-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BQE0+7m3fdFS7EuQKjjfES5kinuZOF/gxqHOhWFv6WDT5IQT8r426dPg6cPgeGYM i/vSa52hsWgjy3vIOJJywg== 0000950130-96-000929.txt : 19960325 0000950130-96-000929.hdr.sgml : 19960325 ACCESSION NUMBER: 0000950130-96-000929 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960322 SROS: NYSE 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: 1934 Act SEC FILE NUMBER: 001-01657 FILM NUMBER: 96537631 BUSINESS ADDRESS: STREET 1: 100 FIRST STAMFORD PLACE CITY: STAMFORD STATE: CT ZIP: 06902 BUSINESS PHONE: 2033637300 10-K405 1 FORM 10-K405 FORM 10-K405 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, 1995 ----------------- OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _______________ Commission file number 1-1657 ------ CRANE CO. ------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 13-1952290 ---------------------------------------- --------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No) 100 First Stamford Place, Stamford, CT 06902 ---------------------------------------- --------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (203) 363-7300 ------------------- Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered ----------------------- ------------------------ Common shares, par value $1.00 New York Stock Exchange Preferred Share Purchase Rights New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: 7 1/4% senior notes due June, 1999 8 1/2% senior notes due March, 2004 ------------------------------------------------------- (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days. Yes X No _____ ----- Indicate by check mark if the disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (X) Based on the closing sales price of January 31, 1996 the aggregate market value of the voting stock held by nonaffiliates of the registrant was $1,194,520,787. The number of shares outstanding of the registrant's common stock, $1.00 par value was 30,145,635 at January 31, 1996. DOCUMENTS INCORPORATED BY REFERENCE ----------------------------------- Portions of the annual shareholders report for the year ended December 31, 1995 are incorporated by reference into Parts I, II and IV. Portions of the proxy statement for the annual shareholders meeting May 6, 1996 are incorporated by reference into Parts I and III. PART I ITEM 1. BUSINESS -------- Crane is a diversified manufacturer of engineered industrial products and the nation's largest American distributor of doors, windows and millwork. Founded in 1855, Crane employs over 10,000 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 twelve acquisitions. During 1995, the company completed three acquisitions at a cost of $9.4 million. In February the company, through its Barksdale subsidiary, acquired Unimess GmbH, a German-based manufacturer of a full line of solid state pressure switches and transducers, level switches and indicating systems, and flow measurement and control components for specialized instrumentation requirements in numerous industrial processes. In the fourth quarter, the company acquired Process Systems, Inc. based in Michigan. Process Systems is a manufacturer of vertical turbine pumps and accessories for industrial applications. In November 1995, the company acquired Kessel PTE Ltd., a fluoropolymer plastic lined pipe manufacturer with facilities in Singapore, Malaysia and Thailand. The company completed three acquisitions in 1994 at a total cost of $240 million. The company, through its wholly-owned subsidiary Huttig Sash & Door Company, acquired a moulding and millwork manufacturing operation in Prineville, Oregon in May 1994. In April, 1994, the company purchased Mark Controls Corporation, a manufacturer of automatic and manually operated valves, and specialized instruments and controls, for commercial and industrial customers. The company acquired ELDEC Corporation in March 1994. ELDEC's products are used worldwide on all major commercial and business aircraft and include: position indication and control systems, proximity switches and components, true mass fuel flowmeters, and power conversion components and systems. In 1993, the company completed five acquisitions at a total cost of $106 million. In December, the company acquired Burks Pumps, Inc., which has manufacturing facilities in Piqua, Ohio and Decatur, Illinois and provides engineered pumps for an array of specialized commercial, industrial and municipal fluid handling applications. The products are marketed under the Barnes, Burks, Weinman and Prosser brand names. Also included was a line of tank cleaning equipment sold under the Sellers brand name for the industrial clean- in-place market. This acquisition substantially increased Crane's involvement in niche pump markets. In October 1993, the company acquired Filon, a manufacturer of fiberglass- reinforced plastic (FRP) panels. Filon was integrated with the company's Kemlite unit in the fourth quarter of 1993. The Filon acquisition significantly expanded Kemlite's position as a supplier of FRP panels to the recreational vehicle market. In April and May 1993 Huttig Sash & Door Company expanded its nationwide millwork distribution by acquiring Rondel's Inc., a millwork distributor serving the eastern Washington/western Idaho region, and the Whittier-Ruhle Millwork Company, serving the Mid-Atlantic region. Perflow Instruments, Ltd., a British manufacturer of pressure and flow measurement equipment, was added to Crane Ltd. in 1993. /1 PART I (CONTINUED) ITEM 1. BUSINESS (CONTINUED) -------- In 1992, certain assets of Jenkins Canada, Inc., a manufacturer of bronze and iron valves, were acquired as an addition to the company's North American valve unit. DIVESTITURES In the past five years, the company has divested three businesses. In December 1994, Huttig sold its window manufacturing business for $2.4 million. The transaction excluded real estate and receivables. In July 1994, the company sold Modulinc, the fiber optic channel product line of ELDEC. In April 1993, the company sold its precision ordnance business, UniDynamics/ Phoenix for approximately $6 million. LONG-TERM FINANCING In June 1994 the company sold $150,000,000 of 7 1/4% notes that will mature on June 15, 1999. During March 1992 the company sold $100,000,000 8 1/2% notes that will mature on March 15, 2004. BUSINESS SEGMENTS See pages 28 and 29 of the Annual Report to Shareholders for sales, operating profit and assets employed of each business segment. FLUID HANDLING The Fluid Handling segment consists of valve, pump and water treatment businesses. The Crane Valve business with five manufacturing facilities in North America, as well as plants in the United Kingdom, Australia, Norway, China and Indonesia, sells a wide variety of commodity and special purpose valves and fluid control products for the chemical and hydrocarbon processing, power generation, marine, general industrial and commercial construction industries. Products are sold under the Crane, Jenkins, Pacific, Westad, Flowseal and Center Line brands. Crane Pumps has six manufacturing facilities in the United States located in Ohio, Illinois, Pennsylvania, West Virginia and Michigan. Pumps are manufactured under the Deming, Weinman, Chempump, Burks, Chem/Meter, Barnes and Process Systems brand names. Pumps are sold to a broad customer base which includes chemical and hydrocarbon process industries, automotive, municipal, industrial and commercial wastewater, power generation, commercial heating, ventilation and air-conditioning industries and original equipment manufacturers. The water treatment business has a manufacturing facility in Pennsylvania and serves the water and wastewater treatment market. Its products are sold under the Cochrane name. This group employs 3,200 people and had assets of $261.2 million at December 31, 1995. The Fluid Handling business continued to focus on reducing product costs. Crane has established a low cost base of suppliers in China, South Korea, India, Mexico, Romania and Poland. Cellular manufacturing techniques were successfully implemented at Crane Ltd. in 1995 and are planned for our Brantford, Canada bronze valve facility in 1996. Two valve manufacturing joint ventures were established in the Far East in 1995, one in China and one in Indonesia. Both were manufacturing and shipping valves in the fourth quarter of 1995. Crane acquired Process Systems Inc., a manufacturer of industrial line shaft turbine pumps in the fourth quarter of 1995. This company, with annual sales of $9.0 million, will be integrated into Crane's existing vertical turbine pump business in 1996. Products in this group are sold directly to end users through Crane's sales organization and through independent distributors and manufacturers representatives. /2 PART I (CONTINUED) ITEM 1. BUSINESS (CONTINUED) -------- AEROSPACE The Aerospace segment consists of ELDEC, Hydro-Aire, and Lear Romec. The group employs 1,500 people and had assets of $166.6 million at year end. The order backlog totaled $211 million at December 31, 1995, slightly above the prior year level. ELDEC designs, manufactures and markets custom position indication and control systems, proximity sensors and components, true mass fuel flowmeters, power conversion components and systems for the commercial, business and military aerospace industries, and military marine and telecommunications markets. These products are custom designed for specific aircraft to meet technically demanding requirements of the aerospace industry. ELDEC also has a $5.0 million 47% equity investment in Powec AS, a Norwegian manufacturer of power conditioning products and systems, whose products are complementary to the products and complex power systems engineering capabilities at ELDEC. This accelerates the transfer of our Aerospace power conversion technology to the commercial wireless telecommunications market. Hydro-Aire designs, manufactures and sells anti-skid and automatic braking systems, fuel and hydraulic pumps, and coolant pumps and systems, hydraulic and pneumatic valves and regulators, actuators and solid state components for the commercial, business and military aerospace industries as original equipment. In addition, the company designs and manufactures systems similar to those above for the retrofit of aircraft with improved systems and manufactures replacement parts for systems installed as original equipment by the aircraft manufacturer. All of these products are largely proprietary to the company and, to some extent, are custom designed to the requirements and specifications of the aircraft manufacturer or program contractor. These systems and replacement parts are sold directly to airlines, governments, and aircraft maintenance and overhaul companies. Lear Romec designs, manufactures and sells lubrication and fuel pumps for aircraft, aircraft engines and radar cooling systems for the commercial and military aerospace industries. Lear Romec has a leading share of the non- captive market for turbine engine lube and scavenge oil pumps. Lear Romec also manufactures fuel boost and transfer pumps for commuter and business aircraft. /3 PART I (CONTINUED) ITEM 1. BUSINESS (CONTINUED) -------- ENGINEERED MATERIALS The Engineered Materials segment consists of five businesses: Kemlite, Cor Tec, Resistoflex, Polyflon and Crane Plumbing. This group had assets of $100.6 million at December 31, 1995 and employed 1,200 people. Order backlog at year end 1995 was strong at $22.5 million. Although down significantly from the inflated level at year end 1994 which was caused by anticipated fiberglass shortages, this backlog is historically high compared to normal order backlog levels. Kemlite manufactures fiberglass-reinforced plastic panels for use principally by the transportation industry in refrigeration and dry van truck trailers and recreational vehicles. Kemlite products are also sold to the commercial construction industry for food processing, fast food restaurant and supermarket applications, and to institutions where fire rated materials with low smoke generation and minimum toxicity are required. Kemlite sells its products directly to the truck trailer and recreational vehicle manufacturers. Kemlite uses distributors to serve its commercial construction market and some segments of the recreational vehicle market. Cor Tec manufactures fiberglass-reinforced laminated panels serving the truck and truck trailer segment of the transportation industry. Cor Tec markets its products directly to the truck and truck trailer manufacturers. Resistoflex is engaged in the design, manufacture and sale of corrosion- resistant, plastic-lined steel pipes, fittings, tanks, valves, expansion joints and hose used primarily by the pharmaceutical, chemical processing, pulp and paper, petroleum distribution, 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. In the fourth quarter of 1995, Resistoflex acquired Kessel PTE, Ltd., a plastic-lined pipe manufacturer with facilities in Singapore, Malaysia and Thailand. This acquisition will provide Resistoflex with immediate market access to the rapidly expanding Asian chemical process industry. Polyflon manufactures radio frequency and microwave components, capacitors, circuit processing, and antennas for commercial and aerospace uses. Crane Plumbing manufactures plumbing fixtures in Canada. Its products are sold through distributors in Canada and it has a large share of the Canadian plumbing fixtures market. /4 PART I (CONTINUED) ITEM 1. BUSINESS (CONTINUED) -------- CRANE CONTROLS This segment includes five businesses: Barksdale, Powers Process Controls, Dynalco Controls, Azonix, and Ferguson. The companies in this segment design, manufacture and market industrial and commercial products that control flows and processes in various industries including the petroleum, chemical, construction, food and beverage, power generation industries and transportation. Crane Controls had assets of $128.5 million at December 31, 1995, and employs 800 people. On December 31, 1995, Crane Controls had a backlog of $26.2 million, equivalent with last year. Barksdale manufactures solid state and electromechanical pressure and vacuum switches, pressure transducers, temperature switches, and directional control valves which serve a broad range of commercial and industrial applications. It has manufacturing and marketing facilities in the United States and Germany. The February 1995 acquisition of Unimess GmbH brought a full line of solid state switches, transducers and indicating systems to Barksdale, complementing existing German and United States product lines and market channels. Powers Process Controls designs, manufactures and markets microprocessor- based process controllers and instrumentation, pneumatic actuated control valves, self-contained temperature regulators, water mixing and thermal shock protection shower valves and plumbing brass for industrial applications and the institutional construction industry. Dynalco Controls designs and manufactures rotational speed sensors, monitoring instruments, and ignition and air to fuel control systems. Dynalco's products are used worldwide by industries in a variety of applications, including stationary natural gas engines, power generation, oil and gas production and transmissions, and agriculture equipment. Azonix manufactures high precision data acquisition, control systems and operator interfaces for a wide range of industries which require equipment to withstand harsh environments. Ferguson designs and manufactures in the United States and through Ferguson Machine S.A. in Europe, precision index and transfer systems for use on and with machines which perform automatic forming, assembly, metal cutting, testing and inspection operations. Products include index drives and tables, mechanical parts handlers, in line transfer machines, rotary tables, press feeds and custom cams. The products in this segment are sold directly to end users, and engineering contractors through the company's own sales forces and cooperatively with sales representatives, stocking specialists and industrial distributors. MERCHANDISING SYSTEMS The Merchandising Systems segment has two operating units: National Vendors, the industry leader in the design and manufacture of a complete line of vending merchandisers for the food/service vending market; and NRI, which manufactures electronic coin validators in Buxtehude, Germany for the automated merchandising and gambling/amusement markets in Europe. National Vendors products include electronic vending merchandisers for refrigerated and frozen foods, hot and cold beverages, snack foods, single cup individually brewed hot drinks and combination vendors/merchandisers, designed to vend both snack foods and /5 PART I (CONTINUED) ITEM 1. BUSINESS (CONTINUED) -------- MERCHANDISING SYSTEMS (CONTINUED) hot/cold drinks, or snacks and refrigerated/frozen foods in one machine. National Vendors manufactures its products in a 463,000 sq. ft. state of the art facility in Bridgeton, Missouri. National Vendors' products are marketed directly to customers in the United States and Europe by company sales and marketing personnel, and in other international markets through independent distributors. Merchandising Systems employs 1,150 people and had assets of $88.9 million at year end 1995. Order backlog totaled $14.7 million at December 31, 1995, which is normal for Merchandising Systems. In 1995, National Vendors expanded its international distribution and now has six distributors in Latin America, five in the Pacific Rim, and six in the Middle East. International sales, particularly in Europe, but also in Latin America and the Pacific Rim, will be key to future growth along with continued new product introduction. WHOLESALE DISTRIBUTION The company distributes millwork products through its wholly-owned subsidiary, Huttig Sash & Door Company ("Huttig"). These products include doors, windows, mouldings and related building products. Huttig assembles certain of these products to customer specification prior to distribution. Its principal customers are building material dealers, building contractors and home remodelers that service the new construction and remodeling markets. Wholesale operations are conducted nationally through forty-six distribution centers throughout the United States, in both major and medium-sized cities. Huttig's sales are made on both a direct shipment and out-of-warehouse basis entirely through its own sales force. Huttig has a manufacturing plant in Montana, where it produces certain of the above products and other finished lumber, the bulk of which is sold directly to third parties, some of whom compete with Huttig branches. Huttig acquired a specialty moulding and millwork manufacturing operation in Prineville, Oregon in 1994. The majority of the moulding products are sold to third parties but Huttig is the largest customer. Valve Systems & Controls is a value-added industrial distributor providing power operated valves and flow control systems to the petroleum, chemical, power and general processing industries. It services its customers through facilities in Texas and Louisiana. Crane Supply, a distributor of plumbing supplies, valves and piping in Canada, maintains thirty-six branches throughout Canada and distributes Crane manufactured products in that country. Crane Supply also distributes products which are both complementary to and partly competitive with Crane's own manufactured products. OTHER The other segment consists of Crane Defense Systems, which is the only Crane business focused on defense industry products. Crane Defense Systems is engaged in the development and manufacture of specialized handling systems, elevators, winches, ground support equipment, cranes and associated electronics. These products are sold directly to the government and defense contractors and represent less than 1% of 1995 sales. /6 PART I (CONTINUED) ITEM 1. BUSINESS (CONTINUED) -------- COMPETITIVE CONDITIONS The company's lines of business are conducted under actively competitive conditions in each of the geographic and product areas they serve. Because of the diversity of the classes of products manufactured and sold, they do not compete with the same companies in all geographic or product areas. Accordingly, it is not possible to estimate the precise number of competitors or to identify the principal methods of competition. Although reliable statistics are not available, the company believes that it is an important supplier to a number of market niches and geographic areas. The company's products have primary application in the industrial, construction, aerospace, automated merchandising, transportation, and fluid handling industries. As such, they are dependent upon numerous unpredictable factors, including changes in market demand, general economic conditions, residential and commercial building starts, and capital spending. Because these products are also sold in a wide variety of markets and applications, the company does not believe it can reliably quantify or predict the possible effects upon its business resulting from such changes. Seasonality is a factor in Huttig and the Canadian operations. The company's engineering and product development activities are directed primarily toward improvement of existing products and adaptation of existing products to particular customer requirements. While the company owns numerous patents and licenses, none are of such importance that termination would materially affect its business. Product development and engineering costs aggregated approximately $51,900,000 in 1995, $46,400,000 in 1994 and $18,400,000 in 1993, respectively. Included in these amounts were approximately $12,600,000 and $9,500,000 received by the company in 1995 and 1994, respectively, for customer sponsored research and development. The increase in 1995 was mainly due to the ELDEC acquisition. The company is not dependent on any single customer nor are there any issues at this time regarding available raw materials for inventory. /7 PART I (CONTINUED) ITEM 1. BUSINESS (CONTINUED) -------- Costs of compliance with federal, state and local laws and regulations involving the discharge of materials into the environment or otherwise relating to the protection of the environment are not expected to have a material effect upon the company's capital expenditures, earnings or competitive position. ITEM 2. PROPERTIES ----------
MANUFACTURING FACILITIES* NUMBER AREA - ------------------------- ------ ---- Fluid Handling United States 14 1,318,000 sq. ft. Canada 2 140,000 sq. ft. International 7 910,000 sq. ft. Aerospace United States 3 536,000 sq. ft. International 1 7,500 sq. ft. Engineered Materials United States 7 689,000 sq. ft. Canada 3 601,000 sq. ft. International 2 11,000 sq. ft. Crane Controls United States 7 423,000 sq. ft. International 2 53,000 sq. ft. Merchandising Systems United States 1 463,000 sq. ft. Other International 1 197,000 sq. ft. Wholesale Distribution 2 888,000 sq. ft. Other 1 113,000 sq. ft. - ----------------------
*Includes plants under lease agreements.
