-----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, H8RisWIWZEfqo2zQTzb9nx0ydXYs63s1qtGlqdFcpuOdPX17j6yUxqzU4ezbEgE7 9BRB5kz2AJqXYCORKh4wFw== 0000950130-01-001276.txt : 20010314 0000950130-01-001276.hdr.sgml : 20010314 ACCESSION NUMBER: 0000950130-01-001276 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010313 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CRANE CO /DE/ CENTRAL INDEX KEY: 0000025445 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FABRICATED METAL PRODUCTS [3490] IRS NUMBER: 131952290 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-01657 FILM NUMBER: 1567060 BUSINESS ADDRESS: STREET 1: 100 FIRST STAMFORD PLACE CITY: STAMFORD STATE: CT ZIP: 06902 BUSINESS PHONE: 2033637300 MAIL ADDRESS: STREET 1: 100 FIRST STAMFORD PLACE CITY: STAMFORD STATE: CT ZIP: 06902 10-K405 1 0001.txt FORM 10-K405 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, 2000 ----------------- 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 Stock, par value $1.00 New York Stock Exchange Preferred Share Purchase Rights New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: 8 1/2% senior notes due March 2004 6 3/4% senior notes due October 2006 (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ______ 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. (X) Based on the average stock price of $27.47 on January 31, 2001 the aggregate market value of the voting stock held by nonaffiliates of the registrant was $1,663,953,578. The number of shares outstanding of the registrant's common stock, $1.00 par value was 60,573,483 at January 31, 2001. DOCUMENTS INCORPORATED BY REFERENCE ----------------------------------- Portions of the annual report to shareholders for the year ended December 31, 2000 and portions of the proxy statement for the annual shareholders meeting to be held on April 23, 2001 are incorporated by reference into Parts I, II, III and IV of this Form 10-K Annual Report. PART I Item 1. Business -------- Crane Co. ("Crane" or the "company") is a diversified manufacturer of engineered industrial products. Founded in 1855, Crane employs over 9,000 people in North America, Europe, Asia and Australia. STRATEGY The company's strategy is to grow the earnings of niche businesses with high market share, build an aggressive and committed management team whose interests are directly aligned to those of the shareholders, and maintain a focused, efficient corporate structure. ACQUISITIONS In the past five years, the company has completed 13 acquisitions. During 2000, the company completed two acquisitions at a total cost of $11.9 million. In March 2000, the company acquired Streamware Corporation, a privately held company based in Norwood, Massachusetts that is a leading provider of business management software and market analysis tools for the vending and food service industry. In December, the company acquired the assets of the Valve Repair Division of Groth Corporation. Located in Houston, Texas, the Valve Repair Division provides both shop and field testing and repair services for a broad range of valve types and is an authorized repair facility for many leading valve manufacturers. Cost in excess of net assets acquired in 2000 amounted to $8.5 million and is being amortized over 15 years. In December 2000, the company entered into an agreement to purchase certain operations of the Industrial Flow business of Alfa Laval Holding AB for approximately $47 million. This transaction is expected to close by the end of April 2001. During 1999, the company completed one acquisition at a total cost of $33 million. In October 1999, the company acquired Stentorfield, Ltd., which is based in Chippenham, England. Stentorfield is a premier designer and manufacturer of hot and cold beverage vending machines, serving the U.K. and European market with a broad line of full size and tabletop products, for the hotel, restaurant, office coffee service and vending industries. Stentorfield is known in the industry to provide high quality, reliable and easily serviced products and excellent customer service. This business was integrated with Crane's National Vendors business, which is the leading North American designer and manufacturer of full line vending machines, for snack, food and beverage. The acquisition provides the means for National Vendors to satisfy the growing U.K. and European demand for a broader "one-stop" product offering, consisting of Stentorfield's drinks machines and National Vendors' snack and food machines. During 1998, the company completed four acquisitions at a total cost of $178 million. In May, the company acquired Environmental Products USA, Inc. This business manufactures membrane-based water treatment systems for industrial, commercial and institutional markets. In August, the company acquired Sequentia Holdings, Inc., a manufacturer of fiberglass-reinforced plastic panels for the construction and building products markets. Sequentia complements the company's Kemlite subsidiary, which provides fiberglass- reinforced plastic panels for the transportation and recreational vehicle markets. In September, the company acquired Liberty Technologies, Inc. which develops, manufactures, markets and sells valve, motor, engine and compressor condition monitoring products and related services to the nuclear power generation and industrial process markets worldwide. Liberty complements the company's nuclear valve business which provides valves, valve diagnostic equipment and related services to the nuclear power industry, and its Dynalco Controls business, which provides sensors, instrumentation, control products and automation systems for use in industrial engine applications. Also in September, the company acquired the Plastic-Lined Piping Products ("PLPP") division of The Dow Chemical Company. PLPP was integrated with the company's Resistoflex division, which supplies lined pipe and valves to the chemical process and industrial markets. 2 PART I Item 1. Business (continued) -------- During 1997, the company completed four acquisitions at a total cost of $70 million, including assumed debt. In March, the company acquired the transportation products business of Sequentia, Incorporated. This business, which produces fiberglass-reinforced plastic panels for the truck body, trailer and container market, has been integrated with the company's Kemlite subsidiary. Also in March, the company acquired Polyvend Inc., a manufacturer of snack and food vending machines. Polyvend was completely integrated into Crane's National Vendors division, significantly expanding its sales distribution channels. In April, the company acquired the nuclear valve business of ITI MOVATS from Westinghouse. MOVATS is a leading supplier of valve diagnostic equipment and valve services to the commercial nuclear power industry. In December, the company acquired certain operations and product lines of Stockham Valves & Fittings, Inc. The acquired product lines and related manufacturing operations have been integrated into the company's valve businesses. During 1996, the company acquired two companies. In mid-October, the company acquired Interpoint Corporation in a tax-free merger in which the company issued 1,094,312 shares of Crane common stock and assumed $26 million in debt. Interpoint is a leader in the design and manufacture of standard and custom miniature DC-to-DC power converters with applications in aerospace and medical technology industries. In late October, the company acquired Grenson Electronics Ltd. of Daventry, England. Grenson Electronics produces low voltage power conversion electronics for aerospace, defense and industrial markets. DIVESTITURES In the past five years, the company has divested seven businesses. In May 2000, the company sold its interest in Powec AS, a Norwegian manufacturer of power supplies for the telecommunications industry. In addition, the company's wholly owned ELDEC Corporation subsidiary sold its related telecommunications power supply product line to the same purchaser. Total consideration for both businesses was $45.6 million. In April 1999, the company sold Southwest Foundry, acquired as part of the Stockham Valves and Fittings, Inc. transaction, for $400,000. In December 1999, the company sold its Crane Defense Systems business for $6.4 million in cash and a $750,000 note. In 1998, the company sold two foundry operations acquired as part of the Stockham Valves and Fittings Inc. transaction. Accu-Cast, Inc. and the Aliceville Foundry were sold for a total of $4.3 million. In 1997, the company sold its Valve Systems and Controls division for $7.5 million in cash and $1.5 million in preferred stock. In March of 1996, the company sold Empire Foundry for $1.4 million. DISCONTINUED OPERATIONS On December 16, 1999, the company distributed all of the shares of its Huttig Building Products ("Huttig") subsidiary to shareholders of the company on the basis of one share of Huttig for every 4.5 shares of Crane Co. common stock. Prior to this spin-off distribution, Huttig repaid an intercompany loan of $68 million to the company, which the company used to pay down debt. The Wholesale segment was discontinued when Huttig was spun off. LONG-TERM FINANCING In September 1998 the company sold $100,000,000 of 6 3/4% notes that will mature on October 1, 2006. During April 1992 the company sold $100,000,000 8 1/2% notes that will mature on March 15, 2004. 3 PART I Item 1. Business (continued) -------- BUSINESS SEGMENTS See page 27 of the Annual Report to Shareholders for year ended December 31, 2000, for sales, operating profit and assets employed by each business segment. AEROSPACE The Aerospace segment consists of ELDEC, Hydro-Aire, Lear Romec and Interpoint. ELDEC designs, manufactures and markets custom position indication and control systems, proximity sensors, pressure sensors, true mass fuel flowmeters and power conversion systems for the commercial transport, business, regional, general aviation, military, repair and overhaul and electronics markets. These products are custom designed for specific aircraft to meet technically demanding requirements of the aerospace industry. ELDEC has facilities in Redmond, Washington, one in England and one in France. In May 2000, ELDEC sold its interest in Powec AS, a Norwegian manufacturer of power supplies for the telecommunications industry. In addition, ELDEC sold its related telecommunications power supply product line to the same purchaser. The company accounted for its investment in Powec AS using the equity method. Hydro-Aire designs, manufactures and sells aircraft brake control and anti-skid systems, including electro-hydraulic servo valves and manifolds, embedded software and rugged electronic controls, hydraulic control valves, landing gear sensors and fuel pumps as original equipment to the commercial transport, business, regional, general aviation, military and government aerospace, repair and overhaul markets. In addition, Hydro-Aire designs and manufactures systems similar to those above for the retrofit of aircraft with improved systems and manufactures replacement parts for systems installed as original equipment by the aircraft manufacturer. All of these products are largely proprietary to Hydro-Aire and, to some extent, are custom designed to the requirements and specifications of the aircraft manufacturer or program contractor. These systems and replacement parts are sold directly to aircraft manufacturers, airlines, governments, and aircraft maintenance and overhaul companies. Lear Romec designs, manufactures and sells lubrication and fuel pumps for aircraft, aircraft engines and radar cooling systems for the commercial and military aerospace industries. Lear Romec has a leading share of the non-captive market for turbine engine lube and scavenge oil pumps. Lear Romec also manufactures fuel boost and transfer pumps for commuter and business aircraft. Interpoint designs, manufactures and sells standard and custom miniature (hybrid) DC-to-DC power converters and custom miniature (hybrid) electronic circuits for applications in commercial, space and military aerospace, medical technology, fiber optic and medical technology industries. Interpoint has facilities in Redmond, Washington and in Taiwan. The segment employs 2,100 people and had assets of $258.7 million at year-end. The order backlog totaled $301.6 million at December 31, 2000. 4 PART I (continued) Item 1. Business (continued) -------- ENGINEERED MATERIALS The Engineered Materials segment consists of five businesses: Kemlite, CorTec, Resistoflex, Polyflon and Crane Plumbing. Kemlite manufactures fiberglass-reinforced plastic panels for use principally by the transportation industry in refrigeration and dry van truck trailers and recreational vehicles. Kemlite products are also sold to the commercial construction industry for food processing, fast food restaurant and supermarket applications, to institutions where fire rated materials with low smoke generation and minimum toxicity are required, and for residential construction. Kemlite sells its products directly to the truck trailer and recreational vehicle manufacturers. Sequentia manufactures fiberglass-reinforced plastic panels for the construction and building products markets. Kemlite uses distributors to serve its commercial construction market and some segments of the recreational vehicle market. Sequentia's Grand Junction, Tennessee and Houston, Texas plants were added to Kemlite's plants in Joliet, Illinois and Jonesboro, Arkansas. CorTec manufactures fiberglass-reinforced laminated panels serving the truck and truck trailer segment of the transportation industry and for specialty applications. CorTec markets its products directly to the truck and truck trailer manufacturers. Resistoflex is engaged in the design, manufacture and sale of corrosion-resistant, plastic-lined steel pipes, fittings, tanks, valves, expansion joints and hose used primarily by the pharmaceutical, chemical processing, pulp and paper, ultra pure water and waste management industries. It also manufactures high-performance, separable fittings for operating pressures to 8,000 PSI used primarily in the aerospace industry. Resistoflex sells its industrial products through distributors who provide stocking and fabrication services to industrial users in the United States. Its aerospace products are sold directly to the aerospace industry. Resistoflex also manufactures plastic-lined pipe products at its Singapore plant serving the Asian chemical processing and the Asian pharmaceutical industries. Polyflon manufactures microwave laminates, high voltage RF capacitors, radomes and circuit processing for 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, where it has a large share of the Canadian plumbing fixtures market. This segment had assets of $228.6 million at December 31, 2000 and employed 1,700 people. Order backlog at year-end 2000 was $18.7 million. 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. 5 PART I (continued) Item 1. Business (continued) -------- National Vendors products include electronic vending merchandisers for refrigerated and frozen foods, hot and cold beverages, snack foods, single cup individually brewed hot drinks and combination vendors/merchandisers, designed to vend both snack foods and hot/cold drinks, or snacks and refrigerated/frozen foods in one machine. National Vendors manufactures its products in Bridgeton, Missouri. National Vendors' products are marketed to customers in the United States and Europe by company sales and marketing personnel, as well as distributors, and in other international markets through independent distributors. In March 2000, the company acquired Streamware Corporation, a privately held company based in Norwood, Massachusetts that is a leading provider of business management software and market analysis tools for the vending and food service industry. The acquisition of Streamware gives National Vendors an opportunity to develop a significant new business. Streamware's VendMAX is a fully integrated software/hardware solution that offers operators complete cash accountability, inventory control and improved merchandising capabilities. NRI is among the relatively few makers of coin validators that will supply European countries, which must equip existing and new coin-operated vending machines, with validators programmed for the new euro coins that will go into circulation at the start of 2002. Merchandising Systems employs 1,400 people and had assets of $159.9 million at year-end 2000. Order backlog totaled $69.4 million at December 31, 2000. FLUID HANDLING The Fluid Handling segment consists of the Crane Valves, Crane Valves-U.K., Valve Services, Crane Pumps, Crane Environmental and Crane Supply businesses. The Crane Valves and Crane Valves-U.K. businesses, with four manufacturing facilities in North America, as well as operations in the United Kingdom, Australia, Norway, China and Indonesia, sell a wide variety of commodity and special purpose valves and fluid control products for the chemical and hydrocarbon processing, power generation, marine, general industrial and commercial construction industries. Products are sold under the trade names Crane, Jenkins, Pacific, Westad, Flowseal, Center Line, Stockham, Triangle and Duo-Check. The company's Valve Service business, with two manufacturing facilities in North America, provides valves, valve diagnostic equipment and related services to the nuclear power, chemical and hydrocarbon processing and power generation industries. Crane Pumps has eight manufacturing facilities in the United States. Pumps are manufactured under the trade names Deming, Weinman, Chempump, Burks, Chem/Meter, Barnes, Sellers and Process Systems. Pumps are sold to a broad customer base, which includes chemical and hydrocarbon processing, automotive, municipal, industrial and commercial wastewater, power generation, commercial heating, ventilation and air-conditioning industries and original equipment manufacturers. The Crane Environmental business has manufacturing facilities in Pennsylvania and Florida and serves the water and wastewater treatment market. Its products are sold under the trade names Cochrane and Environmental Products. Crane Supply, a distributor of plumbing supplies, valves and piping in Canada, maintains thirty-five branches throughout Canada and distributes Crane manufactured products in that country. Crane Supply also distributes products that are both complementary to and competitive with Crane's own manufactured products. Products in this group are sold directly to end users through Crane's sales organization and through independent distributors and manufacturers representatives. This segment employs 3,100 people and had assets of $308.7 million at December 31, 2000. Fluid Handling order backlog totaled $91.6 million. 6 PART I (continued) Item 1. Business (continued) -------- 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 petroleum, chemical, construction, food and beverage, power generation and transportation. Barksdale manufactures solid state and electromechanical pressure switches and transducers, level switches and continuous level indicators, temperature switches, and directional control valves that serve a broad range of commercial and industrial applications. It has manufacturing and marketing facilities in the United States and Germany. Powers Process Controls designs, manufactures and markets water mixing and thermal shock protection shower systems, commercial and residential plumbing brass, 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 transmission, and agriculture equipment. Azonix manufactures operator interfaces and measurement and control systems for hazardous and harsh applications, intelligent data acquisition products, high-precision thermometers and calibrators for the oil and gas, petrochemical, chemical, pharmaceutical and metal processing industries. Ferguson designs and manufactures, in the United States and through Ferguson Machine Co. S.A. in Europe, precision index and transfer systems for use on and with machines that perform automatic forming, assembly, metal cutting, testing and inspection operations. Products include mechanical 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 force and cooperatively with sales representatives, stocking specialists and industrial distributors. Controls had assets of $118.0 million at December 31, 2000, and employs 800 people. On December 31, 2000, Crane Controls had a backlog of $22.3 million. 7 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 aerospace, hydrocarbon processing, petrochemical, power generation, automated merchandising and transportation industries. As such, they are dependent upon numerous unpredictable factors, including changes in market demand, general economic conditions and capital spending. Because these products are also sold in a wide variety of markets and applications, the company does not believe it can reliably quantify or predict the possible effects upon its business resulting from such changes. Seasonality is a factor in the Canadian operations. Net sales in Canada and assets related to Canadian operations were 13.89% and 7.14% of the respective 2000 consolidated amounts. The company's engineering and product development activities are directed primarily toward improvement of existing products and adaptation of existing products to particular customer requirements. While the company owns numerous patents and licenses, none are of such importance that termination would materially affect its business. Product development and engineering costs totaled approximately $55.0 million in 2000, $58.9 million in 1999, and $70.9 million in 1998. Included in these amounts were approximately $6.7 million, $7.4 million and $15.8 million received by the company in 2000, 1999 and 1998, respectively, for customer sponsored research and development. The company is not dependent on any single customer nor are there any issues at this time regarding available raw materials for inventory. Costs of compliance with federal, state and local laws and regulations involving the discharge of materials into the environment or otherwise relating to the protection of the environment are not expected to have a material effect upon the company's capital expenditures, earnings or competitive position. 8 PART I (continued) Item 1. Business (continued) -------- FORWARD LOOKING STATEMENTS -------------------------- Throughout the Annual Report to Shareholders, particularly in the Chairman's 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 negatively impact 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 could 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. 9 PART I (continued) Item 1. Business (continued) -------- Forward Looking Statements (continued) - --------------------------- Net sales and assets related to operations outside the United States were 36.3% and 20.9% of the respective 2000 consolidated amount. Such operations and transactions entail the risks associated with conducting business internationally, including the risk of currency fluctuations, slower payment of invoices, adverse trade regulations and possible social and economic instability. While the full impact of this economic instability cannot be predicted, it could have a material adverse effect on the company's revenue and profitability. Certain of the company's business segments are dependent upon highly qualified personnel, and the company generally is dependent upon the continued efforts of key management employees. Particularly in light of the current tight labor market, the company's prospects would be adversely affected by an inability to retain its key personnel. New factors emerge from time to time, and it is not possible for management to predict all of such factors. Further, management cannot assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. 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, such as Boeing, which represents approximately 21% of the segment's revenue, 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 further slowing of the U. S. economy causes customers to delay or cancel spare parts or aircraft orders. Engineered Materials In the Engineered Materials segment, sales and profits could fall if there were a decline in demand for truck trailers, recreational vehicles or building products, for which Crane's companies produce fiberglass-reinforced panels. Profits could be adversely affected as well by unanticipated increases in resin and fiberglass material costs, by unforeseen fluctuations in the Canadian dollar, and by any inability on the part of Crane's companies to maintain their position in product cost and functionality against competing materials. Merchandising Systems Results at Crane's U.S.-based vending machine business could be reduced by delays in launching or supplying new products or an inability to achieve new product sales objectives. Results at Crane's German-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 euro or other European currencies versus the U.S. dollar. 10 PART I (continued) Item 1. Business (continued) -------- Forward Looking Statements (continued) - --------------------------- Fluid Handling Crane's companies could face increased price competition from larger competitors. Further slowing of the U. S. economy could reduce sales and profits, particularly if projects for which Crane's companies are suppliers or bidders are cancelled or delayed, or if the companies' ability to source product from international sources is impeded. At Crane's Canadian distribution operation, reported results in U.S. dollar terms could be eroded by an unanticipated weakening of Canada's currency. Controls A number of factors could affect the Controls segment's results. Lower sales and earnings could result if Crane's companies can not maintain their cost competitiveness, encounter delays in introducing new products, or fail to achieve their new product sales objectives. Results could decline because of an unanticipated decline in demand for Crane products from the industrial machinery, oil and gas, or heavy equipment industries, or from unforeseen product obsolescence. 11 PART I (continued) Item 2. Properties ---------- TOTAL MANUFACTURING FACILITIES NUMBER AREA - ------------------------------ ------ ---- Fluid Handling United States 15 1,191,000 sq. ft. Canada 2 140,000 sq. ft. International 7 1,144,000 sq. ft. Aerospace United States 6 634,000 sq. ft. International 3 40,000 sq. ft. Engineered Materials United States 10 1,235,000 sq. ft. Canada 3 636,000 sq. ft. International 1 10,000 sq. ft. Crane Controls United States 5 334,000 sq. ft. International 2 63,000 sq. ft. Merchandising Systems United States 1 463,000 sq. ft. Other International 2 131,000 sq. ft. Leased Leases Manufacturing Expiring Facilities Through Number Area ---------- ------- ------ ---- United States 2009 11 536,000 sq. ft. Canada 2001 1 13,000 sq. ft. Other International 2007 5 133,000 sq. ft. Other Facilities - ---------------- Fluid Handling operates five valve service centers in the United States, of which two are owned, and three distribution centers in the United States. This segment operates thirty-eight distribution and three service centers outside the United States. Crane Controls operates one distribution center outside the United States. Merchandising Systems operates eight distribution centers in the United States and six outside the United States. Engineered Materials operates seven distribution centers in the United States, of which one is owned, and two outside the United States. 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. 12 PART I (continued) Item 3. Legal Proceedings Neither the company, nor any subsidiary of the company has become a party to, nor has any of their property become the subject of, any material legal proceedings, other than ordinary routine litigation incidental to their businesses. Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of security holders during the fourth quarter of 2000. 13 PART I (continued) EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers of the registrant are as follows:
Business Experience Officer Name Position During Past Five Years Age Since - ---- -------- ---------------------- --- ------- Robert S. Evans* Chairman and Chief Chairman and Chief 56 1974 Executive Officer Executive Officer of the company since 1984 and previously President of the company Eric C. Fast* President and President and Chief Operating 51 1999 Chief Operating Officer, previously Co-head of Global Officer Investment Banking of Salomon Smith Barney and a Managing Director of that firm Gil A. Dickoff Treasurer Treasurer of the company, 39 1992 previously Assistant Treasurer of the company Augustus I. duPont Vice President, Vice President and General 49 1996 General Counsel Counsel and Secretary of and Secretary the company. Bradley L. Ellis Vice President- Vice President - Chief 32 1997 Chief Information Information Officer of the Officer company since July 1997, previously with the Business Systems consulting group of Arthur Andersen LLP, an international provider of auditing and business consulting services Elise M. Kopczick Vice President- Vice President-Human Resources 47 2001 Human Resources since January 2001, previously President of the company's Lear Romec subsidiary and Vice President- Human Resources at the company's Hydro-Aire subsidiary Thomas M. Noonan Vice President- Controller since February 2000, 46 1999 Controller and Vice President - Taxes since Chief Tax Officer September 1999, previously Director of Taxes of the company from March 1996 to September 1999, previously Director of Taxes Tax Counsel, Loctite Corporation, a manufacturer of sealants, adhesives and coatings Anthony D. Pantaleoni Vice President- Vice President - Environment, 46 1989 Environment, Health & Safety of the company Health & Safety
14 PART I (continued) EXECUTIVE OFFICERS OF THE REGISTRANT (continued)
Business Experience Officer Name Position During Past Five Years Age Since - ---- -------- ---------------------- --- ------- Michael L. Raithel Vice President- Vice President - Finance 53 1985 Finance and Chief and Chief Financial Officer since Financial Officer February 2000, previously Controller of the company since 1985.
