8-K

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): January 22, 2004

CRANE CO.

(Exact name of registrant as specified in its charter)

DELAWARE

(State or other jurisdiction of incorporation)

1-1657	13-1952290
(Commission File Number)	(I.R.S. Employer 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

N/A

(Former name or former address, if changed since last report)

INFORMATION TO BE INCLUDED IN THE REPORT

ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURES

The following information is provided in order to update the information with respect to the Company’s asbestos liability contained in the Company’s previously filed reports:

Asbestos Liability

As of December 31, 2003, the Company was a defendant, among a number of defendants, typically over 50 and frequently in the hundreds, in cases filed in various state and federal courts alleging injury or death as a result of exposure to asbestos. Activity related to asbestos claims during the periods indicated was as follows:

	2003		2002		2001
Beginning claims	54,038		16,180		5,460
New claims	19,115		49,429		10,985
Settlements	(3,883	)	(11,299	)	(66	)
Dismissals	(664	)	(272	)	(199	)
Ending claims	68,606		54,038		16,180

Of the 68,606 pending claims as of December 31, 2003, approximately 24,000 claims are pending in New York and approximately 30,000 claims are pending in Mississippi. These filings typically do not identify any of the Company’s products as a source of asbestos exposure. A substantial majority of the New York claims have been placed on a deferred docket and are ineligible for trial on the merits without medical evidence of asbestos-related disease.

Generally, the Company has required evidence of exposure to asbestos-containing materials in products manufactured or sold by the Company, as well as medical evidence of asbestos-related disease, as a prerequisite to settling an asbestos claim. A significant proportion of the resolved claims against the Company have been dismissed without payment because these criteria are not satisfied. Despite this litigation posture, the Company has recognized that the number of asbestos claims pending against it continues to increase, albeit at a lower rate than in the past two years, and the settlement demands from asbestos claimants continue to escalate. The Company believes that federal legislation establishing a trust fund to compensate asbestos victims is the most appropriate solution to the asbestos litigation problem. The Company has been actively monitoring, studying and supporting developments in federal legislation during the past year and believes that there is a reasonable possibility that legislation will be passed in the current or next Congress. In addition, the Company continues to monitor and study the structured settlement transactions announced by certain other asbestos defendants. As the Company has stated previously, it will explore all feasible alternatives available to resolve its asbestos liability in a manner consistent with the best interest of the Company’s shareholders.

The gross settlement and defense costs (before insurance recoveries and tax effects) for the Company in the year ended December 31, 2003 totaled $11.9 million and $9.2 million, respectively. The Company’s

total pre-tax cash payments for settlement and defense costs net of the Company’s cost sharing arrangements with insurers amounted to $4.6 million in the year ended December 31, 2003 and reflect the timing and terms of payments in accordance with the aforementioned arrangements. Detailed below are the comparable amounts for the periods indicated.

(In Millions)	Year Ended December 31, 2003		Year Ended December 31, 2002		Year Ended December 31, 2001
Settlement costs (1)	$	11.9	$	7.3	$	0.8
Defense costs (1)		9.2		4.8		2.3
Pre-tax cash payments (2)		4.6		1.4		0.8

(1) Before insurance recoveries and tax effects

(2) Net of cost sharing arrangements with insurers

Cumulative aggregate settlement and defense costs (before insurance recoveries and tax effects) to date as of December 31, 2003 were $21.6 million and $22.3 million, respectively. The Company’s cumulative pre-tax cash payments for settlement and defense costs net of the Company’s cost sharing arrangements with insurers amounted to $8.3 million as of December 31, 2003.

These amounts are not necessarily indicative of future period amounts, which may be higher or lower than those reported. It is not possible to forecast when the cash payments related to the asbestos liability will be expended; however, it is expected such cash payments will continue for many years. Payment uncertainty results from the significant proportion of unasserted claims included in the estimated asbestos liability as well as variability of timing and terms of settlements and insurance reimbursement.

