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<SEC-DOCUMENT>0000950130-01-001276.txt : 20010314
<SEC-HEADER>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
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<FILENAME>0001.txt
<DESCRIPTION>FORM 10-K405
<TEXT>
<PAGE>
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.
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
PART I (continued)
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the registrant are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
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
</TABLE>
14
<PAGE>
PART I (continued)
EXECUTIVE OFFICERS OF THE REGISTRANT (continued)
<TABLE>
<CAPTION>
<S> <C> <C>
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.
</TABLE>
* 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
<PAGE>
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
<PAGE>
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
<PAGE>
SIGNATURES
Pursuant to the requirements of Section l3 or l5 (d) of the Securities Exchange
Act of l934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CRANE CO.
-----------------
(Registrant)
By 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
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.I
<SEQUENCE>2
<FILENAME>0002.txt
<DESCRIPTION>INCENTIVE COMPENSATION PLAN
<TEXT>
<PAGE>
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.
<PAGE>
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:
<TABLE>
<CAPTION>
Event Disposition of Equity Balance
- ----- -----------------------------
<S> <C>
- - 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
</TABLE>
/(1)/ Retirement is defined as normal retirement at age 65
<PAGE>
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.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.J
<SEQUENCE>3
<FILENAME>0003.txt
<DESCRIPTION>EMPLOYMENT AGREEMENT
<TEXT>
<PAGE>
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.
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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]
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-11
<SEQUENCE>4
<FILENAME>0004.txt
<DESCRIPTION>COMPUTATION OF NET INCOME PER SHARE
<TEXT>
<PAGE>
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)
<TABLE>
<CAPTION>
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
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
======== ====== ====== ====== =======
</TABLE>
*All share and per share data have been retroactively restated to reflect the
three-for-two splits of common stock effected in the form of a 50% stock
dividend in 1998 and 1996.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>5
<FILENAME>0005.txt
<DESCRIPTION>ANNUAL REPORT
<TEXT>
<PAGE>
- --------------------------------------------------------------------------------
2000 Annual Report
- --------------------------------------------------------------------------------
Crane Co.
<PAGE>
----------------------------------------------------------------------
Our Credo
----------------------------------------------------------------------
We strive for a dominant presence
in niche markets.
We generate solid rates of return on
invested capital and high levels of cash flow.
We use our cash effectively
to grow and strengthen our existing businesses,
and to acquire new businesses.
We acquire businesses that fit
with our existing businesses and strengthen our position
in niche markets.
We maintain an incentive compensation plan
specifically designed to align the interests of
management and shareholders.
We do this with one goal in mind:
to build shareholder value.
Table of Contents
Financial Highlights 1
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
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
($ and shares in thousands except per share data) 2000 1999 %Change
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(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
--
<PAGE>
- --------------------------------------------------------------------------------
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
- --
<PAGE>
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
--
<PAGE>
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
- --
<PAGE>
- --------------------------------------------------------------------------------
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
--
<PAGE>
- --------------------------------------------------------------------------------
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
- --
<PAGE>
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.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Business Unit Products Markets Served
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
--
Crane Co / 2000 Annual Report 7
--
<PAGE>
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.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Business Unit Products Markets Served
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --
8 Crane Co / 2000 Annual Report
- --
<PAGE>
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
--
<PAGE>
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.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Business Unit Products Markets Served
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --
10 Crane Co / 2000 Annual Report
- --
<PAGE>
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
--
<PAGE>
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.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Business Unit Products Markets Served
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --
12 Crane Co / 2000 Annual Report
- --
<PAGE>
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
--
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Business Unit Products Markets Served
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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
- --
<PAGE>
- --------------------------------------------------------------------------------
Consolidated Statements of Income
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For Years Ended December 31, (in thousands except per share data) 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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
==============================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
--
Crane Co / 2000 Annual Report 15
--
<PAGE>
- --------------------------------------------------------------------------------
Consolidated Balance Sheets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Balance at December 31, (in thousands except share data) 2000 1999
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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
=========================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
--
Crane Co / 2000 Annual Report 16
--
<PAGE>
- --------------------------------------------------------------------------------
Consolidated Statements of Cash Flows
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For Years Ended December 31, (in thousands) 2000 1999 1998
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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
=======================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
--
Crane Co / 2000 Annual Report 17
--
<PAGE>
- --------------------------------------------------------------------------------
Consolidated Statements of
Changes in Common Shareholders' Equity
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
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
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
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
==================================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
- --
18 Crane Co / 2000 Annual Report
- --
<PAGE>
- --------------------------------------------------------------------------------
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
--
<PAGE>
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
- --
<PAGE>
Discontinued Operations
On December 6, 1999, the company's Board of Directors approved the spin-off of
its Huttig Building Products ("Huttig") subsidiary effective December 16, 1999,
to shareholders of record as of December 8, 1999. Huttig common shares were
distributed on the basis of one share of Huttig for every 4.5 shares of Crane
Co. common stock. Prior to the spin-off, Huttig transferred $68 million to the
company, which the company used to pay down debt.