* On January 22, 2001 the company announced that Mr. R. S. Evans planned to retire from his positions as Chief Executive Officer effective at the Annual Meeting, although he will continue to serve the company as Chairman of the Board, and Mr. E. C. Fast, currently President and Chief Operating Officer of the company, will succeed Mr. Evans as Chief Executive Officer. PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters. The information required by Item 5 is hereby incorporated by reference to Pages 35 through 37 of the 2000 Annual Report to Shareholders. Item 6. Selected Financial Data. The information required by Item 6 is hereby incorporated by reference to Pages 35 of the 2000 Annual Report to Shareholders. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. The information required by Item 7 is hereby incorporated by reference to Pages 6 through 14 of the 2000 Annual Report to Shareholders. Item 7A. Quantitative and Qualitative Disclosures about Market Risks. The information required by Item 7A is hereby incorporated by reference to Page 34 of the 2000 Annual Report to Shareholders. Item 8. Financial Statements and Supplementary Data. The information required by Item 8 is hereby incorporated by reference to Pages 15 through 28 and page 35 of the 2000 Annual Report to Shareholders. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None PART III Item 10. Directors and Executive Officers of the Registrant The information required by Item 10 is incorporated by reference to the definitive proxy statement dated March 7, 2001, which the company has filed with the Commission pursuant to Regulation l4A except that such information with respect to Executive Officers of the Registrant is included, pursuant to Instruction 3, paragraph (b) of Item 401 of Regulation S-K, under Part I. 15 PART III (continued) Item 11. Executive Compensation The information required by Item 11 is incorporated by reference to the definitive proxy statement dated March 7, 2001, which the company has filed with the Commission pursuant to Regulation l4A. Item 12. Security Ownership of Certain Beneficial Owners and Management The inform ation required by Item 12 is incorporated by reference to the definitive proxy statement dated March 7, 2001, which the company has filed with the Commission pursuant to Regulation 14A. Item 13. Certain Relationships and Related Transactions The information required by Item 13 is incorporated by reference to the definitive proxy statement dated March 7, 2001, which the company has filed with the Commission pursuant to Regulation 14A. PART IV Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K (a)(1) The consolidated balance sheets of Crane Co. and subsidiaries as of December 31, 2000 and 1999 and the related consolidated statements of income, changes in common shareholders' equity and cash flows for the years ended December 31, 2000, 1999 and 1998 and the report thereon of Deloitte & Touche LLP dated January 16, 2001 appearing on Pages 15 through 28 of Crane Co.'s 2000 Annual Report to Shareholders which will be furnished with the company's proxy statement as required by Regulation 14A, Rule 14a-3(c), are incorporated herein by reference (2) Financial statement schedules for which provision is made in the applicable regulation of the Securities and Exchange Commission have been omitted because they are not required under related instructions or are inapplicable, or the information is shown in the financial statements and related notes. (3) Exhibits: Exhibit 10(i) The EVA Incentive Compensation Plan as amended January 22, 2001. Exhibit 10(j) The employment agreement with Eric C. Fast date January 22, 2001. Exhibit 11 Computation of net income per share. Exhibit 13 Annual Report to shareholders for the year ended December 31, 2000. Exhibit 21 Subsidiaries of the Registrant. 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, 2000. (c) Exhibits to Form 10-K: There is incorporated by reference herein: (3) (a) The company's Certificate of Incorporation, as amended on May 25, 1999 contained in Exhibit 3A to the company's Annual report on Form 10-K for the fiscal year ended December 31, 1999. (b) The company's By-Laws, as amended on January 24, 2000 contained in Exhibit 3B to the company's Annual report on Form 10-K for the fiscal year ended December 31, 1999. (4) Instruments Defining the Rights of Security Holders, including Indentures: (a) There is incorporated by reference herein: (1) Preferred Share Purchase Rights Agreement contained in Exhibit 1 to the company's Report on Form 8-K filed with the Commission on July 6, 1998. 16 PART IV (continued) Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (continued) (b) There is incorporated by reference herein: 1) Indenture dated as of April 1,1991 between the Registrant and the Bank of New York contained in Exhibit 4.1 to the company's report on Form 8-K filed with the Commission on September 16, 1998. (10) Material Contracts: (iii)Compensatory Plans There is incorporated by reference herein: (a) The forms of Employment/Severance Agreement between the company and certain executive officers (form I) and (form II) which provide for the continuation of certain employee benefits upon a change of control as contained in Exhibit C of the company's annual report on Form 10-K for the fiscal year ended December 31, 1994. (b) The 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. (c) 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. (d) The Crane Co. 1998 Stock Option Plan contained in Exhibit 4.1 to the company's Registration Statement No. 333-50489 on Form S-8 filed with the Commission on April 20, 1998. (e) The Crane Co. 1998 Restricted Stock Award Plan contained in Exhibit 4.1 to the company's Registration Statement No. 333-50487 on Form S-8 filed with the Commission on April 20, 1998. (f) The Crane Co. 1998 Non-Employee Director Restricted Stock Award Plan contained in Exhibit 4.1 to the company's Registration Statement No. 333-50495 on Form S-8 filed with the Commission on April 20, 1998. (g) The Crane Co. 2000 Non-Employee Director Stock Compensation Plan contained in Exhibit 10(a) to the company's quarterly report on Form 10-Q for the quarter ended March 31, 2000. (h) The employment agreement with Eric. C. Fast contained in Exhibit 10(b) to the company's quarterly report on Form 10-Q for the quarter ended March 31, 2000. All other exhibits are omitted because they are not applicable or the required information is shown elsewhere in this Annual Report on Form 10-K. 17 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 M. L. Raithel --------------- M. L. Raithel Vice President-Finance and Chief Financial Officer Date 2/26/01 Pursuant to the requirements of the Securities Exchange Act of l934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. OFFICERS R. S. Evans -------------------- R. S. Evans Chairman and Chief Executive Officer and a Director Date 2/26/01 ------- E. C. Fast M. L. Raithel ---------------------------------------- ------------------------------- E. C. Fast M. L. Raithel President and Chief Vice President-Finance and Operating Officer and a Director Chief Financial Officer Date 2/26/01 (Principal Financial Officer and ------- Principal Accounting Officer) Date 2/26/01 ------- DIRECTORS E. T. Bigelow, Jr. ------------------------------ ----------------- E. T. Bigelow, Jr. R. S. Forte Date 2/26/01 Date ------- D. R. Gardner J. J. Lee - ---------------------- -------------------- -------------------- D.R. Gardner J. J. Lee W. E. Lipner Date 2/26/01 Date 2/26/01 Date ------- ------- D. C. Minton C. J. Queenan, Jr. - ---------------------- ---------------------------- ----------------- D. C. Minton C. J. Queenan, Jr. J. L. L. Tullis Date 2/26/01 Date 2/26/01 Date ------- ------- 18 EX-10.I 2 0002.txt INCENTIVE COMPENSATION PLAN Exhibit 10(i) Incentive Compensation Plan - EVA PURPOSE OF PLAN: To maximize shareholder wealth by aligning management's interests with those of shareholders and rewarding management for sustainable and continuous improvement in EVA (Economic Value Added). ELIGIBILITY: Corporate Officers, Business Unit Presidents, Key Executives as designated and approved, including discretionary pools where appropriate. ADMINISTRATION: The plan is administered by the Corporation's Chief Executive Officer and approved by the Organization and Compensation Committee of the Board of Directors. Awards are calculated and recommended on year-end audited results. THE PLAN CONCEPTS: The plan is designed using the concept of Economic Value Added (EVA). Economic Value Added is defined as the difference between the return on capital and the cost of that capital multiplied by the amount of capital invested. The key elements of this plan are: . Cost of Capital (C*) . Average Capital Employed (C) . Net Operating Profit After Tax (NOPAT) . Return on Capital (R). R = NOPAT/C . Economic Value Added (EVA). EVA = (R-C*) x C . Base EVA . Bonus Bank Account 1. Actual results are compared to the prior year (not a Plan). 2. Return on capital invested is compared to a cost of capital. 3. Bonus awards earned in a given year are put into a "Bank" with 1/3 of the bank being paid out each year. The participants and their percentage allocation are developed by the Business Unit President based upon their determination of each individual's relative value to the Business Units' success or, at his/her discretion, based upon a peer evaluation of each participant as to how the bonus pool should be allocated. The final percentage awarded into each individual's bank will be determined by the Business Unit Executive based on the individual's performance for the year as well as his relative performance compared to the other participants in that Business Unit. All awards are reviewed and approved by Corporate prior to distribution. Incentive Compensation Plan - EVA BONUS POOL CALCULATION: The bonus pool is generated by applying a formula to the EVA calculated. If prior year EVA was: . negative - the current year's formula is 25% or 15% of the change -------- in EVA (positive or negative). . positive - the current year's formula is 15% or 10% of the change -------- in EVA (positive or negative) plus 10% or 6% of any positive EVA in the current year. CURRENT BONUS POOL FORMULA: If Prior Year EVA was --------------------- Negative Positive -------- -------- - - Units under $30MM sales & distribution 25 / 0% 15 / 10% - - All other Units 15 / 0% 10 / 6% BANK AND PAY-OUT CALCULATIONS: The EVA award is added to the individual's bank account and then 1/3 of the account balance is paid out in cash to the participant. The remainder of the bank account balance represents the individual's "equity" in the account. Each year the corporation will add interest income to a positive equity balance at a rate deemed appropriate by the money markets. A negative equity balance will not be effected by interest charges. New participant's pay-outs will be phased in. They will receive 70% of their bank account in their first pay-out, 50% in their second pay-out and 1/3 thereafter. DISPOSITION OF THE EQUITY BALANCE: Certain events may occur that change the status of the plan and/or the employee's right to participate in the plan. The following is an outline of what would happen to any positive equity balance upon a particular event:
Event Disposition of Equity Balance - ----- ----------------------------- - - Terminate / quit - Lose equity balance - - Removed from plan / demotion - Equity balance paid out over next 2 years - - Unit sold by Crane Co. - Receive in cash - - Retirement /(1)/ / death / disability - Receive in cash - - Unit spun off - Don't receive. Continued - - Crane acquired - Receive in cash - - Transfer to another business unit - Equity balance transfers with you
/(1)/ Retirement is defined as normal retirement at age 65 Incentive Compensation Plan - EVA RIGHT TO AMEND AND MODIFY: EVA is the way Crane measures its business performance and establishes funds available (positive or negative) to recognize the results. Formula driven plans are not perfect and, from time to time, need to be modified to achieve the desired result of enhancing shareholder value for Crane Co. Therefore, Crane reserves the right to make changes in the overall plan, and/or by Business Unit, and/or by individual participants with the approval of the Organization and Compensation Committee of the Board of Directors. EX-10.J 3 0003.txt EMPLOYMENT AGREEMENT Exhibit 10(j) EMPLOYMENT AGREEMENT WITH ERIC C. FAST - January 22, 2001 The parties to this Employment Agreement (this "Agreement") are CRANE CO., a Delaware corporation (the "Company"), and ERIC C. FAST ("Mr. Fast"). Mr. Fast is currently employed as President and Chief Operating Officer of the Company under the terms of an employment agreement dated September 8, 1999 (the "Original Employment Agreement"). The Company desires to ensure itself of the services of Mr. Fast as Chief Executive Officer as of and following the resignation of R. S. Evans from such position and Mr. Fast desires to accept such employment on the terms and conditions set forth below. Accordingly, the parties, intending to be legally bound, agree as follows: 1. Employment and Term. The Company offers to employ Mr. Fast as the ------------------- President and Chief Executive Officer ("CEO") of the Company, and Mr. Fast accepts such employment with the Company, for the Term set forth below. The term of Mr. Fast's employment under this Agreement (the "Term") shall commence upon the date of the Company's 2001 annual shareholders meeting, provided that R. S. Evans resigns as CEO as of such date, or such other date agreed upon by the parties in writing (the "Effective Date"). The Term shall end on the second anniversary of that date, subject to extension of the Term as set forth in the immediately following sentence or earlier expiration of the Term as provided in Section 7. The Term shall be automatically extended for one (1) additional year as of each annual anniversary of the Effective Date unless either the Company or Mr. Fast provides written notice to the other of non-renewal not later than ninety (90) days prior to any such anniversary date. In the event that the Term shall not commence as stated above, then this Agreement shall be of no force or effect and the Original Employment Agreement shall continue in full force and effect. During the Term, the Board of Directors of the Company (the "Board") shall nominate Mr. Fast to serve on the Board, and Mr. Fast agrees that, if elected as a director by the Company's stockholders, he shall serve as such. 2. Duties. During the Term, Mr. Fast shall serve as President and Chief ------ Executive Officer of the Company, and shall perform the duties, services and responsibilities and have the authority commensurate to such position. Mr. Fast shall report to the Board. Mr. Fast shall perform his duties at the Company's executive offices, reasonable periods of travel for business purposes excepted. Mr. Fast shall devote his best efforts to promote the Company's interests, and he shall perform his duties and responsibilities faithfully, diligently and to the best of his ability, consistent with sound business practices. Mr. Fast shall devote his full working time to the business and affairs of the Company. Nothing in this Agreement shall preclude Mr. Fast from devoting reasonable periods required for engaging in charitable and community activities, serving as a director of other companies and managing his personal investments; provided, that such activities do not, in the good faith determination of the Board, interfere in any material respect with the regular performance of his duties and responsibilities under this Agreement. 3. Base Salary. During the Term, the Company shall pay Mr. Fast a base ----------- salary (the "Base Salary") at an annual rate of no less than $650,000. Such Base Salary shall be subject to increase from time to time during the Term at the discretion of the Board. The Base Salary shall be payable in accordance with the Company's regular payroll practices, but no less frequently than monthly. EMPLOYMENT AGREEMENT WITH ERIC C. FAST - January 22, 2001 4. Incentive Compensation. During the Term, Mr. Fast shall be ---------------------- entitled to participate in the Company's EVA Incentive Compensation Plan (the "EVA Plan") with a participation percentage of 30% for the period from the commencement of the Term through December 31, 2001, and thereafter as fixed by the Board from time to time, subject to the terms and conditions of such Plan. 5. Other Benefits -------------- (a) Participation in Plans. During the Term, Mr. Fast shall be ---------------------- entitled to participate in and receive benefits as a senior executive under and subject to the terms and conditions of all of the Company's employee benefit plans, programs and arrangements, as they may be duly amended, approved or adopted by the Board from time to time, including any retirement plan, savings plan, life insurance plan, health insurance plan, accident or disability insurance plan and any vacation policy. (b) Stock Option Awards. As of the date of the Board meeting in April ------------------- 2001, Mr. Fast shall be granted non-qualified stock options to purchase 200,000 shares of Crane Common Stock. As of the date of the Board meeting in January 2002, Mr. Fast shall be granted non-qualified stock options to purchase 300,000 shares of Crane Common Stock. The foregoing share amounts are subject to appropriate adjustments to take account of the effect of any change in the number of issued shares of Crane Common Stock in connection with a stock dividend, stock split, recapitalization or similar event that occurs prior to the applicable grant date. The exercise price per share of each such stock option shall be equal to the fair market value per share of the Common Stock on the date of grant of such option. For this purpose, the "fair market value" shall be determined by the average of the high and low prices of the Common Stock on the New York Stock Exchange on the ten consecutive trading days ending on the date of grant. Each option shall vest and become exercisable 50% one year after the grant date, 75% two years after the grant date and 100% three years after the grant date. All of the terms and conditions of each such option shall be governed by and set forth in a written stock option agreement containing such terms and conditions, consistent with this letter and the applicable stock option plan, as are customary for such grants by the Company. (c) Restricted Stock Award. As of the April 2001 Board meeting, Mr. ---------------------- Fast shall also be granted 65,000 shares of Crane Common Stock (the "Restricted Stock") under the Crane Co. Restricted Stock Award Plan or other applicable stock incentive plan (the "Restricted Stock Plan"). The Restricted Stock shall be subject to transfer and forfeiture restrictions that shall lapse with respect to 16,250 shares on each of the second, third, fourth and fifth anniversaries of the date of grant. The foregoing share amounts are subject to appropriate adjustments to take account of the effect of any change in the number of issued shares of Crane Common Stock in connection with a stock dividend, stock split, recapitalization or similar event that occurs prior to the date of grant of such Restricted Stock. All of the terms and conditions of the Restricted Stock shall be governed by the Restricted Stock Plan and set forth in a written restricted stock agreement containing such terms and conditions, consistent with this Agreement and the Restricted Stock Plan, as are customary for such grants by the Company. 2 EMPLOYMENT AGREEMENT WITH ERIC C. FAST - January 22, 2001 (d) Expense Reimbursement. During the Term, Mr. Fast shall be --------------------- entitled to receive prompt reimbursement for all reasonable expenses incurred by Mr. Fast in performing services under this Agreement, provided that such expenses are properly accounted for and are in accordance with the policies and practices for senior executives in effect from time to time as established by the Company. 6. Covenants. In order to induce the Company to enter into this --------- Agreement, Mr. Fast hereby covenants as follows: (a) Confidentiality. Mr. Fast agrees and understands that in his --------------- current and former position with the Company, Mr. Fast has been and will be exposed to and receive information relating to the confidential affairs of the Company, including but not limited to technical information, business and marketing plans, strategies, customer information, other information concerning the Company's products, promotions, development, financing, expansion plans, business policies and practices, and other forms of information considered by the Company to be confidential and in the nature of trade secrets. Mr. Fast agrees that during the Term and thereafter, Mr. Fast shall keep such information confidential and shall not disclose such information, either directly or indirectly, to any third person or entity without the prior written consent of the Company; provided, however, that (i) Mr. Fast shall have no such obligation -------- ------- to the extent such information is or becomes publicly known or generally known in the Company's industry other than as a result of Mr. Fast's breach of his obligations hereunder, and (ii) Mr. Fast may, after giving prior notice to the Company to the extent practicable under the circumstances, disclose such information to the extent required by applicable laws or governmental regulations or judicial or regulatory process. This confidentiality covenant has no temporal or territorial restriction. Upon expiration of the Term, Mr. Fast shall promptly return to the Company all property, keys, notes, memoranda, writings, lists, files, reports, customer lists, correspondence, tapes, disks, cards, surveys, maps, logs, machines, technical data or any other tangible product or document which has been produced by, received by or otherwise submitted to Mr. Fast in the course or otherwise as a result of Mr. Fast's position with the Company during or prior to the Term, provided that the Company shall retain such materials and make them available to Mr. Fast if requested by him in connection with any litigation against Mr. Fast under circumstances in which (i) Mr. Fast demonstrates to the reasonable satisfaction of the Company that the materials are necessary to his defense in the litigation, and (ii) the confidentiality of the materials is preserved to the reasonable satisfaction of the Company. (b) Records. All papers, books and records of every kind and ------- description relating to the business and affairs of the Company, or any of its affiliates, whether or not prepared by Mr. Fast, other than personal notes prepared by or at the direction of Mr. Fast, shall be the sole and exclusive property of the Company, and Mr. Fast shall surrender them to the Company immediately upon expiration of the Term and at any time upon request by the Board. 3 EMPLOYMENT AGREEMENT WITH ERIC C. FAST - January 22, 2001 (c) Non-Competition. By and in consideration of payments and benefits --------------- to be provided to Mr. Fast by the Company hereunder, Mr. Fast's exposure to the proprietary information of the Company and as an inducement to the Company to enter into this Agreement with Mr. Fast, Mr. Fast agrees that for a period of two (2) years after Mr. Fast's employment with the Company terminates for any reason (the "Non-Competition Period"), Mr. Fast shall not, directly or indirectly, own, manage, operate or control, whether as officer, director, employee, partner or investor, any Competing Enterprise. For purposes of this paragraph, the term "Competing Enterprise" shall mean any person, corporation, partnership or other entity (or any of their respective subsidiaries) which competes anywhere in the world with any business of the Company or any of its subsidiaries from which the Company derived more than five (5) percent of its sales or income during the most recently completed fiscal year. Notwithstanding anything contained in this Section 6(c) to the contrary, Mr. Fast shall not be prohibited from (i) owning less than five percent (5%) of any class of securities or debt of any corporation or other entity, whether publicly traded or privately held, (ii) serving as a general or limited partner or having a similar ownership interest in any partnership or investment company that owns or controls a Competing Enterprise so long as Mr. Fast is not actively engaged in the management of such Competing Enterprise or (iii) serving as a director of any entity which derives less than 10 percent of its sales and income from competing businesses. The Board shall consider any written request from Mr. Fast to waive this covenant as to any particular circumstance, and such waiver shall not be unreasonably withheld. (d) Non-Solicitation. During the Non-Competition Period, Mr. Fast ---------------- shall not directly or indirectly solicit for employment on his own behalf, or on behalf of any other enterprise, any individual who is an employee of the Company during the Term or the Non-Competition Period. (e) Assignment. Mr. Fast irrevocably assigns to the Company, or to ---------- any party designated by the Company, his entire right, title and interest in all Developments that are made, conceived, or developed by Mr. Fast, in whole or in part, alone or jointly with others, within the scope of his affiliation with the Company. Such assignment shall include, without limitation, all Intellectual Property Rights in such Developments. "Developments" shall mean all discoveries, inventions, designs, improvements, enhancements, ideas, concepts, techniques, know-how, software, documentation or other works of authorship, whether or not copyrightable or patentable, related to any business or technology that has been developed or is under development by the Company. "Intellectual Property Rights" shall mean all forms of intellectual property rights and protections that may be obtained for, or may pertain to, the confidential information (described in Section 6(a)) and Developments and may include without limitation all right, title and interest in and to (i) all Letters Patent and all filed, pending or potential applications for Letters Patent, including any reissue, reexamination, division, continuation or continuation-in-part applications throughout the world now or hereafter filed; (ii) all trade secrets, and all trade secret rights and equivalent rights arising under the common law, state law, Federal law and laws of foreign countries; (iii) all mask works, copyrights other literary property or author's rights, whether or not protected by copyright or as a mask work, under common law, state law, Federal law and laws of foreign countries; and (iv) all proprietary indicia, trademarks, tradenames, symbols, logos and/or brand names under common law, state law, Federal law and laws of foreign countries. 4 EMPLOYMENT AGREEMENT WITH ERIC C. FAST - January 22, 2001 (f) Blue Pencil. The provisions contained in this Section 6 as to the ----------- time periods, geographic area and scope of activities restricted shall be deemed divisible, so that if any provision contained in this Section 6 is determined to be invalid or unenforceable, that provision shall be deemed modified so as to be valid and enforceable to the full extent lawfully permitted. (g) Enforcement. Mr. Fast agrees and warrants that the covenants ----------- contained herein are reasonable, that valid consideration has been and shall be received therefor and that the agreements set forth herein are the result of arms-length negotiations between the parties hereto. Mr. Fast recognizes that the provisions of this Section 6 are vitally important to the continuing welfare of the Company, and its affiliates, and that money damages constitute a totally inadequate remedy for any violation thereof. Accordingly, in the event of any such violation by Mr. Fast, the Company, and its affiliates, in addition to any other remedies they may have, shall have the right to institute and maintain a proceeding to compel specific performance thereof or to issue an injunction restraining any action by Mr. Fast in violation of this Section 6. 