The liability recorded for asbestos claims constitutes management’s best estimate, based on the Company’s past experience, of costs for pending and reasonably anticipated future claims through 2007. For claims that will be filed beyond 2007, management believes that the level of uncertainty is too great to provide for reasonable estimation of the number of future claims, the nature of such claims, or the cost to resolve them and, accordingly, no accrual has been recorded for any costs which may be incurred beyond 2007. A long-term liability was recorded to cover the estimated cost of asbestos claims through 2007 and a long-term asset was recorded representing the probable insurance reimbursement for such claims (approximately 40 percent of settlement and defense costs). The Company’s liability for asbestos-related claims before insurance recoveries, which is included in other liabilities, was $193 million and $200 million at December 31, 2003 and 2002, respectively, or $116 million and $120 million, respectively, after probable insurance recoveries. At December 31, 2003 and 2002 approximately 60% and 70%, respectively, of the asbestos liability represented the estimated cost of unasserted claims against the Company.

The Company’s asbestos liability is based on its estimated cost of pending claims plus unasserted claims through 2007. In determining this estimate, both average annual incremental claims and costs per claim are significant assumptions. Costs per claim vary depending on a number of factors, including the nature of the alleged exposure, the injury alleged and the jurisdiction where the claim was filed. The estimated liability for New York claims includes a substantial discounting of such claims due to the deferred docket noted above. This discount rate is significantly higher than the dismissal rate applied to substantially all other jurisdictions. The gross estimated cost of projected asbestos claims is reduced by approximately 40% representing the Company’s probable insurance recovery. In 2002, as a result of dramatic increases in annual incremental claims and claim costs, management changed the basis for these assumptions to an analysis of the past few years of experience as compared to the long-term historical averages previously used, which thereby increased the aggregate estimated liability. In 2003, the Company reviewed its estimate in light of a number of factors and developments including the New York deferred docket referred to above, the substantial reduction in the new claims filed in Mississippi and New York, the increase in new claims filed in other jurisdictions, the proportion of claims dismissed for lack of product identification and the increasing settlement demands from claimants. Future projections of these trends is inherently uncertain, and while the Company believes its current estimate of the asbestos liability is a reasonable judgment, there can be no assurance about future developments.

Estimation of the Company’s ultimate exposure for asbestos-related claims is subject to significant uncertainties, as there are multiple variables that can affect the timing, severity and quantity of claims. The Company cautions that its estimated liability is based on assumptions with respect to future claims, settlement and defense costs based on recent experience during the last few years that may not prove reliable as predictors. A significant upward or downward trend in the number of claims filed, depending on the nature of the alleged injury, the jurisdiction where filed and the quality of the product identification, could change the estimated liability, as would any substantial adverse verdict at trial. A legislative solution or a structured settlement transaction could also change the estimated liability.

A significant portion of the Company’s settlement and defense costs are paid by its primary insurers and one umbrella insurer up to the agreed available limits of the applicable policies. The Company has substantial excess coverage policies that are expected to respond to asbestos claims as settlements and other payments exhaust the underlying policies, but there is no cost sharing or allocation agreement yet in place with the excess insurers. The same factors that affect developing estimates of probable settlement and defense costs for asbestos-related liabilities also affect estimates of the probable insurance payment, as do a number of additional factors. These additional factors include the financial viability of the insurance companies, the method in which losses will be allocated to the various insurance policies and the years covered by those policies, how settlement and defense costs will be covered by the insurance policies and interpretation of the effect on coverage of various policy terms and limits and their interrelationships.

The Company determined it probable that approximately 40% of the estimated gross liability will be paid by the Company’s insurers. This determination was made after considering the terms of the available insurance coverage, the financial viability of the insurance companies, the status of negotiations with its insurers and consulting with legal counsel. This insurance receivable was included in other assets.

