-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RSQ7D7+DMLbDJlwcygn8dXoMRUZXIGayIcSbcO9IeBhfGetVA8RWU8jRXzHuxsya MXwkQqzqrgcsB1GaNUbEWA== 0000950130-98-001500.txt : 19980330 0000950130-98-001500.hdr.sgml : 19980330 ACCESSION NUMBER: 0000950130-98-001500 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980327 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CRANE CO /DE/ CENTRAL INDEX KEY: 0000025445 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-LUMBER, PLYWOOD, MILLWORK & WOOD PANELS [5031] IRS NUMBER: 131952290 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-01657 FILM NUMBER: 98575970 BUSINESS ADDRESS: STREET 1: 100 FIRST STAMFORD PLACE CITY: STAMFORD STATE: CT ZIP: 06902 BUSINESS PHONE: 2033637300 10-K 1 FORM 10-K FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 (x) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1997 ----------------- OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to --------------- --------------- Commission file number 1-1657 ------ CRANE CO. - ------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 13-1952290 ------------------------------- ------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No) 100 First Stamford Place, Stamford, CT 06902 ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (203) 363-7300 ------------------- Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered ----------------------- ------------------------ Common shares, par value $1.00 New York Stock Exchange Preferred Share Purchase Rights New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: 7 1/4% senior notes due June, 1999 8 1/2% senior notes due March, 2004 ------------------------------------------------------- (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate by check mark if the disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ( ) Based on the average stock price of $43.31 on January 30, 1998 the aggregate market value of the voting stock held by nonaffiliates of the registrant was $1,614,147,251. The number of shares outstanding of the registrant's common stock, $1.00 par value was 45,556,820 at January 30, 1998. DOCUMENTS INCORPORATED BY REFERENCE ----------------------------------- Portions of the annual shareholders report for the year ended December 31, 1997 are incorporated by reference into Parts I, II and IV. Portions of the proxy statement for the annual shareholders meeting to be held on April 20, 1998 are incorporated by reference into Parts I and III. PART I ITEM 1. BUSINESS -------- Crane is a diversified manufacturer of engineered industrial products and the nation's largest American distributor of doors, windows and millwork. Founded in 1855, Crane employs over 11,000 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 18 acquisitions. During 1997, the company completed five acquisitions at a total cost of $82 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 July, through its Huttig Sash & Door Company subsidiary, the company acquired MALLCO Lumber & Building Materials Inc., a leading wholesale distributor of lumber, doors and engineered wood products serving Arizona and the surrounding region. In December the company acquired certain operations and product lines of Stockham Valves & Fittings, Inc. The acquired product lines and related manufacturing operations will be integrated into the company's engineered valve business and its commercial bronze and iron valve business. 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 Co. 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 for a cash payment of $2.7 million. 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. The company completed three acquisitions in 1994 at a total cost of $240 million. The company, through its wholly-owned subsidiary Huttig Sash & Door Company, acquired a molding and millwork manufacturing operation in Prineville, Oregon in May 1994. In April, 1994, the company purchased Mark Controls Corporation, a manufacturer of automatic and manually operated valves, and specialized instruments and controls, for commercial and industrial /02 ITEM 1. BUSINESS (CONTINUED) -------- customers. The company acquired ELDEC Corporation in March 1994. ELDEC's products are used worldwide on all major commercial and business aircraft and include: position indication and control systems, proximity switches and components, true mass fuel flowmeters, and power conversion components and systems. In 1993, the company completed five acquisitions at a total cost of $106 million. In December, the company acquired Burks Pumps, Inc., which has manufacturing facilities in Piqua, Ohio and Decatur, Illinois and provides engineered pumps for an array of specialized commercial, industrial and municipal fluid handling applications. The products are marketed under the Barnes, Burks, Weinman and Prosser brand names. Also included was a line of tank cleaning equipment sold under the Sellers brand name for the industrial clean- in-place market. This acquisition substantially increased Crane's involvement in niche pump markets. In October 1993, the company acquired Filon, a manufacturer of fiberglass-reinforced plastic (FRP) panels. Filon was integrated with the company's Kemlite unit in the fourth quarter of 1993. The Filon acquisition significantly expanded Kemlite's position as a supplier of FRP panels to the recreational vehicle market. In April and May 1993 Huttig Sash & Door Company expanded its nationwide millwork distribution by acquiring Rondel's Inc., a millwork distributor serving the eastern Washington/western Idaho region, and the Whittier-Ruhle Millwork Company, serving the Mid-Atlantic region. Perflow Instruments, Ltd., a British manufacturer of pressure and flow measurement equipment, was added to Crane Ltd. in 1993. DIVESTITURES In the past five years, the company has divested five 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. In March of 1996, the company sold Empire Foundry. In December 1994, Huttig sold its window manufacturing business for $2.4 million. The transaction excluded real estate and receivables. In July 1994, the company sold Modulinc, the fiber optic channel product line of ELDEC. In April 1993, the company sold its precision ordnance business, UniDynamics/Phoenix for approximately $6 million. LONG-TERM FINANCING In June 1994 the company sold $150,000,000 of 7 1/4% notes that will mature on June 15, 1999. During March 1992 the company sold $100,000,000 8 1/2% notes that will mature on March 15, 2004. BUSINESS SEGMENTS See pages 32 and 33 of the Annual Report to Shareholders for sales, operating profit and assets employed of each business segment. /03 ITEM 1. BUSINESS (CONTINUED) -------- FLUID HANDLING The Fluid Handling segment consists of valve, pump and water treatment businesses. The Crane Valve business with six manufacturing facilities in North America, as well as operations in the United Kingdom, Australia, Norway, China and Indonesia, sells 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. Crane Pumps has six manufacturing facilities in the United States located in Ohio, Illinois, Pennsylvania, West Virginia and Michigan. 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 a manufacturing facility in Pennsylvania and serves the water and wastewater treatment market. Its products are sold under the Cochrane name. This group employs 3,000 people and had assets of $322.5 million at December 31, 1997. Fluid Handling order backlog totaled $112.8 million, a $24.3 million increase from the prior year. Products in this group are sold directly to end users through Crane's sales organization and through independent distributors and manufacturers representatives. AEROSPACE The Aerospace segment consists of ELDEC, Hydro-Aire, Lear Romec and Interpoint. The group employs 2,500 people and had assets of $277.7 million at year end. The order backlog totaled $297.4 million at December 31, 1997, an increase of $28.5 million from the prior year. ELDEC designs, manufactures and markets custom position indication and control systems, proximity sensors, pressure sensors, true mass fuel flowmeters, 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 also has a $5.8 million 47% 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. /04 PART I (CONTINUED) ITEM 1. BUSINESS (CONTINUED) -------- Hydro-Aire designs, manufactures and sells aircraft brake control and anti-skid systems, including electro-hydraulic servo valves and manifolds, embedded software and redundant, ruggedized electronic controls, hydraulic control valves, landing gear sensors and fuel pumps for the commercial transport, business and commuter, military, government and general aviation aerospace industries as original equipment. In addition, the company designs and manufactures systems similar to those above for the retrofit of aircraft with improved systems and manufactures replacement parts for systems installed as original equipment by the aircraft manufacturer. All of these products are largely proprietary to the company and, to some extent, are custom designed to the requirements and specifications of the aircraft manufacturer or program contractor. These systems and replacement parts are sold directly to airlines, governments, and aircraft maintenance and overhaul companies. Lear Romec designs, manufactures and sells lubrication 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 minature (hybrid) DC-to-DC power converters and custom minature (hybrid) electronic circuits for applications in commercial, space and military aerospace industries and in the medical technology industry. /05 PART I (CONTINUED) ITEM 1. BUSINESS (CONTINUED) -------- ENGINEERED MATERIALS The Engineered Materials segment consists of five businesses: Kemlite, CorTec, Resistoflex, Polyflon and Crane Plumbing. This group had assets of $109.6 million at December 31, 1997 and employed 1,200 people. Order backlog at year end 1997 was strong at $28.8 million, a 27% increase from the prior year. Kemlite manufactures fiberglass-reinforced plastic panels for use principally by the transportation industry in refrigeration and dry van truck trailers and recreational vehicles. Kemlite products are also sold to the commercial construction industry for food processing, fast food restaurant and supermarket applications, and to institutions where fire rated materials with low smoke generation and minimum toxicity are required. Kemlite sells its products directly to the truck trailer and recreational vehicle manufacturers. Kemlite uses distributors to serve its commercial construction market and some segments of the recreational vehicle market. Cor Tec manufactures fiberglass-reinforced laminated panels serving the truck and truck trailer segment of the transportation industry. Cor Tec markets its products directly to the truck and truck trailer manufacturers. Resistoflex is engaged in the design, manufacture and sale of corrosion- resistant, plastic-lined steel pipes, fittings, 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 industry as well as the Asian pharmaceutical industry. 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. /06 PART I (CONTINUED) ITEM 1. BUSINESS (CONTINUED) -------- CRANE CONTROLS This segment includes five businesses: Barksdale, Powers Process Controls, Dynalco Controls, Azonix, and Ferguson. The companies in this segment design, manufacture and market industrial and commercial products that control flows and processes in various industries including the petroleum, chemical, construction, food and beverage, power generation industries and transportation. Crane Controls had assets of $121.4 million at December 31, 1997, and employs 860 people. On December 31, 1997, Crane Controls had a backlog of $32.3 million, a 29% increase from the prior year level. Barksdale manufactures solid state and electromechanical pressure switches and transducers, level switches and continuous level indicators, temperature switches, and directional control valves which serve a broad range of commercial and industrial applications. It has manufacturing and marketing facilities in the United States and Germany. Powers Process Controls designs, manufactures and markets 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 S.A. in Europe, precision index and transfer systems for use on and with machines which perform automatic forming, assembly, metal cutting, testing and inspection operations. Products include 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. 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 /07 PART I (CONTINUED) ITEM 1. BUSINESS (CONTINUED) -------- MERCHANDISING SYSTEMS (continued) 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. Merchandising Systems employs 1,000 people and had assets of $109.2 million at year end 1997. Order backlog totaled $18.8 million at December 31, 1997, a slight increase from the prior year. WHOLESALE DISTRIBUTION The company distributes millwork products through its wholly owned subsidiary, Huttig Sash & Door Company ("Huttig"). These products include doors, windows, moldings and related building products. Huttig assembles certain of these products to customer specification prior to distribution. Its principal customers are building material dealers, building contractors and home remodelers that service the new construction and remodeling markets. Wholesale operations are conducted nationally through forty-six distribution centers throughout the United States, in both major and medium-sized cities. Huttig's sales are made on both a direct shipment and out-of-warehouse basis entirely through its own sales force. Huttig also manufactures specialty molding and millwork products at its Prineville, Oregon facility. The majority of the molding products are sold to third parties but Huttig is the largest customer. In 1996, Huttig closed its manufacturing plant in Montana, where it produced certain of the above products and other finished lumber. 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 which are both complementary to and partly competitive with Crane's own manufactured products. OTHER The other segment consists of Crane Defense Systems, which is engaged in the development and manufacture of specialized handling systems, elevators, winches, ground support equipment, cranes and associated electronics. These products are sold directly to the government, defense contractors and commercial shipbuilders. /08 PART I (CONTINUED) ITEM 1. BUSINESS (CONTINUED) -------- COMPETITIVE CONDITIONS The company's lines of business are conducted under actively competitive conditions in each of the geographic and product areas they serve. Because of the diversity of the classes of products manufactured and sold, they do not compete with the same companies in all geographic or product areas. Accordingly, it is not possible to estimate the precise number of competitors or to identify the principal methods of competition. Although reliable statistics are not available, the company believes that it is an important supplier to a number of market niches and geographic areas. The company's products have primary application in the industrial, construction, aerospace, automated merchandising, transportation, and fluid handling industries. As such, they are dependent upon numerous unpredictable factors, including changes in market demand, general economic conditions, residential and commercial building starts, and capital spending. Because these products are also sold in a wide variety of markets and applications, the company does not believe it can reliably quantify or predict the possible effects upon its business resulting from such changes. Seasonality is a factor in Huttig and the Canadian operations. 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 $56,800,000 in 1997, $52,000,000 in 1996, and $51,900,000 in 1995. Included in these amounts were approximately $9,500,000, $10,300,000 and $12,600,000 received by the company in 1997, 1996 and 1995, 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. /09 PART I (CONTINUED) ITEM 1. BUSINESS (CONTINUED) -------- Costs of compliance with federal, state and local laws and regulations involving the discharge of materials into the environment or otherwise relating to the protection of the environment are not expected to have a material effect upon the company's capital expenditures, earnings or competitive position. FORWARD LOOKING STATEMENTS - -------------------------- Throughout the Annual Report to Shareholders, particularly in the Letter to Shareholders and Management's Discussion and Analysis of Operations, the company makes numerous statements about expectations of future performance and market trends, and statements about plans and objectives and other matters, which because they are not historical fact may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, the company and its representatives may from time to time make written or oral forward-looking statements, including statements contained in the company's filings with the Securities and Exchange Commission and in its reports to shareholders, which can be identified by the use of forward-looking terminology such as "believes", "contemplates", "expects", "may", "will", "could", "should", "would" or "anticipates" or the negative thereof or comparable terminology. All forward-looking statements speak only as of the date on which such statements are made and involve risk and uncertainties that exist in the company's operations and business environment and are not guarantees of future performance. The company assumes no obligation to update any of these forward- looking statements, whether as a result of new information or future events. As a responsibility to our investors,the company will make reasonable efforts at timely disclosure of future facts and circumstances which may affect such statements. Because the company wishes to take advantage of the "safe harbor" provision of the Private Securities Litigation Reform Act of 1995, readers are cautioned to consider the following important risk factors that could affect the company's businesses and cause actual results to differ materially from those projected. General A substantial portion of the sales of the company's business segments are concentrated in industries which are cyclical in nature. Because of the cyclical nature of these businesses, their results are subject to fluctuations in domestic and international economies, as well as to currency fluctuations and unforeseen inflationary pressures. Reductions in the business levels of these industries would impact negatively on the sales and profitability of the affected business segments. While the company is a principal competitor in most of its markets, all of its markets are highly competitive. The company's competitors in many of its business segments can be expected in the future to improve technologies, reduce costs and develop and introduce new products, and the ability of the company's business segments to achieve similar advances will be important to their competitive positions. Competitive pressures, including those discussed above, could cause one or more of the company's business segments to lose market share or could result in significant price erosion, either of which would have an adverse effect on the company's results of operations. The company's acquisition program entails the potential risks inherent in assessing the value, strengths, weaknesses, contingent or other liabilities and potential profitability of acquisition candidates and in integrating the operations of acquired companies. There can be no assurance that suitable acquisition opportunities will be available in the future, that the company will continue to acquire businesses or that any business acquired will be integrated successfully or prove profitable. The company has substantial operations and sales outside the United States. 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. Fluid Handling Results for the Fluid Handling segment could be affected in the event of unanticipated difficulties in assimilating newly acquired valve businesses into existing operations. In addition, Crane's companies could face increased price competition from larger competitors. Asia's economic turmoil could reduce sales and profits, particularly if major 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. /10 PART I (continued) Item 1. Business (continued) Aerospace A significant fall-off in demand for air travel or a decline in airline profitability generally could result in reduced aircraft orders, and could also cause the airlines to scale back their purchases of repair parts from Crane companies. The companies could also be impacted if major aircraft manufacturers encountered production problems, or if pricing pressure from aircraft customers caused the manufacturers to press their suppliers to lower prices. Sales and profits could face erosion if pricing pressure from competitors increased, if planned new products were delayed, if finding new aerospace- qualified suppliers grew more difficult, or if required technical personnel became harder to hire and retain. Aerospace segment results could be below expectations if Asia's economic problems led to a 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. Engineered Materials In the Engineered Materials segment, sales and profits could fall if there were a decline in demand for truck trailers or recreational vehicles, for which Crane companies produce fiberglass-reinforced plastic side and roof panels and trailer liners. 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, as well as by difficulties in assimilating a vending machine business acquired in 1997. 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. 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. Wholesale Distribution Sales in the Wholesale Distribution segment are significantly affected by the strength of the domestic housing market, and a decline in housing starts could have a negative impact on results. Decisions by some major suppliers to change their distribution channels, bypassing Crane's wholesale distribution network, could also diminish sales and profits. At Crane's Canadian wholesale distribution operation, reported results in U.S. dollar terms could be eroded by an unanticipated weakening of Canada's currency. Impact of the Year 2000 The "Year 2000" issue concerns 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 face Year 2000 issues. A failure to successfully address the Year 2000 issue could have a material adverse effect on the company's business or results of operations. The discussion of the Impact of the Year 2000 contained on Page 37 of the company's 1997 Annual Report under Management's Discussion and Analysis of Operations is incorporated herein by reference. /11 MANUFACTURING FACILITIES NUMBER AREA - -------------------------- ------ ---- Fluid Handling United States 14 1,312,000 sq. ft. Canada 2 140,000 sq. ft. International 10 1,307,000 sq. ft. Aerospace United States 6 612,000 sq. ft. International 3 35,000 sq. ft. Engineered Materials United States 7 736,000 sq. ft. Canada 3 601,000 sq. ft. International 1 10,000 sq. ft. Crane Controls United States 7 423,000 sq. ft. International 2 63,000 sq. ft. Merchandising Systems United States 1 463,000 sq. ft. Other International 1 77,000 sq. ft. Wholesale Distribution 1 577,000 sq. ft. Other 1 113,000 sq. ft. Leased Leases Manufacturing Expiring Facilities Number Area Through ----------- ------ ---- -------- United States 9 462,000 sq. ft. 2006 Canada 1 12,000 sq. ft. 2000 Other International 6 86,000 sq. ft. 2013 Fluid Handling operates six valve service centers in the United States, of which four are owned, and one distribution center in the United States. This segment operates internationally eight distribution and four service centers. Crane Controls operates one distribution center internationally. Merchandising Systems operates eight distribution centers in the United States and six internationally. Wholesale Distribution has forty-six Huttig branch warehouses in the United States, of which twenty-eight are owned. The Canadian wholesale operation maintains thirty-six distribution branch warehouses in Canada, of which thirteen are owned. 