7. Termination of Employment. ------------------------- (a) Death or Disability. Mr. Fast's employment under this Agreement ------------------- shall terminate upon his death or disability. Mr. Fast shall be deemed to be disabled at the end of any period of 180 consecutive days during which, by reason of physical or mental injury or disease, Mr. Fast has, in the good faith determination of the Board, been unable to perform substantially his usual and customary duties under this Agreement. At any time and from time to time, upon reasonable request therefor by the Company, Mr. Fast shall submit to reasonable medical examination for the purpose of determining the existence, nature and extent of any such disability. The Company shall promptly give Mr. Fast notice of any such determination of Mr. Fast's disability and of the decision of the Company to terminate Mr. Fast's employment by reason thereof. (b) Termination by the Company. The Company may terminate Mr. Fast's -------------------------- employment under this Agreement with or without Cause (as defined below) by giving written notice to Mr. Fast of such termination. For purposes of this Agreement, the Company shall have "Cause" to terminate Mr. Fast's employment under this Agreement if (i) Mr. Fast commits any intentional act or acts of disloyalty, misconduct, or moral turpitude or is convicted of a felony, (ii) Mr. Fast commits an intentional act of fraud, embezzlement or theft in connection with his duties or in the course of his employment with the Company or (iii) Mr. Fast intentionally violates any of the provisions of Section 6. (c) Termination by Mr. Fast. Mr. Fast may resign from his employment ----------------------- with the Company by giving at least sixty (60) days prior written notice to the Company. 5 EMPLOYMENT AGREEMENT WITH ERIC C. FAST - January 22, 2001 8. Compensation Upon Termination. ----------------------------- (a) As a Result of Death, Disability, Cause or Resignation. If Mr. ------------------------------------------------------ Fast's employment under this Agreement is terminated prior to the scheduled expiration of the Term by reason of his death or disability, termination by the Company for Cause or resignation by Mr. Fast, then Mr. Fast (or in the case of his death, his personal representative) shall be entitled to receive the following benefits (collectively, the "Pre-Termination Benefits"): (i) the amount of his Accrued Obligations (as defined below), such amount to be paid in a single lump sum cash payment within thirty (30) days of the date of termination, and (ii) any payments which Mr. Fast, his spouse, beneficiaries or estate may be entitled to receive pursuant to any employee benefits plan or program of the Company. As used in this Agreement, "Accrued Obligations" means, as of the date of termination, (A) any accrued but unpaid Base Salary and (B) any accrued and unpaid expense reimbursements. (b) By the Company other than for Cause. ----------------------------------- (i) Payments and Benefits. If, prior to scheduled expiration of --------------------- the Term, the Company terminates Mr. Fast's employment without Cause, or if the Company notifies Mr. Fast that it does not intend to extend the Term as contemplated by Section 1 hereof, Mr. Fast shall be entitled to receive the Pre- Termination Benefits and, subject to Section 8(b)(ii), he shall be entitled to the following (the "Post-Termination Benefits"): (1) he shall receive a lump sum in cash within thirty (30) days after the date of termination equal to the sum of (A) two (2) times his annual base salary at the then current rate and (B) the greater of (I) the amount then credited to Mr. Fast's bank account under the EVA Plan or (II) two (2) times the highest annual bonus Mr. Fast received from the Company for any of the five most recent fiscal years completed prior to the date of termination, (2) Mr. Fast and/or his family shall remain eligible for a period of two (2) years after the date of termination to receive benefits under all welfare plans maintained by the Company, provided that Mr. Fast shall bear any portion of the cost of such benefits as is required to be borne by similarly situated employees, and provided further, that such benefits shall be discontinued prior to the end of such two (2)-year period to the extent, but only to the extent, that Mr. Fast receives substantially similar benefits from a subsequent employer and (iii) all stock options granted to Mr. Fast by the Company shall become fully vested and shall remain exercisable for a period of two (2) years after the date of termination (but not after the original expiration date of such options), and all restricted stock granted to Mr. Fast by the Company shall become fully vested and non-forfeitable. 6 EMPLOYMENT AGREEMENT WITH ERIC C. FAST - January 22, 2001 (ii) Conditions to Receipt of Post-Termination Benefits under -------------------------------------------------------- Section 8(b)(i). As a condition to receiving any Post-Termination Benefits (but - -------------- not Pre-Termination Benefits) to which Mr. Fast would otherwise be entitled under Section 8(b)(i), Mr. Fast shall execute a release (the "Release"), in substantially the form of Annex A hereto, of any claims, whether arising under Federal, state or local statute, common law or otherwise, against the Company and its direct or indirect subsidiaries, and their respective officers, directors and stockholders which arise or may have arisen on or before the date of the Release, other than any claims under this Agreement or any rights to indemnification from the Company and its direct or indirect subsidiaries pursuant to any provisions of the Company's (or any of its subsidiaries') certificate of incorporation or by-laws, any written indemnification agreement between the Company and Mr. Fast or any directors and officers liability insurance policies maintained by the Company. If Mr. Fast fails or otherwise refuses to execute a Release within a reasonable time after the Company's request to do so, Mr. Fast will not be entitled to any Post-Termination Benefits. In addition, if, following a termination of employment that gives Mr. Fast a right to the payment of Post-Termination Benefits, Mr. Fast engages in any activities that violate any of the covenants in Section 6, Mr. Fast shall have no further right or claim to any Post-Termination Benefits and shall promptly repay any Post-Termination Benefits previously received (such repayment to be in addition to any other rights or remedies available to the Company in respect of such violation). (iii) Payment Obligation. Except as otherwise provided in Section ------------------ 8(b)(i)(2) or Section 8(b)(ii), (1) the Company's obligation to make the payments and the arrangements provided for herein shall be absolute and unconditional, and shall not be affected by any circumstances, including, without limitation, any offset, counterclaim, recoupment, defense, or other right which the Company may have against Mr. Fast or any other party, (2) all amounts payable by the Company hereunder shall be paid without notice or demand, (3) Mr. Fast shall not be obligated to seek other employment in mitigation of the amounts payable or arrangements made under any provision of this Agreement, and (4) the obtaining of any such other employment shall in no event effect any reduction of the Company's obligations to make the payments and arrangements required to be made under this Agreement. 9. Miscellaneous. ------------- (a) Binding Effect. This Agreement shall be binding upon and -------------- inure to the benefit of the heirs and representatives of Mr. Fast and the successors and assigns of the Company. 7 EMPLOYMENT AGREEMENT WITH ERIC C. FAST - January 22, 2001 (b) Notices. Any notice or other communication under this ------- Agreement shall be in writing and shall be considered given when mailed by registered, return receipt requested mail, to the parties at the following addresses (or at such other address as a party may specify by notice to the others): (i) to the Board or the Company, to: Crane Co. 100 First Stamford Place Stamford, CT 06902 Attention: Corporate Secretary (ii) to Mr. Fast: Mr. Eric C. Fast 200 Locust Avenue Rye, New York 10580 Addresses may be changed by written notice sent to the other party at the last recorded address of that party. (c) Execution in Counterparts. This Agreement may be executed in ------------------------- two or more counterparts, each of which shall constitute an original, but all of which together shall constitute but a single instrument. (d) Jurisdiction and Governing Law. This Agreement shall be ------------------------------ governed by and construed in accordance with the laws of the State of Delaware applicable to agreements made and to be performed in Delaware. (e) Severability. If any provision of this Agreement, or the ------------ application of any provision to any person or circumstance, shall for any reason and to any extent be invalid or unenforceable, the remainder of this Agreement and the application of that provision to other persons or circumstances shall not be affected but shall be enforced to the full extent permitted by law. (f) Prior Understandings. Except as otherwise expressly provided -------------------- in Section 1 with respect to the Original Employment Agreement, this Agreement embodies the entire understanding of the parties hereof, and supersedes all other oral or written agreements or understandings between them regarding the subject matter hereof. No change, alteration or modification hereof may be made except in a writing, signed by each of the parties hereto. Notwithstanding any provision of this Agreement to the contrary, Mr. Fast's Employment/Severance Agreement, dated as of September 27, 1999 (the "Change in Control Agreement"), shall remain in effect, and upon the occurrence of a Change in Control (as defined in the Change in Control Agreement), this Agreement shall terminate and Mr. Fast's rights shall be governed by the Change in Control Agreement. If Mr. Fast becomes eligible to receive severance payments and benefits under the Change in Control Agreement, he shall not be eligible for any severance payments and benefits under this Agreement. 8 EMPLOYMENT AGREEMENT WITH ERIC C. FAST - January 22, 2001 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the day and year first above written. CRANE CO. By: /s/ R. S. Evans ---------------- Name: R. S. Evans Title: Chairman and Chief Executive Officer /s/ E. C. Fast ------------------ Eric C. Fast EMPLOYMENT AGREEMENT With Eric c. fast - January 22, 2001 Annex A FORM OF RELEASE --------------- The undersigned individual and Crane Co., a Delaware corporation (the "Company"), are parties to an Employment Agreement, dated as of January 22, 2001 (the Agreement"). Under Section 8(b)(ii) of the Agreement, the undersigned's right to receive certain Post-Termination Benefits (as defined in the Agreement) is subject to, among other things, the undersigned's execution and delivery of this Release. The undersigned acknowledges that, by signing this Release and accepting the Post-Termination Benefits, the undersigned is giving up forever the right to seek any further monetary or other relief from the Company as a result of the undersigned's employment or termination of employment. Pursuant to that understanding and as a consideration for the Post-Termination Benefits, the undersigned, intending to be legally bound, irrevocably and unconditionally releases, acquits and discharges the Company and any of its affiliated companies, its past and present officers, directors, trustees, representatives, shareholders, agents, servants, employees, successors and assigns (separately and collectively, "releasees") jointly and individually from any and all claims, known or unknown, which the undersigned, his heirs, executors, administrators, successors or assigns have, shall or may have against releasees and any and all liability which the releasees may have to the undersigned whether called claims, demands, causes of action, judgments, debts, accounts, obligations, damages, or liabilities, arising from any and all bases, however called, including but not limited to, claims of discrimination, contract, tort, conversion, interference with contract, wrongful discharge, conspiracy, fiduciary breach or whistleblower under any federal, state or local law, rule, ordinance, or regulation. This Release relates to claims arising from and during employment or as a result of the undersigned's termination of employment and the facts and events related thereto, whether those claims are past or present, whether they rise from common law or statute, order or ordinance. The Undersigned specifically acknowledges that this Release is applicable to any claim under the Age Discrimination in Employment Act of 1967, as amended, (or any similar state or local law). This Release is for any relief no matter how called, including, but not limited to, wages, back pay, front pay, compensatory damages, liquidated damages, punitive damages, damages for pain or suffering, claims for non-vested benefits costs or attorneys' fees, or to be continued in the employ of the Company or reinstated to employment with the Company. Further, the undersigned agrees that the undersigned will not be entitled to any benefit from any claim or proceedings filed by the undersigned or on his behalf with any agency or court. Notwithstanding the foregoing, this Release shall not extinguish the undersigned's rights as expressly set forth in the Agreement. Finally, nothing contained in this Release is intended to or constitutes a waiver of any rights the undersigned may have to indemnification under applicable Company policies or any individual indemnification agreement with respect to any claim brought by third parties against the undersigned in connection with his Company employment. The undersigned states that he knows and understands the contents of this Release, that he executes this document knowingly and voluntarily as his own free act and deed, and that this document was freely negotiated and entered into without fraud, duress or coercion. The undersigned acknowledges that he was given at least twenty-one (21) days in which to consider whether to execute this Release before being required to make a decision and that he may revoke the Release for a period of seven (7) days from the date that he executed the Release, in which event he shall not be entitled to the Post-Termination Benefits. __________________________ Date:______________ [Employee] EX-11 4 0004.txt COMPUTATION OF NET INCOME PER SHARE CRANE CO. AND SUBSIDIARIES Exhibit 11 to FORM 10-K Annual Report for the Year Ended December 31, 2000 Computation of Net Income Per Share* (In Thousands Except Per Share Data)
2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- Basic - ----- Income from continuing operations $123,729 $100,898 $124,842 $103,716 $79,822 Income from discontinued operations - 13,672 13,596 9,055 12,288 -------- -------- -------- -------- ------- Net income $123,729 $114,570 $138,438 $112,771 $92,110 ======== ======== ======== ======== ======= Income from continuing operations $ 2.03 $ 1.51 $ 1.82 $ 1.51 $ 1.17 Income from discontinued operations - .20 .20 .13 .18 -------- -------- -------- -------- ------- Net income per share $ 2.03 $ 1.71 $ 2.02 $ 1.64 $ 1.35 ======== ======== ======== ======== ======= Weighted average number of basic shares 60,919 66,981 68,555 68,565 68,034 Diluted - ------- Income from continuing operations $123,729 $100,898 $124,842 $103,716 $ 79,822 Income from discontinued operations - 13,672 13,596 9,055 12,288 -------- -------- -------- -------- -------- Net income $123,729 $114,570 $138,438 $112,771 $ 92,110 ======== ======== ======== ======== ======== Income from continuing operations $ 2.02 $ 1.50 $ 1.80 $ 1.50 $ 1.16 Income from discontinued operations - .20 .20 .13 .18 -------- -------- -------- -------- -------- Net income per share $ 2.02 $ 1.70 $ 2.00 $ 1.63 $ 1.34 ======== ======== ======== ======== ======== Weighted average number of basic shares 60,919 66,981 68,555 68,565 68,034 Add: Adjustment to basic shares for dilutive stock options 480 479 813 819 566 -------- ------ ------ ------ ------- Total weighted average number of shares 61,399 67,460 69,368 69,384 68,600 ======== ====== ====== ====== =======
*All share and per share data have been retroactively restated to reflect the three-for-two splits of common stock effected in the form of a 50% stock dividend in 1998 and 1996. EX-13 5 0005.txt ANNUAL REPORT - -------------------------------------------------------------------------------- 2000 Annual Report - -------------------------------------------------------------------------------- Crane Co. ---------------------------------------------------------------------- Our Credo ---------------------------------------------------------------------- We strive for a dominant presence in niche markets. We generate solid rates of return on invested capital and high levels of cash flow. We use our cash effectively to grow and strengthen our existing businesses, and to acquire new businesses. We acquire businesses that fit with our existing businesses and strengthen our position in niche markets. We maintain an incentive compensation plan specifically designed to align the interests of management and shareholders. We do this with one goal in mind: to build shareholder value. Table of Contents Financial Highlights 1 Chairman's Letter to Shareholders 2 Management's Discussion and Analysis of Operations 6 Consolidated Financial Statements 15 Notes to Consolidated Financial Statements 19 Management's Responsibility for Financial 28 Reporting Independent Auditors' Report 28 Directors and Officers 36 Shareholder Information 37 - -------------------------------------------------------------------------------- Financial Highlights - --------------------------------------------------------------------------------
($ and shares in thousands except per share data) 2000 1999 %Change - ---------------------------------------------------------------------------------------------------------------------------- Summary of Operations Net Sales $ 1,491,190 $ 1,553,657 (4.0) Operating Profit: As Reported 184,026 169,554 8.5 As Adjusted/(a)(c)/ 184,026 204,541 (10.0) Income from Continuing Operations: As Reported 123,729 100,898 22.6 As Adjusted/(b)(c)/ 107,519 121,785 (11.7) Cash Flow from Operating Activities 151,176 210,704 (28.3) Amortization of Goodwill and Intangibles 20,478 21,018 (2.6) EBITDA/(c)/ 266,385 236,211 12.8 - --------------------------------------------------------------------------------------------------------------------------- Diluted Share Data Income from Continuing Operations $ 2.02 $ 1.50 34.7 Dividends .40 .40 Average Diluted Shares 61,399 67,460 - ---------------------------------------------------------------------------------------------------------------------------- Financial Position at Assets $ 1,143,851 $ 1,180,697 (3.1) December 31, Net Debt/(d)/ 217,722 297,183 (26.7) Shareholders' Equity 606,763 568,110 6.8 Market Value of Equity/(e)/ 1,718,369 1,248,199 37.7 Market Capitalization/(e)/ 1,936,091 1,545,382 25.3 - -------------------------------------------------------------------------------------------------------------------------- Key Statistics Operating Margins: As Reported 12.3% 10.9% As Adjusted/(a)(c)/ 12.3% 13.2% Return on Average Shareholders' Equity: As Reported 21.7% 17.6% As Adjusted/(b)(c)/ 18.8% 20.8% Net Debt to Common Shareholders' Equity 35.9% 52.3% Net Debt to Total Capitalization 26.4% 34.3% - --------------------------------------------------------------------------------------------------------------------------
(a) Excludes special charges of $34,987 in 1999. (b) Excludes the gain on the sale of investments of $26,646 ($16,210 after-tax or $.26 per diluted share) in 2000 and special charges of $34,987 ($22,567 after-tax or $.33 per diluted share) and the gain on the sale of an investment of $2,582 ($ 1,680 after-tax or $.03 per diluted share) in 1999. (c) "As adjusted" measures are presented to reflect operating results before the unusual items described above. EBITDA (income before interest, taxes, depreciation and amortization) is a measure of the company's ability to generate cash flow. These measures should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with generally accepted accounting principles and may be inconsistent with similar measures presented by other companies. (d) Net debt is total debt less cash and cash equivalents. (e) Market value of equity is number of shares of common stock outstanding times the closing stock price. Market capitalization is market value of equity plus net debt. Diluted EPS From EBITDA Income From Continuing Operations (in millions) Continuing Operations (in dollars) (in millions) [GRAPH] [GRAPH] [GRAPH] -- Crane Co / 2000 Annual Report 1 -- - -------------------------------------------------------------------------------- Chairman's Letter To Shareholders - -------------------------------------------------------------------------------- Dear Shareholder: For Crane, 2000 was a year of mixed accomplishment, marked by significant progress on a number of fronts despite softness in many markets that resulted in lower sales.This progress was exemplified by a turnaround in the Fluid Handling segment, a resurgence in Aerospace and a 32% increase in year-end backlog. Earnings held up well in 2000, despite some disappointments, and fourth-quarter results were solid, even with the economy clearly weakening. For the year, diluted earnings per share rose to $2.02 from $1.50 in 1999.The 2000 results include a $.26 gain, primarily from the highly profitable sale of the company's minority investment in Powec A.S., a Norwegian telecommunications power supply maker. The $1.50 figure for 1999 includes a $.03 gain from an asset sale and special charges of $.33 per share (mainly in Fluid Handling for plant closures and product line rationalization). Operating margins, at 12.3%, dipped slightly below the 13.2% margins achieved in 1999 before special charges, in part because of losses at three companies. The price of Crane's stock appreciated 43% in 2000 as the market recognized the value of businesses that generated real and sustainable earnings and cash flow. Leveraging Crane's Financial Strength The current business environment is challenging, as the U.S. economy weakens, but Crane is well positioned for growth in both sales and earnings in 2001. Some of our most important markets are actually strengthening, most notably the markets for our commercial aerospace, fluid handling and merchandising systems businesses. As noted, our backlog is up substantially. Our balance sheet is strong, and our debt-to-capital ratio, at 26.4%, is not only down from 34.3% at year-end 1999 but is at the lowest level in many years. By design, our companies generate a great deal of cash -- indeed, cash earnings (income from continuing operations plus amortization of goodwill and intangibles) were $144 million versus 1999's $122 million. Cash flow from operating activities exceeding $150 million a year enabled us to invest in a number of ways beneficial to Crane and its shareholders. We invested $30 million in our existing businesses. We acquired two small businesses for approximately $12 million: Streamware, a developer of software for the vending industry ($8.5 million), and Groth Corporation's Valve Repair Division, which expands our valve servicing presence in the key Houston market ($3.4 million). Near year-end, we also announced an agreement to purchase Alfa Laval's Industrial Flow Group, a leading maker of diaphragm valves and pumps, for $47 million, a deal expected to close by the end of April 2001. We repurchased 2.9 million shares of stock-- 5% of the outstanding shares - --at a cost of $60.6 million, and paid dividends of $24.3 million. We also spent $70.0 million to pay down debt -- a good thing going into difficult economic times. Progress in Critical Areas More than a year ago, we identified three critical, interrelated areas in which Crane needed to make solid and continuing progress: intellectual capital, customer focus and operational excellence. All of our companies have accepted that challenge. - -- 2 Crane Co / 2000 Annual Report - -- Intellectual capital -- We are strong believers in development and training, and we are working to improve the quality, depth and continuity of management, and the skills of employees at all levels. In 2000, we appointed a new chief financial officer, a new controller, an operational excellence leader, and new heads of corporate development and human resources, all but one, promotions from within. We named a new group head in Controls, strengthened our leadership in Fluid Handling and appointed seven business unit presidents. Through participation in the Six Sigma program in recent years, we have trained six "master black belts" and 44 "lean black belts" who are applying their analytical and problem-solving skills to our diverse businesses. We will continue to develop our intellectual capital aggressively through training and career development programs. Customer Focus -- We are doing a better job of identifying our customer needs and measuring how well we are really meeting those needs, and we are holding our businesses accountable for improving performance, particularly on three key metrics: on-time delivery, lead times, and quality. Operational Excellence -- All our companies are working aggressively to squeeze costs out of their manufacturing and business processes, improve product and service quality and make it easier to do business with Crane.The key metrics for operational excellence are operating profit margins and inventory turns. Many of our businesses have launched e-commerce initiatives, and most are finding new ways to leverage their investments in enterprise resource planning systems. Excellence is a moving target, but we are an improving and increasingly agile company. I believe that speaks well for our ability to prosper amid the inevitable uncertainty and cyclicality of global markets. Crane Then and Now Crane is a very different company today than it was at the beginning of 1984, when I became Chairman and Chief Executive Officer, but our goal of building shareholder value has not changed over the years. On 1983 sales of $772 million, we had operating profits of $26 million -- $18 million generated by Huttig Building Products and $25 million by Hydro-Aire, partially offset by losses totaling $17 million at our other businesses, which included our domestic and international valve, pump and distribution businesses and a cement company. In addition, we held for disposal a steel business, which was losing money and was not included in operating results. During 1984, we announced a strategic plan to focus on our strength in special engineered manufacturing for niche markets and in wholesale distribution, reducing Crane's dependence on capital-intensive, cyclical and commodity-oriented businesses, which typically faced international competition with lower labor costs and overca-pacity. In subsequent years, we spun off our steel company CF&I, our cement company Medusa, and most recently, our profitable but low-margin building products wholesaler Huttig. We consolidated, invested and made both opportunistic and strategic acquisitions in order to grow Crane profitably, with emphasis on manufacturing highly engineered, high value-added products with high market share in niches, and on generating cash and positive earnings per share. We have also increased our per-share earnings by repurchasing shares when they were significantly undervalued; most recently 6.0 million shares in 1999 and 2.9 million shares purchased in 2000, reducing the outstanding shares by 13% in two years. -- Crane Co / 2000 Annual Report 3 -- In the last 17 years, Crane's year-end stock price has been lower than the year before only three times. A shareholder who bought 100 shares of Crane stock for $2,850 on February 24, 1984, the day I became CEO, reinvesting all dividends and all proceeds from selling his stock in spun-off companies, would have 1,900 shares worth $54,031 at the end of 2000, a 1,796% return, or a compounded average return of 19.1% per year. By comparison, an investor who put $2,850 in the S&P 500 at the same time, reinvesting in the same way, would have ended 2000 with stock worth just under $38,473, a 1,250% return, or 16.7% per year. On average, Crane stock outperformed the S&P 500 by 2.4 percentage points a year, or 14.4%. I am proud of that record. A New Day I mention this history because it marks an era that is about to end, and because it has relevance for the future as well. At Crane's annual meeting on April 23, 2001, I will step down as Chief Executive Officer, though continuing as Chairman of the Board. Eric C. Fast, our capable President and Chief Operating Officer, will assume the additional role of Chief Executive Officer. For the first time in 42 years, Crane will no longer have a member of the Evans family as CEO. My father,Thomas M. Evans directed Crane's course for 25 years before I became CEO in 1984. I am confident that Eric will build on our existing strengths to lead Crane to new heights of market leadership, profitability and shareholder value. Over the past year and a half, he has learned a great deal about the manufacturing world while overseeing and improving our diverse businesses domestically and abroad. As the former Co-Head of Global Investment Banking for Salomon Smith Barney and Salomon Brothers, Inc., he brings a strong background in deal-making, finance and public markets. I believe Eric has the intellectual capability and energy to take Crane to new levels of performance. Outlook A combination of recovering markets and internal improvements should enable Crane to achieve earnings gains of 10-15% in 2001, in spite of currently deteriorating economic