Since many uncertainties exist surrounding asbestos litigation, the Company will continue to evaluate its asbestos-related estimated liability and corresponding estimated insurance reimbursement as well as the underlying assumptions used to derive these amounts. These uncertainties may result in the Company incurring future charges to operations to adjust the carrying value of recorded liabilities and assets, particularly if escalation in the number of claims and settlement and defense costs occurs or if legislation or another alternative solution is implemented; however, the Company is currently unable to estimate such future changes. Although the resolution of these claims is anticipated to take many years, amounts recorded for the liability under generally accepted accounting principles are not discounted, and the effect on results of operations, cash flow and financial position in any given period from a revision to these estimates could be material.

ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On January 22, 2004, Crane Co. announced its results of operations for the quarter ended December 31, 2003. A copy of the related press release is being furnished as Exhibit 99.1 to this Form 8-K and is incorporated herein by reference in its entirety. In addition, a copy of the Crane Co. Quarterly Financial Data Supplement for the quarter ended December 31, 2003 is being furnished as Exhibit 99.2 to this Form 8-K and is incorporated herein by reference in its entirety.

The information is furnished under Item 12 of this Current Report on Form 8-K,including Exhibit 99.1 and Exhibit 99.2, and is not deemed to be “filed” for purposes of the Securities Exchange Act of 1934, as amended.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Crane Co.
	/s/    George S. Scimone
	George S. Scimone Vice President, Finance and Chief Financial Officer

Date: January 22, 2004

EXHIBIT INDEX

Exhibit Number
99.1	Press Release, dated January 22, 2004, issued by Crane Co.
99.2	Crane Co. Quarterly Financial Data Supplement for the quarter ended December 31, 2003.

EX-99.1

Crane Co. Exhibit 99.1 NEWS

Contact: .

Pamela J.S. Styles

Director, Investor Relations and Strategic Planning

203-363-7352

www.craneco.com

CRANE CO. REPORTS FOURTH QUARTER RESULTS OF $0.56 PER SHARE

REAFFIRMS 2004 EARNINGS GUIDANCE OF $1.85 – $2.00

STAMFORD, CONNECTICUT—January 22, 2004—Crane Co. (NYSE: CR) reports fourth quarter 2003 net income of $33.7 million, or $0.56 per share, at the high end of management’s previous guidance, compared with a net loss of $51.2 million or ($0.86) per share reported for the fourth quarter 2002. The fourth quarter 2002 net loss reflected a $73.3 million, or $1.23 per share, non-cash charge for asbestos-related claims. Fourth quarter 2002 net income before the non-cash charge for asbestos-related claims was $22.1 million, or $0.37 per share.

Operating profit for the fourth quarter 2003 was $53.2 million on sales of $428.3 million versus fourth quarter 2002 operating profit of $35.5 million on a comparable basis (excluding a $107.9 million pre-tax charge for asbestos-related claims) on sales of $367.2 million. The $107.9 million asbestos charge was included in the reported fourth quarter 2002 operating loss of $72.4 million. The $17.7 million increase in operating profit for the fourth quarter 2003 included $9.5 million from the 2003 acquisition of Signal Technology Corporation (“STC”) and the pipe and fittings businesses of Etex, margin improvement from all business segments except Fluid

Handling, and a $6.4 million benefit from reduced inventory write-offs. Partially offsetting these results were $4.3 million of higher severance and pension costs versus the prior year quarter.

Full year 2003 net income was $104.3 million, or $1.75 per share, compared with a net loss of $11.4 million, or ($0.19) per share, for the year 2002. The 2002 net loss included a change in an accounting principle related to goodwill that reduced 2002 income by $28.1 million ($0.47 per share) and the full year non-cash charge of $115.3 million ($78.4 million after-tax, or $1.31 per share) for asbestos-related claims. Full year 2002 net income before these two items was $95.0 million, or $1.59 per share.