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. /012 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, except for the following. On February 28, 1991, the company was served with a complaint filed in the U.S. District Court for the Eastern District of Missouri naming the company and its former subsidiary, CF&I Steel Corporation ("CF&I"), as defendants and alleging violations of the federal False Claims Act in connection with the distribution of the company's shares of CF&I to the company's shareholders in 1985. A subsequent complaint with substantially similar allegations was served on the company on September 22, 1992. The two actions have been consolidated by the court (Civil Actions Nos. 91-0429-C-1 and 4:92CVOO5144JCH). On June 1,1993 the district court dismissed the case for lack of subject matter jurisdiction under the False Claims Act and the plaintiff appealed. On November 16, 1994, the U.S. Court of Appeals for the Eighth Circuit reinstated the action. The company's petition for a writ of certiorari to the U.S. Supreme Court was denied on or about June 16, 1995 and the case has been returned to the District court to further proceedings. The case was brought in the name of the U.S. Government by a private individual (the "relator") and involves allegations of a conspiracy between the company and CF&I to cause the Pension Benefit Guaranty Corporation ("PBGC") to assume certain unfunded liabilities under a CF&I pension plan (alleged to have been approximately $270 million), to prevent the PBGC from obtaining any reimbursement from the company and to publish and file misleading information in furtherance of those alleged objectives. The suit seeks treble damages and attorney's fees. The lawsuit was dismissed in May 1996 upon the company's motion for summary judgment and for judgment on the pleadings. The dismissal was affirmed on appeal by the Eighth Circuit Court of Appeals in August 1997. The Plaintiff filed a petition seeking review by the United States Supreme Court and on March 23, 1998 the United States Supreme Court denied the plaintiffs' petition. The following proceedings are not considered by the company to be material to its business or financial condition and are reported herein because of the requirements of the Securities and Exchange Commission with respect to the descriptions of administrative or judicial proceedings by governmental authorities arising under federal, state or local provisions regulating the discharge of materials into the environment or otherwise relating to the protection of the environment. In a letter dated October 15, 1992 the office of the Attorney General of the State of Ohio advised Cor Tec, a division of Dyrotech Industries, Inc. which is a subsidiary of the company, that Cor Tec's plant facility in Washington Court House, Ohio, had operated numerous air contaminant sources in its manufacturing process which emitted air pollutants for an extended period of time without the required state permits and in some instances in amounts exceeding the limits allegedly allowed under applicable rules. The Ohio Attorney General's office also alleged that certain contaminant sources at the Cor Tec facility were installed without obtaining permits to install. The main air contaminant in question is styrene, a volatile organic compound that is alleged to be a carcinogen. In 1993, in full cooperation with the Ohio EPA, Cor Tec constructed an emission control system in its plant at a cost exceeding $700,000 which included the installation of a hood, vent and incinerator to capture and incinerate the styrene emissions. At a meeting in Columbus, Ohio on March 4, 1993 the Attorney General's office representing the Ohio EPA, proposed that Cor Tec and the company sign a Consent Decree which would include general injunctive relief and civil penalties in the amount of $4.6 million which Cor Tec has refused to do. In a letter dated November 9, 1995, the Attorney General's office presented a reduced civil penalty demand for $1.8 million and, by letter dated December 9, 1996 the Attorney General's office again threatened /13 PART I (CONTINUED) ITEM 3. LEGAL PROCEEDINGS (CONTINUED) to commence suit in thirty (30) days (subsequently extended) unless Cor Tec significantly increased its $50,000 offer to settle. Cor Tec has responded in writing that, among other things, (i) the rule upon which the state's demands are based was not adopted in accordance with applicable statutory directives and is, therefore, unenforceable, (ii) Cor Tec has nevertheless complied with the rule as it is currently applied by the state, (iii) the state has considerable discretion in penalty calculation and the penalties sought by the state against Cor Tec are wholly out of proportion with the nature of the alleged violations and (iv) more lenient rules have been adopted for much larger VOC emission sources located in more polluted urban areas and thus Cor Tec's competitors have an advantage in the marketplace. On February 21, 1997, the Attorney General's office on behalf of the Ohio EPA commenced a civil action against Cor Tec in the Court of Common Pleas, Fayette County, Ohio alleging among other things, failure to obtain various permits to install and operate sources of contaminants and also alleging violation of air emission standards, for the period 1974 to 1993. Penalties for $25,000 per day for each day of violation have been demanded in the Complaint. The proceedings remain at a very preliminary stage. Cor Tec continues to believe it has adequate defenses to the allegations in the Complaint. On July 12, 1985 the company received written notice from the United States Environmental Protection Agency (the "EPA") that the EPA believes the company may be a potentially responsible party ("PRP") under the Federal Comprehensive Environmental Response Compensations and Liability Act of 1980 ("CERCLA") to pay for investigation and corrective measures which may be required to be taken at the Roebling Steel Company site in Florence Township, Burlington County, New Jersey (the "Site") of which its former subsidiary, CF&I Steel Corporation ("CF&I") was a past owner and operator prior to the enactment of CERCLA. The stated grounds for the EPA's position was the EPA's belief that the company had owned and/or operated the Site. The company had advised the EPA that such was not the case and does not believe that it is responsible for any testing or clean-up at the Site based on current facts. The EPA has identified sources and areas of contamination at the Roebling Site which must be examined for potential environmental damage. The EPA has disclosed that two surface clean-ups have been performed at a cost in excess of $19 million. IN July 1996, the EPA completed a third Focused Feasibility Study which defined the nature of the contaminants and evaluated appropriate remedial alternatives, and the EPA estimated the cost of its preferred clean-up alternative at $38 million. On November 7, 1990 CF&I filed a petition for reorganization and protection under Chapter 11 of the United States Bankruptcy Code. In the bankruptcy proceeding of CF&I, the EPA was allowed an unsecured claim against CF&I for $27.1 million related to the EPA's environmental investigations and remediation at the Roebling Site. In June 1996 the company received a Section 104 request issued by the EPA under CERCLA seeking information about the company's (and CF&I's) connection to the Roebling Site. On August 26, 1996, the company filed its response to the Section 104 Request and, to date, has received no further communications from the EPA concerning the Roebling Site. Based on the facts and circumstances summarized above, the company does not believe it is responsible for any portion of the Roebling Site clean-up. 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 1997. /14 PART I (CONTINUED) EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers of the registrant are as follows:
Officer Name Position Business Experience Age Since - ---- -------- ------------------- --- ----- Robert S. Evans Chairman and Chief Chairman and Chief 54 1974 Executive Officer Executive Officer of the company since 1984 and previously President of the company L. Hill Clark President and President and Chief Operating 53 1994 Chief Operating Officer, previously Executive Vice Officer President of the company, President of Lear Romec, and previously held various positions within Allied Signal Inc., a diversified manufacturing company Augustus I. duPont Vice President, Vice President and General 46 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; Vice President, General Counsel and Secretary of Sprague Technologies, Inc., a manufacturer of electronic components, from May 1987 to December 1993 Bradley L. Ellis Vice President- Vice President-Chief 29 1997 Chief information Information Officer of the Officer company, previously with the Business systems consulting group of Arthur Andersen LLP. Anthony D. Pantaleoni Vice President Vice President - Environment, 43 1989 Environment, Health & Safety of the company Health & Safety Richard B. Phillips Vice President Vice President - Human 54 1987 Human Resources Resources of the company David S. Smith Vice President- Vice President - Finance 41 1991 Finance and and Chief Financial Officer Chief Financial of the company, previously Officer Vice President - Corporate Development of the company Michael L. Raithel Controller Controller of the company 50 1985
PART I (continued) /015 EXECUTIVE OFFICERS OF THE REGISTRANT(CONTINUED) Gil A. Dickoff Treasurer Treasurer of the company, 36 1992 previously Assistant Treasurer of the company
Certain Proceedings - ------------------- * Reeves Industries, Inc., a corporation which Mr.duPont served as Vice President, General Counsel and Secretary from May 1994 to December 1995, filed a petition and Plan of Reorganization for a consensual debt restructuring under Chapter 11 of the United States Bankruptcy Code on November 21, 1997. PART II The information required by Items 5 through 8 is hereby incorporated by reference to Pages 9 through 38 of the Annual Report to Shareholders. ITEM 9. CHANGES IN AND DISAGREEMENTS 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 March 6, 1998, which the company will file with the Commission pursuant to Regulation l4A except that such information with respect to Executive Officers of the Registrant is included, pursuant to Instruction 3, paragraph (b) of Item 401 of Regulation S-K, under Part I. ITEM 11. EXECUTIVE COMPENSATION The information required by Item 11 is incorporated by reference to the definitive proxy statement dated March 6, 1998, which the company will file with the Commission pursuant to Regulation l4A. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by Item 12 is incorporated by reference to the definitive proxy statement dated March 6, 1998, which the company will file with the Commission pursuant to Regulation 14A. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by Item 13 is incorporated by reference to the definitive proxy statement dated March 6, 1998, which the company will file with the Commission pursuant to Regulation 14A. /016 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K
Page ---- (a)(1) The consolidated balance sheets of Crane Co. and subsidiaries as of December 31, 1997 and 1996 and the related consolidated statements of income, changes in common shareholders' equity and cash flows for the years ended December 31, 1997, 1996 and 1995 and the financial review, appearing on Pages 9 through 38 of Crane Co.'s Annual Report to Shareholders which will be furnished with the company's proxy statement as required by Regulation 14A, Rule 14a-3(c), are incorporated herein by reference (2) The following financial statement schedules are included in this report on Form 10-K: Independent Auditors' Report 20 Schedule II - Valuation and Qualifying Accounts 21
All other statements and schedules for which provision is made in the applicable regulation of the Securities and Exchange Commission have been omitted because they are not required under related instructions or are inapplicable, or the information is shown in the financial statements and related notes. (3) Exhibits: Exhibit 11: Computation of net income per share. Annual report to security holders: Exhibit 13 Annual Report to shareholders for the year ended December 31, 1997. Subsidiaries of the Registrant: Exhibit 21: Subsidiaries of the Registrant. Consent of Experts and Counsel Exhibit 23: Independent auditors' consent. (b) Reports on Form 8-K: No reports on Form 8-K were filed during the quarter ended December 31, 1997. (c) Exhibits to Form 10-K: (3) There is incorporated by reference herein: (a) The company's Certificate of Incorporation contained in Exhibit D (Certificate of Designation) to the company's Annual Report on Form 10-K for the fiscal year ended December 31, 1987. (b) The company's By-laws contained in Exhibit A to the company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995. (4) Instruments Defining the Rights of Security Holders, including Indentures: (a) There is incorporated by reference herein: (1) Preferred Share Purchase Rights Agreement contained in Exhibit 1 to the company's Report on Form 8-K filed with the Commission on July 12, 1988. (2) Amendment to Preferred Share Purchase Rights Agreement contained in Exhibit 1 to the company's Report on Form 8-K filed with the Commission on June 29, 1990. PART IV (CONTINUED) ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (CONTINUED) (b) There is incorporated by reference herein: /017 1) Indenture dated as of April 1,1991 between the Registrant and the Bank of New York contained in Exhibit 4 to Registration Statement No. 33-39658. (10) Material Contracts: (iii)Compensatory Plans There is incorporated by reference herein: (a) The Crane Co. Restricted Stock Award Plan as amended through May 6, 1996, contained in Exhibit A to the company's Form 10-Q for the quarter ended March 31, 1996. (b) The forms of Employment/Severance Agreement between the company company and the 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. (c) The E.V.A. incentive compensation plan for executive officers contained in Exhibit B to the company's annual report on Form 10-K for the fiscal year December 31, 1994. (d) The Crane Co. Non-Employee Directors Restricted Stock Award Plan as amended through May 10, 1993 contained in Exhibit B to the company's annual report on Form 10-K for the fiscal year ended December 31, 1994. (e) 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. (f) 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. (g) The Crane Co. Stock Option Plan as amended as of February 27, 1995 contained in Exhibit 4(a) to the company's Registration Statement No. 33-59389 on Form S-8 filed with the Commission on May 17, 1995. 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. /018 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/ D. S. Smith ------------------------- D. S. Smith Vice President-Finance Date 3/23/98 ------- 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, Chief Executive Officer and Director Date 3/23/98 ------- /s/ D. S. Smith /s/ M. L. Raithel ------------------------------- ----------------------------- D. S. Smith M. L. Raithel Vice President-Finance Controller Date 3/23/98 Date 3/23/98 ------- ------- DIRECTORS /s/ M. Anathan, III /s/ E. T. Bigelow, Jr. /s/ R.S. Forte - ------------------------ --------------------------- -------------------- M. Anathan, III E. T. Bigelow, Jr. R.S. Forte Date 3/23/98 Date 3/23/98 Date 3/23/98 ------- ------- ------- /s/ D.R. Gardner - ------------------------ ------------------------ ---------------------- D.R. Gardner J. Gaulin D.C. Minton Date 3/23/98 Date 3/23/98 Date 3/23/98 ------- ------- ------- /s/ C.J. Queenan, Jr. /s/ B. Yavitz - ------------------------------- ---------------------------- C.J. Queenan, Jr. B. Yavitz Date 3/23/98 Date 3/23/98 ------- -------
/19 INDEPENDENT AUDITORS' REPORT TO THE SHAREHOLDERS OF CRANE CO.: We have audited the consolidated financial statements of Crane Co. and subsidiaries as of December 31, 1997 and 1996, and for each of the three years in the period ended December 31, 1997 and have issued our report thereon dated January 21, 1998; such financial statements and report are included in the 1997 Annual Report to Shareholders and are incorporated herein by reference. Our audits also included the consolidated financial statement schedule of Crane Co., listed in Item 14. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this schedule based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. DELOITTE & TOUCHE LLP Stamford, Connecticut January 21, 1998
Balance at Additions Balance Beginning Charged to at End Description of Year Cost & Expenses Deductions of Year - ----------- ------- --------------- ---------- ------- Year Ended December 31, 1997: Allowance for doubtful accounts $5,271 $ 2,986 $ 2,482 $5,775 Allowance for cash discounts, returns and allowances 1,292 16,641 16,844 1,089 ------ ------- ------- ------ $6,563 $19,627 $19,326 $6,864 ====== ======= ======= ====== Year Ended December 31, 1996: Allowance for doubtful accounts $4,003 $ 3,173 $ 1,905 $5,271 Allowance for cash discounts, returns and allowances 1,443 14,931 15,072 1,292 ------ ------- ------- ------- $5,436 $18,104 $16,977 $6,563 ====== ======= ======= ====== Year Ended December 31, 1995: Allowance for doubtful accounts $4,977 $ 2,810 $ 3,784 $4,003 Allowance for cash discounts, returns and allowances 1,847 13,799 14,213 1,433 ------ ------- ------- ------ $6,824 $16,609 $17,997 $5,436 ====== ======= ======= ======
/21 EX-11 2 COMPUTATION OF NET INCOME PER SHARE EXHIBIT 11 CRANE CO. AND SUBSIDIARIES EXHIBIT 11 TO FORM 10-K ANNUAL REPORT FOR THE YEAR ENDED DECEMBER 31, 1997 Computation of Net Income Per Share* (In Thousands Except Per Share Data)
Basic 1997 1996 1995 1994 1993 - ----- -------- ------- ------- ------- ------- Net Income $112,771 $92,110 $76,337 $55,933 $48,893 ======== ======= ======= ======= ======= Net income per share $ 2.47 $ 2.03 $ 1.68 $ 1.24 $ 1.09 ======== ======= ======= ======= ======= Weighted Average number of basic shares 45,710 45,356 45,397 45,000 44,983 Diluted - ------- Net Income $112,771 $92,110 $76,337 $55,933 $48,893 Conversion of debentures: Add back interest, net of income tax - - - - 25 -------- ------- ------- ------- ------- Net income - assuming conversion of debentures $112,771 $92,110 $76,337 $55,933 $48,918 ======== ======= ======= ======= ======= Net income per share $ 2.44 $ 2.01 $ 1.67 $ 1.24 $ 1.08 ======== ======= ======= ======= ======= Weighted average number of Basic shares 45,710 45,356 45,397 45,000 44,983 Add: Adjustment to basic shares for dilutive stock options 546 377 256 134 209 Shares reserved for conversion of debentures - - - 135 281 -------- ------- ------- ------- ------- Total weighted average number of shares 46,256 45,733 45,653 45,269 45,473 ======== ======= ======= ======= =======
* On December 12, 1996, the company effected a three-for-two split of common stock. All share and per share data prior to the split have been restated. /22 EX-13 3 ANNUAL REPORT Crane Co. - -------------------------------------------------------------------------------- 1997 Annual Report Table of Contents Financial Highlights ..........................................................1 Letter to Shareholders ........................................................2 Crane at a Glance .............................................................6 Market Overview ...............................................................9 Consolidated Financial Statements .................................................................20 Notes to Consolidated Financial Statements .......................................................24 Management`s Responsibility for Financial Reporting ....................................................34 Independent Auditors` Report .................................................34 Management's Discussion and Analysis of Operations .....................................................35 Shareholder Information ......................................................39 Directors and Officers ...............................................Back Cover Financial Highlights
======================================================================================================= ($ and shares in thousands except per share data) 1997 1996 % Change - ------------------------------------------------------------------------------------------------------- Summary of Operations Net Sales $2,036,831 $1,847,732 10.2% EBITDA(a) 255,054 217,842 17.1% Operating Profit 196,601 166,153 18.3% Income Before Taxes 175,837 145,020 21.3% Net Income 112,771 92,110 22.4% Cash Flow(b) 168,171 141,512 18.8% - ------------------------------------------------------------------------------------------------------- Per Share Data Basic Net Income $ 2.47 $ 2.03 21.7% Cash Flow 3.68 3.12 17.9% Diluted Net Income 2.44 2.01 21.4% Cash Flow 3.64 3.09 17.8% Dividends .50 .50 Average Basic Shares 45,710 45,356 Average Diluted Shares 46,256 45,733 - ------------------------------------------------------------------------------------------------------- Financial Position at December 31, Assets $1,185,893 $1,088,855 8.9% Net Debt 284,966 281,404 1.3% Shareholders' Equity 532,544 462,669 15.1% Market Value of Equity(c) 1,975,376 1,324,136 49.2% Market Capitalization(c) 2,260,342 1,605,540 40.8% - ------------------------------------------------------------------------------------------------------- Key Statistics Sales per Employee $ 184 $ 177 Operating Profit as a % of Sales 9.7% 9.0% Net Income as a % of Sales 5.5% 5.0% Return on Average Assets 9.9% 8.9% Return on Average Shareholders' Equity 22.8% 22.6% Net Debt to Capital 34.9% 37.8% - -------------------------------------------------------------------------------------------------------
(a) EBITDA is earnings before interest, taxes, depreciation and amortization. (b) Cash flow is net income plus depreciation and amortization. (c) Market value of equity is number of shares of common stock times closing stock price. Market capitalization is market value of equity plus net debt. [THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Diluted EPS Dollars - ----------- ------- 1993 1.08 1994 1.24 1995 1.67 1996 2.01 1997 2.44
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Dollars EBITDA (in millions) - ------ ------------- 1993 121 1994 160 1995 197 1996 218 1997 255
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Dollars Net Income (in millions) - ---------- ------------- 1993 49 1994 56 1995 76 1996 92 1997 113