conditions in the U.S.The Aerospace segment, our most profitable, will benefit from increased aircraft production in all markets, and from the turnaround we expect at Interpoint, which ran at a loss in 2000. Fluid Handling, our largest segment, should make further gains after improving margins and profits in 2000. Engineered Materials will be held back by weak comparisons to the strong markets for truck trailers in 1999 and the first half of 2000. Weak capital spending in the chemical process industry markets could also affect profitability. Merchandising Systems will do well because of heavy demand for euro coin validators and operational improvements in our vending machine business. Controls should regain profitability after a loss in 2000 caused primarily by a poorly executed plant move at Ferguson. With the economy slowing, our financial strength should help us accelerate our acquisition activity from the pace of the past several years, further adding to growth and expanding our reach and market penetration. In sum, I am optimistic about results in 2001 and beyond. Meanwhile, I am grateful to our customers and our suppliers for their loyalty, to our employees for their dedication to making Crane a more effective and profitable competitor, and to our shareholders for their steadfast support of our efforts in that regard. I am grateful as well to the members of our Board of Directors for their confidence and wise counsel over the years. I think it is fair to say that both Eric and I look forward to a challenging and successful year. Sincerely, /s/ R. S. Evans R. S. Evans Chairman and Chief Executive Officer February 21, 2001 - -- 4 Crane Co / 2000 Annual Report - -- - -------------------------------------------------------------------------------- 2000 Review - -------------------------------------------------------------------------------- Crane's businesses report their results in five segments: Aerospace Engineered Materials Merchandising Systems Fluid Handling Controls In the pages that follow, we discuss these results, along with the events, trends, market dynamics and management initiatives that influenced them. -- Crane Co / 2000 Annual Report 5 -- - -------------------------------------------------------------------------------- Management's Discussion and Analysis of Operations - -------------------------------------------------------------------------------- Aerospace ============================================================================== (dollars in millions) 2000 1999 - -------------------------------------------------------------- Sales $ 346.8 $ 363.1 Operating Profit 83.7 87.1 Operating Profit* 83.7 96.1 Gross Margin* 44.0% 45.0% Operating Margin* 24.1% 26.5% - -------------------------------------------------------------- *Before special charges of $9.0 million in 1999. Performance in the Aerospace segment, though below near-record 1999 levels, exceeded earlier expectations and remained Crane's most profitable segment. Segment sales decreased $16.3 million, or 4.5%, from 1999. Operating profit decreased $12.4 million, or 13%, from 1999 (before special charges in 1999). Gross margins remained flat from 1999 levels. Domestic sales accounted for 65% and 69% of the segment's sales in 2000 and 1999, respectively. Aircraft build rates and aftermarket sales for commercial aircraft, although down significantly from 1999 levels, were higher than anticipated. Sales and operating profit were strong at Hydro-Aire (world market leader in aircraft anti-skid brake control systems and a niche manufacturer of fuel pumps) and ELDEC (world market leader in aircraft proximity sensing systems and power supplies), above expectations but below 1999 results. Lear Romec's (fuel and scavenge pumps) sales and operating profit exceeded the prior year. Interpoint, the remaining Aerospace unit member, reported a loss on sharply lower revenue from its miniaturized power supplies and DC-DC converters for aerospace, medical and telecommunications markets. Its performance was affected by design issues in some products under development and shortages of key electronic components. Order backlog for the Aerospace segment increased $69 million to $302 million at December 31, 2000, as compared with 1999. Hydro-Aire made significant progress in 2000, solidifying and expanding its market position. While Boeing production rates decreased from 620 aircraft in 1999 to 489 in 2000, they are projected to rebound to approximately 530 aircraft in 2001. Hydro-Aire is Boeing's sole supplier of brake control systems and a leading supplier of fuel pumps. Further, a large installed base on Boeing airplanes has enabled Hydro-Aire to grow its aftermarket business in repair and overhaul and its sales of spare parts for older aircraft. Hydro-Aire has laid the foundation for future growth with a continuing series of new product and application "wins" due to its recognized leadership in brake control technology. These include brake control systems on the new Boeing 767-400ER and 777X, the Cessna Sovereign business jet and the low- and high-level trainers for the Eurofighter program. The company is also benefiting from the robust market in smaller, regional jets, of which 280 were delivered in 1998, 300 in 1999, 360 in 2000 and a projected 430 in 2001. Hydro-Aire brake control systems are on all Embraer aircraft, the Bombardier CRJ-100/200 models, and all but one of the Fairchild Dornier jet models. Hydro-Aire is developing brake control solutions for proposed new regional and business jets, the military Joint Strike Fighter, the Airbus superjumbo A380, and Boeing derivative aircraft. ELDEC, Crane Aerospace's largest business, also outpaced expectations, improving its already strong position in the regional jet market. Its proximity sensing systems are on Embraer 170 and 190 models, Bombardier's CRJ 700 and 900 models, and Dornier's 728 and 928 models. ELDEC will provide DC electrical components and power supplies to certain Embraer and Dornier aircraft. Embraer honored ELDEC with its "Best Suppliers Award -- 2000" for quality. ELDEC remains the sole-source supplier of proximity sensors, systems and components on Boeing's new, longer-range 777X and is working with Boeing on the strategic 747X that responds to the Airbus superjumbo challenge. ELDEC continues to supply equipment -- door and landing gear proximity sensing systems -- on Airbus aircraft. The company is working with both Boeing and Lockheed Martin on their competing versions of the Joint Strike Fighter, with the winner to be chosen sometime in 2001. - -- 6 Crane Co / 2000 Annual Report - -- ELDEC maintained strong margins in the face of lower sales, price pressures and a less favorable product mix by accelerating its efforts at quick-response manufacturing. Lear Romec increased its operating profit by $1.2 million on modestly higher sales by strengthening margins, largely through its emphasis on lean manufacturing and training to reduce costs and improve execution. Bookings continued strong in 2001 despite intense competition and pricing pressure from several engine manufacturers for which it supplies lube or scavenge pumps. Both competitors for the Joint Strike Fighter design chose Lear Romec to supply fuel pumps, and the company was also chosen to supply fuel pumps for the new Pilatus turboprop trainer, scheduled to go into service in 2003. Lear Romec is also developing a new pump and integrated drive gear for Honeywell and equipment for several helicopters due to enter service in late 2001 and 2002. Interpoint operated at a loss in 2000 with revenue and operating profit down $10 million and $9 million, respectively, from 1999. Interpoint faced soft markets for its standard power converters and other products for uses in its main Aerospace market. Conversely, the company was unable to meet the strong demand for other products due to manufacturing inefficiencies associated with shortages of critical electronic components. Under new leadership in the latter part of 2000, Interpoint focused on smoothing its production processes through cell manufacturing techniques, obtaining alternative component supplies, and resolving several design issues with customers. Significant opportunities exist for its radio frequency products for fiberoptic cable, which serve the telecommunication market. Order backlog has increased to $38 million at December 31, 2000 from $18 million in 1999. Outlook Crane Aerospace management expects sales and earnings to increase in 2001.The largest gains are expected at Hydro-Aire and ELDEC -- and to a lesser extent, Lear Romec -- primarily on the basis of higher production volumes expected at Boeing, increased deliveries of regional and business jets, and expanding aftermarket sales that will strengthen margins. Interpoint is strengthening its manufacturing processes to increase its margins. It has the potential to expand its sales volume significantly in new markets, and expects an improved financial performance in 2001.
- ------------------------------------------------------------------------------------------------------------------------------------ Business Unit Products Markets Served - ------------------------------------------------------------------------------------------------------------------------------------ Hydro-Aire Aircraft brake control and anti-skid systems, Commercial transport, business and commuter, including electro-hydraulic servo valves and manifolds, general aviation, military and government embedded software and redundant, rugged electronic aerospace, repair and overhaul controls, hydraulic control valves and landing gear sensors, fuel pumps - ------------------------------------------------------------------------------------------------------------------------------------ [AELDEC Position indication and control systems, proximity Commercial, transport business, regional, sensor, pressure sensors, mass fuel flowmeters, power general aviation and military aircraft, repair conversion systems and equipment and overhaul, aerospae and defense electronics - ------------------------------------------------------------------------------------------------------------------------------------ Lear Romec Lubrication and fuel pumps for aircraft, aircraft Commercial and military aerospace, defense engines and radar cooling systems industry - ----------------------------------------------------------------------------------------------------------------------------------- Interpoint Standard, custom and radiation-hardened miniature Commercial, space and militiary aerospace (hybrid) DC-to-DC power conversion products, EMI defense industry, medical industries filters and custom minature(hybrid) electronic including implantable medical devices, circuits industrial, fiber optic and telecommunication markets - ------------------------------------------------------------------------------------------------------------------------------------
-- Crane Co / 2000 Annual Report 7 -- Engineered Materials ================================================================================ (dollars in millions) 2000 1999 - ------------------------------------------------------------ Sales $ 344.0 $ 357.1 Operating Profit 49.5 56.7 Operating Profit* 49.5 59.9 Gross Margin* 24.1% 25.8% Operating Margin* 14.4% 16.8% - ------------------------------------------------------------ *Before special charges of $3.2 million in 1999. Overall sales and operating profit declined in the Engineered Materials segment in 2000, although three of the five companies had higher sales and two increased their operating profit. Segment sales decreased $13.1 million, or 3.7%, from 1999 and operating profit decreased $10.4 million, or 17.3%, from 1999 (before special charges in 1999). Gross margins were 24.1% in 2000, compared with 25.8% in 1999. Domestic sales accounted for approximately 80% of the segment sales in both 2000 and 1999. Operating margins also decreased, and bookings declined slightly. All of the companies invested significantly in lean manufacturing or other cost-reduction initiatives aimed at improving margins in the future. Backlog decreased $6 million to $19 million at December 31, 2000 as compared with 1999. Kemlite, the segment's largest business, had its first down year in sales since 1991, off $17.9 million from 1999, and its first decline in operating profit since 1995, down $10.0 million from 1999, as a result of a sharp fall-off in the truck trailer transportation market and softer recreational vehicle and building products markets. Operating margins were reduced 13.5% by higher raw material costs for its fiberglass-reinforced plastic truck and trailer liner panels, recreational vehicle side-walls, construction panels and by the bankruptcy of a major customer. The company responded by adjusting spending, cutting costs through Six Sigma and lean manufacturing programs, focusing on new sales opportunities and emphasizing customer service. As a result, Kemlite realized solid operating margins and maintained its strong market position in all markets served. Cash flow, although below 1999 levels, remained strong. In 2001, Kemlite expects that modest gains in the international and building products markets, for which it is developing new products, will partially offset continuing softness in the transportation and recreational vehicle markets. CorTec, manufacturer of fiberglass-reinforced composite panels for transportation and specialty markets, turned in a strong earnings performance despite a modest decline in sales, reversing a 1999 loss resulting when a major transportation account switched to competing materials. One factor in the turnaround was a better product mix, with more high-value, specialty panels used in such applications as racecar haulers, pleasure boats and houseboats. . With weak transportation markets expected in 2001, CorTec plans to maintain sales and earnings by increasing its emphasis on niche marine and other specialty markets, and continuing to increase productivity.
- --------------------------------------------------------------------------------------------------------------------------------- Business Unit Products Markets Served - --------------------------------------------------------------------------------------------------------------------------------- Kemlite Fiberglass-reinforced plastic panels used as Recreational vehicle, truck trailer and sidewalls, liners,translucent roofs, interior commercial and residential construction walls and ceiling - --------------------------------------------------------------------------------------------------------------------------------- CorTec Fiberglass-reinforced laminated composite panels Trucks and truck trailers, special-purpose and structural foam core trailers, houseboats,general construction and specialty foam core applications - --------------------------------------------------------------------------------------------------------------------------------- Resistoflex Corrosion-resistant plastic-lined pipe, Pharmaceutical, chemical processing, pulp and fittings,valves, expansion joints and, hose paper, ultra-pure water, waste management assemblies, high performance aerospace hose industries, military and aerospace contractors tube and fittings - --------------------------------------------------------------------------------------------------------------------------------- Crane Plumbing Plumbing and sanitary fixtures Residential, industrial, commercial and institutional construction and renovation markets in Canada - --------------------------------------------------------------------------------------------------------------------------------- Polyflon Microwave laminates, circuit processing and Wireless communications, magnetic resonance high-voltage RF capacitors imaging, microwave and radar system manufacturers - ---------------------------------------------------------------------------------------------------------------------------------
- -- 8 Crane Co / 2000 Annual Report - -- Resistoflex increased sales of its plastic-lined, corrosion-resistant products for industrial and aerospace markets, but margins and operating profits, although strong, declined slightly because of higher-than-expected development costs for hose and specialty products. Sales of pipe and fittings, the company's main products, were flat domestically but sales in Asia increased and were profitable. The chemical process industry, Resistoflex's largest market, remained flat during 2000 as high energy and raw material costs constrained customers' capital spending. The pharmaceutical portion of the market was less affected, but global competition and the strong U.S. dollar negatively impacted sales.The company anticipates that the chemical process industry market will remain weak in 2001. Resistoflex increased its military aerospace business, with strong activity in the space shuttle and engine markets. In addition, a new tube-bending capability generated significant additional sales. The company also sought patents for two new fittings designed to withstand vibration, and these are being tested by major airframe and engine manufacturers. New military programs, such as the F-22 fighter and Joint Strike Fighter, will also provide Resistoflex with continued growth opportunities for its fittings, and tube and hose products. Crane Plumbing increased sales of its steel, acrylic and ceramic plumbing supplies and fixtures by 9% on gains in Canada's new housing market and increased sales in the U.S. The company's 2000 operating loss widened by $2.8 million compared with 1999, however, as increasing oil and natural gas prices pushed up raw material and transportation costs while competitive conditions constrained pricing to customers. Outlook Slightly lower results are expected, in 2001, due to the continued softening of the truck trailer and recreational vehicle markets at Kemlite and continued weakness in the chemical process industry at Resistoflex. Merchandising Systems - -------------------------------------------------------------------------------- (dollars in millions) 2000 1999 - -------------------------------------------------------------------------------- Sales $ 220.6 $ 201.9 Operating Profit 31.3 35.8 Gross Margin 33.0% 36.4% Operating Margin 14.2% 17.7% - -------------------------------------------------------------------------------- Segment sales increased $18.7 million, or 9.2%, from 1999, while operating profit decreased $4.5 million, or 12.7%. Gross margins were 33.0% in 2000, compared with 36.4% in 1999. Domestic sales were 51% of the segment sales in 2000, compared with 54% in 1999. Results at National Vendors, the larger of the segment's two businesses, were impacted by costs associated with disappointing new product introductions, unfavorable currency exchange rates in Europe, labor issues and manufacturing inefficiencies at its St. Louis, Missouri, plant, and costs associated with the Streamware, acquired earlier in the year. The segment's other business, National Rejectors (NRI) increased its operating margin to 22.2% and operating profits by $1.5 million, despite adverse currency translation that resulted in lower sales in U.S. dollar terms. Order backlog increased $51 million to $69 million at December 31, 2000, as compared with 1999, resulting from advanced orders in anticipation of the euro currency conversion. National Vendors' sales of its core snack and beverage vending machine products grew modestly, but the largest part of its sales gain was derived from its 1999 acquisition of Stentorfield in the U.K. Although its initial sales were less than expected, National Vendors' All Temperature Vending machine, the first snack machine designed for stand-alone use at outdoor locations under a wide range of weather conditions, was well received at premier U.S. locations, such as Yosemite National Park, and in Australia. Exports of snack and beverage machines were solid in 2000, and continued to result in strong sales in Australia and New Zealand.The March acquisition of Streamware, a leading U.S. provider of software and market research information to the vending industry, gave National Vendors an opportunity to develop a significant new business. -- Crane Co / 2000 Annual Report 9 -- Streamware's VendMAX is a fully integrated software/hardware solution that offers operators complete cash accountability, inventory control and improved merchandising capabilities. National Vendors is well positioned to meet the challenge of integrating this capability into its own machines and those of competing equipment makers. National Vendors, under new leadership since the fourth quarter of 2000, is focusing on improving profitability through operational efficiencies at its manufacturing plant in St. Louis and by focusing on business opportunities at Streamware. National Vendors expects to improve its production processes through Six Sigma and lean manufacturing programs. At NRI, the long-awaited demand for its coin validation machines designed for euro coins finally materialized in August. NRI is among the relatively few makers of coin validators that will supply European countries, which must equip existing and new coin-operated vending machines, with validators programmed for the new euro coins that will go into circulation at the start of 2002. Delays in a number of countries in establishing final designs for euro coins prevented early production of sufficient machines to accommodate the changeover. NRI significantly increased sales of its smallest validators in 2000, as some major customers started to make their equipment euro-currency compliant. Because approximately one million of these validators are in service throughout Europe, replacement business will be a substantial and continuing revenue source. NRI has added additional shifts to meets its customer needs. The company looks for increased sales and profits in 2001, as the vending industry converts to the new coinage. Outlook Prospects are good for gains in sales and operating profit for the Merchandising Systems segment in 2001. National Vendors expects improved margins in 2001 as Streamware revenue begins to grow and efficiencies are achieved at the St. Louis manufacturing location. NRI expects record earnings as Europe's vending industry continues to convert to the euro coins.
- -------------------------------------------------------------------------------------------------------------------------- Business Unit Products Markets Served - -------------------------------------------------------------------------------------------------------------------------- National Vendors Electronic vending merchandisers for refrigerated Automated merchandising, office coffee and frozen foods, hot and cold beverages, office service coffee services, snack foods, coin and currency changers and vending information management software - -------------------------------------------------------------------------------------------------------------------------- National Rejectors, Inc. Electronic coin validators and changers, chip card Automated merchandising GmbH (NRI) cashless payment systems - --------------------------------------------------------------------------------------------------------------------------
- -- 10 Crane Co / 2000 Annual Report - -- FLUID HANDLING - -------------------------------------------------------------------------------- (dollars in millions) 2000 1999 Sales $ 461.1 $ 502.2 Operating Profit 31.8 4.0 Operating Profit* 31.8 22.9 Gross Margin* 24.3% 21.8% Operating Margin* 6.9% 4.6% - -------------------------------------------------------------------------------- * Before special charges of $18.9 million in 1999. The Fluid Handling segment increased profits in 2000 on planned lower sales, as plant consolidations, product rationalizations and other cost-saving efforts undertaken in 1999 significantly reduced fixed costs. Segment sales decreased $41.1 million, or 8.2%, while operating profit increased $8.9 million, or 38.8%, from 1999 (before special charges in 1999). Gross margins were 24.3% in 2000, compared with 21.8% in 1999. Domestic sales were 52% of segment sales in both 2000 and 1999. Operating profit of $31.8 million was well above the $22.9 million earned in 1999 before related special charges that reduced that year's operating profit to $4 million. The sales decline resulted from reduced nuclear power plant outages, reduced export sales at Crane Valves -- U.K. and renewed emphasis on accepting only profitable business. Contributing to the operating profit increase were the improved business mix, sharply increased demand from the power generation industry, and a significant turnaround in the U.K. at Crane Ltd., which returned to profitability despite lower sales. Fluid Handling order backlog was up 18% to $92 million at December 31, 2000, compared with the prior year level. Crane's global valve business was reorganized in late 2000 to leverage the products and brands sold through its North American distribution channels and to focus its direct selling efforts at Pacific, Westad and Stockham Belfast on specific end user markets in the power generation, hydrocarbon and marine industries. Crane Valves' North American operations, which includes the Crane, Centerline, Flowseal, Stockham and Duo Check brands sold through distribution, recorded improved results, operating profitably despite an 11% decline in shipments. The decline in revenue resulted primarily from accepting only profitable business in 2000, which improved overall margins. Production costs were higher than normal in 2000 after closure of a steel facility in Rogers, Arkansas, and concentration of manufacturing in the Washington, Iowa, plant. The consolidation is expected to yield cost savings in 2001. Pacific tripled its prior-year operating profit on a 60% increase in revenue to $33.1 million, as demand from the power generation industry for its high performance, pressure seal valves surged. Westad and Stockham U.K. both operated at a loss in 2000 because of lower project business in their respective marine and hydrocarbon markets. At Crane Valves -- U.K., which manufactures both valves and malleable fittings, operating results were significantly improved as a result of the restructuring actions taken in 1999. Operating margin was approximately 7% compared with a loss in 1999. Shipments to third parties were down 22% to $57 million, as enhanced price discipline resulted in lower export sales in the latter part of 1999 and first half of 2000, leading to lost market share. Valve Services' sales and operating profit in 2000 were down $13.4 million and $1.7 million, respectively from 1999, mainly because of a decline in nuclear service revenue that resulted from the industry's cyclical nature and a reduction in the number and duration of planned outages at nuclear power plants. This cyclical business, in which Crane has a leading market position, was impacted as utilities extended refuel cycles from 12 months to 18 or 24 months. Overall operating margin remained strong at 11% as the repair parts, testing products and commercial services improved from the prior year level. The late December, 2000 acquisition of the Valve Repair Division of Groth Corporation and the February 2001 acquisition of Ventech, Inc., will further enhance Crane's presence and capabilities in the key Houston market. Crane Pumps had lower profits of $1.7 million on flat sales because of expenses related to the resolution of a product field issue, and because of higher administrative costs incurred in improving its management team. The new leadership and management organization clearly focuses responsibility for expanding the sales and profitability of Crane's many pump brands. Continuing cost reduction, cross-branding opportunities and manufacturing and material sourcing efficiencies will be emphasized in 2001. Crane Environmental, also under new leadership, had lower sales and operating profit but gained momentum as it launched a quick-ship program and focused on high-potential water desalination and whole-house water purification niches. -- Crane Co / 2000 Annual Report 11 -- Crane Supply increased its operating profit to $8.2 million on slightly lower sales to $106.1 million from $111.9 million in 1999, with an improved customer and product mix.The company, which distributes pipe, valves and fitting supplies throughout Canada, also benefited from strength in the Ontario and Quebec markets. It successfully introduced a line of stainless steel pipe, valves and fittings, and in the fourth quarter, launched an online order entry system that was well received. The company implemented a new warehouse management system at the first two of eight warehouses, opened two new branches in Ontario, and converted three more of its 30 service branches to higher-margin express stores, for a total of nine. Outlook Order backlog of $92 million at December 31, 2000, an improved cost structure, and improving customer metrics should allow Fluid Handling to achieve higher operating results in 2001, despite continued softness in many industrial markets that weakened in the second half of 2000.