Operating profit for the full year 2003 was $169.0 million on sales of $1.636 billion versus full year 2002 operating profit of $155.0 million on a comparable basis (excluding $115.3 million for asbestos-related claims) on sales of $1.516 billion. Operating profit for the year 2003 included $16 million from acquisitions made during the year. Operating profit excluding these acquisitions was slightly lower than the prior year, as increased costs in 2003 from pension, severance and insurance exceeded aggregate charges in 2002 for environmental remediation ($7.1 million) and aerospace fuel pump inspections ($4.0 million). As reported, 2002 operating profit was $39.7 million, including the $115.3 million non-cash charge for asbestos-related claims.

The Company has furnished a copy of this press release to the Securities and Exchange Commission on Form 8-K, which includes updated information through December 31, 2003 with respect to the Company’s asbestos liability, including pending claims, settlement costs, defense costs and other information in the format typically contained in the Company’s Form 10-Q or Form 10-K.

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Market Conditions

The Aerospace & Electronics Segment experienced improved demand for aerospace components from the military market and strength in the aftermarket, resulting from increased military activity, and stable demand in the commercial market. In the Engineered Materials Segment, demand for fiberglass-reinforced panels to the recreational vehicle (“RV”) and truck trailer markets remained strong. Demand for European coin changing equipment and North American vending machines remained depressed for the Merchandising Systems Segment. The Fluid Handling Segment continued to suffer from weak market conditions in the chemical processing industry, power, marine and general industrial markets.

Financial Position

Net debt to capital was 24.4% at December 31, 2003, compared with 31.0% at September 30, 2003, and 25.1% at December 31, 2002. During the fourth quarter 2003, the Company generated $71.3 million in cash flow from operating activities, allowing the Company to pay $6 million in dividends to shareholders and to invest $7.7 million in capital expenditures. Free cash flow (cash flow from operating activities, less dividends and capital expenditures) for the fourth quarter 2003 was $57.7 million. During the full year 2003, the Company generated $162.7 million in cash flow from operating activities resulting in free cash flow of $110.8 million.

Order backlog at December 31, 2003 totaled $451.7 million versus $459.5 million at September 30, 2003 and $385.7 million at December 31, 2002. The increase from December 31, 2002 was entirely the result of acquisitions.

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Segment Results

Aerospace & Electronics sales of $126.9 million increased $41.5 million, or 49%, in the fourth quarter 2003 compared with fourth quarter 2002. Fourth quarter 2003 sales included STC, acquired in May 2003, which accounted for $31.7 million of the sales increase. Operating profit of $33.4 million increased $14.1 million, or 73%, compared with $19.2 million in the fourth quarter 2002. Fourth quarter 2003 results included $8.0 million in incremental profit from the STC acquisition. Operating profit margins were 26.3% in the fourth quarter 2003, compared with 22.5% in the fourth quarter 2002, from improvement in both the Aerospace and Electronics Groups.

Sales in Crane’s Aerospace Group (Hydro-Aire/Lear Romec, Eldec and Resistoflex Aerospace) increased 5% to $65.8 million in the quarter from $62.6 million in the prior year fourth quarter, reflecting strong sales in the military and government market and in the commercial retrofit market. Operating profit increased 14% in the fourth quarter 2003 as a result of increased military aftermarket sales and strong cost controls.

The Electronics Group (Interpoint, Eldec Power Supply, GTC and STC) sales increased to $61.3 million in the quarter from $23.0 million in the prior year fourth quarter. STC accounted for the majority of the sales increase. Operating profit more than doubled in the fourth quarter 2003 with particularly strong results from STC and the power supplies businesses.

The Aerospace & Electronics Segment backlog was $277.2 million at December 31, 2003, a decrease of $9.4 million, or 3%, compared with $286.5 million at September 30, 2003. This decline was principally in the power supply market and electronic radio and microwave

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markets, which typically experiences large backlog fluctuations due to the longer-term nature of projects.