================================================================================ 1997 annual report Crane Co 01 Letter to Shareholders ================================================================================ To Our Shareholders: Crane Co. achieved record sales and earnings for the fifth consecutive year in 1997, turning in the best performance in its history. For the first time, the company generated sales of more than $2 billion and net earnings in excess of $100 million. Sales and earnings were boosted by acquisitions and the continuing strong performance of the Aerospace segment. Operating earnings rose 18% to a record $196.6 million on sales of $2.04 billion, up 10.2% from the $1.8 billion record set in 1996. Net income jumped 22% to $112.8 million from $92.1 million in the prior year. On a diluted per share basis, net earnings were $2.44 per share, compared with $2.01 in the prior year, a 21.4% gain on an increased number of shares outstanding. Aerospace Leads Segment Performance All six of Crane's business segments were solidly profitable in 1997, with four showing strong advances, particularly Aerospace. The global strength of the airline industry continued to benefit Crane's Aerospace companies, which supply a wide range of high-value, highly engineered products and systems to Boeing, Airbus and makers of regional and commuter airliners and business aircraft. The airline companies' continuing efforts to refurbish their existing fleets also enabled our Aerospace businesses to increase spare parts sales and expand repair and overhaul services. [PHOTO] Robert S. Evans Chairman and Chief Executive Officer Our Fluid Handling, Engineered Materials and Merchandising Systems segments also showed good gains in both sales and operating earnings. The Controls segment reported slightly higher sales and earnings, while the Wholesale Distribution segment saw earnings dip in spite of a modest sales gain. Five Companies Acquired During 1997, Crane acquired five companies at a cost of $82 million, bringing to $500 million the company's investment in the acquisition of 18 companies since 1992. All five acquisitions fit well into existing Crane operations and thus contribute to our objective of broadening and enhancing our core businesses. In March, our Kemlite Company, a leading manufacturer of fiberglass-reinforced plastic panels for various applications, acquired the transportation products business of Sequentia, ================================================================================ 02 Crane Co 1997 annual report ================================================================================ Inc., of Grandview, Missouri, thereby increasing its market share in liner panels for truck bodies, trailers and containers. Polyvend, Inc., a Conway, Arkansas-based manufacturer of snack and food vending machines that our National Vendors unit acquired in March and subsequently integrated into its modern St. Louis facility, added an important new distribution capability to National Vendors' global vending machine business. In April, we acquired the nuclear valve business of Westinghouse's ITI MOVATS, which provides valve diagnostic equipment and valve services to the commercial nuclear power industry, and integrated it into Crane Valves' Nuclear Valve Division. In July, Huttig Sash & Door Company, our millwork and lumber distribution business, purchased MALLCO Lumber and Building Materials, a leading wholesale distributor in Phoenix, Arizona, strengthening Huttig's business throughout the region. In the year's largest acquisition, we acquired various operations and product lines of Stockham Valves & Fittings, Inc., based in Birmingham, Alabama, in December. These product lines and manufacturing operations are being integrated into our Engineered Valve group, or our global bronze and iron valve organization, broadening those operations and improving manufacturing efficiency. We divested one business in 1997, our Houston, Texas-based Valve Systems and Controls Division, a distributor of automated valves and control systems for the oil and gas, chemical processing and power generation industries. - -------------------------------------------------------------------------------- [THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Dollars Cash Flow (Net income plus depreciation and amoritization) (in millions) - ---------------------------------------------------------- ------------- 1993 78 1994 101 1995 125 1996 142 1997 168
Valve Businesses Restructured During 1997 we reorganized our various valve manufacturing operations into two broad, globally oriented groups within our Fluid Handling segment in order to sharpen our product focus and capture economies of scale. The Commercial Valve division, headed by Dennis Taylor, Managing Director of Crane Ltd. in Ipswich, England, comprises our businesses in standard bronze and iron valves. In general, their products reach end-users through networks of distributors. The Engineered Valve division, headed by Paul Baldetti, President of Crane Valves, in Long Beach, California, encompasses our businesses that make custom-engineered valves and generally sell directly to end-users. Financial Condition Strong As we move forward in 1998, Crane's financial position is strong and continuing to improve. Overall, our operating margins improved to 9.7% in 1997 after a similar gain in the previous year, and there is room for further improvement. Not surprisingly, Aerospace's margins led the way again in 1997, with Fluid Handling, Engineered Materials, Merchandising Systems and Controls showing gains. Margins were down in Wholesale Distribution. Our cash flow -- defined as net earnings plus depreciation and amortization -- rose 19% to $168.2 million, or $3.64 per share. In effect, it more than covered the cost of our acquisitions and of our stock repurchase program, in which we invested nearly $25 million to buy 650,000 shares at an average cost of $38 per share. ================================================================================ 1997 annual report Crane Co 03 ================================================================================ Our net debt to capital ratio, which declined from 43.8% in 1995 to 37.8% in 1996, continued to fall in 1997 to 34.9%. Our credit strength, coupled with our demonstrated ability to generate cash flow, positions us well to take advantage of attractive opportunities to increase shareholder value. Six Sigma Program Launched In previous reports we have discussed our EVA -- Economic Value Added -- incentive program, which continues to contribute to the improvement of our manufacturing and other operations as well as our financial results. During 1997, we have become active participants in the Six Sigma program, a quality improvement program that we expect will yield improved margins and important competitive advantages in years to come. Six Sigma is an approach to statistical process control that sets as its goal a virtually defect-free performance in every one of a company's processes, whether manufacturing, distribution, cash management or customer service. Motorola developed it in order to survive against its quality-minded foreign competitors, and General Electric and AlliedSignal are among its most prominent exponents. The program requires training cadres of team leaders, known as "black belts," whose assignment is to analyze processes and then to identify and execute projects that will reduce errors or defects, thereby gaining significant cost- or time-savings and increasing customer satisfaction. In so doing, they build teams and inculcate the Six Sigma culture. The first class of 20 Crane employees from various companies underwent intensive training in August and the second in January, at a cost of $1 million per class. We estimate that each of these "black belts" can save his or her company $400,000 per year, adding to our bottom line as well as strengthening the competitive position of every one of our businesses. The key to lasting results, of course, lies in changing the culture of the entire organization, getting everyone to think in terms of zero defects. We are committed to that goal, as are our companies' managements, and of course, our growing numbers of "black belts." ================================================================================ With the U.S. economy continuing its steady growth, and the aerospace industry continuing to expand, we are confident that 1998 will see further growth in Crane's sales and earnings. ================================================================================ Outlook Positive With the U.S. economy continuing its steady growth, and the aerospace industry continuing to expand, we are confident that 1998 will see further growth in Crane's sales and earnings. Much of this growth will be internally generated; some will come from acquisitions. While Asia's financial problems remain a concern, particularly insofar as they represent a potential threat to the global economy, we believe that the impact on our companies will be modest. We continue to focus on improving our products and our individual businesses, and we view the combination of our EVA incentive program with Six Sigma as a powerful one that will help to position us for continuing, long-term growth. In this fast-changing, competitive global economy, a talented, motivated work force is an indispensable asset, and we are grateful to our employees for their skill and dedication. We are grateful as well to our directors for their sound guidance and sharp focus on the interests of our shareholders, whose staunch support we continually strive to merit. We look forward to a very positive 1998. Sincerely, /s/ R. S. Evans R. S. Evans Chairman and Chief Executive Officer February 12, 1998 ================================================================================ 04 Crane Co 1997 annual report ================================================================================ 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. [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] Net Sales* Wholesale Distributions 37% Fluid Handling 19% Aerospace 17% Engineered Materials 11% Merchandising Systems 9% Crane Controls 6% Other 1%
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] Operating Profit* Aerospace 41% Merchandising Systems 14% Engineered Materials 14% Fluid Handling 14% Wholesale Distributions 12% Crane Controls 5% Other 0%
* Before Intersegment Sales and Corporate Expenses ================================================================================ 1997 annual report Crane Co 05 Crane at a Glance
==================================================================================================================================== Fluid Handling Business Unit Products Markets Served ==================================================================================================================================== Crane Valves Gate, globe, check and ball Hydrocarbon processing: North America valves made from bronze, refining, petrochemical, oil Crane cast-iron, steel, stainless and gas production and Pacific steel, titanium and special distribution and chemical Flowseal corrosion-resilient alloys processing Jenkins Center Line Wedge plug, non-lubricated Power generation including Stockham plug valves nuclear applications Triangle Duo-Check HF acid valves Industrial, municipal, commercial and institutional Crane Nuclear, Inc. Dual disc wafer check valves construction, water and Kennesaw, GA sewage, building and High performance, and engineering services Crane Ltd. resilient seat butterfly Ipswich, U.K. valves Pulp and paper Crane Australia Cryogenic valves Commercial heating, Pty., Ltd. ventilation and air Sydney, Australia Valve diagnostics, repair, conditioning (HVAC) contract maintenance and Stockham Valves, Ltd. "in-line" services Marine, cryogenic applications Belfast, N. Ireland Wigan, U.K. Pipe fittings Stockham Australia Pty., Ltd. Thomastown, Australia Westad Industri A/S Geithus, Norway ------------------------------------------------------------------------------------------------- Crane Pumps & Submersible wastewater and Municipal, industrial and Systems, Inc. dewatering centrifugal, self- commercial water and priming centrifugal, wastewater, specialty Piqua, OH regenerative turbine, industrial markets, original Barnes Pumps horizontal and vertical equipment manufacturers (OEM), Burks Pumps turbine, sealed and sealless power and construction, Deming Pump end suction and in-line government contracts, Weinman centrifugal, split case, air commercial HVAC, chemical Chempump operated diaphragm, metering processing, pharmaceutical, Chem/Meter pumps and pumping systems pulp and paper, and Process Systems hydrocarbon processing Sellers Rotary tank cleaners, steam injectors ------------------------------------------------------------------------------------------------- Cochrane Inc. Water and wastewater treatment Power/steam generation, pulp King of Prussia, PA units and systems and paper, hydrocarbon processing and industrial chemical production =================================================================================================
================================================================================ 06 Crane Co 1997 annual report
==================================================================================================================================== Aerospace Business Unit Products Markets Served ==================================================================================================================================== ELDEC Corporation Position indication and Commercial, business and Lynnwood, WA control systems, proximity military aerospace, military sensors, pressure sensors, marine, telecommunications mass fuel flowmeters, power conversion systems ------------------------------------------------------------------------------------------------- Hydro-Aire, Inc. Aircraft brake control and Commercial transport, business Burbank, CA antiskid systems, including and commuter, general electro-hydraulic servo valves aviation, military and and manifolds, embedded government aerospace, repair software and redundant, and overhaul ruggedized electronic controls, hydraulic control valves and landing gear sensors, fuel pumps ------------------------------------------------------------------------------------------------- Lear Romec Lubrication and fuel pumps for Commercial and military Elyria, OH aircraft, aircraft engines and aerospace, defense industry radar cooling systems ------------------------------------------------------------------------------------------------- Interpoint Corporation Standard and custom miniature Commercial, space and military Redmond, WA (hybrid) DC-to-DC power aerospace, defense industry, converters and custom medical industries including miniature (hybrid) electronic implantable medical devices circuits and industrial markets ==================================================================================================================================== Engineered Materials =================================== Kemlite Fiberglass-reinforced plastic Recreational vehicle, truck Company, Inc. (frp) panels used as sidewalls trailer and commercial Joliet, IL and roofs for recreational construction vehicles, interior wall liners and roofs for truck trailers, and wall and ceiling systems for commercial construction ------------------------------------------------------------------------------------------------- CorTec Fiberglass-reinforced Trucks and truck trailers, Washington Court House, OH laminated composite panels for special-purpose trailers, transportation, construction marine houseboats and general and marine applications construction ------------------------------------------------------------------------------------------------- Resistoflex Corrosion resistant Pharmaceutical, chemical Marion, NC plastic-lined pipe, fittings, processing, pulp and paper, tanks, valves, expansion ultra pure water, waste joints and hose assemblies, management industries, high performance aerospace military and aerospace fittings for operating contractors pressures to 8,000 psi ------------------------------------------------------------------------------------------------- Crane Plumbing Plumbing fixtures Residential, industrial, Montreal, Quebec commercial and institutional construction in Canada ------------------------------------------------------------------------------------------------- Polyflon Microwave laminates, circuit Wireless communications, Norwalk, CT processing, high voltage RF magnetic resonance imaging, capacitors, radomes microwave and radar system manufacturers =================================================================================================
================================================================================ 1997 annual report Crane Co 07 Crane at a Glance
==================================================================================================================================== Merchandising Systems Business Unit Products Markets Served ==================================================================================================================================== National Vendors Electronic vending Automated merchandising Bridgeton, MO merchandisers for refrigerated and frozen foods, hot and cold beverages, snack foods, coin and currency changers ------------------------------------------------------------------------------------------------- National Rejectors, Inc. Electronic coin validators and Automated merchandising GmbH (NRI) changers, chip card cashless Buxtehude, Germany payment systems ==================================================================================================================================== Wholesale Distribution =================================== Huttig Sash & Door Company Distributor of doors, windows, Building product retailers, Chesterfield, MO millwork, specialty contractors and home construction materials and remodeling related products ------------------------------------------------------------------------------------------------- Crane Supply Distributor of pipe, valves, Industrial, municipal, Montreal, Quebec fittings and plumbing fixtures commercial and institutional and hydronic heating products construction, MRO markets and integrated supplies ==================================================================================================================================== Controls =================================== Barksdale, Inc. Solid state and Manufacturers of compressors, Los Angeles, CA electro-mechanical pressure machine tools, trucks, oil and switches and transducers, gas exploration, spa heaters, level switches and continuous compactors, bailers and heat level indicators, temperature tracing equipment switches and directional control valves ------------------------------------------------------------------------------------------------- Powers Process Controls Water mixing and thermal shock Light commercial and Skokie, IL protection shower systems, institutional facilities, commercial and residential residential plumbing brass, plumbing brass, correctional chemical processing, food water controllers, process processing, pharmaceuticals, controllers and water and wastewater treatment instrumentation, process control valves and temperature regulators ------------------------------------------------------------------------------------------------- Dynalco Controls Rotational speed sensors, Industrial engine Ft. Lauderdale, FL speed, temperature and manufacturers and users, pressure instruments and natural gas pipelines and monitors for rugged utilities, construction, environments, microprocessor marine and agricultural based engine and mechanism equipment manufacturers controls ------------------------------------------------------------------------------------------------- Azonix Corporation Operator interfaces and Oil and gas service, Billerica, MA measurement and control petrochemical, chemical, systems for hazardous and pharmaceutical and metal harsh applications, processing intelligent data acquisition products, high-precision thermometers and calibrators ------------------------------------------------------------------------------------------------- Ferguson Mechanical and electronic Assembly, packaging, St. Louis, MO index drives, rotory tables, processing and metal working pick-and-place robots, machinery manufacturers for precision synchronous in-line the automotive, beverage, transfer machines, press food, health care, and feeds, clutches and custom electronic industries cams ==================================================================================================================================== Other =================================== Crane Defense Specialized handling systems, Military and commercial Conroe, TX elevators, winches, ground shipbuilding, offshore oil support equipment, cranes and rigs, commercial and related electronics industrial precision fabrication =================================================================================================
================================================================================ 08 Crane Co 1997 annual report Market Overview ================================================================================ Crane's more than thirty businesses report their results in six segments: Fluid Handling, Aerospace, Engineered Materials, Merchandising Systems, Controls and Wholesale Distribution. In the pages that follow, we discuss these results, along with the events, trends, market dynamics and management initiatives that influenced them. ================================================================================ 1997 annual report Crane Co 09 Market Overview ================================================================================ Fluid Handling Segment Gains
(in millions) 1997 1996 - -------------------------------------------------------------------------------- Sales $394.2 $364.0 - -------------------------------------------------------------------------------- Operating Profit 30.0 25.7 - -------------------------------------------------------------------------------- Operating Margins 7.6% 7.1% - --------------------------------------------------------------------------------