Leased Leases Manufacturing Expiring Facilities Number Area Through - ------------- ------ ---- -------- United States 8 433,000 sq. ft. 2017 Canada 1 12,000 sq. ft. 2000 Other International 7 83,000 sq. ft. 2013
Fluid Handling operates four valve service centers in the United States, of which two are owned. This segment operates internationally six distribution and six service centers. /8 PART I (CONTINUED) ITEM 2. PROPERTIES (CONTINUED) ---------- Crane Controls operates one distribution center internationally. Merchandising Systems operates eight distribution centers in the United States and six internationally Wholesale Distribution has forty-six Huttig branch warehouses in the United States, of which twenty-seven are owned. The Canadian wholesale operation maintains thirty-six distribution branch warehouses in Canada, of which sixteen are owned. Valve Systems & Controls operates three leased distribution facilities in the United States. In the opinion of management, properties have been well maintained, are in sound operating condition, and contain all necessary equipment and facilities for their intended purposes. /9 PART I (CONTINUED) ITEM 3. LEGAL PROCEEDINGS Neither the company, nor any subsidiary of the company has become a party to, nor has any of their property become the subject of any material legal proceedings, other than ordinary routine litigation incidental to their businesses, except for the following. On February 28, 1991, the company was served with a complaint filed in the U.S. District Court for the Eastern District of Missouri naming the company and its former subsidiary, CF&I Steel Corporation ("CF&I"), as defendants and alleging violations of the federal False Claims Act in connection with the distribution of the company's shares of CF&I to the company's shareholders in 1985. A subsequent complaint with substantially similar allegations was served on the company on September 22, 1992. The two actions have been consolidated by the court (Civil Actions Nos. 91-0429-C-1 and 4:92CVOO5144JCH). On June 1,1993 the district court dismissed the case for lack of subject matter jurisdiction under the False Claims Act and the plaintiff appealed. On November 16, 1994, the U.S. Court of Appeals for the Eighth Circuit reinstated the action. The company's petition for a writ of certiorari to the U.S. Supreme Court was denied on or about June 16, 1995 and the case has been returned to the District court to further proceedings. The case was brought in the name of the U.S. Government by a private individual (the "relator") and involves allegations of a conspiracy between the company and CF&I to cause the Pension Benefit Guaranty Corporation ("PBGC") to assume certain unfunded liabilities under a CF&I pension plan (alleged to have been approximately $270 million), to prevent the PBGC from obtaining any reimbursement from the company and to publish and file misleading information in furtherance of those alleged objectives. The suit seeks treble damages and attorney's fees. Discovery in the case has been substantially completed. The company believes that the allegations are without merit, and has filed motions for summary judgment and judgment on the pleadings. Although the Department of Justice has declined to intervene in the action, the relator may proceed to trial, which is currently scheduled for June 1996. The company has vigorously defended itself in the litigation and will continue to do so, and believes that it will ultimately prevail. The following proceedings are not considered by the company to be material to its business or financial condition and are reported herein because of the requirements of the Securities and Exchange Commission with respect to the descriptions of administrative or judicial proceedings by governmental authorities arising under federal, state or local provisions regulating the discharge of materials into the environment or otherwise relating to the protection of the environment. In a letter dated October 15, 1992 the office of the Attorney General of the State of Ohio advised Cor Tec, a division of Dyrotech Industries, Inc. which is a subsidiary of the company, that Cor Tec's plant facility in Washington Court House, Ohio, had operated numerous air contaminant sources in its manufacturing process which emitted air pollutants for an extended period of time without the required state permits and in some instances in amounts exceeding the limits allegedly allowed under applicable rules. The Ohio Attorney General's office also alleged that certain contaminant sources at the Cor Tec facility were installed without obtaining permits to install. The main air contaminant in question is styrene, a volatile organic compound that is alleged to be a carcinogen. In 1993, Cor Tec constructed an emission control system in its plant which included the installation of a hood, vent and incinerator to capture and incinerate the styrene emissions. At a meeting in Columbus, Ohio on March 4, 1993 the Attorney General's office proposed that Cor Tec and the company sign a Consent Decree which would include general injunctive relief and civil penalties in the amount of $4.6 million which Cor Tec has refused to do. In a letter dated July 17, 1995 the Attorney General's office of the State of Ohio delivered a draft Complaint to Cor Tec (Court of Common Pleas, Fayette County, Ohio) alleging failure by Cor Tec to obtain various permits to install and to operate sources of contaminants and also alleging violations of air emissions standards, for periods 1974 to 1993. Penalties of $25,000 per day for each violation are demanded in the draft complaint. In a letter dated November 9, 1995, the Attorney General's office presented a civil penalty demand for $1.8 million and, by letter dated February 1, 1996 the Attorney General's office presented a draft Permit to /10 PART I (CONTINUED) ITEM 3. LEGAL PROCEEDINGS (CONTINUED) Operate the principal equipment in the Cor Tec facility that generates the styrene emissions. Cor Tec has responded in writing that, among other things, (i) the rule upon which the state's demands are based was not adopted in accordance with applicable statutory directives and is, therefore, unenforceable, (ii) Cor Tec has nevertheless complied with the rule as it is currently applied by the state, (iii) the penalties sought by the state are wholly out of proportion with the nature of the alleged violations and (iv) the proposed Permit to Operate does not comply with the emission limit criteria specified in the applicable state rule. Cor Tec has proposed revisions to the proposed Permit to Operate to conform to the applicable state rule and actual technical operating parameters. Cor Tec continues to believe it has adequate defenses to the allegations made by the Attorney General and it plans to vigorously resist paying any damages, fines, or penalties. On July 12, 1985 the company received written notice from the United States Environmental Protection Agency (the "EPA") that the EPA believes the company may be a potentially responsible party ("PRP") under the Federal Comprehensive Environmental Response Compensations and Liability Act of 1980 ("CERCLA") to pay for investigation and corrective measures which may be required to be taken at the Roebling Steel Company site in Florence Township, Burlington County, New Jersey (the "Site") of which its former subsidiary, CF&I Steel Corporation ("CF&I") was a past owner and operator prior to the enactment of CERCLA. The stated grounds for the EPA's position was the EPA's belief that the company had owned and/or operated the Site. The company had advised the EPA that such was not the case and does not believe that it is responsible for any testing or clean-up at the Site based on current facts. CF&I also has received notice from the State of New Jersey Department of Environmental Protection, Office of Regulatory Services ("NJDEP)", advising CF&I that an investigation by the NJDEP had identified what was considered an existing and potential environmental problem at the Site. As a past owner and operator at the Site, CF&I was notified of the NJDEP's belief that further investigatory action was needed to identify all potential environmental problems at the Site and thereafter formulate and implement a remedial plan to address any identified problems. The NJDEP has subsequently requested information from CF&I, and CF&I has cooperated in providing information, including results of tests which CF&I has conducted at the Site. The EPA identified sources of contamination, which must be examined for potential environmental damage, including: chemical waste drums, storage tanks, transformers, impressed gas cylinders, chemical laboratories, bag house dust, rubber tires, inactive railroad cars, wastewater treatment plants, lagoons, slag disposal areas, and a landfill. On November 7, 1990 CF&I filed a petition for reorganization and protection under Chapter 11 of the United States Bankruptcy Code. The EPA has disclosed that two surface clean-ups have been performed at a cost in excess of $2,000,000 and a further surface clean-up has been announced at an estimated cost of approximately $5,000,000. On July 1, 1991 the company received a letter from the EPA providing an update of the clean-up at the Site. The EPA's July 1, 1991 letter describes a proposed third phase of the investigation, including a Focused Feasibility Study which defined the nature of contaminants and evaluated remedial alternatives for two portions of the Site. The estimated cost for the preferred remedy selected by the EPA for these locations is $12,000,000. In the bankruptcy proceeding of CF&I the EPA was allowed an unsecured claim against CF&I for $27.1 million related to EPA's environmental investigations and remediation at the Roebling Site. Based on the analysis above, the company does not believe it is responsible for any portion of the clean-up. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter of 1995. /11 PART I (CONTINUED) EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers of the registrant are as follows:
Officer Name Position Business Experience Age Since - ---- -------- ------------------- --- ------- Robert S. Evans Chairman and Chief Chairman and Chief 51 1974 Executive Officer Executive Officer of the company since 1985 and previously President of the company L. Hill Clark (1) President and Executive Vice President of 51 1994 Chief Operating the company, previously Officer President of Lear Romec, and previously held various positions within Allied Signal Inc., a diversified manufacturing company Robert J. Muller, Jr. Executive Vice Executive Vice President of 49 1988 President the company Augustus I. duPont (2) Vice President, Vice President and General 44 1996 General Counsel Counsel of Reeves Industries, Inc., and Secretary a manufacturer of apparel textiles and industrial coated fabrics, from May 1994 to December 1995; Vice President, General Counsel and Secretary of Sprague Technologies, Inc., a manufacturer of electronic components, from May 1987 to December 1993 Anthony D. Pantaleoni Vice President Vice President - Environment, 41 1989 Environment, Health & Safety of the company Health & Safety Richard B. Phillips Vice President Vice President - Human 52 1987 Human Resources Resources of the company David S. Smith Vice President- Vice President - Finance 38 1991 Finance and and Chief Financial Officer Chief Financial of the company, previously Officer Vice President - Corporate Development of the company, and previously Vice President of Corporate Finance of Bankers Trust Company Michael L. Raithel Controller Controller of the company 48 1985 Gil A. Dickoff Treasurer Treasurer of the company, 34 1992 previously Assistant Treasurer of the company
(1) Effective October 23, 1995. (2) Effective January 22, 1996. /12 PART II The information required by Items 5 through 8 is hereby incorporated by reference to Pages 8 through 31 of the Annual Report to Shareholders. ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable 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 which the company will file with the Commission pursuant to Regulation l4A except that such information with respect to Executive Officers of the Registrant is included, pursuant to Instruction 3, paragraph (b) of Item 401 of Regulation S-K, under Part I. ITEM 11. EXECUTIVE COMPENSATION The information required by Item 11 is incorporated by reference to the definitive proxy statement which the company will file with the Commission pursuant to Regulation l4A. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by Item 12 is incorporated by reference to the definitive proxy statement which the company will file with the Commission pursuant to Regulation 14A. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by Item 13 is incorporated by reference to the definitive proxy statement which the company will file with the Commission pursuant to Regulation 14A. /13 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K Page ---- (a) Financial Statements and Schedule: Independent Auditors' Report 17 Schedule VIII Valuation and Qualifying Accounts 18 The consolidated balance sheets of Crane Co. and subsidiaries as of December 31, 1995 and 1994 and the related consolidated statements of income, changes in common shareholders' equity and cash flows for the years ended December 31, 1995, 1994 and 1993 and the financial review, appearing on Pages 8 through 31 of Crane Co.'s Annual Report to Shareholders which will be furnished with the company's proxy statement as required by Regulation 14A, Rule 14a-3(c), are incorporated herein by reference and are supplemented by the schedule on Page 16 of this report. All other statements and schedules for which provision is made in the applicable regulation of the Securities and Exchange Commission have been omitted because they are not required under related instructions or are inapplicable, or the information is shown in the financial statements and related notes. (b) Reports on Form 8-K: No reports on Form 8-K were filed during the quarter ended December 31, 1995. (c) Exhibits to Form 10-K: (3) Exhibit A-By-laws There is incorporated by reference herein: (a) The company's Certificate of Incorporation contained in Exhibit D to the company's Annual Report on Form 10-K for the fiscal year ended December 31, 1987. (4) Instruments Defining the Rights of Security Holders, including Indentures: (a) There is incorporated by reference herein: (1) Preferred Share Purchase Rights Agreement contained in Exhibit 1 to the company's Report on Form 8-K filed with the Commission on July 12, 1988. (2) Amendment to Preferred Share Purchase Rights Agreement contained in Exhibit 1 to the company's Report on Form 8-K filed with the Commission on June 29, 1990. /14 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 to Registration Statement No. 33-39658. (10) Material Contracts: (iii)Compensatory Plans Exhibit B: There is incorporated by reference herein: (a) The forms of Employment/Severance Agreement between the company company and the executive officers (form I) and (form II) which provide for the continuation of certain employee benefits upon a change of control as contained in Exhibit C of the company's annual report on Form 10-K for the fiscal year ended December 31, 1994. (b) The E.V.A. incentive compensation plan for executive officers contained in Exhibit B to the company's annual report on Form 10- K for the fiscal year December 31, 1994. (c) The Crane Co. Restricted Stock Award Plan as amended through May 10,1993 contained in Exhibit A to the company's annual report on Form 10-K for the fiscal year ended December 31, 1993. (d) The Crane Co. Non-Employee Directors Restricted Stock Award Plan as amended through May 10, 1993 contained in Exhibit B to the company's annual report on Form 10-K for the fiscal year ended December 31, 1994. (e) The indemnification agreements entered into with each director and executive officer of the company, the form of which is contained in Exhibit C to the company's definitive proxy statement filed with the Commission in connection with the company's April 27, 1987 Annual Meeting. (f) The Crane Co. Retirement Plan for Non-Employee Directors contained in Exhibit E to the company's Annual Report on Form 10- K for the fiscal year ended December 31, 1988. (g) The Crane Co. Stock Option Plan as amended as of February 27, 1995 contained in Exhibit 4(a) to the company's Registration Statement No. 33-59389 on Form S-8 filed with the Commission on May 17, 1995. (11) Statement re computation of per share earnings: Exhibit B: Computation of net income per share. (13) Annual report to security holders: Exhibit C: Annual Report to shareholders for the year ended December 31, 1995. (21) Subsidiaries of the Registrant: Exhibit D: Subsidiaries of the Registrant. (23) Consent of Experts and Counsel Exhibit E: Independent auditors' consent. 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. /15 SIGNATURES Pursuant to the requirements of Section l3 or l5(d) of the Securities Exchange Act of l934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CRANE CO. ------------------- (Registrant) By s/D. S. Smith -------------------- D. S. Smith Vice President-Finance Date 2/26/96 ------- Pursuant to the requirements of the Securities Exchange Act of l934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. OFFICERS s/R. S. Evans ----------------------- R. S. Evans Chairman, Chief Executive Officer and Director Date 2/26/96 ------- s/D. S. Smith s/M. L. Raithel ----------------------------- ---------------------------- D. S. Smith M. L. Raithel Vice President-Finance Controller Date 2/26/96 Date 2/26/96 ------- ------- DIRECTORS s/C. J. Queenan, Jr. --------------------------- C. J. Queenan, Jr. Date 2/26/96 ------- s/M. Anathan, III s/E. T. Bigelow s/J. Gaulin ----------------- ------------------- ---------------- M. Anathan, III E. T. Bigelow J. Gaulin Date 2/26/96 Date 2/26/96 Date 2/26/96 ------- ------- ------- D. C. Minton - -------------------- -------------------- -------------------- R. S. Forte D. C. Minton B. Yavitz Date Date 2/26/96 Date ------- s/D. R. Gardner -------------------- D. R. Gardner Date 2/26/96 ------- /16 INDEPENDENT AUDITORS' REPORT TO THE SHAREHOLDERS OF CRANE CO.: We have audited the consolidated financial statements of Crane Co. and subsidiaries as of December 31, 1995 and 1994, and for each of the three years in the period ended December 31, 1995 and have issued our report thereon dated January 22, 1996; such financial statements and report are included in your 1995 Annual Report to Shareholders and are incorporated herein by reference. Our audits also included the consolidated financial statement schedule of Crane Co., listed in Item 14. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this schedule based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ Deloitte & Touche LLP Stamford, Connecticut January 22, 1996 /17 CRANE CO. AND SUBSIDIARIES SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS (In Thousands)
Balance at Additions Balance Beginning Charged to at End Description of Year Cost & Expenses Deductions of Year - ----------- ---------- --------------- ---------- ------- Year Ended December 31, 1995: Allowance for doubtful accounts $ 2,200 $ 2,433 $ 2,247 $2,386 Allowance for cash discounts, returns and allowances 1,493 13,885 14,166 1,212 ------- ------- ------- ------- $ 3,693 $16,318 $16,413 $ 3,598 ======= ======= ======= ======= Year Ended December 31, 1994: Allowance for doubtful accounts $ 2,054 $ 8,434 $ 8,288 $2,200 Allowance for cash discounts, returns and allowances 1,000 17,096 16,603 1,493 ------- ------- ------- ------- $ 3,054 $25,530 $24,891 $ 3,693 ======= ======= ======= ======= Year Ended December 31, 1993: Allowance for doubtful accounts $ 859 $ 2,747 $ 1,552 $2,054 Allowance for cash discounts, returns and allowances 812 11,839 11,651 1,000 ------- ------- ------- ------- $ 1,671 $14,586 $13,203 $ 3,054 ======= ======= ======= =======
/18 (Page 1 of 2) CRANE CO. AND SUBSIDIARIES EXHIBIT B TO FORM 10-K ANNUAL REPORT FOR THE YEAR ENDED DECEMBER 31, 1995 Computation of Net Income Per Share (In Thousands Except Per Share Data)
Primary 1995 1994 1993 1992 1991 - ------- ---- ---- ---- ---- ---- Income before a change in accounting $76,337 $55,933 $48,893 $24,286 $44,993 Cumulative effect of a change in accounting - - - - (22,341)(a) ------- ------- ------- ------- -------- Net Income $76,337 $55,933 $48,893 $24,286 $22,652 ======= ======= ======= ======= ======= Per common share before a change in accounting $ 2.50 $ 1.86 $ 1.62 $ .79 $ 1.42 Cumulative effect of a change in accounting - - - - (.70)(a) ------- ------- ------- ------- -------- Net income per share $ 2.50 $ 1.86 $ 1.62 $ .79 $ .72 ======= ======= ======= ======= ======= Average number of primary shares 30,544 30,146 30,217 30,845 31,628
(a) Postretirement benefits other than pensions. /19 (Page 2 of 2) CRANE CO. EXHIBIT B TO FORM 10-K (CONTINUED) ANNUAL REPORT FOR THE YEAR ENDED DECEMBER 31, 1995 Computation of Net Income Per Share (In Thousands Except Per Share Data)
Fully Diluted 1995 1994 1993 1992 1991 - ------------- ---- ---- ---- ---- ---- Income before a change in accounting $76,337 $55,933 $48,893 $24,286 $44,993 Conversion of debentures: Add back interest, net of income tax - - 25 30 32 ------- ------- ------- ------- ------- Income assuming conversion of debentures before change in accounting 76,337 55,933 48,918 24,316 45,025 Cumulative effect of a change in accounting - - - - (22,341)(a) ------- ------- ------- ------- -------- Net income - assuming conversion of debentures $76,337 $55,933 $48,918 $24,316 $22,684 ======= ======= ======= ======= ======= Income per share before a change in accounting $ 2.49 $ 1.85 $ 1.61 $ .78 $ 1.41 Cumulative effect of a change in accounting - - - - (.70)(a) ------- ------- ------- ------- -------- Net income $ 2.49 $ 1.85 $ 1.61 $ .78 $ .71 ======= ======= ======= ======= ======= Average number of primary shares 30,544 30,146 30,217 30,845 31,628 Add: Adjustment to primary shares for dilutive stock options (ending market price higher than average market price) 79 14 - 18 55 Shares reserved for conversion of debentures - 90 187 217 231 ------- ------- ------- ------- ------- Total average number of shares 30,623 30,250 30,404 31,080 31,914 ======= ======= ======= ======= =======
