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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(x) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
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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
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CRANE CO.
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(Exact name of registrant as specified in its charter)
Delaware 13-1952290
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No)
100 First Stamford Place, Stamford, CT 06902
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 363-7300
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
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Common Stock, par value $1.00 New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
8 1/2% senior notes due March 2004
6 3/4% senior notes due October 2006
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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Indicate by check mark if the disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ( )
Based on the average stock price of $19.41 on January 31, 2000 the aggregate
market value of the voting stock held by nonaffiliates of the registrant was
$962,788,784.
The number of shares outstanding of the registrant's common stock, $1.00 par
value was 61,974,291 at January 31, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Portions of the annual report to shareholders for the year ended December 31,
1999 and portions of the proxy statement for the annual shareholders meeting to
be held on April 10, 2000 are incorporated by reference into Parts I, II, III
and IV of this Form10-K Annual Report.
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PART I
Item 1. Business
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Crane Co. ("Crane" or the "Company") is a diversified manufacturer of
engineered industrial products. Founded in 1855, Crane employs over 9,000 people
in North America, Europe, Asia and Australia.
STRATEGY
The company's strategy is to grow the earnings of niche businesses with
high market share, build an aggressive and committed management team whose
interests are directly aligned to those of the shareholders, and maintain a
focused, efficient corporate structure.
ACQUISITIONS
In the past five years, the company has completed 14 acquisitions. In
October 1999, the company acquired Stentorfield, Ltd., based in Chippenham,
England, for $33 million. Stentorfield is a premier designer and manufacturer of
hot and cold beverage vending machines, serving the U.K. and European market
with a broad line of full size and tabletop products, for the hotel, restaurant,
office coffee service and vending industries. Stentorfield is known in the
industry to provide high quality, reliable and easily serviced products and
excellent customer service. This business was integrated with Crane's National
Vendors business, which is the leading North American designer and manufacturer
of full line vending machines, for snack, food and beverage. The acquisition
provides the means for National Vendors to satisfy the growing U.K. and European
demand for a broader "one-stop" product offering, consisting of Stentorfield's
drinks machines and National Vendors' snack and food machines.
During 1998 the company completed four acquisitions at a total cost of $178
million. In May, the company acquired Environmental Products USA, Inc. This
business manufactures membrane-based water treatment systems for industrial,
commercial and institutional markets. In August, the company acquired Sequentia
Holdings, Inc., a manufacturer of fiberglass-reinforced plastic panels for the
construction and building products markets. Sequentia complements the company's
Kemlite subsidiary, which provides fiberglass-reinforced plastic panels for the
transportation and recreational vehicle markets. In September, the company
acquired Liberty Technologies, Inc. which develops, manufactures, markets and
sells valve, motor, engine and compressor condition monitoring products and
related services to the nuclear power generation and industrial process markets
worldwide. Liberty complements the company's nuclear valve business which
provides valves, valve diagnostic equipment and related services to the nuclear
power industry, and its Dynalco Controls business, which provides sensors,
instrumentation, control products and automation systems for use in industrial
engine applications. Also in September, the company acquired the Plastic-Lined
Piping Products ("PLPP") division of The Dow Chemical Company. PLPP was
integrated with the company's Resistoflex division, which supplies lined pipe
and valves to the chemical process and industrial markets.
During 1997, the company completed four acquisitions at a total cost of $70
million, including assumed debt. In March, the company acquired the
transportation products business of Sequentia, Incorporated. This business,
which produces fiberglass-reinforced plastic panels for the truck body, trailer
and container market, has been integrated with the company's Kemlite subsidiary.
Also in March, the company acquired Polyvend Inc., a manufacturer of snack and
food vending machines. Polyvend was completely integrated into Crane's National
Vendors division significantly expanding its sales distribution channels. In
April, the company acquired the Nuclear Valve Business of ITI MOVATS from
Westinghouse. MOVATS is a leading supplier of valve diagnostic equipment and
valve services to the commercial nuclear power industry. In December the company
acquired certain operations and product lines of Stockham Valves & Fittings,
Inc. The acquired product lines and related manufacturing operations have been
integrated into the company's engineered valve business and its commercial
bronze and iron valve business.
2
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PART I
Item 1. Business (continued)
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During 1996, the company acquired two companies. In mid-October, the
company acquired Interpoint Corporation in a tax-free merger in which the
company issued 1,094,312 shares of Crane common stock and assumed $26 million in
debt. Interpoint is a leader in the design and manufacture of standard and
custom miniature DC-to-DC power converters with applications in aerospace and
medical technology industries. In late October the company acquired Grenson
Electronics Ltd. of Daventry, England. Grenson Electronics produces low voltage
power conversion electronics for aerospace, defense and industrial markets.
During 1995, the company completed three acquisitions at a total cost of
$9.4 million. In February the company, through its Barksdale Control Products
GmbH subsidiary, acquired Unimess GmbH, a German-based manufacturer of solid
state pressure switches and transducers, level switches and indicating systems,
and flow measurement and control components for specialized instrumentation. In
the fourth quarter, the company, through its Crane Pumps & Systems subsidiary,
acquired Process Systems, Inc. based in Michigan. Process Systems is a
manufacturer of vertical turbine pumps and accessories for industrial
applications. In November 1995, the company acquired Kessel PTE Ltd., a
fluoropolymer plastic lined pipe manufacturer with facilities in Singapore and
Thailand.
DIVESTITURES
In the past five years, the company has divested six businesses. In April
1999, the company sold Southwest Foundry, acquired as part of the Stockham
Valves and Fittings, Inc. transaction, for $.4 million. In December 1999, the
company sold its Crane Defense Systems business for $6.4 million in cash and a
$.8 million note. In 1998, the company sold two foundry operations acquired as
part of the Stockham Valves and Fittings Inc. transaction. Accu-Cast, Inc. in
Chattanooga, TN and the Aliceville Foundry in Aliceville, AL were sold for a
total of $4.3 million. In 1997, the company sold its Valve Systems and Controls
division for $7.5 million in cash and $1.5 million in preferred stock. In March
of 1996, the company sold Empire Foundry.
DISCONTINUED OPERATIONS
On December 6, 1999, the company's Board of Directors approved the spin-off of
its Huttig Building Products ("Huttig") subsidiary effective December 16, 1999,
to shareholders of record as of December 8, 1999. Huttig common shares were
distributed on a basis of one share of Huttig for every 4.5 shares of Crane Co.
common stock. Prior to the spin-off, Huttig repaid an intercompany loan of $68
million to the company, which the company used to pay down debt. The Wholesale
segment was discontinued when Huttig was spun off.
LONG-TERM FINANCING
In September 1998 the company sold $100,000,000 of 6 3/4% notes that will
mature on October 1, 2006. During April 1992 the company sold $100,000,000 8
1/2% notes that will mature on March 15, 2004.
BUSINESS SEGMENTS
See pages 27 and 28 of the Annual Report to Shareholders for year ended
December 31, 1999 for sales, operating profit and assets employed of each
business segment.
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PART I
Item 1. Business (continued)
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ENGINEERED MATERIALS
The Engineered Materials segment consists of five businesses: Kemlite,
CorTec, Resistoflex, Polyflon and Crane Plumbing.
Kemlite manufactures fiberglass-reinforced plastic panels for use
principally by the transportation industry in refrigeration and dry van truck
trailers and recreational vehicles. Kemlite products are also sold to the
commercial construction industry for food processing, fast food restaurant and
supermarket applications, to institutions where fire rated materials with low
smoke generation and minimum toxicity are required and to residential
construction. Kemlite sells its products directly to the truck trailer and
recreational vehicle manufacturers. Sequentia manufactures fiberglass-reinforced
plastic panels for the construction and building products markets. Kemlite uses
distributors to serve its commercial construction market and some segments of
the recreational vehicle market. Sequentia's Grand Junction, Tennessee and
Houston, Texas plants were added to Kemlite's plants in Joliet, Illinois and
Jonesboro, Arkansas.
CorTec manufactures fiberglass-reinforced laminated panels serving the
truck and truck trailer segment of the transportation industry. CorTec markets
its products directly to the truck and truck trailer manufacturers.
Resistoflex is engaged in the design, manufacture and sale of corrosion-
resistant, plastic-lined steel pipes, fittings, tanks, valves, expansion joints
and hose used primarily by the pharmaceutical, chemical processing, pulp and
paper, ultra pure water and waste management industries. It also manufactures
high-performance, separable fittings for operating pressures to 8,000 PSI used
primarily in the aerospace industry. Resistoflex sells its industrial products
through distributors who provide stocking and fabrication services to industrial
users in the United States. Its aerospace products are sold directly to the
aerospace industry. Resistoflex also manufactures plastic-lined pipe products at
its Singapore plant serving the Asian chemical processing and the Asian
pharmaceutical industries.
Polyflon manufactures microwave laminates, high voltage RF capacitors,
radomes and circuit processing for the wireless communication, magnetic
resonance imaging, microwave and radar system manufacturers.
Crane Plumbing manufactures plumbing fixtures in Canada. Its products are
sold through distributors in Canada and it has a large share of the Canadian
plumbing fixtures market.
This group had assets of $250.0 million at December 31, 1999 and employed
1,700 people. Order backlog at year-end 1999 was $24.7 million.
4
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PART I (continued)
Item 1. Business (continued)
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MERCHANDISING SYSTEMS
The Merchandising Systems segment has two operating units: National
Vendors, the industry leader in the design and manufacture of a complete line of
vending merchandisers for the food/service vending market; and NRI, which
manufactures electronic coin validators in Buxtehude, Germany for the automated
merchandising and gambling/amusement markets in Europe. National Vendors
products include electronic vending merchandisers for refrigerated and frozen
foods, hot and cold beverages, snack foods, single cup individually brewed hot
drinks and combination vendors/merchandisers, designed to vend both snack foods
and hot/cold drinks, or snacks and refrigerated/frozen foods in one machine.
National Vendors manufactures its products in a 463,000 sq. ft. state of the art
facility in Bridgeton, Missouri. National Vendors' products are marketed to
customers in the United States and Europe by company sales and marketing
personnel as well as distributors, and in other international markets through
independent distributors. In October 1999, the company acquired Stentorfield,
Ltd., based in Chippenham, England. Stentorfield is a premier designer and
manufacturer of hot and cold beverage vending machines, serving the U.K. and
European market with a broad line of full size and tabletop products, for the
hotel, restaurant, office coffee service and vending industries. Stentorfield is
known in the industry to provide high quality, reliable and easily serviced
products and excellent customer service. This business was integrated with
Crane's National Vendors business, which is the leading North American designer
and manufacturer of full line vending machines, for snack, food and beverage.
The acquisition provides the means for National Vendors to satisfy the growing
U.K. and European demand for a broader "one-stop" product offering, consisting
of Stentorfield's drinks machines and National Vendors' snack and food machines.
Merchandising Systems employs 1,350 people and had assets of $150.2 million
at year-end 1999. Order backlog totaled $18.3 million at December 31, 1999.
AEROSPACE
The Aerospace segment consists of ELDEC, Hydro-Aire, Lear Romec and
Interpoint.
ELDEC designs, manufactures and markets custom position indication and
control systems, proximity sensors, pressure sensors, true mass fuel flowmeters
and power conversion systems for the commercial, business and military aerospace
industries, and military marine and telecommunications markets. These products
are custom designed for specific aircraft to meet technically demanding
requirements of the aerospace and telecommunication industry. ELDEC has two
international facilities, one in England and one in France.
ELDEC also has a 45% equity investment in Powec A/S, a Norwegian
manufacturer of power conditioning products and systems for the commercial
wireless telecommunications market, whose products are complementary to the
products and complex power systems engineering capabilities at ELDEC.
Hydro-Aire designs, manufactures and sells aircraft brake control and anti-
skid systems, including electro-hydraulic servo valves and manifolds, embedded
software and rugged electronic controls, hydraulic control valves, landing gear
sensors and fuel pumps as original equipment for the commercial transport,
business and commuter, military, government and general aviation aerospace
markets. In addition, Hydro-Aire designs and manufactures systems similar to
those above for the retrofit of aircraft with improved systems and manufactures
replacement parts for systems installed as original equipment by the aircraft
manufacturer. All of these products are largely proprietary to Hydro-Aire and,
to some extent, are custom designed to the requirements and specifications of
the aircraft manufacturer or program contractor. These systems and replacement
parts are sold directly to aircraft manufacturers, airlines, governments, and
aircraft maintenance and overhaul companies.
5
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PART I (continued)
Item 1. Business (continued)
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Lear Romec designs, manufactures and sells lubrication and fuel pumps for
aircraft, aircraft engines and radar cooling systems for the commercial and
military aerospace industries. Lear Romec has a leading share of the non-
captive market for turbine engine lube and scavenge oil pumps. Lear Romec also
manufactures fuel boost and transfer pumps for commuter and business aircraft.
Interpoint designs, manufactures and sells standard and custom miniature
(hybrid) DC-to-DC power converters and custom miniature (hybrid) electronic
circuits for applications in commercial, space and military aerospace industries
and in the medical technology industry. Interpoint has one international
facility in Taiwan.
The group employs 2,100 people and had assets of $269.2 million at year-
end. The order backlog totaled $232.6 million at December 31, 1999.
FLUID HANDLING
The Fluid Handling segment consists of Engineered Valves, Commercial
Valves, Valve Services, Crane Supply and pump and water treatment businesses.
The Crane Engineered and Commercial valve businesses, with four manufacturing
facilities in North America, as well as operations in the United Kingdom,
Australia, Norway, China and Indonesia, sell a wide variety of commodity and
special purpose valves and fluid control products for the chemical and
hydrocarbon processing, power generation, marine, general industrial and
commercial construction industries. Products are sold under the Crane, Jenkins,
Pacific, Westad, Flowseal, Center Line, Stockham, Triangle and Duo-Check brands.
The company's Valve Service business, with two manufacturing facilities in North
America, provides valves, valve diagnostic equipment and related services to the
nuclear power, hydrocarbon, chemical processing and power generation industries.
Crane Pumps has eight manufacturing facilities in the United States. Pumps are
manufactured under the Deming, Weinman, Chempump, Burks, Chem/Meter, Barnes,
Sellers and Process Systems brand names. Pumps are sold to a broad customer
base, which includes chemical and hydrocarbon process industries, automotive,
municipal, industrial and commercial wastewater, power generation, commercial
heating, ventilation and air-conditioning industries and original equipment
manufacturers. The water treatment business has manufacturing facilities in
Pennsylvania and Florida and serves the water and wastewater treatment market.
Its products are sold under the Cochrane and Environmental Products names. Crane
Supply, a distributor of plumbing supplies, valves and piping in Canada,
maintains thirty-five branches throughout Canada and distributes Crane
manufactured products in that country. Crane Supply also distributes products
that are both complementary to and competitive with Crane's own manufactured
products.
This group employs over 3,000 people and had assets of $330.5 million at
December 31, 1999. Fluid Handling order backlog totaled $79.5 million.
Products in this group are sold directly to end users through Crane's sales
organization and through independent distributors and manufacturers
representatives.
6
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PART I (continued)
Item 1. Business (continued)
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CRANE CONTROLS
This segment includes five businesses: Barksdale, Powers Process Controls,
Dynalco Controls, Azonix, and Ferguson. The companies in this segment design,
manufacture and market industrial and commercial products that control flows and
processes in various industries including the petroleum, chemical, construction,
food and beverage, power generation industries and transportation.
Barksdale manufactures solid state and electromechanical pressure switches
and transducers, level switches and continuous level indicators, temperature
switches, and directional control valves that serve a broad range of commercial
and industrial applications. It has manufacturing and marketing facilities in
the United States and Germany.
Powers Process Controls designs, manufactures and markets water mixing and
thermal shock protection shower systems, commercial and residential plumbing
brass, correctional water controllers, process controllers and instrumentation,
process control valves and temperature regulators for industrial applications
and the commercial and institutional construction industry.
Dynalco Controls designs and manufactures rotational speed sensors,
temperature and pressure instruments and monitors for rugged environments,
microprocessor based engine and mechanism controls. Dynalco's products are used
worldwide by industries in a variety of applications, including stationary
natural gas engines, power generation, oil and gas production and transmissions,
and agriculture equipment.
Azonix manufactures operator interfaces and measurement and control systems
for hazardous and harsh applications, intelligent data acquisition products,
high-precision thermometers and calibrators for the oil and gas, petrochemical,
chemical, pharmaceutical and metal processing industries.
Ferguson designs and manufactures in the United States and through Ferguson
Machine Co. S.A. in Europe, precision index and transfer systems for use on and
with machines that perform automatic forming, assembly, metal cutting, testing
and inspection operations. Products include mechanical and electronic index
drives, pick-and-place robots, in line transfer machines, rotary tables, press
feeds and custom cams.
The products in this segment are sold directly to end users, and
engineering contractors through the company's own sales forces and cooperatively
with sales representatives, stocking specialists and industrial distributors.
Crane Controls had assets of $129.2 million at December 31, 1999, and
employs 900 people. On December 31, 1999, Crane Controls had a backlog of $28.3
million.
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PART I (continued)
Item 1. Business (continued)
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COMPETITIVE CONDITIONS
The company's lines of business are conducted under actively competitive
conditions in each of the geographic and product areas they serve. Because of
the diversity of the classes of products manufactured and sold, they do not
compete with the same companies in all geographic or product areas. Accordingly,
it is not possible to estimate the precise number of competitors or to identify
the principal methods of competition. Although reliable statistics are not
available, the company believes that it is an important supplier to a number of
market niches and geographic areas.
The company's products have primary application in the industrial,
construction, aerospace, automated merchandising, transportation, and fluid
handling industries. As such, they are dependent upon numerous unpredictable
factors, including changes in market demand, general economic conditions,
residential and commercial building starts, and capital spending. Because these
products are also sold in a wide variety of markets and applications, the
company does not believe it can reliably quantify or predict the possible
effects upon its business resulting from such changes.
Seasonality is a factor in the Canadian operations. Net sales in Canada and
assets related to Canadian operations were 13.19% and 7.85% of the respective
1999 consolidated amounts.
The company's engineering and product development activities are directed
primarily toward improvement of existing products and adaptation of existing
products to particular customer requirements. While the company owns numerous
patents and licenses, none are of such importance that termination would
materially affect its business. Product development and engineering costs
totaled approximately $58.9 million in 1999, $70.9 million in 1998, and
$56.3million in 1997. Included in these amounts were approximately $7.4 million,
$15.8 million and $9.6 million received by the company in 1999, 1998 and 1997,
respectively, for customer sponsored research and development.
The company is not dependent on any single customer nor are there any
issues at this time regarding available raw materials for inventory.
Costs of compliance with federal, state and local laws and regulations
involving the discharge of materials into the environment or otherwise relating
to the protection of the environment are not expected to have a material effect
upon the company's capital expenditures, earnings or competitive position.
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PART I (continued)
Item 1. Business (continued)
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FORWARD LOOKING STATEMENTS
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Throughout the Annual Report to Shareholders, particularly in the Letter to
Shareholders and Management's Discussion and Analysis of Operations, the company
makes numerous statements about expectations of future performance and market
trends, and statements about plans and objectives and other matters, which
because they are not historical fact may constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
In addition, the company and its representatives may from time to time make
written or oral forward-looking statements, including statements contained in
the company's filings with the Securities and Exchange Commission and in its
reports to shareholders, which can be identified by the use of forward-looking
terminology such as "believes", "contemplates", "expects", "may", "will",
"could", "should", "would" or "anticipates" or the negative thereof or
comparable terminology.
All forward-looking statements speak only as of the date on which such
statements are made and involve risk and uncertainties that exist in the
company's operations and business environment and are not guarantees of future
performance. The company assumes no obligation to update any of these forward-
looking statements, whether as a result of new information or future events. As
a responsibility to our investors, the company will make reasonable efforts at
timely disclosure of future facts and circumstances which may affect such
statements.
Because the company wishes to take advantage of the "safe harbor" provision
of the Private Securities Litigation Reform Act of 1995, readers are cautioned
to consider the following important risk factors that could affect the company's
businesses and cause actual results to differ materially from those projected.
General
A substantial portion of the sales of the company's business segments are
concentrated in industries which are cyclical in nature. Because of the cyclical
nature of these businesses, their results are subject to fluctuations in
domestic and international economies, as well as to currency fluctuations and
unforeseen inflationary pressures. Reductions in the business levels of these
industries would impact negatively on the sales and profitability of the
affected business segments.
While the company is a principal competitor in most of its markets, all of
its markets are highly competitive. The company's competitors in many of its
business segments can be expected in the future to improve technologies, reduce
costs and develop and introduce new products, and the ability of the company's
business segments to achieve similar advances will be important to their
competitive positions. Competitive pressures, including those discussed above,
could cause one or more of the company's business segments to lose market share
or could result in significant price erosion, either of which would have an
adverse effect on the company's results of operations.
The company's acquisition program entails the potential risks inherent in
assessing the value, strengths, weaknesses, contingent or other liabilities and
potential profitability of acquisition candidates and in integrating the
operations of acquired companies. There can be no assurance that suitable
acquisition opportunities will be available in the future, that the company will
continue to acquire businesses or that any business acquired will be integrated
successfully or prove profitable.
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PART I (continued)
Item 1. Business (continued)
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Forward Looking Statements (continued)
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Net sales and assets related to operations outside the United States were
34.8% and 21.9% of the respective 1999 consolidated amount. Such operations and
transactions entail the risks associated with conducting business
internationally, including the risk of currency fluctuations, slower payment of
invoices, adverse trade regulations and possible social and economic
instability. While the full impact of this economic instability cannot be
predicted, it could have a material adverse effect on the company's revenues and
profitability.
Certain of the company's business segments are dependent upon highly
qualified personnel, and the company generally is dependent upon the continued
efforts of key management employees. Particularly in light of the current tight
labor market, the company's prospects would be adversely affected by an
inability to retain its key personnel.
New factors emerge from time to time, and it is not possible for management
to predict all of such factors. Further, management cannot assess the impact of
each such factor on the business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements.
The "Year 2000" issue concerned the potential exposures related to the
automated generation of business and financial misinformation resulting from the
application of computer programs which have been written using two digits,
rather than four, to define the applicable year of business transactions.
Suppliers, customers and creditors of the company also faced Year 2000 issues.
The discussion of the Impact of the Year 2000 contained on Page 34 of the
company's 1999 Annual Report under Management's Discussion and Analysis of
Operations is incorporated herein by reference.
Engineered Materials
In the Engineered Materials segment, sales and profits could fall if there
were a decline in demand for truck trailers, recreational vehicles or building
products, for which Crane companies produce fiberglass-reinforced panels.
Profits could be squeezed as well by unanticipated increases in resin and
fiberglass material costs, by unforeseen fluctuations in the Canadian dollar,
and by any inability on the part of Crane's companies to maintain their position
in product cost and functionality against competing materials.
Merchandising Systems
Results at Crane's U.S.-based vending machine business could be reduced by
delays in launching or supplying new products or an inability to achieve new
product sales objectives. Results at Crane's Germany-based coin validation
machine business could be affected by changes in demand stemming from the advent
of the Euro, the planned new European currency, as well as by unforeseen
fluctuations in the value of the Deutschemark versus the U.S. dollar.
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PART I (continued)
Item 1. Business (continued)
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Forward Looking Statements (continued)
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Aerospace
A significant fall-off in demand for air travel or a decline in airline
profitability generally could result in reduced aircraft orders, and could also
cause the airlines to scale back their purchases of repair parts from Crane
companies. The companies could also be impacted if major aircraft manufacturers
encountered production problems, or if pricing pressure from aircraft customers
caused the manufacturers to press their suppliers to lower prices. Sales and
profits could face erosion if pricing pressure from competitors increased, if
planned new products were delayed, if finding new aerospace-qualified suppliers
grew more difficult, or if required technical personnel became harder to hire
and retain. Aerospace segment results could be below expectations if Asia's
economic problems lead to a further decline in aircraft orders, particularly
since the new, long-range Boeing aircraft favored for many Asian routes contain
a higher value of Crane-supplied equipment than other aircraft from Boeing and
other manufacturers.
Fluid Handling
Crane's companies could face increased price competition from larger
competitors. Further economic turmoil in Asia could reduce sales and profits,
particularly if projects for which Crane companies are suppliers or bidders are
cancelled or delayed, or if the companies' ability to source product from
international sources is impeded. At Crane's Canadian distribution operation,
reported results in U.S. dollar terms could be eroded by an unanticipated
weakening of Canada's currency.
Controls
A number of factors could affect the Controls segment's results. Lower
sales and earnings could result if Crane's companies can not maintain their cost
competitiveness, encounter delays in introducing new products, or fail to
achieve their new product sales objectives. Results could decline because of an
unanticipated decline in demand for Crane products from the industrial
machinery, oil and gas, and heavy equipment industries, or from unforeseen
product obsolescence.
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PART I (continued)
Item 2. Properties
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TOTAL MANUFACTURING FACILITIES NUMBER AREA
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Fluid Handling
United States 16 1,401,000 sq. ft.
Canada 2 140,000 sq. ft.
International 9 1,251,000 sq. ft.
Aerospace
United States 6 634,000 sq. ft.
International 3 40,000 sq. ft.
Engineered Materials
United States 10 1,235,000 sq. ft.
Canada 3 636,000 sq. ft.
International 1 10,000 sq. ft.
Crane Controls
United States 6 407,000 sq. ft.
International 2 63,000 sq. ft.
Merchandising Systems
United States 1 463,000 sq. ft.
Other International 2 109,000 sq. ft.
Leased Leases
Manufacturing Expiring
Facilities Through Number Area
---------- ---------- ------ ----
United States 2009 11 536,000 sq. ft.
Canada 2000 1 13,000 sq. ft.
Other International 2007 6 139,000 sq. ft.
Other Facilities
----------------
Fluid Handling operates six valve service centers in the United States, of which
three are owned, and three distribution centers in the United States. This
segment operates internationally thirty-nine distribution and three service
centers.
Crane Controls operates one distribution center internationally.
Merchandising Systems operates eight distribution centers in the United States
and seven internationally.
Engineered Materials operates eight distribution centers in the United States,
of which one is owned, and two internationally.
In the opinion of management, these properties have been well maintained, are in
sound operating condition, and contain all necessary equipment and facilities
for their intended purposes.
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PART I (continued)
Item 3. Legal Proceedings
Neither the company, nor any subsidiary of the company has become a party
to, nor has any of their property become the subject of, any material legal
proceedings, other than ordinary routine litigation incidental to their
businesses.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of 1999.
13
<PAGE>
PART I (continued)
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 and Chief Chairman and Chief 55 1974
Executive Officer Executive Officer of the company
since 1984 and previously
President of the company
Eric C. Fast President and President and Chief Operating 50 1999
Chief Operating Officer, previously Co-head of Global
Officer Investment Banking of Salomon Smith
Barney and a Managing Director of that
firm
Augustus I. duPont Vice President, Vice President and General 48 1996
General Counsel Counsel and Secretary of
and Secretary the company, previously Vice
President, General Counsel and
Secretary of Reeves Industries, Inc.,*
a manufacturer of apparel textiles
and industrial coated fabrics, from
May 1994 to December 1995
Bradley L. Ellis Vice President- Vice President - Chief 31 1997
Chief Information Information Officer of the
Officer company since July 1997, previously
with the Business Systems consulting
group of Arthur Andersen LLP, an
international provider of auditing and
business consulting services
John R. Packard Vice President- Vice President- Human 45 1999
Human Resources Resources of the company since
January 1999, previously Human
Resources Director for Fortune
Brands, Inc., a diversified consumer
products company
Anthony D. Pantaleoni Vice President- Vice President - Environment, 45 1989
Environment, Health & Safety of the company
Health & Safety
Michael L. Raithel (1) Vice President- Vice President - Finance 52 1985
Finance and Chief and Chief Financial Officer
Financial Officer and Controller of the company,
previously Vice President - Controller
of the company
(1) Effective February 18, 2000
</TABLE>
14
<PAGE>
PART I (continued)
EXECUTIVE OFFICERS OF THE REGISTRANT(continued)
<TABLE>
<CAPTION>
Officer
Name Position Business Experience Age Since
- ------------------------ -------- ------------------- --- -------
<S> <C> <C> <C> <C>
Thomas M. Noonan Vice President- Vice President - Taxes since 45 1999
Taxes September 1999, previously Director
of Taxes of the company from March
1996 to September 1999, previously
Director of Taxes and Tax Counsel,
Loctite Corporation, a manufacturer of
sealants, adhesives and coatings
Gil A. Dickoff Treasurer Treasurer of the company, 38 1992
previously Assistant Treasurer
of the company
</TABLE>
Certain Proceedings
- -------------------
* Reeves Industries, Inc., a corporation which Mr.duPont served as Vice
President, General Counsel and Secretary from May 1994 to December 1995,
filed a petition and Plan of Reorganization for a consensual debt
restructuring under Chapter 11 of the United States Bankruptcy Code on
November 21, 1997.
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters.
The information required by Item 5 is hereby incorporated by reference to
Pages 35 through 37 of the 1999 Annual Report to Shareholders.
Item 6. Selected Financial Data.
The information required by Item 6 is hereby incorporated by reference to
Pages 35 of the 1999 Annual Report to Shareholders.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The information required by Item 7 is hereby incorporated by reference to
Pages 6 through 14 of the 1999 Annual Report to Shareholders.
Item 7A. Quantitative and Qualitative Disclosures about Market Risks.
The information required by Item 7A is hereby incorporated by reference to
Page 34 of the 1999 Annual Report to Shareholders.
Item 8. Financial Statements and Supplementary Data.