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
--
<PAGE>
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:
<TABLE>
<CAPTION>
Pension Benefit Postretirement Benefits
- -----------------------------------------------------------------------------------------------
(in thousands) December 31, 2000 1999 2000 1999
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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)
===============================================================================================
</TABLE>
- --
22 Crane Co / 2000 Annual Report
- --
<PAGE>
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
================================================================
<TABLE>
<CAPTION>
(Dollars in thousands Pension Benefits Postretirement Benefits
- -------------------------------------------------------------------------------------------
December 31, 2000 1999 1998 2000 1999 1998
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
===========================================================================================
</TABLE>
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
--
<PAGE>
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
- --
<PAGE>
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
--
<PAGE>
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
- --
<PAGE>
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
--
<PAGE>
- --------------------------------------------------------------------------------
Management's Responsibility for Financial Reporting
- --------------------------------------------------------------------------------
The accompanying consolidated financial statements of Crane Co. and subsidiaries
have been prepared by management in conformity with 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
- --
<PAGE>
- --------------------------------------------------------------------------------
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
--
<PAGE>
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
- --
<PAGE>
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
--
<PAGE>
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
--
<PAGE>
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
--
<PAGE>
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
--
<PAGE>
- --------------------------------------------------------------------------------
Five-Year Summary of Selected Financial Data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31, (in thousands except per 2000 1999 1998 1997 1996
share data)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
=================================================================================================================================
</TABLE>
- -------------------------------------------------------------------------------
Quarterly Results for the Year
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31, (in thousands except per First Second Third Fourth Year
share data)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
==============================================================================================================================
</TABLE>
(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
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
New York Stock Exchange Composite Price per Share Dividends per Share
- ---------------------------------------------------------------------------------------------------------------------------------
2000 2000 1999 1999 2000 1999
Quarter High Low High Low
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
---------------------------
</TABLE>
--
Crane Co / 2000 Annual Report 35
--
<PAGE>
- --------------------------------------------------------------------------------
Directors And Officers
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Directors Corporate Officers
<S> <C>
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
</TABLE>
(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
--
<PAGE>
- -------------------------------------------------------------------------------
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
--
<PAGE>
- -------
CRANE
- -------
Crane Co.
Executive Offices
100 First Stamford Place
Stamford, CT 06092
(203) 363-7300
www.craneco.com
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>6
<FILENAME>0006.txt
<DESCRIPTION>SUBSIDIARIES OF THE REGISTRANT
<TEXT>
<PAGE>
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.
<TABLE>
<S> <C>
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)
</TABLE>
<PAGE>
Subsidiaries of Registrant (continued)
<TABLE>
<S> <C>
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
</TABLE>
2
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>7
<FILENAME>0007.txt
<DESCRIPTION>INDEPENDENT AUDITORS' CONSENT
<TEXT>
<PAGE>
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
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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