(a) Postretirement benefits other than pensions. /20 EX-3 2 BY-LAWS EXHIBIT 3 EXHIBIT A CRANE CO. BY-LAWS ARTICLE I DEFINITIONS, OFFICES Section 1. Definitions. When used herein, "Board" shall mean the ----------- Board of Directors of the Corporation, "Chairman" shall mean the Chairman of the Board and "Corporation" shall mean this Corporation. Section 2. Principal Office. The principal office of the Corporation ---------------- shall be located in the City of New York, State of New York. Section 3. Other Offices. The Corporation may have and maintain such ------------- other business office or offices, either within or without the State of New York, as the Board of Directors may from time to time determine. Section 4. Registered Office. The registered office of the ----------------- corporation shall be at such address as from time to time the Board of Directors may determine. ARTICLE II STOCKHOLDERS Section 1. Annual Meeting. The annual meeting of the stockholders of -------------- the corporation shall be held at the hour of ten o'clock a.m. on the fourth Monday of April in each year beginning in 1986 unless the Board shall fix a different date and time, for the election of Directors and for the transaction of such other business as may properly come before the meeting. If the day fixed for the annual meeting shall be a legal holiday, such meeting shall be held on the next succeeding business day. If the election of Directors shall not be held on the day designated herein for the annual meeting, or at any adjournment thereof, the Board of Directors shall cause the election to be held at a special meeting of the stockholders as soon thereafter as such meeting can conveniently be convened and held. Section 2. Special Meetings. Special meetings of the stockholders for ---------------- any purpose may be called at any time only by a majority of the entire Board or by the Chairman of the Board. A call for a special meeting of stockholders shall be in writing, filed with the Secretary, and shall specify the time and place of holding such meeting and the purpose or purposes for which it is called. Section 3. Stockholder Action. Any action required or permitted to be ------------------ taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such stockholders. Section 4. Place of Meetings. The annual meeting of stockholders and ----------------- all special meetings of stockholders for the election of directors shall be held either at the principal office of the Corporation or at such other place suitable for the holding of a stockholders' meeting as shall be designated in the notice thereof. Special meetings of stockholders for a purpose or purposes other than the election of directors may be held at such place, either within or without the State of New York, as shall be specified or fixed in the call for such meeting and the notice thereof as the place for the holding of a special meeting for any purpose or purposes. Section 5. Notice of Meetings. Except as otherwise provided by ------------------ statute, written or printed notice stating the place, day and hour of the meeting and, in case of a special meeting, stating the purpose or purposes for which the meeting is called, shall be delivered not less than 10 nor more than 60 days before the date of the meeting, either personally or by mail, by or at the direction of the Secretary, to each stockholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail in a sealed envelope addressed to the stockholder at his last known post office address as it appears on the stock record books of the Corporation, with postage thereon prepaid. Attendance of a person at a meeting of stockholders, in person or by proxy, constitutes a waiver of notice of the meeting, except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Section 6. Record Dates. The Board may fix in advance a date, not ------------ more than 60 nor fewer than 10 days prior to the date of any meeting of stockholders, nor more than 60 days prior to the date for the payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, as a record date for the determination of the stockholders entitled to notice of, and to vote at, any such meeting and any adjournment thereof, or entitled to receive payment of any such dividend, or to any such allotment of rights, or to exercise the rights in respect of any such change, conversion or exchange of capital stock, and in such case such stockholders and only such stockholders as shall the stockholders of record on the date so fixed shall be entitled to such notice of, and to vote at, such meeting and any adjournment thereof, or to receive payment of such dividend, or to receive such allotment of rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any stock on the books of the Corporation after any such record date fixed as aforesaid. Section 7. Voting Lists. The officer or agent having charge of the ------------ transfer book for shares of the Corporation shall prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at such meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder present. The original share or stock ledger or transfer book or a duplicate thereof, shall be the only evidence as to who are the stockholders entitled to examine such list or share ledger or transfer book or to vote at any meeting of stockholders. Section 8. Quorum. At any meeting of stockholders the holders of a ------ majority of the shares of the capital stock of the corporation issued and outstanding and entitled to vote, present in person or represented by proxy, shall constitute a quorum of the stockholders for all purposes unless a greater or lesser quorum shall be provided by law or by the Certificate of Incorporation and in such case the representation of the number so required shall constitute a quorum. The stockholders present in person or by proxy at a meeting at which a quorum is present may continue to do business until adjournment, notwithstanding withdrawal of enough stockholders to leave less than a quorum. Whether or not a quorum is present the meeting may be adjourned from time to time by a vote of the holders of a majority of the shares present. At any such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting if held at the time specified in the notice thereof. Section 9. Voting and Proxies. Each holder of Common Stock shall be ------------------ entitled to one vote per share held of record upon each matter on which stockholders generally are entitled to vote. At all meetings of stockholders, a stockholder entitled to vote may vote in person or by proxy executed in writing by the stockholder or by his duly authorized attorney-in-fact. Such proxy shall be filed with the Secretary of the Corporation before or at the time of the meeting. Unless otherwise provided by law, all questions touching the validity or sufficiency of the proxies shall be decided by the Secretary. Directors shall be elected by a plurality of the votes cast at an election. All other action (unless a greater plurality is required by law or by the Certificate of Incorporation or by these By-laws) shall be authorized by a majority of the votes cast by the holders of shares entitled to vote thereon, present in person or represented by proxy, and where a separate vote by class is required, by a majority of the votes cast by stockholders of such class, present in person or represented by proxy. Section 10. Voting of Shares by Certain Holders. ----------------------------------- (a) Shares standing in the name of another corporation, domestic or foreign, may be voted by such officer, agent or proxy as the By-laws of such corporation may prescribe, or, in the absence of such provision, as the Board of Directors of such corporation may determine. (b) Shares standing in the name of a deceased person may be voted by his administrator or his executor either in person or by proxy. (c) Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name, if authority so to do be contained in an appropriate order of the court by which such receiver was appointed, and a certified copy of such order is filed with the Secretary of the Corporation before or at the time of the meeting. (d) A stockholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. (e) Shares of the Corporation belonging to it shall not be voted, directly or indirectly, at any meeting, and shall not be counted in determining the total number of outstanding shares at any given time, but shares of the Corporation held by it in a fiduciary capacity may be voted and shall be counted in determining the number of outstanding shares at any given time. Section 11. Inspectors. At each meeting of stockholders, the chairman ---------- of the meeting may appoint one or more inspectors of voting whose duty it shall be to receive and count the ballots and make a written report showing the results of the balloting. ARTICLE III DIRECTORS Section 1. Number. The business and affairs of the Corporation shall ------ be managed under the direction of the Board which shall consist of not less than three nor more than fifteen persons. The exact number of directors within the minimum and maximum limitations specified in the preceding sentence shall be fixed from time to time by the board pursuant to a resolution adopted by a majority of the entire Board. Section 2. Election and Terms. The directors shall be divided into ------------------ three classes, as nearly equal in number as reasonably possible, with the term of office of the first class to expire at the 1986 annual meeting of stockholders, the term of office of the second class to expire at the 1987 annual meeting of stockholders and the term of office of the third class to expire at the 1988 annual meeting of stockholders. At each annual meeting of stockholders, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election. Section 3. Newly Created Directorships and Vacancies. Newly created ----------------------------------------- directorships resulting from any increase in the authorized number of directors or any vacancies in the Board resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled only by a majority vote of the directors then in office, and directors so chosen shall hold office for a term expiring at the annual meeting of stockholders at which the term of the class to which they have been elected expires. No decrease in the number of directors constituting the Board shall shorten the term of any incumbent director. Section 4. Removal. Any director, or the entire Board, may be removed ------- from office at any time, but only for cause and only by the affirmative vote of the holders of at least two-thirds of the voting power of the shares of the Corporation then entitled to vote at an election of directors, voting together as a single class. Section 5. Regular Meetings. The regular annual meeting of the Board ---------------- shall be held at such time and place as the Board may by resolution determine from time to time without other notice than as set forth in such resolution. The regular monthly meetings of the Board shall be held at such time and place as the Board may by resolution determine from time to time. The Board may by resolution change the times and places, either within or without the State of New York, for the holding of such regular monthly meetings, and such times and places for the holding of other regular meetings without notice other than such resolution. Section 6. Special Meetings. Special meetings of the Board may be ---------------- held at any time on the call of the Chairman or at the request in writing of a majority of the directors. Special meetings of the Board may be held at such place, either within or without the State of New York, as shall be specified or fixed in the call for such meeting or notice thereof. Section 7. Notice of Special Meetings. Notice of each special meeting -------------------------- shall be deposited in the United States mail by or at the direction of the Secretary to each director addressed to him at his residence or usual place of business at least seventy-two (72) hours before the day on which the meeting is to be held, or shall be sent to him by telegram, be delivered personally, or be given orally at least twenty-four (24) hours before the day on which the meeting is to be held. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail in a sealed envelope so addressed, with postage thereon prepaid. If notice be given by telegraph, such notice shall be deemed to be delivered when the same is delivered to the telegraph company. If the Secretary shall fail or refuse to give any such notice, then notice may be given by the officer or any one of the directors making the call. Notice may be waived in writing by any director, either before or after the meeting. Any meeting of the Board of Directors shall be a legal meeting without any notice thereof having been given if all directors shall be present thereat, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting, and any and all business may be transacted thereat. Section 8. Quorum. A majority of the members of the Board then in ------ office, or of a committee thereof, shall constitute a quorum for the transaction of business, except that the presence of the Chairman of the Board shall be necessary to constitute a quorum of the Executive Committee of the Board, and the vote of a majority of the members present at a meeting at which a quorum is present shall be the act of the Board or of the Committee thereof, except for the amendment of the By-laws which shall require the vote of not less than a majority of the members of the Board then in office. Section 9. Action without a Meeting. Action required or permitted to ------------------------ be taken pursuant to authorization voted at a meeting of the Board, or a committee thereof, may be taken without a meeting if, before or after the action, all members of the Board or of the Committee consent thereto in writing. The written consents shall be filed with the minutes of the proceedings of the Board or Committee. The consent shall have the same effect as a vote of the Board or Committee thereof for all purposes. Section 10. Organization. At all meetings of the Board the Chairman, ------------ the Vice Chairman of the Board, the President, an Executive Vice President or a Vice President, or in their absence a member of the Board to be selected by the members present, shall preside as Chairman of the meeting. The Secretary or an Assistant Secretary of the Corporation hall act as Secretary of all meetings of the Board, except that in their absence the Chairman of the meeting may designate any other person to act as secretary. At meetings of the Board business shall be transacted in such order as from time to time the Board may determine. Section 11. Compensation. In the discretion of the Board, directors ------------ may be paid a fixed fee for attendance at meetings and allowed reimbursement for expenses incurred in such attendance or otherwise in performance of duties as directors. In addition each director may be paid a fixed annual fee, in an amount to be determined by the Board, payable in convenient installments. Directors shall also be entitled to receive compensation for services rendered to the Corporation as officers, committee members, employees, or in any other capacity than as directors. Section 12. Presence at Meeting. A member of the Board or of a ------------------- Committee designated by the Board may participate in a meeting by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation in this manner constitutes presence in person at the meeting. Section 13. Executive Committee. The Board, by resolution adopted by ------------------- a majority of the entire board, may designate two or more directors to constitute an Executive Committee, which committee, to the extent Provided in such resolution or in these By-laws, shall have and exercise all of the authority of the Board in the management of the Corporation provided such Committee shall not have the authority of the Board in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation involving the corporation, recommending to the stockholders the sale, lease, or exchange of all or substantially all of the property and assets of the Corporation, recommending to the stockholders a dissolution of the Corporation or a revocation thereof, filling vacancies on the Board or on any committee of the Board (including the Executive Committee), amending, altering or repealing any By-laws of the Corporation, electing or removing officers of the Corporation, fixing the compensation of any member of the Executive Committee or amending, altering or repealing any resolution of the Board which by its terms provides that it shall not be amended, altered or repealed by the Executive Committee. Section 14. Committees of the Board. The Board may designate one or ----------------------- more other committees, each consisting of one or more directors of the Corporation as members and one or more directors as alternate members, with such power and authority as prescribed by the By-laws or as provided in a resolution adopted by a majority of the Board. Each Committee, and each member thereof, shall serve at the pleasure of the Board. ARTICLE IV OFFICERS Section 1. Officers' Number. The officers of the Corporation shall be ---------------- a Chairman of the Board, a President, a Vice Chairman, one or more Executive Vice Presidents, Senior Vice Presidents and Vice Presidents, a Secretary, a Treasurer, a Controller, and such other subordinate corporate or divisional officers as may be elected or appointed in accordance with the provisions of Section 3 of this Article IV. The Board may designate a variation in the title of any officer. Any two or more offices may be held by the same person except the offices of President and Secretary. Section 2. Election, Term of Office, and Qualifications. The officers -------------------------------------------- of the Corporation shall be elected annually by the Board at the first meeting of the Board held after the annual meeting of stockholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as the same can conveniently be held. Each officer, except such officers as may be elected or appointed in accordance with the provisions of Section 3 of this Article IV, shall hold his office until his successor shall have been duly elected and shall have qualified or until his death, resignation or removal. Section 3. Subordinate Officers. -------------------- (a) Subordinate Corporate Officers. The Board may annually appoint one or more Assistant Controllers, Executive Assistants, Assistant Vice Presidents, a Secretary of the Board, one or more Assistant Secretaries, Assistant Treasurers, Auditors or Assistant Auditors, and such other subordinate corporate officers and agents as the Board may determine, to hold office as subordinate corporate officers for such period and with such authority and to perform such duties as may be prescribed by these By-laws or as the Board may from time to time determine. The Board may, by resolution, empower the Chairman of the Board to appoint any such subordinate corporate officers or agents to hold office for such period and to perform such duties as may be prescribed in said resolution. In its discretion the Board may leave unfilled, for any such period as it may fix by resolution, any corporate office, except those of President, Secretary and Treasurer. (b) Divisional Officers. The Board, the Chairman of the Board or the ------------------- President may from time to time appoint employees of the Company divisional officers who shall have such operating and divisional responsibilities as may be designated by the President. Such divisional officers shall not be corporate officers and shall serve at the discretion of, under the direction of, and subject to removal by, the President. Section 4. Resignations. Any officer may resign at any time by giving ------------ written notice to the Board or to the Chairman of the Board or Secretary of the Corporation. Any such resignation shall take effect at the time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 5. Removal. Any of the officers designated in Section 1 of ------- this Article IV may be removed by the Board, whenever in its judgment the best interests of the Corporation will be served thereby, by the vote of a majority of the total number of directors then in office. Any subordinate corporate officer appointed in accordance with Section 3 of this Article IV may be removed by the Board for like reason by a majority vote of the directors present at any meeting, a quorum being present, or by any superior officer upon whom such power of removal has been conferred by resolution of the Board. Any divisional officer appointed in accordance with Section 3 of this Article IV may be removed by the Chairman of the Board at any time and at his sole discretion or by any superior officer upon whom the power of removal has been conferred by the Chairman of the Board. The removal of any officer, subordinate officer or agent shall be without prejudice to the contract rights, if any, of the person so removed. Section 6. Vacancies. A vacancy in any office because of death, --------- resignation, removal, disqualification or otherwise may be filled for the unexpired portion of the term in the same manner in which an officer to fill said office may be chosen pursuant to Section 2 or 3 of this Article IV, as the case may be. Section 7. Bonds. If the Board shall so require, any officer or agent ----- of the Corporation shall give bond to the Corporation in such amount and with such surety as the Board may deem sufficient, conditioned upon the faithful performance of their respective duties and offices. Section 8. The Chairman of the Board. The Board shall elect a ------------------------- Chairman who shall be the Chief Executive Officer of the Corporation. He shall preside at all meetings of the stockholders and of the Board. He shall have general and active management of the business of the Corporation and shall see that all orders and resolutions of the Board are carried into effect, subject, however, to the right of the Board to delegate any specific powers, except such as may be by law exclusively conferred upon the President, to any officer or officers of the Corporation. All papers, documents, deeds, and other instruments required to be executed by the Corporation shall be signed and executed for the Corporation by the Chairman or the President when directed by, and in the manner prescribed by, the Board. He shall have the general powers and duties of supervision and management which are usually vested in the Chief Executive Officer of a Corporation. Section 9. The President. The