- ----------------------------------------------------------------------------------------------------------------------------------- Business Unit Products Markets Served - ----------------------------------------------------------------------------------------------------------------------------------- Crane Valves Quarter turn, wafer check, pressure seal, HF Hydrocarbon and chemical processing, power acid, cast and stainless steel valves, bronze generation, marine and shipbuilding, and iron gate, globe, check and ball valves commercial building and industrial applications, HVAC, refining and chemical processing - ----------------------------------------------------------------------------------------------------------------------------------- Crane Valves -- U.K. Wafer check, bronze and iron gate, globe, check, Hydrocarbon and chemical processing, ball and quarter turn valves and malleable Iron power generation, commercial building and fittings industrial applications, HVAC, refining and chemical processing - ----------------------------------------------------------------------------------------------------------------------------------- Valve Services Nuclear valves, valve parts, test equipment and Nuclear and commercial power generation, valve and actuator maintenance and testing refining, chemical processing, pulp and paper, water and marine - ----------------------------------------------------------------------------------------------------------------------------------- Pumps/Environmental Submersible, sealed and sealless horizontal Municipal, residential, industrial, utility, centrifugal, turbine, air-operated diaphragm, professional plumbing, construction, metering pumps and pumping systems, water pharmaceutical, pulp and and paper, chemical purification and cross-flow membrane and hydrocarbon processing commercial markets, products and systems original equipment manufacturers and government contractors - ----------------------------------------------------------------------------------------------------------------------------------- Crane Supply Distributor of pipe, valves and fittings Mechanical contractors, industrial plants, fabricators and engineering procurement and construction companies and maintenance, repair and overhaul - -----------------------------------------------------------------------------------------------------------------------------------
- -- 12 Crane Co / 2000 Annual Report - -- Controls - -------------------------------------------------------------------------------- (dollars in millions) 2000 1999 - ---------------------------------------------------------------- Sales $ 121.9 $ 121.2 Operating (Loss) Profit (2.1) .7 Operating (Loss) Profit* (2.1) 4.1 Gross Margin* 29.5% 34.2% Operating Margin* (1.8)% 3.4% - -------------------------------------------------------------------------------- * Before special charges of $3.4 million in 1999. The Controls segment had an operating loss of $2.1 million for the year on flat sales, primarily due to a loss at Ferguson. Gross margin was 29.5% in 2000, compared with 34.2% in 1999. Domestic sales were 78% of segment sales in 2000, compared with 76% in 1999. Of the five businesses in the segment, three were able to increase their sales, offsetting declines at the other two. These businesses, operating mainly in mature markets, are seeking to grow sales and improve operating results through new products, aggressive marketing, geographic expansion and cost reduction. At year-end, Dynalco and Azonix were placed under common management to increase their effectiveness and presence in the marketplace. Order backlog decreased $6 million to $22 million at December 31, 2000 as compared with 1999. At Barksdale, the segment's largest business, sales decreased to $42.9 million, from $44.1 million in 1999, and operating profit declined to $4.0 million, from $4.8 million in 1999. Barksdale continued its transition from a process-oriented organization to an externally focused, growth-oriented enterprise. In 2000, with a new management team, the company deployed cross-functional teams company-wide and improved customer service and increased on-time delivery. Barksdale's German operation had a significant sales gain and strong market acceptance of the company's new solid state pressure switch, which is being launched in the U.S. in 2001. Barksdale is focusing on expanding its markets in Europe and penetrating Asia and Latin America, while pushing product development to gain new customers in mature U.S. markets. It looks for increased sales and earnings in 2001. Ferguson's problems centered around the move of its machining operations from Greenwood, Mississippi, to its St. Louis, Missouri, plant. A poorly executed plant consolidation, resulting in machinery reinstallation difficulties, machine breakdowns, inefficient scheduling and expensive outsourcing, combined with ineffective pricing practices added to Ferguson's loss.The company, under new leadership, expects markets to soften but anticipates a return to profitability by year-end 2001. At Powers Process Controls, sales fell moderately to $22.8 million from $24.6 million in 1999 and profits declined by $1.4 million to near break-even level, as the company's vigorous new-product sales effort could not offset reduced sales in its core water tempering valve business. Powers introduced ten new products in 2000, its largest one-year total, with five more scheduled for 2001. They are designed to be less costly to manufacture and to penetrate price-sensitive institutional markets. Powers invested significant effort in reducing inventories, completing cellular layouts and repositioning its commercial plumbing products. Powers expects improved profitability on slightly higher sales in 2001. Dynalco reported excellent results in 2000, with a sales gain of $1.7 million, or 13.2%, improved margins and sharply higher operating profits. Strong sales of its engine diagnostic equipment -- a product line acquired as part of the Liberty Technologies acquisition in 1998 -- contributed to this positive result, along with marginal recovery in the gas transmission segment of the oil and gas market. Lean and cellular manufacturing techniques figured in the strong profit performance. All three lines of business -- automation solutions, diagnostics and discrete instruments and controls --showed strength in 2000 and are expected to fuel higher sales and earnings in 2001. Azonix, which serves many of the same oil and gas markets as Dynalco with its Man Machine Interface (MMI) panels for hazardous and harsh environments, had higher sales but remained in a loss position, as a significant customer ran into financial troubles, depriving Azonix of expected high-margin sales and requiring a large write-off. At year-end, the president of Dynalco was given overall responsibility for Azonix as well, a move intended to develop synergies in marketing products for overlapping customer bases, leverage product development efforts and add management depth. In 2001, Azonix will focus on manufacturing improvements and supply chain issues to strengthen margins. Azonix is well positioned to have an improved performance in 2001. Outlook Modest gains in sales and improved margins and profits are likely for the Controls segment as improvements in Feruguson's results, new products, targeted marketing and sales efforts, and competitive advantages derived from lower manufacturing costs and shorter cycle times take hold. The European operations of Barksdale and Ferguson should continue to strengthen, yielding higher profits. Closer ties between Dynalco and Azonix are expected to increase their marketplace impact. -- Crane Co / 2000 Annual Report 13 --
- ------------------------------------------------------------------------------------------------------------------------------------ Business Unit Products Markets Served - ------------------------------------------------------------------------------------------------------------------------------------ Barksdale Solid state and electromecpressure switches Manufacturers of pumps, compressormachine tools, and transducers, level switches and indicators, trucks, heat tracing, oil and gas exploration, temperature switches and directional control compactors, and bailers valves - ------------------------------------------------------------------------------------------------------------------------------------ Ferguson Mechanical index drives, pick-and-place Assembly, packaging, processing and metal working robots, indexing conveyors, rotary tables, machinery manufacturers for the automotive, clutches and custom cams electrical, food, health care, and electronics industries - ------------------------------------------------------------------------------------------------------------------------------------ Powers Process Controls Thermal shock protection shower valves and Light commercial and institutional facilities, systems, process control valves and chemical and food processing, pharmaceutical instrumentand temperature control regulators manufacturing and water and wastewater treatment - ------------------------------------------------------------------------------------------------------------------------------------ Dynalco Controls Engine and compressor control systems and Oil and gas utilities,industrial engine analyzers, machinery instruments, monitors manufacturers and users, industry, construction and controls, rotational speed sensors and agricultural equipment manufacturers - ------------------------------------------------------------------------------------------------------------------------------------ Azonix Operator interfaces and measurement and Oil and gas service petrochemical, pharmaceutical, control systems, intelligent data primary metal processing compressor manufacturers, acquisition products, high-precision rail transport, semiconductor production equipment, thermometers and calibrators military ship control - ------------------------------------------------------------------------------------------------------------------------------------
CORPORATE - -------------------------------------------------------------------------------- (dollars in millions) 2000 1999 - ---------------------------------------------------------------- Corporate Charges $ (10.1) $ (13.6) Interest Income .8 9.8 Interest Expense (21.6) (27.9) Miscellaneous-- Net 27.1 4.3 Effective Tax Rate on Income 35.0% 35.2% - ---------------------------------------------------------------- Corporate charges were reduced by $3.5 million in 2000 compared with 1999, primarily because of lower incentive compensation. Interest expense declined by $6.3 million in 2000, compared with 1999, as the result of the $177.5 million reduction in debt over the past two years. Interest Income declined by $8.9 million due primarily to the inclusion in 1999 of $7.3 million in non-recurring interest received from discontinued operations (Huttig Building Products). Miscellaneous -- net in 2000 includes $26.6 million from the gain on the sale of the company's investment in Powec AS and a related telecommunications power supply product line. The prior year's amount was composed primarily of a gain of $2.6 million on the sale of an equity investment. Management's Discussion and Analysis of Operations continues on page 29. - -- 14 Crane Co / 2000 Annual Report - -- - -------------------------------------------------------------------------------- Consolidated Statements of Income - --------------------------------------------------------------------------------
For Years Ended December 31, (in thousands except per share data) 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------ Net Sales $ 1,491,190 $ 1,553,657 $ 1,561,055 Operating Costs and Expenses: Cost of sales 988,518 1,057,003 1,018,369 Selling, general and administrative 263,365 264,788 274,852 Depreciation and amortization 55,281 62,312 55,873 - ------------------------------------------------------------------------------------------------------------------------------ 1,307,164 1,384,103 1,349,094 - ------------------------------------------------------------------------------------------------------------------------------ Operating Profit 184,026 169,554 211,961 Other Income (Expense): Interest income 820 9,750 9,496 Interest expense (21,564) (27,854) (27,661) Miscellaneous-- net 27,078 4,345 (1,007) - ------------------------------------------------------------------------------------------------------------------------------ 6,334 (13,759) (19,172) - ------------------------------------------------------------------------------------------------------------------------------ Income Before Taxes 190,360 155,795 192,789 Provision for Income Taxes 66,631 54,897 67,947 - ------------------------------------------------------------------------------------------------------------------------------ Income from Continuing Operations 123,729 100,898 124,842 Income from Discontinued Operations, Net of Taxes -- 13,672 13,596 - ------------------------------------------------------------------------------------------------------------------------------ Net Income $ 123,729 $ 114,570 $ 138,438 ============================================================================================================================== Basic Net Income per Share: Income from continuing operations $ 2.03$ 1.51 $ 1.82 Income from discontinued operations -- .20 .20 - ------------------------------------------------------------------------------------------------------------------------------ Net Income $ 2.03 $ 1.71 $ 2.02 - ------------------------------------------------------------------------------------------------------------------------------ Average Basic Shares Outstanding 60,919 66,981 68,555 Diluted Net Income per Share: Income from continuing operations $ 2.03 $ 1.50 $ 1.80 Income from discontinued operations -- .20 .20 - ------------------------------------------------------------------------------------------------------------------------------ Net Income $ 2.02 $ 1.70 $ 2.00 - ------------------------------------------------------------------------------------------------------------------------------ Average Diluted Shares Outstanding 61,399 67,460 69,368 ==============================================================================================================================
See Notes to Consolidated Financial Statements. -- Crane Co / 2000 Annual Report 15 -- - -------------------------------------------------------------------------------- Consolidated Balance Sheets - --------------------------------------------------------------------------------
Balance at December 31, (in thousands except share data) 2000 1999 - ------------------------------------------------------------------------------------------------------------------------- Assets Current Assets: Cash and cash equivalents $ 10,926 $ 3,245 Accounts receivable 209,817 206,468 Inventories Finished goods 87,118 107,006 Finished parts and subassemblies 53,361 57,667 Work in process 24,749 23,471 Raw materials 71,101 71,330 - ------------------------------------------------------------------------------------------------------------------------- Total inventories 236,329 259,474 Deferred tax asset 31,455 25,841 Other current assets 11,625 10,132 - ------------------------------------------------------------------------------------------------------------------------- Total Current Assets 500,152 505,160 Property, Plant and Equipment: Land 32,338 29,033 Buildings and improvements 132,142 124,220 Machinery and equipment 424,953 426,010 - ------------------------------------------------------------------------------------------------------------------------- Gross property, plant and equipment 589,433 579,263 Less accumulated depreciation 343,322 322,614 - ------------------------------------------------------------------------------------------------------------------------- Net Property, Plant and Equipment 246,111 256,649 Other Assets 39,116 45,771 Intangibles 39,599 43,796 Cost in Excess of Net Assets Acquired 318,873 329,321 - ------------------------------------------------------------------------------------------------------------------------- $ 1,143,851 $ 1,180,697 ========================================================================================================================= Liabilities and Shareholders' Equity Current Liabilities: Current maturities of long-term debt $ 326 $ 385 Loans payable 14,532 13,271 Accounts payable 92,249 87,611 Accrued liabilities 104,361 116,098 U.S. and foreign taxes on income 20,509 16,150 - ------------------------------------------------------------------------------------------------------------------------- Total Current Liabilities 231,977 233,515 Long-Term Debt 213,790 286,772 Other Liabilities 22,746 25,927 Accrued Postretirement Benefits 29,653 31,709 Accrued Pension Liabilities 10,536 8,798 Deferred Income Taxes 28,386 25,866 Preferred Shares, par value $.01; 5,000,000 shares authorized -- -- Common Shareholders' Equity: Common shares, par value $1.00; Authorized: 200,000,000 Issued: 72,426,139 shares; Outstanding: 60,426,161 shares (62,802,471 in 1999) after deducting 11,999,978 shares in treasury (9,623,668 in 1999) 72,426 72,426 Capital surplus 101,144 98,289 Retained earnings 720,864 623,421 Accumulated other comprehensive income (loss) (31,096) (22,481) Common shares held in treasury (256,575) (203,545) - ------------------------------------------------------------------------------------------------------------------------- Total Common Shareholders' Equity 606,763 568,110 - ------------------------------------------------------------------------------------------------------------------------- $ 1,143,851 $ 1,180,697 =========================================================================================================================
See Notes to Consolidated Financial Statements. -- Crane Co / 2000 Annual Report 16 -- - -------------------------------------------------------------------------------- Consolidated Statements of Cash Flows - --------------------------------------------------------------------------------
For Years Ended December 31, (in thousands) 2000 1999 1998 - ----------------------------------------------------------------------------------------------------------------------- Operating Activities: Income from continuing operations $ 123,729 $ 100,898 $ 124,842 Non-cash special charges -- 16,765 -- Gain on sale of assets (26,646) (2,582) -- Depreciation and amortization 55,281 62,312 55,873 Deferred income taxes (2,689) 6,489 4,412 Cash provided from (used for) operating working capital 5,338 36,678 (8,129) Other (3,837) (9,856) (4,279) - ----------------------------------------------------------------------------------------------------------------------- Total Provided from Operating Activities 151,176 210,704 172,719 - ----------------------------------------------------------------------------------------------------------------------- Investing Activities: Capital expenditures (29,977) (28,988) (48,743) Proceeds from disposition of capital assets 1,779 6,253 8,013 Purchase of equity investments -- (2,029) (750) Sale of equity investments 31,556 5,361 -- Payments for acquisitions, net of cash and liabilities assumed of $909 in 2000, $7,004 in 1999, and $13,725 in 1998 (11,921) (32,760) (177,512) Proceeds from divestitures 14,000 6,881 4,276 - ----------------------------------------------------------------------------------------------------------------------- Total Provided from (Used for) Investing Activities 5,437 (45,282) (214,716) - ----------------------------------------------------------------------------------------------------------------------- Financing Activities: Equity: Dividends paid (24,323) (26,704) (25,199) Reacquisition of shares-- open market (62,296) (124,024) (11,329) Reacquisition of shares-- stock incentive program (4,374) (780) (10,895) Stock options exercised 12,388 6,191 9,250 - ----------------------------------------------------------------------------------------------------------------------- (78,605) (145,317) (38,173) - ----------------------------------------------------------------------------------------------------------------------- Debt: Issuance of long-term debt 86,200 181,200 143,565 Repayments of long-term debt ( 158,576) (265,114) (5,317) Net increase (decrease) in short-term debt 2,393 (23,594) (19,929) - ----------------------------------------------------------------------------------------------------------------------- (69,983) (107,508) 118,319 - ----------------------------------------------------------------------------------------------------------------------- Total (Used for) Provided from Financing Activities (148,588) (252,825) 80,146 - ----------------------------------------------------------------------------------------------------------------------- Cash provided from (used for) discontinued operations -- 75,091 (31,381) Effect of exchange rate on cash and cash equivalents (344) (638) 905 - ----------------------------------------------------------------------------------------------------------------------- Increase (Decrease) in Cash and Cash Equivalents 7,681 (12,950) 7,673 Cash and cash equivalents at beginning of year 3,245 16,195 8,522 - ----------------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 10,926 $ 3,245 $ 16,195 - ----------------------------------------------------------------------------------------------------------------------- Detail of Cash Provided from (Used for) Operating Working Capital (Net of Effects of Acquisitions): Accounts receivable $ (9,810) $ 31,934 $ 276 Inventories 17,806 17,335 (11,266) Other current assets (140) 8,283 (5,129) Accounts payable 8,300 (5,688) (3,694) Accrued liabilities (13,002) (14,551) 6,449 U.S. and foreign taxes on income 2,184 (635) 5,235 - ----------------------------------------------------------------------------------------------------------------------- Total $ 5,338 $ 36,678 $ (8,129) - ----------------------------------------------------------------------------------------------------------------------- Supplemental Disclosure of Cash Flow Information: Interest paid $ 21,596 $ 28,726 $ 25,142 Income taxes paid $ 59,117 $ 54,825 $ 63,358 =======================================================================================================================
See Notes to Consolidated Financial Statements. -- Crane Co / 2000 Annual Report 17 -- - -------------------------------------------------------------------------------- Consolidated Statements of Changes in Common Shareholders' Equity - --------------------------------------------------------------------------------
Common Accumulated Total Shares Other Treasury Common Issued at Capital Retained Comprehensive Comprehensive Stock Shareholders' (in thousands except share data) Par Value Surplus Earnings Income Income (Loss) at Cost Equity - ----------------------------------------------------------------------------------------------------------------------------------- At January 1, 1998 $72,426 $ 89,624 $460,682 $ (16,550) $ (73,638) $532,544 =================================================================================================================================== Net income 138,438 $ 138,438 138,438 Cash dividends (25,199) (25,199) Reacquisition of 702,276 shares (22,224) (22,224) Exercise of stock options, 780,902 shares 9,250 9,250 Tax benefit -- exercise of stock options 6,638 6,638 Restricted stock awarded, 104,787 shares, net 876 4,397 5,273 Currency translation adjustment (1,486) (1,486) (1,486) - ----------------------------------------------------------------------------------------------------------------------------------- Comprehensive income 136,952 =================================================================================================================================== Balance December 31, 1998 72,426 96,262 574,797 (18,036) (82,215) 643,234 - ----------------------------------------------------------------------------------------------------------------------------------- Net income 114,570 114,570 114,570 Dividend of Huttig shares (42,382) (42,382) Cash dividends (26,704) (26,704) Reacquisition of 6,063,254 shares (126,469) (126,469) Exercise of stock options, 419,914 6,191 6,191 shares Tax benefit-- exercise of stock options 2,027 2,027 Restricted stock forfeited, 50,083 shares, net 3,140 (1,052) 2,088 Currency translation adjustment (4,445) (4,445) (4,445) - ----------------------------------------------------------------------------------------------------------------------------------- Comprehensive income 110,125 ================================================================================================================================== Balance December 31, 1999 72,426 98,289 623,421 (22,481) (203,545) 568,110 - ----------------------------------------------------------------------------------------------------------------------------------- Net income 123,729 123,729 123,729 Cash dividends (24,323) (24,323) Reacquisition of 3,068,375 shares (65,012) (65,012) Exercise of stock options 796,617 shares 12,388 12,388 Tax benefit -- exercise of stock options 2,855 2,855 Restricted stock forfeited, 104,552 shares, net (1,963) (406) (2,369) Currency translation adjustment (8,615) (8,615) (8,615) - ----------------------------------------------------------------------------------------------------------------------------------- Comprehensive income 115,114 ================================================================================================================================== Balance December 31, 2000 $72,426 $101,144 $ 720,864 $ (31,096) $(256,575) $606,763 ==================================================================================================================================
