Note 6 – Pension and Postretirement Benefits

In the United States, the Company sponsors a defined benefit pension plan that covers approximately 31% of all U.S. employees. The benefits are based on years of service and compensation on a final average pay basis, except for certain hourly employees where benefits are fixed per year of service. This plan is funded with a trustee in respect of past and current service. Charges to expense are based upon costs computed by an independent actuary. The Company's funding policy is to contribute annually amounts that are allowable for federal or other income tax purposes. These contributions are intended to provide for future benefits earned to date and those expected to be earned in the future. A number of the Company's non-U.S. subsidiaries sponsor defined benefit pension plans that cover approximately 14% of all non-U.S. employees. The benefits are typically based upon years of service and compensation. These plans are funded with trustees in respect of past and current service. Charges to expense are based upon costs computed by independent actuaries. The Company's funding policy is to contribute annually amounts that are allowable for tax purposes or mandated by local statutory requirements. These contributions are intended to provide for future benefits earned to date and those expected to be earned in the future.

Non-union employees hired after December 31, 2005 are no longer eligible for participation in the Company's domestic defined benefit pension plan or the ELDEC Corporation ("ELDEC") and Interpoint Corporation ("Interpoint") money purchase plan. Instead, qualifying employees receive an additional 2% Company contribution to their 401(K) plan accounts. Certain of the Company's non-U.S. defined benefit pension plans were also amended whereby eligibility for new participants will cease.

Postretirement health care and life insurance benefits are provided for certain 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.

A summary of benefit obligations, fair value of plan assets and funded status is as follows:


	Pension Benefits						Postretirement Benefits
(in thousands) December 31,	2011			2010			2011			2010
Change in benefit obligation:
Beginning of year		$674,136		$	641,033		$	13,108		$	15,025
Service cost		11,710			10,883			121			114
Interest cost		38,163			36,301			588			745
Plan participants' contributions		1,389			1,328			—			—
Amendments		177			—			—			(1,598	)
Actuarial loss		96,558			18,231			129			536
Settlement		(123	)		(10,919	)		—			—
Benefits paid		(31,911	)		(32,508	)		(1,374	)		(1,735	)
Foreign currency exchange impact		(2,777	)		(8,974	)		(10	)		21
Acquisition/divestitures/curtailment		—			18,761			—			—
Adjustment for expenses/tax contained in service cost		(730	)		—
Benefit obligation at end of year	$	786,592		$	674,136		$	12,562		$	13,108
Change in plan assets:
Fair value of plan assets at beginning of year	$	661,319		$	566,882
Actual return on plan assets		3,192			75,823
Foreign currency exchange impact		(2,059	)		(5,977	)
Employer contributions		47,495			42,439
Acquisition/transferred asset		(1,056	)		24,251
Plan participants' contributions		1,389			1,328
Settlement		(119	)		(10,919	)
Benefits paid		(31,911	)		(32,508	)
Fair value of plan assets at end of year	$	678,250		$	661,319		$	—		$	—
Funded status	$	(108,342	)	$	(12,817	)	$	(12,562	)	$	(13,108	)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Amounts recognized in the Consolidated Balance Sheets consist of:


	Pension Benefits						Postretirement Benefits
(in thousands) December 31,	2011			2010			2011			2010
Other assets	$	59,891		$	74,477		$	—		$	—
Current liabilities		(1,169	)		(640	)		(1,248	)		(1,438	)
Accrued pension and postretirement benefits		(167,068	)		(86,654	)		(11,314	)		(11,670	)
	$	(108,346	)	$	(12,817	)	$	(12,562	)	$	(13,108	)

Amounts recognized in accumulated other comprehensive loss (income) consist of:


	Pension Benefits						Postretirement Benefits
(in thousands) December 31,	2011			2010			2011			2010
Net actuarial loss (gain)	$	239,624		$	103,548		$	(1,518	)	$	(1,756	)
Prior service cost (credit)		1,036			1,287			(1,362	)		(1,598	)
Transition asset		(3	)		(5	)		—			—
	$	240,657		$	104,830		$	(2,880	)	$	(3,354	)

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the U.S. and Non-U.S. plans, are as follows:


	Pension Obligations/Assets
	U.S.				Non-U.S.				Total
(in millions) December 31,	2011		2010		2011		2010		2011		2010
Projected benefit obligation	$	455.1	$	374.9	$	331.5	$	299.2	$	786.6	$	674.1
Accumulated benefit obligation		439.6		366.1		303.9		277.2		743.5		643.3
Fair value of plan assets		336.4		321.8		341.9		339.5		678.3		661.3

Information for pension plans with an accumulated benefit obligation in excess of plan assets is as follows:


	Pension Benefits
(in thousands) December 31,	2011		2010
Projected benefit obligation	$	616,411	$	414,492
Accumulated benefit obligation		580,977		400,674
Fair value of plan assets		448,205		338,501

Components of Net Periodic Benefit Cost are as follows:


	Pension Benefits									Postretirement Benefits
(in thousands) December 31,	2011			2010			2009			2011			2010			2009
Net Periodic Benefit Cost
Service cost	$	11,710		$	11,417		$	10,370		$	121		$	114		$	106
Interest cost		38,163			36,301			35,722			588			745			891
Expected return on plan assets		(50,620	)		(43,793	)		(37,312	)		—			—			—
Amortization of prior service cost		421			451			530			(236	)		—			—
Amortization of net (gain) loss		6,733			6,985			8,357			(110	)		(175	)		(514	)
Settlement costs		—			2,614			172			—			—			—
Special termination benefits		—			52			428			—			—			—
Net periodic benefit cost	$	6,407		$	14,027		$	18,267		$	363		$	684		$	483

The estimated net loss and prior service cost for the defined benefit pension plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year are $19.2 million and $0.4 million, respectively. The estimated net gain and prior service cost for the postretirement plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year are $0.1 million and $0.2 million, respectively.

The weighted average assumptions used to determine benefit obligations are as follows:


	Pension Benefits						Postretirement Benefits
December 31,	2011		2010		2009		2011		2010		2009
U.S. Plans:
Discount rate		5.00%		5.80%		6.10%		4.25%		4.75%		5.30%
Rate of compensation increase		3.50%		3.50%		3.65%
Non-U.S. Plans:
Discount rate		4.56%		5.40%		5.76%
Rate of compensation increase		3.89%		3.74%		3.72%

The weighted-average assumptions used to determine net periodic benefit cost are as follows:


	Pension Benefits						Postretirement Benefits
December 31,	2011		2010		2009		2011		2010		2009
U.S. Plans:
Discount rate		5.80%		6.10%		6.75%		4.25%		5.30%		7.00%
Expected rate of return on plan assets		8.25%		8.25%		8.75%
Rate of compensation increase		3.50%		3.65%		3.91%
Non-U.S. Plans:
Discount rate		5.40%		5.76%		6.40%
Expected rate of return on plan assets		7.01%		7.13%		7.25%
Rate of compensation increase		3.74%		3.72%		3.62%

PART II / ITEM 8

The long term expected rate of return on plan assets assumptions were determined by the Company with input from independent investment consultants and plan actuaries, utilizing asset pricing models and considering historical returns. The discount rates used by the Company for valuing pension liabilities are based on a review of high quality corporate bond yields with maturities approximating the remaining life of the projected benefit obligations.

In the U.S., the 8.25% expected rate of return on assets assumption for 2011 reflected a long-term asset allocation target comprised of an asset allocation range of 25%-75% equity securities, 15%-35% fixed income securities, 10%-35% alternative assets, and 0%-10% cash. As of December 31, 2011, the actual asset allocation for the U.S. plan was 48% equity securities, 23% fixed income securities, 20% alternative assets, and 9% cash and cash equivalents.

For the non-U.S. Plans, the 7.01% expected rate of return on assets assumption for 2011 reflected a weighted average of the long-term asset allocation targets for our various international plans. As of December 31, 2011, the actual weighted average asset allocation for the non-U.S. plans was 48% equity securities, 47% fixed income securities, 3% alternative assets/other, and 2% cash and cash equivalents.

The assumed health care cost trend rates are as follows:


December 31,	2011		2010
Health care cost trend rate assumed for next year		8.00%		8.50%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)		4.75%		4.75%
Year that the rate reaches the ultimate trend rate		2019		2019

Assumed health care cost trend rates have a significant effect on the amounts reported for the Company's health care plans.

A one-percentage-point change in assumed health care cost trend rates would have the following effects:


(in thousands)	One Percentage Point Increase		One Percentage Point (Decrease)
Effect on total of service and interest cost components	$	44	$	(40	)
Effect on postretirement benefit obligation		707		(651	)

Plan Assets

The Company's pension plan target allocations and weighted-average asset allocations by asset category are as follows:


			Actual Allocation
Asset Category December 31,	Target Allocation		2011		2010
Equity securities		40%-60%		48%		54%
Fixed income securities		25%-45%		35%		32%
Alternative assets/Other		0%-25%		12%		12%
Money market		0%-5%		5%		2%

The Company's pension investment committees and trustees, as applicable, exercise reasonable care, skill and caution in making investment decisions. Independent investment consultants are retained to assist in executing the plans' investment strategies. A number of factors are evaluated in determining if an investment strategy will be implemented in the Company's pension trusts. These factors include, but are not limited to, investment style, investment risk, investment manager performance and costs.