President shall have supervision over ------------- all such matters as may be delegated to him by the Board or the Chairman. In the absence of the Chairman or whenever the office of Chairman is vacant the President shall have the general powers of and shall perform the duties pertaining to the office of Chairman. Section 10. The Vice Chairman of the Board. The Vice Chairman of the ------------------------------ Board shall elect a Chairman who shall be the Chief Executive Officer of the Corporation. He shall preside at all meetings of the stockholders and of the Board. He shall have general and active management of the business of the Corporation and shall see that all orders and resolutions of the Board are carried into effect, subject, however, to the right of the Board to delegate any specific powers, except such as may be by law exclusively conferred upon the President, to any officer or officers of the Corporation. All papers, documents, deeds, and other instruments required to be executed by the Corporation shall be signed and executed for the Corporation by the Chairman or the President when directed by, and in the manner prescribed by, the Board. He shall have the general powers and duties of supervision and management which are usually vested in the Chief Executive Officer of a Corporation. Section 11. Executive Vice Presidents; Senior Vice -------------------------------------- Presidents and Vice Presidents. - ------------------------------ (a) Executive Vice Presidents and Senior Vice Presidents shall have supervision over all such matters, other officers of the Company, including Vice Presidents, and in the case of Executive Vice Presidents, Senior Vice Presidents, and other employees as may be designated or assigned to them by the President or Chairman of the Board, and shall perform such duties as the Board of Directors may designate or as may be assigned to them by the President or by the Chairman of the Board in the event of absence or disability of the President. Whenever the term "Vice President" is used in any other Article of these By-laws, it shall be deemed to include Executive Vice Presidents and Senior Vice Presidents. (b) The Vice Presidents shall perform such duties as the Board may designate or may be assigned to them by the President, or the Chairman of the Board in the event of absence or disability of the President. Section 12. Treasurer. The Treasurer shall: --------- (a) Subject to the supervision and direction of the Vice President - Finance, have the custody of all moneys, notes, bonds, securities and other evidences of indebtedness belonging to the Corporation, and shall keep full and accurate accounts of all moneys and securities received and of all moneys paid by him on account of the Corporation. He shall daily deposit all moneys, checks and drafts received to the credit and in the name of the Corporation, in such banks or other depositories as shall from time to time be authorized, approved or directed by the President, the Vice President - Finance, or the Board, and shall, on behalf of the corporation, endorse for deposit or collection, checks, notes, drafts and other obligations, provided, however, that checks of the United States Government or of any state or municipal government, which may be received by any branch house of the Corporation, may be endorsed for deposit by the local manager of the house receiving the check, and provided further, however, that checks, warrants, drafts, notes and other negotiable instruments, which may be received by any branch house of the Corporation, may be endorsed by the local manager in the name of the Corporation for collection or deposit by or in the local bank authorized to carry the local accounts. (b) Furnish to the Board, to the President and to such other officers as the Board may designate, at such times as may be required, an account of all his transactions as Treasurer. (c) Perform such other duties pertaining to the business of the Corporation as shall be directed or required by the President, the Vice President - Finance, or the Board and, subject to the control of the Vice President - Finance, the Board and these By-laws, perform all acts incident to the office of the Treasurer. (d) Give such bond of the faithful discharge of his duties as the Board may require. The books and papers of the Treasurer shall at all times be open to the inspection of the President and each member of the Board. Section 13. Secretary. The Secretary shall: --------- (a) Attend all meetings of the stockholders and also, in the event that no Secretary of the Board is elected or appointed, he shall attend meetings of the Board, and keep the minutes of such meetings in one or more books provided for that purpose. (b) See that all notices are duly given in accordance with the provisions of these By-laws, or as required by law. (c) Be custodian of the corporate records and of the seal of the Corporation and see that the seal of the Corporation or a facsimile thereof is affixed to or impressed on all certificates for shares prior to the issue thereof, and all documents, the execution of which on behalf of the Corporation under its seal, is duly authorized. (d) Sign with the President or a Vice President certificates for shares of the Corporation, the issue of which shall have been authorized by resolution of the Board. (e) See that the reports, statements, certificates and all other documents and records required by law are properly made, kept and filed. (f) In general, perform all other duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the President or the Board. Section 14. Controller. The Controller shall: ---------- (a) Maintain adequate records of all assets, liabilities, and transactions of this Corporation; see that adequate audits thereof are currently and regularly made; and in conjunction with other officers and department heads initiate and enforce measures and procedures whereby the business of the Corporation shall be conducted with the maximum safety, efficiency, and economy. His duties and powers shall extend to all subsidiary corporations and to all affiliated corporations. (b) Prepare and furnish such reports and financial statements covering results of operations of the Corporation as shall be required of him by the President or the Board. Prepare and furnish such reports and statements showing the financial condition of the Corporation as shall be required of him by the President or the Board, and have the primary responsibility for the preparation of financial reports to the stockholders. (c) Perform such other duties pertaining to the business of the Corporation as shall be directed or required by the President or the Board and, subject to the control of the President, the Board and these By-laws, perform all acts incident to the office of the Controller. The books, records and papers of the Controller shall at all times be open to the inspection of the President and each member of the Board. Section 15. Assistant Treasurers. If one or more Assistant Treasurers -------------------- shall be elected or appointed pursuant to the provisions of Section 3 of this Article IV, then in the absence or disability of the Treasurer, the Assistant Treasurers shall perform all the duties of the Treasurer, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the Treasurer, except that they shall have no power to sign in the name of the Corporation contracts as described in Section 1 of Article VII, unless specifically authorized by the Board. Any such Assistant Treasurer shall perform such other duties as from time to time may be assigned to him by the Board or any superior officer. Section 16. Assistant Secretaries. If one or more Assistant --------------------- Secretaries shall be elected or appointed pursuant to the provisions of Section 3 of this Article IV, then in the absence or disability of the Secretary, the Assistant Secretaries shall perform the duties of the Secretary, and when so acting shall have all the powers of, and be subject to all the restrictions imposed upon, the Secretary. Any such Assistant Secretary shall perform such other duties as from time to time may be assigned to him by the Board or any superior officer. Section 17. Secretary of the Board. The Secretary of the Board shall ---------------------- record the minutes of meetings of the Board, deposit them with the Secretary of the Corporation, and perform such other duties as may be assigned to him by the Board. Section 18. Compensation. The compensation of the officers shall be ------------ fixed from time to time by the Board; provided that the Board may authorize any officer or Committee to fix the compensation of officers and employees. No officer shall be prevented from receiving such compensation by reason of the fact that he is also a director of the Corporation. ARTICLE V CAPITAL STOCK Section 1. Certificates of Stock. The certificates for shares of the --------------------- capital stock of the Corporation shall be in such form as shall be approved by the Board. The certificates shall be signed by the Chairman or the Vice Chairman of the Board, the President, an Executive Vice President, Senior Vice President or Vice President and also by the Treasurer or the Secretary, and may be sealed with the seal of the Corporation, or a facsimile thereof. The signatures of the aforesaid officers may be facsimiles if the certificate is countersigned by a transfer agent or registered by a registrar other than the Corporation or its employee. The validity of any stock certificate of the Corporation signed and executed by or in the name of duly qualified officers of the Corporation shall not be affected by the subsequent death, resignation, or the ceasing for any other reason of any such officer to hold such office, whether before or after the date borne by or the actual delivery of such certificate. The name of the person owning the shares represented thereby, with the number of such shares and the date of issue, shall be entered on the Corporation's capital stock records. All certificates surrendered to the Corporation shall be cancelled, and no new certificates shall be issued until the former certificate for the same number of shares shall have been surrendered and cancelled except in case of a lost or destroyed certificate. The Corporation may treat the holder of record of any share or shares of stock as the holder in fact thereof, and shall not be bound to recognize any equitable or other claim to interest in any such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by law. Section 2. Lost, Stolen or Destroyed Certificates. The Corporation -------------------------------------- may issue a new certificate for shares in place of a certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Board may require the owner of the lost or destroyed certificate, or his legal representative, to give the Corporation a bond in form satisfactory to the Corporation sufficient to indemnify the Corporation, its transfer agents and registrars against any claim that may be made against them on account of the alleged lost or destroyed certificate or the issuance of such a new certificate. Section 3. Transfer of Shares. Shares of the capital stock of the ------------------ Corporation shall be transferable by the owner thereof in person or by duly authorized attorney, upon surrender of the certificates therefor properly endorsed. The Board, at its option, may appoint a transfer agent and registrar, or one or more transfer agents and one or more registrars, or either, for the stock of the Corporation. Section 4. Regulations. The Board shall have power and authority to ----------- make all such rules and regulations as they may deem expedient concerning the issue, transfer and registration of certificates for shares of the capital stock of the Corporation. ARTICLE VI [INTENTIONALLY OMITTED IN 1985] ARTICLE VII EXECUTION OF INSTRUMENTS ON BEHALF OF THE CORPORATION Section 1. Contracts. Except as herein provided, all contracts of the --------- Corporation shall be signed in the name of the Corporation by the Chairman, the President, a Vice President or the Treasurer, sealed with the Corporate Seal and attested by the Secretary or an Assistant Secretary. Bids and contracts for the purchase or sale of merchandise in the ordinary course of business of branch houses or divisions of the Corporation, together with bonds given to secure the performance thereof, shall be executed in the name of the Corporation or in an authorized divisional name by an officer authorized to sign contracts as above specified in this section, or, if relating to business of branch houses, by a District Manager, or by the Manager or Assistant Manager of the branch houses, respectively, and if relating to the business of a division, by an Officer, Manager or Assistant Manager of such division. Section 2. Bills of Exchange, Promissory Notes, Bonds or Other --------------------------------------------------- Evidence of Indebtedness of the Corporation, Bonds of Indemnity, and Securities - ------------------------------------------------------------------------------- Received. All bills of exchange, promissory notes, bonds, or other evidences of - -------- indebtedness of the Corporation shall be signed in the name of the Corporation by the Chairman, the President, or a Vice President, and shall be countersigned by the Treasurer or by an Assistant Treasurer. All forms of bonds of indemnity, the execution of which is required of the Corporation, shall be signed in the name of the Corporation by the Chairman, the President, a Vice President, the Treasurer or an Assistant Treasurer, and shall be countersigned by the Secretary or an Assistant Secretary. Any securities received by the Corporation in settlement or for security for the payment of any indebtedness due the Corporation may be sold, assigned, transferred and delivered by the Chairman, the President, a Vice President or the Treasurer, and all instruments of conveyance, assignment or transfer thereof shall be executed in the name of the Corporation by such officers, attested by the Secretary or an Assistant Secretary, and the corporate seal attached. Section 3. Checks and Accounts. All checks shall be signed by either ------------------- the Chairman, the President, a Vice President, the Treasurer or an Assistant Treasurer, the Controller or Assistant Controller and also signed by either the Controller or an Assistant Controller, an Auditor or an Assistant Auditor, the Secretary or an Assistant Secretary of the Corporation, and no other person or persons shall be authorized to sign checks upon or against the funds of the Corporation except as hereinafter provided. The Chairman, the President, a Vice President, or the Treasurer is authorized to establish and maintain Managers' funds for branch house's or manufacturing division's general use including the meeting of payrolls, at the various locations of the branch houses, or manufacturing divisions of the Corporation, and special payroll funds at any location where the corporation carries on business. Such funds shall be subject to withdrawal on the signature or signatures of one or more persons, as determined and designated in writing by either the chairman, the President, a Vice President, or the Treasurer. Checks drawn for the payment of dividends on shares of the Corporation's stock, and such other checks as may be designated in writing by the Chairman or the President, together with a Vice President or the Treasurer, may bear facsimile signatures, provided, however, that for the purpose of transfer ring funds between banks in which the Corporation has monies on deposit, the Treasurer or an Assistant Treasurer may direct or authorize the use of checks payable to a depository hank for credit of the Corporation, which checks shall have plainly printed upon their face "Depository Transfer Check" and shall require no signature other than the printed name of the Corporation. The respective Managers or Assistant Managers of the Corporation's branch houses, Managers, Credit Managers or Credit Supervisors of Regional Offices, and Officers, Managers or Assistant Managers of the Corporation's Divisions, are authorized to file claims for and to collect on behalf of the Corporation any amounts due for merchandise sold or invoiced from such branch houses, regional offices or divisions, and in the name of the corporation, or in an authorized divisional name, to give proper receipts, releases and waivers of mechanics' and materialmen's liens in connection therewith. Section 4. Conveyances, Leases, Releases and Satisfaction of Judgment ---------------------------------------------------------- and Mortgages. All conveyances, leases and releases and satisfactions of - ------------- judgment and mortgages shall be signed in the name of the Corporation by the Chairman, the President, a Vice President or the Treasurer, sealed with the corporate seal and attested by the Secretary or an Assistant Secretary. Section 5. Other Instruments. All other instruments not hereinabove ----------------- specifically designated shall be signed in the name of the Corporation by the Chairman, the President, a Vice President, or Treasurer, sealed with the corporate seal and attested by the Secretary or an Assistant Secretary, provided, however, that notwithstanding the provisions contained in these By- laws, the Board may at any time direct the manner in which and the person by whom any particular instrument, contract or obligation, or any class of instruments, contracts or obligations of the Corporation may and shall be executed. Section 6. Miscellaneous. Whenever the Board directs the execution of -------------- an instrument, contract or obligation and does not specify the officer who shall execute the same, it shall be executed as hereinabove provided. ARTICLE VIII CORPORATE SEAL The corporate seal of the Corporation shall have inscribed thereon the name of the Corporation and the words "Corporate Seal-1985-Delaware." Said seal may be used by causing it or a facsimile or equivalent thereof to be impressed or affixed or reproduced, and shall be in the custody of the Secretary. If an when so directed by the Board, a duplicate of the seal may be kept and used by the Treasurer, or by any Assistant Treasurer or Assistant Secretary. ARTICLE IX MISCELLANEOUS PROVISIONS Section 1. Dividends. Dividends upon the outstanding shares of the ---------- Corporation may be paid from any source permitted by law. Dividends may be declared at any regular or special meeting of the Board and may be paid in cash or other property or in the form of a stock dividend. Section 2. Fiscal Year. The fiscal year of the Corporation shall end ------------ on the 31st day of December each year, unless otherwise provided by resolution of the Board. Section 3. Stock in other Corportions. Any shares of stock in any --------------------------- other corporation which may from time to time be held by the Corporation may be represented and voted at any meeting of stockholders of such corporation by the Chairman or the President of the Corporation or by any other person or persons thereunto authorized by the Board, or by any proxy designated by written instrument of appointment executed in the name of the Corporation either by the Chairman, the President, or a Vice President, and attested by the Secretary or an Assistant Secretary. Shares of stock in any other corporation which shares are owned by the Corporation need not stand in its name, but may be held for its benefit in the individual name of the Chairman or of any other nominee desinated for the purpose by the Board. Certificates for shares so held for the benefit of the Corporation shall be endorsed in blank, or have proper stock powers attached so that said certificates are at all time in due form for transfer, and shall be held for safekeeping in such manner as shall be determined from time to time by the Board. Section 4. Election of Auditors. The directors shall select --------------------- independent auditors to audit the books and records of the Corporation for the current fiscal year, subject to the approval of the stockholders at the annuyal meeting. Should the auditors so elect resign, be removed for good cause shown, or otherwise fail to serve during or with respect to said year, a majoirity of the directors shall select a substitute firm of auditors to serve with respect to said year. ARTICLE X INDEMNIFICATION Section 1. Actions, Suits or Proceedings other than by or in the Right ----------------------------------------------------------- of the Corporation. The Corporation shall indemnify any person who was or is a - ------------------- party or is threatened to be made a party to any threatened pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was or has agreed to become a director or officer of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as a director or officer or trustee of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity against costs, charges, expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such action, suit or proceeding or any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. Section 2. Actions or Suits by or in the Right of the Corporation. ------------------------------------------------------ The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was or has agreed to become a director or officer of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as a director or officer or trustee of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, against costs, charges and expenses (including attorneys' fees) actually and reasonably incurred by him or on his behalf in connection with the defense or settlement of such action or suit and any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the Corporation unless and only to the extent that the court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of such liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such costs, charges and expenses which the Court of Chancery or such other court shall deem proper. Section 3. Indemnification for Costs, Charges and Expenses of -------------------------------------------------- Successful Party. Notwithstanding the other provisions of this Article, to the - ---------------- extent that a director or officer of the Corporation has been successful on the merits or otherwise, including, without limitation, the dismissal of an action without prejudice, in defense of any action, suit or proceeding referred to in Sections 1 and 2 of this Article, or in defense