Crane's Fluid Handling segment, comprised of its valve, pump and water treatment system businesses, generated a 16% increase in operating profits in 1997 on an 8% gain in sales. The sales and earnings gains were derived principally from strong results at Crane Pumps & Systems and from the Crane Valve Group's April 1 acquisition of Movats, a provider of valve diagnostic products and services to the nuclear power industry. Operating profits of $30.0 million were $4.3 million above the 1996 level. Sales were $394.2 million, an increase of $30.2 million. Overall operating margins improved to 7.6% of sales in 1997 from 7.1% in 1996. The backlog of $113 million is $24 million over 1996. Valve Businesses Gain The reorganization of Crane's global valve businesses to rationalize sources and focus on products on a global basis, began to show results in 1997. At Crane Valves, based in Long Beach, California, significant margin improvements in cast steel and butterfly valves and the continued ramp-up of the valve manufacturing joint venture in China contributed to profit gains, as did increased sales of hydrofluoric acid valves. The acquisition of Kennesaw, Georgia-based Movats from Westinghouse provided a strong contribution to sales and earnings in 1997 and should solidly enhance the nuclear valve division's 1998 results. In the United Kingdom, Crane Ltd.'s domestic valve sales were depressed by consolidation among major customers, partially offset by new business. Export sales were hurt by the strength of the British pound and a lack of new orders from certain existing customers in Europe and the Middle East. Margins and operating profits also declined, in part because of costs associated with the company's continuing re-engineering program. Crane Australia enjoyed strong gains in sales and operating profits in 1997, primarily because of increased exports to Southeast Asia. The company shipped its largest-ever order in Malaysia during the year. Gains in market share in Indonesia and Malaysia and higher sales of cast steel valves more than offset a softening of the Australian market and declines in sales of forged steel, alloy and cast iron valves. Indonesia's currency devaluation reduced Crane's manufacturing operation there to break-even status. Westad, Crane's Norwegian valve manufacturer, reported higher sales, but operating profits declined, reflecting the cost of ramping up for increased volume, as well as a less-favorable product mix and higher warranty expenses. Orders for high-value titanium valves for special industrial applications and a series of contracts from shipbuilders for LNG valves, increased Westad's sales, as did the overall strength of the marine market. Crane's global valve business was significantly changed by the December acquisition of most of the assets and operations of Stockham Valves & Fittings, Inc., of Birmingham, Alabama. The result will be to increase Crane's bronze and iron volumes, improving economies of scale and efficiency, and expanding Crane's offerings of engineered valves such as Triangle cast steel, wedge plug and wafer check valves. The global business has been reorganized into two groups. The Engineered Valve Group includes Crane's butterfly valve businesses (Flowseal, Center Line and Westad), its cast steel valve businesses (Pacific Valve, Crane and now Triangle), and the Nuclear Services business, and the newly acquired wafer ================================================================================ 10 Crane Co 1997 annual report ================================================================================ check and wedge plug valves. The Commercial Valve Group comprises commercial bronze and iron valves worldwide, and includes Crane Ltd., casting and manufacturing operations in Brantford, Ontario and Washington, Iowa, and a new Birmingham, Alabama-based distribution operation. Improved Results at Pump Companies Crane Pumps & Systems translated a small sales gain into a second year of record profits as a result of a more favorable product mix, price increases and higher margins derived from outsourcing and continuous improvement activities. The company's brands are leaders or strong contenders in niches within major municipal, military and industrial markets. While total bookings increased modestly, total backlog enjoyed substantial growth. Chempump, the leader in sealless canned motor pumps, had lower sales and earnings in 1997 after a record year in 1996. The sales decline reflected an industry shift from standard pumps to more customer-specific engineered pumps, which require longer lead times. However, bookings and backlog increased in 1997, primarily in engineered pumps. Water Treatment Business Cochrane, Inc., had flat earnings in 1997 on slightly higher sales. Cochrane reported significant gains in bookings and backlog. Outlook Continuing cost reduction programs, along with the increased manufacturing efficiency and product focus generated by the reorganization in 1997, should benefit Crane's valve businesses in 1998. Asia's financial problems may impact some businesses: Westad, some of whose marine valves go to Korean shipbuilders; and Pacific Valve which has a portion of its business serving the power generation market in Asia. In addition, devalued currencies in various Asian countries can be expected to increase competition from manufacturers in the region. ================================================================================ Aerospace Segment Shows Strong Growth
(in millions) 1997 1996 - -------------------------------------------------------------------------------- Sales $343.9 $246.7 - -------------------------------------------------------------------------------- Operating Profit 90.1 65.9 - -------------------------------------------------------------------------------- Operating Margins 26.2% 26.7% - --------------------------------------------------------------------------------
The Aerospace segment was a star performer for Crane again in 1997, with operating profits gaining 37% on a 39% increase in sales. The continuing strength of the commercial air transport industry was the driving force in this performance, along with a full year's results from Interpoint, acquired in October, 1996. Segment sales were $343.9 million, up from $246.7 million in 1996, while operating profits rose from $65.9 million to $90.1 million. Operating profit margins declined slightly to 26.2% as 1997 results included Interpoint for the whole year. Interpoint's margins are historically lower than the other Aerospace businesses. The backlog increased to $297.4 million up $28.5 million from 1996. Sales and Profits Advance at ELDEC ELDEC, the segment's largest business, reported strong growth in sales and operating profits, maintaining its solid margins despite investing heavily in R & D and implementation of a new enterprise resource planning system. Total bookings and year-end backlog were well above year-earlier figures. ELDEC's proximity sensing and control systems, aircraft electrical power systems, power conversion products and flowmeters are found on most of the aircraft being built in the world. In addition to supplying all major OEMs, ELDEC has strong aftermarket sales to the airlines and other operators. ================================================================================ 1997 annual report Crane Co 11 Market Overview ================================================================================ ELDEC won orders for its proximity sensing systems or power systems on almost all of the new aircraft launched during 1997. The company won proximity sensing systems business on the Raytheon Hawker Horizon business jet and the Boeing MD-10 upgrade for Federal Express, as well as on the Canadair RJ-700, a new 70-seat regional jet, and a battery system for the MD-95. The company has also completed development of a new battery system that is now being installed in all new generation Boeing 737 and 747 aircraft. ELDEC's sales of power conversion products for avionics systems dipped in 1997 as several military programs ended, but a shift to commercial applications is expected to increase demand in 1998. The company's advanced power supply and power conversion technology for telecommunications applications is a small but high-potential portion of its business. Boeing Derivatives and Aftermarket Boost Hydro-Aire Hydro-Aire's outstanding performance was driven primarily by sales of braking systems for Boeing aircraft, including the latest derivatives in Boeing's 737 series, which continue to gain market share. Aftermarket sales showed continued strong growth, as did sales of repair and overhaul services. Military sales, mainly braking systems for the C-17 and Lockheed C-130J transports, also increased. Strength in the business and commuter jet market, where Hydro-Aire has a strong market position, and demand for Hydro-Aire offerings of centrifugal pumps also contributed to the improved results. Hydro-Aire upgraded its facilities to expand production and committed to a major enterprise resource planning installation to provide real-time data access and improve administrative and manufacturing efficiency. The company also invested heavily in employee training, receiving ISO-9001 certification and achieving Boeing's newest quality standard. Progress at Lear Romec Lear Romec, a leading supplier of aircraft lubrication and scavenge pumps and centrifugal fuel pumps, achieved a solid profit gain on essentially flat sales. Bookings gained 10%, despite a sharp drop in government spares orders after a strong 1996. Increased marketing and support efforts boosted sales in the repair and overhaul business, and higher sales of pumps for Hawk missile systems and initial provisioning sales to airlines increased aftermarket sales. Sales of engineering services also gained, but overall OEM unit sales declined because of lower military sales. Lear Romec improved its overall margins by aggressively cutting costs and by improving its production efficiency with automated equipment and cell manufacturing techniques. The company is also applying engineering and manufacturing resources to support Hydro-Aire's line of high performance centrifugal fuel pumps. Strong Showing for Interpoint Interpoint, which makes proprietary high density power converters and microminiature integrated circuits, turned in strong sales and earnings gains in its first full year as a Crane company. Operating profits were affected by integration costs, a new wage structure, and the expense of implementing new systems for materials requirements planning and cost accounting. Bookings and year-end backlog increased significantly. All three ================================================================================ 12 Crane Co 1997 annual report ================================================================================ market subsegments within its military/aerospace segment gained, with aerospace driven by suppliers' efforts to meet demand from Boeing and the military market benefiting from increased spending for replacement and upgrading of electronic systems. Semiconductor manufacturing also saw a sustained uptrend. Sales also increased in the medical segment, Interpoint's second largest business, where Interpoint has a dominant market share for implantable microelectronic devices. Backlogs for implantable hearing assist, insulin pump and surgical instrumentation products increased. Interpoint's standard power converters for space applications continued to find increasing use in scientific work -- the Hubble space telescope has 60 Interpoint converters, for example -- and in the fast-growing telecommunications industry. Outlook Crane's Aerospace businesses are positioned for another strong year in 1998. Commercial aviation is continuing to expand, government and military spending for new aircraft, upgraded systems and spares remains solid, and all four companies continue to win most of the orders for which they compete. The markets for Crane's products in medical and space electronics are vibrant. In addition, each company continues to focus on streamlining its manufacturing and business processes and improving quality. ================================================================================ Engineered Materials Segment Reports Higher Profits
(in millions) 1997 1996 - -------------------------------------------------------------------------------- Sales $225.6 $207.2 - -------------------------------------------------------------------------------- Operating Profit 30.1 25.7 - -------------------------------------------------------------------------------- Operating Margins 13.3% 12.4% - --------------------------------------------------------------------------------
The Engineered Materials segment achieved 17% higher profits in 1997 on a 9% increase in sales. Strong sales and earnings gains at Kemlite, the segment's largest business, and improved profitability at Crane Plumbing were the principal elements in this result. Operating profit margins improved to 13.3% compared to 12.4% in 1996. Backlog increased to $29 million at December 31, 1997 compared to $23 million in 1996. Kemlite Increases Earnings, Market Penetration Stronger market conditions helped three of Kemlite's four market segments to increase sales and earnings. In the transportation segment, Kemlite's market-leading fiberglass-reinforced plastic liner panels and translucent roof panels for truck trailers and trucks turned in a 28% increase in sales. More than half of the increase stemmed from the March acquisition of the assets of a competitor, Sequentia, which helped increase Kemlite's market share. Kemlite also benefited from the continuing trend toward substitution of translucent fiberglass-reinforced plastic for aluminum in truck and trailer roof applications. In addition, a 20% increase in the dry van truck/trailer market increased roof panel sales. This market is expected to increase modestly in 1998. Kemlite's sales of frp panels for sidewalls and roofs on motorhomes and recreational trailers increased by 10%, largely because of OEMs' shift away from aluminum. Kemlite is the solid leader in a market expected to grow by 4% in 1998. International sales rose by 25% on increased sales to several large accounts, and in international markets, generally, the company's business is expanding rapidly, as the widespread growth of fast food franchising has increased opportunities for Kemlite's building products, and growing truck/trailer markets have proven receptive to frp liner and roof panels. ================================================================================ 1997 annual report Crane Co 13 Market Overview ================================================================================ Kemlite focused in 1997 on increasing capacity by improving plant efficiency, and in early 1998 expects to expand capacity in its Jonesboro plant with a new frp manufacturing line. Sales Gain at CorTec CorTec, which operates in a related field, reported a 7% sales gain, but start-up costs on a new product resulted in flat earnings. Shipments into Canada more than doubled, and panel sales to truck body manufacturers also increased sharply. Demand for longer trailer panels fell by 10%, reflecting lower frp production at CorTec's largest customer. During 1997, CorTec successfully pilot-tested its new Encor(R) product, in which a proprietary, resin-based foam, rather than plywood, is laminated between layers of fiberglass-reinforced plastic. This laminate, which can be manufactured as a single 10-foot-wide structural panel up to 55 feet long, is intended to replace plywood and metals in many composite panel applications. It was well received, particularly for use in truck bodies and specialty applications such as horse trailers, and CorTec is ahead of its original roll-out schedule. CorTec was chosen to supply frp panels for over 2,000 new trailer units for the U.S. Postal Service in 1998, and with its second-highest year-end backlog in a decade, the company expects continued growth in both transportation and specialty markets in 1998. Earnings Flat at Resistoflex Resistoflex reported flat earnings on lower sales in 1997, as a fall-off in project business in economically troubled Southeast Asia squeezed the company's fledgling operations there and the company's plastic-lined pipe and fittings faced soft domestic markets. Its aerospace business, primarily domestic military sales, increased significantly, however, and overall margins improved, making possible an earnings performance level with 1996 results. Resistoflex maintains a market leadership position in corrosion-resistant plastic-lined pipes and fittings and continues to strengthen that position by investing in new machinery, which is expected to pay off in improved manufacturing costs, faster customer response, and increased productivity. In 1998, Resistoflex plans to upgrade its business operating system, which should improve efficiency, and will begin to benefit from the roll-out of the full line of hose products. The company expects strong demand for its products will continue in the U.S. military market with weak demand persisting in the domestic industrial and Asian markets. Progress at Crane Plumbing Crane Plumbing, which manufactures plumbing fixtures for both the new construction and repair and renovation segments of Canada's residential, industrial, commercial and institutional construction markets, improved its profitability on a 6% sales increase, essentially breaking even after a loss in 1996. Although a slowdown in commercial construction, coupled with a shift in demand toward lower-priced residential bathware products, led to a net decline in prices; the company showed an improvement in earnings performance over 1996. Contributing to the company's improved performance was the turnaround of the Acrylics operation and the automation of a number of operations at its Steelware facility. ================================================================================ 14 Crane Co 1997 annual report ================================================================================ Polyflon Gains Polyflon, Crane's smallest company, increased its sales, raising margins and operating profits. Polyflon expects continued growth in 1998. Outlook A strong domestic economy and continuing near-term growth in demand in truck and trailer markets should benefit both Kemlite and CorTec in 1998. Crane Plumbing's prospects are brightened by Canada's improving economy. Resistoflex's 1998 results hinge on domestic sales of military and industrial products, including its new hose line. Sales, Earnings Edge Up in Controls Segment
(in millions) 1997 1996 - -------------------------------------------------------------------------------- Sales $131.5 $129.7 - -------------------------------------------------------------------------------- Operating Profit 11.6 11.3 - -------------------------------------------------------------------------------- Operating Margins 8.9% 8.7% - --------------------------------------------------------------------------------
The Controls Segment had a modest increase in operating profits in 1997 on a small sales increase. The five companies in the segment reported combined sales of $131.5 million, up 1%, and operating earnings of $11.6 million, a gain of 3% that reflected slightly improved operating margins. Barksdale Sales Up But Operating Profits Flat Barksdale increased its penetration of the market for truck and bus ride leveling systems and expanded its presence in the resurgent U.S. "oil patch," but operating profits were flat despite a 6% sales gain. Backlog and bookings rose in 1997. Barksdale continued to invest in manufacturing improvements and new product development, and successfully introduced new integral actuator valves and explosion-proof pressure switches for offshore oil production platforms. Domestic oil exploration and production, Barksdale's largest market before that industry's near-collapse in the mid-1980s, has rebounded, and is expected to remain a strong market for Barksdale's control valves and pressure switches. Barksdale's German subsidiary has a strong presence in the important European market. Although it had productivity gains, flat sales and an unfavorable currency translation rate offset these gains. Barksdale looks for improved results in 1998 on the basis of its higher year-end bookings trend, the expected strengthening of European markets, the impact of manufacturing improvements and the positive reception anticipated for a number of new products. These include an environmentally safe overfill protection device for large storage tanks, solid state pressure switches for severe duty equipment, such as machine tools, and specialized level-measuring switches for the process and power generation industries. Ferguson's Sales Dip Sales and profits declined in 1997 at Ferguson, which makes custom cams, index drives, special robots and other mechanical devices for machinery manufacturers. Despite product margin gains, profits slipped as a result of reduced project business in 1997, the cost of closing its Detroit manufacturing plant and other reorganization expenses. Year-end backlog in the U.S. rose 11% on a surge in orders late in the year. The gains reflected new sales and marketing initiatives and increased penetration of the processing and packaging segments. Ferguson's European operation in Brussels increased profits through margin improvements and new sales and marketing efforts. Orders were higher at year-end. Ferguson expects sales and earnings gains in both operations in 1998. ================================================================================ 1997 annual report Crane Co 15 Market Overview ================================================================================ Mixed Year for Powers Process Controls Powers Process Controls had lower sales and earnings primarily because of weak commercial markets in Canada and increased expenses that offset gains in the company's commercial non-residential plumbing business in the U.S. Powers expects some improvement in 1998 in Canadian commercial and institutional construction markets and in U.S. industrial and commercial construction markets. Six large orders resulted after a major engineering firm specified Powers equipment as standard for wastewater treatment plants. Powers will introduce several significant new products in 1998, and expects to strengthen margins through its cell manufacturing and cost reduction programs. Rapid Growth at Azonix Azonix turned in an especially strong performance in 1997, aided by an expanding oil exploration industry. Profits more than doubled on a 33% sales increase. Strong engineering capabilities have enabled Azonix to attain a leadership position with man machine interface (MMI) products in the oil and gas exploration industries. The company's rugged MMI products, specifically designed for hazardous or harsh environments, were the largest gainer for Azonix in 1997, and strong bookings suggest further growth in 1998. Drilling operators rely on MMI systems for real-time information as they drill. Azonix's products are built to withstand weather extremes ranging from North Sea cold to scorching desert heat, as well as the shock and vibration inevitable with truck-mounted drilling equipment. Safety issues are also paramount, particularly for equipment used in oil and gas production and in petrochemical processing and refining. The company added three regional sales managers in 1997 and looks for strong sales gains in 1998. Dynalco Reports Record Sales, Lower Earnings Dynalco Controls had higher sales and bookings in 1997, both setting new records. A less favorable product mix resulted in slightly lower margins and operating profits. Sales of Dynalco's instruments and controls to equipment OEMs were strong, offsetting a small decline in the agricultural OEM sector that reflected a cyclical dip in agricultural equipment sales. Aftermarket sales of standard instrumentation and control products finished the year on a strong upswing. This was a direct result of a new packaged-system product offering, providing customers with turnkey solutions constructed using standard Dynalco products. Sales of these system packages offset a decline in distributor sales. Dynalco expects continued strong performance in the aftermarket to result from extending these product offerings to other customers, as well as from strengthening its distributor network. The company anticipates sales and earnings gains in both the OEM and aftermarket segments in 1998. Outlook Segment results should improve in 1998, propelled by growth in the U.S. "oil patch," further moderate growth in the U.S. economy, and continuing efforts by all the companies to improve manufacturing processes and gain market share through lower costs and new products. ================================================================================ 16 Crane Co 1997 annual report ================================================================================ Merchandising Systems Segment Profits Increase
(in millions) 1997 1996 - -------------------------------------------------------------------------------- Sales $179.9 $172.8 - -------------------------------------------------------------------------------- Operating Profit 31.0 24.8 - -------------------------------------------------------------------------------- Operating Margins 17.3% 14.4% - --------------------------------------------------------------------------------