The primary investment objective of the Company's various pension trusts is to maximize the value of plan assets, focusing on capital preservation, current income and long-term growth of capital and income. The plans' assets are typically invested in a broad range of equity securities, fixed income securities, alternative assets and cash instruments. The company's investment strategies across its pension plans worldwide results in a global target asset allocation range of 40%-60% equity securities, 25%-45% fixed income securities, 0%-25% alternative assets, and 0%-5% money market, as noted in the table above.

Equity securities include investments in large-cap, mid-cap, and small-cap companies located in both developed countries and emerging markets around the world. Fixed income securities include government bonds of various countries, corporate bonds that are primarily investment-grade, and mortgage-backed securities. Alternative assets include investments in hedge funds with a wide variety of strategies.

The Company periodically reviews investment managers and their performance in relation to the plans' investment objectives. The Company expects its pension trust investments to meet or exceed their predetermined benchmark indices, net of fees. Generally, however, the Company realizes that investment strategies should be given a full market cycle, normally over a three to five-year time period, to achieve stated objectives.

Equity securities include Crane Co. common stock, which represents 5% and 4% of plan assets at December 31, 2011 and 2010, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The fair value of the Company's pension plan assets at December 31, 2011, by asset category are as follows:


(in thousands)	Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3		Total Fair Value
Cash and Money Markets	$	38,084	$	—	$	—	$	38,084
Common Stocks
Actively Managed U.S. Equities		93,869		—		—		93,869
Fixed Income Bonds and Notes		—		25,485		—		25,485
Commingled and Mutual Funds
U.S. Equity Funds		—		26,322		—		26,322
Non-U.S. Equity Funds		—		198,655		—		198,655
U.S. Fixed Income, Government and Corporate		—		33,810		—		33,810
U.S. Tactical Allocation Balanced Fund		—		16,455		—		16,455
Non-U.S. Fixed Income, Government and Corporate		—		159,611		—		159,611
International Balanced Funds		—		8,223		—		8,223
Alternative Investments
Hedge Funds		—		67,967		—		67,967
International Property Funds		—		9,011		—		9,011
Annuity Contract		—		758		—		758
Total Fair Value	$	131,953	$	546,297	$	—	$	678,250

In 2011, assets valued at $16 million were transferred from Level 3 to Level 2 due to the expiration of a restriction on fund redemptions.

Additional information pertaining to the changes in the fair value of the Pension Plans' assets classified as Level 3 for the year ended December 31, 2011 is presented below:


Asset Category (dollars in thousands)	Hedge Funds
Balance at January 1, 2011		17,169
Total Realized and Unrealized Gains/Losses		(1,498	)
Purchases, Sales, Settlements Transfers in or out of Level 3		(15,671	)
Balance at December 31, 2011		—

The fair value of the Company's pension plan assets at December 31, 2010, by asset category are as follows:


(in thousands)	Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3		Total Fair Value
Cash and Money Markets	$	11,862	$	—	$	—	$	11,862
Common Stocks
Actively Managed U.S. Equities		97,117		—		—		97,117
Fixed Income Bonds and Notes		—		23,579		—		23,579
Commingled and Mutual Funds
U.S. Equity Funds		—		25,954		—		25,954
Non-U.S. Equity Funds		—		228,551		—		228,551
U.S. Fixed Income, Government and Corporate		—		41,787		—		41,787
Non-U.S. Fixed Income, Government and Corporate		—		145,811		—		145,811
International Balanced Funds		—		6,017		—		6,017
Alternative Investments
Hedge Funds		—		54,380		17,169		71,549
International Property Funds		—		8,347		—		8,347
Annuity Contract		—		745		—		745
Total Fair Value	$	108,979	$	535,171	$	17,169	$	661,319

In 2010, assets valued at $111 million were transferred from Level 1 to Level 2 due to a change in classification methodology.

Additional information pertaining to the changes in the fair value of the Pension Plans' assets classified as Level 3 for the year ended December 31, 2010 is presented below:


Asset Category (dollars in thousands)	Hedge Funds
Balance at January 1, 2010	$	14,885
Total Realized and Unrealized Gains/(Losses)		2,284
Purchases, Sales, Settlements Transfers in or out of Level 3		—
Balance at December 31, 2010	$	17,169

PART II / ITEM 8

The following table sets forth a summary of pension plan assets valued using Net Asset Value (NAV) or its equivalent as of December 31, 2011:

( dollars in thousands)

Fair
Value*

Redemption
Frequency

Unfunded
Commitment

Other
Redemption
Restrictions

Redemption
Notice Period

Archstone Offshore Fund, Ltd(a)

28,241

12 Months

None

90 days written

Evanston Capital Management(a)

24,055

12 Months

None

65 days written

Strategic Value Fund(b)

15,671

12 Months

None

90 days written

U.S. Equity Funds(c)