The information required by Item 8 is hereby incorporated by reference to
Pages 15 through 35 of the 1999 Annual Report to Shareholders.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by Item 10 is incorporated by reference to the
definitive proxy statement dated February 28, 2000, which the company has filed
with the Commission pursuant to Regulation l4A except that such information with
respect to Executive Officers of the Registrant is included, pursuant to
Instruction 3, paragraph (b) of Item 401 of Regulation S-K, under Part I.
15
<PAGE>
PART III (continued)
Item 11. Executive Compensation
The information required by Item 11 is incorporated by reference to the
definitive proxy statement dated February 28, 2000, which the company has filed
with the Commission pursuant to Regulation l4A.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by Item 12 is incorporated by reference to the
definitive proxy statement dated February 28, 2000, which the company has filed
with the Commission pursuant to Regulation 14A.
Item 13. Certain Relationships and Related Transactions
The information required by Item 13 is incorporated by reference to the
definitive proxy statement dated February 28, 2000, which the company has filed
with the Commission pursuant to Regulation 14A.
PART IV
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K
(a)(1) The consolidated balance sheets of Crane Co. and subsidiaries as of
December 31, 1999 and 1998 and the related consolidated statements of
income, changes in common shareholders' equity and cash flows for the
years ended December 31, 1999, 1998 and 1997 and the report thereon of
Deloitte & Touche LLP dated January 20, 2000 appearing on Pages 15
through 29 of Crane Co.'s 1999 Annual Report to Shareholders which will
be furnished with the company's proxy statement as required by Regulation
14A, Rule 14a-3(c), are incorporated herein by reference
(2) Financial statement schedules for which provision is made in the
applicable regulation of the Securities and Exchange Commission have been
omitted because they are not required under related instructions or are
inapplicable, or the information is shown in the financial statements and
related notes.
(3) Exhibits: Exhibit 3A Certificate of Incorporation, as amended on May
25, 1999.
Exhibit 3B By-laws, as amended on January 24, 2000.
Exhibit 11 Computation of net income per share.
Exhibit 13 Annual Report to shareholders for the year ended
December 31, 1999.
Exhibit 21 Subsidiaries of the Registrant.
Exhibit 23 Independent auditors' consent.
(b) Reports on Form 8-K:
Filed 10/21/1999 The Company filed a Current Report on Form 8-K,
reporting on Item 5 thereof, the unaudited pro forma consolidated
balance sheet of the Registrant as of June 30, 1999 and the
unaudited pro forma consolidated statements of income for the
six-month period ended June 30, 1999 and for the year ended December
31, 1998. These pro forma financial statements reflect the pro
forma impact of the Huttig Building Products, Inc. spin-off.
Filed 12/23/1999 The Company filed a Current Report on Form 8-K,
reporting on Item 2 thereof, that on November 17, 1999, Crane
received a tax ruling from the IRS that the spin-off of Huttig would
be tax-free to Crane and its shareholders. On December 16, 1999,
Crane distributed all of the outstanding common stock of Huttig to
its shareholders of record as of the close of business on December
8, 1999.
16
<PAGE>
PART IV (continued)
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(continued)
(c) Exhibits to Form 10-K:
(3) (a) The company's Certificate of Incorporation, as amended on May
25, 1999 (filed herewith as Exhibit 3A).
(b The company's By-Laws, as amended on January 24, 2000 (filed
herewith as Exhibit 3B).
(4) Instruments Defining the Rights of Security Holders, including
Indentures:
(a) There is incorporated by reference herein:
(1) Preferred Share Purchase Rights Agreement contained in
Exhibit 1 to the company's Report on Form 8-K filed with
the Commission on July 6, 1998.
(b) There is incorporated by reference herein:
1) Indenture dated as of April 1,1991 between the Registrant
and the Bank of New York contained in Exhibit 4.1 to the
company's report on Form 8-K filed with the Commission on
September 16, 1998.
(10)Material Contracts:
(iii)Compensatory Plans
There is incorporated by reference herein:
(a) The forms of Employment/Severance Agreement between the company
and certain executive officers (form I) and (form II) which
provide for the continuation of certain employee benefits upon
a change of control as contained in Exhibit C of the company's
annual report on Form 10-K for the fiscal year ended December
31, 1994.
(b) The E.V.A. incentive compensation plan contained in Exhibit B
to the company's annual report on Form 10-K for the fiscal year
December 31, 1994.
(c) The indemnification agreements entered into with each director
and executive officer of the company, the form of which is
contained in Exhibit C to the company's definitive proxy
statement filed with the Commission in connection with the
company's April 27, 1987 Annual Meeting.
(d) The Crane Co. Retirement Plan for Non-Employee Directors
contained in Exhibit E to the company's Annual Report on Form
10-K for the fiscal year ended December 31, 1988.
(e) The Crane Co. 1998 Stock Option Plan contained in Exhibit 4.1
to the company's Registration Statement No. 333-50489 on Form
S-8 filed with the Commission on April 20, 1998.
(f) The Crane Co. 1998 Restricted Stock Award Plan contained in
Exhibit 4.1 to the company's Registration Statement No. 333-
50487 on Form S-8 filed with the Commission on April 20, 1998.
(g) The Crane Co. 1998 Non-Employee Director Restricted Stock Award
Plan contained in Exhibit 4.1 to the company's Registration
Statement No. 333-50495 on Form S-8 filed with the Commission
on April 20, 1998.
All other exhibits are omitted because they are not applicable or the
required information is shown elsewhere in this Annual Report on Form 10-K.
17
<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 /s/ M. L. Raithel
---------------------------
M. L. Raithel
Vice President-Finance and
Chief Financial Officer and Controller
Date 2/28/00
-------
Pursuant to the requirements of the Securities Exchange Act of l934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
OFFICERS
/s/ R. S. Evans
------------------------
R. S. Evans
Chairman and Chief Executive Officer and a Director
Date 2/28/00
-------
/s/ E. C. Fast /s/ M. L. Raithel
----------------------------- ---------------------------
E. C. Fast M. L. Raithel
President and Chief Vice President-Finance and
Operating Officer and a Director Chief Financial Officer and Controller
(Principal Financial Officer and
Principal Accounting Officer)
Date 2/28/00 Date 2/28/00
------- -------
DIRECTORS
/s/ E. T. Bigelow, Jr. /s/ R. S. Forte
----------------------- ----------------------
E. T. Bigelow, Jr. R. S. Forte
Date 2/28/00 Date 2/28/00
------- -------
/s/ D.R. Gardner /s/ J. J. Lee /s/
- ----------------------- ----------------------- ----------------------
D.R. Gardner J. J. Lee W. E. Lipner
Date 2/28/00 Date 2/28/00 Date 2/28/00
------- ------- -------
/s/ D. C. Minton /s/ C. J. Queenan, Jr. /s/
- ----------------------- ----------------------- ----------------------
D. C. Minton C. J. Queenan, Jr. J. L. L. Tullis
Date 2/28/00 Date 2/28/00 Date 2/28/00
------- ------- -------
18
<PAGE>
EXHIBIT 3A
CERTIFICATE OF MERGER
OF
CRANE CO.
INTO
CRANE DELAWARE
Pursuant to Section 252 of the
Delaware General Corporation Law
The undersigned corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the name and state of incorporation of each of the
-----
constituent corporations of the merger is as follows:
Name State of Incorporation
---- ----------------------
Crane Co. Illinois
Crane Delaware Co. Delaware
SECOND: That an Agreement and Plan of Merger, dated as of April 3,
------
1985, by and between Crane Co. and Crane Delaware Co., providing for the merger
(the "Merger") of Crane Co. with and into Crane Delaware Co. has been approved,
adopted, certified, executed and acknowledged by each of the constituent
corporations in accordance with the requirements of subsection (c) of Section
252 of the General Corporation Law of the State of Delaware.
THIRD: That the surviving corporation shall be Crane Delaware Co.,
-----
which shall change its name in the Merger to Crane Co.
<PAGE>
FOURTH: The Certificate of Incorporation of the surviving
------
corporation, with such amendments as are effected by the Merger, is attached to
this Certificate of Merger as Exhibit A, and, as so amended, shall constitute
the Certificate of Incorporation, as amended, of the surviving corporation.
From and after the filing of this Certificate of Merger, and until further
amended or provided by law, said Exhibit A may be certified as the Certificate
of Incorporation of the surviving corporation, as amended, separate and apart
from this Certificate of Merger.
FIFTH: That the executed Agreement and Plan of Merger is on file at
-----
the principal place of business of the surviving corporation. The address of
the principal place of business of the surviving corporation is 300 Park Avenue,
New York, N.Y. 10022.
SIXTH: That a copy of the Agreement and Plan of Merger will be
-----
furnished by the surviving corporation, on request and without cost, to any
stockholder of either constituent corporation.
SEVENTH: The authorized capital stock of Crane Co. consists of
-------
20,000,000 shares of common stock, $6.25 par value, and 600,000 shares of serial
preferred stock, $5.00 par value.
EIGHTH: This Certificate of Merger is not to become effective until
------
the issuance of a Certificate of Merger in respect of the Merger by the
Secretary of State of the State of Illinois pursuant to the Business Corporation
Act of the State of Illinois.
CRANE DELAWARE CO.
By: /s/ R. S. Evans
----------------
President
ATTEST:
-2-
<PAGE>
By: /s/ Paul R. Hundt
------------------
Secretary
-3-
<PAGE>
EXHIBIT A
CERTIFICATE OF INCORPORATION
OF
CRANE CO.
ARTICLE I
---------
The name of the corporation (hereinafter called the "Corporation") is
Crane Co.
ARTICLE II
----------
The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware
19801. The name of the Corporation's registered agent at such address is The
Corporation Trust Company.
ARTICLE III
-----------
The purpose or purposes for which the Corporation is organized are to
engage in any lawful act or activity for which a corporation may be organized
under the General Corporation Law of Delaware.
ARTICLE IV
----------
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 40,000,000 shares of common stock,
par value $6.25 per share ("Common Stock"). The holders of Common Stock shall
have the exclusive power to vote and shall have one vote in respect of each
share of such stock held by them.
ARTICLE V
---------
Board of Directors
------------------
Section 1. Number. The business and affairs of the Corporation shall
--------- ------
be managed under the direction of the Board of Directors which shall consist of
not less than three nor more than fifteen persons. The exact number of
directors within the minimum and maximum limitations specified in the preceding
sentence shall be fixed from time to time by the Board of Directors pursuant to
a resolution adopted by a majority of the entire Board of Directors.
-4-
<PAGE>
Section 2. Election and Terms. The directors shall be divided into
--------- ------------------
three classes, as nearly equal in number as reasonably possible, with the term
of office of the first class to expire at the 1986 Annual Meeting of
Stockholders, the term of office of the second class to expire at the 1987
Annual Meeting of Stockholders and the term of office of the third class to
expire at the 1988 Annual Meeting of Stockholders. At each Annual Meeting of
Stockholders, directors elected to succeed those directors whose terms expire
shall be elected for a term of office to expire at the third succeeding Annual
Meeting of Stockholders after their election.
Section 3. Newly Created Directorships and Vacancies. Newly created
--------- -----------------------------------------
directorships resulting from any increase in the authorized number of directors
or any vacancies in the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause shall be filled
only by a majority vote of the directors then in office, and directors so chosen
shall hold office for a term expiring at the Annual Meeting of Stockholders at
which the term of the class to which they have been elected expires. No
decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
Section 4. Removal. Any director, or the entire Board of Directors,
--------- -------
may be removed from office at any time, but only for cause and only by the
affirmative vote of the holders of at least two-thirds of the voting power of
the shares then entitled to vote at an election of directors, voting together as
a single class.
Section 5. Amendment, Repeal, etc. Notwithstanding anything
--------- -----------------------
contained in this Certificate of Incorporation to the contrary, the affirmative
vote of the holders of at least two-thirds of the voting power of the then
outstanding shares entitled to vote thereon pursuant to Article IV, voting
together as a single class, shall be required to amend or repeal, or adopt any
provisions inconsistent with, this Article V.
ARTICLE VI
----------
Stockholder Action
------------------
Any action required or permitted to be taken by the stockholders of
the Corporation must be effected at a duly called annual or special meeting of
stockholders of the Corporation and may not be effected by any consent in
writing by such stockholders. Special meetings of stockholders of the
Corporation may be called only by the Chairman of the Board of Directors or by
the Board of Directors pursuant to a resolution approved by a majority of the
entire Board of Directors. Notwithstanding anything contained in this
Certificate of Incorporation to the contrary, the affirmative vote of the
holders of at least two-thirds of the voting power of the then outstanding
shares entitled to vote thereon pursuant to Article IV, voting together as a
single class, shall be required to amend or repeal, or adopt any provisions
inconsistent with, this Article VI.
-5-
<PAGE>
ARTICLE VII
-----------
By-law Amendments
-----------------
The Board of Directors shall have the power to make, alter, amend or
repeal the By-laws of the Corporation by such vote as may be specified therein.
The affirmative vote of the holders of two-thirds or more of the voting power of
the then outstanding shares entitled to vote thereon pursuant to Article IV,
voting together as a single class, shall be required for the stockholders to
make, alter, amend or repeal the By-laws. Notwithstanding anything contained in
this Certificate of Incorporation to the contrary, the affirmative vote of the
holders of at least two-thirds of the voting power of the then outstanding
shares entitled to vote thereon pursuant to Article IV, voting together as a
single class, shall be required to amend or repeal, or adopt any provisions
inconsistent with, this Article VII.
ARTICLE VIII
------------
The name and mailing address of the incorporator of the Corporation is
John F. Johnston, 12th and Market Streets, Wilmington, Delaware 19801.
IN WITNESS WHEREOF, I, John F. Johnston, the sole incorporator of
CRANE CO., have executed this Certificate of Incorporation this 3rd day of
April, 1985, and DO HEREBY CERTIFY under the penalties of perjury that the facts
stated in this Certificate of Incorporation are true.
/s/ John F. Johnston
----------------------------------
John F. Johnston, Incorporator
-6-
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
Crane Co. (the "Company"), a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of the Company held
on February 23, 1987, resolutions were duly adopted setting forth proposed
amendments of the Certificate of Incorporation of the Company, declaring said
amendments to be advisable and calling a meeting of stockholders of the Company
for consideration thereof. The resolutions setting forth the proposed amendments
are as follows:
RESOLVED, that the Certificate of Incorporation be amended by
increasing the number of authorized shares of common stock from 40,000,000
to 80,000,000, decreasing the par value of the Company's Common Stock from
$6.25 to $1.00 per share, splitting each issued common share, including
shares held in treasury, into one and one-half Common Shares, par value
$1.00 per share, for each share previously issued, thereby effecting a
three-for-two Common Share stock split, and authorizing a new class of
5,000,000 shares of preferred stock, par value $.01; and
FURTHER RESOLVED, that Article IV of the Certificate of Incorporation
of the Company be amended in its entirety to read as follows:
ARTICLE IV
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is eighty million (80,000,000)
shares of common stock, par value $1.00 per share ("Common Stock"), and five
million (5,000,000) shares of preferred stock, par value $.01 per share
("Preferred Stock").
The following is a description of each of the classes of stock of the
Corporation and a statement of the powers, preferences, and rights of such
stock, and the qualifications and restrictions thereof.
1
<PAGE>
(a) At all meetings of the shareholders of the Corporation the holders
of the Common Stock shall be entitled to one vote for each share of Common
Stock held by them respectively.
(b) Shares of the Preferred Stock may be issued from time to time in
one or more series as may from time to time be determined by the Board of
Directors of the Corporation. Each series shall be distinctly designated.
Except as otherwise provided in the resolution setting forth the
designations and rights of the series of Preferred Stock, all shares of any
one series of Preferred Stock shall be alike in every particular, except
that there may be different dates from which dividends (if any) thereon
shall be cumulative, if made cumulative. The relative preferences,
participating, optional and other special rights of each such series, and
limitations thereof, if any, may differ from those of any and all other
series at any time outstanding. The Board of Directors of the Corporation is
hereby expressly granted authority to fix by resolution or resolutions
adopted prior to the issuance of any shares of each particular series of the
Preferred Stock, the designation, preferences, and relative, participating,
optional or other rights, if any, or the qualifications, limitations or
restrictions thereof, if any, of such series, including, but without
limiting the generality of the foregoing, the following:
(1) the distinctive designation of, and the number of shares of the
Preferred Stock which shall constitute the series, which number may be
increased (except as otherwise fixed by the Board of Directors) or decreased
(but not below the number of shares thereof then outstanding) from time to
time by action of the Board of Directors;
(2) the rate and times at which, and the terms and conditions upon
which, dividends, if any, on shares of the series may be paid, the extent of
preferences or relation, if any, of such dividends to the dividends payable
on any other class or classes of stock of the corporation, or on any series
of the Preferred Stock or of any other class or class of stock of the
Corporation, and whether such dividends shall be cumulative, partially
cumulative or non-cumulative;
(3) the right, if any, of the holders of shares of the series to
convert the same into, or exchange the same for, shares of any other class
or classes of stock of the Corporation, and the terms and conditions of such
conversion or exchange;
(4) whether shares of the series shall be subject to redemption and
the redemption price or prices and the time or times at which, and the terms
and conditions upon which, shares of the series may be redeemed;
(5) the rights, if any, of the holders of shares of the series upon
voluntary or involuntary liquidation, merger, consolidation, distribution or
sale of assets, dissolution or winding-up of the Corporation;
(6) the terms of the sinking fund or redemption or purchase
account, if any, to be provided for shares of the series; and
2
<PAGE>
(7) the voting powers, if any, of the holders of shares of the
series which may, without limiting the generality of the foregoing, include
the right, voting as a series by itself or together with other series of the
Preferred Stock or all series of the Preferred Stock as a class, (1) to cast
more or less than one vote per share on any or all matters voted upon by the
shareholders, (2) to elect one or more directors of the Corporation in the
event there shall have been a default in the payment of dividends on any one
or more series of the Preferred Stock or under such other circumstances and
upon such conditions as the Board of Directors may fix.
(c) The relative preferences, rights and limitations of each series of
Preferred Stock in relation to the preferences, rights and limitations of
each other series of Preferred Stock shall, in each case, be as fixed from
time to time by the Board of Directors in the resolution or resolutions
adopted pursuant to authority granted in this Article IV, and the consent by
class or series vote or otherwise, of the holders of the Preferred Stock of
such of the series of the Preferred Stock as are from time to time
outstanding shall not be required for the issuance by the Board of Directors
of any other series of Preferred Stock whether the preferences and rights of
such other series shall be fixed by the Board of Directors as senior to, or
on a parity with, the preferences and rights of such outstanding series, or
any of them; provided, however, that the Board of Directors may provide in
such resolution or resolutions adopted with respect to any series of
Preferred Stock that the consent of the holders of a majority (or such
greater proportion as shall be therein fixed) of the outstanding shares of
such series voting thereon shall be required for the issuance of any or all
other series of Preferred Stock.
(d) Subject to the provisions of the preceding paragraph (c), shares of
any series of Preferred Stock may be issued from time to time as the Board
of Directors shall determine and on such terms and for such consideration,
not less than the par value thereof, as shall be fixed by the Board of
Directors.
Upon this amendment becoming effective, each of the issued Common
Shares, par value $6.25 per share, of the Company, including the Common
Shares held in the Company's Treasury (collectively the "Old Common
Shares"), shall be reclassified without any action on the part of the holder
thereof into one and one-half fully paid and non-assessable Common Shares,
par value $1.00 per share, of the Company, authorized to be issued under the
Certificate of Incorporation of the Company, as hereby amended (the "New
Common Shares"), provided, however, that fractional shares shall not be
issued and the Company shall appoint an agent to act on behalf of the
shareholders to arrange for the consolidation of fractional interests by
providing forms for shareholders to elect either to sell their fraction or
to buy additional fractions sufficient to make up a whole share. Each
certificate representing one or more Old Common Shares issued at the time
this amendment becomes effective shall automatically without the necessity
of presenting the same for exchange thereafter represent the same number of
New Common Shares. As soon as practicable following the date upon which this
amendment becomes effective, the Company shall deliver to the persons
entitled thereto certificates representing the additional whole New Common
Shares to which they shall have become
3
<PAGE>
entitled by virtue hereof. The number of shares reserved for issuance under
the Company 1984 Stock Option Plan, outstanding stock options, convertible
debentures and the Company's Shareholders Common Share Purchase Rights Plan
shall be appropriately adjusted in accordance with the terms of their
governing instruments.
RESOLVED, that the Certificate of Incorporation of the Company be
amended by adding a new Article IX to such Certificate of Incorporation
which shall read as follows:
ARTICLE IX
No director of the Corporation shall be liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived
an improper personal benefit. This paragraph shall not eliminate or limit
the liability of a director for any act or omission occurring prior to the
effective date of its adoption. If the General Corporation Law of the State
of Delaware is hereafter amended to authorize corporate action further
limiting or eliminating the personal liability of directors, then the
liability of a director to the Corporation shall be limited or eliminated to
the fullest extent permitted by the General Corporation Law of the State of
Delaware, as so amended from time to time. No repeal or modification of this
Article IX, directly or by adoption of an inconsistent provision of this
Certificate of Incorporation, by the stockholders of the Corporation shall
be effective with respect to any cause of action, suit, claim or other
matter, that, but for this Article IX, would accrue or arise prior to such
repeal or modification.
SECOND: That thereafter, at a meeting of the stockholders of the
Company duly called and held, the necessary number of shares as required by
statute were voted in favor of the foregoing amendments.
THIRD: That the foregoing amendments were duly adopted in accordance
with the provisions of Section 242 of the General Corporation Law of the State
of Delaware.
4
<PAGE>
IN WITNESS WHEREOF, Crane Co. has caused this Certificate to be signed
by Paul R. Hundt, its Vice President and attested by Frances E. Edwards, its
Assistant Secretary, this 30th day of April, 1987.
Crane Co.
By: /s/ Paul R. Hundt
------------------
Vice President
ATTEST:
/s/ Frances E. Edwards
-----------------------
Assistant Secretary
5
<PAGE>
AMENDED CERTIFICATE OF DESIGNATION,
PREFERENCES AND RIGHTS
of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
CRANE CO.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
-----------------------------------
Crane Co., a corporation organized and existing under the General
Corporation Law of the State of Delaware (hereinafter called the "Corporation"),
hereby certifies that:
1. The Certificate of Designation, Preferences and Rights of Series A Junior
Participating Preferred Stock of the Corporation was filed on August 20, 1996.
2. There are no shares of Series A Junior Participating Preferred Stock of the
Corporation issued and outstanding as of the date hereof.
3. The powers, designations, preferences and relative, participating, optional
or other rights, if any, or the qualifications, limitations or restrictions
thereof, if any, of the Series A Junior Participating Preferred Stock of the
Corporation shall be amended and restated in their entirety as set forth below.
4. The following resolution was adopted by the Board of Directors of the
Corporation as required by Section 151 of the General Corporation Law at a
meeting duly called and held on April 20, 1998:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Corporation (hereinafter called the "Board of
Directors" or the "Board") in accordance with the provisions of the Certificate
of Incorporation of the Corporation, the Board of Directors hereby creates a
series of Preferred Stock, par value $.01 per share (the "Preferred Stock"), of
the Corporation and hereby states the designation and number of shares, and
fixes the relative rights, preferences, and limitations thereof as follows:
Series A Junior Participating Preferred Stock:
Section 1. Designation and Amount. The shares of this series shall
----------------------
be designated as "Series A Junior Participating Preferred Stock" (the "Series A
Preferred Stock") and the number of shares constituting the Series A Preferred
Stock shall be five hundred thousand
<PAGE>
(500,000). Such number of shares may be increased or decreased by resolution of
the Board of Directors; provided, that no decrease shall reduce the number of
--------
shares of Series A Preferred Stock to a number less than the number of shares
then outstanding plus the number of shares reserved for issuance upon the
exercise of outstanding options, rights or warrants or upon the conversion of
any outstanding securities issued by the Corporation convertible into Series A
Preferred Stock.
Section 2. Dividends and Distributions.
---------------------------
(A) Subject to the rights of the holders of any shares of any series
of Preferred Stock (or any other stock) ranking prior and superior to the
Series A Preferred Stock with respect to dividends, the holders of shares
of Series A Preferred Stock, in preference to the holders of Common Stock,
par value $.01 per share (the "Common Stock"), of the Corporation, and of
any other junior stock, shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the first day of March,
June, September and December in each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series A Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (a) $1 or (b) subject
to the provision for adjustment hereinafter set forth, 100 times the
aggregate per share amount of all cash dividends, and 100 times the
aggregate per share amount (payable in kind) of all non-cash dividends or
other distributions, other than a dividend payable in shares of Common
Stock or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect to
the first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series A Preferred Stock. In the event the
Corporation shall at any time declare or pay any dividend on the Common
Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of
Common Stock) into a greater or lesser number of shares of Common Stock,
then in each such case the amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event under clause
(b) of the preceding sentence shall be adjusted by multiplying such amount
by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which
is the number of shares of Common Stock that were outstanding immediately
prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock); provided
that, in the event no dividend or distribution shall have been declared on
the Common Stock during the period between any Quarterly Dividend Payment
Date and the next subsequent Quarterly Dividend Payment Date, a dividend of
-2-
<PAGE>
$1 per share on the Series A Preferred Stock shall nevertheless be payable
on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares, unless the date of issue
of such shares is prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall begin to accrue
from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of shares of Series A Preferred Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment
Date, in either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of Series A
Preferred Stock in an amount less than the total amount of such dividends
at the time accrued and payable on such shares hall be allocated pro rata
on a share-by-share basis among all such shares at the time outstanding.
The Board of Directors may fix a record date for the determination of
holders of shares of Series A Preferred Stock entitled to receive payment
of a dividend or distribution declared thereon, which record date shall be
not more than 60 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A
-------------
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Preferred Stock shall entitle the holder thereof to
100 votes on all matters submitted to a vote of the stockholders of the
Corporation. In the event the Corporation shall at any time declare or pay
any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by payment of
a dividend in shares of Common Stock) into a greater or lesser number of
shares of Common Stock, then in each such case the number of votes per
share to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such
number by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) Except as otherwise provided herein, in any other Certificate of
Designations creating a series of Preferred Stock or any similar stock, in
the Restated Certificate of Incorporation of the Corporation or by law, the
holders of shares of Series A Preferred Stock and the holders of shares of
Common Stock and any other capital stock of the Corporation having general
voting rights shall vote together as one class on all matters submitted to
a vote of stockholders of the Corporation.
-3-
<PAGE>
(C) Except as set forth herein, or as otherwise provided by law,
holders of Series A Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled
to vote with holders of Common Stock as set forth herein) for taking any
corporate action.
Section 4. Certain Restrictions.
--------------------
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Preferred
Stock outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions,
on any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred
Stock;
(ii) declare or pay dividends, or make any other distributions,
on any shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except dividends paid ratably on the Series A
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred
Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such junior stock in exchange for
shares of any stock of the Corporation ranking junior (as to dividends
and upon dissolution, liquidation or winding up) to the Series A
Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Series A Preferred Stock, or any shares of stock ranking
on a parity with the Series A Preferred Stock, except in accordance
with a purchase offer made in writing or by publication (as determined
by the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of
the Corporation unless the Corporation could, under paragraph (A) of this
Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
-4-
<PAGE>
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
-----------------
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
restated Certificate of Incorporation, or in any other Certificate of
Designations creating a series of Preferred Stock or any similar stock or as
otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
--------------------------------------
liquidation, dissolution or winding up of the Corporation, no distribution shall
be made (1) to the holders of shares of stock ranking junior (upon liquidation,
dissolution or winding up) to the Series A Preferred Stock unless, prior
thereto, the holders of shares of Series A Preferred Stock shall have received
$100 per share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment,
provided that the holders of shares of Series A Preferred Stock shall be
entitled to receive an aggregate amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 100 times the aggregate amount to be
distributed per share to holders of shares of Common Stock, or (2) to the
holders of shares of stock ranking on a parity (upon liquidation, dissolution or
winding up) with the Series A Preferred Stock, except distributions made ratably
on the Series A Preferred Stock and all such parity stock in proportion to the
total amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the Corporation shall at
any time declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the aggregate amount to which
holders of shares of Series A Preferred Stock were entitled immediately prior to
such event under the proviso in clause (1) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
---------------------------
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the
-5-
<PAGE>
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Preferred Stock
-------------
shall not be redeemable.
Section 9. Rank. The Series A Preferred Stock shall rank, with
----
respect to the payment of dividends and the distribution of assets, junior to
all series of any other class of Preferred Stock.
Section 10. Amendment. The Certificate of Incorporation of the
---------
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Preferred Stock
so as to affect them adversely without the affirmative vote of the holders of at
least two-thirds of the outstanding shares of Series A Preferred Stock, voting
together as a single class.
IN WITNESS WHEREOF, Crane Co. has caused this Certificate of
Designations of Series A Junior Participating Preferred Stock to be duly
executed by the undersigned this 2nd day of July, 1998.
Crane Co.
/s/ Augustus I. duPont
----------------------
Name: Augustus I. duPont
Title:Vice President
-6-
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CRANE CO.
Crane Co. (the "Corporation"), a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware, DOES
HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of the Corporation
resolutions were duly adopted setting forth a proposed amendment
of the Certificate of Incorporation of the Corporation, declaring
said amendment to be advisable and directing that it be submitted
to the stockholders of the Corporation for approval and adoption.
The resolution setting forth the proposed amendment is as
follows:
RESOLVED, that the first paragraph of Article IV of the
Certificate of Incorporation be amended in its entirety to read
as follows:
"The total number of shares of all classes of stock which the
Corporation shall have authority to issue is Two Hundred Million
(200,000,000) shares of common stock, par value $1.00 per share
("Common Stock"), and Five Million (5,000,000) shares of
preferred stock, par value $.01per share ("Preferred Stock")."