The Merchandising Systems segment reported a 25% increase in profits for 1997 on the strength of a modest sales gain and a strong increase in margins. The two companies in the segment -- National Vendors and National Rejectors, Inc. GmbH (NRI) -- had combined sales of $179.9 million, up 4% from 1996 sales. Operating profits rose to $31.0 million, up $6.2 million from the prior year. Operating profit margins improved to 17.3% compared to 14.4% in 1996. Backlog of $18.8 million is up slightly from the prior year. Acquisition Boosts National Vendors National Vendors continued as the market leader in 1997, posting a 9% sales gain attributable primarily to the March, 1997 acquisition of Polyvend, Inc. a manufacturer of lower-priced vending equipment sold through distributors to smaller operators. Operating income increased by 20%. Margins improved on a more favorable product mix and manufacturing cost improvement. For National Vendors, which has traditionally sold directly to larger operators, the Polyvend acquisition provides a marketing channel to reach the distributor market that serves smaller operators. This new approach was especially important because the current downsizing trend in American business has created a shift away from larger factories and offices towards smaller, decentralized workplaces, typically serviced by smaller operators. Production of Polyvend's products has been fully integrated into National Vendors' modern St. Louis plant. GPL, the product line for this new distribution market, represents a major growth opportunity. New product line enhancements made in 1997 are intended to set GPL apart from its competitors. National Vendors currently has 65 distributors through which the GPL product line will be sold in the U.S., Canada, Europe and LatinAmerica. In late 1997, National Vendors also went into full production with its innovative new Millennia(TM) styling. Millennia is being marketed to the vending industry as a modern and up-to-date look for all locations, including high-tech environments. This European-inspired styling, first exhibited in October, 1996, will provide impetus to move vending into locations whose potential has not previously been explored. The company also introduced its Expanded Refreshment Center 4 food module, designed for less populous locations. National Vendors expects higher 1998 sales in all channels as a result of its new styles, enhanced product lines and expanded distribution. Gains at National Rejectors National Rejectors, Inc., GmbH, Europe's leading maker of electronic coin validating equipment and coin-changers, turned in a strong performance in 1997, with sharply improved margins. NRI, based in Buxtehude, Germany, doubled its operating earnings on a 6% increase in sales. In dollar terms, these results translated into an 81% earnings gain on slightly lower sales. Generally good market conditions in Europe, coupled with accelerating demand for NRI's battery-operated validator for outdoor cigarette machines, particularly in Germany, ================================================================================ 1997 annual report Crane Co 17 Market Overview ================================================================================ drove NRI's improved results. The company's branches in France, Spain and the U.K. were profitable in local currency terms. The NRI validator's consistent performance in high-humidity or frosty conditions has made it the choice of OEMs and vending machine operators for open-air cigarette machines, of which there are some 800,000 throughout Germany. The cigarette, amusement and vending industries are moving aggressively in Germany to modernize their machines with validators that can be programmed to accept the Euro, the proposed currency unit for the European Monetary Union. The advent of the Euro should greatly increase the demand for coin validators and coin-changers, since each participating country will mint its own version of the Euro, with a common design on one side and a national design on the other, and each country's Euro must be accepted in every other participating country. Demand for programmable electronic validators and coin-changers is expected to rise significantly. Margins benefited from continuing improvements in design and manufacturing processes, reduced raw material costs and a small price increase. NRI continued its Total Quality Management (TQM) project, and for the second time received ISO 9001 and ISO 14001 (environmental) certification for quality. Prospects for 1998 appear solid, on the strength of a higher year-end backlog. Outlook The Merchandising Systems segment is likely to show further growth in 1998. National Vendors expects to increase its penetration of the small operator/ small office market with its innovative Millennia and Generation(TM) product lines. NRI anticipates further growth as a result of its new products and increased demand relating to the Euro. ================================================================================ Sales Rise in Wholesale Distribution Segment
(in millions) 1997 1996 - -------------------------------------------------------------------------------- Sales $760.6 $734.6 - -------------------------------------------------------------------------------- Operating Profit 26.3 29.5 - -------------------------------------------------------------------------------- Operating Margins 3.5% 4.0% - --------------------------------------------------------------------------------
Wholesale Distribution, Crane's largest segment measured by sales, reported increased sales but lower earnings for 1997. Sales of $760.6 million were up 3.5% for the year, but operating profits fell by just under 11% to $26.3 million. Huttig Grows Despite Soft Markets Huttig Sash & Door Co. had 1997 sales of $625.5 million, a gain of $30.4 million that essentially resulted from the July, 1997 acquisition of Mallco Lumber Co., a Phoenix lumber and millwork dealer. Mallco's sales, reflected in the second half, added $32.3 million to the total. Operating profit declined 10%. Huttig distributes lumber and millwork to dealers through a nationwide network of 45 distribution centers in 37 states, as well as directly to some contractors. Its Prineville operation manufactures wood moulding. Huttig's performance is closely tied to the vitality of the local and regional housing markets in which it operates. Distribution sales increased slightly in 1997, excluding Mallco, even though housing starts declined throughout most of the country, and fell 1.1% in the markets served by Huttig, according to an F.W. Dodge estimate. Solid housing gains in California and Florida and modest improvement in the Northeast contributed to the improved results. Other areas, particularly in the Midwest, but also in the Northwest and the Central and Southern regions, experienced generally softer housing markets. In some areas, Huttig branches are attempting to regain volume, by pursuing a one-step approach, shipping to ================================================================================ 18 Crane Co 1997 annual report ================================================================================ contractors instead of to dealers. Huttig's international sales also declined as a result of the strength of the dollar versus the Japanese yen. Sales, margins and operating profits fell significantly at Prineville because of higher lumber prices throughout 1997, resulting in lower profits for Huttig as a whole. The 1996 closure of another manufacturing unit, Missoula White Pine & Sash, improved overall manufacturing profits. For 1998, distribution sales will benefit from a full year of Mallco results, and further expansion of builder direct and consumer sales at some branches. Huttig is also opening a window and door retail store in Atlanta, one of the country's largest housing markets. Crane Supply's Sales Flat in Mixed Markets Crane Supply had essentially flat sales of the pipe, valves, fittings and plumbing fixtures it distributes in Canadian markets, as operating profits dipped slightly on lower margins. Strong growth in the industrial sector boosted sales sharply in the Atlantic region, and increased oil and gas activity in Alberta was the main ingredient in a solid gain in that province. The company improved its profitability in underperforming markets outside central Canada in 1997, and found ways to cut inventories to reduce working capital needs. It also established electronic data interchange links with many of its best customers, speeding order handling. For 1998, the company expects higher sales and operating profits on the strength of increased economic activity in Canada, particularly in commercial and institutional markets, with Ontario and Alberta leading the way. Crane Supply looks for gains in market share in Alberta and in Vancouver, British Columbia, where it opened a new branch in 1997. Valve Systems and Controls Sold In October, the third company in the segment, Valve Systems and Controls, was sold for $7.5 million in cash and $1.5 million in convertible preferred stock. The Houston-based company, which distributes automated valves and related products to the petrochemical, oil refining and pipeline transmission industries, reported a small loss on sales of nearly $25 million through September 30. In 1996, it had modest profits on sales of $27 million. Outlook Segment sales and earnings are likely to rise as a result of acquisitions, aggressive marketing and improving market conditions in some sectors, combined with rigorous cost cutting to strengthen margins. Huttig will have a full year of Mallco sales, and any margin improvement at that unit would further contribute. Huttig traditionally has grown faster than the housing markets it serves. Stable lumber prices are expected to result in better profits in the wood moulding operation. Continued improvement in Canada's economy should help Crane Supply increase sales and earnings, particularly if it can achieve share gains in several strong markets. Gains at Crane Defense Systems Crane Defense Systems combined a 24% sales increase with improved margins in 1997 to generate a gain in operating profit. The company is primarily a military contractor that custom-designs and builds heavy equipment for Navy ships, such as elevators, cranes, large doors, and ammunition and torpedo handling systems. ================================================================================ 1997 annual report Crane Co 19 Consolidated Statements of Income
For Years Ended December 31, (in thousands except per share data) 1997 1996 1995 ========================================================================================== Net Sales $2,036,831 $1,847,732 $1,782,310 Operating Costs and Expenses: Cost of sales 1,477,048 1,344,745 1,316,321 Selling, general and administrative 307,782 287,432 274,276 Depreciation and amortization 55,400 49,402 48,765 - ------------------------------------------------------------------------------------------ 1,840,230 1,681,579 1,639,362 - ------------------------------------------------------------------------------------------ Operating Profit 196,601 166,153 142,948 Other Income (Expense): Interest income 3,072 2,527 2,025 Interest expense (23,817) (23,420) (26,913) Miscellaneous-net (19) (240) 3,408 - ------------------------------------------------------------------------------------------ (20,764) (21,133) (21,480) - ------------------------------------------------------------------------------------------ Income Before Taxes 175,837 145,020 121,468 Provision for Income Taxes 63,066 52,910 45,131 - ------------------------------------------------------------------------------------------ Net Income $ 112,771 $ 92,110 $ 76,337 ========================================================================================== Net Income Per Share Basic $ 2.47 $ 2.03 $ 1.68 Diluted $ 2.44 $ 2.01 $ 1.67 Average basic shares outstanding 45,710 45,356 45,397 Dividends Per Common Share $ .50 $ .50 $ .50 ==========================================================================================
See Notes to Consolidated Financial Statements ================================================================================ 20 Crane Co 1997 annual report Consolidated Balance Sheets
Balance December 31, (in thousands except per share data) 1997 1996 ==================================================================================================================================== Assets Current Assets: Cash and cash equivalents $ 6,982 $ 11,579 Accounts receivable 297,969 253,729 Inventories Finished goods 113,496 124,490 Finished parts and subassemblies 46,351 35,507 Work in process 51,345 43,894 Raw materials 79,892 63,383 --------------------------------------------------------------------------------------------------------------------------------- Total inventories 291,084 267,274 Other current assets 11,718 7,432 --------------------------------------------------------------------------------------------------------------------------------- Total Current Assets 607,753 540,014 Property, Plant and Equipment at Cost: Land 34,485 36,794 Buildings and improvements 159,811 153,576 Machinery and equipment 388,408 357,196 --------------------------------------------------------------------------------------------------------------------------------- Gross Property, Plant and Equipment 582,704 547,566 Less accumulated depreciation 308,947 289,219 --------------------------------------------------------------------------------------------------------------------------------- Net Property, Plant and Equipment 273,757 258,347 Other Assets 31,913 29,879 Intangibles 51,907 55,862 Cost in Excess of Net Assets Acquired 220,563 204,753 - ------------------------------------------------------------------------------------------------------------------------------------ $ 1,185,893 $ 1,088,855 ==================================================================================================================================== Liabilities and Shareholders' Equity Current Liabilities: Current maturities of long-term debt $ 992 $ 1,251 Loans payable 30,240 23,937 Accounts payable 122,616 105,082 Accrued liabilities 128,794 116,488 U.S. and foreign taxes on income 13,170 7,095 --------------------------------------------------------------------------------------------------------------------------------- Total Current Liabilities 295,812 253,853 Long-Term Debt 260,716 267,795 Other Liabilities 25,618 25,126 Accrued Postretirement Benefits 41,838 43,155 Accrued Pension Liabilities 6,559 6,483 Deferred Income Taxes 22,806 29,774 Preferred Shares, par value $.01; 5,000,000 shares authorized -- -- Common Shareholders' Equity: Common shares, par value $1.00; 80,000,000 shares authorized Outstanding 45,541,820 shares (45,659,859 in 1996) after deducting 2,743,106 shares in treasury (2,625,067 in 1996) 45,542 45,660 Capital surplus 19,951 29,756 Retained earnings 483,601 394,621 Cumulative currency translation adjustment (16,550) (7,368) --------------------------------------------------------------------------------------------------------------------------------- Total Common Shareholders' Equity 532,544 462,669 - ------------------------------------------------------------------------------------------------------------------------------------ $ 1,185,893 $ 1,088,855 ====================================================================================================================================
See Notes to Consolidated Financial Statements ================================================================================ 1997 annual report Crane Co. 21 Consolidated Statement of Cash Flows
For Years Ended December 31, (in thousands) 1997 1996 1995 ==================================================================================================================================== Cash Flows from Operating Activities: - ------------------------------------------------------------------------------------------------------------------------------------ Net income $ 112,771 $ 92,110 $ 76,337 Depreciation 36,995 35,122 35,746 Amortization 18,405 14,280 13,019 Deferred income taxes 4,816 3,105 (4,317) Cash (used for) provided from operating working capital (16,529) (13,783) (7,320) Other (6,684) (8,678) (6,847) --------------------------------------------------------------------------------------------------------------------------------- Total Provided from Operating Activities 149,774 122,156 106,618 --------------------------------------------------------------------------------------------------------------------------- Cash Flows from Investing Activities: Capital expenditures (40,642) (50,471) (26,603) Proceeds from disposition of capital assets 4,747 11,759 8,218 Purchase of equity investments -- -- (5,067) Sale of equity investments -- -- 19,440 Payments for acquisitions net of cash, and liabilities assumed of $34,400 in 1997, $1,126 in 1996 and $2,653 in 1995 (81,665) (2,523) (9,419) Proceeds from divestitures 7,453 1,554 -- --------------------------------------------------------------------------------------------------------------------------------- Total Used for Investing Activities (110,107) (39,681) (13,431) --------------------------------------------------------------------------------------------------------------------------- Cash Flows from Financing Activities: Equity: Dividends paid (22,870) (22,710) (22,755) Reacquisition of shares (24,977) (26,683) (17,940) Stock options exercised 7,382 5,042 8,784 ------------------------------------------------------------------------------------------------------------------------------ (40,465) (44,351) (31,911) ------------------------------------------------------------------------------------------------------------------------------ Debt: Repayments of long-term debt (3,458) (12,987) (47,527) Net increase (decrease) in short-term debt 1,099 (18,996) (10,398) ------------------------------------------------------------------------------------------------------------------------------ (2,359) (31,983) (57,925) ------------------------------------------------------------------------------------------------------------------------------ Total Used for Financing Activities (42,824) (76,334) (89,836) --------------------------------------------------------------------------------------------------------------------------- Effect of exchange rate on cash and cash equivalents (1,440) (38) 53 - ------------------------------------------------------------------------------------------------------------------------------------ Increase (Decrease) in Cash and Cash Equivalents (4,597) 6,103 3,404 Cash and cash equivalents at beginning of year 11,579 5,476 2,072 - ------------------------------------------------------------------------------------------------------------------------------------ Cash and Cash Equivalents at End of Year $ 6,982 $ 11,579 $ 5,476 ==================================================================================================================================== Detail of Cash (Used for) Provided from Operating Working Capital (Net of Effects of Acquisitions): Accounts receivable $ (25,358) $ (733) $ (3,034) Inventories 2,476 (2,878) (4,474) Other current assets 2,090 (327) (330) Accounts payable 5,702 2,134 (64) Accrued liabilities 2,683 (8,235) (4,722) U.S. and foreign taxes on income (4,122) (3,744) 5,304 --------------------------------------------------------------------------------------------------------------------------------- Total $ (16,529) $ (13,783) $ (7,320) --------------------------------------------------------------------------------------------------------------------------- Supplemental Disclosure of Cash Flow Information: Interest paid $ 22,865 $ 22,790 $ 26,262 Income taxes paid $ 48,825 $ 48,017 $ 43,474
See Notes to Consolidated Financial Statements ================================================================================ 22 Crane Co. 1997 annual report Consolidated Statements of Changes in Common Shareholders' Equity
Currency Total Common Common Capital Retained Translation Shareholders' (in thousands except per share data) Shares Surplus Earnings Adjustment Equity - ------------------------------------------------------------------------------------------------------------------------------------ Balance December 31, 1994 $ 45,071 $ 13,057 $ 280,953 $ (11,089) $ 327,992 - ------------------------------------------------------------------------------------------------------------------------------------ Net income 76,337 76,337 Cash dividends (22,755) (22,755) Reacquisition of 827,850 shares (828) (17,112) (17,940) Exercise of stock options, 594,863 shares 595 8,189 8,784 Restricted stock awarded, 349,830 shares 350 8,401 (7,520) 1,231 Currency translation adjustment 1,080 1,080 - ------------------------------------------------------------------------------------------------------------------------------------ Balance December 31, 1995 $ 45,188 $ 12,535 $ 327,015 $ (10,009) $ 374,729 - ------------------------------------------------------------------------------------------------------------------------------------ Net income 92,110 92,110 Cash dividends (22,710) (22,710) Issuance of 1,094,312 shares for Interpoint acquisition 1,094 31,722 32,816 Reacquisition of 1,081,761 shares (1,082) (27,519) (28,601) Exercise of stock options, 307,257 shares 307 7,702 8,009 Restricted stock awarded, 153,428 shares 153 5,316 (1,794) 3,675 Currency translation adjustment 2,641 2,641 - ------------------------------------------------------------------------------------------------------------------------------------ Balance December 31, 1996 $ 45,660 $ 29,756 $ 394,621 $ (7,368) $ 462,669 - ------------------------------------------------------------------------------------------------------------------------------------ Net income 112,771 112,771 Cash dividends (22,870) (22,870) Reacquisition of 654,303 shares (654) (20,782) (21,436) Exercise of stock options, 435,015 shares 435 6,947 7,382 Restricted stock awarded, 101,249 shares 101 4,030 (921) 3,210 Currency translation adjustment (9,182) (9,182) - ------------------------------------------------------------------------------------------------------------------------------------ Balance December 31, 1997 $ 45,542 $ 19,951 $ 483,601 $ (16,550) $ 532,544 ====================================================================================================================================
See Notes to Consolidated Financial Statements ================================================================================ 1997 annual report Crane Co. 23 Notes to Consolidated Financial Statements ================================================================================ Accounting Policies Principles of Consolidation--The consolidated financial statements include all majority-owned subsidiaries. Investments in affiliates owned 50% or less are accounted for under the equity method. All significant intercompany items have been eliminated. Certain prior year amounts have been reclassified to conform with the 1997 presentation. All share and per share data have been retroactively restated to reflect a three-for-two split of common stock effected in the form of a 50% stock dividend in 1996. 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. The company evaluates the recoverability of all long lived assets by assessing whether the unamortized asset can be recovered over its remaining life through cash flows. Revenue Recognition--Revenues are recorded generally when title passes to the customer. Revenues on long-term contracts are recognized under the percentage-of-completion method of accounting and are measured principally on either a cost-to-cost or a unit-of-delivery basis. These contracts represented less than one percent of sales in 1997. Accounts receivable included unreimbursed costs and accrued profits to be billed of $4.4 million and $3.5 million at December 31, 1997 and 1996, respectively. 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--As required by Financial Accounting Standard No. 128 "Earnings 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, stock warrants and convertible securities.