This segment will benefit from a full year of results from STC and increased demand for military aerospace and defense electronics, but will continue to experience price pressures in commercial aerospace. Operating profit in 2004 is expected to be slightly higher than 2003.

Engineered Materials sales of $54.7 million increased $3.6 million, or 7%, in the quarter compared with sales of $51.2 million in the fourth quarter 2002. Segment operating profit of $10.2 million in the fourth quarter 2003 increased $2.3 million, or 29%, compared with operating profit of $7.9 million in the fourth quarter 2002. The increase in operating profit for the quarter reflects increased sales of fiberglass-reinforced panels to the RV market, partially offset by reduced shipments of commercial building products and reduced shipments to mass merchandisers. Operating profit margins improved to 18.6% from 15.5% in the prior year quarter due to favorable mix. Backlog at December 31, 2003 was $11.8 million, an increase of $0.9 million or 8%, compared with $10.9 million at September 30, 2003.

Management expects the RV market to remain strong and the truck trailer transportation market to continue to grow in 2004. Operating profit in 2004 is forecasted to be slightly higher than 2003, as continued focus on cost containment is expected to mitigate increased raw material costs.

Merchandising Systems sales of $37.4 million in the fourth quarter 2003 were slightly below sales of $37.9 million in the fourth quarter 2002. Segment operating profit of $1.5 million

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in the quarter compared favorably to the operating loss of $236 thousand in the fourth quarter 2002. Crane Merchandising Systems (“CMS”) sales declined 4% in the fourth quarter 2003 compared with the prior year quarter, reflecting continued market weakness in North America. In spite of the volume decline, CMS remained profitable through good cost control. National Rejector (“NRI”) sales improved 17% compared with the prior year quarter; however, substantially reduced price levels in the marketplace and costs that remain too high produced an operating loss. Backlog at December 31, 2003 was $10.3 million, essentially even compared with $10.4 million at September 30, 2003.

Management expects the Merchandising Systems 2004 operating profit to be above prior year reflecting new product initiatives at CMS and reduced losses at NRI. End market demand is expected to stabilize, although at historically low levels.

Fluid Handling sales of $192.9 million in the fourth quarter 2003 were $16.1 million higher than sales of $176.8 million in the fourth quarter 2002. Sales increased as a result of the additional sales volume from the pipe coupling and fittings businesses acquired from Etex, which provided incremental sales of $14.5 million, and favorable impact of foreign currency translation of $12.2 million. Excluding the incremental sales of the businesses acquired from Etex and favorable foreign currency impact, sales declined $10.6 million, or 6%, from the prior year quarter. This decline reflected continued weakness in end markets particularly chemical processing, power and marine. Operating profit of $10.9 million in the quarter reflected a decrease of $2.9 million, or 21%, compared with $13.9 million in the fourth quarter 2002. Operating profit margins were 5.7% compared with 7.8% in the prior year quarter.

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Valve Group fourth quarter 2003 sales of $104.0 million declined $1.4 million, or 1%, from the prior year quarter and would have declined $7.4 million, or 7%, without the $6 million favorable impact of foreign currency translation. This business continued to be impacted by low volume driven by the weak chemical processing and power markets, and costs associated with reducing operating capacity. The Valve Group was marginally profitable during the quarter, with the results including $2.5 million in severance costs.

At Crane Ltd., previously included in the Valve Group, sales more than doubled to $23.6 million from $10.7 million in the prior year quarter due to the additional sales volume from the pipe coupling and fittings businesses acquired from Etex, while operating profit declined 8% as the base business was off sharply due to very weak demand. Sales in the pump business were 4% below the prior year quarter due to the absence of sales from the Chempump business which was sold in March 2003. Operating profit margins for the pump business were 17% for the fourth quarter 2003. Crane Supply sales increased 24% and operating profit improved 35% due to the stronger Canadian dollar in 2003 and improved product mix. Resistoflex-Industrial sales and operating profit declined slightly in the fourth quarter of 2003 compared with the prior year quarter, as operating losses in the European operations were partially offset by strong improvement in North America where plant consolidations are complete. Total segment backlog at December 31, 2003 was $140.2 million, compared with $139.2 million at September 30, 2003.