SECOND: That a majority of the outstanding stock entitled to vote on the
proposed amendment voted in favor of the amendment at the Annual
Meeting of Shareholders of the Corporation held on April 5, 1999.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the
State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by David S. Smith, its duly authorized officer on this 24th day of May,
1999.
CRANE CO.
By: /s/ David S. Smith
-----------------------------
David S. Smith
Vice President-Finance and
Chief Financial Officer
<PAGE>
EXHIBIT 3B
CRANE CO.
BY-LAWS
(as amended through January 24, 2000)
ARTICLE I
Definitions, Offices
Section 1. Definitions. When used herein, "Board" shall mean the
-----------
Board of Directors of the Corporation, "Chairman" shall mean the Chairman of the
Board and "Corporation" shall mean this Corporation.
Section 2. Principal Office. The principal office of the Corporation
----------------
shall be located in the City of Stamford, State of Connecticut.
Section 3. Other Offices. The Corporation may have and maintain such
-------------
other business office or offices, either within or without the State of
Connecticut, as the Board of Directors may from time to time determine.
Section 4. Registered Office. The registered office of the
-----------------
corporation shall be at such address as from time to time the Board of Directors
may determine.
ARTICLE II
Stockholders
Section 1. Annual Meeting. The annual meeting of the stockholders of
--------------
the corporation shall be held at the hour of ten o'clock a.m. on the second
Monday of May in each year unless the Board shall fix a different date and time,
for the election of Directors and for the transaction of such other business as
may properly come before the meeting. If the day fixed for the annual meeting
shall be a legal holiday, such meeting shall be held on the next succeeding
business day. If the election of Directors shall not be held on the day
designated herein for the annual meeting, or at any adjournment thereof, the
Board of Directors shall cause the election to be held at a special meeting of
the stockholders as soon thereafter as such meeting can conveniently be convened
and held.
<PAGE>
Section 2. Special Meetings. Special meetings of the stockholders for
----------------
any purpose may be called at any time only by a majority of the entire Board or
by the Chairman of the Board.
A call for a special meeting of stockholders shall be in writing, filed
with the Secretary, and shall specify the time and place of holding such meeting
and the purpose or purposes for which it is called.
Section 3. Stockholder Action. Any action required or permitted to be
------------------
taken by the stockholders of the Corporation must be effected at a duly called
annual or special meeting of stockholders of the Corporation and may not be
effected by any consent in writing by such stockholders.
Section 4. Place of Meetings. The annual meeting of stockholders and
-----------------
all special meetings of stockholders for the election of directors shall be held
either at the principal office of the Corporation or at such other place
suitable for the holding of a stockholders' meeting as shall be designated in
the notice thereof. Special meetings of stockholders for a purpose or purposes
other than the election of directors may be held at such place, either within or
without the State of Connecticut, as shall be specified or fixed in the call for
such meeting and the notice thereof as the place for the holding of a special
meeting for any purpose or purposes.
Section 5. Notice of Meetings. Except as otherwise provided by
------------------
statute, written or printed notice stating the place, day and hour of the
meeting and, in case of a special meeting, stating the purpose or purposes for
which the meeting is called, shall be delivered not less than 10 nor more than
60 days before the date of the meeting, either personally or by mail, by or at
the direction of the Secretary, to each stockholder of record entitled to vote
at such meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail in a sealed envelope addressed to the
stockholder at his last known post office address as it appears on the stock
record books of the Corporation, with postage thereon prepaid.
Attendance of a person at a meeting of stockholders, in person or by
proxy, constitutes a waiver of notice of the meeting, except when the
stockholder attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened.
2
<PAGE>
Section 6. Record Dates. The Board may fix in advance a date, not
------------
more than 60 nor fewer than 10 days prior to the date of any meeting of
stockholders, nor more than 60 days prior to the date for the payment of any
dividend, or the date for the allotment of rights, or the date when any change
or conversion or exchange of capital stock shall go into effect, as a record
date for the determination of the stockholders entitled to notice of, and to
vote at, any such meeting and any adjournment thereof, or entitled to receive
payment of any such dividend, or to any such allotment of rights, or to exercise
the rights in respect of any such change, conversion or exchange of capital
stock, and in such case such stockholders and only such stockholders as shall
the stockholders of record on the date so fixed shall be entitled to such notice
of, and to vote at, such meeting and any adjournment thereof, or to receive
payment of such dividend, or to receive such allotment of rights, or to exercise
such rights, as the case may be, notwithstanding any transfer of any stock on
the books of the Corporation after any such record date fixed as aforesaid.
Section 7. Voting Lists. The officer or agent having charge of the
------------
transfer book for shares of the Corporation shall prepare and make, at least 10
days before every meeting of stockholders, a complete list of the stockholders
entitled to vote at such meeting, arranged in alphabetical order, and showing
the address of each stockholder and the number of shares registered in the name
of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall be produced and kept at the time and
place of the meeting during the whole time thereof and may be inspected by any
stockholder present. The original share or stock ledger or transfer book or a
duplicate thereof, shall be the only evidence as to who are the stockholders
entitled to examine such list or share ledger or transfer book or to vote at any
meeting of stockholders.
Section 8. Quorum. At any meeting of stockholders the holders of a
------
majority of the shares of the capital stock of the corporation issued and
outstanding and entitled to vote, present in person or represented by proxy,
shall constitute a quorum of the stockholders for all purposes unless a greater
or lesser quorum shall be provided by law or by the Certificate of
3
<PAGE>
Incorporation and in such case the representation of the number so required
shall constitute a quorum. The stockholders present in person or by proxy at a
meeting at which a quorum is present may continue to do business until
adjournment, notwithstanding withdrawal of enough stockholders to leave less
than a quorum.
Whether or not a quorum is present the meeting may be adjourned from
time to time by a vote of the holders of a majority of the shares present. At
any such adjourned meeting at which a quorum shall be present, any business may
be transacted which might have been transacted at the meeting if held at the
time specified in the notice thereof.
Section 9. Voting and Proxies. Each holder of Common Stock shall be
------------------
entitled to one vote per share held of record upon each matter on which
stockholders generally are entitled to vote.
At all meetings of stockholders, a stockholder entitled to vote may
vote in person or by proxy executed in writing by the stockholder or by his duly
authorized attorney-in-fact. Such proxy shall be filed with the Secretary of
the Corporation before or at the time of the meeting. Unless otherwise provided
by law, all questions touching the validity or sufficiency of the proxies shall
be decided by the Secretary.
Directors shall be elected by a plurality of the votes cast at an
election.
All other action (unless a greater plurality is required by law or by
the Certificate of Incorporation or by these By-laws) shall be authorized by a
majority of the votes cast by the holders of shares entitled to vote thereon,
present in person or represented by proxy, and where a separate vote by class is
required, by a majority of the votes cast by stockholders of such class, present
in person or represented by proxy.
Section 10. Voting of Shares by Certain Holders.
-----------------------------------
(a) Shares standing in the name of another corporation, domestic
or foreign, may be voted by such officer, agent or proxy as the By-laws of such
corporation may prescribe, or, in the absence of such provision, as the Board of
Directors of such corporation may determine.
4
<PAGE>
(b) Shares standing in the name of a deceased person may be voted
by his administrator or his executor either in person or by proxy.
(c) Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into his name, if authority so to do
be contained in an appropriate order of the court by which such receiver was
appointed, and a certified copy of such order is filed with the Secretary of the
Corporation before or at the time of the meeting.
(d) A stockholder whose shares are pledged shall be entitled to
vote such shares until the shares have been transferred into the name of the
pledgee, and thereafter the pledgee shall be entitled to vote the shares so
transferred.
(e) Shares of the Corporation belonging to it shall not be voted,
directly or indirectly, at any meeting, and shall not be counted in determining
the total number of outstanding shares at any given time, but shares of the
Corporation held by it in a fiduciary capacity may be voted and shall be counted
in determining the number of outstanding shares at any given time.
Section 11. Inspectors. At each meeting of stockholders, the chairman
----------
of the meeting may appoint one or more inspectors of voting whose duty it shall
be to receive and count the ballots and make a written report showing the
results of the balloting.
Section 12. Nomination of Directors. Only persons who are nominated
-----------------------
in accordance with the following procedures shall be eligible for election as
directors; provided, however, that the following procedures shall not apply to
the nomination of persons for election as directors by vote of any class or
series of preferred stock of the Corporation. Nominations of persons for
election to the Board of Directors of the Corporation at an annual meeting of
stockholders may be made at such meeting by or at the direction of the Board of
Directors, by any committee or persons appointed by the Board of Directors or by
any common stockholder of the Corporation entitled to vote for the election of
directors at the meeting who complies with the notice procedures set forth in
this Section 12. Such nominations, other than those made by or at the direction
of the Board of Directors, shall be made pursuant to timely notice in writing to
the Secretary of the Corporation. To be timely, a
5
<PAGE>
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation, in the case of an annual meeting
of stockholders, not less than 90 nor more than 120 days prior to the
anniversary date of the immediately preceding annual meeting of stockholders;
provided, however, that in the event that the annual meeting is called for a
date that is not within 30 days before or after such anniversary date, notice by
the stockholder in order to be timely must be so received not later than the
close of business on the 15th day following the day on which such notice of the
date of the annual meeting was mailed or such public disclosure of the date of
the annual meeting was made, whichever first occurs; and in the case of a
special meeting of stockholders called for the purpose of electing directors,
not later than the close of business on the 15th day following the day on which
notice of the date of the special meeting was mailed or public disclosure of the
date of the special meeting was made, whichever first occurs. Such stockholder's
notice to the Secretary shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or re-election as a director, (i)
the name, age, business address and residence address of the person, (ii) the
principal occupation or employment of the person, (iii) the class, series and
number of shares of capital stock of the Corporation which are beneficially
owned by the person and (iv) any other information relating to the person that
is required to be disclosed in solicitations for proxies for election of
directors pursuant to the Rules and Regulations of the Securities and Exchange
Commission under Section 14 of the Securities Exchange Act of 1934, as amended;
and (b) as to the stockholder giving the notice (i) the name and record address
of the stockholder and (ii) the class, series and number of shares of capital
stock of the Corporation which are beneficially owned by the stockholder. Such
notice shall be accompanied by the executed consent of each nominee to serve as
a director if so elected. The Corporation may require any proposed nominee to
furnish such other information as may reasonably be required by the Corporation
to determine the eligibility of such proposed nominee to serve as a director of
the Corporation.
No person shall be eligible for election as a director of the
Corporation by the holders of Common Stock of the Corporation unless nominated
in accordance with the procedures set forth in this Section 12. The officer of
the Corporation presiding at an annual meeting of stockholders shall, if the
facts warrant, determine and declare to the meeting that a nomination was not
made in accordance with the foregoing proce-
6
<PAGE>
dure, and if he should so determine, he shall so declare to the meeting, and the
defective nomination shall be disregarded.
Section 13. Advance Notification of Stockholder Proposed Business to
--------------------------------------------------------
be Transacted at Annual Meetings. To be properly brought before an annual
- --------------------------------
meeting of stockholders, business must be either (a) specified in the notice of
meeting (or any supplement or amendment thereto) given by or at the direction of
the Board of Directors, (b) otherwise properly brought before the meeting by or
at the direction of the Board of Directors, or (c) otherwise properly brought
before the meeting by a stockholder. In addition to any other applicable
requirements, for business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the secretary of the Corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than 90 nor more than 120 days prior to the anniversary
date of the immediately preceding annual meeting of stockholders; provided,
however, that in the event that the annual meeting is called for a date that is
not within 30 days before or after such anniversary date, notice by the
stockholder in order to be timely must be so received not later than the close
of business on the 15th day following the day on which such notice of the date
of the annual meeting was mailed or such public disclosure of the date of the
annual meeting was made. Such stockholder's notice to the Secretary shall set
forth as to each matter the stockholder proposes to bring before the meeting (i)
a brief description of the business desired to be brought before the meeting and
the reasons for conducting such business at the meeting, (ii) the name and
record address of the stockholder proposing such business, (iii) the class,
series and number of shares of capital stock of the Corporation which are
beneficially owned by the stockholder and (iv) any material interest of the
stockholder in such business.
No business shall be conducted at an annual meeting except in
accordance with the procedures set forth in this Section 13, provided, however,
that nothing in this Section 13 shall be deemed to preclude discussion by any
stockholder of any business properly brought before the meeting. The officer of
the Corporation presiding at the meeting shall, if the facts warrant, determine
and declare to the meeting that business was not properly brought before the
meeting in accordance with the provisions of this Section 13, and if he should
so determine, he shall so declare to the meeting and any such business not
properly brought before the meeting shall not be transacted.
7
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The provisions of this Section 13 shall not apply to any stockholder
proposal included in the Corporation's proxy statement pursuant to Rule 14a-8
promulgated under the Securities Exchange Act of 1934, as amended.
8
<PAGE>
ARTICLE III
Directors
Section 1. Number. The business and affairs of the Corporation shall
------
be managed under the direction of the Board which shall consist of not less than
three nor more than fifteen persons. The exact number of directors within the
minimum and maximum limitations specified in the preceding sentence shall be
fixed from time to time by the board pursuant to a resolution adopted by a
majority of the entire Board.
Section 2. Election and Terms. The directors shall be divided into
------------------
three classes, as nearly equal in number as reasonably possible, with the term
of office of the first class to expire at the 1986 annual meeting of
stockholders, the term of office of the second class to expire at the 1987
annual meeting of stockholders and the term of office of the third class to
expire at the 1988 annual meeting of stockholders. At each annual meeting of
stockholders, directors elected to succeed those directors whose terms expire
shall be elected for a term of office to expire at the third succeeding annual
meeting of stockholders after their election.
Section 3. Newly Created Directorships and Vacancies. Newly created
-----------------------------------------
directorships resulting from any increase in the authorized number of directors
or any vacancies in the Board resulting from death, resignation, retirement,
disqualification, removal from office or other cause shall be filled only by a
majority vote of the directors then in office, and directors so chosen shall
hold office for a term expiring at the annual meeting of stockholders at which
the term of the class to which they have been elected expires. No decrease in
the number of directors constituting the Board shall shorten the term of any
incumbent director.
Section 4. Removal. Any director, or the entire Board, may be removed
-------
from office at any time, but only for cause and only by the affirmative vote of
the holders of at least two-thirds of the voting power of the shares of the
Corporation then entitled to vote at an election of directors, voting together
as a single class.
Section 5. Regular Meetings. The regular annual meeting of the Board
----------------
shall be held at such time and place as the
9
<PAGE>
Board may by resolution determine from time to time without other notice than as
set forth in such resolution.
The regular monthly meetings of the Board shall be held at such time
and place as the Board may by resolution determine from time to time.
The Board may by resolution change the times and places, either within
or without the State of Connecticut, for the holding of such regular monthly
meetings, and such times and places for the holding of other regular meetings
without notice other than such resolution.
Section 6. Special Meetings. Special meetings of the Board may be
----------------
held at any time on the call of the Chairman or at the request in writing of a
majority of the directors. Special meetings of the Board may be held at such
place, either within or without the State of Connecticut, as shall be specified
or fixed in the call for such meeting or notice thereof.
Section 7. Notice of Special Meetings. Notice of each special meeting
--------------------------
shall be deposited in the United States mail by or at the direction of the
Secretary to each director addressed to him at his residence or usual place of
business at least seventy-two (72) hours before the day on which the meeting is
to be held, or shall be sent to him by telegram, be delivered personally, or be
given orally at least twenty-four (24) hours before the day on which the meeting
is to be held. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail in a sealed envelope so addressed, with
postage thereon prepaid. If notice be given by telegraph, such notice shall be
deemed to be delivered when the same is delivered to the telegraph company. If
the Secretary shall fail or refuse to give any such notice, then notice may be
given by the officer or any one of the directors making the call.
Notice may be waived in writing by any director, either before or after
the meeting. Any meeting of the Board of Directors shall be a legal meeting
without any notice thereof having been given if all directors shall be present
thereat, except where a director attends a meeting for the express purpose of
objecting to the transaction of any business because the meeting is not lawfully
called or convened.
Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of
10
<PAGE>
such meeting, and any and all business may be transacted thereat.
11
<PAGE>
Section 8. Quorum. A majority of the members of the Board then in
------
office, or of a committee thereof, shall constitute a quorum for the transaction
of business, except that the presence of the Chairman of the Board shall be
necessary to constitute a quorum of the Executive Committee of the Board, and
the vote of a majority of the members present at a meeting at which a quorum is
present shall be the act of the Board or of the Committee thereof, except for
the amendment of the By-laws which shall require the vote of not less than a
majority of the members of the Board then in office.
Section 9. Action without a Meeting. Action required or permitted to
------------------------
be taken pursuant to authorization voted at a meeting of the Board, or a
committee thereof, may be taken without a meeting if, before or after the
action, all members of the Board or of the Committee consent thereto in writing.
The written consents shall be filed with the minutes of the proceedings of the
Board or Committee. The consent shall have the same effect as a vote of the
Board or Committee thereof for all purposes.
Section 10. Organization. At all meetings of the Board the Chairman,
------------
the Vice Chairman of the Board, the President, an Executive Vice President or a
Vice President, or in their absence a member of the Board to be selected by the
members present, shall preside as Chairman of the meeting. The Secretary or an
Assistant Secretary of the Corporation shall act as Secretary of all meetings of
the Board, except that in their absence the Chairman of the meeting may
designate any other person to act as secretary.
At meetings of the Board business shall be transacted in such order as
from time to time the Board may determine.
Section 11. Compensation. In the discretion of the Board, directors
------------
may be paid a fixed fee for attendance at meetings and allowed reimbursement for
expenses incurred in such attendance or otherwise in performance of duties as
directors. In addition each director may be paid a fixed annual fee, in an
amount to be determined by the Board, payable in convenient installments.
Directors shall also be entitled to receive compensation for services rendered
to the Corporation as officers, committee members, employees, or in any other
capacity than as directors.
12
<PAGE>
Section 12. Presence at Meeting. A member of the Board or of a
-------------------
Committee designated by the Board may participate in a meeting by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other. Participation in this
manner constitutes presence in person at the meeting.
Section 13. Executive Committee. The Board, by resolution adopted by
-------------------
a majority of the entire board, may designate two or more directors to
constitute an Executive Committee, which committee, to the extent Provided in
such resolution or in these By-laws, shall have and exercise all of the
authority of the Board in the management of the Corporation provided such
Committee shall not have the authority of the Board in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or consolidation
involving the corporation, recommending to the stockholders the sale, lease, or
exchange of all or substantially all of the property and assets of the
Corporation, recommending to the stockholders a dissolution of the Corporation
or a revocation thereof, filling vacancies on the Board or on any committee of
the Board (including the Executive Committee), amending, altering or repealing
any By-laws of the Corporation, electing or removing officers of the
Corporation, fixing the compensation of any member of the Executive Committee or
amending, altering or repealing any resolution of the Board which by its terms
provides that it shall not be amended, altered or repealed by the Executive
Committee.
Section 14. Committees of the Board. The Board may designate one or
-----------------------
more other committees, each consisting of one or more directors of the
Corporation as members and one or more directors as alternate members, with such
power and authority as prescribed by the By-laws or as provided in a resolution
adopted by a majority of the Board. Each Committee, and each member thereof,
shall serve at the pleasure of the Board.
13
<PAGE>
ARTICLE IV
Officers
Section 1. Officers' Number. The officers of the Corporation shall be
----------------
a Chairman of the Board, a President, a Vice Chairman, one or more Executive
Vice Presidents, Senior Vice Presidents and Vice Presidents, a Secretary, a
Treasurer, a Controller, and such other subordinate corporate or divisional
officers as may be elected or appointed in accordance with the provisions of
Section 3 of this Article IV. The Board may designate a variation in the title
of any officer. Any two or more offices may be held by the same person except
the offices of President and Secretary.
Section 2. Election, Term of Office, and Qualifications. The officers
--------------------------------------------
of the Corporation shall be elected annually by the Board at the first meeting
of the Board held after the annual meeting of stockholders. If the election of
officers shall not be held at such meeting, such election shall be held as soon
thereafter as the same can conveniently be held. Each officer, except such
officers as may be elected or appointed in accordance with the provisions of
Section 3 of this Article IV, shall hold his office until his successor shall
have been duly elected and shall have qualified or until his death, resignation
or removal.
Section 3. Subordinate Officers.
--------------------
(a) Subordinate Corporate Officers. The Board may annually appoint
------------------------------
one or more Assistant Controllers, Executive Assistants, Assistant Vice
Presidents, a Secretary of the Board, one or more Assistant Secretaries,
Assistant Treasurers, Auditors or Assistant Auditors, and such other subordinate
corporate officers and agents as the Board may determine, to hold office as
subordinate corporate officers for such period and with such authority and to
perform such duties as may be prescribed by these By-laws or as the Board may
from time to time determine. The Board may, by resolution, empower the Chairman
of the Board to appoint any such subordinate corporate officers or agents to
hold office for such period and to perform such duties as may be prescribed in
said resolution. In its discretion the Board may leave unfilled, for any such
period as it may fix by resolution, any corporate office, except those of
President, Secretary and Treasurer.
14
<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.
15
<PAGE>
Section 8. The Chairman of the Board. The Board shall elect a
-------------------------
Chairman who shall be the Chief Executive Officer of the Corporation. He shall
preside at all meetings of the stockholders and of the Board. He shall have
general and active management of the business of the Corporation and shall see
that all orders and resolutions of the Board are carried into effect, subject,
however, to the right of the Board to delegate any specific powers, except such
as may be by law exclusively conferred upon the President, to any officer or
officers of the Corporation. All papers, documents, deeds, and other
instruments required to be executed by the Corporation shall be signed and
executed for the Corporation by the Chairman or the President when directed by,
and in the manner prescribed by, the Board. He shall have the general powers
and duties of supervision and management which are usually vested in the Chief
Executive Officer of a Corporation.
Section 9. The President. The President shall have supervision over
-------------
all such matters as may be delegated to him by the Board or the Chairman. In
the absence of the Chairman or whenever the office of Chairman is vacant the
President shall have the general powers of and shall perform the duties
pertaining to the office of Chairman.
Section 10. The Vice Chairman of the Board. The Board may elect a
------------------------------
Vice Chairman who shall have such duties as may be delegated to him by the Board
or the Chairman.
Section 11. Executive Vice Presidents; Senior Vice Presidents and Vice
----------------------------------------------------------
Presidents.
- ----------
(a) Executive Vice Presidents and Senior Vice Presidents shall have
supervision over all such matters, other officers of the Company, including Vice
Presidents, and in the case of Executive Vice Presidents, Senior Vice
Presidents, and other employees as may be designated or assigned to them by the
President or Chairman of the Board, and shall perform such duties as the Board
of Directors may designate or as may be assigned to them by the President or by
the Chairman of the Board in the event of absence or disability of the
President. Whenever the term "Vice President" is used in any other Article of
these By-laws, it shall be deemed to include Executive Vice Presidents and
Senior Vice Presidents.
(b) The Vice Presidents shall perform such duties as the Board may
designate or may be assigned to them by the
16
<PAGE>
President, or the Chairman of the Board in the event of absence or disability of
the President.
Section 12. Treasurer. The Treasurer shall:
---------
(a) Subject to the supervision and direction of the Vice President
- - Finance, have the custody of all moneys, notes, bonds, securities and other
evidences of indebtedness belonging to the Corporation, and shall keep full and
accurate accounts of all moneys and securities received and of all moneys paid
by him on account of the Corporation. He shall daily deposit all moneys, checks
and drafts received to the credit and in the name of the Corporation, in such
banks or other depositories as shall from time to time be authorized, approved
or directed by the President, the Vice President - Finance, or the Board, and
shall, on behalf of the corporation, endorse for deposit or collection, checks,
notes, drafts and other obligations, provided, however, that checks of the
United States Government or of any state or municipal government, which may be
received by any branch house of the Corporation, may be endorsed for deposit by
the local manager of the house receiving the check, and provided further,
however, that checks, warrants, drafts, notes and other negotiable instruments,
which may be received by any branch house of the Corporation, may be endorsed by
the local manager in the name of the Corporation for collection or deposit by or
in the local bank authorized to carry the local accounts.
(b) Furnish to the Board, to the President and to such other
officers as the Board may designate, at such times as may be required, an
account of all his transactions as Treasurer.
(c) Perform such other duties pertaining to the business of the
Corporation as shall be directed or required by the President, the Vice
President - Finance, or the Board and, subject to the control of the Vice
President - Finance, the Board and these By-laws, perform all acts incident to
the office of the Treasurer.
d) Give such bond of the faithful discharge of his duties as the
Board may require.
The books and papers of the Treasurer shall at all times be open to the
inspection of the President and each member of the Board.
17
<PAGE>
Section 13. Secretary. The Secretary shall:
---------
(a) Attend all meetings of the stockholders and also, in the event
that no Secretary of the Board is elected or appointed, he shall attend meetings
of the Board, and keep the minutes of such meetings in one or more books
provided for that purpose.
(b) See that all notices are duly given in accordance with the
provisions of these By-laws, or as required by law.
(c) Be custodian of the corporate records and of the seal of the
Corporation and see that the seal of the Corporation or a facsimile thereof is
affixed to or impressed on all certificates for shares prior to the issue
thereof, and all documents, the execution of which on behalf of the Corporation
under its seal, is duly authorized.
(d) Sign with the President or a Vice President certificates for
shares of the Corporation, the issue of which shall have been authorized by
resolution of the Board.
(e) See that the reports, statements, certificates and all other
documents and records required by law are properly made, kept and filed.
(f) In general, perform all other duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the President or the Board.
18
<PAGE>
Section 14. Controller. The Controller shall:
----------
(a) Maintain adequate records of all assets, liabilities, and
transactions of this Corporation; see that adequate audits thereof are currently
and regularly made; and in conjunction with other officers and department heads
initiate and enforce measures and procedures whereby the business of the
Corporation shall be conducted with the maximum safety, efficiency, and economy.
His duties and powers shall extend to all subsidiary corporations and to all
affiliated corporations.
(b) Prepare and furnish such reports and financial statements
covering results of operations of the Corporation as shall be required of him by
the President or the Board. Prepare and furnish such reports and statements
showing the financial condition of the Corporation as shall be required of him
by the President or the Board, and have the primary responsibility for the
preparation of financial reports to the stockholders.
(c) Perform such other duties pertaining to the business of the
Corporation as shall be directed or required by the President or the Board and,
subject to the control of the President, the Board and these By-laws, perform
all acts incident to the office of the Controller.
The books, records and papers of the Controller shall at all times be
open to the inspection of the President and each member of the Board.
Section 15. Assistant Treasurers. If one or more Assistant Treasurers
--------------------
shall be elected or appointed pursuant to the provisions of Section 3 of this
Article IV, then in the absence or disability of the Treasurer, the Assistant
Treasurers shall perform all the duties of the Treasurer, and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
Treasurer, except that they shall have no power to sign in the name of the
Corporation contracts as described in Section 1 of Article VII, unless
specifically authorized by the Board. Any such Assistant Treasurer shall
perform such other duties as from time to time may be assigned to him by the
Board or any superior officer.
Section 16. Assistant Secretaries. If one or more Assistant
---------------------
Secretaries shall be elected or appointed pursuant to the provisions of Section
3 of this Article IV, then in the absence or disability of the Secretary, the
Assistant Secretaries shall perform the duties of the Secretary, and when
19
<PAGE>
so acting shall have all the powers of, and be subject to all the restrictions
imposed upon, the Secretary. Any such Assistant Secretary shall perform such
other duties as from time to time may be assigned to him by the Board or any
superior officer.
Section 17. Secretary of the Board. The Secretary of the Board shall
----------------------
record the minutes of meetings of the Board, deposit them with the Secretary of
the Corporation, and perform such other duties as may be assigned to him by the
Board.
Section 18. Compensation. The compensation of the officers shall be
------------
fixed from time to time by the Board, provided that the Board may authorize any
officer or Committee to fix the compensation of officers and employees. No
officer shall be prevented from receiving such compensation by reason of the
fact that he is also a director of the Corporation.
ARTICLE V
Capital Stock
Section 1. Certificates of Stock. The certificates for shares of the
---------------------
capital stock of the Corporation shall be in such form as shall be approved by
the Board. The certificates shall be signed by the Chairman or the Vice
Chairman of the Board, the President, an Executive Vice President, Senior Vice
President or Vice President and also by the Treasurer or the Secretary, and may
be sealed with the seal of the Corporation, or a facsimile thereof.
The signatures of the aforesaid officers may be facsimiles if the
certificate is countersigned by a transfer agent or registered by a registrar
other than the Corporation or its employee. The validity of any stock
certificate of the Corporation signed and executed by or in the name of duly
qualified officers of the Corporation shall not be affected by the subsequent
death, resignation, or the ceasing for any other reason of any such officer to
hold such office, whether before or after the date borne by or the actual
delivery of such certificate.
The name of the person owning the shares represented thereby, with the
number of such shares and the date of issue, shall be entered on the
Corporation's capital stock records.
20
<PAGE>
All certificates surrendered to the Corporation shall be cancelled, and
no new certificates shall be issued until the former certificate for the same
number of shares shall have been surrendered and cancelled except in case of a
lost or destroyed certificate.
The Corporation may treat the holder of record of any share or shares
of stock as the holder in fact thereof, and shall not be bound to recognize any
equitable or other claim to interest in any such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof,
save as expressly provided by law.
Section 2. Lost, Stolen or Destroyed Certificates. The Corporation
--------------------------------------
may issue a new certificate for shares in place of a certificate theretofore
issued by it, alleged to have been lost, stolen or destroyed, and the Board may
require the owner of the lost or destroyed certificate, or his legal
representative, to give the Corporation a bond in form satisfactory to the
Corporation sufficient to indemnify the Corporation, its transfer agents and
registrars against any claim that may be made against them on account of the
alleged lost or destroyed certificate or the issuance of such a new certificate.