1997 1996 1995 - -------------------------------------------------------------------------------- Income available to common shareholders $112,771 $92,110 $76,337 Basic shares outstanding 45,710 45,356 45,397 Effect of dilutive stock options 546 377 256 - -------------------------------------------------------------------------------- Diluted shares outstanding 46,256 45,733 45,653 Earnings per share: Basic $ 2.47 $ 2.03 $ 1.68 Diluted $ 2.44 $ 2.01 $ 1.67 - --------------------------------------------------------------------------------
Cash Equivalents--Marketable securities with original maturities of three months or less are included in cash equivalents. Accounts Receivable--Receivables are carried at net realizable value. The allowance for doubtful accounts at December 31, 1997 and 1996 was $5.8 million and $5.3 million respectively. 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 $4.5 million in 1997, $4.4 million in 1996, and $4 million in 1995. Replacement cost would have been higher by $46.6 million and $49.3 million at December 31, 1997 and 1996, respectively. 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 $18.5 million and $14.6 million at December 31, 1997 and 1996, 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 $37.4 million and $28.6 million at December 31, 1997 and 1996, respectively. Stock-Based Compensation Plans--As allowed by Statement of Financial Accounting Standard No. 123 (SFAS 123), "Accounting for Stock-Based Compensation," the company records compensation expense for its employee stock-based 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 are translated at the rate of exchange in effect on the balance sheet date; income and expense are translated at the average rates of exchange prevailing during the year. The related translation adjustments are accumulated 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, 1997. 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, 1997 for such contracts were not material. Research and Development Product development and engineering costs were approximately $56.8 million, $52.0 million, and $51.9 million in 1997, 1996, and 1995, respectively. Included in these amounts were approximately $9.5 million, $10.3 million and $12.6 million received in 1997, 1996 and 1995, respectively, for customer-sponsored research and development. ================================================================================ 24 Crane Co 1997 annual report ================================================================================ Miscellaneous--Net
(In thousands) For Years Ended December 31, 1997 1996 1995 - -------------------------------------------------------------------------------- Gain (loss) on capital assets $ 509 $ 3,242 $(3,037) Gain on investments 29 -- 9,440(a) Other (557) (3,482)(b) (2,995)(b) - -------------------------------------------------------------------------------- $ (19) $ (240) $ 3,408 ================================================================================
(a)Reflects gain on sale of investment in Mid Ocean Limited. (b)Includes $4.0 million and $3.4 million for legal costs related to a previously discontinued operation in 1996 and 1995, respectively. Supplementary Cash Flow Information In a noncash transaction, the company acquired Interpoint in 1996 by issuing stock of $32.8 million and assuming liabilities of $37.9 million. The fair value of assets acquired totaled $32.2 million for an excess purchase price over net assets acquired of $38.5 million. Income Taxes Income before taxes is as follows:
(In thousands) For Years Ended December 31, 1997 1996 1995 - -------------------------------------------------------------------------------- U.S. operations $157,242 $128,666 $113,359 Non-U.S. operations 18,595 16,354 8,109 - -------------------------------------------------------------------------------- $175,837 $145,020 $121,468 ================================================================================
The provision (benefit) for income taxes consists of:
(In thousands) For Years Ended December 31, 1997 1996 1995 - -------------------------------------------------------------------------------- Current: U.S. federal tax $ 47,991 $ 39,793 $ 38,396 State and local tax 4,943 6,199 6,952 Non-U.S. tax 5,316 3,813 4,100 - -------------------------------------------------------------------------------- 58,250 49,805 49,448 - -------------------------------------------------------------------------------- Deferred: U.S. federal tax 4,143 1,683 (3,671) State and local tax 290 397 (619) Non-U.S. tax 383 1,025 (27) - -------------------------------------------------------------------------------- 4,816 3,105 (4,317) - -------------------------------------------------------------------------------- Total income taxes $ 63,066 $ 52,910 $ 45,131 ================================================================================
Reconciliation of the statutory U.S. federal rate to effective tax rate is as follows:
(In thousands) For Years Ended December 31, 1997 1996 1995 - -------------------------------------------------------------------------------- Statutory U.S. federal tax at 35% $ 61,543 $ 50,757 $ 42,514 Increase (reduction) from: Non-U.S. taxes (1,001) (1,065) 753 State and local taxes 3,401 4,287 4,116 Non-deductible goodwill 2,732 1,992 1,822 Foreign Sales Corporation (3,021) (2,106) (1,986) Other (588) (955) (2,088) - -------------------------------------------------------------------------------- Provision for income taxes $ 63,066 $ 52,910 $ 45,131 - -------------------------------------------------------------------------------- Effective tax rate 35.9% 36.5% 37.2% - --------------------------------------------------------------------------------
At December 31, 1997, the company had unremitted earnings of foreign subsidiaries of $94 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. Furthermore, it is not practicable to determine this liability. The components of deferred tax assets and liabilities included on the balance sheet at December 31 are as follows:
(In thousands) 1997 1996 - -------------------------------------------------------------------------------- Deferred tax assets: Postretirement benefits $ 16,404 $ 16,804 Inventory 4,944 5,627 Insurance 10,530 8,816 Environmental 5,253 5,679 Tax loss and credit carryforwards 3,483 6,384 Deferred compensation 7,083 8,245 Other 4,641 5,389 - -------------------------------------------------------------------------------- Total 52,338 56,944 Less valuation allowance on tax loss carryforwards 3,483 6,384 - -------------------------------------------------------------------------------- Total deferred tax assets, net $ 48,855 $ 50,560 ================================================================================ Deferred tax liabilities: Depreciation $ 15,767 $ 14,715 Difference between book basis and tax basis of assets 10,152 19,468 Intangibles 14,547 15,090 Pension 4,606 5,462 - -------------------------------------------------------------------------------- Total deferred liabilities $ 45,072 $ 54,735 ================================================================================ Net deferred asset (liability) $ 3,783 $ (4,175) - -------------------------------------------------------------------------------- Balance sheet classification: Current assets: Accounts receivable $ 26,589 $ 25,599 Long-term liabilities: Deferred income taxes 22,806 29,774 - -------------------------------------------------------------------------------- $ 3,783 $ (4,175) ================================================================================
================================================================================ 1997 annual report Crane Co 25 As of December 31, 1997, the company had net operating loss (NOL) carryforwards and U.S. tax credit carryforwards which will expire, if unused, as follows:
Non-U.S. Non-U.S. U.S. U.S. U.S. (In thousands) National Municipal State Federal R&D Year of Expiration NOL NOL NOL NOL Credit - -------------------------------------------------------------------------------- 1998-2001 $ 932 $ -- $4,470 $ 615 $ 38 After 2001 348 -- 4,721 440 18 Indefinite 3,282 5,425 -- -- -- - -------------------------------------------------------------------------------- Total $4,562 $5,425 $9,191 $1,055 $ 56 ================================================================================ Deferred tax asset on tax carryforwards $1,838 $ 476 $ 743 $ 370 $ 56
The entire $3.5 million deferred tax asset on tax carryfowards has been offset by the valuation allowance because of the uncertainty of ultimately realizing these future benefits. Accrued Liabilities
(In thousands) December 31, 1997 1996 - -------------------------------------------------------------------------------- Employee-related expenses $ 62,950 $ 52,964 Insurance 12,418 14,107 Environmental 5,619 3,846 Warranty 8,282 8,199 Professional fees 5,551 3,932 Sales allowances 3,805 3,229 Customer advanced payments 2,410 3,015 Interest 3,609 3,456 Taxes other than income 3,017 2,512 Pensions 2,795 4,169 Other 18,338 17,059 - -------------------------------------------------------------------------------- $128,794 $116,488 ================================================================================
Other Liabilities
(In thousands) December 31, 1997 1996 - -------------------------------------------------------------------------------- Environmental $ 11,319 $ 11,872 Insurance 7,215 7,715 Minority interest 3,040 3,165 Other 4,044 2,374 - -------------------------------------------------------------------------------- $ 25,618 $ 25,126 ================================================================================
Postretirement Benefits 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.
(In thousands) December 31, 1997 1996 1995 - -------------------------------------------------------------------------------- Accumulated postretirement benefit obligation: Retirees $ 20,072 $ 21,070 $ 23,068 Fully eligible active plan participants 2,322 2,540 2,295 Other active plan participants 5,453 5,808 6,093 - -------------------------------------------------------------------------------- Total 27,847 29,418 31,456 Unrecognized net gain 13,991 13,737 11,615 - -------------------------------------------------------------------------------- Accrued postretirement benefit $ 41,838 $ 43,155 $ 43,071 ================================================================================ Net periodic cost: Benefits earned during the period $ 439 $ 523 $ 564 Interest cost on accumulated benefit obligation 1,978 2,120 2,294 Amortization of gain (975) (772) (715) - -------------------------------------------------------------------------------- Net cost 1,442 1,871 2,143 Benefits paid (2,759) (1,943) (2,138) Acquisition -- 156 -- Accrued postretirement benefit: beginning of year 43,155 43,071 43,066 - -------------------------------------------------------------------------------- end of year $ 41,838 $ 43,155 $ 43,071 ================================================================================
For the purpose of estimating this liability, the cost of covered benefits was assumed to increase 9.4% for 1997, and then to decrease gradually to 5.0% by 2007 and remain at that level thereafter. In 1996, the cost of covered benefits was assumed to increase 10.2%, and then to decrease gradually to 5.2% by 2007 and remain at that level thereafter. An increase in the assumed health care cost trend rate by one percentage point would increase the accumulated postretirement benefit obligation by approximately $2.5 million at December 31, 1997 and the net periodic cost by approximately $.3 million for the year. The discount rate used in determining the accumulated postretirement benefit obligation was 7.25% in 1997 and 7.5% in 1996 and 1995. The company participates in several multi-employer insurance plans, which provide benefits to certain employees under collective bargaining agreements. Total contributions to these plans were approximately $2.2 million in 1997, $2.4 million in 1996 and $2.6 million in 1995. Pensions 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. ================================================================================ 26 Crane Co 1997 annual report ================================================================================ The following table sets forth by funded status the amounts recognized in the company's balance sheet at December 31, for company sponsored defined benefit pension plans:
1997 1996 (In thousands) Overfunded Underfunded Overfunded Underfunded - ------------------------------------------------------------------------------------------------------------------------------------ Actuarial present value of benefit obligation: Vested $ 231,849 $ 5,986 $ 213,720 $ 5,424 Non-vested 8,097 205 7,530 185 - ------------------------------------------------------------------------------------------------------------------------------------ Accumulated benefit obligation 239,946 6,191 221,250 5,609 Effect of future pay increases 33,799 598 30,936 509 - ------------------------------------------------------------------------------------------------------------------------------------ Projected benefit obligation (PBO) 273,745 6,789 252,186 6,118 Funded assets at fair value 376,866 5,130 342,419 4,507 - ------------------------------------------------------------------------------------------------------------------------------------ Assets over (under) PBO 103,121 (1,659) 90,233 (1,611) Unrecognized net (asset) liability at date of adoption less amortization (11,609) 140 (10,621) 214 Unrecognized net (gains) losses (77,150) 494 (67,397) 685 Unrecognized prior service cost 2,315 -- 1,757 -- Adjustment required to recognize minimum liability -- (540) -- (721) - ------------------------------------------------------------------------------------------------------------------------------------ Prepaid (accrued) pension cost $ 16,677 $ (1,565) $ 13,972 $ (1,433) ====================================================================================================================================
The following rates were used to determine the projected benefit obligation:
1997 1996 1995 - -------------------------------------------------------------------------------- U.S. Plans: Discount rate 7.25% 7.50% 7.50% Expected long-term rate of return on assets 8.75% 8.75% 8.75% Rate of compensation increase 4.50% 4.75% 4.75% Non-U.S. Plans: Discount rate 7.25%-7.50% 7.50% 7.50%-8.25% Expected long-term rate of return on assets 7.50%-8.00% 7.50%-8.00% 8.25%-9.00% Rate of compensation increase 6.25%-6.50% 6.25%-6.50% 6.25%-6.50%
The following table sets forth net periodic pension costs for company sponsored defined benefit plans:
(In thousands) December 31, 1997 1996 1995 - -------------------------------------------------------------------------------- Benefits earned during the period $ 10,294 $ 9,268 $ 8,004 Interest cost on projected benefit obligation 17,185 15,604 15,990 Actual return on plan assets (53,028) (41,749) (62,311) Net amortization and deferral 25,648 18,175 41,320 - -------------------------------------------------------------------------------- Pension expense (income) $ 99 $ 1,298 $ 3,003 ================================================================================
At December 31, 1997, substantially all plan assets are invested in listed stocks and bonds. These investments include common stock of the company which represents 5% 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 $1.5 million in 1997 and 1996 and $1.7 million in 1995. 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 participants gross compensation. The contributions for 1997, 1996 and 1995 were $1.7 million, $1.4 million and $1.9 million, respectively. The company and its subsidiaries sponsor savings and investment plans which are available to eligible employees of the company and its subsidiaries. The company made contributions of approximately $5.4 million to the plans in 1997, $4.7 million and $4.2 million in 1996 and 1995, respectively. Short-Term Financing The weighted average interest rate for short-term borrowings at December 31, 1997 and 1996 was 6.3% and 4.9%, respectively. As of December 31, 1997, the company had available domestic lines of credit totaling $187.5 million and available foreign lines of credit totaling $35 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 $8.0 million at December 31, 1996 were classified as long-term debt since the company had entered into finance agreements that permit it to refinance short-term obligations on a long-term basis. ================================================================================ 1997 annual report Crane Co 27 Notes to Consolidated Financial Statements (continued) Long-Term Financing
(In thousands) December 31, 1997 1996 - -------------------------------------------------------------------------------- Crane Co. Senior debt: 8 1/2% notes due 2004 $ 100,000 $ 100,000 Original issue discount (519) (602) Deferred financing costs (426) (494) ------------------------------------------------------------------------------ 99,055 98,904 ------------------------------------------------------------------------------ 7 1/4% notes due 1999 150,000 150,000 Original issue discount (99) (173) Deferred financing costs (651) (1,093) ------------------------------------------------------------------------------ 149,250 148,734 - -------------------------------------------------------------------------------- Total Crane Co. 248,305 247,638 - -------------------------------------------------------------------------------- Subsidiaries: Industrial revenue bonds 2,513 2,895 Capital lease obligations 1,512 1,844 Various loans 9,378 16,669 ------------------------------------------------------------------------------ Total Subsidiaries 13,403 21,408 - -------------------------------------------------------------------------------- Total long-term debt 261,708 269,046 Less current portion 992 1,251 ------------------------------------------------------------------------------ Long-term debt net of current portion $ 260,716 $ 267,795 ================================================================================
At December 31, 1997, the principal amounts of long-term debt repayments required for the next five years are $1 million in 1998, $159.5 million in 1999, $.7 million in 2000, $.6 million in 2001, and $.9 million in 2002. As of December 31, 1997 Crane Co. had $200 million in contractually committed lines of credit, under a long-term bank credit facility that expires in August 2000. There were no borrowings outstanding under this facility at December 31, 1997. Commitments under the facility are for general corporate purposes and to provide bridge financing for acquisitions. In addition, the company has other international long-term credit arrangements with banks totaling $14 million, of which $.6 million was outstanding at December 31, 1997. The long-term credit facilities contain certain financial and restrictive covenants, including limitations on indebtedness and liens. In June 1994, the company issued $150 million 7 1/4% Senior Notes due 1999. Incorporating the effects of underwriting fees, original issue discount and the cost of a treasury lock agreement, the effective cost of this financing was 7.6%. This public debt was issued under the company's $300 million shelf registration as filed with the Securities and Exchange Commission in May 1994. Financial Instruments--The company periodically enters into interest rate swap agreements to manage its exposure to interest rate changes and to lower the overall cost of borrowings. All interest rate swaps are subject to market risk as interest rates fluctuate. No new interest rate swap agreements were executed in 1997 and 1996. At December 31, 1997 and 1996, the company had no interest rate swap contracts outstanding. Fair Value of Financial Instruments The following estimated fair values have been determined using available market information and appropriate valuation methodologies:
(In thousands) December 31, 1997 1996 - -------------------------------------------------------------------------------- Estimated Estimated Carrying Fair Carrying Fair Value Value Value Value - -------------------------------------------------------------------------------- Assets: Investments $ 7,559 $ 7,559 $ 6,356 $ 6,356 Liabilities: Short-term debt 31,232 31,232 25,188 25,188 Long-term debt 260,716 273,371 267,795 278,251 ------------------------------------------------------------------------------
The company sold its Valve Systems and Controls division in 1997 for cash and $1.5 million in convertible preferred stock. In 1995, the company purchased an equity position in Powec, a Norwegian manufacturer, and in Kessel Thailand Co., Ltd. The carrying value of the preferred stock and the investment in Powec and Kessel Thailand Co., Ltd., approximates the company's interest in their underlying assets. Short-term and long-term debt rates currently available to the company for debt with similar terms and remaining maturities are used to estimate the fair value for debt issues that are not quoted on an exchange. Leases The company leases certain facilities, vehicles and equipment under capital and operating leases with various terms. Certain leases contain renewal or purchase options. Future minimum payments, by year, and in the aggregate, under leases with initial or remaining terms of one year or more consisted of the following at December 31, 1997:
Minimum Capital Operating Sublease (In thousands) Leases Leases Income Net - -------------------------------------------------------------------------------- 1998 $ 366 $11,250 $ 1,063 $10,553 1999 215 8,613 1,014 7,814 2000 204 6,175 771 5,608 2001 204 4,889 489 4,604 2002 204 3,742 396 3,550 Thereafter 715 5,503 497 5,721 - -------------------------------------------------------------------------------- Total minimum lease payments $ 1,908 $40,172 $ 4,230 $37,850 ================================= Interest (396) - ---------------------------------------- Present value $ 1,512 ========================================
================================================================================ 28 Crane Co 1997 annual report ================================================================================ The weighted average interest rate for capital leases is 7.92%. Rental expense for all operating leases was $14.9 million, $15.6 million and $16.6 million for 1997, 1996 and 1995 respectively. The cost of assets capitalized under leases at December 31 is as follows:
(In thousands) 1997 1996 - -------------------------------------------------------------------------------- Buildings and improvements $ 6,336 $ 6,377 Machinery and equipment 7,158 7,619 - -------------------------------------------------------------------------------- 13,494 13,996 Less accumulated depreciation 11,829 12,006 - -------------------------------------------------------------------------------- $ 1,665 $ 1,990 ================================================================================