of any claim issue or matter therein, he shall be indemnified against all costs, charges and expenses (including attorneys' fees) actually and reasonably incurred by him or on his behalf in connection therewith. Section 4. Determination of Right to Indemnification. Any ----------------------------------------- indemnification under Sections 1 and 2 of this Article (unless ordered by a court) shall be paid by the corporation unless a determination is made (1) by the Board of Directors by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (2) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (3) by the stockholders, that indemnification of the director or officer is not proper in the circumstances because he has not met the applicable standard of conduct set forth in Sections 1 and 2 of this Article. Section 5. Advance of Costs, Charges and Expenses. Costs, charges and -------------------------------------- expenses (including attorneys' fees) incurred by a person referred to in Sections 1 and 2 of this Article in defending any civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding; provided, however, that the payment of such costs, charges and expenses incurred by a director or officer in his capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer) in advance of the final disposition of such action, suit or proceeding shall be made only upon receipt of an undertaking by or on behalf of the director or officer to repay all amounts so advanced in the event that it shall ultimately be determined that such director or officer is not entitled to be indemnified by the corporation as authorized in this Article. The Board of Directors may, in the manner set forth above, and upon approval of such director or officer of the Corporation, authorize the Corporation's counsel to represent such person, in any action, suit or proceeding, whether or not the Corporation is a party to such action, suit or proceeding. Section 6. Procedure for Indemnification. Any indemnification under ----------------------------- Sections 1, 2 and 3, or advance of costs, charges and expenses under Section 5 of this Article, shall be made promptly, and in any event within 60 days, upon the written request of the director or officer. The right to indemnification or advances as granted by this Article shall be enforceable by the director or officer in any court of competent jurisdiction, if the Corporation denies such request, in whole or in part, or if no disposition thereof is made within 60 days. Such persons' costs and expenses incurred in connection with successfully establishing right to indemnification, in whole or in part, in any such action shall also be indemnified by the Corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for the advance of costs, charges and expenses under Section 5 of this Article where the required undertaking, if any, has been received by the Corporation) that the claimant has not met the standard of conduct set forth in Sections 1 or 2 of this Article, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, its independent legal counsel, and its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he has met the applicable standard of conduct set forth in Sections 1 or 2 of this Article, nor the fact that there has been an actual determination by the Corporation (including its Board of Directors, its independent legal counsel, and its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. Section 7. Other Rights; Continuation of Right to Indemnification. ------------------------------------------------------ The indemnification provided by this Article shall not be deemed exclusive of any other rights to which a person seeking indemnification may be entitled under any law (common or statutory), agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding office or while employed by or acting as agent for the Corporation, and shall continue as to a person who has ceased to be a director or officer, and shall inure to the benefit of the estate, heirs, executors and administrators of such person. All rights to indemnification under this Article shall be deemed to be a contract between the Corporation and each director or officer of the Corporation who serves or served in such capacity at any time while this Article is in effect. Any repeal or modification of this Article or any repeal or modification of relevant provisions of the Delaware General Corporation Law or any other applicable laws shall not in any way diminish any rights to indemnification of such director or officer or the obligations of the Corporation arising hereunder. Section 8. Insurance. The Corporation shall purchase and maintain --------- insurance on behalf of any person who is or was or has agreed to become a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him or on his behalf in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article, provided that such insurance is available on acceptable terms, which - -------- determination shall be made by a vote of a majority of the entire Board of Directors. Section 9. Savings Clause. If this Article or any portion hereof -------------- shall be invalidated on any ground by any court of competent jurisdiction, any portion of this Article so invalidated shall be severable and such invalidity shall not by itself render any other portion of this Article invalid, and the Corporation shall nevertheless indemnify each director or officer of the Corporation as to costs, charges and expenses (including attorneys' fees), judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the Corporation, to the full extent permitted by any applicable portion of this Article that shall not have been invalidated and to the full extent permitted by applicable law. ARTICLE XI AMENDMENTS Except as otherwise required by law or the Certificate of Incorporation, these By-laws may be amended or repealed, and new By-laws may be adopted, either by the affirmative vote of two-thirds of the shares of stock outstanding and entitled to vote thereon, voting together as a single class, or by the affirmative vote of a majority of the Board then in office. EX-13 3 ANNUAL REPORT EXHIBIT 13 Crane Co. - -------------------------------------------------------------------------------- Annual Report - -------------------------------------------------------------------------------- 1995 ABOUT THE COMPANY Crane Co. is a diversified manufacturer of engineered industrial products and the largest American distributor of doors, windows and millwork. Founded in 1855, Crane employs over 10,000 people in North America, Europe, Asia and Australia. Crane Co. Financial Highlights (In thousands except per share data)
1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- Net Sales $1,782,310 $1,653,466 $1,310,205 $1,306,977 $1,302,532 Operating Profit 142,948 109,889 85,856 45,244 78,902 Income before Taxes 121,468 91,227 79,818 38,689 72,405 Provision for Income Taxes (45,131) (35,294) (30,925) (14,403) (27,412) ---------- ---------- ---------- ---------- ---------- Income from Operations $ 76,337 $ 55,933 $ 48,893 $ 24,286 $ 44,993(a) ========== ========== ========== ========== ========== Per Primary Share: Income from Operations $ 2.50 $ 1.86 $ 1.62 $ .79 $ 1.42(a) Dividends Per Common Share $ .75 $ .75 $ .75 $ .75 $ .75 Average Primary Shares Outstanding 30,544 30,146 30,217 30,845 31,628 ---------- ---------- ---------- ---------- ----------
(a) Income before cumulative effect of a change in accounting for postretirement benefits other than pensions of $22,341 ($.70 per share). Table of Contents Financial Highlights 1 Letter to Shareholders 2 Crane Co. at a Glance 4 Management's Discussion and Analysis of Operations 8 Consolidated Financial Statements 15 Notes to Consolidated Financial Statements 20 Segment Data 28 Management's Responsibility/ Independent Auditors' Report 30 Shareholder Information 32 Directors and Officers Back Cover Letter to Shareholders [PHOTO APPEARS HERE] R. S. Evans Chairman and Chief Executive Officer "Last year I said that Crane had its best mix of businesses and growth opportunities, which would result in the strongest cash flow and earnings potential ever. That assessment has proven true." I am proud to report that in 1995 Crane Co. had the best financial performance in its history. Sales were up 8% to nearly $1.8 billion, net income was up 36% to $76.3 million and earnings per share were up 34% to $2.50. Last year I said that Crane had its best mix of businesses and growth opportunities, which would result in the strongest cash flow and earnings potential ever. That assessment has proven true. 1995 was a year of consolidation and investment. Cash flow was used to repay $58 million in debt, resulting in a further upgrade of our debt rating and increased financial flexibility. Our debt to total capital ratio improved from 52% to 44%. During the year, $34 million was invested in fixed assets and working capital to better serve our customers. We spent $14.5 million on acquisitions of three businesses which strengthen our existing operations at Barksdale, Resistoflex, and Crane Pumps and Systems, and an equity investment in a fourth which fits well with ELDEC's strengths in power supply systems for the telecommunications market. Also, we were able to return $40.7 million to shareholders by repurchasing 551,900 shares for $17.9 million at an average price of $32.50 per share, and paying dividends of $22.8 million or $.75 per share. During 1995 we made a number of investments in support of our growth and earnings strategies. We established a joint venture in China to produce iron valves for distribution through our global network and developed several new international sources for valve products; Chempump, long a leader in sealless pump technology, introduced the NC series of pumps which permit continuous monitoring of critical pump operating parameters; Resistoflex's new plastic lined pipe and hose products help customers meet stringent emissions requirements; Cor Tec is developing a new core for its structural panels for the trans- 2 portation industry; the sensor technology acquired by Barksdale in Germany is being introduced to U.S. distribution channels; and National Vendors Cafe System "7" continues to make new inroads in the office coffee service market. One of the best examples of investing for the future is our Aerospace business where Hydro-Aire has won nine of the last ten programs on which it has competed, ELDEC fifteen of the last twenty and Lear Romec seven of the last eleven. Each of these new aircraft programs requires substantial up-front investment in new technology and new product applications. Our success over the past five years is best exemplified by our position on the Boeing 777 aircraft where we have proprietary market positions in brake control, proximity sensing and electrical power control. Our investment in this program will have excellent returns as Boeing's 777 orders grow. We expect similar success with the other programs. The efficient use of capital continues to be a driving force at Crane. The EVA incentive system, used by all our business units and the corporate office, encourages this effort and continues to show results. Our use of working capital as a percentage of sales has improved every year since implementation of the EVA system in 1990. This year our average working capital as a percentage of sales improved to 23.4% from 24.5% in 1994. Return on assets also improved to 7.6% from 6.4% in 1994. While this is still not high enough, it is a marked improvement. The past year saw two important management changes at Crane. During the 12 years that I have been Chairman and CEO, I have also been President twice. During 1995, it became clear to me that we needed to continue to strengthen our operating management. With more than 30 business units, we needed a President and Chief Operating Officer. L. Hill Clark was elected to that position in the fourth quarter. Hill is ideal for the position. An engineer by training and an operations manager by background, Hill joined Crane in 1990 as President of Lear Romec. Since 1993 he has had group responsibilities for Fluid Handling and Aerospace. Hill's efforts will be dedicated to increasing efficiency and quality, reducing costs and developing new products and markets. Also, in January 1996, Paul R. Hundt, Vice President, General Counsel and Secretary, retired after more than 27 years with Crane. Paul and I have shared many exciting and innovative business experiences over the years. His integrity, broad business skills, wise and intelligent advice and daily participation in management of the company will be truly missed by me and all those who worked with him. There are more than 10,000 employees at Crane. The success of our company is due to the effective dedication of all of them, and with you, I am thankful for their efforts. Sincerely, /s/ Robert S. Evans Robert S. Evans Chairman and Chief Executive Officer February 9, 1996 3 Crane Co. at a Glance
Business Unit PRODUCTS MARKETS SERVED BUSINESS HIGHLIGHTS BUSINESS OUTLOOK - ------------------------------------------------------------------------------------------------------------------------------------ Fluid Handling - ------------------------------------------------------------------------------------------------------------------------------------ CRANE VALVES Gate, Globe, Check Hydrocarbon Processing: Joint ventures were Sales and profits North America and Ball valves in Refining, established in China expected to all size ranges Petrochemical, Oil and to manufacture increase due to: CRANE LTD. made from Bronze, Gas Production and resilient seat . operating Ipswich, U.K. Cast Iron, Steel, Distribution; Chemical butterfly valves and improvements at Stainless Steel, Processing; Pulp and in Indonesia to the Brantford, PACIFIC VALVES Titanium and other Paper; Power Generation assemble and test Ontario bronze Long Beach, CA special corrosion including Nuclear steel valves for the valve facility resistant alloys applications; hydrocarbon . market FLOWSEAL/CENTER LINE High performance, Commercial processing/refining expansion in Asia Long Beach, CA resilient seat and Construction, HVAC, industry. . new product composite Water and Sewage, Market share offerings at WESTAD INDUSTRI A/S butterfly valves, Building and gains at Crane Crane Ltd. Geithus, Norway HF Acid Valves; Engineering services, Ltd. based on new extensive repair, Marine, Cryogenic product offerings CRANE AUSTRALIA PTY., LTD. contract services and in the marine Sydney, Australia maintenance and market at Westad. "in-line" service Reorganized capabilities, pipe sales/marketing fittings organization and manufactured in eliminated redundant United Kingdom sales/distribution channels. Began implementation of bronze valve modernization project in Brantford, Ontario. Completed consolidation of the Mark Controls Center Line product into the Long Beach facility. CRANE PUMPS & Submersible Municipal, Industrial Acquired Process Sales and profit will SYSTEMS, INC. Wastewater and Commercial Systems, a increase as a result Piqua, OH Regenerative Wastewater, Specialty manufacturer of of: Turbine and Industrial Markets, industrial line shaft . market share gains BARNES PUMPS End Suction Original Equipment turbine pumps which for pressure sewer Centrifugal, Manufacturers, Power will be integrated pump products BURKS PUMPS Horizontal & and Construction with the Deming . full year results Vertical Industries; vertical turbine pump at Process Systems DEMING PUMP Centrifugal, Government Contracts, line, establishing a . market share gains Standard Commercial HVAC solid market position for Chempump's new NC WEINMAN Vertical Industry, Chemical in this niche series diagnostic Turbine, and Hydro-Carbon industrial market. sealless pump CHEMPUMP Air-Operated Processing Industries Introduced new . Increased sales to Diaphragm, pressure sewer pump original equipment CHEM/METER Submersible products to serve manufacturers. Dewatering, growing market for PROCESS SYSTEMS Split Case, alternative sewage End Suction, collection system. SELLERS In-Line, Introduced new Leakproof sealless pump Centrifugal, technology featuring and Metering an electronic Pumps, diagnostic system Rotary Tank providing real time Cleaners and monitoring of Steam critical operating Injectors parameters, allowing pump users to plan simple parts replacements before a costly failure occurs. COCHRANE ENVIRONMENTAL SYSTEMS King Of Prussia, Pa Water/wastewater Most industries New senior Sales and treatment requiring water management team profitability consisting of and wastewater with increased expected to reverse osmosis, treatment focus on water increase as the softening, including Power treatment market loss on the filtration, Generation, Taiwan Power clarification, Pharmaceuticals, Project is demineralizers, Chemicals and brought to an and condensate Petroleum end and the booster pumps company focuses on its transition to a full service water treatment organization from a deaerator manufacturer.
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BUSINESS UNIT PRODUCTS MARKETS SERVED BUSINESS HIGHLIGHTS BUSINESS OUTLOOK - ------------------------------------------------------------------------------------------------------------------------------------ Aerospace - ------------------------------------------------------------------------------------------------------------------------------------ ELDEC CORPORATION Position Indication Commercial, Business ELDEC was selected The Aerospace Lynnwood, WA and Control Systems, and Military for major power market, which Proximity Sensors, Aerospace conversion began to recover Pressure Sensors and Industries, Military components on the in 1995 after a Components, True Marine and Gulfstream V and three year Mass Fuel Telecommunications the Canadair decline, is Flowmeters, Power Global Express. expected to Conversion Purchased a 47% continue to Components and equity position in improve in 1996. Systems Powec A.S., a This, along with Norwegian additional HYDRO-AIRE Anti-Skid and Commercial, Business manufacturer of equipment Burbank, CA Automatic Braking and Military power conditioning penetration on the Systems, Fuel and Aerospace Industries products and newest model Hydraulic Pumps, systems serving aircraft in both Coolant Pumps and the commercial the commercial and Systems, wireless the business Hydraulic and telecommunications aerospace markets Pneumatic Valves market. and increased and Regulators, Hydro-Aire was focus on the Actuators and awarded the brake overhaul and Solid State controls, fuel repair market by Components pumps and all three hydraulic operating units, LEAR ROMEC Lubrication and Commercial and components for the will provide for Elyria, OH Fuel Pumps for Military new Boeing 737-700 sales and profit Aircraft, Aircraft, Ground and brake controls growth in 1996. Aircraft Engines, Vehicles, Land for the new In addition, the Radar Cooling and Marine McDonnell Douglas equity position in Systems Applications and MD-95, both Powec A.S. is Missiles launched in 1995. expected to The first Rolls accelerate the Royce Trent engine transfer of our using a Lear Romec Aerospace power lube and scavenge conversion pump was put in technology to the service in 1995. $800 million wireless telecommunications market. - ------------------------------------------------------------------------------------------------------------------------------------ ENGINEERED MATERIALS - ------------------------------------------------------------------------------------------------------------------------------------ Kemlite Company, Inc. Fiberglass- Truck Trailer, Worldwide Solid results Joliet, IL Reinforced Recreational shortage of are expected in Plastic Vehicle and fiberglass 1996. Although Panels used Commerical hindered sales the as Truck Construction growth at transportation Interior Wall Kemlite which market served Liners and lost market by both Kemlite Roofs; share in the and Cor Tec Recreational first half of will be down Vehicle 1995. Kemlite's from 1995 Sidewall and strong market levels, this Roofs; and position should be Wall and allowed it to offset by Ceiling immediately market share Systems for regain market gain resulting the Building share as the from the easing Products fiberglass of the Market shortage eased fiberglass in the second shortage and half of 1995. the Kemlite's displacement of translucent aluminum in dry roof for the van truck dry van trailer trailer and market and its recreational COR TEC Fiberglass- Truck and Truck decorative vehicle Washington Court Reinforced Trailer sidewalls for sidewall House, OH Polyester Resin Manufacturers, the applications, Laminated Infrastructure recreational and further Panels for Construction vehicle market expansion in Transportation, continued to global markets. Construction, gain market Resistoflex Marine, Signage share will benefit in and Sound displacing 1996 from Barrier aluminum. market share Applications Cor Tec's gains in the foam core FRP Asian chemical Resistoflex Corrosion Pharmaceutical, panel "Encor" process Marion, NC Resistant Chemical Pro- performed well industry Plastic-Lined cessing, Pulp and in prototype through the Pipe, Fittings, Paper, Ultra Pure truck body and acquisition of Tanks, Valves, Water, Waste specialty Kessel PTE, Expansion Management Industries, trailer Ltd. In Joints and Hose Military and Aero- markets. This addition, Assemblies, space Contractors new product investment in High offers many new products, Performance advantages to rotational Separable customers molding and Fittings for including lower vertical Operating cost and extrusion Pressures to weight. equipment over 8,000 PSI Resistoflex the last two acquired Kessel years should Crane Plumbing Manufacturer of Residential, Industrial PTE., Ltd., a improve its Montreal, Canada Plumbing Commercial and Institutional plastic-lined domestic market Fixtures Construction in Canada pipe position. manufacturer Crane Polyflon Radio Frequency Magnetic with facilities Plumbing sales Norwalk, CT and Microwave Resonance in Singapore, will increase Components, Imaging, Radar Malaysia and in 1996 with an Capacitors, and Microwave Thailand. This improved Circuit Manufacturers allows Canadian Processing, Resistoflex housing market Antennas immediate and expansion access to the into the retail rapidly distribution expanding Asian market. chemical process industry. Crane Plumbing restructured its sales and marketing organization to gain access to the retail distribution channels in Canada and reduce costs.