Section 3. Transfer of Shares. Shares of the capital stock of the
------------------
Corporation shall be transferable by the owner thereof in person or by duly
authorized attorney, upon surrender of the certificates therefor properly
endorsed. The Board, at its option, may appoint a transfer agent and registrar,
or one or more transfer agents and one or more registrars, or either, for the
stock of the Corporation.
Section 4. Regulations. The Board shall have power and authority to
-----------
make all such rules and regulations as they may deem expedient concerning the
issue, transfer and registration of certificates for shares of the capital stock
of the Corporation.
21
<PAGE>
ARTICLE VI
[Intentionally Omitted in 1985]
ARTICLE VII
Execution of Instruments on Behalf of the Corporation
Section 1. Contracts. Except as herein provided, all contracts of the
---------
Corporation shall be signed in the name of the Corporation by the Chairman, the
President, a Vice President or the Treasurer, sealed with the Corporate Seal and
attested by the Secretary or an Assistant Secretary.
Bids and contracts for the purchase or sale of merchandise in the
ordinary course of business of branch houses or divisions of the Corporation,
together with bonds given to secure the performance thereof, shall be executed
in the name of the Corporation or in an authorized divisional name by an officer
authorized to sign contracts as above specified in this section, or, if relating
to business of branch houses, by a District Manager, or by the Manager or
Assistant Manager of the branch houses, respectively, and if relating to the
business of a division, by an Officer, Manager or Assistant Manager of such
division.
Section 2. Bills of Exchange, Promissory Notes, Bonds or Other
---------------------------------------------------
Evidence of Indebtedness of the Corporation, Bonds of Indemnity, and Securities
- -------------------------------------------------------------------------------
Received. All bills of exchange, promissory notes, bonds, or other evidences of
- --------
indebtedness of the Corporation shall be signed in the name of the Corporation
by the Chairman, the President, or a Vice President, and shall be countersigned
by the Treasurer or by an Assistant Treasurer.
All forms of bonds of indemnity, the execution of which is required of
the Corporation, shall be signed in the name of the Corporation by the Chairman,
the President, a Vice President, the Treasurer or an Assistant Treasurer, and
shall be countersigned by the Secretary or an Assistant Secretary.
Any securities received by the Corporation in settlement or for
security for the payment of any indebtedness due the Corporation may be sold,
assigned, transferred and delivered by the Chairman, the President, a Vice
President or the Treasurer, and all instruments of conveyance, assignment or
transfer thereof shall be executed in the name of the
22
<PAGE>
Corporation by such officers, attested by the Secretary or an Assistant
Secretary, and the corporate seal attached.
Section 3. Checks and Accounts. All checks shall be signed by either
-------------------
the Chairman, the President, a Vice President, the Treasurer or an Assistant
Treasurer, the Controller or Assistant Controller and also signed by either the
Controller or an Assistant Controller, an Auditor or an Assistant Auditor, the
Secretary or an Assistant Secretary of the Corporation, and no other person or
persons shall be authorized to sign checks upon or against the funds of the
Corporation except as hereinafter provided.
The Chairman, the President, a Vice President, or the Treasurer is
authorized to establish and maintain Managers' funds for branch house's or
manufacturing division's general use including the meeting of payrolls, at the
various locations of the branch houses, or manufacturing divisions of the
Corporation, and special payroll funds at any location where the corporation
carries on business. Such funds shall be subject to withdrawal on the signature
or signatures of one or more persons, as determined and designated in writing by
either the Chairman, the President, a Vice President, or the Treasurer.
Checks drawn for the payment of dividends on shares of the
Corporation's stock, and such other checks as may be designated in writing by
the Chairman or the President, together with a Vice President or the Treasurer,
may bear facsimile signatures, provided, however, that for the purpose of
transfer ring funds between banks in which the Corporation has monies on
deposit, the Treasurer or an Assistant Treasurer may direct or authorize the use
of checks payable to a depository hank for credit of the Corporation, which
checks shall have plainly printed upon their face "Depository Transfer Check"
and shall require no signature other than the printed name of the Corporation.
The respective Managers or Assistant Managers of the Corporation's
branch houses, Managers, Credit Managers or Credit Supervisors of Regional
Offices, and Officers, Managers or Assistant Managers of the Corporation's
Divisions, are authorized to file claims for and to collect on behalf of the
Corporation any amounts due for merchandise sold or invoiced from such branch
houses, regional offices or divisions, and in the name of the corporation, or in
an authorized divisional name, to give proper receipts, releases and waivers of
mechanics' and materialmen's liens in connection therewith.
23
<PAGE>
Section 4. Conveyances, Leases, Releases and Satisfaction of Judgment
----------------------------------------------------------
and Mortgages. All conveyances, leases and releases and satisfactions of
- -------------
judgment and mortgages shall be signed in the name of the Corporation by the
Chairman, the President, a Vice President or the Treasurer, sealed with the
corporate seal and attested by the Secretary or an Assistant Secretary.
Section 5. Other Instruments. All other instruments not hereinabove
-----------------
specifically designated shall be signed in the name of the Corporation by the
Chairman, the President, a Vice President, or Treasurer, sealed with the
corporate seal and attested by the Secretary or an Assistant Secretary,
provided, however, that notwithstanding the provisions contained in these By-
laws, the Board may at any time direct the manner in which and the person by
whom any particular instrument, contract or obligation, or any class of
instruments, contracts or obligations of the Corporation may and shall be
executed.
Section 6. Miscellaneous. Whenever the Board directs the execution of
--------------
an instrument, contract or obligation and does not specify the officer who shall
execute the same, it shall be executed as hereinabove provided.
ARTICLE VIII
Corporate Seal
The corporate seal of the Corporation shall have inscribed thereon the
name of the Corporation and the words "Corporate Seal-1985-Delaware." Said seal
may be used by causing it or a facsimile or equivalent thereof to be impressed
or affixed or reproduced, and shall be in the custody of the Secretary. If an
when so directed by the Board, a duplicate of the seal may be kept and used by
the Treasurer, or by any Assistant Treasurer or Assistant Secretary.
24
<PAGE>
ARTICLE IX
Miscellaneous Provisions
Section 1. Dividends. Dividends upon the outstanding shares of the
----------
Corporation may be paid from any source permitted by law. Dividends may be
declared at any regular or special meeting of the Board and may be paid in cash
or other property or in the form of a stock dividend.
Section 2. Fiscal Year. The fiscal year of the Corporation shall end
------------
on the 31st day of December each year, unless otherwise provided by resolution
of the Board.
Section 3. Stock in other Corporations. Any shares of stock in any
----------------------------
other corporation which may from time to time be held by the Corporation may be
represented and voted at any meeting of stockholders of such corporation by the
Chairman or the President of the Corporation or by any other person or persons
thereunto authorized by the Board, or by any proxy designated by written
instrument of appointment executed in the name of the Corporation either by the
Chairman, the President, or a Vice President, and attested by the Secretary or
an Assistant Secretary.
Shares of stock in any other corporation which shares are owned by the
Corporation need not stand in its name, but may be held for its benefit in the
individual name of the Chairman or of any other nominee designated for the
purpose by the Board. Certificates for shares so held for the benefit of the
Corporation shall be endorsed in blank, or have proper stock powers attached so
that said certificates are at all time in due form for transfer, and shall be
held for safekeeping in such manner as shall be determined from time to time by
the Board.
Section 4. Election of Auditors. The directors shall select
---------------------
independent auditors to audit the books and records of the Corporation for the
current fiscal year, subject to the approval of the stockholders at the annual
meeting. Should the auditors so elect resign, be removed for good cause shown,
or otherwise fail to serve during or with respect to said year, a majority of
the directors shall select a substitute firm of auditors to serve with respect
to said year.
25
<PAGE>
ARTICLE X
Indemnification
Section 1. Actions, Suits or Proceedings other than by or in the Right
-----------------------------------------------------------
of the Corporation. The Corporation shall indemnify any person who was or is a
- -------------------
party or is threatened to be made a party to any threatened pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was or has agreed to become a director or
officer of the Corporation, or is or was serving or has agreed to serve at the
request of the Corporation as a director or officer or trustee of another
corporation, partnership, joint venture, trust or other enterprise, or by reason
of any action alleged to have been taken or omitted in such capacity against
costs, charges, expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him or on his
behalf in connection with such action, suit or proceeding or any appeal
therefrom, if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation, and with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
Section 2. Actions or Suits by or in the Right of the Corporation.
------------------------------------------------------
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was or has agreed to become a director or
officer of the Corporation, or is or was serving or has agreed to serve at the
request of the Corporation as a director or officer or trustee of another
corporation, partnership, joint venture, trust or other enterprise, or by reason
of any action alleged to have been taken or omitted in such capacity, against
costs, charges and expenses (including attorneys' fees) actually and reasonably
incurred by him or on his behalf in connection with the defense or settlement of
such
26
<PAGE>
action or suit and any appeal therefrom, if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Corporation except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
Corporation unless and only to the extent that the Court of Chancery of Delaware
or the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of such liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such costs, charges and expenses which the Court of Chancery or
such other court shall deem proper.
Section 3. Indemnification for Costs, Charges and Expenses of
--------------------------------------------------
Successful Party. Notwithstanding the other provisions of this Article, to the
- ----------------
extent that a director or officer of the Corporation has been successful on the
merits or otherwise, including, without limitation, the dismissal of an action
without prejudice, in defense of any action, suit or proceeding referred to in
Sections 1 and 2 of this Article, or in defense of any claim issue or matter
therein, he shall be indemnified against all costs, charges and expenses
(including attorneys' fees) actually and reasonably incurred by him or on his
behalf in connection therewith.
Section 4. Determination of Right to Indemnification. Any
-----------------------------------------
indemnification under Sections 1 and 2 of this Article (unless ordered by a
court) shall be paid by the corporation unless a determination is made (1) by
the Board of Directors by a majority vote of the directors who are not parties
to such action, suit or proceeding, even though less than a quorum, or (2) if
there are no such directors, or if such directors so direct, by independent
legal counsel in a written opinion, or (3) by the stockholders, that
indemnification of the director or officer is not proper in the circumstances
because he has not met the applicable standard of conduct set forth in Sections
1 and 2 of this Article.
Section 5. Advance of Costs, Charges and Expenses. Costs, charges and
--------------------------------------
expenses (including attorneys' fees) incurred by a person referred to in
Sections 1 and 2 of this Article in defending any civil, criminal,
administrative or investigative action, suit or proceeding shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding; provided, however, that the payment of such costs, charges and
expenses incurred by a director or officer in his
27
<PAGE>
capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such person while a director or officer) in
advance of the final disposition of such action, suit or proceeding shall be
made only upon receipt of an undertaking by or on behalf of the director or
officer to repay all amounts so advanced in the event that it shall ultimately
be determined that such director or officer is not entitled to be indemnified by
the corporation as authorized in this Article. The Board of Directors may, in
the manner set forth above, and upon approval of such director or officer of the
Corporation, authorize the Corporation's counsel to represent such person, in
any action, suit or proceeding, whether or not the Corporation is a party to
such action, suit or proceeding.
Section 6. Procedure for Indemnification. Any indemnification under
-----------------------------
Sections 1, 2 and 3, or advance of costs, charges and expenses under Section 5
of this Article, shall be made promptly, and in any event within 60 days, upon
the written request of the director or officer. The right to indemnification or
advances as granted by this Article shall be enforceable by the director or
officer in any court of competent jurisdiction, if the Corporation denies such
request, in whole or in part, or if no disposition thereof is made within 60
days. Such persons' costs and expenses incurred in connection with successfully
establishing right to indemnification, in whole or in part, in any such action
shall also be indemnified by the Corporation. It shall be a defense to any such
action (other than an action brought to enforce a claim for the advance of
costs, charges and expenses under Section 5 of this Article where the required
undertaking, if any, has been received by the Corporation) that the claimant has
not met the standard of conduct set forth in Sections 1 or 2 of this Article,
but the burden of proving such defense shall be on the Corporation. Neither the
failure of the Corporation (including its Board of Directors, its independent
legal counsel, and its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he has met the applicable standard of conduct set
forth in Sections 1 or 2 of this Article, nor the fact that there has been an
actual determination by the Corporation (including its Board of Directors, its
independent legal counsel, and its stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that the claimant has not met the applicable standard of conduct.
Section 7. Other Rights; Continuation of Right to Indemnification.
------------------------------------------------------
The indemnification provided by this Article
28
<PAGE>
shall not be deemed exclusive of any other rights to which a person seeking
indemnification may be entitled under any law (common or statutory), agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding
office or while employed by or acting as agent for the Corporation, and shall
continue as to a person who has ceased to be a director or officer, and shall
inure to the benefit of the estate, heirs, executors and administrators of such
person. All rights to indemnification under this Article shall be deemed to be a
contract between the Corporation and each director or officer of the Corporation
who serves or served in such capacity at any time while this Article is in
effect. Any repeal or modification of this Article or any repeal or modification
of relevant provisions of the Delaware General Corporation Law or any other
applicable laws shall not in any way diminish any rights to indemnification of
such director or officer or the obligations of the Corporation arising
hereunder.
Section 8. Insurance. The Corporation shall purchase and maintain
---------
insurance on behalf of any person who is or was or has agreed to become a
director or officer of the Corporation, or is or was serving at the request of
the Corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him or on his behalf in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article,
provided that such insurance is available on acceptable terms, which
- --------
determination shall be made by a vote of a majority of the entire Board of
Directors.
Section 9. Savings Clause. If this Article or any portion hereof
--------------
shall be invalidated on any ground by any court of competent jurisdiction, any
portion of this Article so invalidated shall be severable and such invalidity
shall not by itself render any other portion of this Article invalid, and the
Corporation shall nevertheless indemnify each director or officer of the
Corporation as to costs, charges and expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement with respect to any action, suit
or proceeding, whether civil, criminal, administrative or investigative,
including an action by or in the right of the Corporation, to the full extent
permitted by any applicable portion of this Article that shall not have been
invalidated and to the full extent permitted by applicable law.
29
<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.
30
<PAGE>
CRANE CO. AND SUBSIDIARIES
Exhibit 11 to FORM 10-K
Annual Report for the Year Ended December 31, 1999
Computation of Net Income Per Share*
(In Thousands Except Per Share Data)
<TABLE>
<CAPTION>
Basic 1999 1998 1997 1996 1995
- ----- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Income from Continuing Operations $100,898 $124,842 $103,716 $79,822 $64,486
Income from Discontinued Operations 13,672 13,596 9,055 12,288 11,851
-------- -------- -------- ------- -------
Net Income $114,570 $138,438 $112,771 $92,110 $76,337
======== ======== ======== ======= =======
Income from Continuing Operations $ 1.51 $ 1.82 $ 1.51 $ 1.17 $ .95
Income from Discontinued Operations .20 .20 .13 .18 .17
-------- -------- -------- ------- -------
Net income per share $ 1.71 $ 2.02 $ 1.64 $ 1.35 $ 1.12
======== ======== ======== ======= =======
Weighted Average number of
basic shares 66,981 68,555 68,565 68,034 68,096
Diluted
-------
Income from Continuing Operations $100,898 $124,842 $103,716 $79,822 $64,486
Income from Discontinued Operations 13,672 13,596 9,055 12,288 11,851
-------- -------- -------- ------- -------
Net Income $114,570 $138,438 $112,771 $92,110 $76,337
======== ======== ======== ======= =======
Income from Continuing Operations $ 1.50 $ 1.80 $ 1.50 $ 1.16 $ .94
Income from Discontinued Operations .20 .20 .13 .18 .17
-------- -------- -------- ------- -------
Net income per share $ 1.70 $ 2.00 $ 1.63 $ 1.34 $ 1.11
======== ======== ======== ======= =======
Weighted average number of
Basic shares 66,981 68,555 68,565 68,034 68,096
Add:
Adjustment to basic shares
for dilutive stock options 479 813 819 566 384
-------- -------- -------- ------- -------
Total weighted average number of
shares 67,460 69,368 69,384 68,600 68,480
======== ======== ======== ======= =======
</TABLE>
*All share and per share data have been retroactively restated to reflect the
three-for-two splits of common stock effected in the form of a 50% stock
dividend in 1998 and 1996.
<PAGE>
EXHIBIT 13
1999 Annual Report
[LOGO OF CRANE CO.]
<PAGE>
Our Credo
We strive for a dominant presence
in niche markets.
We generate solid rates of return on invested
capital and high levels of cash flow.
We use our cash effectively to grow and strengthen
our existing businesses, and to acquire new businesses.
We acquire businesses that fit with our
existing businesses and strengthen our position
in niche markets.
We maintain an incentive compensation plan
specifically designed to align the interests of
management and shareholders.
We do this with one goal in mind:
To build shareholder value.
Table of Contents
Financial Highlights 1
Letter to Shareholders 2
Management's Discussion and Analysis of Operations 6
Consolidated Financial Statements 15
Notes to Consolidated Financial Statements 19
Management's Responsibility for Financial Reporting 29
Independent Auditors` Report 29
Directors and Officers 36
Shareholder Information 37
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
($ and shares in thousands except per share data) 1999 1998 % Change
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Summary of Operations Net Sales $1,553,657 $1,561,055 -- %
EBITDA(b) 279,916 276,323 1.3%
Operating Profit 204,541(a) 211,961 (3.5)%
Income Before Taxes 190,782(a) 192,789 (1.0)%
Income from Continuing Operations 123,465(a) 124,842 (1.1)%
Cash Flow(c) 184,745 180,715 2.2%
- --------------------------------------------------------------------------------------------------------------------------------
Diluted Share Data Income from Continuing Operations $ 1.83(a) $ 1.80 1.7%
Cash Flow 2.74 2.61 5.0%
Dividends .40 .37 8.1%
Average Diluted Shares 67,460 69,368
- --------------------------------------------------------------------------------------------------------------------------------
Financial Position at Assets $1,175,447 $1,379,731 (14.8)%
December 31, Net Debt 297,183 392,384 (24.3)%
Shareholders' Equity 568,110 643,234 (11.7)%
Market Value of Equity(d) 1,248,199 2,067,206 (39.6)%
Market Capitalization(d) 1,545,382 2,459,590 (37.2)%
- --------------------------------------------------------------------------------------------------------------------------------
Key Statistics Sales per Employee $ 161 $ 155
Operating Profit as a % of Sales 13.2%(a) 13.6%
Income from Continuing Operations as a % of Sales 7.9%(a) 8.0%
Return on Average Assets-Continuing Operations 10.1%(a) 10.7%
Return on Average Shareholders' Equity 21.1%(a) 23.8%
Net Debt to Capital 34.3% 37.9%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Before pre-tax special charges of $34,987 ($22,567 after tax or $.33 per
diluted share.)
(b) EBITDA is earnings before interest, taxes, depreciation and amortization
and special charges.
(c) Cash flow is income from continuing operations before special charges plus
depreciation and amortization.
(d) Market value of equity is number of shares of common stock outstanding
times closing stock price. Market capitalization is market value of equity
plus net debt.
[GRAPH]
Diluted EPS from Income from
Continuing Operations EBITDA Continuing Operations
(in dollars) (in millions) (in millions)
95 0.94 95 171 95 64
96 1.16 96 192 96 80
97 1.50 97 236 97 104
98 1.80 98 276 98 125
99 1.83 99 280 99 123
Crane Co 1999 Annual Report 1
<PAGE>
Chairman's Letter to Shareholders
- --------------------------------------------------------------------------------
Dear Shareholder:
After a strong performance in 1998, Crane Co. overcame weakness in some markets
and operating problems in several businesses in 1999 to achieve slightly higher
per-share earnings and cash flow, before one-time charges, on essentially level
sales.
We took aggressive action to sharpen our corporate focus on manufacturing,
strengthen margins, and position Crane to resume its strong earnings growth,
which has averaged about 18% annually over the past five years. We spun off our
distribution business, Huttig Building Products, our largest single unit, in
mid-December, reinforcing Crane's position as a manufacturer of engineered
industrial products. In order to deal with softness or declines in key markets
and reduce our cost base in our Fluid Handling, Aerospace, and Controls
segments, we consolidated facilities, reduced staff and rationalized product
lines. In all, five manufacturing facilities and eight peripheral facilities
have been or will be closed.
These actions are expected to improve annual operating results by $26
million.
1999 Results
Before special charges associated with our repositioning and cost-reduction
programs, our net earnings from continuing operations for the year were $1.83
per diluted share, compared with $1.80 in 1998, on fewer shares outstanding.
Earnings from discontinued operations -- Huttig -- contributed $.20 per diluted
share, equal to Huttig's 1998 results, for a total of $2.03 per diluted share
versus $2.00 in 1998. The special charges, $.33 per diluted share, lowered 1999
net earnings to $1.70 per diluted share.
Income from continuing operations before special charges was $123.5 million
in 1999, a dip of 1% from $124.8 million in 1998, on sales of $1.55 billion.
Special charges, net of taxes, totaling $22.6 million, reduced income from
continuing operations to $100.9 million.
Cash flow from continuing operations increased from $2.61 per diluted share
to $2.74 in 1999, before special charges. After special charges, cash flow was a
strong $2.40 per diluted share, or $162.2 million -- equal to 10 cents per
dollar of sales.
Positive Achievements
In spite of the difficult operating environment, we continued to make good
progress in pursuing three key objectives:
. Enhancing Crane's intellectual capital -- finding and nurturing the talented,
dedicated people who will create the company's future. We installed new
leadership at several businesses, hiring or promoting skilled executives to
those positions. We brought aboard Eric C. Fast, former Co-Head of Global
Investment Banking for Salomon Smith Barney, as Crane's President and Chief
Operating Officer. He replaces L. Hill Clark, who retired but is continuing to
help us in a manufacturing consulting role.
. Focusing on the customer -- moving vigorously to determine our customers'
needs and investing in innovative, cost-efficient ways to meet those needs,
including new products and e-commerce solutions.
. Achieving operational excellence -- aggressively deploying a range of
techniques including Six Sigma, lean manufacturing and focused factories to
shorten manufacturing cycle times, increase efficiency and reduce costs.
We have invested $40 million over the past several years to assure that our
businesses have state-of-the-art ERP systems. Eleven such business systems were
implemented in 1999 alone, and they are already delivering on the promise of
increased manufacturing and administrative efficiency and lower cost. These
systems had the added benefit of making the businesses "Y2K"compliant.
Our Operational Excellence program has continued to demonstrate its value.
At all of our businesses, "black belts"trained in Six Sigma analytical
techniques and lean manufacturing methods are streamlining our production and
business processes, reducing waste, and improving our competitive
2 Crane Co 1999 Annual Report
<PAGE>
position and the bottom line. At one of those businesses, Lear Romec, the new
president is herself a black belt. Cost savings from Six Sigma projects totaled
approximately $18 million in 1999.
Our EVA compensation system, which ties managers' rewards to actual
economic value added, is also contributing to development of a highly
beneficial, results-oriented culture throughout Crane.
Segment Overview
Two of our five business segments -- Engineered Materials and Merchandising
Systems -- achieved higher sales and operating profits. The Fluid Handling
segment, particularly our valve businesses, was hard hit by the global downturn
in the oil and gas markets and had earnings of only $4 million after absorbing
$18.9 million of special charges to close four manufacturing facilities and five
peripheral facilities, and rationalize product lines. From the beginning of
1999, our companies in this segment reduced their employment by 18%, with an
additional 3% reduction expected in the first quarter of 2000. Controls, facing
soft energy markets, recorded a modest operating profit. In Aerospace, sales and
profits fell more than anticipated, as Boeing sold fewer widebody airplanes and
aftermarket demand for provisioning spares declined. Aerospace remained our most
profitable segment, however, with 1999 operating profits surpassed only by the
extraordinarily strong 1997 and 1998 results.
Strong Gains in Engineered Materials Segment
Engineered Materials turned in an excellent performance, fueled by strong sales
and operating profit gains at Kemlite and Resistoflex. Kemlite's sales of
fiberglass-reinforced plastic panels benefited from its strong positions in the
transportation, recreational vehicle (RV) and building products markets and from
a full year's results from its 1998 Sequentia acquisition. Resistoflex's
plastic-lined pipe, hose and fittings business similarly benefited from
synergies and full-year results from its 1998 acquisition of Plastic-Lined
Piping Products.
Acquisition Boosts Merchandising Systems Results
National Vendors had its best sales year, maintaining its 1998 gains and getting
a boost in the United Kingdom from the addition of Stentorfield in October
1999. Stentorfield's strength in the U.K. Office Coffee Service (OCS) market
extends National Vendors' existing leadership in the snack and food vending
machine market there, and gives the company a strong entry into the large
European hot drink market.
National Rejectors, based in Germany, also had increased sales and
significantly higher operating profits, despite growing competition in the
coin-validation industry and delayed approval of designs for euro-denominated
coins.
[GRAPH]
Cash Flow
(Income from continuing operations plus
special charges, depreciation and
amortization)
(in millions)
95 108
96 124
97 155
98 181
99 185
Revamping of Valve Businesses
We took far-reaching measures to rationalize our global valve businesses, which
have been hurt by the oil and gas capital spending downturn, by Asia's economic
ills, and by internal problems. We reduced our personnel by approximately 25%
and closed or downsized a number of facilities in North America and Europe. As a
result of these actions, and with stronger oil and gas markets likely, we look
for a return to solid profitability in 2000.
Huttig Spun Off to Shareholders
Our businesses have generally been effective in establishing strong, defensible
positions in niche markets, where we can earn good margins on the high-value-
added, engineered products we manufacture. Huttig is in a different business
that does not fit our strategy or earnings goals. As a building products
distribution business, it has inherently lower operating margins, which have
made the impressive margins in our manufacturing business harder to see in our
consolidated results. The Huttig spin-off will significantly increase Crane's
overall operating margin, and should result in a higher price/earnings ratio for
our stock. That, in turn, will help with acquisitions, which are an important
part of our growth strategy. As part of the Huttig spin-off, Crane received $68
million, which was used to pay down debt, strengthening our balance sheet. Crane
shareholders received a tax-free dividend on December 16, 1999, of one share of
Huttig common stock for each 4.5 shares of Crane stock held.
Crane Co 1999 Annual Report 3
<PAGE>
Also in December, we sold Crane Defense Systems, which builds large
shipboard equipment for the Navy, for $7.2 million.
Financial Strength and Shareholder Value
An important goal at Crane has been to grow our cash flow, which increases our
flexibility in building shareholder value. It is worth noting that our 1999 cash
flow of $260 million, including the Huttig spin-off, roughly approximates our
investment in Stentorfield ($33 million), the repurchase of 6.0 million shares
of Crane stock ($124 million) and a significant reduction in our debt ($108
million). Although we prefer to invest in our existing businesses or make
attractive acquisitions, we will continue to repurchase Crane stock when it is
undervalued and when doing so represents the best way of enhancing shareholder
value.
New Directors Join Board
Retirements led to the election of two new directors to Crane's Board. Boris
Yavitz retired from the Board after 12 years of service and will be missed, as
will his guidance and counsel on corporate policy and governance. He was
replaced by John Lee, Chairman and Chief Executive Officer of Hexcel
Corporation, who brings a depth of financial and operating experience and strong
knowledge of the aerospace industry. Eric C. Fast, our new President and COO,
was also elected to the board.
New Century, Positive Outlook
The first year of the new century should be a positive one for Crane, with good
gains in sales and earnings, and stronger gains in earnings per share as a
result of improved margins and continued deployment of our strong cash flow. The
U.S. economy seems likely to remain strong and growing, with the Asian and
European economies continuing their recovery. Oil and gas markets are expected
to turn up before mid-year. Our 1999 cost-cutting actions and operating
improvements will have a continuing positive effect in 2000, and we are well
positioned to make acquisitions that meet our criteria, further enhancing
growth. We look for flat sales but improved earnings in Fluid Handling, and much
stronger sales and profits in the Controls segment. Aerospace sales and earnings
are likely to stabilize at levels below 1999, with increased sales for regional
and business jets partially offsetting lower Boeing business. We anticipate
higher sales and earnings in the Engineered Materials segment, where both
Kemlite and Resistoflex have extremely strong positions in their markets. We
also have high expectations for Merchandising Systems, where both National
Vendors and National Rejectors combine great strength in their home markets with
high-potential new products and effective strategies for increased penetration
in Europe.
All told, 2000 looks at this writing like a good year, and prospects for
subsequent years are considerably brighter.
We want to thank our customers for their loyalty, our suppliers for their
focus on quality and timeliness, and our employees for the dedication and skill
they bring to work every day. We also wish to thank the members of our Board of
Directors for the perceptive and valuable guidance they provide, and our
shareholders for their continuing support.
Sincerely,
/s/ R. S. Evans /s/ Eric C. Fast
R. S. Evans Eric C. Fast
Chairman and Chief Executive Officer President and Chief Operating Officer
February 15, 2000
4 Crane Co 1999 Annual Report
<PAGE>
1999 Review
Crane's businesses report their
results in five segments:
Engineered Materials
Merchandising Systems
Aerospace
Fluid Handling
Controls
In the pages that follow,
we discuss these results,
along with the events,
trends, market dynamics and
management initiatives
that influenced them.
Crane Co 1999 Annual Report 5
<PAGE>
Management's Discussion and Analysis of Operations
Engineered Materials
- --------------------------------------------------------------------------------
Strong Gains in Engineered Materials
(dollars in millions) 1999 1998
- --------------------------------------------------------------------------------
Sales $357.1 $279.0
Operating Profit 59.9* 39.7
Operating Margins 16.8% 14.2%
- --------------------------------------------------------------------------------
*Before special charges of $3.2 million.