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, which have first dollar coverage. The company does not deem its deductible exposure to be material. As of December 31, 1997, the company has received certain proposed notices of adjustment to federal income tax and 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 $17 million at December 31, 1997, 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 $3.4 million on environmental costs in 1997, and expects to pay remediation costs of approximately $3.1 million in 1998. 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 obligation. The company is not aware of any significant additional liability that would result from the inability of other PRPs to fulfill their obligation. 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. The company has also been advised by the Environmental Protection Agency (EPA) that it is a potentially responsible party (PRP) with respect to the Roebling Steel Company Superfund site in Roebling, New Jersey, previously operated by a former subsidiary, CF&I Steel Corporation. The company has advised the EPA that it was not an owner or operator of the site and has rejected all assertions of PRP status. Crane Co. is a defendant in a class action arising out of the contamination of a creek in eastern Ohio by a chemical pesticide sold under the trade name Mirex. This chemical was not manufactured or sold by Crane but was manufactured by another company, also a defendant, at a site adjacent to a Crane facility. The complaint seeks compensatory damages of $10 million and a like amount in punitive damages against Crane, and compensatory damages of $100 million and a like amount in punitive damages against the manufacturer. Crane has asserted cross-claims for contamination of its property and for indemnification against any liability to the plaintiffs against the manufacturer, its foreign parent company and the seller of the pesticide that arranged for its manufacture. It is expected that the lawsuit will be tried in late 1998. Based on data from environmental studies available to date, the company believes that it not only has meritorious defenses to the plaintiffs' class action but also has valid claims against the other parties. Accordingly, the company believes that these actions are not likely to have a material effect on its results of operations or financial condition. Crane Co. is a defendant in a lawsuit under the False Claims Act seeking treble damages and attorney's fees in connection with the assumption by the Pension Benefit Guarantee Corporation of the unfunded pension liabilities (allegedly $270 million) of CF&I Steel Corporation. The company believes the allegations are without merit. The lawsuit was dismissed in May 1996 upon the company's motions for summary judgment and for judgment on the pleadings. The dismissal was affirmed on appeal by the Eighth Circuit Court of Appeals in August 1997. While the plaintiff has filed a petition seeking review by the United States Supreme Court, the company believes the dismissal will be upheld and accordingly, that the lawsuit is not likely to have a material effect on the company's results of operations or financial condition. ================================================================================ 1997 annual report Crane Co 29 Notes to Consolidated Financial Statements (continued) ================================================================================ The company's Crane Canada, Inc. subsidiary is the defendant in a class action pending in British Columbia, Canada alleging damages to property from water escaping from toilet tanks manufactured by Crane Canada. Crane Canada has settled past claims for property damage arising from water escaping from cracked toilet tanks on a case by case basis, and has entered into claims handling agreements with a number of property insurers to process such claims pursuant to agreed claim procedures and reimbursement formulas. Although the class certification order has been upheld on appeal, Crane Canada continues to settle property damage claims in accordance with the claims handling agreements and to enter into such agreements with additional insurers. Accordingly, the company believes that the pending legal action will not have a material impact on its liabilities. Based on the historical trends for claims related to cracked toilet tanks and the experience of Crane Canada in resolving such claims, the company believes that pending and reasonably anticipated future claims are not likely to have a material effect on its results of operations or financial condition. As of December 31, 1997, Crane Co. was a defendant (among a number of defendants, typically 15 to 40) in approximately 642 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. During 1997, the company completed five acquisitions at a total cost of $82 million. In March, the company acquired the transportation products business of Sequentia, Incorporated. This business, which produced 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 our 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 July, through its Huttig Sash & Door Company subsidiary, the company acquired MALLCO Lumber & Building Materials Inc., a leading wholesale distributor of lumber, doors and engineered wood products serving Arizona and the surrounding region. In December the company acquired certain operations and products lines of Stockham Valves & Fittings, Inc. The acquired product lines and related manufacturing operations are being integrated into the company's engineered valve business and its commercial bronze and iron valve business. Also in 1997, the company sold its Valve Systems and Controls division for $7.5 million in cash and $1.5 million in preferred stock. During 1996, the company completed two acquisitions. The company acquired Interpoint Corporation in a tax-free merger in which the company assumed $26 million of Interpoint debt and issued 1.1 million shares of Crane common stock for all the outstanding shares of Interpoint. Interpoint designs and manufactures high density power converters with applications in the aerospace and medical technology industries. The company also acquired Grenson Electronics of Daventry, England, for a cash payment of $2.7 million. Grenson Electronics produces low voltage power conversion electronics for the aerospace, defense and industrial markets. The company sold Empire Foundry in 1996. During 1995, the company completed three acquisitions at a cost of $9.4 million. In February, the company, through its Barksdale subsidiary, acquired Unimess GmbH, a German-based manufacturer of a full line of solid state pressure switches and transducers, level switches and indicating systems, and flow measurement and control components for specialized instrumentation requirements in numerous industrial processes. In the fourth quarter, the company 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. In September, ELDEC made a 47% equity investment in Powec, a Norwegian manufacturer of power conditioning products and systems. 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. Preferred Share Purchase Rights In 1988, the company distributed one preferred share purchase right for each outstanding share of common stock. The preferred rights were not exercisable when granted and may only become exercisable under certain circumstances involving actual or potential acquisitions of the company's common stock by a person or affiliated persons. Depending upon the circumstances, if the rights become exercisable, the holder may be entitled to purchase shares of the company's Series A Junior Participating Preferred Stock, or shares of common stock of the acquiring person. Preferred shares purchasable upon exercise of the rights will not be redeemable. Each preferred share will be entitled to preferential rights regarding dividend and liquidation payments, voting power, and, in the event of any merger, consolidation or ================================================================================ 30 Crane Co 1997 annual report ================================================================================ other transaction in which common shares are exchanged, preferential exchange rate. The rights will remain in existence until June 27, 1998, unless they are earlier terminated, exercised or redeemed. The company has authorized five million shares of $.01 par value preferred stock of which 525,000 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 $8.8 million in 1997, $4.6 million in 1996 and $2.9 million in 1995. The pro forma net income and earnings per share listed below reflect the impact of measuring compensation expense for options granted in 1997, 1996 and 1995 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) 1997 1996 1995 - -------------------------------------------------------------------------------- Net income As reported $112,771 $92,110 $76,337 Pro forma 110,339 90,616 75,753 Net income per share: Basic As reported 2.47 2.03 1.68 Pro forma 2.42 2.00 1.67 - -------------------------------------------------------------------------------- Diluted As reported 2.44 2.01 1.67 Pro forma 2.39 1.98 1.66 - --------------------------------------------------------------------------------
The weighted average fair value of options granted was $10.33 per share in 1997, $8.01 per share in 1996 and $6.74 per share in 1995. These estimates were based on the Black-Scholes multiple option-pricing model with the following weighted average assumptions:
1997 1996 1995 - -------------------------------------------------------------------------------- Dividend yield 1.48% 1.81% 2.18% Volatility 24.98% 26.89% 29.69% Risk-free interest rates 6.76% 6.53% 6.41% Expected lives in years 5.10 4.75 4.75 - --------------------------------------------------------------------------------
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:
Number of Weighted (Shares in thousands) Shares Average Price - -------------------------------------------------------------------------------- 1995 - -------------------------------------------------------------------------------- Options outstanding at beginning of year 2,259 $ 16.15 Granted 504 22.90 Exercised (595) 14.75 Canceled (71) 18.09 Options outstanding at end of year 2,097 18.10 Options exercisable at end of year 1,272 16.30 1996 - -------------------------------------------------------------------------------- Granted 481 27.55 Exercised (307) 16.64 Canceled (60) 23.03 Options outstanding at end of year 2,211 20.26 Options exercisable at end of year 1,416 17.63 1997 - -------------------------------------------------------------------------------- Granted 535 33.91 Exercised (435) 16.98 Canceled (96) 28.60 Options outstanding at end of year 2,215 23.87 Options exercisable at end of year 1,420 19.87 - --------------------------------------------------------------------------------
A summary of information regarding stock options outstanding at December 31, 1997 follows:
(Shares In thousands) Options Outstanding Options Exercisable - -------------------------------------------------------------------------------- Weighted Weighted Weighted Average Average Average Range Of Number of Remaining Exercise Number of Exercise Exercise Prices Shares Life Price Shares Price - -------------------------------------------------------------------------------- $22.21-41.69 1,272 8.50 $ 28.71 477 $ 24.89 14.88-18.05 921 4.89 17.49 921 17.49 9.92-11.73 22 1.01 11.10 22 11.10 - --------------------------------------------------------------------------------
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 212,500 shares with a weighted average fair value of $34.07 in 1997. As of December 31, 1997, there were available for future awards a total of 579,982 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 retainers which 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 2,400 shares with a weighted average fair value of $33.69 in 1997. ================================================================================ 1997 annual report Crane Co 31 Notes to Consolidated Financial Statements (continued) Segment Information Information by industry segments follows:
(in thousands) 1997 1996 1995 ============================================================================================= Fluid Handling - --------------------------------------------------------------------------------------------- Net Sales $ 394,151 $ 363,968 $ 343,751 Operating Profit 29,977 25,735 19,723 Assets 322,488 255,093 261,201 Capital Expenditures 6,835 7,888 5,678 Depreciation and Amortization 10,381 10,666 10,866 Aerospace - --------------------------------------------------------------------------------------------- Net Sales $ 343,900 $ 246,674 $ 216,161 Operating Profit 90,055 65,914 56,030 Assets 277,704 251,716 166,599 Capital Expenditures 13,496 8,325 3,589 Depreciation and Amortization 12,785 10,126 9,896 Engineered Materials - --------------------------------------------------------------------------------------------- Net Sales $ 225,560 $ 207,198 $ 202,073 Operating Profit 30,093 25,666 22,911 Assets 109,578 102,035 103,276 Capital Expenditures 8,210 4,252 3,177 Depreciation and Amortization 6,178 5,537 5,499 Crane Controls - --------------------------------------------------------------------------------------------- Net Sales $ 131,521 $ 129,676 $ 131,127 Operating Profit 11,640 11,256 11,322 Assets 121,432 125,433 128,523 Capital Expenditures 2,538 4,170 3,174 Depreciation and Amortization 6,502 6,495 6,760 Merchandising Systems - --------------------------------------------------------------------------------------------- Net Sales $ 179,905 $ 172,847 $ 183,082 Operating Profit 31,034 24,810 23,573 Assets 109,190 91,529 88,936 Capital Expenditures 5,089 7,900 9,161 Depreciation and Amortization 6,426 5,664 4,929 Wholesale Distribution - --------------------------------------------------------------------------------------------- Net Sales $ 760,608 $ 734,585 $ 710,844 Operating Profit 26,273 29,492 25,032 Assets 186,633 199,622 197,528 Capital Expenditures 4,146 3,368 1,451 Depreciation and Amortization 5,210 6,362 6,534 Consolidated - --------------------------------------------------------------------------------------------- Net Sales Other $ 13,136 $ 10,587 $ 11,520 Intersegment Elimination (11,950) (17,803) (16,248) --------------------------------------------------------------------------------------- Total Net Sales $2,036,831 $1,847,732 $1,782,310 ======================================================================================= Operating Profit Other $ 850 $ 470 $ (629) Corporate (23,425) (17,311) (15,150) Intersegment Elimination 104 121 136 --------------------------------------------------------------------------------------- Total Operating Profit $ 196,601 $ 166,153 $ 142,948 ======================================================================================= Assets Other $ 12,266 $ 7,100 $ 8,099 Corporate 46,602 56,327 44,249 --------------------------------------------------------------------------------------- Total Assets $1,185,893 $1,088,855 $ 998,411 =======================================================================================
================================================================================ 32 Crane Co 1997 annual report ================================================================================ Segment Information continued Information by geographic segments follows:
(in thousands) 1997 1996 1995 ============================================================================================= United States - --------------------------------------------------------------------------------------------- Net Sales $1,663,094 $1,466,683 $1,428,495 Operating Profit 196,168 162,533 143,672 Assets 899,852 812,832 760,536 Canada - --------------------------------------------------------------------------------------------- Net Sales $ 179,534 $ 182,014 $ 173,312 Operating Profit 6,512 4,731 3,094 Assets 83,510 88,912 86,163 Other International - --------------------------------------------------------------------------------------------- Net Sales $ 231,560 $ 229,903 $ 208,885 Operating Profit 17,346 16,200 11,332 Assets 155,929 130,784 107,463 Consolidated - --------------------------------------------------------------------------------------------- Net Sales Interregional Elimination (37,357) (30,868) (28,382) --------------------------------------------------------------------------------------- Total Net Sales $ 2,036,831 $1,847,732 $1,782,310 ======================================================================================= Operating Profit Corporate (23,425) (17,311) (15,150) --------------------------------------------------------------------------------------- Total Operating Profit $ 196,601 $ 166,153 $ 142,948 ======================================================================================= Assets Corporate 46,602 56,327 44,249 --------------------------------------------------------------------------------------- Total Assets $1,185,893 $1,088,855 $ 998,411 =======================================================================================
================================================================================ 1997 annual report Crane Co 33 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 Deloitte & Touche LLP [LOGO] To The Shareholders of Crane Co. We have audited the accompanying consolidated balance sheets of Crane Co. and its subsidiaries as of December 31, 1997 and 1996, 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, 1997. 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, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997 in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP Stamford, Connecticut January 21, 1998 ================================================================================ 34 Crane Co 1997 annual report Management's Discussion and Analysis of Operations ================================================================================ Results of Operations 1997 Results of operations for 1997 are explained in detail on pages 10 to 19. Results of Operations 1996 Total sales rose 4% in 1996, with sales increasing in Fluid Handling because of international growth and strong pump shipments, and in Aerospace because of higher demand and the acquisition of Interpoint. Total operating profit in 1996 increased more than $23 million, or 16.2%, with all business segments except Controls reporting profit gains. Increased sales volume, higher product margins and continued emphasis on cost controls contributed to the earnings growth. Net income in 1996 increased nearly $16 million, or 20.7%. Net interest expense declined nearly $4 million, or 16.1%, as a result of reduced debt levels and lower interest rates. Net capital gain on the disposition of assets was $3.0 million in 1996, compared to $11.3 million in 1995, which included a $9.4 million gain attributable to the sale of the company's investment in Mid Ocean Limited. In addition, the company incurred miscellaneous expense of $3.2 million, compared to $7.9 million in 1995, as a writedown of excess real estate to current market value resulted in a noncash charge of $4.4 million in 1995. The effective tax rate in 1996 was 36.5%, compared to 37.2% in 1995 because of greater utilization of foreign tax loss carryforwards. Results of operations by industry segments follow: Fluid Handling Fluid Handling sales increased 5.9% in 1996 compared to 1995, with both the valve and pump businesses experiencing gains. Valve group sales growth derived from international operations. Crane Ltd. in the United Kingdom experienced strong export sales, which more than offset a weak domestic market. Crane Australia also benefited from strong export sales, mainly to Asia, as a result of its manufacturing joint venture in Indonesia, begun in the fourth quarter of 1995, which contributed $3.3 million to its overall sales gain. Crane Ningjin in China, another joint venture begun in the fourth quarter of 1995, shipped $2.8 million of product as the company continued to expand and strengthen its international presence. Pump business shipments increased 20% with the full-year impact of the Process Systems acquisition completed in the fourth quarter of 1995 contributing 50% of the increase. The continued success of new products, namely Chempump's NC Series self-diagnostic sealless pump and Barnes' pressure sewer pump systems, along with increased demand for most of the other pump product lines, contributed the other half. Valve sales in North America declined because of weak demand in cast steel and nuclear valve markets. In addition, the sale of Empire Foundry in the first quarter of 1996 negatively impacted North American sales comparisons by $4.4 million. Operating profit improved 30% in 1996 on stronger performances by Crane Australia and the pump and water treatment businesses. With significantly higher sales, Crane Australia returned to more normal profit margins from the depressed levels of a year ago. The pump businesses improved margins through higher production volume and wider acceptance of their new product lines. Cochrane's water treatment business recorded profitable results compared to a loss in the prior year, which was caused by one large project. The North American valve business experienced a slight decline in operating profit because of lower sales volume. Aerospace Aerospace sales increased 14.1%, or $30.5 million, in 1996. The Interpoint acquisition, completed in October of 1996, contributed $10 million to the sales gain, while ELDEC contributed $9.3 million, Hydro-Aire $7.1 million and Lear Romec $4.4 million. ELDEC experienced strong OEM sales of its proximity, low voltage and fuel flow product lines as aircraft production increased in 1996. ELDEC spare parts sales also increased as a result of higher aircraft utilization rates. Hydro-Aire posted strong commercial OEM sales as a result of the increase in aircraft production, and strong aftermarket sales. Significant growth in the overhaul and repair segment, which benefited from improved customer service standards, contributed to the increase in aftermarket sales, along with the higher aircraft utilization rates. Lear Romec experienced gains in both the OEM market and aftermarket as it benefited from the increased aircraft production and higher demand for spare parts in the government sector. Aerospace operating profit increased 18%, or $9.9 million, in 1996 and margins improved to 26.7% from 25.9%. All units contributed to the increase. Higher shipment and production levels combined with process improvements at Lear Romec resulted in significantly higher margins. Profits from increased OEM and aftermarket sales at ELDEC more than offset higher development costs on the MD-95 and Global Express programs and costs related to a major business process reengineering project. Hydro-Aire's increased sales volume resulted in higher profits with slightly lower margins because of higher product and market development costs. Engineered Materials Sales improved 2.5% in 1996 with Resistoflex the largest contributor. Resistoflex sales grew by 30%, as the company's Asian operations, acquired in December 1995, secured significant contracts. In addition, an upturn in the domestic chemical processing industry resulted in increased demand in the lined pipe product line. Cor Tec saw a significant drop in sales because of a decline of approximately 25% in the truck and trailer transportation industry. For Kemlite, this decline in transportation was more than offset by strong sales in the recreational vehicle market, as fiberglass reinforced panels continued to displace aluminum. Engineered Materials, operating profits increased 12%. Resistoflex posted significant profit gains on increased sales volume and significantly higher margins at its defense operations because of investments in manufacturing technology and improved processes. Kemlite benefited from higher sales along with a change in product mix. Profits declined at Cor Tec and Crane Plumbing because of lower shipments. Merchandising Systems Merchandising Systems 1996 sales declined $10.3 million, which consisted of a $13.2 million decline at National Vendors and a $2.9 million increase at NRI. The decline at National Vendors