During 2003 management focused on right-sizing its Fluid Handling business to better align itself to the weak demand throughout most of its end markets. Right-sizing initiatives resulted in closure of three plants and three service centers and a reduction of approximately 370 employees, which represents 10% of the U.S. and Western European workforce, at an

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approximate cost of $8 million. The benefits of these actions and movement of manufacturing to low cost foreign facilities are expected to offset continued weakness in the chemical processing, power, marine and general industrial markets in 2004. Management expects a strong increase in operating profit in 2004 resulting from a modest improvement in sales, in part from incremental sales from the businesses acquired from Etex, and the benefits of lower costs from the 2003 downsizing actions.

Controls sales of $16.4 million in the fourth quarter 2003 increased 3%, as compared with sales of $15.9 million in the fourth quarter 2002. Operating profit of $2.0 million compared with $1.5 million operating profit in the fourth quarter 2002. Sales improvements at Barksdale on increased demand for air suspension valves (ASV) and the effect of favorable foreign currency translation offset slightly lower sales at Azonix/Dynalco. Both units continued to suffer from weakness in their respective end markets. Backlog was $12.2 million as of December 31, 2003, down slightly from $12.5 million at September 30, 2003.

Management forecasts operating profit from Controls to increase slightly in 2004.

Corporate expenses were $4.9 million in the fourth quarter 2003 compared with $114.6 million in the fourth quarter 2002. The 2002 Corporate expenses included $107.9 million of asbestos-related costs and higher corporate expenses mostly for environmental remediation and employee-related costs.

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Outlook for First Quarter and Full Year 2004

The Company expects first quarter 2004 earnings per share to be in the range of $0.33 to $0.38, which includes anticipated severance charges of approximately $2 million or $0.02 per share. Earnings per share in the first quarter 2003 of $0.28 included $5 million for severance costs. The Company expects 2004 full year earnings per share to be in the range of $1.85 to $2.00, unchanged from previous guidance.

Free cash flow (cash flow from operating activities, less dividends and capital expenditures) is expected to be approximately $110 million to $120 million in 2004. The Company plans to continue its focus on the efficient utilization of capital, and is well positioned to take advantage of strategic acquisition opportunities.

Conference Call

Crane Co. has scheduled a conference call to discuss the fourth quarter’s financial results on Friday, January 23^rd, 2004 at 10:00 A.M. (Eastern). All interested parties may listen to a live webcast of the call at http://www.craneco.com. An archived webcast will also be available to replay this conference call directly from the Company’s website.

Crane Co. is a diversified manufacturer of engineered industrial products. Crane Co. is traded on the New York Stock Exchange (NYSE:CR).

This press release may contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. These statements present management’s expectations, beliefs, plans and objectives regarding future financial performance, and assumptions or judgments concerning such performance. Any discussions contained in this press release, except to the extent that they contain historical facts, are forward-looking and accordingly involve estimates, assumptions, judgments and uncertainties. There are a number of factors that could cause actual results or outcomes to differ materially from those addressed in the forward-looking statements. Such factors are detailed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002 and subsequent reports filed with the Securities and Exchange Commission.

(Financial Tables Follow)

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EX-99.2

Exhibit 99.2

CRANE CO.