Sales, operating profit and operating margin increased to record levels in the
Engineered Materials segment, fueled by internal growth and acquisition-related
gains at Kemlite and Resistoflex. Operating profit increased by 51% before
special charges of $3.2 million on a 28% sales gain, as two of the segment's
five businesses improved their results. Operating profit after special charges
was $56.7 million. Order backlog at year end totaled $25 million, up $1 million
from the prior year. Special charges were principally for a product liability
issue related to a Crane Plumbing facility closed in 1990.
Kemlite Increases Sales, Operating Profit
Kemlite, the largest business, had a record year, with sales and operating
profit up 40% and 58%, respectively, largely because of full-year results from
its Sequentia acquisition. Kemlite's core business -- fiberglass-reinforced-
plastic (frp) liner panels and translucent roofs for trucks and trailers and
side panels for recreational vehicles (RV) -- grew 15% overall. Kemlite's
shipments to the truck and trailer markets, expected to decline in 1999, instead
rose 8%, and shipments to the RV market increased 23% as RV unit volume exceeded
300,000 for the first time. Kemlite, the industry leader in both markets, also
benefited as supplier to the faster-growing RV manufacturers. Sales of building
products gained 11%. International sales jumped 23% on sales of $1.6 million for
military shelters for British troops in Kosovo and strong fourth quarter sales
in Canada and South Korea. The company also opened a sales office in Shanghai.
Kemlite successfully introduced its new fiber-free, higher-gloss Medallion(R)
panels to the RV market and improved manufacturing efficiency at all three
plants through Six Sigma and other cost-reduction efforts.
Difficult Year for CorTec
CorTec, Crane's other manufacturer of fiberglass-reinforced materials, saw
sales drop 25% from 1998 and reported a loss for the year, as several trailer
fleets switched away from CorTec's fiberglass-reinforced plywood side panels to
other materials. High mid-year plywood costs, lower volume and aggressive
pricing to gain market share in truck body panels lowered operating profit and
margin. CorTec incurred additional development expenses for its new Encor(R)
product, in which a foam core replaces plywood, and is repositioning it as a
premium material for refrigerated trailers and controlled temperature food
service trucks. Encor(R), impervious to rot, is finding a niche in houseboats
and in personal cargo, utility and specialty trailers. CorTec implemented a new,
customer-focused enterprise resource planning system (ERP), and has reduced
Encor(R) production costs through Six Sigma projects. Lower costs, improving
pricing, and sales to Ryder for larger rental trucks should strengthen results
in 2000.
Record Results for Resistoflex
Resistoflex enjoyed its best year, with sales and operating profit up sharply,
principally as a result of its fourth quarter 1998 acquisition of Plastic-Lined
Piping Products. Resistoflex achieved these results despite a cyclical downturn
in the global chemical processing industry, a major user of its corrosion-
resistant, Teflon-lined pipe, fittings and hoses, and a slowdown in its military
business as the government ended production of the F-15 fighter. Successful
integration of Plastic-Lined Piping Products into its operations yielded
important production, administrative, sales and supply chain synergies. A new
ERP system linked the company's plants in Marion, North Carolina, and Bay City,
Michigan, with the defense business in Jacksonville, Florida. Resistoflex also
introduced its flangeless Conquest(R) system for creating leakproof, welded
connections of Teflon-lined pipe, designed to address safety and environmental
concerns and reduce installation and maintenance costs. It also acquired a new
facility in Singapore to serve the strengthening Asian chemical and
pharmaceutical markets. In 2000, the company will focus significant resources,
including e-commerce initiatives, on increasing its small market share in
Teflon-lined flexible hose.
6 Crane Co 1999 Annual Report
<PAGE>
Sales Up at Crane Plumbing
Crane Plumbing increased sales by 7%, but price competition and substantial
investments in new product and sales initiatives led to a loss for the year
before a special charge of $3.1 million for a product liability issue related to
a facility that was closed in 1990. The company gained volume and share in
Canadian retail markets, and now supplies every major retailer with Crane china
and steel lavatories, toilets, tubs and showers, with Home Depot as its largest
customer. From a modest base, sales to U.S. wholesale customers increased, and
the company plans to push into U.S. retail markets. Wholesale volume in Canada
dipped as construction declined in Quebec and British Columbia, but sales
increased in the key Ontario market. Crane plans to introduce a new line of
gelcoat shower products positioned between its economy steel and high-end
acrylic products. A new ERP system and several Six Sigma projects achieved
significant cost reductions.
Polyflon Operating Profit Rises
Polyflon, Crane's smallest business, improved its operating profit on slightly
lower sales of its capacitors and proprietary microwave materials.
Outlook
Sales and operating profit should increase in 2000, although less than in 1999.
Kemlite's transportation, recreational vehicle and building products markets are
expected to remain strong, CorTec's sales and operating margins should
improve, and Resistoflex should benefit from recovering Asian and European
markets and a second-half pickup in domestic chemical processing markets. Crane
Plumbing and Polyflon also look for modest sales and operating profit growth.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Business Unit Products Markets Served
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Kemlite Fiberglass-reinforced plastic (frp) panels used as Recreational vehicle, truck trailer and
side-walls and roofs commercial and residential construction
- -----------------------------------------------------------------------------------------------------------------------------------
CorTec Fiberglass-reinforced laminated composite panels Trucks and truck trailers, special-purpose
trailers, marine houseboats and general construction
- -----------------------------------------------------------------------------------------------------------------------------------
Resistoflex Corrosion-resistant plastic-lined Pharmaceutical, chemical processing, pulp and
pipe, fittings, tanks, paper, ultra-pure water, waste management
valves, expansion joints and hose assemblies, industries, military and aerospace contractors
high-performance aerospace fittings
- -----------------------------------------------------------------------------------------------------------------------------------
Crane Plumbing Plumbing and sanitary fixtures Residential, industrial, commercial and
institutional construction and renovation markets in
Canada
- -----------------------------------------------------------------------------------------------------------------------------------
Polyflon Microwave laminates, circuit processing, high-voltage Wireless communications, magnetic resonance imaging,
RF capacitors, radomes microwave and radar system manufacturers
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Crane Co 1999 Annual Report 7
<PAGE>
Merchandising Systems
- --------------------------------------------------------------------------------
Sales, Operating Profit Growth in Merchandising Systems
(dollars in millions) 1999 1998
- --------------------------------------------------------------------------------
Sales $201.9 $191.9
Operating Profit 35.8 33.5
Operating Margins 17.7% 17.5%
- --------------------------------------------------------------------------------
The Merchandising Systems segment achieved a 7% earnings gain in 1999 on a 5%
increase in sales. National Rejectors, Crane's European coin-validation
equipment business, generated a significant operating profit increase.
Strong Prospects for National Vendors
At National Vendors, the larger of the segment's two businesses, sales advanced
moderately despite a flat domestic market, stiff price competition in European
markets, and delayed introduction of new Office Coffee Service products.
National Vendors held onto and expanded its 1998 market share gains, and several
positive developments positioned the business for strong growth.
The October 1999 acquisition of Stentorfield, a leading U.K. manufacturer
of coffee machines, gave National Vendors a needed strong entry into Europe's
large coffee machine market. National Vendors, with its new Millennia-styled
machines, was already the clear market leader in snack and food machines in the
U.K. but its coffee machines were less popular. National Vendors is integrating
Stentorfield products into its strong snack and food machine businesses in
France and Germany, and has folded its U.K. unit, UMC, into Stentorfield to
provide both Office Coffee Service (OCS) and snack and food machine sales and
service to the U.K. and certain European distributors.
Although sales were flat in the U.K. and declined slightly in
France, National Vendors' German unit had a banner year, with successful
marketing initiatives aimed primarily at Germany but also at Holland, Austria,
Hungary and the Middle East. The company took share from competitors in the
German market by focusing on quality service.
After a worldwide competition, National Vendors received its largest order
ever late in the year from Smith's, a leading Australian snack company owned by
PepsiCo, giving the company a strong, immediate presence in a large, new
overseas market. National Vendors increased its penetration of Latin American
markets by winning other large orders from Nestle Mexico, considered a
bellwether for other Nestle units in the region, and Sodexho, a French worldwide
catering company that selected National Vendors as its preferred vending machine
supplier for Chile and Argentina.
National Vendors expanded its potential in the domestic OCS market by
introducing four new, single-cup-brewing office coffee machines in early
November. Two are compact models for office shelves; two are improved or
high-traffic versions of the full-sized Cafe 7 machine.
The company's new-product focus responds to operators' desire for
glass-front machines, which generate much higher merchandising sales. One
product being introduced domestically in 2000 is an all-weather, outdoor snack
machine, the ATM (All Temperature Machine) Snack. The machine, rigorously tested
under harsh outdoor conditions at 26 customer locations around the U.S.,
provides operators access to outdoor snack sales for the first time.
NRI Increases Sales, Operating Profit
National Rejectors (NRI) increased sales of its coin changers and validators by
12% on solid demand for its new four-tube changer and its electronic
coin-validation equipment for outdoor cigarette machines. Improved manufacturing
efficiency and lowered costs for some products, largely the result of Six Sigma
cost reduction projects, strengthened margins, leading to a strong operating
profit gain.
Delays by some European mints in issuing sample euro coins continued to
slow the process of finalizing software requirements to operate euro-capable
changers and validators, leading many NRI customers to postpone orders. Euro
coins, still differing slightly from country to country but acceptable
throughout the euro region, will begin to circulate in 2002. NRI will start
shipping its Euromatic(R) validator and changer equipment during the first
quarter, and expects accelerating bookings as vending operators rush to
modernize.
NRI's sales were strong in Spain and France, but slower in the highly
competitive U. K. market. Sales to Canada for the Canadian lottery declined
slightly, but volume in Chile, where NRI products are used in bus ticketing, was
strong.
Outlook
Both National Vendors and NRI expect strong sales and operating profit gains in
2000. National Vendors' new products and increased presence and offerings in the
U.K., continental Europe, Australia and Latin America, and a full-year
contribution from Stentorfield will boost results significantly. NRI expects
solid gains in bookings, sales and operating profit as customers begin to
prepare for the advent of the euro coin.
8 Crane Co 1999 Annual Report
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Business Unit Products Markets Served
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
National Vendors Electronic vending merchandisers for refrigerated Automated merchandising, office coffee service
and frozen foods, hot and cold beverages,
office coffee services (OCS), snack foods, coin
and currency changers
- ------------------------------------------------------------------------------------------------------------------------------------
National Rejectors, Inc. Electronic coin validators and changers, chip card Automated merchandising
GmbH (NRI) cash-less payment systems
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Aerospace
- --------------------------------------------------------------------------------
Decline in Aerospace Sales, Operating Profit
(dollars in millions) 1999 1998
- --------------------------------------------------------------------------------
Sales $363.1 $394.5
Operating Profit 96.1* 118.2
Operating Margins 26.5% 30.0%
- --------------------------------------------------------------------------------
*Before special charges of $9.0 million.
Aerospace continued to be Crane's most profitable segment, but sales fell below
the exceptionally strong 1998 results, and margins and operating profit
declined. Order backlog totaled $233 million at December 31, 1999, compared with
$281 million in the prior year. Special charges recorded in the third and fourth
quarters of 1999 reflect costs incurred to reduce staffing levels, rationalize
product lines, and address a product warranty issue. The cost of these actions
totaled $9 million ($5.5 million cash, $3.5 million non-cash). Annual savings
from these actions are expected to total $11.5 million. Staff levels in the
Aerospace businesses have been reduced by 446 people, or 18%, since the
beginning of 1999.
Boeing, the segment's largest single customer, built more airplanes in
1999, but fewer widebody, twin-aisle versions that utilize more Crane products.
The resulting drop in sales to Boeing was greater than expected. So, too, was a
decline in sales of provisioning spares, normally purchased by aircraft
operators when new models go into service. ELDEC, which provides power supplies
and proximity systems for Boeing and other airframe manufacturers, had lower
sales of replacement parts because of improved reliability of its products,
coupled with customers' more sophisticated purchasing and inventory control.
In a major strategic move, the segment's four companies -- ELDEC,
Hydro-Aire, Interpoint and Lear Romec -- formally became part of Crane Aerospace
in August. The combination provides critical mass in dealing with OEMs and
airlines and, through integrating products, can significantly expand Crane's
product/system offerings. At the new Crane Aerospace Technology Center, located
in Lynnwood, Washington, Hydro-Aire and ELDEC are working on a weight-saving
integrated brake control product.
Three of the companies -- Lear Romec was the exception -- had lower sales,
and all four had lower operating profit. The companies reacted quickly to the
downturn with aggressive cost-cutting, staff reductions, and process
improvements. At ELDEC, a quick-response version of lean manufacturing
techniques cut cycle times by 20% and halved the volume of work-in-process. Six
Sigma projects focused on eliminating unnecessary work from the production
process. Hydro-Aire reduced costs through Six Sigma projects, work force
reductions, long-term supplier agreements and process reengineering. A focused
factory production approach boosted on-time deliveries to well over 90%.
Crane Co 1999 Annual Report 9
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Business Unit Products Markets Served
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ELDEC Position indication and control systems, proximity Commercial, business and military aerospace,
sensors, pressure sensors, mass fuel flowmeters, defense, electronics, and telecommunications
power conversion systems and equipment
- -----------------------------------------------------------------------------------------------------------------------------------
Hydro-Aire Aircraft brake control and anti-skid systems, Commercial transport, business and commuter, general
including electro-hydraulic servo valves and aviation military and government aerospace, repair
manifolds, software and redundant, rugged electronic and overhaul
controls, hydraulic control valves and landing gear
sensors, fuel pumps
- -----------------------------------------------------------------------------------------------------------------------------------
Lear Romec Lubrication and fuel pumps for aircraft, engines Commercial and military aerospace, defense industry
and radar cooling systems
- -----------------------------------------------------------------------------------------------------------------------------------
Interpoint Standard and custom miniature (hybrid) DC-to-DC Commercial, space and military aerospace, defense
power converters and custom miniature (hybrid) industry, medical industries including implantable
electronic circuits medical devices and industrial markets
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Interpoint imposed spending cuts and work force reductions as sales and
bookings fell sharply, reflecting lower aerospace business, the loss of a key
medical product program, and the residual effects of the company's production
problems in 1997. Interpoint's strong 1998 sales and earnings reflected its
success in cleaning up delinquent backlog, making for a difficult comparison
with 1999.
Lear Romec had a solid gain in sales of its fuel, lube and scavenge pumps,
but slightly lower operating profit and margin, reflecting higher manufacturing
costs. The company sells to aircraft engine makers and also to airframe
manufacturers, such as Boeing, Airbus, Bombardier, Embraer, Learjet and Cessna.
Aggressive sales and new-product initiatives had a positive impact in 1999.
ELDEC, the market leader in aircraft proximity sensing systems and power
supplies, was chosen to equip the new Embraer 70 and 90 regional jets. Its new
battery charging system is being installed in all new Boeing aircraft except the
777 and retrofitted by many airlines. ELDEC also became the exclusive supplier
to the Displays and Controls Division of Britain's Smiths Industries for high-
and low-voltage power supplies for commercial and military aircraft avionics
systems.
Hydro-Aire, the world leader in aircraft anti-skid brake control systems,
recorded solid gains in general aviation and repair and overhaul sales, despite
lower overall OEM and aftermarket sales. It won all four of the new jet aircraft
contracts for which it competed, including the Bombardier 100 and Cessna 525
business jets, and the Embraer 140 and 170/190 regional jet families.
Interpoint is focusing its microelectronic product development efforts on
medical markets, which are expected to grow 17% annually through 2006, and on
custom and aerospace applications, including higher-voltage input/lower-voltage
output power converters.
Outlook
Crane Aerospace sales and operating profit are likely to decline further in
2000, but the segment will remain Crane's largest profit contributor. Sales to
regional and business jet OEMs and, in ELDEC's case, to Airbus, will partially
offset lower sales to Boeing, particularly at Hydro-Aire and ELDEC, reflecting
Boeing's lower aircraft build-rates. Operating margins will remain strong.
Interpoint's sales and profits are projected to fall below 1999 levels, but
margins should gradually improve. Lear Romec expects flat sales and slightly
lower operating profit for 2000.
10 Crane Co 1999 Annual Report
<PAGE>
Fluid Handling
- --------------------------------------------------------------------------------
Fluid Handling Reports a Small Profit After Special Charges
(dollars in millions) 1999 1998
- --------------------------------------------------------------------------------
Sales $502.2 $557.8
Operating Profit 22.9* 35.0
Operating Margins 4.6% 6.3%
- --------------------------------------------------------------------------------
*Before special charges of $18.9 million.
Sales and operating profit dropped significantly in Crane's Fluid Handling
business. Before special charges of $18.9 million, operating profit totaled
$22.9 million, or 4.6% of sales, compared with $35 million, or 6.3% of sales, in
1998. After special charges, operating profit was $4 million for the year. Order
backlog at December 31, 1999, was $79 million, down $5 million from the prior
year.
Fluid Handling results in 1999 were severely impacted by weak demand from
the oil and gas industry and Asian markets. Engineered and commercial valve
shipments declined 29% and 20%, respectively, and the pump/water treatment
business operating margin declined to 8.5% of sales compared with 11.3% in 1998
because of exceptional workers' compensation, medical and product warranty
expenses. On the positive side, operating profit in the Valve Services business
and Crane Supply were up 45% and 13%, respectively, on higher revenue.
To address the business downturn, actions were taken in the third and
fourth quarters to reduce significantly the fixed cost structure of Fluid
Handling businesses. These actions included closure of four manufacturing
facilities and five peripheral facilities, staff reductions, and product line
rationalizations. The cost of these actions totaled $18.9 million, comprising
$6.1 million in cash expenditures and $12.8 million in non-cash asset write-
downs. Annual savings are expected to total $13.4 million.
The global weakness in the oil and gas industry, including key North Sea and
Asian markets, severely curtailed sales of engineered valves, which are designed
for specific applications or customers. Although this market is expected to
improve in 2000 with the increase in oil and gas prices, two manufacturing
facilities were closed in 1999 to reduce fixed costs related to this specific
market, and staffing levels were reduced by 239 people, or 27%, since the
beginning of the year.
New products introduced in 1999 should enhance results in engineered valves
in 2000. These products include a triple offset rotary valve for high-pressure,
high-temperature applications in power plants and hydrocarbon production, and
two series of butterfly valves for the food and beverage and industrial markets.
Introduction of a complete line of pneumatic and electrical actuators to
automate valve operations moved Crane into a market it had not previously
served.
The Valve Services business, now encompassing nuclear power plant and
out-of-production industrial valves and parts, plus testing products and nuclear
and commercial services, gained in sales and operating profit on full-year
results from the September 1998 acquisition of Liberty Technologies Inc. and
increased demand for nuclear services and testing products. Sales were up 37% in
1999 to $49.1 million, and operating margins improved to 11.1% of sales from
10.5% in 1998.
Commercial valve shipments were down $31 million (20%) from the prior year
level, and the business operated at a loss because of market weakness in North
America and England stemming from industry overcapacity.
To address these issues, Crane consolidated its cast steel manufacturing
facility in Rogers, Arkansas, into its Washington, Iowa, plant and closed a
small manufacturing facility in the U.K., and two peripheral facilities. In
addition, staffing levels have been reduced by over 400 people, 30% of the work
force, since the beginning of the year.
Crane Co 1999 Annual Report 11
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Business Unit Products Markets Served
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Engineered Valves Quarter turn, wafer check, pressure seal, HF Hydrocarbon and chemical processing, power
acid, cast and stainless steel valves generation, marine and shipbuilding, commercial
building and industrial applications
- -----------------------------------------------------------------------------------------------------------------------------------
Commercial Valves Bronze and iron gate, globe, check, ball and Commercial building, HVAC, refining and chemical
butterfly, cast and stainless steel valves processing
- -----------------------------------------------------------------------------------------------------------------------------------
Valve Services Nuclear valves and diagnostic services, service Nuclear power, hydrocarbon, chemical processing and
centers, nuclear services, industrial services power generation industries
- -----------------------------------------------------------------------------------------------------------------------------------
Pumps/Water Submersible, sealed and sealless horizontal Municipal, residential, industrial, utility,
Treatment centrifugal, turbine, air-operated diaphragm, construction, pharmaceutical, pulp and paper,
metering pumps and pumping systems, water and chemical and hydro-carbon processing and commercial
wastewater treatment units and systems markets, original equipment manufacturers (OEMs) and
government contractors
- -----------------------------------------------------------------------------------------------------------------------------------
Crane Supply Distributor of pipe, valves and fittings Mechanical contractors, industrial plants,
fabricators and engineering procurement and
construction companies and maintenance, repair and
overhaul (MRO)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Crane Pumps & Systems' operating profit dropped on slightly lower volume, a
less favorable product mix and the combination of price/cost pressures in 1999
versus 1998. Results in 2000 should benefit from Six Sigma cost-reduction
projects, lean manufacturing techniques, global sourcing, and aggressive sales
initiatives. Cochrane completed the integration of its 1998 acquisition of
Environmental Products, a global supplier of reverse osmosis systems, and
strengthened its focus on energy-related water purification applications. Volume
declined for the year, but sales and operating profit began to rebound in the
second half.
Crane Supply reported a modest gain in sales and a larger increase in
operating profit in a flat market for the pipes, valves and fittings it
distributes across Canada. Strong sales in Quebec and Atlantic Canada offset a
drop in oil and gas business in Western Canada. Six Sigma projects reduced costs
and led to the MRO (Maintenance, Repair and Overhaul) initiative, in which the
company has leveraged its inventory control expertise by contracting to procure
and manage customers' inventories of maintenance products.
Outlook
Improving oil and gas markets, a strong power generation market, accelerating
economic recovery in Asia and operating improvements in fixed cost structure
should assure solid profitability in 2000. Overall sales are expected to be in
line with the 1999 level, with gains at Crane Supply and the pump businesses,
flat sales at engineered valves, and a slight decline in the commercial valve
business, largely caused by Crane's policy of not accepting unprofitable
business.
12 Crane Co 1999 Annual Report
<PAGE>
Controls
- --------------------------------------------------------------------------------
Controls Sales, Operating Profit Dip
(dollars in millions) 1999 1998
- --------------------------------------------------------------------------------
Sales $121.2 $132.3
Operating Profit 4.1* 8.9
Operating Margins 3.4% 6.7%
- --------------------------------------------------------------------------------
*Before special charges of $3.4 million.
Sales declined 8% in the Controls segment in 1999 on widespread market weakness,
particularly in the oil and gas sector. Operating profit margins fell to 3.4% of
sales before special charges of $3.4 million, compared with 6.7% in 1998. After
special charges, operating profit was $.7 million for the year. Order backlog at
December 31, 1999, was $28 million, a slight improvement from the prior year
level.
The special charges of $3.4 million taken in the third and fourth quarters
of 1999 included costs to close the Ferguson manufacturing facility in
Greenwood, Mississippi, to reduce staffing levels, and to rationalize inventory.
Two companies had solid earnings performances despite lower sales. Sales
declined slightly at Barksdale, the segment's largest business, but operating
profit rose 12%. Powers Process Controls also saw sales decline, but operating
profit rose 16%. Addition of the Beta controls line from the Liberty
Technologies acquisition in September 1998 increased Dynalco's sales, but
integration costs and costs related to a new enterprise resource planning (ERP)
system reduced operating profit. Ferguson's shipments declined 17%, and it
operated at a loss for the year. Bookings and backlog increased at Azonix, but
the company experienced a slight loss for the year on lower sales, reflecting
the depressed oil and gas market.
At Barksdale, 1999 was a transition year marked by new leadership and
successful implementation of ERP systems in the U.S. and Germany. The new
systems, along with lean manufacturing techniques and Six Sigma projects
undertaken in 1999, should improve customer service and help strengthen margins
in 2000. Weakness in the oil and gas industry hurt sales of Barksdale's blowout-
preventer controls for oil exploration and production equipment, but an upturn
is now expected. Barksdale's ride-leveling air suspension valves enjoyed
increasing use among U.S. heavy truck OEMs and sparked interest from trailer
manufacturers. A new electronic pressure switch was well received in Germany,
Italy and France, and Barksdale hopes to expand by designing new products for a
broader market rather than specific customers.
Ferguson's U.S. and European businesses faced weak capital markets for
their indexers and other custom-engineered, precision motion control products in
1999. In Europe, new leadership and a reorganized management team took hold, and
a new ERP system was implemented. In the U.S., Ferguson reduced its work force
early in 1999 and began consolidating all domestic production in St. Louis,
Missouri, using lean manufacturing techniques, and began the closure of its
Greenwood, Mississippi, manufacturing facility.
Powers Process Controls turned in a solid operating profit gain despite a
sales decline stemming largely from earlier management and operating
problems. These problems impeded Powers' ability to take full advantage of a
strong Canadian commercial plumbing market -- particularly hospital and health
care facility construction -- at a time when its industrial process controls
markets were flat and price competition in the thermostatic shower controls
market was intensifying. Powers has launched initiatives to reduce the cost of
its thermostatic valves. The company expects sales and operating profit to grow
modestly in 2000.
Azonix, known for its MMI (man-machine interface) hardware and software
products for hazardous environments, such as oil drilling rigs, diversified into
harsh environment applications in 1999. Timing, however, led to a decline in
revenue and a loss for the year as initial penetration of the harsh market did
not offset the decline in the hazardous market. Azonix expects much improved
results in 2000 from an oil and gas upturn and from increased penetration of the
much broader harsh environment market.
Crane Co 1999 Annual Report 13
<PAGE>
A fall-off in revenue from gas transmission markets, new product
integration costs, and costs related to a new ERP system depressed Dynalco's
1999 profits, despite the addition of the Beta product line from the Liberty
Technologies acquisition in 1998. The company reduced product costs throughout
the year, and launched two initiatives aimed at expanding its sales. One extends
coverage in the market for engine controls, sensors, analyzers and other
instruments by establishing additional regional sales and service offices, with
two scheduled for the coming year. The other initiative is to pursue automation
solutions with oil and gas customers that traditionally buy its monitoring and
control packages. With oil and gas bookings and shipments rising in the year's
final four months, Dynalco expects improved results in 2000.
Outlook
All businesses in the segment anticipate improved sales and earnings in 2000,
largely the result of determined cost-reduction efforts, new marketing or
product development initiatives, and a resurgence in the oil and gas markets.
Management's Discussion and Analysis of Operations continues on page 30.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Business Unit Products Markets Served
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Barksdale Solid state and electromechanical pressure Manufacturers of compressors, machine tools,
switches and transducers, level switches and trucks, oil and gas exploration, compactors, and
indicators, temperature switches and bailers
directional control valves
- -----------------------------------------------------------------------------------------------------------------------------------
Powers Process Controls Thermal shock protection shower valves and Light commercial and institutional facilities,
systems, process control valves and instruments chemical and food processing, pharmaceutical
and temperature control regulators manufacturing and water and wastewater treatment
- -----------------------------------------------------------------------------------------------------------------------------------
Dynalco Controls Rotational speed sensors, instruments and Industrial engine manufacturers and users, oil and
monitors, microprocessor-based engine controls, gas industry, utilities, construction and
engine and compressor analyzers, machinery agricultural equipment manufacturers
controls
- -----------------------------------------------------------------------------------------------------------------------------------
Azonix Operator interfaces and measurement and control Oil and gas service, petrochemical, pharmaceutical,
systems, intelligent data acquisition products, primary metal processing, compressor manufacturers,
high-precision thermometers and calibrators rail transport, semiconductor production equipment,
military ship control
- -----------------------------------------------------------------------------------------------------------------------------------
Ferguson Mechanical and electronic index drives, Assembly, packaging, processing and metal working
pick-and-place robots, indexing conveyors, machinery manufacturers for the automotive,
rotary tables, clutches and custom cams electrical, food, health care, and electronics
industries
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
14 Crane Co 1999 Annual Report
<PAGE>
Consolidated Statements of Income
<TABLE>
<CAPTION>
For Years Ended December 31, (in thousands except per share data) 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales $ 1,553,657 $ 1,561,055 $ 1,411,328
Operating Costs and Expenses:
Cost of sales 1,052,756(b) 1,017,648 933,951
Selling, general and administrative 270,067(c) 275,573 249,627
Depreciation and amortization 61,280 55,873 50,991
- ---------------------------------------------------------------------------------------------------------------------------
1,384,103 1,349,094 1,234,569
- ---------------------------------------------------------------------------------------------------------------------------
Operating Profit 169,554(a) 211,961 176,759
Other Income (Expense):
Interest income 9,750 9,496 7,354
Interest expense (27,854) (27,661) (23,632)
Miscellaneous -- net 4,345 (1,007) 541
- ---------------------------------------------------------------------------------------------------------------------------
(13,759) (19,172) (15,737)
- ---------------------------------------------------------------------------------------------------------------------------
Income Before Taxes 155,795(a) 192,789 161,022
Provision for Income Taxes 54,897 67,947 57,306
- ---------------------------------------------------------------------------------------------------------------------------
Income from Continuing Operations 100,898(a) 124,842 103,716
- ---------------------------------------------------------------------------------------------------------------------------
Income from Discontinued Operations, Net of Taxes 13,672 13,596 9,055
- ---------------------------------------------------------------------------------------------------------------------------
Net Income $ 114,570(a) $ 138,438 $ 112,771
- ---------------------------------------------------------------------------------------------------------------------------
Basic Net Income per Share:
Income from Continuing Operations $ 1.51(a) $ 1.82 $ 1.51
Income from Discontinued Operations .20 .20 .13
- ---------------------------------------------------------------------------------------------------------------------------
Net Income $ 1.71(a) $ 2.02 $ 1.64
- ---------------------------------------------------------------------------------------------------------------------------
Average Basic Shares Outstanding 66,981 68,555 68,565
Diluted Net Income per Share:
Income from Continuing Operations $ 1.50(a) $ 1.80 $ 1.50
Income from Discontinued Operations .20 .20 .13
- ---------------------------------------------------------------------------------------------------------------------------
Net Income $ 1.70(a) $ 2.00 $ 1.63
- ---------------------------------------------------------------------------------------------------------------------------
Average Diluted Shares Outstanding 67,460 69,368 69,384
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Includes pre-tax special charges of $34,987 ($22,567 after tax or $.33 per
diluted share.)