See Notes to Consolidated Financial Statements. - -- 18 Crane Co / 2000 Annual Report - -- - -------------------------------------------------------------------------------- Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- Accounting Policies Consolidation -- The consolidated financial statements include all majority-owned subsidiaries. Investments in affiliates over which the company exercises significant influence but which it does not control (generally 20% to 50% ownership) are accounted for under the equity method. All intercompany items have been eliminated. Use of Estimates -- The company's financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. 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 revenue and expense during the reporting period. Actual results may differ from those estimated. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the financial statements in the period in which they are determined to be necessary. Revenue Recognition -- Sales revenue is recorded when a product is shipped and title passes to the customer. Income Taxes -- Income tax expense is based on reported earnings before income taxes. Deferred income taxes reflect the impact of temporary differences between assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes using currently enacted tax rates. Net Income Per Share -- The company's basic earnings per share calculations are based on the weighted average number of common shares outstanding during the year. Diluted earnings per share gives effect to all dilutive potential common shares outstanding during the year. (In thousands, except per share data) 2000 1999 1998 - -------------------------------------------------------------------- Income from continuing operations $123,729 $100,898 $124,842 Income from discontinued operations -- 13,672 13,596 - -------------------------------------------------------------------- Net income $123,729 $114,570 $138,438 - -------------------------------------------------------------------- Average basic shares outstanding 60,919 66,981 68,555 Effect of dilutive stock options 480 479 813 - -------------------------------------------------------------------- Average diluted shares outstanding 61,399 67,460 69,368 - -------------------------------------------------------------------- Basic Net Income Per Share: Income from continuing operations $ 2.03 $ 1.51 $ 1.82 Income from discontinued operations -- .20 .20 - -------------------------------------------------------------------- Net Income $ 2.03 $ 1.71 $ 2.02 Diluted Net Income Per Share: Income from continuing operations $ 2.02 $ 1.50 $ 1.80 Income from discontinued operations -- .20 .20 - -------------------------------------------------------------------- Net Income $ 2.02 $ 1.70 $ 2.00 ==================================================================== Cash and Cash Equivalents -- Marketable securities with original maturities of three months or less are considered to be cash equivalents. Accounts Receivable -- Receivables are carried at net realizable value. A summary of the allowance for doubtful accounts at December 31, follows: (in thousands) for years ended December 31, 2000 1999 1998 - ----------------------------------------------------------------------- Balance at beginning of year $ 7,073 $ 6,199 $ 5,636 Provisions 7,093 5,928 2,665 Deductions (6,069) (5,054) (2,102) - ----------------------------------------------------------------------- Balance at end of year $ 8,097 $ 7,073 $ 6,199 ======================================================================= 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 $1.3 million in 2000, $2.7 million in 1999 and $.6 million in 1998. Replacement cost would have been higher by $21.4 million and $23.1 million at December 31, 2000 and 1999, respectively. Property, Plant and Equipment -- Depreciation is provided by the straight-line method over the estimated useful lives of the respective assets, which range from three to twenty-five years. -- Crane Co / 2000 Annual Report 19 -- Intangibles -- Intangible assets are being amortized on a straight-line basis over their estimated useful lives, which range from five to twenty years.The accumulated amortization was $22.9 million and $19.3 million at December 31, 2000 and 1999, respectively. Cost in Excess of Net Assets Acquired (Goodwill) -- 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 $69.4 million and $52.5 million at December 31, 2000 and 1999, respectively. Valuation of Long-Lived Assets -- The company periodically evaluates the carrying value of long-lived assets, including goodwill and other intangible assets, when events and circumstances warrant such a review.The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flow from such asset is separately identifiable and is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair market value of the long-lived asset. Fair market value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Stock-Based Compensation Plans -- The company records compensation expense for its stock-based employee compensation plans in accordance with the intrinsic-value method prescribed by APB No. 25, "Accounting for Stock Issued to Employees." Intrinsic value is the amount by which the market price of the underlying stock exceeds the exercise price of the stock option or award on the measurement date, generally the date of grant. Currency Translation -- Assets and liabilities of subsidiaries that prepare financial statements in currencies other than the U.S. dollar are translated at the rate of exchange in effect on the balance sheet date; results of operations are translated at the average rates of exchange prevailing during the year. The related translation adjustments are included in accumulated other comprehensive income (loss) in a separate component of common 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, 2000 and 1999. In addition, the company periodically uses option contracts and forward foreign exchange contracts to hedge anticipated transactions and firm purchase and sale commitments. Gains and losses on such contracts that are qualifying hedges are deferred and recognized as part of the related transactions. All other contracts are marked to market on a current basis and the respective gains and losses are recognized in other income (expense). At December 31, 2000, the company was a party to a euro-denominated call option with a notional amount of 50 million euros expiring in March 2001, related to the Alfa Laval acquisition which is expected to close by the end of April 2001.The fair value of this instrument was $4.2 million at December 31, 2000 and is included in other current assets. Recently Issued Accounting Standards -- The company is required to implement the Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities", in the first quarter of fiscal 2001. The company has historically made limited use of derivative instruments and financial hedges.The impact of the new accounting pronouncement on the financial statements will be immaterial. In December 1999, the Securities and Exchange Commission staff released Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" (SAB 101), which provides guidance on the recognition, presentation and disclosure of revenue in financial statements and which was effective in the fourth quarter of 2000.The adoption of SAB 101 did not have a material effect on the company's financial position or results of operations. Special Charges The pre-tax special charges of $35.0 million taken in 1999 were principally for a series of actions to reduce the fixed cost base in Aerospace, Engineered Materials, Fluid Handling and Controls by closing or consolidating facilities, reducing staff, rationalizing product lines and for other unusual items. In total, five manufacturing facilities have been closed or ceased production. Severance costs have been recognized in connection with the involuntary termination of 550 employees, of whom 380 were terminated prior to December 31, 1999, and the remainder were terminated in 2000. Expenditures in 2000 for these facility closure and severance costs that exceeded the amounts accrued at December 31, 1999, were charged to the income statement in 2000.The asset impairments and disposals were the result of management's decision to close certain manufacturing and peripheral facilities in the Fluid Handling segment.The impairments involve the write-off of goodwill related to certain businesses that were exited and the disposal of equipment. The goodwill was reduced to zero and the equipment was reduced to estimated fair valve, based on estimated proceeds from disposition. The charge was included in cost of sales. A summary of the special charges for the year ended December 31, 1999, is as follows: (in thousands) Total - -------------------------------------------------------- Severance costs $ 6,258 Facility closure costs 3,553 Product liability costs 7,347 Other items 1,064 - -------------------------------------------------------- Total cash $ 18,222 - -------------------------------------------------------- Inventory markdowns 12,248 Asset impairments and disposals 4,517 - -------------------------------------------------------- Total non-cash 16,765 - -------------------------------------------------------- Total $ 34,987 ======================================================== Research and Development Research and development and engineering costs are expensed when incurred.These costs were approximately $55.0 million, $58.9 million and $70.9 million in 2000, 1999 and 1998, respectively. Included in these amounts were approximately $6.7 million, $7.4 million and $15.8 million received in 2000, 1999 and 1998, respectively, for customer-sponsored research and development. - -- 20 Crane Co / 2000 Annual Report - -- Discontinued Operations On December 6, 1999, the company's Board of Directors approved the spin-off of its Huttig Building Products ("Huttig") subsidiary effective December 16, 1999, to shareholders of record as of December 8, 1999. Huttig common shares were distributed on the basis of one share of Huttig for every 4.5 shares of Crane Co. common stock. Prior to the spin-off, Huttig transferred $68 million to the company, which the company used to pay down debt. Huttig's results of operations and cash contributions to Crane have been reflected in the accompanying financial statements as a discontinued operation. Summarized financial information for discontinued operations is set forth below: (in thousands except per share amounts) 1999 1998 - -------------------------------------------------------------------------------- Net sales $ 760,723 $ 707,450 Income before taxes 21,833(a) 21,851 Net income 13,672 13,596 Diluted net income per share .20 .20 - -------------------------------------------------------------------------------- (a) Includes pension plan curtailment gain of $7.2 million. Miscellaneous -- Net (in thousands) for years ended December 31, 2000 1999 1998 - -------------------------------------------------------------------------------- Gain (loss) on disposition of capital assets $ (265) $ 1,712 $ 307 Gain on sale of equity investments and related product line 26,646(a) 2,582 -- Unrealized foreign exchange gain 2,597 -- -- Other (1,900) 51 (1,314) - -------------------------------------------------------------------------------- $ 27,078 $ 4,345 $ (1,007) - -------------------------------------------------------------------------------- (a) Reflects gain on sale of investment in Powec AS and related telecommunications power supply product line. Income Taxes Income (loss) before taxes is as follows: (in thousands) for years ended December 31, 2000 1999 1998 - -------------------------------------------------------------------------------- U.S. operations $174,879 $160,888 $ 176,030 Non-U.S. operations 15,481 (5,093) 16,759 - -------------------------------------------------------------------------------- $190,360 $155,795 $ 192,789 - -------------------------------------------------------------------------------- The provision for income taxes consists of: (in thousands) for years ended December 31, 2000 1999 1998 - -------------------------------------------------------------------------------- Current: U.S. federal tax $ 59,369 $ 41,007 $ 54,066 State and local tax 4,374 2,100 3,548 Non-U.S. tax 5,577 5,301 5,921 - -------------------------------------------------------------------------------- 69,320 48,408 63,535 - -------------------------------------------------------------------------------- Deferred: U.S. federal tax (5,656) 8,799 3,150 State and local tax (127) 2,194 386 Non-U.S. tax 3,094 (4,504) 876 - -------------------------------------------------------------------------------- (2,689) 6,489 4,412 - -------------------------------------------------------------------------------- Provision for income taxes $ 66,631 $ 54,897 $ 67,947 - -------------------------------------------------------------------------------- Reconciliation of the statutory U.S. federal rate to the effective tax rate is as follows: (in thousands) for years ended December 31, 2000 1999 1998 - -------------------------------------------------------------------------------- Statutory U.S. federal tax at 35% $ 66,631 $ 54,528 $ 67,476 Increase (reduction) from: Non-U.S. taxes 3,253 2,606 931 State and local taxes 2,761 2,879 2,595 Non-deductible goodwill 4,697 4,836 3,391 Foreign Sales Corporation (6,227) (6,033) (2,974) Other (4,484) (3,919) (3,472) - -------------------------------------------------------------------------------- Provision for income taxes $ 66,631 $ 54,897 $ 67,947 - -------------------------------------------------------------------------------- Effective tax rate 35.0% 35.2% 35.2% - -------------------------------------------------------------------------------- At December 31, 2000, the company had unremitted earnings of foreign subsidiaries of $100.8 million. Because these earnings, which reflect full provision for non-U.S. income taxes, are indefinitely reinvested in non-U.S. operations or can be remitted substantially free of additional tax, no provision has been made for taxes that might be payable upon remittance of such earnings. The components of deferred tax assets and liabilities included on the balance sheet at December 31 are as follows: (in thousands) December 31, 2000 1999 - ----------------------------------------------------------------- Deferred tax assets: Postretirement benefits $ 11,951 $ 12,333 Inventory 5,128 5,691 Insurance 6,141 6,259 Environmental 2,789 3,884 Tax loss and credit carryforwards 11,137 8,869 Deferred compensation 5,269 5,684 Other 24,362 15,792 - ----------------------------------------------------------------- Total 66,777 58,512 Less valuation allowance on tax loss and credit carryforwards 7,256 4,375 - ----------------------------------------------------------------- Total deferred tax assets, net 59,521 54,137 - ----------------------------------------------------------------- Deferred tax liabilities: Depreciation (34,816) (32,329) Intangibles (11,432) (12,668) Pension (10,204) (9,165) - ----------------------------------------------------------------- Total deferred liabilities (56,452) (54,162) - ----------------------------------------------------------------- Net deferred asset (liability) $ 3,069 $ (25) ================================================================= -- Crane Co / 2000 Annual Report 21 -- As of December 31, 2000, the company had net operating loss (NOL) carryforwards and tax credit carryforwards that will expire, if unused, as follows: Non-U.S. Non -U.S U.S. U.S. U.S. (in thousands) National R&D State Federal R&D year of expiration NOL Credit NOL NOL Credit - ---------------------------------------------------------------------------- 2000-2004 $ 1,005 $ -- $ 24,498 $ 803 $ -- After 2004 4,521 118 44,104 560 961 Indefinite 15,195 -- -- -- -- - ---------------------------------------------------------------------------- Total $ 20,721 $ 118 $ 68,602 $ 1,363 $ 961 ============================================================================ Deferred tax asset on tax carryforwards $ 6,651 $ 118 $ 2,930 $ 477 $ 961 ============================================================================ Of the total $11.1 million deferred tax asset on tax carryforwards at December 31, 2000, $7.3 million has been offset by the valuation allowance because of the uncertainty of ultimately realizing these future benefits. Accrued Liabilities (in thousands) December 31, 2000 1999 - ------------------------------------------------------------------- Employee-related expenses $ 49,746 $ 51,878 Insurance 10,060 9,202 Environmental 1,805 2,648 Warranty and product liability 10,899 13,473 Professional fees 2,125 2,781 Sales allowances 7,576 7,003 Customer advanced payments 2,202 1,772 Interest 4,446 4,478 Taxes other than income 2,400 3,285 Pensions 3,111 4,859 Other 9,991 14,719 - ------------------------------------------------------------------- $ 104,361 $ 116,098 =================================================================== Other Liabilities (in thousands) December 31, 2000 1999 - ------------------------------------------------------------------- Environmental $ 5,681 $ 7,337 Insurance 6,744 6,893 Minority interest 1,031 2,215 Other 9,290 9,482 - ------------------------------------------------------------------- $ 22,746 $ 25,927 =================================================================== Pension and Postretirement Benefits The company and most of its subsidiaries have defined benefit pension plans for their employees. The plans generally provide benefit payments using a formula based on length of service and final average compensation, except for some hourly employees for whom the benefits are a fixed amount per year of service. The company's policy is to fund at least the minimum amount required by the applicable governmental regulations. Postretirement health care and life insurance benefits are provided for certain domestic and non-U.S. employees hired before January 1, 1990, who meet minimum age and service requirements. The company does not pre-fund these benefits and has the right to modify or terminate the plan. The following table sets forth the amounts recognized in the company's balance sheet at December 31, for company-sponsored defined benefit pension and post-retirement benefit plans:
Pension Benefit Postretirement Benefits - ----------------------------------------------------------------------------------------------- (in thousands) December 31, 2000 1999 2000 1999 - ----------------------------------------------------------------------------------------------- Change in benefit obligation: Benefit obligation at beginning of year $ 317,892 $ 329,032 $ 16,997 $ 20,390 Service cost 9,503 12,574 165 146 Interest cost 20,724 20,427 1,331 1,163 Plan participants' contributions 773 964 1,144 1,445 Amendments (487) 1,334 -- (959) Actuarial (gain) loss (6,574) (24,813) 2,320 (1,569) Benefits paid (16,235) (15,837) (2,977) (3,619) Foreign currency exchange rate (gain) loss (10,161) (1,072) -- -- Acquisition/divestitures -- (4,717) -- -- - ----------------------------------------------------------------------------------------------- Benefit obligation at end of year 315,435 317,892 18,980 16,997 - ----------------------------------------------------------------------------------------------- Change in plan assets: Fair value of plan assets at beginning of year 451,114 436,508 Actual return on plan assets 14,215 26,939 Foreign currency exchange rate gain (loss) (15,608) (565) Employer contributions 566 1,019 Plan participants' contributions 773 964 Benefits paid (16,235) (15,837) Acquisition/divestitures -- 2,086 - ----------------------------------------------------------------------------------------------- Fair value of plan assets at end of year 434,825 451,114 - ----------------------------------------------------------------------------------------------- Funded status 119,390 133,222 (18,980) (16,997) Unrecognized actuarial (gain) loss (90,508) (105,194) (9,904) (13,848) Unrecognized prior service cost 1,765 1,793 (769) (864) Unrecognized transition (asset)/obligation (946) (4,694) -- -- - ----------------------------------------------------------------------------------------------- Prepaid benefit/ (accrued cost) $ 29,701 $ 25,127 $ (29,653) $ (31,709) ===============================================================================================
- -- 22 Crane Co / 2000 Annual Report - -- Pension Benefits - ---------------------------------------------------------------- (in thousands) December 31, 2000 1999 - ---------------------------------------------------------------- Balance sheet classification: Other assets $ 38,274 $ 29,505 Accrued liabilities (69) (1,719) Accrued pension liabilities (8,504) (2,659) - ---------------------------------------------------------------- $ 29,701 $ 25,127 ================================================================
(Dollars in thousands Pension Benefits Postretirement Benefits - ------------------------------------------------------------------------------------------- December 31, 2000 1999 1998 2000 1999 1998 - ------------------------------------------------------------------------------------------- Weighted average assumptions as of December 31: Discount rate 6.98% 6.92% 6.68% 7.75% 7.5% 6.75% Expected rate of return on plan assets 7.88% 8.12% 8.27% -- -- -- Rate of compensation increase 4.59% 4.53% 4.81% -- -- -- - ------------------------------------------------------------------------------------------- Components of net periodic benefit cost: Service cost $ 9,503 $ 12,574 $ 11,062 $ 165 $ 146 $ 173 Interest cost 20,724 20,427 18,860 1,331 1,163 1,378 Expected rate of return on plan assets (33,182) (32,461) (30,833) -- -- -- Amortization of prior service cost (872) (748) (678) (95) (95) -- Recognized net actuarial loss (gain) (3,503) (2,092) (1,161) (786) (959) (958) - ------------------------------------------------------------------------------------------- Net periodic (benefit) cost $ (7,330) $ (2,300) $ (2,750) $ 615 $ 255 $ 593 ===========================================================================================
The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets were $8.7 million, $8.0 million and $7.3 million, and $9.7 million, $8.8 million and $7.6 million, as of December 31, 2000 and 1999, respectively. At December 31, 2000, substantially all plan assets were invested in listed stocks and bonds.These investments included 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 $1.1 million in 2000 and 1999 and $1.0 million in 1998. The company's subsidiaries ELDEC Corporation and Interpoint Corporation have a money purchase plan to provide retirement benefits for all eligible employees. The annual contribution is 5% of each eligible participant's gross compensation. The contributions for 2000, 1999 and 1998 were $2.1 million, $2.5 million and $2.2 million, respectively. The company and its subsidiaries sponsor savings and investment plans that are available to eligible employees of the company and its subsidiaries. The company made contributions to the plans of approximately $5.4 million in 2000 and 1999 and $4.7 million in 1998. For the purpose of estimating the postretirement liability, the cost of covered benefits was assumed to increase 8.0% for 2000, and then to decrease gradually to 5.25% by 2005 and remain at that level thereafter. In 1999, the cost of covered benefits was assumed to increase 7.7%, and then to decrease gradually to 5.0% by 2005 and remain at that level thereafter. 1 Percentage 1 Percentage (in thousands) Point Increase Point Decrease - ----------------------------------------------------------------------------- Effect on total of service and interest cost components $ 120 $ 105 Effect on postretirement benefit obligation 1,296 1,149 - ----------------------------------------------------------------------------- Short-Term Financing The weighted average interest rate for loans payable, consisting of short-term bank borrowings of $14.5 million and $13.3 million at December 31, 2000 and 1999, was 6.7% and 5.9%, respectively. As of December 31, 2000, the company had unused domestic lines of credit totaling $150.0 million and unused foreign lines of credit totaling $21.1 million.These lines of credit are typically available for borrowings up to 364 days and are renewable at the option of the lender. Long-Term Financing (in thousands) December 31, 2000 1999 - ------------------------------------------------------------------- Crane Co. 8.50% notes due 2004 $ 100,000 100,000 Original issue discount (269) (352) Deferred financing costs (223) (290) - ------------------------------------------------------------------- 99,508 99,358 - ------------------------------------------------------------------- 6.75% notes due 2006 100,000 100,000 Original issue discount (215) (253) Deferred financing costs (703) (849) - ------------------------------------------------------------------- 99,082 98,898 - ------------------------------------------------------------------- Credit facility -- 66,800 Deferred financing costs (74) (88) - ------------------------------------------------------------------- (74) 66,712 - ------------------------------------------------------------------- Total Crane Co. 198,516 264,968 - ------------------------------------------------------------------- Subsidiaries Industrial revenue bonds 1,100 1,485 Various loans-- 6.0% average rate 14,500 20,704 - ------------------------------------------------------------------- Total Subsidiaries 15,600 22,189 - ------------------------------------------------------------------- Total long-term debt 214,116 287,157 Less current portion 326 385 - ------------------------------------------------------------------- Long-term debt, net of current portion $ 213,790 $ 286,772 =================================================================== Crane Co / 2000 Annual Report 23 -- At December 31, 2000, the principal amounts of long-term debt repayments required for the next five years are $.3 million in 2001, $2.3 million in 2002, $0 million in 2003, $113.0 million in 2004, and $0 million in 2005. At December 31, 2000, the company had a $300 million contractually committed long-term bank credit facility under which the company can borrow, repay or, to the extent permitted by the agreement, prepay loans and reborrow at any time prior to the termination date of November 2003. Proceeds may be used for general corporate purposes or to provide financing for acquisitions. The agreement contains certain covenants, including limitations on indebtedness and liens. No loans were outstanding under this agreement at year-end. The company also has a $300 million shelf registration filed with the Securities and Exchange Commission, all of which remains unissued. Fair Value of Financial Instruments The carrying value of investments and short-term debt approximates the fair value. Long-term debt rates currently available to the company for debt with similar terms and remaining maturities are used to estimate the fair value for debt issues that are not quoted on an exchange. The estimated fair value of long-term debt at December 31, 2000, was $217.9 million compared with a carrying value of $213.8 million. The company 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 the company for all uncollectible loans made to National Vendors' customers by the banks under this agreement is limited. Leases The company leases certain facilities, vehicles and equipment. Future minimum payments, by year, and in the aggregate, under leases with initial or remaining terms of one year or more consisted of the following at December 31, 2000: Minimum Operating Sublease (in thousands) December 31, Leases Income Net - ----------------------------------------------------------------- 2001 $ 8,235 $ 564 $ 7,671 2002 6,755 337 6,418 2003 5,741 337 5,404 2004 4,644 235 4,409 2005 3,565 160 3,405 Thereafter 2,763 102 2,661 - ----------------------------------------------------------------- Total minimum lease payments $31,703 $1,735 $29,968 ================================================================= Rental expense was $10.6 million, $9.7 million and $9.3 million for 2000, 1999 and 1998, respectively. Contingencies The company has established insurance programs to cover product and general liability losses.These programs have deductible amounts of $5 million per claim, $10 million aggregate per policy year before coverage begins, with the exception of aircraft products, and non-U.S. claims, which have first-dollar coverage.The company does not deem its deductible exposure to be material. As of December 31, 2000, the company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material effect on the company's financial condition and results of operations. The company continues to be involved in various remediation actions to clean up hazardous wastes as required by federal and state laws. Estimated future environmental remediation cost was $7.5 million at December 31, 2000, 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 $2.5 million on environmental costs in 2000, and expects to pay remediation costs of approximately $1.8 million in 2001.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 PRP at certain third-party environmental remediation sites where remediation obligations are joint and several, and the company, as part of its estimate of potential liability, periodically reviews whether the major PRPs have the ability to fulfill their portion of such remediation obligations. The company is not aware of any significant additional liability that would result from the inability of other PRPs to fulfill their obligations. Overall, the company's liability for the required remedial actions being implemented or engineered is not, individually or in the aggregate, expected to be material. As of December 31, 2000, the company was a defendant (among a number of defendants, typically 15 to 40) in approximately 5,460 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. The liability recorded for asbestos claims constitutes management's best estimate of such costs for pending and future claims.The company cautions, however, that inherent in its estimate of liabilities are expected trends in claim severity, frequency, and other factors, which may vary as claims are filed and settled or otherwise disposed of. Accordingly, these matters, if resolved in a manner different from the estimate, could have a material effect on the operating results or cash flows in future periods. While it is not possible to predict with certainty the ultimate outcome of these lawsuits and contingencies, the company believes, after consultation with counsel, that resolution of these matters is not expected to have a material effect on the company's financial position or liquidity. 