5 CRANE CO. AT A GLANCE
Business Unit PRODUCTS MARKETS SERVED BUSINESS HIGHLIGHTS BUSINESS OUTLOOK - ------------------------------------------------------------------------------------------------------------------------------------ CRANE CONTROLS - ------------------------------------------------------------------------------------------------------------------------------------ BARKSDALE, INC. Pressure Switches Manufacturers of Unimess acquisition Sales and profit Los Angeles, Ca and Transducers, Compressors, added solid state are expected to Temperature Machine Tools, pressure switches increase in 1996 Switches and Trucks and Spa and level switches the result of: Directional Heaters to Barksdale's . New products and Control Valves product offerings. established Barksdale's air distribution at POWERS PROCESS CONTROLS Process Controllers Chemical Process suspension valve Barksdale Skokie, IL and Instrumentation, Industry, Food continued to gain . Increased benefit Control Valves, Processing, market share with of the plumbing Temperature Pharmaceuticals, truck manufacturers brass product on Regulators, Water Water and Wastewater capturing nine Powers Process Mixing and Thermal Treatment, Light major accounts in . New products and Shock Protection Commercial and 1995 compared to cost reductions Shower Valves, Institutional only one in 1994. at Dynalco Plumbing Brass Facilities, Powers Process . New products and Residential Plumbing redirected its increased OEM sales Brass marketing efforts at Azonix on electronic . Lower cost base DYNALCO CONTROLS Rotational Speed Stationary Engines, faucet and shower at Ferguson Europe Ft. Lauderdale, FL Sensors, Instruments, Pipelines, control systems to and market share Control Systems Construction, Marine satisfying specific gains in the and Agriculture customer domestic market. Equipment applications in the institutional AZONIX, INC. Data Acquisition Chemical, market. Billerica, MA Products, Control Petrochemical, Dynalco began Systems and Oil, Gas, Metal development process Operator Processing for new modular Interfaces product architecture using FERGUSON Index Drives Industrial and surface mount St. Louis, MO and Tables, Commercial components. Mechanical Machinery Ferguson completed Parts Handlers, the consolidation In-Line of its European Transfer manufacturing Machines, facilities into one Rotary Tables, location Press Feeds, significantly Custom Cams, reducing its fixed Special cost base and Intermittent achieving Motion Machines profitable fourth quarter results. - ------------------------------------------------------------------------------------------------------------------------------------ MERCHANDISING SYSTEMS - ------------------------------------------------------------------------------------------------------------------------------------ NATIONAL VENDORS Electronic Vending Automated 1995 was another 1996 prospects are Bridgeton, MO Merchandisers for Merchandising record sales year strong due to Refrigerated and for National lower costs and Frozen Food, Hot Vendors. The Cafe market penetration and Cold System "7" initiatives. Key Beverages, Snack continued to opportunities lie Foods, Coin and penetrate the in growing the Currency Changers office coffee international and market and convenience store expanded into the markets. convenience store The National market. In Vendors plant NATIONAL REJECTORS, INC. Electronic Validators, Automated addition, European expansion program GmbH Chip Card Cashless Merchandising sales increased is essentially Buxtehude, Germany Payment Systems dramatically. complete. The international Reduced distribution production costs network was and increased expanded in 1995 manufacturing positioning flexibility will National Vendors enable National for global market Vendors to growth. National successfully Vendors now has satisfy the six distributors requirements of its in Latin America, present and future five in the customer base. Pacific Rim, and In addition, an six in the Middle improved European East. economy and bus NRI GmbH operated ticketing at a profit for applications in the first time Latin America since 1991 due to should help NRI higher production operate profitably and sales levels in 1996. and the benefits of the cost reduction program previously instituted.
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BUSINESS UNIT PRODUCTS MARKETS SERVED BUSINESS HIGHLIGHTS BUSINESS OUTLOOK - ------------------------------------------------------------------------------------------------------------------------------------ Wholesale Distribution - ------------------------------------------------------------------------------------------------------------------------------------ HUTTIG SASH & DOOR COMPANY Distributor of Building Products Huttig's management 1996 profit expected Chesterfield, MO Doors, Windows, Retailers, information system to improve due to: Millwork, Contractors and became a . Stronger domestic Specialty Home Remodeling competitive single family Construction advantage - housing starts as a Materials and inventories were result of low Related Products reduced $11.4 interest rates million in 1995 . Improved operating CRANE SUPPLY Distributor of Pipe, Industrial, with inventory to efficiency at Huttig Montreal, Canada Valves, Fittings, Municipal, sales ratio through the benefit Plumbing Fixtures Commercial and improving to 12.4% of its management Institutional compared to 14% in information system Construction 1994. Additional . Improvement in the benefits were Canadian economy VALVE SYSTEMS AND CONTROLS Industrial Petroleum, realized in favorably impacting Houston, TX Distributor of Chemical, Power and product/branch cost Crane Supply. Automated Valves General Processing analysis, and Integrated Industries purchasing, and Control Systems warehouse operating efficiency. Huttig closed its Wharton, New Jersey branch which incurred a loss of $2.2 million over the last two years. Crane Supply achieved its best results since 1988 through increased management focus on value added services improving operating margins. Valve Systems and Controls new management emphasis on its core business, valve actuation, produced profitable results compared to operating losses in the last two years. Business Outlook - ------------------------------------------------------------------------------------------------------------------------------------ OTHER - ------------------------------------------------------------------------------------------------------------------------------------ CRANE DEFENSE Specialized Handling Shipbuilding Increased emphasis Stable results as Conroe, TX Systems, Elevators, on core shipbuilding Crane Defense focuses Winches, Ground products. on its core business - Support Equipment, shipbuilding Cranes and products. Associated Electronics
7 Management's Discussion and Analysis of Operations
1995 OVERVIEW (in millions) 1995 1994 1993 - ------------- ---- ---- ---- Sales $1,782.3 $1,653.5 $1,310.2 Operating Profit 142.9 109.9 85.9 Operating Margin 8.0% 6.6% 6.6%
In 1995 Crane Co. had the best overall financial performance in its history. Sales increased $128.8 million (8%) in 1995 to a record $1.8 billion, and operating profit rose $33 million to a record $142.9 million, an increase of 30% from last year. Since 1993, sales have increased $472.1 million and operating profit has risen $57 million. Net income was $76.3 million in 1995, an increase of 36% from 1994 and 56% from 1993. Total cash flow (net income plus depreciation and amortization) totaled $125.1 million, up 24% from 1994. In addition, $27.7 million was received from the sale of an equity investment and surplus real estate. As a result Crane Co. was able to invest $33.9 million in capital equipment and working capital, acquire three operating companies and an equity position in a fourth for $14.5 million and return $40.7 million to the shareholders through dividends and stock repurchases. While Crane continued to invest in improving its businesses, debt was reduced by $57.9 million, significantly improving financial flexibility for 1996 and beyond. REVENUE Reflecting the inclusion of full year results of 1994 acquisitions, sales increased 11% in Fluid Handling, 34% in Aerospace, 49% in Crane Controls, 9% in Merchandising Systems and were flat in Engineered Materials, which more than offset the 3% decline in Wholesale Distribution. In 1994, sales were $343 million higher than in 1993, of which $308 million was attributable to acquisitions. Excluding the acquisitions, revenues increased 5% in Fluid Handling, 7% in Engineered Materials and 5% in Wholesale Distribution, which more than offset the 14% decline in the Aerospace business. OPERATING PROFIT Aerospace was the most significant contributor to the record 1995 operating profit of $142.9 million. It also reported the largest operating profit increase from 1994, reflecting the full year contribution from ELDEC, the impact of cost reduction programs, returns on earlier investments in product programs for new aircraft and higher aftermarket demand. Although sales in Wholesale Distribution were down due to the impact of the 11% decline in domestic single family housing starts on Huttig, profits were higher due to cost reductions and improved industrial markets in Canada. All other business segments reported increased earnings in 1995 with the exception of Engineered Materials where earnings were in line with 1994 levels. In 1994, operating profit increased $24 million to $109.9 million, from 1993. Acquisitions accounted for the increase with Merchandising Systems and Fluid Handling reporting increases in profits of 29% and 13%, respectively. However, these strong results were adversely impacted by the general weakness in the Aerospace industry. 1993 operating results showed improvements in Engineered Materials, Wholesale Distribution and Merchandising Systems which more than offset declines at Fluid Handling, Crane Controls and Aerospace. FINANCIAL Net interest expense increased $4.3 million to $24.9 million in 1995 due to the full year effect of debt incurred to finance the acquisitions made in 1994. Net interest expense increased $13.6 million in 1994 due to acquisition related debt. Of particular significance, the company has repaid $145 million of debt over the last eighteen months. Miscellaneous income totaled $3.4 million in 1995 and included a $9.4 million gain on the sale of the company's investment in Mid Ocean Limited, partially offset by legal costs for a discontinued operation and a write down of excess real estate to current market value. Miscellaneous income totaled $1.9 million in 1994, compared to $.9 million in 1993. The company's effective tax rate was 37.2% in 1995, 38.7% in 1994 and 38.7% in 1993. The lower effective tax rate in 1995 was principally due to favorable tax treatment on higher export sales and a lower effective foreign tax rate due to non-deductible foreign losses in 1994.
FLUID HANDLING (in millions) 1995 1994 1993 - ------------- ---- ---- ---- Sales $343.8 $310.0 $197.7 Operating Profit 19.7 19.1 8.9 Operating Margin 5.7% 6.1% 4.5%
Fluid Handling consists of valve, pump and water treatment businesses. The Crane Valve business with five manufacturing facilities in North America, as well as plants in the United Kingdom, Australia, Norway, China and Indonesia, sells a wide variety of commodity and special purpose valves and fluid control products for 8 the chemical and hydrocarbon processing, power generation, marine, general industrial and commercial construction industries. Products are sold under the Crane, Jenkins, Pacific, Westad, Flowseal and Center Line brands. Crane Pumps has six manufacturing facilities in the United States located in Ohio, Illinois, Pennsylvania, West Virginia and Michigan. Pumps are manufactured under the Deming, Weinman, Chempump, Burks, Chem/Meter, Barnes and Process Systems brand names. Pumps are sold to a broad customer base which includes chemical and hydrocarbon process industries, automotive, municipal, industrial and commercial wastewater, power generation, commercial heating, ventilation and air- conditioning industries and original equipment manufacturers. The water treatment business has a manufacturing facility in Pennsylvania and serves the water and wastewater treatment market. Its products are sold under the Cochrane name. This group employs 3,200 people and had assets of $261.2 million at December 31, 1995. Sales in our Fluid Handling group increased 11% in 1995 primarily due to the April 1994 acquisition of Mark Controls. In addition, Crane Ltd. shipments increased by 15% in a flat market on the strength of new product offerings: steel valves, the Center Line resilient seat butterfly valve and balancing valves. Westad, our Norwegian valve operation, gained market share in 1995 by capturing a number of marine projects. North American valve shipments were down 1% from the 1994 level. Pump sales totaled $89 million in 1995, down slightly from last year. Operating profit increased 3.5% due to market share gains at Crane Ltd. and Westad, and the improved operating margins at Crane Pumps & Systems due to cost reductions from product line and manufacturing rationalizations. Partially offsetting these favorable factors were lower valve margins in North America and Australia. The Mark Controls acquisition contributed marginally to the improvement. Fluid Handling order backlog at December 31, 1995 totaled $91 million, an increase of $23 million from the prior year level. 1994 operating profit increased $10.2 million on a 57% increase in sales. The improved results were due to the acquisition of Burks Pumps at the end of 1993 and the Mark Controls valve businesses in April 1994. Operating profit of $8.9 million in 1993 was $3.0 million lower than the prior year level with sales declining 9%. Fluid Handling continued to focus on reducing product costs. Crane has established a low cost base of suppliers in China, South Korea, India, Mexico, Romania and Poland. Cellular manufacturing techniques were successfully implemented at Crane Ltd. in 1995 and are planned for our Brantford, Canada bronze valve facility in 1996. Two valve manufacturing joint ventures were established in the Far East in 1995, one in China and one in Indonesia. Both were manufacturing and shipping valves in the fourth quarter of 1995. Crane acquired Process Systems Inc., a manufacturer of industrial line shaft turbine pumps in the fourth quarter of 1995. This company, with annual sales of $9.0 million, will be integrated into Crane's existing vertical turbine pump business in 1996. With these initiatives in place, 1996 should show improvement. AEROSPACE (in millions) 1995 1994 1993 - ------------- ---- ---- ---- Sales $216.2 $160.8 $99.6 Operating Profit 56.0 31.3 31.2 Operating Margin 25.9% 19.5% 31.3% Aerospace consists of ELDEC, the industry leader in design and manufacture of position indication and control systems, Hydro-Aire, the industry leader in design and manufacture of electronically controlled anti-skid and automatic braking systems, and Lear Romec, a supplier of oil lubrication and fuel boost pumps. Additional products manufactured by this group consist of proximity sensors, fuel flowmeters, high and low voltage power conversion systems, fuel and hydraulic pumps, coolant pumps and systems, valves, regulators and actuators for the commercial, business and military aerospace industry. Aerospace operates three manufacturing facilities located in Lynnwood, Washington; Burbank, California, and Elyria, Ohio; and a small assembly facility in France. The group employs 1,500 people and had assets of $166.6 million at year end. The dramatic 1995 sales increase of 34% or $55.4 million and operating profit increase of 79% or $24.7 million was the result of several factors. In 1995 Crane Co. had a full year contribution from ELDEC, which was acquired in March 1994. ELDEC has leading market positions in its product lines, but at the time of the acquisition it was marginally profitable due to an inappropriately high cost structure. After the acquisition, the organization was restructured and right sized, facilities were consolidated and costs were dramatically reduced. As a result, the business became increasingly profitable through 1994 and into 1995. Also contributing were slightly higher overall OEM shipments, particularly for the position indication and control systems and power systems products for the new Boeing 777 aircraft, and increased aftermarket demand. 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS (continued) In 1995, Aerospace aftermarket sales increased 28% from 1994 due to higher aircraft utilization rates by airlines, spare parts provisioning requirements for the new Boeing 777 aircraft and increased focus on the overhaul and repair business by all three operating units. Performance in the Aerospace group has benefited from the emphasis on cost control at both Hydro-Aire and Lear Romec over the last four years, during the industry downturn. This has resulted in higher profit margins as the market improved in 1995. Sales per employee at Lear Romec and Hydro-Aire have increased 16% since 1993. The order backlog totaled $211 million at December 31, 1995, slightly above the prior year level. Crane has also continued to invest in developing new products and technologies for specific aircraft applications such as the Boeing 777, Boeing 737, Cessna Citation 10, Learjet 45, Canadair Global Express and Gulfstream V, Embraer 145, Lockheed Martin F-22 and McDonnell Douglas MD-95. This investment in the future, while hurting short term reported results, has built a stronger business. In 1995, Crane also made a $5.0 million 47% equity investment in Powec AS, a Norwegian manufacturer of power conditioning products and systems, whose products are complementary to the products and complex power systems engineering capabilities at ELDEC. This accelerates the transfer of our Aerospace power conversion technology to the commercial wireless telecommunications market. While this is not yet a major contributor to Crane's results, the company believes its capabilities are well suited for the needs of this $800 million market. In 1994, sales increased $61.2 million due entirely to the ELDEC acquisition which added $75.7 million to revenues. Operating profit totaled $31.3 million in 1994, up $.1 million from the 1993 level as additional ELDEC earnings offset lower results at the other two Aerospace units. The aerospace market, which began to recover in 1995 after a three year decline, is expected to continue to improve in 1996. Though the Aerospace business is faced with increased competitive pressures and a highly concentrated customer base, Crane has demonstrated its commitment to face these challenges with strategic acquisitions, continued cost reductions and investments in new product technology. These efforts are being helped by increasingly effective cooperation between Crane's facilities in Washington, California and Ohio across all functional disciplines. ENGINEERED MATERIALS (in millions) 1995 1994 1993 - ------------- ---- ---- ---- Sales $202.1 $201.9 $161.8 Operating Profit 22.9 23.0 15.5 Operating Margin 11.3% 11.4% 9.6% Engineered Materials consists of four principal operating units: Kemlite manufactures fiberglass-reinforced plastic panels at facilities in Jonesboro, Arkansas and Joliet, Illinois for the transportation, recreational vehicle and commercial building products markets; Cor Tec manufactures fiberglass-reinforced laminated panels in its Washington Court House, Ohio plant for use as structural sidewalls by the truck and trailer industry; Resistoflex manufactures corrosion- resistant, plastic-lined pipe, fittings and valves in its Marion, North Carolina plant for the chemical process and pharmaceutical industries; and Crane Plumbing manufactures china, acrylic and steel plumbing fixtures in three plants in Canada for the Canadian construction industry. This group had assets of $100.6 million at December 31, 1995 and employed 1,200 people. Sales in 1995 were in line with the prior year level, as strong sales to the transportation truck and trailer industry at both Kemlite and Cor Tec and major project wins at Resistoflex were offset by a 30% decline in the residential housing market in Canada and the transfer of plumbing brass products to the Controls group. In addition, sales were adversely impacted by a fiberglass shortage, a key raw material in Kemlite's products, hurting its ability to fully meet the demand from truck trailer manufacturers in the first half of the year. Operating profit totaled $22.9 million in 1995 and was level with the prior year's earnings. The productivity gains at Cor Tec and improved results at Resistoflex were fully offset by the impact of the drastic decline in the residential construction market in Canada on Crane Plumbing and the adverse margin impact of higher fiberglass and resin costs at Kemlite. Order backlog at year end 1995 was strong at $22.5 million. Although down significantly from the inflated level at year end 1994 caused by anticipated fiberglass shortages, this backlog is historically high compared to normal order backlog levels. 1994 operating profit increased $7.5 million or 48% on a 25% increase in sales due to Kemlite's Filon acquisition in October 1993, a strengthened transportation market and improvement at Crane Plumbing. In 1993 operating profit increased $9.4 million on a slight increase in sales due principally to a $5.7 million charge in 1992 for product liability and environmental expenses. 