(b) Includes special charges of $32,013.
(c) Includes special charges of $2,974.
See Notes to Consolidated Financial Statements
15 Crane Co 1999 Annual Report
<PAGE>
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Balance at December 31, (in thousands except share data) 1999 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 3,245 $ 16,195
Accounts receivable 206,468 236,217
Inventories
Finished goods 107,006 109,135
Finished parts and subassemblies 57,667 58,643
Work in process 23,471 36,571
Raw materials 71,330 82,865
- -------------------------------------------------------------------------------------------------------------------
Total inventories 259,474 287,214
Net assets of discontinued operations -- 120,660
Other current assets 35,973 44,830
- -------------------------------------------------------------------------------------------------------------------
Total Current Assets 505,160 705,116
Property,Plant and Equipment at Cost:
Land 29,033 29,631
Buildings and improvements 124,220 132,062
Machinery and equipment 426,010 412,637
- -------------------------------------------------------------------------------------------------------------------
Gross property, plant and equipment 579,263 574,330
Less accumulated depreciation 322,614 304,069
- -------------------------------------------------------------------------------------------------------------------
Net Property, Plant and Equipment 256,649 270,261
Other Assets 40,521 32,661
Intangibles 43,796 47,372
Cost in Excess of Net Assets Acquired 329,321 324,321
- -------------------------------------------------------------------------------------------------------------------
$ 1,175,447 $ 1,379,731
- -------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current Liabilities:
Current maturities of long-term debt $ 385 $ 468
Loans payable 13,271 50,401
Accounts payable 87,611 87,664
Accrued liabilities 116,098 129,796
U.S. and foreign taxes on income 16,150 16,967
- -------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 233,515 285,296
Long-Term Debt 286,772 357,710
Other Liabilities 25,927 27,735
Accrued Postretirement Benefits 31,709 33,512
Accrued Pension Liabilities 3,548 5,955
Deferred Income Taxes 25,866 26,289
Preferred Shares, par value $.01; 5,000,000 shares authorized -- --
Common Shareholders' Equity:
Common shares, par value $1.00; Authorized: 200,000,000 shares; Issued: 72,426,139 shares; -- --
Outstanding: 62,802,471 shares (68,495,894 in 1998) after deducting 9,623,668 shares
in treasury (3,930,245 in 1998) 72,426 72,426
Capital surplus 98,289 96,262
Retained earnings 623,421 574,797
Accumulated other comprehensive income (loss) (22,481) (18,036)
Common shares held in treasury (203,545) (82,215)
- -------------------------------------------------------------------------------------------------------------------
Total Common Shareholders' Equity 568,110 643,234
- -------------------------------------------------------------------------------------------------------------------
$ 1,175,447 $ 1,379,731
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements
16 Crane Co 1999 Annual Report
<PAGE>
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For Years Ended December 31,(in thousands) 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities:
Income from continuing operations $ 100,898 $ 124,842 $ 103,716
Non-cash special charges 16,765 -- --
Depreciation 37,250 35,024 33,623
Amortization 24,030 20,849 17,368
Deferred income taxes 6,489 4,412 5,355
Cash provided from (used for) operating working capital 36,678 (8,129) (27,650)
Other (11,406) (4,279) (5,521)
- ------------------------------------------------------------------------------------------------------------------------
Total Provided from Operating Activities 210,704 172,719 126,891
- ------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Capital expenditures (28,988) (48,743) (37,301)
Proceeds from disposition of capital assets 6,253 8,013 4,389
Purchase of equity investments (2,029) (750) --
Sale of equity investments 5,361 -- --
Payments for acquisitions, net of cash and liabilities assumed of $7,004 in 1999,
$13,725 in 1998,and $33,537 in 1997 (32,760) (177,512) (69,615)
Proceeds from divestitures 6,881 4,276 7,453
- ------------------------------------------------------------------------------------------------------------------------
Total Used for Investing Activities (45,282) (214,716) (95,074)
- ------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Equity:
Dividends paid (26,704) (25,199) (22,870)
Reacquisition of shares -- open market (124,024) (11,329) (20,529)
Reacquisition of shares -- stock incentive program (780) (10,895) (4,448)
Stock options exercised 6,191 9,250 7,382
- ------------------------------------------------------------------------------------------------------------------------
(145,317) (38,173) (40,465)
- ------------------------------------------------------------------------------------------------------------------------
Debt:
Issuance of long-term debt 181,200 143,565 --
Repayments of long-term debt (265,114) (5,317) (3,071)
Net increase (decrease) in short-term debt (23,594) (19,929) 1,099
- ------------------------------------------------------------------------------------------------------------------------
(107,508) 118,319 (1,972)
- ------------------------------------------------------------------------------------------------------------------------
Total (Used for) Provided from Financing Activities (252,825) 80,146 (42,437)
- ------------------------------------------------------------------------------------------------------------------------
Cash Provided from (Used for) Discontinued Operations 75,091 (31,381) 7,223
Effect of exchange rate on cash and cash equivalents (638) 905 (1,440)
- ------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents (12,950) 7,673 (4,837)
Cash and cash equivalents at beginning of year 16,195 8,522 13,359
- ------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 3,245 $ 16,195 $ 8,522
========================================================================================================================
Detail of Cash Provided from (Used for) Operating
Working Capital (Net of Effects of Acquisitions):
Accounts receivable $ 31,934 $ 276 $ (23,616)
Inventories 17,335 (11,266) (7,821)
Other current assets 8,283 (5,129) 1,992
Accounts payable (5,688) (3,694) 5,504
Accrued liabilities (14,551) 6,449 2,849
U.S.and foreign taxes on income (635) 5,235 (6,558)
- ------------------------------------------------------------------------------------------------------------------------
Total $ 36,678 $ (8,129) $ (27,650)
- ------------------------------------------------------------------------------------------------------------------------
Supplemental Disclosure of Cash Flow Information:
Interest paid $ 28,726 $ 25,142 $ 22,865
Income taxes paid $ 54,825 $ 63,358 $ 54,842
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements
17 Crane Co 1999 Annual Report
<PAGE>
Consolidated Statements of Changes in Common Shareholders' Equity
<TABLE>
<CAPTION>
Common Accumulated
Shares Other Treasury
Issued at Capital Retained Comprehensive Comprehensive Stock
(in thousands except share data) Par Value Surplus Earnings Income Income (Loss) at Cost
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
At January 1, 1997 $ 72,426 $ 86,083 $ 371,702 $ (7,368) $ (60,174)
- -----------------------------------------------------------------------------------------------------------------------------------
Net income 112,771 $ 112,771
Cash dividends (22,870)
Reacquisition of 981,455 shares (24,977)
Exercise of stock options, 652,523 shares 7,382
Tax benefit-exercise of stock options 3,541
Restricted stock awarded, 151,873 shares, net (921) 4,131
Currency translation adjustment (9,182) (9,182)
- -----------------------------------------------------------------------------------------------------------------------------------
Comprehensive income 103,589
- -----------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1997 72,426 89,624 460,682 (16,550) (73,638)
- -----------------------------------------------------------------------------------------------------------------------------------
Net income 138,438 138,438
Cash dividends (25,199)
Reacquisition of 702,276 shares (22,224)
Exercise of stock options, 780,902 shares 9,250
Tax benefit-exercise of stock options 6,638
Restricted stock awarded, 104,787 shares, net 876 4,397
Currency translation adjustment (1,486) (1,486)
- -----------------------------------------------------------------------------------------------------------------------------------
Comprehensive income 136,952
- -----------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1998 72,426 96,262 574,797 (18,036) (82,215)
- -----------------------------------------------------------------------------------------------------------------------------------
Net income 114,570 114,570
Dividend of Huttig shares (42,382)
Cash dividends (26,704)
Reacquisition of 6,063,254 shares (126,469)
Exercise of stock options 419,914 shares 6,191
Tax benefit-exercise of stock options 2,027
Restricted stock forfeited, 50,083 shares, net 3,140 (1,052)
Currency translation adjustment (4,445) (4,445)
- -----------------------------------------------------------------------------------------------------------------------------------
Comprehensive income 110,125
- -----------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1999 $ 72,426 $ 98,289 $ 623,421 $ (22,481) $(203,545)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Total
Common
Shareholders'
(in thousands except share data) Equity
- ----------------------------------------------------------
At January 1,1997 $ 462,669
- ----------------------------------------------------------
Net income 112,771
Cash dividends (22,870)
Reacquisition of 981,455 shares (24,977)
Exercise of stock options, 652,523 shares 7,382
Tax benefit-exercise of stock options 3,541
Restricted stock awarded, 151,873 shares, net 3,210
Currency translation adjustment (9,182)
- ----------------------------------------------------------
Comprehensive income
- ----------------------------------------------------------
Balance December 31, 1997 532,544
- ----------------------------------------------------------
Net income 138,438
Cash dividends (25,199)
Reacquisition of 702,276 shares (22,224)
Exercise of stock options, 780,902 shares 9,250
Tax benefit-exercise of stock options 6,638
Restricted stock awarded, 104,787 shares, net 5,273
Currency translation adjustment (1,486)
- ----------------------------------------------------------
Comprehensive income
- ----------------------------------------------------------
Balance December 31, 1998 643,234
- ----------------------------------------------------------
Net income 114,570
Dividend of Huttig shares (42,382)
Cash dividends (26,704)
Reacquisition of 6,063,254 shares (126,469)
Exercise of stock options 419,914 shares 6,191
Tax benefit-exercise of stock options 2,027
Restricted stock forfeited,50,083 shares,net 2,088
Currency translation adjustment (4,445)
- ----------------------------------------------------------
Comprehensive income
- ----------------------------------------------------------
Balance December 31, 1999 $ 568,110
- ----------------------------------------------------------
See Notes To Consolidated Financial Statements.
18 Crane Co 1999 Annual Report
<PAGE>
Notes To Consolidated Financial Statements
Accounting Policies
Principles of Consolidation -- The consolidated financial statements include all
majority-owned subsidiaries. Prior year amounts have been restated to reflect
the distribution of Huttig Building Products, Inc. to shareholders on December
16, 1999. Prior year amounts have been reclassified to conform to this
treatment. Investments in affiliates over which Crane exercises significant
influence but which it does not control (generally 20% to 50% ownership) are
accounted for under the equity method. All intercompany items have been
eliminated. All share and per share data have been retroactively restated to
reflect the three-for-two split of common stock effected in the form of a 50%
stock dividend in 1998.
General -- The company's financial statements are prepared in conformity with
generally accepted accounting principles. These require management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting period. Actual results may differ
from those estimated. Estimates and assumptions are reviewed periodically, and
the effects of revisions are reflected in the financial statements in the period
in which they are determined to be necessary.
Revenue Recognition -- Revenues are recorded generally when title passes to the
customer.
Income Taxes -- Income tax expense is based on reported earnings before income
taxes. Deferred income taxes reflect the impact of temporary differences between
assets and liabilities recognized for financial reporting purposes and such
amounts recognized for tax purposes using currently enacted tax rates.
Net Income Per Share -- The company's basic earnings per share calculations are
based on the weighted average number of common shares outstanding. Diluted
earnings per share include all stock options. The company has no stock warrants
or convertible securities.
(In thousands, except per share data) 1999 1998 1997
- --------------------------------------------------------------------------------
Income from continuing operations $100,898 $124,842 $103,716
Income from discontinued operations 13,672 13,596 9,055
- --------------------------------------------------------------------------------
Net income $114,570(a) $138,438 $112,771
Average basic shares outstanding 66,981 68,555 68,565
Effect of dilutive stock options 479 813 819
- --------------------------------------------------------------------------------
Average diluted shares outstanding 67,460 69,368 69,384
- --------------------------------------------------------------------------------
Basic Net Income Per Share:
Income from continuing operations $ 1.51 $ 1.82 $ 1.51
Income from discontinued operations .20 .20 .13
- --------------------------------------------------------------------------------
Net Income $ 1.71(a) $ 2.02 $ 1.64
- --------------------------------------------------------------------------------
Diluted Net Income Per Share:
Income from continuing operations $ 1.50 $ 1.80 $ 1.50
Income from discontinued operations .20 .20 .13
- --------------------------------------------------------------------------------
Net Income $ 1.70(a) $ 2.00 $ 1.63
- --------------------------------------------------------------------------------
(a) Includes pre-tax special charges of $34,987 ($22,567 after taxes or $.33 per
diluted share.)
Cash and Cash Equivalents -- Marketable securities with original maturities of
three months or less are considered to be cash equivalents.
Accounts Receivable -- Receivables are carried at net realizable value.
A summary of the allowance for doubtful accounts, cash discounts, returns
and allowances activity at December 31, follows:
(in thousands) for years ended December 31, 1999 1998 1997
- --------------------------------------------------------------------------------
Balance at beginning of year $ 6,199 $ 5,636 $ 5,805
Provisions 5,928 2,665 4,356
Deductions (5,054) (2,102) (4,525)
- --------------------------------------------------------------------------------
Balance at end of year $ 7,073 $ 6,199 $ 5,636
- --------------------------------------------------------------------------------
Inventories -- Inventories are stated at the lower of cost or market principally
on the last-in, first-out (LIFO) method of inventory valuation. The reduction of
inventory quantities has resulted in a liquidation of LIFO inventories acquired
at lower costs prevailing in prior years. Liquidations have reduced cost of
sales by $2.7 million in 1999 and $.6 million in 1998 and 1997.Replacement cost
would have been higher by $23.1 million and $27.5 million at December 31, 1999
and 1998, respectively.
19 Crane Co Annual Report
<PAGE>
Property, Plant and Equipment -- Depreciation is provided primarily by the
straight-line method over the estimated useful lives of the respective
assets, which range from three to twenty-five years.
Intangibles -- Intangible assets are being amortized on a straight-line basis
over their estimated useful lives, which range from five to twenty years. The
accumulated amortization was $22 million and $18.6 million at December 31, 1999
and 1998, respectively.
Cost in Excess of Net Assets Acquired -- Cost in excess of net assets acquired
is being amortized on a straight-line basis ranging from fifteen to forty
years. The accumulated amortization was $60.1 million and $44.6 million at
December 31, 1999 and 1998, respectively.
Valuation of Long-Lived Assets -- The company periodically evaluates the
carrying value of long-lived assets, including goodwill and other intangible
assets, when events and circumstances warrant such a review. The carrying value
of a long-lived asset is considered impaired when the anticipated undiscounted
cash flow from such asset is separately identifiable and is less than its
carrying value. In that event, a loss is recognized based on the amount by which
the carrying value exceeds the fair market value of the long-lived asset. Fair
market value is determined primarily using the anticipated cash flows discounted
at a rate commensurate with the risk involved.
Stock-Based Compensation Plans -- The company records compensation expense for
its stock-based employee compensation plans in accordance with the
intrinsic-value method prescribed by APB No. 25, "Accounting for Stock Issued to
Employees." Intrinsic value is the amount by which the market price of the
underlying stock exceeds the exercise price of the stock option or award on the
measurement date, generally the date of grant.
Currency Translation -- Assets and liabilities of subsidiaries that prepare
financial statements in currencies other than U.S. dollars are translated at the
rate of exchange in effect on the balance sheet date; results of operations are
translated at the average rates of exchange prevailing during the year. The
related translation adjustments are included in accumulated other comprehensive
income (loss) in a separate component of shareholders' equity.
Financial Instruments -- The company periodically enters into interest rate swap
agreements to moderate its exposure to interest rate changes and to lower the
overall cost of borrowings. The differential to be paid or received is accrued
as interest rates change and is recognized in income over the life of the
agreements. No agreements were outstanding at December 31, 1999 and 1998. In
addition, the company periodically uses forward foreign exchange contracts to
hedge firm purchase and sales commitments. Gains and losses on such contracts
are deferred and recognized as part of the related transactions. Amounts
outstanding at December 31, 1999 and 1998 for such contracts were not material.
Recently Issued Accounting Standards -- The company is required to implement the
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" in the first quarter of fiscal 2001. The
company has historically made limited use of derivative instruments and
financial hedges and believes any impact of the new accounting pronouncement on
the financial statements will be immaterial.
Special Charges
The pre-tax special charges in 1999 of $35.0 million ($18.4 million in the third
quarter and $16.6 million recorded in the fourth quarter) were principally for a
series of actions to reduce the fixed cost base in the Engineered Materials,
Aerospace, Fluid Handling and Controls segments by closing or consolidating
facilities, reducing staff, rationalizing product lines and for other unusual
items. In total, five manufacturing facilities have been or are in the process
of being closed, along with eight peripheral facilities. The facility closings
are expected to be completed during 2000. Severance costs have been recognized
in connection with the involuntary termination of 550 employees, of whom 380
were terminated prior to December 31, 1999, and 170 will be terminated in the
first half of 2000. No additional special charges are expected in 2000.
A summary of the special charges and the liability balance (in thousands) at
December 31, 1999, is as follows:
Liability Balance at
Description Total Deductions December 31, 1999
- -----------------------------------------------------------------------
Severance costs $ 6,258 $ 4,931 $ 1,327
Facility closure costs 3,553 1,858 1,695
Product liability costs 7,347 469 6,878
Other items 1,064 1,006 58
- -----------------------------------------------------------------------
Total cash $18,222 $ 8,264 $ 9,958
- -----------------------------------------------------------------------
Inventory markdowns 12,248
Asset impairments
and disposals 4,517
- -----------------------------------------------------------------------
Total non-cash 16,765
- -----------------------------------------------------------------------
Total $34,987
=======================================================================
Research and Development
Research and development and engineering costs were approximately $58.9
million, $70.9 million and $56.3 million in 1999, 1998, and 1997, respectively.
Included in these amounts were approximately $7.4 million, $15.8 million and
$9.6 million received in 1999, 1998 and 1997,respectively,for customer-sponsored
research and development.
20 Crane Co Annual Report
<PAGE>
Discontinued Operations
On December 6, 1999, the company's Board of Directors approved the spin-off of
its Huttig Building Products ("Huttig" subsidiary) effective December 16, 1999,
to shareholders of record as of December 8, 1999. Huttig common shares were
distributed on the basis of one share of Huttig for every 4.5 shares of Crane
Co. common stock. Prior to the spin-off, Huttig transferred $68 million to the
company, which the company used to pay down debt.
The consolidated financial results of the company have been restated to
reflect the divestiture of Huttig. Huttig net assets, results of operations and
cash contributions to Crane have been reflected in the accompanying financial
statements as a discontinued operation.
Summarized financial information for discontinued operations is set forth
below:
(in thousands except per share amounts) 1999 1998 1997
- --------------------------------------------------------------------------------
Net sales $760,723 $707,450 $625,503
Income before taxes 21,833(a) 21,851 14,814
Net income 13,672 13,596 9,055
Diluted earnings per share .20 .20 .13
================================================================================
(a) Includes pension plan curtailment gain of $7.2 million.
Net assets of discontinued operations at December 31,1998,were $121 million,
consisting of $115 million of current assets and $81 million of other assets,
net of third-party liabilities of $75 million.
Miscellaneous -- Net
(in thousands) for years ended December 31, 1999 1998 1997
- --------------------------------------------------------------------------------
Gain on disposition of capital assets $1,712 $ 307 $479
Gain on sale of equity investment 2,582 -- --
Other 51 (1,314) 62
- --------------------------------------------------------------------------------
$4,345 $(1,007) $541
================================================================================
Income Taxes
Income (loss) before taxes is as follows:
(in thousands) for years ended December 31, 1999 1998 1997
- --------------------------------------------------------------------------------
U.S. operations $160,888 $176,030 $142,427
Non-U.S. operations (5,093) 16,759 18,595
- --------------------------------------------------------------------------------
$155,795 $192,789 $161,022
- --------------------------------------------------------------------------------
The provision for income taxes consists of:
(in thousands) for years ended December 31, 1999 1998 1997
- --------------------------------------------------------------------------------
Current:
U.S. federal tax $41,007 $54,066 $42,313
State and local tax 2,100 3,548 4,322
Non-U.S. tax 5,301 5,921 5,316
- --------------------------------------------------------------------------------
48,408 63,535 51,951
- --------------------------------------------------------------------------------
Deferred:
U.S. federal tax 8,799 3,150 4,599
State and local tax 2,194 386 373
Non-U.S. tax (4,504) 876 383
- --------------------------------------------------------------------------------
6,489 4,412 5,355
- --------------------------------------------------------------------------------
Total income taxes $54,897 $67,947 $57,306
================================================================================
Reconciliation of the statutory U.S. federal rate to the effective tax rate
is as follows:
(in thousands) for years ended December 31, 1999 1998 1997
- --------------------------------------------------------------------------------
Statutory U.S. federal tax at 35% $54,528 $67,476 $56,358
Increase (reduction) from:
Non-U.S. taxes 2,606 931 (809)
State and local taxes 2,879 2,595 3,121
Non-deductible goodwill 4,836 3,391 2,533
Foreign Sales Corporation (6,033) (2,974) (2,886)
Other (3,919) (3,472) (1,011)
- --------------------------------------------------------------------------------
Provision for income taxes $54,897 $67,947 $57,306
- --------------------------------------------------------------------------------
Effective tax rate 35.2% 35.2% 35.6%
- --------------------------------------------------------------------------------
At December 31, 1999, the company had unremitted earnings of foreign
subsidiaries of $93.3 million. Because these earnings, which reflect full
provision for non-U.S. income taxes, are indefinitely reinvested in
non-U.S. operations or can be remitted substantially free of additional tax, no
provision has been made for taxes that might be payable upon remittance of such
earnings.
The components of deferred tax assets and liabilities included on the
balance sheet at December 31 are as follows:
(in thousands) December 31, 1999 1998
- --------------------------------------------------------------------------------
Deferred tax assets:
Postretirement benefits $12,333 $13,035
Inventory 5,691 6,848
Insurance 6,259 7,091
Environmental 3,884 3,847
Tax loss and credit carryforwards 8,869 7,395
Deferred compensation 5,684 8,273
Other 15,792 12,776
- --------------------------------------------------------------------------------
Total 58,512 59,265
Less valuation allowance on tax
loss and credit carryforwards 4,375 3,086
- --------------------------------------------------------------------------------
Total deferred tax assets, net 54,137 56,179
- --------------------------------------------------------------------------------
Deferred tax liabilities:
Depreciation 32,329 30,098
Intangibles 12,668 13,675
Pension 9,165 5,599
- --------------------------------------------------------------------------------
Total deferred liabilities 54,162 49,372
- --------------------------------------------------------------------------------
Net deferred (liability) asset $ (25) $ 6,807
================================================================================
Balance sheet classification:
Other current assets $25,841 $33,096
Deferred income taxes 25,866 26,289
- --------------------------------------------------------------------------------
Net deferred (liability) asset $ (25) $ 6,807
================================================================================
21 Crane Co 1999 Annual Report
<PAGE>
As of December 31, 1999, the company had net operating loss (NOL)
carryforwards and U.S. tax credit carryforwards that will expire, if unused, as
follows:
Non-U.S. U.S. U.S. U.S.
(in thousands) National State Federal R&D
year of expiration NOL NOL NOL Credit
- ------------------------------------------------------------------------
2000-2003 $ 1,176 $14,414 $ 803 $ 2
After 2003 290 33,615 2,184 615
Indefinite 15,450 -- -- --
- ------------------------------------------------------------------------
Total $16,916 $48,029 $ 2,987 $ 617
========================================================================
Deferred tax
asset on tax carryforwards $ 5,311 $ 1,896 $ 1,045 $ 617
- ------------------------------------------------------------------------
Of the total $8.9 million deferred tax asset on tax carryforwards, $4.4 million
has been offset by the valuation allowance because of the uncertainty of
ultimately realizing these future benefits.
Accrued Liabilities
(in thousands) December 31, 1999 1998
- ----------------------------------------------------------------
Employee-related expenses $ 51,878 $ 61,352
Insurance 9,202 10,130
Environmental 2,648 4,232
Warranty and product liability 13,473 11,388
Professional fees 2,781 3,265
Sales allowances 7,003 5,196
Customer advanced payments 1,772 3,911
Interest 4,478 5,350
Taxes other than income 3,285 2,616
Pensions 4,859 3,218
Other 14,719 19,138
- ----------------------------------------------------------------
$116,098 $129,796
================================================================
Other Liabilities
(in thousands) December 31, 1999 1998
- -----------------------------------------------------------------
Environmental $ 7,337 $ 9,605
Insurance 6,893 8,104
Minority interest 2,215 3,669
Other 9,482 6,357
- -----------------------------------------------------------------
$ 25,927 $ 27,735
==================================================================
Pension and Postretirement Benefits
The company and most of its subsidiaries have defined benefit pension plans for
their employees. The company also has a defined benefit plan for its
directors. The plans generally provide benefit payments using a formula based on
length of service and final average compensation, except for some hourly
employees for whom the benefits are a fixed amount per year of service. The
company's policy is to fund at least the minimum amount required by the
applicable governmental regulations.
Postretirement healthcare and life insurance benefits are provided for
certain domestic and non-U.S. employees hired before January 1,1990, who meet
minimum age and service requirements. The company does not pre-fund these
benefits and has the right to modify or terminate the plan.
The following table sets forth the amounts recognized in the company's
balance sheet at December 31, for company-sponsored defined benefit pension and
post-retirement benefit plans:
Pension Benefits Postretirement Benefits
- --------------------------------------------------------------------------------
(in thousands) December 31, 1999 1998 1999 1998
- --------------------------------------------------------------------------------
Change in benefit obligation:
Benefit obligation at
beginning of year $329,032 $304,725 $20,390 $ 21,269
Service cost 12,574 11,062 146 173
Interest cost 20,427 18,860 1,163 1,378
Plan participants'
contributions 964 1,509 1,445 1,444
Amendments 1,334 565 (959) --
Actuarial (gain) loss (24,813) 6,694 (1,569) (422)
Benefits paid (15,837) (15,297) (3,619) (3,452)
Foreign currency exchange
rate (gain) loss (1,072) (1,636) -- --
Acquisition/divestitures (4,717) 2,550 -- --
- --------------------------------------------------------------------------------
Benefit obligation at
end of year 317,892 329,032 16,997 20,390
- --------------------------------------------------------------------------------
Change in plan assets:
Fair value of plan assets
at beginning of year 436,508 416,608
Actual return on
plan assets 26,939 33,788
Foreign currency exchange
rate gain (loss) (565) (3,062)
Employer contributions 1,019 641
Plan participants'
contributions 964 1,509
Benefits paid (15,837) (15,297)
Acquisition/divestitures 2,086 2,321
- --------------------------------------------------------------------------------
Fair value of plan assets
at end of year 451,114 436,508
- --------------------------------------------------------------------------------
Funded status 133,222 107,476 (16,997) (20,390)
Unrecognized actuarial
(gain) loss (105,194) (90,225) (14,712) (13,122)
Unrecognized prior
service cost 1,793 3,145 -- --
Unrecognized transition
(asset)/obligation (4,694) (4,101) -- --
- --------------------------------------------------------------------------------
Prepaid (accrued)
benefit cost $ 25,127 $ 16,295 $(31,709) $ (33,512)
================================================================================
22 Crane Co Annual Report
<PAGE>
Pension Benefits
- ---------------------------------------------------------
(in thousands) December 31, 1999 1998
- ---------------------------------------------------------
Balance sheet classification:
Other assets $29,505 $22,193
Accrued liability 1,719 334
Accrued pension liability 2,659 5,564
- ---------------------------------------------------------
$25,127 $16,295
=========================================================
(Dollars in thousands) Pension Benefits Postretirement Benefits
- --------------------------------------------------------------------------------
December 31, 1999 1998 1997 1999 1998 1997
- --------------------------------------------------------------------------------
Weighted average
assumptions as
of December 31:
Discount rate 6.92% 6.68% 6.30% 7.5% 6.75% 7.25%
Expected rate of
return on
plan assets 8.12% 8.27% 7.91% -- -- --
Rate of compensation
increase 4.53% 4.81% 4.41% 4.5% 4.00% 4.50%
- --------------------------------------------------------------------------------
Components of net
periodic benefit cost:
Service cost $12,574 $11,062 $10,293 $ 146 $ 173 $203
Interest cost 20,427 18,860 17,186 1,163 1,378 1,533
Expected rate
of return on
plan assets (32,461) (30,833) (26,321) -- -- --
Amortization of
prior service cost (748) (678) 282 (95) -- --
Recognized net
actuarial loss
(gain) (2,092) (1,161) (1,341) (959) (958) (924)
- --------------------------------------------------------------------------------
Net periodic
benefit cost $(2,300) $(2,750) $ 99 $ 255 $ 593 $812
================================================================================
The projected benefit obligation, accumulated benefit obligation, and fair value
of plan assets for pension plans with accumulated benefit obligations in excess
of plan assets were $9.7 million, $8.8 million, $7.6 million and $11.0 million,
$9.9 million and $8.4 million, as of December 31, 1999 and 1998, respectively.
At December 31, 1999, substantially all plan assets are invested in listed
stocks and bonds. These investments include common stock of the company, which
represents 3% of plan assets.
The company participates in several multi-employer pension plans, which
provide benefits to certain employees under collective bargaining agreements.
Total contributions to these plans were approximately $1.1 million in 1999, $1.0
million in 1998 and $1.1 million in 1997.