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. - -- 24 Crane Co / 2000 Annual Report - -- During 2000, the company completed two acquisitions at a total cost of $11.9 million. In March, the company acquired Streamware Corporation, a privately-held company based in Norwood, Massachusetts, and a leading provider of business management software and market analysis tools for the vending and food service industry. In December, the company acquired the assets of the Valve Repair Division of Groth Corporation, which will make it possible to expand into safety valve testing and repair in the Key Houston, Texas, market. Cost in excess of net assets acquired for these two acquisitions amounted to $8.5 million and is being amortized over 15 years. In December 2000, the company entered into an agreement to purchase the Industrial Flow Group of Alfa Laval Holding for approximately $47 million.This transaction is expected to close by the end of April 2001. In October 1999, the company acquired Stentorfield, Ltd., based in Chippenham, England, for $32.8 million. Stentorfield, a designer and manufacturer of beverage vending machines, serves the U.K. and European markets with a broad line of full-size and tabletop products for the hotel, restaurant, office coffee service and vending industries.This business was integrated with the company's National Vendors business, and allows National Vendors to provide a "one-stop" product offering of snack, food and beverage machines for the U.K. and European markets. Costs in excess of net assets acquired amounted to $24.3 million and is being amortized over 20 years. During 1998, the company completed four acquisitions at a total cost of $178 million. In May, the company acquired Environmental Products USA, Inc. This business manufactures membrane-based water treatment systems for industrial, commercial and institutional markets. In August, the company acquired Sequentia Holdings, Inc., a manufacturer of fiberglass-reinforced plastic panels for the construction and building products markets. Sequentia complements the company's Kemlite subsidiary, which provides fiberglass-reinforced plastic panels for the transportation and recreational vehicle markets. In September, the company acquired Liberty Technologies, Inc., which develops, manufactures, markets and sells valve, motor, engine and compression condition monitoring products and related services to the nuclear power generation and industrial process markets worldwide. Liberty complements the company's nuclear valve business, which provides valves, valve diagnostic equipment and related services to the nuclear power industry, and the company's Dynalco Controls business, which provides sensors, instrumentation, control products and automation systems for use in industrial engine applications. Also in the fourth quarter of 1998, the company acquired the Plastic-Lined Piping Products division of The Dow Chemical Company. PLPP was integrated with the company's Resistoflex division, which supplies lined pipe and valves to the chemical process and industrial markets. Costs in excess of net assets acquired of $130 million related to the 1998 acquisitions is being amortized over a period ranging from fifteen to twenty years. All acquisitions were accounted for by the purchase method. The results of operations for all acquisitions have been included in the financial statements from their respective dates of purchase. The following unaudited pro forma financial information presents the combined results of operations of the company and Environmental Products, Sequentia, Liberty Technologies and Plastic-Lined Piping Products as if the acquisitions had taken place at the beginning of 1998. The pro forma amounts give effect to certain adjustments, including the amortization of goodwill and intangibles, increased interest expense and income tax effects. This pro forma information does not necessarily reflect the results of operations as they would have been if the businesses had been managed by the company during these periods and is not indicative of results that may be obtained in the future. Pro forma 1998 results are as follows: net sales revenue of $1.64 billion, net income of $121.2 million and diluted net income per share of $1.75. Pro forma amounts for 1999 and 2000 acquisitions were not presented because their impact on results was not material. In May 2000, the company sold its interest in Powec AS, a Norwegian manufacturer of power supplies for the telecommunications industry. In addition, the company's wholly owned ELDEC Corporation subsidiary sold its related telecommunications power supply product line to the same company. Total consideration for both businesses was $45.6 million. The company accounted for its investment in Powec AS using the equity method. In April 1999, the company sold Southwest Foundry, acquired as part of the Stockham Valves & Fittings, Inc. transaction, for $.4 million. In December 1999, the company sold its Crane Defense Systems business for $6.4 million in cash and a $.8 million note due in 2002. In May 1998, the company sold two foundry operations acquired as part of the Stockham Valves & Fittings, Inc. transaction. Accu-Cast, Inc. and the Aliceville Foundry were sold for a total of $4.3 million. Preferred Share Purchase Rights On June 27, 1998, the company adopted a Shareholder Rights Plan to replace the existing Plan, which expired on that date. The company distributed one preferred share purchase right for each outstanding share of common stock.The preferred rights were not exercisable when granted and may only become exercisable under certain circumstances involving actual or potential acquisitions of the company's common stock by a person or affiliated persons. Depending upon the circumstances, if the rights become exercisable, the holder may be entitled to purchase shares of the company's Series A Junior Participating Preferred Stock, or shares of common stock of the acquiring person. Preferred shares purchasable upon exercise of the rights will not be redeemable. Each preferred share will be entitled to preferential rights regarding dividend and liquidation payments, voting power and, in the event of any merger, consolidation or other transaction in which common shares are exchanged, a preferential exchange rate. The rights will remain in existence until June 27, 2008, unless they are earlier terminated, exercised or redeemed. The company has authorized five million shares of $.01 par value preferred stock, of which 500,000 shares have been designated as Series A Junior Participating Preferred Stock. -- Crane Co / 2000 Annual Report 25 -- 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 Stock Compensation 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.The net reversal of previously recorded compensation expense under the company's restricted stock award plans was $2.3 million in 2000, while compensation expense recognized for such plans was $2.1 million in 1999 and $5.0 million in 1998. The pro forma net income and earnings per share listed below reflect the impact of measuring compensation expense for options granted in 2000, 1999 and 1998 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 2000 1999 1998 share data) - ---------------------------------------------------------------------------- Net income As reported $ 123,729 $ 114,570 $ 138,438 Pro forma 117,073 108,340 133,071 Net income per share Basic As reported 2.03 1.71 2.02 Pro forma 1.92 1.62 1.94 - ---------------------------------------------------------------------------- Diluted As reported 2.02 1.70 2.00 Pro forma 1.91 1.61 1.92 - ---------------------------------------------------------------------------- The weighted average fair value of options granted was $5.91 per share in 2000, $5.66 per share in 1999 and $11.01 per share in 1998. These estimates were based on the Black-Scholes multiple option-pricing model with the following weighted average assumptions: 2000 1999 1998 - ----------------------------------------------------------------------------- Dividend yield 2.00% 1.85% .92% Volatility 26.46% 25.14% 24.22% Risk-free interest rates 6.64% 5.07% 5.60% Expected lives in years 5.11 5.12 5.29 - ----------------------------------------------------------------------------- Options are granted under the Stock Option Plan to officers, other key employees and directors 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% after the first year, 75% after the second year and 100% after the third year from the date of grant, and expire ten years after the date of grant. A summary of stock option activity follows: Weighted Number Average (Shares in thousands) of Shares Exercise Price - ------------------------------------------------------------------------------- 1998 - ------------------------------------------------------------------------------- Options outstanding at beginning of year 3,603 $14.67 Granted 1,482 33.44 Exercised (847) 10.97 Canceled (28) 23.12 - ------------------------------------------------------------------------------- Options outstanding at end of year 4,210 21.95 Options exercisable at end of year 2,184 14.76 1999 - ------------------------------------------------------------------------------- Granted 1,577 21.66 Exercised (456) 13.59 Canceled (194) 28.20 - ----------------------------------------------------------------------------- Options outstanding at end of year 5,137 22.36 Options exercisable at end of year 2,718 20.11 2000 - ----------------------------------------------------------------------------- Granted 1,134 20.46 Exercised (797) 15.52 Canceled (532) 27.07 - ----------------------------------------------------------------------------- Options outstanding at end of year 4,942 22.52 Options exercisable at end of year 3,045 22.48 - ----------------------------------------------------------------------------- A summary of information regarding stock options outstanding at December 31, 2000, follows: (Shares in thousands) Options Outstanding Options Exercisable - ------------------------------------------------------------------------------- Weighted Weighted Weighted Number Average Average Number Average Range of of Remaining Exercise of Exercise Exercise Prices Shares Life (Years) Price Shares Price - ------------------------------------------------------------------------------- $ 25.63-33.54 1,101 7.30 $33.51 825 $33.51 17.16-24.62 2,906 8.31 21.05 1,285 21.47 10.45-16.96 935 4.13 14.13 935 14.13 - ------------------------------------------------------------------------------- The Restricted Stock Award Plan provides for awards of common stock to officers and other key employees, subject to resale restrictions which lapse over time.The company awarded 287,800 shares with a weighted average fair value of $23.00 in 2000. As of December 31, 2000, there were available for future awards a total of 998,948 shares. Under the Non-Employee Director Stock Compensation Plan, directors who are not full-time employees of the company receive the portion of their annual retainer that exceeds $15,000 in shares of common stock. The shares are issued each year after the company's annual meeting, are forfeitable if the director ceases to remain a director until the company's next annual meeting, and may not be sold for a period of five years, or until the director leaves the Board. Also under this plan, at the date of the annual meeting, each non-employee director is granted an option to purchase 2000 shares of common stock at an exercise price equal to the fair market value of the shares on the date of grant exercisable at a rate of 50% after the first year, 75% after the second year and 100% after the third year from the date of grant, expiring ten years after the date of grant. Further, upon the adoption of this plan in 2000, each non- employee director received a grant of options to purchase common stock with an aggregate value determined on the basis of the Black-Scholes method, equal to his accrued benefit under a retirement plan for non-employee directors, which was terminated. One director elected to remain in the retirement plan and did not receive options under the new plan. As a group, non-employee directors received 5,040 shares with a weighted average fair value of $24.00 in 2000, and approximately 120,000 options to purchase shares at an exercise price of $23.69 per share. - -- 26 Crane Co / 2000 Annual Report - -- Segment Information The company's segments are reported on the same basis used internally for evaluating segment performance and for allocating resources. The company has five segments: Aerospace, Engineered Materials, Merchandising Systems, Fluid Handling and Controls. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The company accounts for intersegment sales and transfers as if the sales or transfers were to third parties at current market prices. Information by industry segments follows: (in thousands) 2000 1999 1998 - ----------------------------------------------------------------------------- Aerospace - ----------------------------------------------------------------------------- Net Sales-- Outside $ 346,823 $ 363,128 $ 394,401 Net Sales-- Intersegment -- -- 65 Operating Profit 83,650 96,078(a) 118,175 Assets 258,735 269,154 296,668 Capital Expenditures 8,652 8,245 17,515 Depreciation and Amortization 13,337 13,041 12,563 Engineered Materials - ----------------------------------------------------------------------------- Net Sales-- Outside 341,988 353,534 275,969 Net Sales-- Intersegment 2,017 3,539 2,985 Operating Profit 49,512 59,879(a) 39,655 Assets 228,632 249,961 263,576 Capital Expenditures 4,265 4,380 6,094 Depreciation and Amortization 13,846 14,085 9,633 Merchandising Systems - ----------------------------------------------------------------------------- Net Sales-- Outside 220,557 201,941 191,927 Net Sales-- Intersegment -- -- -- Operating Profit 31,284 35,838 33,548 Assets 159,912 150,197 117,858 Capital Expenditures 6,182 6,979 2,815 Depreciation and Amortization 8,977 7,128 7,201 Fluid Handling - ----------------------------------------------------------------------------- Net Sales-- Outside 461,016 502,170 554,210 Net Sales-- Intersegment 38 57 3,567 Operating Profit 31,751 22,870(a) 34,961 Assets 308,717 330,528 393,277 Capital Expenditures 8,064 6,390 17,195 Depreciation and Amortization 13,258 16,829 13,101 Controls - ----------------------------------------------------------------------------- Net Sales-- Outside 120,806 120,166 131,052 Net Sales-- Intersegment 1,083 1,051 1,265 Operating (Loss) Profit (2,139) 4,071(a) 8,927 Assets 117,955 129,240 127,702 Capital Expenditures 2,128 1,905 4,264 Depreciation and Amortization 6,619 6,866 6,555 - ----------------------------------------------------------------------------- (a) Before special charges for Aerospace ($9.0 million), Engineered Materials ($3.2 million), Fluid Handling ($18.9 million), Controls ($3.4 million) and Corporate ($.4 million). (in thousands) 2000 1999 1998 - ------------------------------------------------------------------------------- Consolidated Net Sales Reportable Segments $1,494,328 $ 1,545,586 $1,555,441 Other -- 12,717 13,496 Intersegment Elimination (3,138) (4,646) (7,882) - ------------------------------------------------------------------------------- Total Net Sales $1,491,190 $ 1,553,657 $1,561,055 =============================================================================== Operating Profit Reportable Segments $ 194,058 $ 218,736 $ 235,266 Other -- (546) (424) Corporate (10,092) (13,598)(a) (22,937) Special Charges -- (34,987)(a) -- Intersegment Elimination 60 (51) 56 - ------------------------------------------------------------------------------- Total Operating Profit $ 184,026 $ 169,554 $ 211,961 =============================================================================== Assets Reportable Segments $1,073,951 $ 1,129,080 $1,199,081 Other 2,970 2,970 13,003 Corporate 66,930 48,647 46,987 Net Assets of Discontinued Operations -- -- 120,660 - ------------------------------------------------------------------------------- Total Assets $ 1,143,851 $ 1,180,697 $1,379,731 =============================================================================== Capital Expenditures Reportable Segments $ 29,291 $ 27,899 $ 47,883 Other -- 274 810 Corporate 686 815 50 - ------------------------------------------------------------------------------- Total Capital Expenditures $ 29,977 $ 28,988 $ 48,743 =============================================================================== Depreciation and Amortization Reportable Segments $ 56,037 $ 57,949 $ 49,053 Other -- 335 269 Corporate (756) 4,028 6,551 - ------------------------------------------------------------------------------- Total Depreciation and Amortization $ 55,281 $ 62,312 $ 55,873 =============================================================================== Information by geographic segments follows: (in thousands) 2000 1999 1998 - ------------------------------------------------------------------------------- Net Sales United States $ 950,320 $ 1,012,090 $ 977,587 Canada 207,089 202,899 194,723 Europe 222,992 238,320 260,607 Other International 110,789 100,348 128,138 - ------------------------------------------------------------------------------ Total Net Sales $ 1,491,190 $ 1,553,657 $ 1,561,055 =============================================================================== Operating Profit United States $ 126,538 $ 140,362 $ 139,863 Canada 14,353 10,351 14,673 Europe 30,291 8,465 37,715 Other International 12,844 10,376 19,710 - ------------------------------------------------------------------------------ Total Operating Profit $ 184,026 $ 169,554 $ 211,961 =============================================================================== Assets United States $ 905,252 $ 923,215 $ 1,126,438 Canada 81,672 91,367 81,570 Europe 138,232 148,715 151,950 Other International 18,695 17,400 19,773 - ------------------------------------------------------------------------------ Total Assets $ 1,143,851 $ 1,180,697 $ 1,379,731 =============================================================================== -- Crane Co / 2000 Annual Report 27 -- - -------------------------------------------------------------------------------- Management's Responsibility for Financial Reporting - -------------------------------------------------------------------------------- The accompanying consolidated financial statements of Crane Co. and subsidiaries have been prepared by management in conformity with accounting principles generally accepted in the United States of America 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/ M L Raithel M. L. Raithel Vice President, Finance and Chief Financial Officer - -------------------------------------------------------------------------------- Independent Auditors' Report - -------------------------------------------------------------------------------- Deloite & Touche To the Shareholders of Crane Co. We have audited the accompanying consolidated balance sheets of Crane Co. and its subsidiaries ("the Company") as of December 31, 2000 and 1999, 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, 2000. 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 auditing standards generally accepted in the United States of America.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, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. /s/ Deloitte & Touche LLP Stamford, Connecticut January 16, 2001 - -- 28 Crane Co / 2000 Annual Report - -- - -------------------------------------------------------------------------------- 1999 Review Management's Discussion and Analysis of Operations - -------------------------------------------------------------------------------- Aerospace - -------------------------------------------------------------------------------- (dollars in millions) 1999 1998 - ------------------------------------------------------------- Sales $ 363.1 $ 394.5 Operating Profit 87.1 118.2 Operating Profit* 96.1 118.2 Gross Margin* 45.0% 47.2% Operating Margin* 26.5% 30.0% - ------------------------------------------------------------- *Before special charges of $9.0 million in 1999. Aerospace continued to be Crane's most profitable segment, but sales fell below the exceptionally strong 1998 results, and margins and operating profit declined. Order backlog totaled $233 million at December 31, 1999, compared with $281 million in the prior year. Special charges recorded in the third and fourth quarters of 1999 reflect costs incurred to reduce staffing levels, rationalize product lines, and address a product warranty issue. The cost of these actions totaled $9 million ($5.5 million cash, $3.5 million non-cash). Staff levels in the Aerospace businesses were reduced by 446 people, or 18%, from the beginning of 1999. Boeing, the segment's largest single customer, built more airplanes in 1999, but fewer widebody, twin-aisle versions that utilize more Crane products. The resulting drop in sales to Boeing was greater than expected. So, too, was a decline in sales of provisioning spares, normally purchased by aircraft operators when new models go into service. ELDEC, which provides power supplies and proximity systems for Boeing and other airframe manufacturers, had lower sales of replacement parts because of improved reliability of its products, coupled with customers' more sophisticated purchasing and inventory control. In a major strategic move, the segment's four companies --ELDEC, Hydro-Aire, Interpoint and Lear Romec -- formally became part of Crane Aerospace in August 1999.The combination was made in order to provide critical mass in dealing with original equipment manufacturers and airlines and, through integrating products, to significantly expand Crane's product/system offerings. At the new Crane Aerospace Technology Center, located in Lynnwood, Washington, Hydro-Aire and ELDEC worked on a weight-saving integrated brake control product. Three of the companies -- Lear Romec was the exception --had lower sales, and all four had lower operating profit. The companies reacted quickly to the downturn with aggressive cost cutting, staff reductions, and process improvements. At ELDEC, a quick-response version of lean manufacturing techniques cut cycle times by 20% and halved the volume of work-in-process. Six Sigma projects focused on eliminating unnecessary work from the production process. Hydro-Aire reduced costs through Six Sigma projects, work force reductions, long-term supplier agreements and process reengineering. A focused factory production approach boosted on-time deliveries to well over 90%. Interpoint imposed spending cuts and work force reductions as sales and bookings fell sharply, reflecting lower aerospace business, the loss of a key medical product program, and the residual effects of the company's production problems in 1997. Interpoint's strong 1998 sales and earnings reflected its success in cleaning up delinquent backlog, making for a difficult comparison with 1999. Lear Romec had a solid gain in sales of its fuel, lube and scavenge pumps, but slightly lower operating profit and margin, reflecting higher manufacturing costs. The company sells to aircraft engine makers and also to airframe manufacturers, such as Boeing, Airbus, Bombardier, Embraer, Learjet and Cessna. Aggressive sales and new-product initiatives had a positive impact in 1999. ELDEC, the market leader in aircraft proximity sensing systems and power supplies, was chosen to equip the new Embraer 70 and 90 regional jets. Its new battery charging system was chosen for installation in all new Boeing aircraft except the 777 and is being retrofitted by many airlines. ELDEC also became the exclusive supplier to the Displays and Controls Division of Britain's Smiths Industries for high- and low-voltage power supplies for commercial and military aircraft avionics systems. Hydro-Aire, the world leader in aircraft anti-skid brake control systems, recorded solid gains in general aviation and repair and overhaul sales, despite lower overall original equipment manufacturer (OEM) and after-market sales. It won all four of the new jet aircraft contracts for which it competed, including the Bombardier 100 and Cessna 525 business jets, and the Embraer 140 and 170/190 regional jet families. Interpoint focused its microelectronic product development efforts on medical markets, which were expected to grow 17% annually through 2006, and on custom and aerospace applications, including higher-voltage input/lower-voltage output power converters. -- Crane Co / 2000 Annual Report 29 -- Engineered Materials - -------------------------------------------------------------------------------- (dollars in millions) 1999 1998 - ------------------------------------------------------------- Sales $ 357.1 $ 279.0 Operating Profit 56.7 39.7 Operating Profit* 59.9 39.7 Gross Margin* 25.8% 23.6% Operating Margin * 16.8% 14.2% - ------------------------------------------------------------- *Before special charges of $3.2 million in 1999. Sales, operating profit and operating margin increased to record levels in the Engineered Materials segment, fueled by internal growth and acquisition-related gains at Kemlite and Resistoflex. Operating profit increased by 51% before special charges of $3.2 million on a 28% sales gain, as two of the segment's five businesses improved their results. Operating profit after special charges was $56.7 million. Order backlog at year-end totaled $25 million, up $1 million from the prior year. Special charges were principally for a product liability issue related to a Crane Plumbing facility closed in 1990. Kemlite, the largest business, had a record year, with sales and operating profit up 40% and 58%, respectively, largely because of full-year results from its Sequentia acquisition. Kemlite's core business -- fiberglass-reinforced-plastic liner panels and translucent roofs for trucks and trailers and side panels for recreational vehicles -- grew 15% overall. Kemlite's shipments to the truck and trailer markets, expected to decline in 1999, instead rose 8%, and shipments to the RV market increased 23% as RV unit volume exceeded 300,000 for the first time. Kemlite, the industry leader in both markets, also benefited as supplier to the faster-growing RV manufacturers. Sales of building products gained 11%. International sales jumped 23% on sales of $1.6 million for military shelters for British troops in Kosovo and strong fourth-quarter sales in Canada and South Korea. The company also opened a sales office in Shanghai. Kemlite successfully introduced its new fiber-free, higher-gloss Medallion(R) panels to the RV market and improved manufacturing efficiency at all three plants through Six Sigma and other cost-reduction efforts. CorTec, Crane's other manufacturer of fiberglass-reinforced materials, saw sales drop 25% from 1998 and reported a loss for the year, as several trailer fleets switched away from CorTec's fiberglass-reinforced plywood side panels to other materials. High mid-year plywood costs, lower volume and aggressive pricing to gain market share in truck body panels lowered operating profit and margin. CorTec incurred additional development expenses for its Encor(R) product, in which a foam core replaces plywood. CorTec implemented a new, customer-focused enterprise resource planning system, and has reduced Encor(R) production costs through Six Sigma projects. Resistoflex enjoyed its best year, with sales and operating profit up sharply, principally as a result of its fourth-quarter 1998 acquisition of Plastic-Lined Piping Products. Resistoflex achieved those results despite a cyclical downturn in the global chemical processing industry, a major user of its corrosion-resistant, Teflon-lined pipe, fittings and hoses, and a slowdown in its military business as the government ended production of the F-15 fighter. Successful integration of Plastic-Lined Piping Products into its operations yielded important production, administrative, sales and supply chain synergies. A new ERP system linked the company's plants in Marion, North Carolina, and Bay City, Michigan, with the defense business in Jacksonville, Florida. Resistoflex also introduced its flangeless Conquest(R) system for creating leakproof, welded connections of Teflon-lined pipe, designed to address safety and environmental concerns and reduce installation and maintenance costs. It also acquired a new facility in Singapore to serve the strengthening Asian chemical and pharmaceutical markets. Crane Plumbing increased sales by 7%, but price competition and substantial investments in new product and sales initiatives led to a loss for the year before a special charge of $3.1 million for a product liability issue related to a facility that was closed in 1990. The company gained volume and share in Canadian retail markets, and supplied every major retailer with Crane china and steel lavatories, toilets, tubs and showers, with Home Depot as its largest customer. From a modest base, sales to U.S. wholesale customers increased. Wholesale volume in Canada dipped as construction declined in Quebec and British Columbia, but sales increased in the key Ontario market. A new ERP system and several Six Sigma projects achieved significant cost reductions. Polyflon, Crane's smallest business, improved its operating profit on slightly lower sales of its capacitors and proprietary microwave materials. - -- 30 Crane Co / 2000 Annual Report - -- Merchandising Systems - -------------------------------------------------------------------------------- (dollars in millions) 1999 1998 - ------------------------------------------------------------- Sales $ 201.9 $ 191.9 Operating Profit 35.8 33.5 Gross Margin 36.4% 36.2% Operating Margin 17.7% 17.5% - ------------------------------------------------------------- The Merchandising Systems segment achieved a 7% earnings gain in 1999 on a 5% increase in sales. National Rejectors, Crane's European coin-validation equipment business, generated a significant operating profit increase. At National Vendors, the larger of the segment's two businesses, sales advanced moderately despite a flat domestic market, stiff price competition in European markets, and delayed introduction of new Office Coffee Service products. National Vendors held onto and expanded its 1998 market share gains. The October 1999 acquisition of Stentorfield, Ltd., a leading U.K. manufacturer of coffee machines, gave National Vendors a needed strong entry into Europe's large coffee machine market. National Vendors, with its new Millennia-styled machines, was already the clear market leader in snack and food machines in the U.K. but its coffee machines were less popular. National Vendors integrated Stentorfield products into its strong snack and food machine businesses in France and Germany, and has folded its U.K. unit, UMC, into Stentorfield to provide both Office Coffee Service and snack and food machine sales and service to the U.K. and certain European distributors. Although sales were flat in the U.K. and declined slightly in France, National Vendors' German unit had a banner year, with successful marketing initiatives aimed primarily at Germany but also at Holland,Austria, Hungary and the Middle East.The company took share from competitors in the German market by focusing on quality service. After a worldwide competition, National Vendors received its largest order ever late in the year from Smith's, a leading Australian snack company owned by PepsiCo, giving the company a strong, immediate presence in a