26,322

immediate

None

Non-US Equity Funds(d)

198,655

immediate

None

Non US Fixed Income, Gov't and Corp.(e)

159,611

immediate

None

International Property Funds(f)

9,011

immediate

None

International Balanced Funds(g)

8,223

immediate

None

US Government and Corporate Fixed Income(h)

33,810

immediate

None

US Tactical Allocation Balanced Fund(i)

16,455

immediate

None

*	The fair values of the investments have been estimated using the net asset value of the investment

(a)	These funds are alternative assets which seeks to outperform equities while maintaining a lower risk profile than equities

(b)	This fund is an alternative investment that invests in distressed debt instruments seeking price appreciation

(c)	These funds invest in U.S. equity securities and seeks to meet or exceed relative benchmarks

(d)	These funds invest in equity securities outside the U.S. and seek to meet or exceed relative benchmarks

(e)	These funds invest in Corporate and Governments fixed income securities outside the U.S. and seek to meet or exceed relative benchmarks

(f)	These funds invest in real property outside the U.S.

(g)	These funds invest in a pre defined mix of U.S. equity and non U.S. fixed income securities and seek to meet or exceed the performance of a passive/local benchmark of similar mixes

(g)	These funds invest in a blend of equities, fixed income, cash and property outside the U.S. and seek to outperform a similarly weighted index

(h)	These funds invest in U.S. fixed income securities, corporate, government and agency, and seek to outperform the Barclays Capital Aggregate Index

(i)	These funds invest in global bonds, global stocks, real estate and commodities and seek to outperform U.S. inflation by 5% over a market cycle

The following table sets forth a summary of pension plan assets valued using Net Asset Value (NAV) or its equivalent as of December 31, 2010:

( dollars in thousands)

Fair
Value*

Redemption
Frequency

Unfunded
Commitment

Other
Redemption
Restrictions

Redemption
Notice Period

Archstone Offshore Fund, Ltd(a)

29,664

12 Months

None

90 days written

Evanston Capital Management(a)

24,716

12 Months

None

60 days written

Strategic Value Fund(b)

17,169

12 Months

None

90 days written

U.S. Equity Funds(c)

25,954

Immediate

None

Non-U.S. Equity Funds(d)

228,551

Immediate

None

Non-U.S. Fixed Income, Government and Corporate(e)

145,811

Immediate

None

International Property Funds(f)

8,347

Immediate

None

International Balanced Funds(g)

6,017

Immediate

None

U.S. Government and Corporate Fixed Income(h)

41,787

Immediate

None

*	The fair values of the investments have been estimated using the net asset value of the investment

**	This fund is an alternative investment and withdrawals are not permitted until September 2011

(a)	These funds are alternative assets which seeks to outperform equities while maintaining a lower risk profile than equities

(b)	This fund is an alternative investment that invests in distressed debt instruments seeking price appreciation

(c)	These funds invest in U.S. equity securities and seeks to meet or exceed relative benchmarks

(d)	These funds invest in equity securities outside the United States and seek to meet or exceed relative benchmarks

(e)	These funds invest in Government and Corporate fixed income securities outside the U.S. and seek to meet or exceed relative benchmarks

(f)	These funds invest in real property outside the U.S.

(g)	These funds invest in a pre-defined mix of U.S. equity and non-U.S. fixed income securities and seek to meet or exceed the performance of a passive/local benchmark of similar mixes

(h)	These funds invest in U.S. fixed income securities, government, corporate and agency, and seek to outperform the Barclay's Capital Aggregate Index

Cash Flows The Company expects, based on current actuarial calculations, to contribute cash of approximately $5 million to its defined benefit pension plans and $1.3 million to its other postretirement benefit plan in 2012. Cash contributions in subsequent years will depend on a number of factors including the investment performance of plan assets.

Estimated Future Benefit Payments The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:


Estimated future payments (in thousands)	Pension Benefits		Postretirement Benefits
2012	$	34,261	$	1,275
2013		34,621		1,258
2014		36,315		1,226
2015		37,464		1,196
2016		39,188		1,179
2017-2021		223,884		5,773
Total payments	$	405,733	$	11,907

The Company's subsidiaries ELDEC and Interpoint 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 were $2.3 million in 2011, $2.2 million in 2010 and $2.4 million in 2009.

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 $6.6 million in 2011, $3.2 million in 2010 and $4.6 million in 2009.

In addition to participant deferral contributions and Company matching contributions on those deferrals, the Company provides a 2% non-matching contribution to participants who are not eligible to participate in the Company-sponsored defined benefit pension plan or the ELDEC money purchase pension plan due to freezing of participation in those plans effective January 1, 2006. The Company made contributions to these plans of $2.4 million in 2011, $2.2 million in 2010 and $2.0 million in 2009.