Crane subsidiaries ELDEC Corporation and Interpoint Corporation have a
money purchase plan to provide retirement benefits for all eligible
employees. The annual contribution is 5% of each eligible participant's gross
compensation. The contributions for 1999, 1998 and 1997 were $2.5 million, $2.2
million and $1.7 million, respectively.
The company and its subsidiaries sponsor savings and investment plans that
are available to eligible employees of the company and its subsidiaries. The
company made contributions to the plans of approximately $5.4 million, $4.7
million and $3.7 million in 1999, 1998 and 1997, respectively.
For the purpose of estimating the postretirement liability, the cost of
covered benefits was assumed to increase 7.7% for 1999, and then to decrease
gradually to 5.0% by 2005 and remain at that level thereafter. In 1998, the cost
of covered benefits was assumed to increase 8.5%, and then to decrease gradually
to 4.75% by 2005 and remain at that level thereafter:
1 Percentage 1 Percentage
(in thousands) Point Increase Point Decrease
- --------------------------------------------------------------------------------
Effect on total of service and interest
cost components $ 152 $ 133
Effect on postretirement benefit obligation 1,444 1,275
- --------------------------------------------------------------------------------
Short-Term Financing
The weighted average interest rate for loans payable, consisting of short-term
bank borrowings of $13.3 million and $50.4 million at December 31, 1999 and
1998, was 5.9% and 6.4%, respectively. As of December 31, 1999, the company had
unused domestic lines of credit totaling $150.0 million and unused foreign lines
of credit totaling $48.9 million. These lines of credit are typically available
for borrowings up to 364 days and are renewable at the option of the lender.
Short-term obligations of $46.8 million at December 31, 1999, and $150 million
at December 31, 1998, were classified as long-term debt because the company had
entered into finance agreements that permit it to refinance short-term
obligations on a long-term basis.
23 Crane Co 1999 Annual Report
<PAGE>
Long-Term Financing
(in thousands) December 31, 1999 1998
- ---------------------------------------------------------------------
Crane Co.
Senior debt:
7.25% notes due 1999 $ -- $ 150,000
Original issue discount -- (29)
Deferred financing costs -- (205)
- ---------------------------------------------------------------------
-- 149,766
- ---------------------------------------------------------------------
8.50% notes due 2004 100,000 100,000
Original issue discount (352) (436)
Deferred financing costs (290) (358)
- ---------------------------------------------------------------------
99,358 99,206
- ---------------------------------------------------------------------
6.75% notes due 2006 100,000 100,000
Original issue discount (253) (290)
Deferred financing costs (849) (998)
- ---------------------------------------------------------------------
98,898 98,712
- ---------------------------------------------------------------------
6.68% Other debt--due 2003 66,800 --
Deferred financing costs (88) --
- ---------------------------------------------------------------------
66,712 --
- ---------------------------------------------------------------------
Total Crane Co. 264,968 347,684
- ---------------------------------------------------------------------
Subsidiaries
Industrial revenue bonds 1,485 1,677
Various loans--6.0% average rate 20,704 8,817
- ---------------------------------------------------------------------
Total Subsidiaries 22,189 10,494
- ---------------------------------------------------------------------
Total long-term debt 287,157 358,178
Less current portion 385 468
- ---------------------------------------------------------------------
Long-term debt, net of current portion $ 286,772 $ 357,710
=====================================================================
At December 31, 1999, the principal amounts of long-term debt repayments
required for the next five years are $.4 million in 2000, $7.2 million in
2001, $.8 million in 2002, $66.8 million in 2003, and $113.8 million in 2004.
At December 31, 1999, the company had a $300 million contractually
committed long-term bank credit facility under which the company can borrow,
repay or, to the extent permitted by the agreement, prepay loans and reborrow at
any time prior to the termination date of November 2003. Proceeds may be used
for general corporate purposes or to provide financing for acquisitions. The
agreement contains certain covenants, including limitations on indebtedness and
liens. A loan for $20 million was outstanding under this agreement at year end.
The company has a $300 million shelf registration filed with the Securities and
Exchange Commission, all of which remains unissued.
Fair Value of Financial Instruments
The carrying value of investments and short-term debt approximates the fair
value. Long-term debt rates currently available to the company for debt with
similar terms and remaining maturities are used to estimate the fair value for
debt issues that are not quoted on an exchange. The estimated fair value of
long-term debt at December 31, 1999, was $285 million compared with a carrying
value of $287 million.
Crane is a party to a contractually committed off-balance sheet chattel
paper financing facility that enables its National Vendors operation to offer
various sales support financing programs to its customers. Recourse to Crane for
all uncollectible loans made to National Vendors' customers by the banks under
this agreement is limited.
Leases
The company leases certain facilities, vehicles and equipment. Future minimum
payments, by year, and in the aggregate, under leases with initial or remaining
terms of one year or more consisted of the following at December 31, 1999:
Minimum
Operating Sublease
(in thousands) December 31, Leases Income Net
- ----------------------------------------------------------------
2000 $ 7,871 $137 $ 7,734
2001 6,150 112 6,038
2002 4,915 65 4,850
2003 4,071 63 4,008
2004 3,015 63 2,952
Thereafter 3,058 7 3,051
- ----------------------------------------------------------------
Total minimum lease payments $29,080 $447 $28,633
================================================================
Rental expense was $9.7 million, $9.3 million and $10.7 million for 1999, 1998
and 1997, respectively.
24 Crane Co 1999 Annual Report
<PAGE>
Contingencies
The company has established insurance programs to cover product and general
liability losses. These programs have deductible amounts of $5 million per
claim, $10 million aggregate per policy year before coverage begins, with the
exception of aircraft products, and non-U.S. claims, which have first-dollar
coverage. The company does not deem its deductible exposure to be material.
As of December 31, 1999, the company is involved in various claims and
legal actions arising in the ordinary course of business. In the opinion of
management, the ultimate disposition of these matters will not have a material
effect on the company's financial condition and results of operations.
The company continues to be involved in various remediation actions to
clean up hazardous wastes as required by federal and state laws. Estimated
future environmental remediation cost was $10.0 million at December 31, 1999,
which was fully accrued. In certain of these actions, the company is one of
several potentially responsible parties ("PRPs"). As a PRP, the company could be
liable for all clean-up cost despite the involvement of other PRPs. Given the
financial stability of the other PRPs, the company believes this is unlikely and
the accrual represents management's best estimate, based on current facts and
circumstances, with respect to the ultimate liability that will be apportioned
to the company. The company spent $2.1 million on environmental costs in 1999,
and expects to pay remediation costs of approximately $2.6 million in 2000. The
annual level of future remediation expenditures is difficult to estimate because
of the many uncertainties relating to conditions of individual sites, as well as
uncertainties about the status of environmental laws and regulations and
developments in remedial technology. In addition, the company is a minor/de
minimis potentially responsible party (PRP) at certain third-party environmental
remediation sites where remediation obligations are joint and several, and the
company, as part of its estimate of potential liability, periodically reviews
whether the major PRPs have the ability to fulfill their portion of such
remediation obligations. The company is not aware of any significant additional
liability that would result from the inability of other PRPs to fulfill their
obligations. Overall, the company's liability for the required remedial actions
being implemented or engineered is not, individually or in the aggregate,
expected to be material.
As of December 31, 1999, Crane Co. was a defendant (among a number of
defendants,typically 15 to 40) in approximately 2,400 actions filed in various
state and federal courts alleging injury or death as a result of exposure to
asbestos in products allegedly manufactured or sold by the company. Because of
the unique factors inherent in each case and the fact that most are in
preliminary stages, the company lacks sufficient information upon which
judgments can be made as to their validity or ultimate disposition. Based on
the information available to the company and its experience in the disposition
of lawsuits of this type,the company believes that pending and reasonably
anticipated future asbestos actions are not likely to have a material effect on
its results of operations or financial condition.
Acquisitions, Divestitures and Investments
The company reviews potential acquisition candidates with market and technology
positions that provide meaningful opportunities in the markets in which it
already has a presence, or which afford significant financial reward, and may
dispose of operations when consistent with its overall goals and strategies. In
October 1999, the company acquired Stentorfield, Ltd., based in Chippenham,
England, for $32.8 million. Stentorfield is a premier designer and manufacturer
of hot and cold beverage vending machines, serving the U.K. and European market
with a broad line of full-size and tabletop products, for the hotel, restaurant,
office coffee service and vending industries. Stentorfield is known in the
industry to provide high quality, reliable and easily serviced products and
excellent customer service. This business was integrated with Crane's National
Vendors business,which is the leading North American designer and manufacturer
of full-line vending machines, for snack, food and beverage.
The acquisition provides the means for National Vendors to satisfy the
growing U.K. and European demand for a broader "one-stop" product offering,
consisting of Stentorfield's drinks machines and National Vendors' snack and
food machines.
During 1998,the company completed four acquisitions at a total cost of $178
million. In May, the company acquired Environmental Products USA, Inc. This
business manufactures membrane-based water treatment systems for industrial,
commercial and institutional markets. In August,the company acquired Sequentia
Holdings, Inc., a manufacturer of fiberglass-reinforced plastic panels for the
construction and building products markets. Sequentia complements the company's
Kemlite subsidiary, which provides fiberglass-reinforced plastic panels for the
transportation and recreational vehicle markets. In September, the company
acquired Liberty Technologies, Inc. which develops, manufactures, markets and
sells valve, motor, engine and compression condition monitoring products and
related services to the nuclear power generation and industrial process markets
worldwide. Liberty complements the company's nuclear valve business, which
provides valves, valve diagnostic equipment and related services to the nuclear
power industry, and the company's Dynalco Controls business, which provides
sensors, instrumentation, control products and automation systems for use in
industrial engine applications. Also in the fourth quarter of 1998, the company
acquired the Plastic-Lined Piping Products ("PLPP") division of The Dow Chemical
Company. PLPP was integrated with the company's Resistoflex division, which
supplies lined pipe and valves to the chemical process and industrial markets.
In April 1999,the company sold Southwest Foundry, acquired as part of the
Stockham Valves & Fittings, Inc. transaction, for $.4 million. In December 1999,
the company sold its Crane Defense Systems business for $6.4 million in cash and
a $.8 million note due in 2002.
In May of 1998, the company sold two foundry operations acquired as part of
the Stockham Valves & Fittings, Inc. transaction. Accu-Cast, Inc. in
Chattanooga, Tennessee, and the Aliceville Foundry in Aliceville, Alabama, were
sold for a total of $4.3 million.
25 Crane Co 1999 Annual Report
<PAGE>
During 1997, the company completed four acquisitions at a total cost of $70
million. In March, the company acquired the transportation products business of
Sequentia, Inc. This business, which produces fiberglass-reinforced plastic
panels for the truck body, trailer and container market, has been integrated
with the company's Kemlite subsidiary. Also in March, the company acquired
Polyvend Inc., a manufacturer of snack and food vending machines. Polyvend was
completely integrated into National Vendors' modern St. Louis facility by the
end of the third quarter of 1997, significantly expanding distribution sales
channels. In April, the company acquired the Nuclear Valve business of ITI
MOVATS from Westinghouse. MOVATS is a leading supplier of valve diagnostic
equipment and valve services to the commercial nuclear power industry. In
December, the company acquired certain operations and product lines of Stockham
Valves & Fittings, Inc. The acquired product lines and related manufacturing
operations were integrated into the company's engineered valve and commercial
bronze and iron valve businesses.
In 1997, the company sold its Valve Systems and Controls division for $7.5
million in cash and $1.5 million in preferred stock.
All acquisitions were accounted for by the purchase method. The results of
operations for all acquisitions have been included in the financial statements
from their respective dates of purchase.
The following unaudited pro forma financial information presents the
combined results of operations of the company and Environmental Products,
Sequentia, Liberty Technologies and Plastic-Lined Piping Products as if the
acquisitions had taken place at the beginning of 1997. The pro forma amounts
give effect to certain adjustments including the amortization of goodwill and
intangibles, increased interest expense and income tax effects. This pro forma
information does not necessarily reflect the results of operations as they would
have been if the businesses had been managed by the company during these periods
and is not indicative of results that may be obtained in the future. Pro forma
1998 and 1997 results are as follows: net sales of $1.64 billion and $1.55
billion, net income of $121.2 million and $97.2 million and diluted net income
per share of $1.75 and $1.40, respectively.
Preferred Share Purchase Rights
On June 27, 1998, the company adopted a Shareholder Rights Plan to replace the
existing Plan, which expired on that date. The company distributed one preferred
share purchase right for each outstanding share of common stock. The preferred
rights were not exercisable when granted and may only become exercisable under
certain circumstances involving actual or potential acquisitions of the
company's common stock by a person or affiliated persons. Depending upon the
circumstances, if the rights become exercisable, the holder may be entitled to
purchase shares of the company's Series A Junior Participating Preferred
Stock,or shares of common stock of the acquiring person. Preferred shares
purchasable upon exercise of the rights will not be redeemable. Each preferred
share will be entitled to preferential rights regarding dividend and liquidation
payments, voting power, and, in the event of any merger, consolidation or other
transaction in which common shares are exchanged, a preferential exchange
rate. The rights will remain in existence until June 27, 2008, unless they are
earlier terminated, exercised or redeemed. The company has authorized five
million shares of $.01 par value preferred stock of which 500,000 shares have
been designated as Series A Junior Participating Preferred Stock.
Stock-Based Compensation Plans
The company has three stock-based compensation plans: the Stock Option Plan, the
Restricted Stock Award Plan and the Non-Employee Director Restricted Stock
Plan.In accounting for its stock-based compensation plans, the company applies
the intrinsic value method prescribed by APB No.25, "Accounting for Stock Issued
to Employees". Intrinsic value is the amount by which the market price of the
underlying stock exceeds the exercise price of the stock option or award on the
measurement date, generally the date of grant. No compensation expense is
recognized for the company's stock option plan. Compensation expense recognized
for its restricted stock award plans was $2.1 million in 1999, $5.0 million in
1998, and $5.2 million in 1997. The pro forma net income and earnings per share
listed below reflect the impact of measuring compensation expense for options
granted in 1999,1998 and 1997 in accordance with the fair-value-based method
prescribed by SFAS 123, "Accounting for Stock-Based Compensation." These amounts
may not be representative of future years' amounts as options vest over a
three-year period and, generally, additional awards are made each year.
(in thousands except per share data) 1999 1998 1997
- -------------------------------------------------------------------
Net income As reported $114,570 $138,438 $112,771
Pro forma 108,340 133,071 110,339
Net income per share
Basic As reported 1.71 2.02 1.64
Pro forma 1.62 1.94 1.61
- -------------------------------------------------------------------
Diluted As reported 1.70 2.00 1.63
Pro forma 1.61 1.92 1.59
- -------------------------------------------------------------------
26 Crane Co. 1999 Annual Report
<PAGE>
The weighted average fair value of options granted was $5.66 per share in 1999,
$11.01 per share in 1998 and $6.89 per share in 1997. These estimates were based
on the Black-Scholes multiple option-pricing model with the following weighted
average assumptions:
1999 1998 1997
- -------------------------------------------------------------
Dividend yield 1.85% .92% 1.48%
Volatility 25.14% 24.22% 24.98%
Risk-free interest rates 5.07% 5.60% 6.76%
Expected lives in years 5.12 5.29 5.10
- -------------------------------------------------------------
Options are granted under the Stock Option Plan to officers and other key
employees at an exercise price equal to the fair market value of the shares on
the date of grant. Options become exercisable at a rate of 50% the first
year, 75% the second year and 100% the third year after the date of grant, and
expire ten years after the date of grant. A summary of stock option activity
follows:
Weighted
Number Average
(Shares in thousands) of Shares Exercise Price
- -------------------------------------------------------------------------------
1997
- -------------------------------------------------------------------------------
Options outstanding at beginning of year 3,597 $12.45
Granted 871 20.84
Exercised (709) 10.44
Canceled (156) 17.58
- -------------------------------------------------------------------------------
Options outstanding at end of year 3,603 14.67
Options exercisable at end of year 2,309 12.21
1998
- -------------------------------------------------------------------------------
Granted 1,482 33.44
Exercised (847) 10.97
Canceled (28) 23.12
- -------------------------------------------------------------------------------
Options outstanding at end of year 4,210 21.95
Options exercisable at end of year 2,184 14.76
1999
- -------------------------------------------------------------------------------
Granted 1,577 21.66
Exercised (456) 13.59
Canceled (194) 28.20
- -------------------------------------------------------------------------------
Options outstanding at end of year 5,137 22.36
Options exercisable at end of year 2,718 20.11
- -------------------------------------------------------------------------------
A summary of information regarding stock options outstanding at December
31, 1999, follows:
(Shares in thousands) Options Outstanding Options Exercisable
- -------------------------------------------------------------------------------
Weighted Weighted Weighted
Number Average Average Number Average
Range of of Remaining Exercise of Exercise
Exercise Prices Shares Life (Years) Price Shares Price
- -------------------------------------------------------------------------------
$25.63-33.54 1,368 8.29 $33.38 682 $33.31
17.16-24.62 2,227 8.76 21.38 494 20.73
9.15-16.96 1,542 5.12 13.99 1,542 13.99
- -------------------------------------------------------------------------------
The Restricted Stock Award Plan provides for awards of common stock to officers
and other key employees, subject to resale restrictions. The restrictions on
outstanding awards are scheduled to lapse upon the achievement of certain
performance objectives or over time. The company awarded 189,900 shares with a
weighted average fair value of $23.11 in 1999. In addition, 70,884 shares were
issued in conjunction with the Huttig spin-off. As of December 31, 1999, there
were available for future awards a total of 1,257,966 shares.
Under the Non-Employee Director Restricted Stock Plan, directors who are
not full-time employees of the company receive the portion of their annual
retainer that exceeds $15,000 in shares of common stock. The shares are issued
each year after the company's annual meeting, are forfeitable if the director
ceases to remain a director until the company's next annual meeting, and may not
be sold for a period of five years, or until the director leaves the Board. As a
group, non-employee directors received 5,140 shares with a weighted average fair
value of $23.82 in 1999.
Segment Information
The company's segments are reported on the same basis used internally for
evaluating segment performance and for allocating resources.
The company has five segments: Engineered Materials, Merchandising
Systems, Aerospace, Fluid Handling and Controls.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. The company accounts for
intersegment sales and transfers as if the sales or transfers were to third
parties at current market prices.
27 Crane Co 1999 Annual Report
<PAGE>
Information by industry segments follows:
(in thousands) 1999 1998 1997
- --------------------------------------------------------------------------------
Engineered Materials
- --------------------------------------------------------------------------------
Net Sales -- Outside $353,534 $275,969 $222,789
Net Sales -- Intersegment 3,539 2,985 2,771
Operating Profit 59,879(a) 39,655 30,093
Assets 249,961 263,576 109,578
Capital Expenditures 4,380 6,094 8,210
Depreciation and Amortization 14,085 9,633 6,178
Merchandising Systems
- --------------------------------------------------------------------------------
Net Sales -- Outside 201,941 191,927 179,905
Net Sales -- Intersegment -- -- --
Operating Profit 35,838 33,548 31,034
Assets 150,197 117,858 109,190
Capital Expenditures 6,979 2,815 5,089
Depreciation and Amortization 7,128 7,201 6,426
Aerospace
- --------------------------------------------------------------------------------
Net Sales -- Outside 363,128 394,401 343,900
Net Sales -- Intersegment -- 65 --
Operating Profit 96,078(a) 118,175 90,055
Assets 269,154 296,668 277,704
Capital Expenditures 8,245 17,515 13,496
Depreciation and Amortization 13,041 12,563 12,785
Fluid Handling
- --------------------------------------------------------------------------------
Net Sales -- Outside 502,170 554,210 496,553
Net Sales -- Intersegment 57 3,567 3,282
Operating Profit 22,870(a) 34,961 36,869
Assets 330,528 393,277 362,651
Capital Expenditures 6,390 17,195 7,640
Depreciation and Amortization 15,797 13,101 11,025
Controls
- --------------------------------------------------------------------------------
Net Sales -- Outside 120,166 131,052 130,284
Net Sales -- Intersegment 1,051 1,265 1,237
Operating Profit 4,071(a) 8,927 11,640
Assets 129,240 127,702 121,432
Capital Expenditures 1,905 4,264 2,538
Depreciation and Amortization 6,866 6,555 6,502
- --------------------------------------------------------------------------------
(a) Before special charges for Engineered Materials ($3.2 million), Aerospace
($9.0 million), Fluid Handling ($18.9 million), and Controls ($3.4 million).
(in thousands) 1999 1998 1997
- --------------------------------------------------------------------------------
Consolidated
Net Sales
Other $ 12,717 $ 13,496 $ 37,897
Intersegment Elimination (4,646) (7,882) (7,290)
- --------------------------------------------------------------------------------
Total Net Sales $ 1,553,657 $ 1,561,055 $ 1,411,328
================================================================================
Operating Profit
Other $ (546) $ (424) $ 353
Corporate (13,598) (22,937) (23,425)
Special charges (34,987) -- --
Intersegment Elimination (51) 56 140
- --------------------------------------------------------------------------------
Total Operating Profit $ 169,554 $ 211,961 $ 176,759
================================================================================
Assets
Other $ 2,970 $ 13,003 $ 12,266
Corporate 43,397 46,987 49,383
Net Assets of
Discontinued Operations -- 120,660 89,279
- --------------------------------------------------------------------------------
Total Assets $ 1,175,447 $ 1,379,731 $ 1,131,483
================================================================================
Capital Expenditures
Other $ 274 $ 810 $ 245
Corporate 815 50 83
- --------------------------------------------------------------------------------
Total Capital Expenditures $ 28,988 $ 48,743 $ 37,301
================================================================================
Depreciation and Amortization
Other $ 335 $ 269 $ 416
Corporate 4,028 6,551 7,659
- --------------------------------------------------------------------------------
Total Depreciation
and Amortization $ 61,280 $ 55,873 $ 50,991
================================================================================
Information by geographic segments follows:
(in thousands) 1999 1998 1997
- --------------------------------------------------------------------------------
Net Sales
United States $ 1,012,090 $ 977,587 $ 864,683
Canada 202,899 194,723 197,039
Europe 238,320 260,607 213,681
Other International 100,348 128,138 135,925
- --------------------------------------------------------------------------------
Total Net Sales $ 1,553,657 $ 1,561,055 $ 1,411,328
================================================================================
Operating Profit
United States $ 154,350 $ 162,800 $ 134,753
Canada 10,351 14,673 15,773
Europe 8,465 37,715 32,016
Other International 10,376 19,710 17,642
Corporate (13,988) (22,937) (23,425)
- --------------------------------------------------------------------------------
Total Operating Profit $ 169,554 $ 211,961 $ 176,759
================================================================================
Assets
United States $ 874,568 $ 1,079,451 $ 842,661
Canada 91,367 81,570 83,510
Europe 148,715 151,950 141,011
Other International 17,400 19,773 14,918
Corporate 43,397 46,987 49,383
- --------------------------------------------------------------------------------
Total Assets $ 1,175,447 $ 1,379,731 $ 1,131,483
================================================================================
28 Crane Co. 1999 Annual Report
<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 and Chief Executive Officer
/s/ D. S. Smith
D. S. Smith
Vice President,Finance and Chief Financial Officer
Independent Auditors' Report
[LOGO OF DELOITTE & TOUCHE LLP]
To The Shareholders of Crane Co.
We have audited the accompanying consolidated balance sheets of Crane Co. and
its subsidiaries as of December 31, 1999 and 1998, and the related consolidated
statements of income, cash flows and changes in common shareholders' equity for
each of the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Crane Co. and its subsidiaries
at December 31, 1999 and 1998, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1999 in
conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Stamford, Connecticut
January 20, 2000
29 Crane Co 1999 Annual Report
<PAGE>
1998 Review
Management's Discussion and Analysis of Operations
Engineered Materials
- --------------------------------------------------------------------------------
(dollars in millions) 1998 1997
- --------------------------------------------------------------
Sales $279.0 $225.6
Operating Profit 39.7 30.1
Operating Margins 14.2% 13.3%
- --------------------------------------------------------------
Operating profit rose 32% on a 24% increase in sales in the Engineered Materials
segment, reflecting substantial growth at Kemlite and the acquisition of
Sequentia. Strong transportation and building supply markets benefited Kemlite,
Sequentia, and CorTec, which all manufacture fiberglass-reinforced plastic (frp)
materials. Partly offsetting their results were a small loss at Crane Plumbing
and modestly lower earnings at Resistoflex. Order backlog was $24 million at
year end compared with $29 million in 1997.
Increasing use of lightweight, thermally efficient frp roofs for
refrigerated trucks and trailers and translucent frp roofs in dry van trailers
and trucks, along with strong markets for truck and trailer liner panels,
recreational vehicle panels and building panels,boosted Kemlite's sales in 1998.
The increased volume, coupled with successful cost reduction efforts,led to
improved margins and record operating profits.
The substitution of translucent frp roofs for aluminum on dry van trailers
appeared to plateau, but the use of non-translucent frp roofs on refrigerated
trucks and trailers increased. In addition, Korean container manufacturers
increased their purchases of Kemlite frp panels in 1998.
Crane's $125 million acquisition of Sequentia Holdings in August 1998
significantly expanded Kemlite's penetration of the corrugated, translucent and
flat embossed building products markets, particularly in the home center chains.
Crane bought Sequentia's transportation product line in early 1997.
CorTec reported a profit gain on increased sales, consistent with strong
medium truck and dry van trailer markets.
Resistoflex modestly increased sales of its corrosion-resistant
plastic-lined pipes and fittings, despite lagging demand from the chemical
process industry and soft export markets. The September acquisition of
Plastic-Lined Piping Products (PLPP), a competitor,for $23 million boosted
sales, but overall margins and operating profits were moderately lower. The
company's primarily military aerospace fittings business was strong in 1998,
with profitability enhanced by new machining centers, but competition for new
military contracts intensified.
Marginally profitable in 1997, Crane Plumbing operated at a small loss on
an 8% decline in revenue in 1998, prompting a management change. The
Montreal-based company makes china, steel and acrylic plumbing fixtures for new
construction, repair and renovation, serving residential, industrial, commercial
and institutional markets, primarily in Canada.In spite of well-received new
lavatory products, wholesale demand dipped on a nationwide decline in housing
starts, particularly in Quebec and in British Columbia. Retail sales,
however,rose 21%, as Crane gained major home centers and hardware chains as
customers.
Polyflon, which provides proprietary materials and circuit processing
services to the microwave industry, had level profits on slightly lower sales,
as a better business mix strengthened margins.
Merchandising Systems
- --------------------------------------------------------------------------------
(dollars in millions) 1998 1997
- --------------------------------------------------------------
Sales $191.9 $179.9
Operating Profit 33.5 31.0
Operating Margins 17.5% 17.3%
- --------------------------------------------------------------
The Merchandising Systems segment turned in a solid overall performance in 1998,
with increased sales and operating profits that reflected both energetic sales
efforts and successful cost-cutting. National Vendors, the larger of the
segment's two businesses, reported moderate sales gains and maintained its
strong margins and profits, while the other business, National Rejectors,
improved its margins and profits on slightly lower sales. Order backlog totaled
$22 million at December 31, 1998, up 20% over 1997.
National Vendors moved ahead briskly on several fronts in 1998, achieving
increased sales and higher profits domestically and in Europe. National Vendors'
UMC unit in the U.K. had its best year ever,and the company's German operation
also improved its performance, as corporate downsizing and cost-cutting resulted
in substitution of vending machines for employee cafeterias. National Vendors
also began selling in China, a promising market, and strengthened its Latin
American operations by establishing three distributors in Mexico and expanding
its operations in Chile and Colombia.
National Vendors reduced from 58 to 26 the number of distributors for its
"GPL"brand of machines, intended as a lower-cost
30 Crane Co 1999 Annual Report
<PAGE>
solution for smaller operators. The network now includes only one GPL
distributor in most major metropolitan markets in order to avoid overlaps with
other GPL distributors or with National Vendors' direct sales. The use of
exclusivity is aimed at sharpening the distributor's focus on GPL products.
Internationally, GPL sales expanded in Canada and the U.K., contributing to
record National Vendors shipments in both countries.
National Rejectors' shipments of coin-validation machines were down
modestly from 1997. Weakness in the amusement industry and stiffer competition
in the U.K. and Spain, two major markets, off-set continuing strong sales of
validators for outdoor cigarette machines in Germany. Cost reductions, product
redesign and productivity improvements strengthened NRI's margins, resulting in
a solid gain in profits.
In the past two years, NRI has upgraded many of Germany's estimated 800,000
mechanical outdoor cigarette machines with new electronic validators that can be
programmed to accept euro coins when they are introduced in 2002. However, many
more cigarette machines, and several hundred thousand other vending machines,
remain to be refitted, promising strong sales of NRI products in Germany and
Europe in coming years. NRI derives some 57% of its revenue from Germany and 40%
from other European markets, including Spain and the U.K., where its German-made
validators compete with locally made products. NRI also sells to other
international markets, supplying validators for Canada's lottery machines, for
example, and validators and coin-changers for South American markets.
Aerospace
- --------------------------------------------------------------------------------
(dollars in millions) 1998 1997
- --------------------------------------------------------------
Sales $394.5 $343.9
Operating Profit 118.2 90.1
Operating Margins 30.0% 26.2%
- --------------------------------------------------------------
Crane's aerospace businesses were extremely strong in 1998, increasing their
combined operating profits by 31% on a 15% gain in sales. All four businesses in
the segment reported higher sales, and three had higher earnings fueled by
strong commercial, business and general aviation markets. Order backlog totaled
$281 million at year end, compared with $297 million in 1997.