large, new overseas market. National Vendors increased its penetration of Latin American markets by winning other large orders from Nestle Mexico, considered a bellwether for other Nestle units in the region, and Sodexho, a French worldwide catering company that selected National Vendors as its preferred vending machine supplier for Chile and Argentina. National Rejectors (NRI) increased sales of its coin changers and validators by 12% on solid demand for its new four-tube changer and its electronic coin-validation equipment for outdoor cigarette machines. Improved manufacturing efficiency and lowered costs for some products, largely the result of Six Sigma cost reduction projects, strengthened margins, leading to a strong operating profit gain. Delays by some European mints in issuing sample euro coins continued to slow the process of finalizing software requirements to operate euro-capable changers and validators, leading many NRI customers to postpone orders. NRI's sales were strong in Spain and France, but slower in the highly competitive U.K. market. Sales to Canada for the Canadian lottery declined slightly, but volume in Chile, where NRI products are used in bus ticketing, was strong. Fluid Handling - -------------------------------------------------------------------------------- (dollars in millions) 1999 1998 - ------------------------------------------------------------- Sales $ 502.2 $ 557.8 Operating Profit 4.0 35.0 Operating Profit* 22.9 35.0 Gross Margin* 21.8% 22.8% Operating Margin* 4.6% 6.3% - ------------------------------------------------------------- *Before special $18.9million in charges of 1999. Sales and operating profit dropped significantly in Crane's Fluid Handling business. Before special charges of $18.9 million, operating profit totaled $22.9 million, or 4.6% of sales, compared with $35 million, or 6.3% of sales, in 1998. After special charges, operating profit was $4.0 million, or .8%, for the year. Order backlog at December 31, 1999, was $79 million, down $5 million from the prior year. -- Crane Co / 2000 Annual Report 31 -- Fluid Handling's results in 1999 were severely impacted by weak demand from the oil and gas industry and Asian markets. Engineered and commercial valve shipments declined 29% and 20%, respectively, and the pump/water treatment business operating margin declined to 8.5% of sales (before $.7 million in special charges), compared with 11.3% in 1998, because of exceptional workers' compensation, medical and product warranty expenses. On the positive side, operating profit in the Valve Services business and Crane Supply were up 45% and 13%, respectively, on higher revenue. To address the business downturn, actions were taken in the third and fourth quarters to reduce significantly the fixed cost structure of Fluid Handling businesses.These actions included closure of four manufacturing facilities and five peripheral facilities, staff reductions, and product line rationalizations. The cost of these actions totaled $18.9 million, comprising $6.1 million in cash expenditures and $12.8 million in non-cash asset write-downs. The global weakness in the oil and gas industry, including key North Sea and Asian markets, severely curtailed sales of engineered valves, which are designed for specific applications or customers. Two manufacturing facilities were closed in 1999 to reduce fixed costs related to this specific market, and staffing levels were reduced by 239 people, or 27%, from the beginning of the year. New products introduced in 1999 included a triple offset rotary valve for high-pressure, high-temperature applications in power plants and hydrocarbon production, and two series of butterfly valves for the food and beverage and industrial markets. Introduction of a complete line of pneumatic and electrical actuators to automate valve operations moved Crane into a market it had not previously served. The Valve Services business, now encompassing nuclear power plant and out-of-production industrial valves and parts, plus testing products and nuclear and commercial services, gained in sales and operating profit on full-year results from the September 1998 acquisition of Liberty Technologies, Inc., and increased demand for nuclear services and testing products. Sales were up 37% in 1999 to $49.1 million, and operating margins improved to 11.1% of sales from 10.5% in 1998. Commercial valve shipments were down $31 million (20%) from the prior year level, and the business operated at a loss due to market weakness in North America and England stemming from industry overcapacity. To address these issues, Crane consolidated its cast steel manufacturing facility in Rogers, Arkansas, into its Washington, Iowa, plant and closed a small manufacturing facility in the U.K., and two peripheral facilities. In addition, staffing levels were reduced by over 400 people, 30% of the work force, from the beginning of the year. Crane Pumps & Systems' operating profit dropped on slightly lower volume, a less favorable product mix and the combination of price/cost pressures in 1999 versus 1998. Cochrane completed the integration of its 1998 acquisition of Environmental Products, a global supplier of reverse osmosis systems, and strengthened its focus on energy-related water purification applications. Volume declined for the year, but sales and operating profit began to rebound in the second half. Crane Supply reported a modest gain in sales and a larger increase in operating profit in a flat market for the pipes, valves and fittings it distributes across Canada. Strong sales in Quebec and Atlantic Canada offset a drop in oil and gas business in Western Canada. Six Sigma projects reduced costs and led to the MRO (Maintenance, Repair and Overhaul) initiative, in which the company leveraged its inventory control expertise by contracting to procure and manage customers' inventories of maintenance products. Controls - -------------------------------------------------------------------------------- (dollars in millions) 1999 1998 - ----------------------------------------------------------------------- Sales $ 121.2 $ 132.3 Operating Profit .7 8.9 Operating Profit* 4.1 8.9 Gross Margin* 34.2% 35.8% Operating Margin* 3.4% 6.7% - ----------------------------------------------------------------------- *Before special charges of $3.4 million in 1999. Sales declined 8% in the Controls segment in 1999 on widespread market weakness, particularly in the oil and gas sector. Operating profit margins fell to 3.4% of sales before special charges of $3.4 million, compared with 6.7% in 1998. After special charges, operating profit was $.7 million for the year. Order backlog at December 31, 1999, was $28 million, a slight improvement from the prior year level. The special charges of $3.4 million taken in the third and fourth quarters of 1999 included costs to close the Ferguson manufacturing facility in Greenwood, Mississippi, to reduce staffing levels, and to rationalize inventory. Two companies had solid earnings performances despite lower sales. Sales declined slightly at Barksdale, the segment's largest business, but operating profit rose 12%. Powers Process Controls also saw sales decline, but operating profit rose 16%. Addition of the Beta controls line from the Liberty Technologies acquisition in September 1998 increased Dynalco's sales, but integration costs and costs related to a new enterprise resource planning system reduced operating profit. Ferguson's shipments declined 17%, and it operated at a loss for the year. Bookings and backlog increased at Azonix, but the company experienced a slight loss for the year on lower sales, reflecting the depressed oil and gas market. -- 32 Crane Co /2000 Annual Report -- At Barksdale, 1999 was a transition year marked by new leadership and successful implementation of ERP systems in the U.S. and Germany. Weakness in the oil and gas industry hurt sales of Barksdale's blowout-preventer controls for oil exploration and production equipment but its ride-leveling air suspension valves enjoyed increased use among U.S. heavy truck OEMs and sparked interest from trailer manufacturers. A new electronic pressure switch was well received in Germany, Italy and France. Ferguson's U.S. and European businesses faced weak capital markets for their indexers and other custom-engineered, precision motion control products in 1999. In Europe, new leadership and a reorganized management team took hold, and a new ERP system was implemented. In the U.S., Ferguson reduced its work force early in 1999 and began consolidating all domestic production in St. Louis, Missouri, using lean manufacturing techniques, and began the closure of its Greenwood, Mississippi, manufacturing facility. Powers Process Controls turned in a solid operating profit gain despite a sales decline stemming largely from earlier management and operating problems.These problems impeded Powers' ability to take full advantage of a strong Canadian commercial plumbing market -- particularly hospital and health care facility construction --at a time when its industrial process controls markets were flat and price competition in the thermostatic shower controls market was intensifying. Powers launched initiatives to reduce the cost of its thermostatic valves. Azonix, known for its MMI (man-machine interface) hardware and software products for hazardous environments, such as oil drilling rigs, diversified into harsh environment applications in 1999. Timing, however, led to a decline in revenue and a loss for the year as initial penetration of the harsh market did not offset the decline in the hazardous market. A fall-off in revenue from gas transmission markets, new product integration costs, and costs related to a new ERP system depressed Dynalco's 1999 profits, despite the addition of the Beta product line from the Liberty Technologies acquisition in 1998.The company reduced product costs throughout the year, and launched two initiatives aimed at expanding its sales. One extended coverage in the market for engine controls, sensors, analyzers and other instruments by establishing additional regional sales and service offices. The other initiative pursued automation solutions with oil and gas customers that traditionally buy its monitoring and control packages. Liquidity and Capital Resources Cash Flow Operating activities in 2000 generated $151 million in cash flow, allowing the company to invest $12 million expanding its core businesses by making two acquisitions, invest $30 million in capital equipment and return $87 million to shareholders through dividends and share repurchases. This represents the seventh consecutive year that Crane has generated cash in excess of $100 million from operations. Capital expenditures in 2000 totaled $30 million, and primarily funded manufacturing and business process system projects. Net cash used for financing activities in 2000 includes $62 million for the repurchase of 3 million shares of Crane common stock and $24 million for the payment of dividends. Debt repayments totaled $70 million. Capital Structure The following table sets forth the company's capitalization: (dollars in thousands) December 31 2000 1999 - ---------------------------------------------------------------- Short-term debt $ 14,858 $ 13,656 Long-term debt 213,790 286,772 - ---------------------------------------------------------------- Total debt 228,648 300,428 Less cash 10,926 3,245 - ---------------------------------------------------------------- Total net debt 217,722 297,183 Common shareholders' equity 606,763 568,110 - ---------------------------------------------------------------- Total capitalization $ 824,485 $ 865,293 % of net debt to shareholders' equity 35.9% 52.3% % of net debt to total capitalization 26.4% 34.3% - ---------------------------------------------------------------- As of December 31, 2000, the company had unused domestic lines of credit totaling $150.0 million and unused foreign lines of credit totaling $21.1 million. These lines of credit are typically available for borrowings up to 364 days and are renewable at the option of the lender. The company's net debt decreased by $79.5 million to $217.7 million at December 31, 2000. The company's net debt to capital percentage is at 26.4% down from 34.3% in 1999. Interest coverage (income before taxes plus net interest expense divided by net interest expense) increased by 48% to 9.8 times interest in 2000. -- Crane Co / 2000 Annual Report 33 -- At December 31, 2000, the company had a $300 million contractually committed long-term bank credit facility under which the company can borrow, repay or, to the extent permitted by the agreement, prepay loans and reborrow at any time prior to the termination date of November 2003. Proceeds may be used for general corporate purposes or to provide financing for acquisitions. The agreement contains certain covenants, including limitations on indebtedness and liens. There was no amount outstanding under this agreement at year-end. The company also has a $300 million shelf registration filed with the Securities and Exchange Commission, all of which remains unissued. Crane is a party to a contractually committed off-balance sheet chattel paper financing facility that enables its National Vendors operation to offer various sales support financing programs to its customers. Recourse to Crane for all uncollectible loans made to National Vendors' customers by the banks under this agreement is limited. In addition, the company's U.K. subsidiary was also party to a contractually committed long-term line of credit in the U.K. This facility permits borrowing up to $3.0 million, $1.5 million of which was outstanding at December 31, 2000. The company's Canadian subsidiary was party to a contractually committed long-term line of credit in Canada. This facility permits borrowing of up to $16.7 million, of which $14.2 million was outstanding at December 31, 2000. As of December 31, 2000, the company's senior unsecured debt was rated BBB+ by Standard and Poor's and Baa1 by Moody's Investors Service. The company believes it has adequate access to both public and private credit markets to meet all of its operating and strategic objectives. 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 $7.5 million at December 31, 2000, 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 $2.5 million on environmental costs in 2000, and expects to pay remediation costs of approximately $1.8 million in 2001.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 PRP at certain third-party environmental remediation sites where remediation obligations are joint and several, and the company, as part of its estimate of potential liability, periodically reviews whether the major PRPs have the ability to fulfill their portion of such remediation obligations. The company is not aware of any significant additional liability that would result from the inability of other PRPs to fulfill their obligations. Overall, the company's liability for the required remedial actions being implemented or engineered is not, individually or in the aggregate, expected to be material. Quantitative and Qualitative Disclosures about Market Risks The company's cash flows and earnings are subject to fluctuations from changes in interest rates and foreign currency exchange rates. The company manages its exposures to these markets risks through internally established policies and procedures and, when deemed appropriate, through the use of interest rate swap agreements and forward exchange contracts. Long-term debt outstanding of $214 million at December 31, 2000, was generally at fixed rates of interest ranging from 6.59% to 8.50%. At December 31, 2000, the company was a party to a euro-denominated call option with a notional amount of 50 million euros expiring in March 2001, related to the Alfa Laval acquisition, which is expected to close by the end of April 2001.The fair value of this instrument was $4.2 million at December 31, 2000, and is included in other current assets. The company does not enter into derivatives or other financial instruments for trading or speculative purposes. Risk Factors Throughout this Annual Report to Shareholders, particularly in the Chairman's Letter to Shareholders on pages 2-4 and in the sections of Management's Discussion and Analysis of Operations on pages 6-14 the company makes numerous statements about expectations of future performance and market trends, and statements about plans and objectives and other matters, which because they are not historical fact may constitute "forward looking statements" within the meaning of the Private Securities and Litigation Reform Act of 1995. Similar forward looking statements are made periodically in reports to the Securities and Exchange Commission, press releases, reports, and documents and in written and oral presentations to investors, shareholders, analysts and others, regarding future results or expected developments. Because the company wishes to take advantage of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, readers are cautioned to consider, among others, the risk factors that will be described in the company's Form 10-K for the period ended December 31, 2000, to be filed with the Securities and Exchange Commission before March 31, 2001, when evaluating such forward looking statements about future results or developments. Copies of the company's Form 10-K can be obtained after it is filed by writing to the company at the address on the back cover, from the Securities and Exchange Commission, or through the Internet at the company's Web site at www.craneco.com. -- 34 Crane Co / 2000 Annual Report -- - -------------------------------------------------------------------------------- Five-Year Summary of Selected Financial Data - --------------------------------------------------------------------------------
Years Ended December 31, (in thousands except per 2000 1999 1998 1997 1996 share data) - --------------------------------------------------------------------------------------------------------------------------------- Net Sales $ 1,491,190 $ 1,553,657 $ 1,561,055 $ 1,411,328 $ 1,252,544 Depreciation and amortization 55,281 62,312 55,873 50,991 44,474 Operating Profit 184,026 169,554 211,961 176,759 144,049 Interest Expense 21,564 27,854 27,661 23,632 23,203 Income Before Taxes 190,360 155,795 192,789 161,022 124,263 Provision for Income Taxes 66,631 54,897 67,947 57,306 44,441 - --------------------------------------------------------------------------------------------------------------------------------- Income from Continuing Operations 123,729 100,898 124,842 103,716 79,822 - --------------------------------------------------------------------------------------------------------------------------------- Income from Continuing Operations per Diluted Share 2.02 1.50 1.80 1.50 1.16 Cash Dividends per Common Share 0.40 0.40 0.37 0.33 0.33 Total Assets 1,143,851 1,180,697 1,379,731 1,131,483 1,035,311 Long-Term Debt 213,790 286,772 357,710 259,001 265,721 =================================================================================================================================
- ------------------------------------------------------------------------------- Quarterly Results for the Year - -------------------------------------------------------------------------------
Years Ended December 31, (in thousands except per First Second Third Fourth Year share data) - ------------------------------------------------------------------------------------------------------------------------------ 2000 Net Sales $ 383,807 $ 387,853 $ 363,190 $ 356,340 $ 1,491,190 Cost of Sales 254,006 252,490 246,497 235,525 988,518 Depreciation and Amortization(a) 11,853 11,691 11,693 11,242 46,479 Gross Profit 117,948 123,672 105,000 109,573 456,193 Net Income 27,662 47,825 21,407 26,835 123,729 Income from Continuing Operations per Diluted Share (b) 0.45 0.78 0.35 0.44 2.02 ============================================================================================================================== 1999 Net Sales $ 400,046 $ 405,268 $ 384,193 $ 364,150 $ 1,553,657 Cost of Sales 262,488 266,589 271,970 255,956 1,057,003 Depreciation and Amortization(a) 11,370 11,414 11,251 14,049 48,084 Gross Profit 126,188 127,265 100,972 94,145 448,570 Income from Continuing Operations 32,435 36,098 18,347 14,018 100,898 Net Income 33,666 39,311 22,355 19,238 114,570 Income from Continuing Operations per Diluted Share (b) 0.47 0.53 0.27 0.22 1.50 ==============================================================================================================================
(a) Amount included in cost of sales. (b) Income per share is computed independently for each of the quarters presented. Therefore, the sum of the quarters' income per share in 1999 does not equal the total computed for the year. - -------------------------------------------------------------------------------- Market and Dividend Information -- Crane Co. Common Shares - --------------------------------------------------------------------------------
New York Stock Exchange Composite Price per Share Dividends per Share - --------------------------------------------------------------------------------------------------------------------------------- 2000 2000 1999 1999 2000 1999 Quarter High Low High Low - --------------------------------------------------------------------------------------------------------------------------------- First $ 24 $ 18 5/8 $ 31 1/2 $ 23 3/16 $ .10 $ .10 Second 29 1/2 23 32 3/4 23 11/16 .10 .10 Third 26 3/8 $ 20 7/8 30 21 1/2 .10 .10 Fourth 28 1/2 22 $ 23 3/8 16 1/16 .10 .10 - --------------------------------------------------------------------------------------------------------------------------------- On December 31, 2000, there were approximately 4,800 holders of record of Crane Co. common stock. $ .40 $ .40 ---------------------------
-- Crane Co / 2000 Annual Report 35 -- - -------------------------------------------------------------------------------- Directors And Officers - --------------------------------------------------------------------------------
Directors Corporate Officers E.Thayer Bigelow, Jr. /(1,3)/ Robert S. Evans Managing Director Chairman and Bigelow Media Chief Executive Officer Media and Entertainment Eric C. Fast Robert S. Evans /(1)/ President and Chairman and Chief Operating Officer Chief Executive Officer of the Company Gil A. Dickoff Eric C. Fast Treasurer President and Chief Operating Officer of the Company Augustus I. duPont Vice President, General Counsel and Secretary Richard S. Forte /(2)/ President, Dawson Forte Cashmere Company Bradley L. Ellis Importer Vice President, Chief Information Officer Dorsey R. Gardner /(2,3)/ President, Kelso Management Company, Inc. Thomas M. Noonan Investment Management Vice President, Controller and Chief Tax Officer John J. Lee /(2)/ Anthony D. Pantaleoni Chairman and Chief Executive Officer Vice President, of Hexcel Corporation Environment, Health and Safety Manufacturer of Composite Materials and Engineered Products Michael L. Raithel William E. Lipner Vice President, Chairman, President and Finance and Chief Financial Officer Chief Executive Officer NFO WorldGroup Marketing Information/Research Services Worldwide Dwight C. Minton /(1,3)/ Chairman Emeritus of the Board of Church & Dwight Co., Inc. Manufacturer of Consumer and Specialty Products Charles J. Queenan, Jr. /(2)/ Senior Counsel, Kirkpatrick & Lockhart LLP Attorneys at Law James L. L. Tullis /(1,3)/ Chairman, Tullis-Dickerson & Co. Venture Capital to Health Care Industry
(1) Member of the Executive Committee (2) Member of the Audit Committee (3) Member of the Organization and Compensation Committee -- 36 Crane Co / 2000 Annual Report -- - ------------------------------------------------------------------------------- Shareholder Information - ------------------------------------------------------------------------------- Crane Co. Internet Site and Shareholder Information Line Copies of Crane Co.'s report on Form 10-K for 2000 as filed with the Securities and Exchange Commission as well as other financial reports and news from Crane Co. may be read and downloaded off the Internet at www.craneco.com. If you do not have access to the Internet, you may request printed materials by telephone, toll-free, from our Crane Co. Shareholder Direct(R) information line at 1-888-CRANECR (1-888-272-6327). Both services are available 24 hours a day, 7 days a week. Annual Meeting The Crane Co. annual meeting of shareholders will be held at 10:00 A.M. on April 23, 2001, at the Westin Stamford Hotel, One First Stamford Place, Stamford, CT 06902. Stock Listing Crane Co. common stock is traded on the New York Stock Exchange 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 and 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 that are integral and essential elements of its 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 environment, health and safety performance and conducting associated audits on a regular basis in order to provide appropriate information to the Crane Co. management team and to regulatory authorities. Stock Transfer Agent and Registrar of Stock EquiServe/First Chicago Trust Division Customer Service: 1-201-324-1225 Non-Postal Deliveries 525 Washington Blvd. Jersey City, NJ 07310 Dividend Reinvestment and Optional Payments P.O. Box 13531 Newark, NJ 07188-0001 General Correspondence and 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 stock, without paying fees and commissions. Dividend Reinvestment: For all or part of your dividends on Crane common stock; and Voluntary Cash Payments: Of any amount from $10 to a maximum of $5,000 a month. Under terms of the Plan, EquiServe/First Chicago Trust Division will act as agent for shareholders interested in purchasing additional Crane common stock automatically, on a regular basis.The details of this plan and its benefits to you as a Crane shareholder are described in a brochure available by writing to: EquiServe/First Chicago Trust Division Dividend Reinvestment Plan Crane Co. P.O. Box 2598 Jersey City, NJ 07303-2598 -- Crane Co / 2000 Annual Report 37 -- - ------- CRANE - ------- Crane Co. Executive Offices 100 First Stamford Place Stamford, CT 06092 (203) 363-7300 www.craneco.com EX-21 6 0006.txt SUBSIDIARIES OF THE REGISTRANT CRANE CO. Exhibit 21 to FORM 10-K Annual Report for the Year Ended December 31, 2000 Subsidiaries of Registrant The following is a list of active subsidiaries of the registrant and their jurisdictions of incorporation. Except as noted, all of these subsidiaries are wholly owned, directly or indirectly, and all are included in the consolidated financial statements. The names of several other subsidiaries have been omitted, as they would not, if considered in the aggregate as a single subsidiary, constitute a significant subsidiary. Crane Australia Pty., Ltd. Australia P.T. Crane Indonesia (51%) Indonesia Crane Environmental, Inc. Delaware Crane GmbH Germany National Rejectors, Inc. GmbH Germany NRI Iberica, S.A. Spain Crane International Holdings, Inc. Delaware Crane Canada, Inc. Canada Crane Capital Corporation, LLC Delaware Crane Center-Line Valve Co. Delaware Crane Ningjin Valve Co., Ltd. (90%) China Crane Zhengying Rubber Co. Ltd. (80%) China Crane FSC Corporation Barbados Crane Ltd. England Crane Europe Ltd. Scotland Grenson Electronics Ltd. England Stockham Valve Ltd. England Stentorfield Ltd. England Crane Valves (Nantong) Company Ltd. (70%) China Crane Pumps & Systems, Inc. Delaware Barnes Pumps, Inc. Ohio Barnes Pumps Canada, Inc. Ontario Dyrotech Industries, Inc. Delaware ELDEC Corporation Washington ELDEC France S.A.R.L. France Ferguson Machine Co. S.A. Belgium Hydro-Aire, Inc. California Interpoint Corporation Washington Interpoint GmbH Germany Interpoint S.A.R.L. France Interpoint Taiwan Corporation Republic of China Interpoint U.K. Ltd. England (continued)
Subsidiaries of Registrant (continued) Kemlite Company, Inc. Delaware Sequentia Incorporated Ohio Mark Controls Corporation Delaware Azonix Corporation Massachusetts Azonix S.A.R.L. France Barksdale, Inc. Delaware Barksdale Control Products GmbH Germany Dynalco Controls Corporation Delaware Mark Controls Norway A/S Norway Westad Industri A/S Norway Powers Process Controls, Ltd. Ontario Resistoflex (Asia) Pte., Ltd. Singapore Kessel (Thailand) Pte., Ltd. (49%) Thailand Resistoflex Sdn. Bhd. Malaysia Crane Nuclear, Inc. Delaware Stockham Valve Australia Pty., Ltd. Australia Streamware Corporation Massachusetts
2 EX-23 7 0007.txt INDEPENDENT AUDITORS' CONSENT EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement No. 333-35860 on Form S-8, Registration Statement No. 333-37636 on Form S-8, Registration Statement No. 333-50489 on Form S-8, Registration Statement No. 333-50487 on Form S-8, Registration Statement No. 333- 50495 on Form S-8, Registration Statement No. 33-53709 on Form S-3, Registration Statement No. 33-36735 on Form S-8, Post-Effective Amendment No. 1 to Registration Statement No. 33-59389 on Form S-8, Post-Effective Amendment No. 1 to Registration Statement No. 33-59475 on Form S-8 and Registration Statement No. 333-16555 on Form S-8 of our report dated January 16, 2001, appearing in and incorporated by reference in this Annual Report on Form 10-K of Crane Co. for the year ended December 31, 2000. /s/ DELOITTE & TOUCHE LLP Stamford, Connecticut March 12, 2001 -----END PRIVACY-ENHANCED MESSAGE-----