10 Kemlite's products continued to gain market share against alternative materials in 1995. Kemlite's translucent roof for the dry van trailer market and its decorative sidewall for the recreational vehicle market continued to gain market share at the expense of aluminum. Kemlite continued to expand its global distribution and though still only 6.5% of Kemlite's total sales, international sales were up 35% in 1995. Cor Tec is exploring the substitution of lighter and more durable materials for plywood in the core of its panels, and if successful, this new product will improve business performance dramatically by offering many advantages to customers including lower weight and costs. Resistoflex has strengthened its market position through investment in rotational molding equipment and vertical extrusion equipment over the past two years, as well as new product introductions designed to help its customers comply with stringent emissions regulations. In the fourth quarter of 1995, Resistoflex acquired Kessel PTE., Ltd., a plastic-lined pipe manufacturer with facilities in Singapore, Malaysia and Thailand. This acquisition will provide Resistoflex with immediate market access to the rapidly expanding Asian chemical process industry. In 1996, through continued product development, global market expansion and a low cost position this group is expected to exceed 1995 results. CRANE CONTROLS (in millions) 1995 1994 1993 - ------------- ---- ---- ---- Sales $131.1 $88.0 $35.0 Operating Profit 11.3 4.4 .9 Operating Margin 8.6% 5.0% 2.5% Crane Controls, the company's newest business, is an exciting addition because of its technology content and growth prospects. Controls' products are used in a wide variety of specialized industrial applications where process control is required. Barksdale, which has manufacturing operations in Los Angeles, California and Reichelsheim, Germany produces pressure, level and temperature switches, transducers and directional control valves. Powers Process Controls produces electronic sensors, pressure balancing and control valves, and plumbing brass for both industrial and commercial markets at its facility in Skokie, Illinois. Azonix, located in Billerica, Massachusetts, designs electronic data acquisition products and measurement and control systems for harsh industrial environments. Dynalco, in Fort Lauderdale, Florida, produces rotational speed sensors, instruments and control systems for use in industrial engines, natural gas production and pipelines, and agricultural and marine machinery. Ferguson manufactures a complete line of motion control products for transferring and positioning components in automated assembly processes. Ferguson has three domestic manufacturing facilities: St. Louis, Missouri; Greenwood, Mississippi; and Detroit, Michigan; and one in Brussels, Belgium. Crane Controls had assets of $128.5 million at December 31, 1995, and employs 800 people. Crane Controls operating profit of $11.3 million was more than double the level of 1994 on a 49% sales increase. The favorable yearly comparisons were heavily impacted by full year results of the Controls businesses added with the April 1994 Mark Controls acquisition. All units within our Controls group except Powers Process had higher earnings. In addition, sales increased due to the transfer of product line responsibility for plumbing brass products to Powers Process Controls, which serves the same markets with its products. Powers' results in 1995 were adversely impacted by costs associated with the introduction of Crane Plumbing Brass product to its markets. The February 1995 acquisition of Unimess GmbH brought a full line of solid state switches, transducers and indicating systems to Barksdale, complementing existing German and United States product lines and market channels. This, combined with a 10% increase in sales of core products, an improved sales organization and cost reduction initiatives, produced strong results at Barksdale this year and positions it well for the future. Dynalco and Azonix both achieved higher earnings levels in 1995 as they maintained their leadership positions in their respective specialized markets for measurement and control systems. Demand for Ferguson's domestic motion control products was high in 1995. Substantial progress toward cost reduction goals was made at Ferguson Europe, which was profitable in the fourth quarter of 1995 and had much improved results over 1994, when significant costs were incurred in consolidating the company into one facility in Brussels. On December 31,1995, Crane Controls had a backlog of $26.2 million, equivalent with last year. Sales and operating profit were up dramatically in 1994 due to the acquisition of the Mark Controls businesses. In 1993 only the Ferguson operations are reported. This group continues to penetrate niche markets through emphasis on quality and introduction of value added products to their customers. Investments to reduce product costs, enhance product functionality and develop larger markets are important to this group and will continue in 1996. 11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS (continued)
MERCHANDISING SYSTEMS (in millions) 1995 1994 1993 - ------------- ---- ---- ---- Sales $183.1 $168.5 $166.7 Operating Profit 23.6 23.2 18.0 Operating Margin 12.9% 13.7% 10.8%
Merchandising Systems has two operating units: National Vendors, the industry leader in the design and manufacture of a complete line of vending merchandisers for the food/service vending market; and NRI, which manufactures electronic coin validators in Buxtehude, Germany for the automated merchandising and gambling/amusement markets in Europe. National Vendors products include: electronic vending merchandisers for refrigerated and frozen foods, hot and cold beverages, snack foods, single cup individually brewed hot drinks and combination vendors/merchandisers, designed to vend both snack foods and hot/cold drinks, or snacks and refrigerated/ frozen foods in one machine. National Vendors manufactures its products in a 463,000 sq. ft. state of the art facility in Bridgeton, Missouri. National Vendors' products are marketed directly to customers in the United States and Europe by company sales and marketing personnel, and in other international markets through independent distributors. Merchandising Systems employs 1,150 people and had assets of $88.9 million at year end 1995. Merchandising Systems had 9% higher sales in 1995 compared to 1994, as National Vendors achieved record sales for the fifth consecutive year. The improvement was due to a 40% increase in international shipments at National Vendors, market share gains for the Cafe System "7" product in the office coffee service market and higher shipments of coin validation equipment by NRI in Europe. Operating profit improved marginally in 1995 to $23.6 million. Although NRI operated at a profit for the first time since 1991, National Vendors margins were lower due to increased promotional activities to entice new equipment purchases and strengthen the company's leading domestic market position. The margin decline at National Vendors was further compounded by the delayed completion of the plant expansion and modernization project. This project, which is expected to be completed by the end of the first quarter of 1996, will result in increased manufacturing flexibility, reduced cycle times and lower inventory levels. Order backlog totaled $14.7 million at December 31, 1995, which is normal for Merchandising Systems. The automated merchandising industry has always demanded short lead times which should strengthen National Vendors market position as it realizes the benefits of the plant modernization project. Merchandising Systems profits increased 29% in 1994 to $23.2 million on slightly higher sales as National Vendors' innovative products and low cost position improved operating margins. In 1993, profit increased 8% on 10% higher sales. In 1995, National Vendors expanded its international distribution and now has six distributors in Latin America, five in the Pacific Rim, and six in the Middle East. International sales, particularly in Europe, but also in Latin America and the Pacific Rim, will be key to future growth along with continued new product introduction. Results in 1996 are expected to exceed the 1995 level with expanded international sales focus, the cost benefits of the completed plant expansion/modernization project at National Vendors and the return to profitability at NRI.
WHOLESALE DISTRIBUTION (in millions) 1995 1994 1993 - ------------- ---- ---- ---- Sales $710.8 $730.6 $655.2 Operating Profit 25.0 20.0 22.7 Operating Margin 3.5% 2.7% 3.5%
Wholesale Distribution serves three end user markets. Huttig Sash and Door Company, the largest American wholesale distributor of windows, doors and specialty millwork, serves building product retailers, contractors and home remodelers. Huttig operates forty-six distribution centers located throughout the United States. Valve Systems and Controls, an industrial distributor of automated valves and related products located in Houston, Texas, serves the petrochemical, oil refining and pipeline transmission industries; and Crane Supply, a distributor of pipes, valves, fittings, plumbing fixtures and related supplies serving the industrial, municipal and institutional construction industries in Canada. Crane Supply operates thirty-six distribution centers located throughout Canada. The key success factors in Wholesale Distribution are customer service and effective inventory and cost management. This group had assets of $197.5 million at December 31, 1995 and employs 2,400 people. 12 Wholesale Distribution experienced a 3% decline in sales in 1995 due to the impact of an 11% decline in single family home construction on Huttig, the closure of a large but unprofitable Huttig branch in New Jersey, and an exit from the wood window manufacturing business at the end of 1994. This was partially offset by an 8% increase in Crane Supply sales as the industrial market served in Canada was stronger than in 1994, and a full year contribution by Huttig's Prineville, Oregon wood moulding operation, which was acquired in May 1994. The operating profit increase in 1995 was due to improvement at Crane Supply and Valve Systems. Though the sales increase at Crane Supply helped profits, margins were higher primarily due to the focus by new management on costs and margins. Valve Systems' new management concentrated their efforts on cost controls and sales of higher margin, value added products. Though Huttig operating profit declined due to lower sales, this was largely offset by improved margins and greater focus on cost control as well as improved asset management and productivity gains made possible by its management information system that the company believes is the best in the millwork industry and a competitive advantage for the future. Through effective inventory management, Huttig reduced inventory $11.4 million in 1995 resulting in a LIFO gain of $4.1 million. Huttig's average inventory as a percentage of sales improved to 12.4% in 1995 from 14.0% in 1994. In 1994, operating profit declined 12% on a 12% increase in sales compared to 1993. Sales were up due to acquisitions and improvement in Huttig's markets. Operating profit was down due to losses at two of Huttig's manufacturing operations, lower results at Valve Systems and inclusion of a pension gain in prior year results. In 1993 operating profit increased $9.1 million from the depressed level of 1992 due to a stronger United States housing market and a pension gain of $2.7 million at Crane Supply. With the current low interest rates, higher United States single family housing starts and some expectation of improvement in the Canadian economy, 1996 should be a good year for the Wholesale Distribution group. LIQUIDITY AND CAPITAL RESOURCES CASH FLOW 1995 operating activities generated $106.6 million in cash flow allowing the company to reduce debt by $57.9 million and return $40.7 million to shareholders through dividends and share repurchases. This is the second consecutive year Crane has generated cash in excess of $100 million from operations. The increase in the level of working capital was attributable primarily to the company's higher sales. However, the ratio of average working capital to net sales declined 1.1%, which had a positive cash flow impact of $20 million. This improvement is due to effective investment in management information systems, better controls and Crane's compensation system which rewards higher returns on invested capital. Future investments in working capital are expected to be required to fund sales growth, geographic expansion and new products. These increases will be largely offset by continued improvement in working capital management. Investing activities for 1995 consumed a significantly lower amount of cash compared with 1994. The principal reason was fewer acquisition opportunities this year that met the company's financial objectives. The company did utilize $14.5 million for the purchase of three operating companies and an equity interest in a fourth. Crane plans to seek acquisition opportunities in 1996 which complement existing businesses, have leading positions in niche markets and can generate cash returns greater than the cost of capital. Capital investments in 1995 of $26.6 million were primarily for cost reduction and process improvements. In 1995, Fluid Handling made capital investments of $5.7 million, Aerospace $3.6 million, Engineered Materials $3.2 million, Crane Controls $3.2 million, Merchandising Systems $9.2 million and Wholesale Distribution $1.5 million. Capital investments are expected to increase over the next several years to fund manufacturing and business process systems projects. These projects are designed to reduce business process and manufacturing cycle times, increasing the company's ability to respond to customer needs. In 1995, Crane sold its investment in Mid Ocean Limited for $19.4 million. The cost basis for this investment made in 1992 was $10 million. Proceeds from asset sales generated $8.2 million in cash flow in 1995 which related primarily to the disposal of idle plants and properties. During 1995, 551,900 shares of Crane Co. common stock were repurchased for $17.9 million and $22.8 million of dividends were paid. Total borrowings of $57.9 million were repaid in 1995, reducing the company's total debt outstanding at year end to $297.2 million. From its peak at June 30, 1994, the date immediately following Crane's last acquisition in 1994, the company has repaid over $145 million in debt. 13 MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS (continued) At year end, the company's net debt to total capital ratio was 43.8%, a significant improvement compared to 52% at December 31, 1994. The company's working capital increased $21 million to $257 million and the interest coverage ratio rose to 5.5 times interest expense from 4.8 times in 1994. In June, Moody's Investors Service upgraded Crane's senior unsecured debt rating to Baa2 from Baa3, citing improved operating results following the successful integration of the company's recent acquisitions and improved debt protection measurements. LONG-TERM DEBT As of December 31, 1995, Crane had a $200 million contractually committed domestic long-term bank credit facility under which the company can borrow, repay, or to the extent permitted by the Agreement, prepay loans and reborrow at any time prior to the termination date of the Agreement. Proceeds may be used for general corporate purposes or to provide bridge financing for acquisitions. In 1995, an amendment to the credit facility was concluded which extended the termination date of the Agreement to August 2000. The Agreement contains certain financial covenants, customary in credit facilities of this nature, including limitations on indebtedness and liens. No loans were outstanding under this Agreement at year end. At year end, the company and its subsidiaries were also party to contractually committed long-term lines of credit underwritten by banks outside of the United States. These facilities afford local currency borrowings for Crane subsidiaries in the United Kingdom, Canada and Australia for up to $22.9 million. On December 31, 1995, $22.5 million in loans were outstanding with a weighted average interest rate of 6.79%. On June 8, 1994, Crane issued $150 million in Senior Unsecured Notes due 1999 at a nominal rate of 7.25%, proceeds of which were used for acquisitions. Incorporating the effects of underwriting fees, original issue discount and the cost of a treasury lock agreement, the all-in cost of this financing was 7.6%. This debt was issued under the company's $300 million shelf registration filed on Form S-3 with the Securities and Exchange Commission on May 19, 1994. The registration allows Crane to offer from time to time to the public, in one or more series, senior debt securities and/or subordinated debt securities as a direct unsecured obligation of the company. At December 31, 1995, $150 million in debt securities remained registered but unissued. On March 16, 1992, Crane issued $100 million in Senior Unsecured Notes due in 2004 at a nominal rate of 8.50%, proceeds of which were used for general corporate purposes and the early optional redemption of two outstanding public debentures. Incorporating the effects of underwriters fees and original issue discount, the all-in cost of this financing was 8.6%. SHORT TERM DEBT At December 31, 1995, Crane had $215 million in short-term uncommitted, unsecured money market bid rate lines of credit for domestic borrowings of which $203.1 million was unused. Crane's foreign subsidiaries had $38.1 million in United States dollar equivalent short-term borrowing lines available at year end of which $17.2 million were contractually committed and $20.9 were uncommitted. As of December 31, 1995, $11.2 million in loans were outstanding on these foreign credit lines. The weighted average interest rates on the company's short-term loans outstanding at year end were 5.81% and 6.76% for domestic and foreign loans, respectively. All available short-term lines of credit are for borrowings up to 364 days and are renewable at the option of the lender. Crane is also party to a contractually committed off-balance sheet chattel paper financing facility, which enables National Vendors 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. The company believes it has adequate access to both the public and private credit markets to meet all of its operating and strategic objectives. Financial Instruments FININACIAL INSTRUMENTS The company uses financial instruments from time to time, including interest rate swaps, to manage the effect of fluctuating interest rates on outstanding debt. No new interest rate swap contracts were executed in 1995 and none were outstanding at December 31, 1995. 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 $15 million at December 31, 1995, which was fully accrued. Not included in the accrual is the cost of cleaning one site for approximately $3.6 million for which a full escrow was established when the property was acquired in 1993. The company spent $10.3 million on environmental costs in 1995, of which $7.0 million was spent in settling Crane's liabilities in the San Fernando Valley Superfund sites in Burbank and Glendale, California. Crane expects to pay remediation costs of approximately $3 million in 1996. 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; however, the required remedial actions being implemented or engineered are not individually or in the aggregate expected to be material. 14 Crane Co. CONSOLIDATED STATEMENTS OF INCOME (In thousands except per share data)
For Years Ended December 31, 1995 1994 1993 ---- ---- ---- NET SALES $1,782,310 $1,653,466 $1,310,205 OPERATING COSTS AND EXPENSES: Cost of sales 1,316,321 1,253,412 1,016,548 Selling, general and administrative 274,276 245,474 178,381 Depreciation and amortization 48,765 44,691 29,420 ---------- ---------- ---------- 1,639,362 1,543,577 1,224,349 ---------- ---------- ---------- OPERATING PROFIT 142,948 109,889 85,856 OTHER INCOME (EXPENSE): Interest income 2,025 3,616 4,465 Interest expense (26,913) (24,171) (11,396) Miscellaneous-net 3,408 1,893 893 ---------- ---------- ---------- (21,480) (18,662) (6,038) ---------- ---------- ---------- INCOME BEFORE TAXES 121,468 91,227 79,818 PROVISION FOR INCOME TAXES 45,131 35,294 30,925 ---------- ---------- ---------- NET INCOME $ 76,337 $ 55,933 $ 48,893 ========== ========== ========== PRIMARY NET INCOME PER SHARE $ 2.50 $ 1.86 $ 1.62 Average primary shares outstanding 30,544 30,146 30,217 FULLY DILUTED NET INCOME PER SHARE $ 2.49 $ 1.85 $ 1.61 Average fully diluted shares outstanding 30,623 30,250 30,404 DIVIDENDS PER COMMON SHARE $ .75 $ .75 $ .75 ========== ========== ==========
See Notes to Consolidated Financial Statements 15 CONSOLIDATED BALANCE SHEETS (In thousands except share data)
Balance December 31, 1995 1994 ---- ---- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 5,476 $ 2,072 Accounts receivable 240,787 234,695 Inventories Finished goods 117,060 116,625 Finished parts and subassemblies 37,915 30,556 Work in process 35,364 39,286 Raw materials and supplies 54,662 50,598 ---------- ---------- Total inventories 245,001 237,065 Other current assets 6,774 6,407 ---------- ---------- TOTAL CURRENT ASSETS 498,038 480,239 PROPERTY, PLANT AND EQUIPMENT AT COST: Land 36,975 38,841 Buildings and improvements 149,368 157,513 Machinery and equipment 326,642 316,994 ---------- ---------- Gross Property, Plant and Equipment 512,985 513,348 Less accumulated depreciation 269,047 250,350 ---------- ---------- NET PROPERTY, PLANT AND EQUIPMENT 243,938 262,998 OTHER ASSETS 26,874 30,173 INTANGIBLES 58,894 63,434 COST IN EXCESS OF NET ASSETS ACQUIRED 170,667 171,201 ---------- ---------- $ 998,411 $1,008,045 ========== ==========