Record Results for Hydro-Aire
Hydro-Aire, the world market leader in aircraft anti-skid brake control systems,
turned in a record performance, with operating profits up 23% on a 19% increase
in sales. Every Boeing airplane uses its high-performance brake control
systems, and many use its fuel pumps. For instance, the high-volume Boeing
737-700 series incorporates many Hydro-Aire products, including brake control
units, wheelspeed transducers, anti-skid control valves, jettison pumps and
boost pumps. After-market sales of parts and repair and overhaul services also
grew substantially.
With its brake control systems on all Embraer and many Bombardier
aircraft, Hydro-Aire further strengthened its position in regional jets in 1998,
winning the brake control systems on the Dornier 528, 728 and 928. It also won
the brake control systems contract for a new Raytheon Beech business jet.
ELDEC, Crane's largest aerospace business, also set sales and earnings
records in 1998,increasing its operating profits by 41% on a sales gain of
15%. Strong OEM sales, particularly to Boeing, fueled the increases. ELDEC is a
market leader in proximity sensing systems, battery systems, transformer
rectifiers and fuel flowmeters. During 1998, both Rolls Royce and Pratt &
Whitney chose ELDEC's new solid-state pressure transducers, designed for high
accuracy under harsh conditions,for their new aircraft engines.
In its power supply business, ELDEC has developed strong relationships with
such major aerospace equipment suppliers as the U.K.'s Smiths Industries,
positioning the company to provide power supplies for products such as avionics
on the planned Eurofighter.
After successfully implementing an Enterprise Resource Planning system in
1997, ELDEC improved its internal operations in 1998, increasing its on-time
deliveries to customers.
In its second full year as a Crane company, Interpoint had record
results, with operating profits rising 55% on a 10% increase in sales, as the
company cut costs while increasing output, reorganized and refocused on growth
opportunities in the custom, medical and space markets. Interpoint makes
proprietary, high-density power converters and microelectronic hybrid devices
and is the only Class K, space-qualified supplier of dc-to-dc power converters.
Satellites typically use scores of these highly reliable, lightweight devices.
In addition, Interpoint has a small but growing share in the expanding markets
for medical electronic devices included in products such as pacemakers,
defibrillators, heart assist pumps, surgical saws and insulin pumps.
Significant up-front engineering investments on recent development
programs, critical to sustaining the business, modestly reduced Lear Romec's
margins and operating profits, despite a 10% increase in sales. Commercial OEM
markets for Lear Romec's lubrication and scavenge pumps and centrifugal fuel
pumps were strong, as were general aviation, regional and business jet markets,
while military sales were flat. Aftermarket sales, including civilian and
military spares and repair and overhaul contracts, increased substantially.
Sales of parts manufactured for Hydro-Aire also increased. Continuing cost
reductions and productivity improvements, including cell manufacturing, helped
Lear Romec compete successfully in price-sensitive markets.
31 Crane Co 1999 Annual Report
<PAGE>
Fluid Handling
- --------------------------------------------------------------------------------
(dollars in millions) 1998 1997
- --------------------------------------------------------------
Sales $557.8 $499.8
Operating Profit 35.0 36.9
Operating Margins 6.3% 7.4%
- --------------------------------------------------------------
Sales increased 12% in the Fluid Handling segment in 1998, but operating profits
declined by 5%, as markets for many of its products -- valves, pumps and water
treatment systems -- worsened as the year progressed. The increase was derived
from acquisitions and strong first-half sales for many of the businesses in the
group. The gain was smaller than expected as a result of Asia's economic
problems and plunging oil prices, which constrained capital goods purchases and
intensified price competition worldwide. Canadian-based Crane Supply sales and
profits were slightly down and losses in commercial valves and profit declines
in water treatment systems more than offset solid gains in engineered valves.
Order backlog totaled $79 million, down $34 million from the prior year.
In the engineered valve group, most of the cast steel, butterfly and check
valve businesses performed well, with solid sales gains and modest profit
increases fueled in part by the addition of the Stockham businesses, acquired in
December, 1997. Crane Australia, which makes steel valves for the oil and gas
and petrochemical industries, had slightly lower sales and earnings. Crane's
manufacturing joint venture in Ningjin, China, had a strong year, increasing
shipments 95% over the prior year. Westad, Crane's marine valve manufacturer in
Norway, increased its sales and earnings in 1998, but sales are expected to drop
sharply in 1999 as a result of the decline in Korean shipbuilding. In Crane's
service business, which varies with utilities' nuclear plant outages, sales and
profits declined as expected after an exceptionally strong 1997.
In commercial valves, difficulties in absorbing Stockham's bronze
production led to supply shortages and lost business, contributing to a loss for
the year. In addition, Crane U.K. installed a new business system, and right-
sized the business for current market conditions, which were down 13% from the
prior year. As a result, $3.2 million of restructuring costs were incurred in
1998, producing a loss for the year.
Sales and earnings were up slightly at Crane Pumps & Systems. Individual
brands' results varied as the company's products serve major municipal, military
and industrial markets. Barnes commercial pumps and pressure sewer products
performed well. Burks Pumps, which serves the original equipment machinery
market, was impacted by the reduction in capital spending in the semiconductor
industry, and sales of Weinman's HVAC pumps were constrained by depressed
high-rise construction in the Far East. Deming benefited from a large order for
pumps used in hazardous material destruction. Government orders generally were
down as military spending continued to decline. Deferral of major project awards
in the chemical process and automotive industries affected sales and profits at
Chempump and Process Systems, though not their market share.
The May 1998 acquisition of Environmental Products USA, a manufacturer of
state-of-the-art, membrane-based water treatment systems, helped Cochrane
reposition its business away from heavy industrial filtration markets toward
light industrial, beverage and other potable water treatment systems. With the
acquisition, over-all sales rose but profits were off sharply from 1997 as
Cochrane's important Asia markets weakened and industry pricing pressures
intensified.
Canadian-based Crane Supply sales and operating profits were down slightly
in U.S. dollar terms but it was able to maintain its operating margins at 6.2%
of sales. In Canadian dollars, Crane Supply achieved modestly higher profits on
a solid sales increase that reflected share gains in generally flat Canadian
markets.
Controls
- --------------------------------------------------------------------------------
(dollars in millions) 1998 1997
- ---------------------------------------------------------------
Sales $132.3 $131.5
Operating Profit 8.9 11.6
Operating Margins 6.7% 8.9%
- ---------------------------------------------------------------
Sales increased marginally in the Controls segment in 1998, but operating
profits fell by 23% as Crane's businesses faced weak export markets and
stiffening price competition. Order backlog totaled $28 million at year
end, compared with $32 million in 1997.
Barksdale continued to win acceptance in domestic and European markets for
its unique air suspension valves, but operating profits dropped on flat sales.
In oil and gas markets, traditionally Barksdale's most profitable, demand fell
sharply as oil prices sank. The costs of implementing an Enterprise Resource
Planning system offset positive initial results from Six Sigma cost reduction
projects.
Ferguson's domestic and European businesses felt the ripple effect of
lagging machinery exports to Asia, Latin America and Eastern Europe, which led
to softening of capital equipment markets in the U.S. and Europe. Overall sales
and operating profits declined, as did bookings, except in automotive assembly
equipment. Ferguson supplies machinery manufacturers with products and devices
ranging from indexers and pick-and-place robots to rotary tables and custom
cams. A fall-off in sales of large indexers, typically used in large
installations, stemmed from both the Asian downturn and the long General Motors
strike. Lower overall volume and a less favorable product mix resulted, reducing
margins and operating profits.
32 Crane Co 1999 Annual Report
<PAGE>
A moderate decline in sales and bookings and a larger drop in operating
profits marked 1998 for Powers Process Controls. Shipments of Powers' core
products -- water-mixing and thermal shock protection shower systems, water and
process controls, valves and temperature regulators -- slipped in the face of
stiffening price competition and newer technology. Powers' Canadian plumbing
brass operation encountered supply chain problems in the second half of the
year, reducing sales and profits.
Acquisition of a new product line and strong sales to agricultural
equipment OEMs increased Dynalco's volume, while improved margins led to a solid
gain in profits. Dynalco acquired Liberty Technologies' Beta line of engine and
compressor analyzers in September, when the rest of Liberty was acquired by
Crane Nuclear. These products serve essentially the same markets as Dynalco's
speed, temperature and pressure sensors and controls for rugged environments.
Azonix Corporation, whose man-machine interface (MMI) products for
hazardous environments are already dominant in domestic oil and gas
exploration, increased sales by expanding into focused harsh environment
applications. Operating profits were level with strong 1997 results, largely
because of a lower-margin product mix. Sales of higher-margin measurement and
control products also gained in 1998, but overall bookings fell, primarily
reflecting the oil industry downturn.
- --------------------------------------------------------------------------------
Liquidity and Capital Resources
Cash Flow
Operating activities in 1999 generated $211 million in cash flow, allowing the
company to invest $33 million expanding its core businesses by making an
acquisition, invest $29 million in capital equipment and return $151 million to
shareholders through dividends and share repurchases. This represents the sixth
consecutive year that Crane has generated cash in excess of $100 million from
operations and the first year over $200 million.
Net cash used for investing decreased compared with the prior year, mainly
because of the four acquisitions made in 1998. Capital expenditures in 1999
totaled $29 million and primarily funded manufacturing and business process
system projects.
Net cash used for financing activities in 1999 includes $124 million for
the repurchase of 6 million shares of Crane common stock and $27 million for the
payment of dividends. Debt repayments totaled $289 million.
Capital Structure
The following table sets forth the company's capitalization:
(dollars in thousands) December 31 1999 1998
- -------------------------------------------------------------------------
Short-term debt $ 13,656 $ 50,869
Long-term debt 286,772 357,710
- -------------------------------------------------------------------------
Total debt 300,428 408,579
Less cash 3,245 16,195
- -------------------------------------------------------------------------
Total net debt 297,183 392,384
Shareholders' equity 568,110 643,234
- -------------------------------------------------------------------------
Total capitalization $865,293 $1,035,618
% of net debt to shareholders' equity 52.3% 61.0%
% of net debt to total capitalization 34.3% 37.9%
- -------------------------------------------------------------------------
As of December 31, 1999, the company had unused domestic lines of credit
totaling $150.0 million and unused foreign lines of credit totaling $48.9
million. These lines of credit are typically available for borrowings up to 364
days and are renewable at the option of the lender. Short-term obligations of
$46.8 million at December 31, 1999, and $150 million at December 31, 1998, were
classified as long-term debt because the company had entered into finance
agreements that permit it to refinance short-term obligations on a long-term
basis.
At December 31, 1999, the company had a $300 million contractually
committed long-term bank credit facility under which the company can
borrow, repay or, to the extent permitted by the agreement, prepay loans and
reborrow at any time prior to the termination date of November 2003. Proceeds
may be used for general corporate purposes or to provide financing for
acquisitions. The agreement contains certain covenants, including limitations on
indebtedness and liens. A loan for $20 million was outstanding under this
agreement at year end. The company has a $300 million shelf registration filed
with the Securities and Exchange Commission, all of which remains unissued.
Crane is a party to a contractually committed off-balance sheet chattel
paper financing facility that enables its National Vendors operation to offer
various sales support financing programs to its customers. Recourse to Crane for
all uncollectible loans made to National Vendors' customers by the banks under
this agreement is limited.
In addition, the company's U.K. subsidiary was also party to a
contractually committed long-term line of credit in the U.K. This facility
permits borrowing up to $3.2 million, all of which was outstanding at December
31, 1999.
The company's Canadian subsidiary was party to a contractually committed
long-term line of credit in Canada. This facility permits borrowing of up to
$17.3 million, of which $13.8 million was outstanding at December 31, 1999.
As of December 31, 1999, the company's senior unsecured debt was rated BBB+
by Standard and Poor's and Baa1 by Moody's Investors Service. The company
believes it has adequate access to both public and private credit markets to
meet all of its operating and strategic objectives.
33 Crane Co 1999 Annual Report
<PAGE>
Environmental
The company continues to be involved in various remediation actions to clean-up
hazardous wastes as required by federal and state laws. Estimated future
environmental remediation cost was $10.0 million at December 31, 1999, which was
fully accrued. In certain of these actions, the company is one of several
potentially responsible parties ("PRPs"). As a PRP, the company could be liable
for all clean-up cost despite the involvement of other PRPs. Given the financial
stability of the other PRPs, the company believes this is unlikely, and the
accrual represents management's best estimate, based on current facts and
circumstances, with respect to the ultimate liability that will be apportioned
to the company. The company spent $2.1 million on environmental costs in 1999,
and expects to pay remediation costs of approximately $2.6 million in 2000. The
annual level of future remediation expenditures is difficult to estimate because
of the many uncertainties relating to conditions of individual sites as well as
uncertainties about the status of environmental laws and regulations and
developments in remedial technology. In addition, the company is a minor/de
minimis potentially responsible party (PRP) at certain third-party environmental
remediation sites where remediation obligations are joint and several, and the
company, as part of its estimate of potential liability, periodically reviews
whether the major PRPs have the ability to fulfill their portion of such
remediation obligations. The company is not aware of any significant additional
liability that would result from the inability of other PRPs to fulfill their
obligations. Overall, the company's liability for the required remedial actions
being implemented or engineered is not, individually or in the aggregate,
expected to be material.
Impact of the Year 2000
The Year 2000 Issue related to most computer software programs using two digits,
rather than four, to define the applicable year for dates. Any of the company's
information technology (IT) and non-information technology (non-IT) systems and
its products might have recognized a date using "00" as the year 1900, rather
than the year 2000. This could have resulted in system failures or
miscalculations, causing disruptions in operations, including the inability to
process transactions and engage in similar normal business activities within the
company and with third parties.
In 1997, Crane initiated a program to address the company's Year 2000
exposure. The program was substantially completed on schedule in 1999. Crane
experienced no material adverse effects related to the arrival of 2000.
Cost of the Year 2000 program was approximately $28.3 million, of which
$10.0 million was expensed and $18.3 million was capitalized. These costs were
funded from normal operating cash flows of the business. Estimated future costs
related to the Year 2000 program are insignificant.
The company believes that modifications and conversions of its software and
hardware systems were successful. However, there remains the possibility of
latent Year 2000 problems in systems that could cause a failure in the company's
systems. Such failure could result in an interruption in, or a failure
of, certain normal business activities or operations, which could have a
material adverse effect on the company's results of operations, liquidity or
financial condition. The company believes that such an occurrence is unlikely.
However, based on current information, the most reasonably likely worst-case
scenario would involve the temporary disruption of the company's ability to
fulfill customer orders, and no material adverse effect on the company's
financial condition is expected from this specific scenario.
Quantitive and Qualitive Disclosures about Market Risks
The company's cash flows and earnings are subject to fluctuations from changes
in interest rates and foreign currency exchange rates. The company manages its
exposures to these markets risks through internally established policies and
procedures and, when deemed appropriate, through the use of interest rate swap
agreements and forward exchange contracts. Long-term debt outstanding of $287
million at December 31, 1999, was generally at fixed rates of interest ranging
from 6.68% to 8.50%. At December 31, 1999, no interest rate swap agreements were
outstanding and the amounts outstanding for forward exchange contracts were not
material. The company does not enter into derivatives or other financial
instruments for trading or speculative purposes.
Risk Factors
Throughout this Annual Report to shareholders, particularly in the Chairman's
Letter to Shareholders on pages 2-4 and in the sections of Management's
Discussion and Analysis of Operation on pages 6-14 the company makes numerous
statements about expectations of future performance and market trends, and
statements about plans and objectives and other matters, which because they are
not historical fact may constitute "forward looking statements" within the
meaning of the Private Securities and Litigation Reform Act of 1995. Similar
forward looking statements are made periodically in reports to the Securities
and Exchange Commission, press releases, reports, and documents and in written
and oral presentations to investors, shareholders, analysts and others,
regarding future results or expected developments. Because the company wishes to
take advantage of the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, readers are cautioned to consider, among
others, the risk factors that will be described in the company's Form 10-K for
the period ended December 31, 1999, to be filed with the Securities and Exchange
Commission before March 31, 2000, when evaluating such forward looking
statements about future results or developments.
Copies of the company's Form 10-K can be obtained after it is filed by
writing to the company at the address on the back cover, from the Securities and
Exchange Commission, or through the Internet at the company's Web site at
www.craneco.com.
34 Crane Co 1999 Annual Report
<PAGE>
Five Year Summary of Selected Financial Data
<TABLE>
<CAPTION>
Years Ended December 31, (in thousands except per share data) 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $1,553,657 $1,561,055 $1,411,328 $1,252,544 $1,211,454
Depreciation and Amortization 61,280 55,873 50,991 44,474 43,537
Operating Profit 169,554(a) 211,961 176,759 144,049 124,059
Interest Expense 27,854 27,661 23,632 23,203 26,528
Income Before Taxes 155,795(a) 192,789 161,022 124,263 101,374
Provision for Income Taxes 54,897 67,947 57,306 44,441 36,888
- ------------------------------------------------------------------------------------------------------------------------------------
Income from Continuing Operations 100,898(a) 124,842 103,716 79,822 64,486
- ------------------------------------------------------------------------------------------------------------------------------------
Income from Continuing Operations per Diluted Share 1.50(a) 1.80 1.50 1.16 0.94
Cash Dividends per Common Share 0.40 0.37 0.33 0.33 0.33
Total Assets 1,175,447 1,379,731 1,131,483 1,035,311 951,835
Long-Term Debt 286,772 357,710 259,001 265,721 278,553
====================================================================================================================================
</TABLE>
Quarterly Results for the Year
<TABLE>
<CAPTION>
Years Ended December 31, (in thousands except per share data) First Second Third Fourth Year
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1999
Net Sales $ 400,046 $ 405,268 $ 384,193 $ 364,150 $1,553,657
Cost of Sales 261,255 265,336 270,684 255,481 1,052,756
Depreciation and Amortization(b) 12,603 12,667 12,537 14,524 52,331
Gross Profit 126,188 127,265 100,972 94,145 448,570
Income from Continuing Operations 32,435 36,098 18,347 14,018 100,898(a)
Net Income 33,666 39,311 22,355 19,238 114,570(a)
Income from Continuing Operations per Diluted Share 0.47 0.53 0.27 0.22 1.50(a)
====================================================================================================================================
1998
Net Sales $ 379,959 $ 390,618 $ 393,229 $ 397,249 $1,561,055
Cost of Sales 252,283 254,368 254,776 256,221 1,017,648
Depreciation and Amortization(b) 10,296 9,768 12,019 12,490 44,573
Gross Profit 117,380 126,482 126,434 128,538 498,834
Income from Continuing Operations 28,933 33,944 31,672 30,293 124,842
Net Income 29,899 36,557 36,775 35,207 138,438
Income from Continuing Operations per Diluted Share 0.42 0.49 0.46 0.44 1.80
====================================================================================================================================
</TABLE>
(a) Includes special charges of $34,987 ($22,567 after tax or $.33 per share)
(b) Amount included in cost of sales. Note: Earnings per share are computed
independently for each of the quarters presented. Therefore,the sum of the
quarters' earnings per share in 1999 and 1998 does not equal the total computed
for the year.
Market and Dividend Information--Crane Co. Common Shares
<TABLE>
<CAPTION>
New York Stock Exchange Composite Price Per Share Dividends Per Share
- ----------------------------------------------------------------------------------------------------------------------------------
1999 1999 1998 1998 1999 1998
Quarter High Low High Low
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First $31 1/2 $23 3/16 $35 1/2 $26 3/4 $ .1000 $ .0825
Second 32 3/4 23 11/16 37 9/16 31 .1000 .0825
Third 30 $21 1/2 35 43/64 23 5/16 .1000 .1000
Fourth 23 3/8 16 1/6 $32 3/4 21 3/4 .1000 .1000
- ----------------------------------------------------------------------------------------------------------------------------------
On December 31, 1999, there were approximately 5,100 holders of record of Crane Co. common stock. $.4000 $.3650
--------------------------
</TABLE>
35 Crane Co. 1999 Annual Report
<PAGE>
Corporate Information
Directors
E.Thayer Bigelow, Jr. (1, 3)
Senior Advisor,
Time Warner, Inc.
Media and Entertainment
Robert S. Evans (1)
Chairman and
Chief Executive Officer of the Company
Eric C. Fast
President and
Chief Operating Officer of the Company
Richard S. Forte (2)
President,
Dawson Forte Cashmere Company Importer
Dorsey R. Gardner (2, 3)
President, Kelso Management Company,Inc.
Investment Management
John J. Lee (2)
Chairman and Chief Executive Officer
of Hexcel Corporation
Manufacturer of Composite Materials and Engineered Products
William E. Lipner
Chairman, President and
Chief Executive Officer
NFO Worldwide, Inc.
Marketing Information / Research Services Worldwide
Dwight C. Minton (1, 3)
Chairman, Church & Dwight Co.,Inc.
Manufacturer of Consumer and Specialty Products
Charles J. Queenan, Jr. (2)
Senior Counsel, Kirkpatrick & Lockhart LLP
Attorneys at Law
James L. L. Tullis (1, 3)
Chairman, Tullis-Dickerson & Co.
Venture Capital to Health Care Industry
Corporate Officers
Robert S. Evans
Chairman and
Chief Executive Officer
Eric C. Fast
President and
Chief Operating Officer
Gil A. Dickoff
Treasurer
Augustus I. DuPont
Vice President,
General Counsel and Secretary
Bradley L. Ellis
Vice President,
Chief Information Officer
Thomas M. Noonan
Vice President,
Taxes
John R. Packard
Vice President,
Human Resources
Anthony D. Pantaleoni
Vice President,
Environment, Health and Safety
Michael L. Raithel
Vice President,
Controller
David S. Smith
Vice President,
Finance and Chief Financial Officer
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Organization and Compensation Committee
36 Crane Co. 1999 Annual Report
<PAGE>
Shareholder Information
Crane Co. Internet Homepage and Shareholder Information Line
Copies of Crane Co.'s report on Form 10-K for 1999 as filed with the Securities
and Exchange Commission as well as other financial reports and news from Crane
Co. may be read and downloaded off the Internet at www.craneco.com.
If you do not have access to the Internet, you may request printed
materials by telephone, toll-free, from our Crane Co. Shareholder Direct(R)
hotline 1-888-CRANECR (1-888-272-6327).
Both services are available 24 hours a day,7 days a week.
Annual Meeting
The Crane Co. annual meeting of shareholders will be held at 10:00 A.M. on
Monday, April 10, 2000 at the Westin Stamford Hotel, One First Stamford
Place, Stamford, CT 06902.
Stock Listing
Crane Co. common stock is traded on the New York Stock Exchange,listed under the
symbol "CR".
Auditors
Deloitte & Touche LLP
Stamford Harbor Park
Stamford, CT 06902
Equal Employment Opportunity Policy
Crane Co. is an equal opportunity employer. It is the policy of the company to
recruit, hire, promote and transfer to all job classifications without regard to
race, color, religion, sex, age, disability or national origin.
Environment, Health & Safety Policy
Crane Co. is committed to protecting the environment and will strive to protect
the biosphere by taking responsibility to prevent serious or irreversible
environmental degradation through efficient operations and activities. Crane Co.
recognizes environmental management among its highest priorities throughout the
corporation, and has established policies and programs which are integral and
essential elements of the business plan of each of the business units.
Additionally, Crane Co. has established the position of Vice President-
Environment, Health and Safety, which is responsible for assuring compliance,
measuring environmental performance and conducting regular environmental audits
in order to provide appropriate information to the Crane Co. management team and
to regulatory authorities.
Stock Transfer Agent and Registrar of Stock
EquiServe/First Chicago Trust Division
Customer Service: 1-201-324-1225
Non-Postal Deliveries
525 Washington Blvd.
Jersey City, NJ 07310
Dividend Reinvestment & Optional Payments
P.O. Box 13531
Newark, NJ 07188-0001
General Correspondence & Changes of Address
P.O. Box 2500
Jersey City, NJ 07303-2500
Transfer of Stock Certificates
P.O. Box 2506
Jersey City, NJ 07303-2506
Bond Trustee and Disbursing Agent
The Bank of New York
Corporate Trust Department
1-800-438-5473
101 Barclay Street -- 7 East
New York, NY 10286
Dividend Reinvestment and Stock Purchase Plan
Crane offers shareholders the opportunity to participate in a Dividend
Reinvestment and Stock Purchase Plan. The plan provides two convenient methods
for increasing your investment in Crane Co. common shares, without paying fees
and commissions.
Dividend Reinvestment: for all or part of your dividends on Crane common shares;
and Voluntary Cash Payments:of any amount from $10 to a maximum of $5,000 a
month.
Under terms of the Plan, EquiServe/First Chicago Trust Division will act as
agent for shareholders interested in purchasing additional Crane common shares
automatically, on a regular basis. The details of this plan and its benefits to
you as a Crane shareholder are described in a brochure available by writing to:
EquiServe/First Chicago Trust Division
Dividend Reinvestment Plan
Crane Co.
P.O. Box 2598
Jersey City, NJ 07303-2598
37 Crane Co 1999 Annual Report
<PAGE>
- -------
CRANE
- -------
Crane Co.
Executive Offices
100 First Stamford Place
Stamford, CT 06092
(203) 363-7300
www.craneco.com
<PAGE>
CRANE CO.
Exhibit 21 to FORM 10-K
Annual Report for the Year Ended December 31, 1999
Subsidiaries of Registrant
The following is a list of active subsidiaries of the registrant and their
jurisdictions of incorporation. Except as noted, all of these subsidiaries
are wholly owned, directly or indirectly, and all are included in the
consolidated financial statements. The names of several other subsidiaries
have been omitted, as they would not, if considered in the aggregate as a
single subsidiary, constitute a significant subsidiary.
Cochrane, Inc Delaware
Crane Australia Pty., Ltd. Australia
P.T. Crane Indonesia (51%) Indonesia
Crane GmbH Germany
National Rejectors, Inc. GmbH Germany
NRI Iberica, S.A. Spain
Crane International Holdings, Inc. Delaware
Crane Canada, Inc. Canada
Crane Capital Corporation, LLC Delaware
Crane Center-Line Valve Co. Delaware
Crane Ningjin Valve Co.,
Ltd. (70%) China
Crane FSC Corporation Barbados
Crane Ltd. England
Crane Europe Ltd. Scotland
Grenson Electronics Ltd. England
Stockham Valve Ltd. England
UMC Industries Ltd. England
Stentorfield Ltd. England
Crane Pumps & Systems, Inc. Delaware
Barnes Pumps, Inc. Ohio
Barnes Pumps Canada, Inc. Ontario
Dyrotech Industries, Inc. Delaware
ELDEC Corporation Washington
ELDEC France S.A.R.L. France
Ferguson Machine Co. S.A. Belgium
Hydro-Aire, Inc. California
Interpoint Corporation Washington
Interpoint GmbH Germany
Interpoint S.A.R.L. France
Interpoint Taiwan Corporation Republic of China
Interpoint U.K. Ltd. England
(continued)
<PAGE>
Subsidiaries of Registrant (continued)
Kemlite Company, Inc. Delaware
Sequentia Incorporated Ohio
Mark Controls Corporation Delaware
Azonix Corporation Massachusetts
Azonix S.A.R.L. France
Barksdale, Inc. Delaware
Barksdale Control Products
GmbH Germany
Dynalco Controls Corporation Delaware
Mark Controls Norway A/S Norway
Westad Industri A/S Norway
Powers Process Controls, Ltd. Ontario
Resistoflex (Asia) Pte., Ltd. Singapore
Kessel (Thailand) Pte.,
Ltd. (49%) Thailand
Resistoflex Sdn. Bhd. Malaysia
Crane Nuclear, Inc. Delaware
Stockham Valve Australia Pty., Ltd. Australia
<PAGE>
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-50489 on Form S-8, Registration Statement No. 333-50487 on Form S-8,
Registration Statement No. 333-50495 on Form S-8, Registration Statement No.
33-53709 on Form S-3, Registration Statement No. 33-36735 on Form S-8, Post-
Effective Amendment No. 1 to Registration Statement No. 33-59389 on Form S-
8, Post-Effective Amendment No. 1 to Registration Statement No. 33-59475 on
Form S-8 and Registration Statement No. 333-16555 on Form S-8 of our report
dated January 20, 2000, appearing in and incorporated by reference in this
Annual Report on Form 10-K of Crane Co. for the year ended December 31,
1999.
/s/ DELOITTE & TOUCHE LLP
Stamford, Connecticut
February 28, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CRANE CO.'S
CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 1999, CRANE'S CONSOLIDATED STATEMENT
OF INCOME FOR THE YEAR 1999 AND THE RELATED NOTES TO THESE CONSOLIDATED
FINANCIAL STATEMENTS, THAT ARE CONTAINED IN CRANE'S 1999 ANNUAL REPORT ON FORM
10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 3,245
<SECURITIES> 0
<RECEIVABLES> 206,468
<ALLOWANCES> 0
<INVENTORY> 259,474
<CURRENT-ASSETS> 505,160
<PP&E> 579,263
<DEPRECIATION> 322,614
<TOTAL-ASSETS> 1,175,447
<CURRENT-LIABILITIES> 233,515
<BONDS> 286,772
0
0
<COMMON> 62,802
<OTHER-SE> 505,308
<TOTAL-LIABILITY-AND-EQUITY> 1,175,447
<SALES> 1,553,657
<TOTAL-REVENUES> 1,553,657
<CGS> 1,052,756
<TOTAL-COSTS> 1,384,103
<OTHER-EXPENSES> 4,345
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,104
<INCOME-PRETAX> 155,795
<INCOME-TAX> 54,897
<INCOME-CONTINUING> 100,898
<DISCONTINUED> 13,672
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 114,570
<EPS-BASIC> 1.71
<EPS-DILUTED> 1.70
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