Income Statement Data

(in thousands, except per share data)

	Three Months Ended December 31,						Year Ended December 31,
	2003			2002			2003			2002
Net Sales:
Aerospace & Electronics	$	126,903		$	85,444		$	429,128		$	340,762
Engineered Materials		54,739			51,188			240,220			233,180
Merchandising Systems		37,417			37,894			155,289			161,920
Fluid Handling		192,878			176,814			748,259			715,829
Controls		16,385			15,891			63,377			64,759
Intersegment Elimination		(65	)		(23	)		(282	)		(103	)
Total Net Sales	$	428,257		$	367,208		$	1,635,991		$	1,516,347
Operating Profit:
Aerospace & Electronics	$	33,350		$	19,232		$	96,155		$	70,698
Engineered Materials		10,203			7,939			48,136			44,366
Merchandising Systems		1,497			(236	)		2,766			7,186
Fluid Handling		10,930			13,876			43,496			53,688
Controls		2,022			1,451			4,541			4,815
Corporate		(4,849	)		(114,643	)		(26,082	)		(141,082	)
Total Operating Profit (Loss)		53,153			(72,381	)		169,012			39,671
Interest Income		462			370			1,186			2,285
Interest Expense		(7,010	)		(4,026	)		(20,010	)		(16,900	)
Miscellaneous—Net		2,186			730			976			(603	)
Income (Loss) Before Income Taxes		48,791			(75,307	)		151,164			24,453
Provision (Benefit) for Income Taxes		15,125			(24,098	)		46,861			7,825
Income (Loss) Before Cumulative Effect of a Change in Accounting Principle		33,666			(51,209	)		104,303			16,628
Cumulative Effect of a Change in Accounting Principle		—			—			—			(28,076	)
Net Income (Loss)	$	33,666		$	(51,209	)	$	104,303		$	(11,448	)
Depreciation and Amortization	$	15,328		$	12,784		$	54,025		$	49,790
Per Diluted Share Data:
Income (Loss) Before Cumulative Effect of a Change in Accounting Principle	$	0.56			(0.86	)	$	1.75		$	0.28
Cumulative Effect of a Change in Accounting Principle		—						—			(0.47	)
Net Income (Loss)	$	0.56		$	(0.86	)	$	1.75		$	(0.19	)
Average Diluted Shares Outstanding		60,177			59,662			59,716			60,046
Average Basic Shares Outstanding		59,517			59,573			59,394			59,728

CRANE CO.

Condensed Balance Sheets

(in thousands)

	December 31, 2003		December 31, 2002
ASSETS
Current Assets
Cash and Cash Equivalents	$	142,518	$	36,589
Accounts Receivable		248,492		213,850
Inventories		235,431		214,689
Other Current Assets		35,335		44,349
Total Current Assets		661,776		509,477
Property, Plant and Equipment		302,638		273,248
Other Assets		311,123		220,615
Goodwill		536,239		410,356
Total Assets	$	1,811,776	$	1,413,696
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Current Maturities of Long-Term Debt	$	100,275	$	400
Loans Payable		—		48,153
Accounts Payable		116,885		91,072
Accrued Liabilities		171,438		125,859
Income Taxes		29,976		22,941
Total Current Liabilities		418,574		288,425
Long-Term Debt		295,861		205,318
Deferred Income Taxes		57,738		8,972
Postretirement, Pension and Other Liabilities		253,352		261,919
Common Shareholders’ Equity		786,251		649,062
Total Liabilities and Shareholders’ Equity	$	1,811,776	$	1,413,696

CRANE CO.

Condensed Statements of Cash Flows

(in thousands)