resulted from the 1995 completion of the United States Postal Office contract, which contributed $5.4 million in sales in that year, and lower sales to national accounts in the U.S. market. Increased sales of the Cafe System "7" coffee service product and increased penetration in Latin American and Pacific Rim markets partially offset these adverse factors. Sales gains at NRI were the result of increased demand for coin validators throughout Europe. NRI increased profits through higher sales volume and improved margins stemming from its successful efforts to reduce production costs on certain high-volume validators. The lower sales volume ================================================================================ 1997 annual report Crane Co 35 ================================================================================ and lower margins from international sales at National Vendors were partially offset by substantial productivity gains from its plant modernization program. Crane Controls Crane Controls' 1996 sales declined slightly to $129.7 million. Ferguson experienced lower sales across all product lines because of an overall softening in the markets it serves, most notably the packaging industry. Sales at Azonix were down slightly from the prior year with weakness in the OEM product line. Sales gains at the other three Controls business units partially offset these declines. Powers Process Controls recorded the biggest sales gain, benefiting from the significant upturn in the U.S. construction market. Sales at Barksdale increased on the strength of higher shipments of its transducers in the U.S. and level switch products in Europe and the U.S., while sales at Dynalco improved as a result of higher demand in the agricultural OEM market. Operating profit in 1996 was essentially unchanged from the prior year. Profits at Ferguson Europe improved because of the benefits of consolidating its manufacturing facilities, which was completed in 1995, and profits at Powers Process Controls improved because of increased sales volume. At Barksdale, profits were lower despite increased sales because of higher material costs of its level switch and transducer products relative to its other product lines. A change in product mix also resulted in lower margins at Azonix, while higher margins minimized the sales shortfall at Ferguson U.S. Wholesale Distribution Wholesale Distribution sales increased $23.8 million, or 3.3%, in 1996, as sales at Huttig increased $24.2 million because of growth in new home construction and an increase in residential remodel and repair spending throughout the United States. Crane Supply sales were essentially unchanged from the prior year. Weak sales in Quebec because of a depressed economy offset strong results in Alberta, where there was a marked improvement in the oil and gas market. Sales at Valve Systems and Controls declined $1.1 million as a result of the loss of a major supplier. Higher sales of manual valves to the petroleum industry minimized the adverse effect of the loss. 1996 operating profit increased $4.5 million, or 18%, as Huttig's distribution and manufacturing businesses both posted strong results. Distribution operating profit improved on higher overall sales. Manufacturing operating profit increased significantly because of demand-related price increases, production efficiencies and higher sales of value-added products. At Crane Supply, productivity improvements and cost reductions resulted in higher margins. At Valve Systems and Controls, decreased sales and increased competitive pressures unfavorably impacted earnings. Liquidity and Capital Resources Cash Flow Operating activities in 1997 generated $150 million in cash flow, allowing the company to invest $82 million, expanding its core businesses by making five acquisitions, invest $41 million in capital equipment and return $48 million to shareholders through dividends and share repurchases. This represents the fourth consecutive year that Crane has generated cash in excess of $100 million from operations. Although working capital increased because of higher sales, average working capital as a percentage of sales declined, resulting in a positive cash flow impact of $6.1 million. The improvement derives from better controls as a result of investment in management information systems and a compensation system that rewards higher returns on invested capital. The company expects that future working capital requirements for sales growth, geographic expansion and new product offerings will be, to a large extent, funded by continued improvement in working capital management. Net cash used for investing activities increased compared to the prior year, mainly because of the five acquisitions made in 1997. Capital expenditures in 1997 totaled $41 million and primarily funded manufacturing and business process system projects. The company expects to invest approximately $55 million per year on similar capital projects over the next three years. These projects are designed to reduce business process and manufacturing cycle times, increasing the company's ability to respond to customer needs. In 1998, Crane plans to continue to seek acquisition opportunities that complement existing businesses, have leading positions in niche markets, and can generate cash returns greater than the cost of capital. Net cash used for financing activities in 1997 includes $25 million for the repurchase of more than 650,000 shares of Crane common stock and $23 million for the payment of dividends. Capital Structure The following table sets forth the company's capitalization:
(In thousands) For Years Ended December 31, 1997 1996 - -------------------------------------------------------------------------------- Short-term debt $ 30,240 $ 23,937 Long-term debt 261,708 269,046 - -------------------------------------------------------------------------------- Total debt 291,948 292,983 Less cash 6,982 11,579 - -------------------------------------------------------------------------------- Total net debt 284,966 281,404 Shareholders' equity 532,544 462,669 - -------------------------------------------------------------------------------- Total capitalization 817,510 744,073 % of net debt to shareholders' equity 53.5% 60.8% - -------------------------------------------------------------------------------- % of net debt to total capitalization 34.9% 37.8% - --------------------------------------------------------------------------------
Net debt to total capitalization improved significantly to 34.9% in 1997 because of strong earnings. At December 31, 1997, the company had unused lines of credit in support of short-term borrowings of $222.5 million. Available domestic lines of credit, which were uncommitted and unsecured, totaled $187.5 million. Available foreign lines of credit totaled $35 million, of which $13 million was contractually committed and $22 million was uncommitted. All available short-term lines of credit are for borrowings up to 364 days and are renewable at the option of the lender. At December 31, 1997, the company had a $200 million contractually committed domestic 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 August 2000. Proceeds may be used for general corporate purposes or to provide bridge financing for acquisitions. The agreement contains certain covenants, including limitations on indebtedness and liens. No loans were outstanding under this agreement at year end. In addition, the company's Canadian subsidiary was also party to contractually committed long-term lines of credit underwritten by banks in Canada. These facilities afford borrowings for up to $14 million, and on December 31, 1997, such loans outstanding totaled $.6 million. Under a $300 million shelf registration filed with the Securities and Exchange Commission, $150 million in unissued debt securities remains registered. ================================================================================ 36 Crane Co 1997 annual report ================================================================================ 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. As of December 31, 1997, the company's senior unsecured debt was rated BBB by Standard & Poor's Corporation and Baa2 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. 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 $17 million at December 31, 1997, 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 costs 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 $3.4 million on environmental costs in 1997, and expects to pay remediation costs of approximately $3.1 million in 1998. 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 obligation. 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 is the result of computer programs being written using two digits rather than four to define the applicable year. Any of the company's computer programs that have date-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices or engage in similar normal business activities. Based on an initial assessment in 1997, the company determined that it will be required to modify or replace significant portions of its software so that its computer systems will properly utilize dates beyond December 31, 1999. Further confirmatory tests and more detailed assessments are planned in 1998. The company presently believes that with planned modifications to existing software and conversions to new software, the Year 2000 Issue can be effectively mitigated. However, if such modifications and conversions are not made, or are not completed on a timely basis, the Year 2000 Issue could have a material impact on the operations of the company. The company is in the process of initiating formal communications with all of its significant suppliers and large customers to determine the extent to which the company is vulnerable to potential third parties' failures to remediate their own Year 2000 Issues. Though it is in the interest of the company to use this information to mitigate these risks, because of the complexity of this issue, the company can give no guarantee that the systems of other companies on which the company's systems rely will be remedied for the Year 2000 Issue on time or that a failure to remedy the problem by another company would not have a material adverse effect on the company. The company will utilize both internal and external resources to replace or upgrade and test its software for the Year 2000 modifications. In 1998 the company plans to replace the business systems at eleven of its operating units and to modify or upgrade the business software at fifteen of its operating units. The business software being replaced or upgraded will add functionality and efficiency in the business processes of the company. The total cost of those projects is estimated to total $25 million and will be funded through operating cash flow. Of the total project cost, approximately $17 million is attributable to the purchase of new hardware/software, which will be capitalized with the remaining $8 million expensed as incurred. The company believes these projects will be completed on a timely basis, mitigating the impact of the Year 2000 Issue. However, the costs of the project and the date by which the company plans to complete the Year 2000 modifications are based on management's best estimates, which were derived utilizing numerous assumptions of future events, including the continued availability of certain resources, third party modification plans and other factors. However, there can be no guarantee that these estimates will be correct and actual results could differ materially from those plans. Specific factors that might cause such material differences include, but are not limited to, the availability and cost of personnel trained in this area, the ability to locate and correct all relevant computer codes, and similar uncertainties. Risk Factors Throughout this Annual Report to shareholders, particularly in the Letter to Shareholders on pages 2-4 and in the sections of Management's Discussion and Analysis of Operation on pages 10-19 and 35-37 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 which will be described in the company's Form 10-K for the period ended December 31, 1997 to be filed with the Securities and Exchange Commission before March 31, 1998, 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 http:/www.shareholder.com/crane. ================================================================================ 1997 annual report Crane Co 37 ================================================================================ Five Year Summary of Selected Financial Data
(In thousands except per share data) Years Ended December 31, 1997 1996 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------------------------ Net Sales $2,036,831 $1,847,732 $1,782,310 $1,653,466 $1,310,205 Depreciation and Amortization 55,400 49,402 48,765 44,691 29,420 Operating Profit 196,601 166,153 142,948 109,889 85,856 Interest Expense 23,817 23,420 26,913 24,171 11,396 Income Before Taxes 175,837 145,020 121,468 91,227 79,818 Provision for Income Taxes 63,066 52,910 45,131 35,294 30,925 - ------------------------------------------------------------------------------------------------------------------------------------ Income from Operations $ 112,771 $ 92,110 $ 76,337 $ 55,933 $ 48,893 - ------------------------------------------------------------------------------------------------------------------------------------ Basic Net Income Per Common Share $ 2.47 $ 2.03 $ 1.68 $ 1.24 $ 1.09 Cash Dividends Per Common Share $ .50 $ .50 $ .50 $ .50 $ .50 Assets $1,185,893 $1,088,855 $ 998,411 $1,008,045 $ 744,165 Long-Term Debt $ 260,716 $ 267,795 $ 281,093 $ 331,289 $ 105,557 - ------------------------------------------------------------------------------------------------------------------------------------
Quarterly Results for the Year
(In thousands except per share data) Quarter Year Years Ended December 31, First Second Third Fourth - ------------------------------------------------------------------------------------------------------------------------------------ 1997 Net Sales $ 467,333 $ 518,763 $ 534,818 $ 515,917 $2,036,831 Cost of Sales 338,614 376,298 391,503 371,300 1,477,715 Depreciation and Amortization 10,113 10,515 10,502 10,713 41,843 - ------------------------------------------------------------------------------------------------------------------------------------ Gross Profit $ 118,606 $ 131,950 $ 132,813 $ 133,904 $ 517,273 Net Income $ 22,645 $ 29,222 $ 31,400 $ 29,504 $ 112,771 Basic Net Income Per Share $ .50 $ .64 $ .68 $ .65 $ 2.47 - ------------------------------------------------------------------------------------------------------------------------------------ 1996 Net Sales $ 436,463 $ 466,231 $ 481,116 $ 463,922 $1,847,732 Cost of Sales 319,982 339,605 352,632 332,526 1,344,745 Depreciation and Amortization 9,710 9,718 9,872 10,146 39,446 - ------------------------------------------------------------------------------------------------------------------------------------ Gross Profit $ 106,771 $ 116,908 $ 118,612 $ 121,250 $ 463,541 Net Income $ 18,208 $ 22,104 $ 26,889 $ 24,909 $ 92,110 Basic Net Income Per Share $ .40 $ .49 $ .60 $ .55 $ 2.03 - ------------------------------------------------------------------------------------------------------------------------------------
Market and Dividend Information--Crane Co. Common Shares
New York Stock Exchange Composite Price Per Share Dividends Per Share - -------------------------------------------------------------------------------------------------------------- 1997 1996 1997 1996 Quarter High Low High Low - -------------------------------------------------------------------------------------------------------------- First $34 3/8 $27 1/2 $29 $24 $.125 $.125 Second 43 3/8 30 5/8 29 5/8 25 7/8 .125 .125 Third 47 1/4 41 1/16 30 24 .125 .125 Fourth 46 15/16 39 7/8 31 1/2 27 7/8 .125 .125 $ .50 $ .50 - --------------------------------------------------------------------------------------------------------------
On December 12, 1996, the company effected a three-for-two split of common stock. All per share data prior to the split have been restated. At December 31, 1997 there were approximately 5,600 holders of record of Crane Co. common stock. ================================================================================ 38 Crane Co 1997 annual report Shareholder Information ================================================================================ Crane Co. Shareholder Direct(R) Copies of Crane Co.'s report on Form 10-K for 1997 as filed with the Securities and Exchange Commission as well as other financial reports and news from Crane Co. are available by calling 1-888-CRANE-CR (1-888-272-6327), 24 hours a day, 7 days a week. Visit Crane Co. on the Internet at http://www.shareholder.com/crane. Annual Meeting The Crane Co. annual meeting of shareholders will be held at 10:00 A.M. on Monday, April 20, 1998 at the Sheraton 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 First Chicago Trust Company of New York 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, First Chicago Trust Company of New York will act as agent for shareholders interested in purchasing additional Crane common shares automatically, on a regular basis. The details of this plan and its benefits to you as a Crane shareholder are described in a brochure available by writing to: First Chicago Trust Company of New York Dividend Reinvestment Plan Crane Co. P.O. Box 2598 Jersey City, NJ 07303-2598 ================================================================================ 1997 annual report Crane Co 39 Design: Robert Webster Inc Directors Mone Anathan, III Vice Chairman of the Board and Chairman of the Executive Committee, Filene's Basement E. Thayer Bigelow, Jr. (1,2) Chief Executive Officer Court TV, an affiliate of Time Warner Entertainment LP Robert S. Evans (1) Chairman and Chief Executive 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 Jean Gaulin (3) Vice Chairman, President and Chief Operating Officer Ultramar Diamond Shamrock Corporation Refiner and Marketer of Petroleum Products 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 Boris Yavitz (1,3) Dean Emeritus, Columbia University Graduate School of Business Corporate Officers Robert S. Evans Chairman and Chief Executive Officer L. Hill Clark 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 Anthony D. Pantaleoni Vice President, Environment, Health and Safety Richard B. Phillips Vice President, Human Resources Michael L. Raithel Controller David S. Smith Vice President, Finance and Chief Financial Officer [LOGO] - -------- CRANE(R) - -------- Crane Co. Executive Offices 100 First Stamford Place Stamford, CT 06902 (203)363-7300 (1) Member of the Executive Committee (2) Member of the Audit Committee (3) Member of the Organization and Compensation Committee EX-21 4 SUBSIDIARIES OF REGISTRANT EXHIBIT 21 CRANE CO. Exhibit 21 to FORM 10-K Annual Report for the Year Ended December 31, 1997 Subsidiaries of Registrant The following is a list of active subsidiaries of the registrant and their jurisdictions of incorporation. All of these subsidiaries are wholly owned, directly or indirectly, and all are included in the consolidated financial statements. The names of several other subsidiaries have been omitted as they would not, if considered in the aggregate as a single subsidiary, constitute a significant subsidiary. Cochrane, Inc Delaware Crane Australia Pty., Limited Australia Crane Canada Inc. Canada Crane Limited England Crane Pumps & Systems, Inc. Delaware Dyrotech Industries, Inc. Delaware ELDEC Corporation Delaware Hydro-Aire, Inc. California Huttig Sash & Door Company Delaware Interpoint Corporation Washington Kemlite Company, Inc. Delaware Mark Controls Corporation Delaware Barksdale Control Products GmbH Germany Powers Process Controls Limited Canada Westad Industri A/S Norway National Rejectors, Inc. GmbH Germany Ferguson Machine Company, S.A. Belgium Unidynamics/St. Louis, Inc. Delaware Stockham Limited England Stockham Australia Pty Ltd. Australia /23 EX-23 5 INDEPENDENT AUDITOR'S CONSENT EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement No. 33- 53709 on Form S-3, Registration Statement No. 33-36735 on FormS-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 reports dated January 21, 1998, appearing in and incorporated by reference in this Annual Report on Form 10-K of Crane Co. for the year ended December 31, 1997. DELOITTE & TOUCHE LLP Stamford, Connecticut March 23, 1998 /24 EX-27.1 6 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CRANE CO.'S CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 1997, CRANE'S CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR 1997 AND THE RELATED NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS, THAT ARE CONTAINED IN CRANE'S 1997 ANNUAL REPORT ON FORM 10-K. THE SCHEDULE IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS DEC-31-1997 DEC-31-1997 6,982 0 297,969 0 291,084 607,753 582,704 308,947 1,185,893 295,812 260,716 0 0 45,542 487,002 1,185,893 2,036,831 2,036,831 1,519,558 1,840,230 19 0 20,745 175,837 63,066 112,771 0 0 0 112,771 2.47 2.44
EX-27.2 7 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM APPLICABLE 1997 INTERIM FINANCIAL STATEMENTS OF CRANE CO. THE SCHEDULE IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS 6-MOS 9-MOS DEC-31-1997 DEC-31-1997 DEC-31-1997 MAR-31-1997 JUN-30-1997 SEP-30-1997 3,578 8,254 21,863 0 0 0 275,892 291,924 298,415 0 0 0 270,631 273,154 272,255 558,767 580,951 599,444 562,406 572,075 574,943 299,907 306,798 309,813 1,121,728 1,143,837 1,163,701 275,623 276,027 269,079 266,875 267,363 266,916 0 0 0 0 0 0 45,565 45,832 45,897 427,774 449,836 475,978 1,121,728 1,143,837 1,163,701 467,333 986,096 1,520,915 467,333 986,096 1,520,915 348,727 735,540 1,038,428 426,338 893,849 1,374,400 16 232 (177) 0 0 0 5,265 10,863 16,180 35,746 81,616 130,512 13,101 29,749 47,244 22,645 51,867 83,268 0 0 0 0 0 0 0 0 0 22,645 51,867 83,268 0.50 1.14 1.82 0.49 1.12 1.79 RESTATED TO REFLECT THE ADOPTION OF STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 128, "EARNINGS PER SHARE"
EX-27.3 8 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM APPLICABLE 1996 AND 1995 ANNUAL AND INTERIM FINANCIAL STATEMENTS OF CRANE CO.THE SCHEDULE IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS 6-MOS 9-MOS 12-MOS 12-MOS DEC-31-1996 DEC-31-1996 DEC-31-1996 DEC-31-1996 DEC-31-1995 MAR-31-1996 JUN-30-1996 SEP-30-1996 DEC-31-1996 DEC-31-1995 4,748 22,494 28,241 11,579 5,476 0 0 0 0 0 250,001 255,184 268,938 253,729 240,787 0 0 0 0 0 247,925 246,230 241,689 267,274 245,001 510,007 530,999 546,100 540,014 498,038 513,772 521,344 530,701 547,566 512,985 273,652 280,478 281,402 289,219 269,047 1,004,722 1,023,905 1,045,424 1,088,855 998,411 248,081 250,617 268,639 253,853 241,276 265,238 265,180 265,179 267,795 281,093 0 0 0 0 0 0 0 0 0 0 45,306 45,546 44,841 45,660 45,188 344,093 361,542 366,158 417,009 329,541 1,004,722 1,023,905 1,045,424 1,088,855 998,411 436,463 902,694 1,383,810 1,847,732 1,782,310 436,463 902,694 1,383,810 1,847,732 1,782,310 319,982 679,015 1,041,519 1,384,191 1,316,321 402,490 825,144 1,261,248 1,681,579 1,639,362 836 2,601 207 240 (3,408) 1,075 1,421 0 0 0 5,329 10,450 15,722 20,893 24,888 29,480 64,499 106,633 145,020 121,468 11,272 24,187 39,432 52,910 45,131 18,208 40,312 67,201 92,110 76,337 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 18,208 40,312 67,201 92,110 76,337 0.40 .89 1.49 2.03 1.68 0.40 .88 1.47 2.01 1.67 RESTATED TO REFLECT THE ADOPTION OF STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 128, "EARNINGS PER SHARE".
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