	Three Months Ended December 31,						Year Ended December 31,
	2003			2002			2003			2002
Operating Activities:
Net income (loss)	$	33,666		$	(51,209	)	$	104,303		$	(11,448	)
Cumulative effect of a change in accounting principle		—						—			28,076
Income before accounting change		33,666			(51,209	)		104,303			16,628
Income from joint venture		(779	)		(1,910	)		(3,097	)		(2,917	)
Depreciation and amortization		15,328			12,784			54,025			49,790
Asbestos charges—net of tax		—			73,345			—			78,394
Cash provided by operating working capital		25,932			14,387			16,604			58,279
Other		(2,852	)		11,855			(9,107	)		(2,733	)
Total Provided from Operating Activities		71,295			59,252			162,728			197,441
Investing Activities:
Capital expenditures		(7,655	)		(7,135	)		(28,128	)		(25,496	)
Proceeds from disposition of capital assets		2,191			1,085			5,867			5,628
Payments for acquisitions, net		—			(32,363	)		(168,818	)		(82,225	)
Proceeds from divestitures		—			—			1,600			2,705
Total Used for Investing Activities		(5,464	)		(38,413	)		(189,479	)		(99,388	)
Financing Activities:
Dividends paid		(5,964	)		(5,949	)		(23,768	)		(23,896	)
Settlement of treasury shares acquired on the open market		—			(6,280	)		(6,641	)		(6,475	)
Stock options exercised—net of shares reacquired		4,687			—			6,253			1,087
Issuance (repayment) of debt, net		2,431			(8,730	)		149,718			(58,537	)
Total Provided from (Used for) Financing Activities		1,154			(20,959	)		125,562			(87,821	)
Effect of exchange rate on cash and cash equivalents		5,079			3,483			7,118			5,194
Increase in cash and cash equivalents		72,064			3,363			105,929			15,426
Cash and cash equivalents at beginning of period and year		70,454			33,226			36,589			21,163
Cash and cash equivalents at end of period and year	$	142,518		$	36,589		$	142,518		$	36,589

CRANE CO.

Order Backlog

(in thousands)

	December 31, 2003		September 30, 2003		June 30, 2003		March 31, 2003		December 31, 2002
Aerospace & Electronics	$	277,173	$	286,539	$	304,975	$	224,513	$	217,598
Engineered Materials		11,787		10,927		11,071		9,828		11,153
Merchandising Systems		10,330		10,399		11,827		10,543		12,932
Fluid Handling		140,192		139,179		140,657		138,134		130,195
Controls		12,169		12,496		13,481		14,736		13,784
Total Backlog	$	451,651	$	459,540	$	482,011	$	397,754	$	385,662

CRANE CO.

Non-GAAP Financial Measures

(in thousands)

	Three Months Ended December 31,						Year Ended December 31,
	2003			2002			2003			2002			2004
													(Estimated)
Operating profit (loss)	$	53,153		$	(72,381	)	$	169,012		$	39,671
Asbestos charges—pre-tax		—			107,860			—			115,285
Operating profit before asbestos charges	$	53,153		$	35,479		$	169,012		$	154,956
Net income (loss)	$	33,666		$	(51,209	)	$	104,303		$	(11,448	)
Asbestos charges—net of tax		—			73,346			—			78,394
Goodwill amortization—net of tax		—			—			—			28,076
Net income before asbestos charges and the cumulative effect of a change in accounting principle related to goodwill	$	33,666		$	22,137		$	104,303		$	95,022
Earnings (loss) per share	$	0.56		$	(0.86	)	$	1.75		$	(0.19	)
Asbestos charges—net of tax		—			1.23			—			1.31
Goodwill amortization—net of tax		—			—			—			0.47
Earnings per share before asbestos charges and the cumulative effect of a change in accounting principle related to goodwill	$	0.56		$	0.37		$	1.75		$	1.59
Cash provided from operating activities	$	71,295		$	59,252		$	162,728		$	197,441		$	179,000
Less:  Capital expenditures		(7,655	)		(7,135	)		(28,128	)		(25,496	)		(35,000	)
Dividends		(5,964	)		(5,949	)		(23,768	)		(23,896	)		(24,000	)
Free cash flow	$	57,676		$	46,168		$	110,832		$	148,049		$	120,000

The measures calculated before asbestos charges and the cumulative effect of a change in accounting principle related to goodwill are provided to facilitate the comparison to the current year.

Free cash flow provides supplemental information to assist management and certain investors in analyzing the Company’s ability to generate positive cash flow.

Free cash flow is considered a measure of cash generation and should be considered in addition to, but not as a substitute for, other measures reported in accordance with generally accepted accounting principles and may be inconsistent with similar measures presented by other companies.