16 See Notes to Consolidated Financial Statements Crane Co.
Balance December 31, 1995 1994 ---- ---- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt $ 771 $ 1,272 Loans payable 15,359 20,986 Accounts payable 96,873 95,211 Accrued liabilities 115,530 119,382 U.S. and foreign taxes on income 12,743 7,444 ---------- ---------- TOTAL CURRENT LIABILITIES 241,276 244,295 LONG-TERM DEBT 281,093 331,289 OTHER LIABILITIES 21,977 20,159 ACCRUED POSTRETIREMENT BENEFITS 43,071 43,066 ACCRUED PENSION LIABILITIES 8,272 8,804 DEFERRED INCOME TAXES 27,993 32,440 PREFERRED SHARES, par value $.01; 5,000,000 shares authorized -- -- COMMON SHAREHOLDERS' EQUITY: Common shares, par value $1.00: Authorized 80,000,000 shares. Outstanding 30,125,250 shares (30,047,355 in 1994) after deducting 18,200,426 shares in treasury (18,351,321 in 1994) 30,125 30,047 Capital surplus 12,283 12,766 Retained earnings 342,330 296,268 Cumulative currency translation adjustment (10,009) (11,089) ---------- ---------- TOTAL COMMON SHAREHOLDERS' EQUITY 374,729 327,992 ---------- ---------- $ 998,411 $1,008,045 ========== ==========
17 CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
For Years Ended December 31, 1995 1994 1993 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 76,337 $ 55,933 $ 48,893 Depreciation 35,746 35,453 24,144 Amortization 13,019 9,238 5,276 Deferred income taxes (4,317) (3,283) 980 Cash (used for) provided from operating working capital (7,320) 17,550 (3,400) Other (6,847) 2,443 (4,874) -------- --------- --------- TOTAL FROM OPERATING ACTIVITIES 106,618 117,334 71,019 -------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (26,603) (28,199) (38,838) Proceeds from disposition of capital assets 8,218 16,058 986 Purchase of equity investments (5,067) -- -- Sale of equity investments 19,440 49 -- Payments for acquisitions net of liabilities assumed of $2,653, $138,797 and $18,802 in 1995, 1994 and 1993, respectively (9,419) (161,424) (111,457) Proceeds from divestitures -- 2,580 6,029 -------- --------- --------- TOTAL USED FOR INVESTING ACTIVITIES (13,431) (170,936) (143,280) -------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: EQUITY: Dividends paid (22,755) (22,518) (22,511) Reacquisition of shares (17,940) (186) (10,405) Stock options exercised 8,784 1,267 3,322 -------- --------- --------- (31,911) (21,437) (29,594) -------- --------- --------- DEBT: Proceeds from issuance of long-term debt -- 230,105 -- Repayments of long-term debt (47,527) (76,911) (11,737) Net (decrease) increase in short-term debt (10,398) (88,774) 77,123 -------- --------- --------- (57,925) 64,420 65,386 -------- --------- --------- TOTAL (USED FOR) PROVIDED FROM FINANCING ACTIVITIES (89,836) 42,983 35,792 -------- --------- --------- Effect of exchange rate on cash and cash equivalents 53 99 (43) -------- --------- --------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,404 (10,520) (36,512) Cash and cash equivalents at beginning of year 2,072 12,592 49,104 -------- --------- --------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 5,476 $ 2,072 $ 12,592 ======== ========= ========= DETAIL OF CASH (USED FOR) PROVIDED FROM OPERATING WORKING CAPITAL (NET OF EFFECTS OF ACQUISITIONS): Accounts receivable $ (3,034) $ (11,004) $ (8,503) Inventories (4,474) 15,285 (10,581) Other current assets (330) 2,406 (454) Accounts payable (64) 10,358 9,895 Accrued liabilities (4,722) 1,743 2,055 U.S. and foreign taxes on income 5,304 (1,238) 4,188 -------- --------- --------- TOTAL $ (7,320) $ 17,550 $ (3,400) ======== ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid $ 26,262 $ 24,947 $ 17,418 Income taxes paid $ 43,474 $ 32,855 $ 34,721 -------- --------- ---------
See Notes to Consolidated Financial Statements 18 Crane Co. CONSOLIDATED STATEMENTS OF CHANGES IN COMMON SHAREHOLDERS' EQUITY (In thousands except share data)
Currency Total Common Common Capital Retained Translation Shareholders' Shares Surplus Earnings Adjustment Equity ------ ------- -------- ----------- ------------- BALANCE DECEMBER 31, 1992 $29,958 $ 15,252 $236,475 $(10,333) $271,352 Net income -- -- 48,893 -- 48,893 Cash dividends -- -- (22,511) -- (22,511) Reacquisition of 394,220 shares (394) (10,011) -- -- (10,405) Exercise of stock options, 216,792 shares 217 3,105 -- -- 3,322 Conversion of debentures, 25,962 shares 26 78 -- -- 104 Restricted stock awarded, 56,040 shares, net 56 1,736 809 -- Currency translation adjustment -- -- -- (2,537) (2,537) ------- -------- -------- --------- -------- BALANCE DECEMBER 31, 1993 29,863 10,160 263,666 (12,870) 290,819 Net income -- -- 55,933 -- 55,933 Cash dividends -- -- (22,518) -- (22,518) Reacquisition of 6,990 shares (7) (179) -- -- (186) Exercise of stock options, 82,942 shares 83 1,184 -- -- 1,267 Conversion of debentures, 71,569 shares 71 232 -- -- 303 Restricted stock awarded, 36,790 shares, net 37 1,369 (813) -- Currency translation adjustment -- -- -- 1,781 1,781 ------- -------- -------- --------- -------- BALANCE DECEMBER 31, 1994 30,047 12,766 296,268 (11,089) 327,992 Net income -- -- 76,337 -- 76,337 Cash dividends -- -- (22,755) -- (22,755) Reacquisition of 551,900 shares (552) (17,388) -- -- (17,940) Exercise of stock options, 396,575 shares 397 8,387 -- -- 8,784 Restricted stock awarded, 233,220 shares, net 233 8,518 (7,520) -- Currency translation adjustment -- -- -- 1,080 1,080 ------- -------- -------- --------- -------- BALANCE DECEMBER 31, 1995 $30,125 $ 12,283 $342,330 $(10,009) $374,729 ======= ======== ======== ========= ========
See Notes to Consolidated Financial Statements 19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ACCOUNTING POLICIES Principles of Consolidation--The consolidated financial statements include all majority-owned subsidiaries. All significant intercompany items have been eliminated. Certain prior year amounts have been reclassified to conform with the 1995 presentation. General--The company's financial statements are prepared in conformity with generally accepted accounting principles. These require management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The company evaluates the recoverability of all long lived assets by assessing whether the unamortized asset can be recovered over its remaining life through cash flows. Cash Equivalents--Marketable securities with original maturities of three months or less are included in cash equivalents. Accounts Receivable--Receivables are carried at net realizable value. The allowance for doubtful accounts at December 31, 1995 and 1994 were $3,598,000 and $3,693,000. Inventories--Inventories are stated at the lower of cost or market principally on the last-in, first-out (LIFO) method of inventory valuation. The reduction of inventory quantities has resulted in a liquidation of LIFO inventories acquired at lower costs prevailing in prior years. Liquidations have reduced cost of sales by $4,000,000, $3,300,000, and $1,500,000 in 1995, 1994 and 1993, respectively. Replacement cost would be higher by $49,460,000 and $52,739,000 at December 31, 1995 and 1994. Property, Plant and Equipment--Depreciation is provided primarily by the straight-line method over the estimated useful lives of the respective assets which range from three to twenty-five years. Intangibles--Intangible assets are being amortized on a straight-line basis over their estimated useful lives which range from five to twenty years. The accumulated amortization was $11,020,000 and $7,716,000 at December 31, 1995 and 1994, respectively. Cost in Excess of Net Assets Acquired--Cost in excess of net assets acquired is being amortized on a straight-line basis ranging principally from fifteen to forty years. The accumulated amortization was $22,482,000 and $16,730,000 at December 31, 1995 and 1994, respectively. Revenue Recognition--Revenues are generally recorded when title passes to the customer. Revenues on long-term contracts are recognized under the percentage- of-completion method of accounting and are measured principally on either a cost-to-cost or a unit of delivery basis. These contracts represent less than 1 percent of sales this year. Accounts receivable include unreimbursed costs and accrued profits to be billed of $1,943,000 and $4,893,000 at December 31, 1995 and 1994, respectively. Income Taxes--Income tax expense is based on reported earnings before income taxes. Deferred income taxes reflect the impact of temporary differences between assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes. In accordance with Statement of Financial Accounting Standards (SFAS) 109, "Accounting for Income Taxes," these deferred taxes are measured by applying currently enacted tax laws. Currency Translation--Assets and liabilities of subsidiaries are translated at the rate of exchange in effect on the balance sheet date; income and expense are translated at the average rates of exchange prevailing during the year. The related translation adjustments are accumulated in a separate component of shareholders' equity. Financial Instruments--The company periodically enters into interest rate swap agreements to moderate its exposure to interest rate changes and to lower the overall cost of borrowings. The differential to be paid or received is accrued as interest rates change and is recognized in income over the life of the agreements. In addition, the company periodically uses forward foreign exchange contracts to hedge firm purchase and sales commitments. Gains and losses on such contracts are deferred and recognized as part of the related transactions. Amounts outstanding at December 31, 1995 for such contracts were not material. Net Income Per Share--Primary earnings per share calculations are based upon the weighted average number of common shares outstanding after the effect of dilutive stock options. Earnings per share assuming full dilution was determined in the same manner as primary earnings per share except that the year-end stock price was used. Recently Issued Accounting Standard--During 1995, Statement of Financial Accounting Standard No. 123 "Accounting for Stock-Based Compensation" was issued. The company will comply with the additional disclosure required by this statement but is not required to change its method of accounting for stock-based compensation. RESEARCH AND DEVELOPMENT Product development and engineering costs were approximately $51.9 million, $46.4 million, and $18.4 million in 1995, 1994, and 1993, respectively. Included in these amounts were approximately $12,600,000 and $9,500,000 received in 1995 and 1994 respectively, for customer-sponsored research and development. 20
MISCELLANEOUS--NET (In thousands) For Years Ended December 31, 1995 1994 1993 Gain (Loss) on disposal of capital assets $(3,037) $ 1,346 $ 425 Gain on investments 9,440 361 556 Other (2,995)* 186 (88) ------- ------- ----- $ 3,408 $ 1,893 $ 893 ======= ======= =====
*Includes $3.4 million for legal costs related to a previously discontinued operation. SUPPLEMENTARY INCOME STATEMENT INFORMATION The company's repair and maintenance costs for 1995 were $22.2 million as compared to $19.5 million and $15.6 million in 1994 and 1993, respectively. Amounts for amortization of intangible assets, taxes other than payroll and income taxes, royalties and advertising costs were less than 1 percent of sales. INCOME TAXES U.S. and non-U.S. income (loss) before taxes is as follows:
(In thousands) For Years Ended December 31, 1995 1994 1993 ---- ---- ---- Income before taxes: U.S. operations $113,359 $90,765 $83,296 Non-U.S. operations 8,109 462 (3,478) -------- ------- ------- $121,468 $91,227 $79,818 ======== ======= ======= The provision for income taxes consists of: (In thousands) For Years Ended December 31, 1995 1994 1993 ---- ---- ---- Current: U.S. federal tax $ 38,396 $31,152 $25,898 State and local tax 6,952 5,702 5,151 Non-U.S. tax 4,100 1,723 (1,104) -------- ------- ------- 49,448 38,577 29,945 -------- ------- ------- Deferred: U.S. federal tax (3,671) (3,356) 526) State and local tax (619) (130) (11) Non-U.S. tax (27) 203 1,517 (4,317) (3,283) 980 Total income taxes $ 45,131 $ 35,294 $ 30,925 ========= ======== ======== Reconciliation of the statutory U.S. federal rate to actual tax rate is as follows: (In thousands) For Years Ended December 31, 1995 1994 1993 ---- ---- ---- Statutory U.S. federal tax at 35% $ 42,514 $31,929 $27,936 Increase (reduction) from: Non-U.S. taxes 753 1,495 1,415 Local U.S. taxes 4,116 3,622 3,341 Non-deductible goodwill 1,822 1,552 686 Non-taxable FSC income (1,986) (1,343) (737) Effect of tax rate increase -- -- (510) Other (2,088) (1,961) (1,206) -------- ------- ------- Provision for income taxes $ 45,131 $35,294 $30,925 ======== ======= ======= Actual tax rate 37.2% 38.7% 38.7% ======== ======= =======
At December 31, 1995, the company had unremitted earnings of foreign subsidiaries of $72 million. 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. Accordingly, no provision has been made for taxes that might be payable upon remittance of such earnings nor is it practicable to determine the amount of this liability. The components of deferred tax assets and liabilities included on the balance sheet at December 31 are as follows:
(In thousands) 1995 1994 ---- ---- Deferred tax asset: Postretirement benefits $16,587 $16,815 Inventory 3,154 3,612 Insurance 8,324 8,132 Environmental 5,787 8,184 Deferred compensation 6,162 5,032 Other 6,648 3,420 ------- ------- Total deferred asset $46,662 $45,195 ======= ======= Deferred tax liability: Depreciation $11,432 $16,113 Difference between book basis and tax basis of assets 19,301 19,330 Intangibles 15,913 16,928 Pension 4,075 3,396 Other 740 (51) ------- ------- Total deferred liability $51,461 $55,716 ======= =======
21 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) At December 31, 1995 current deferred tax assets of $23.2 million ($21.9 million in 1994) were included in other receivables. Net non-current deferred tax liabilities of $28 million ($32.4 million in 1994) were included in deferred income taxes. POSTRETIREMENT BENEFITS Postretirement healthcare and life insurance benefits are provided for certain domestic and non-U.S. employees hired before January 1, 1990 who meet minimum age and service requirements. The company does not pre-fund these benefits and has the right to modify or terminate the plan.
(In thousands) December 31, 1995 1994 1993 ---- ---- ---- Accumulated postretirement benefit obligation: Retirees $23,068 $23,059 $24,807 Fully-eligible active plan participants 2,295 1,983 1,973 Other active plan participants 6,093 5,934 6,669 ------- ------- ------- Total 31,456 30,976 33,449 Unrecognized net gain 11,615 12,090 9,121 ------- ------- ------- Accrued postretirement benefit $43,071 $43,066 $42,570 ======= ======= ======= Net periodic cost: Service cost-benefits earned during the period $ 564 $ 722 $ 850 Interest cost on accumulated benefit obligation 2,294 2,303 2,768 Amortization of gain (715) (448) (182) ------- ------- ------- Net cost 2,143 2,577 3,436 Benefits paid (2,138) (2,411) (2,482) Burks Pumps acquisition -- -- 2,218 Mark Controls acquisition -- 330 -- Accrued postretirement benefit-- beginning of year 43,066 42,570 39,398 ------- ------- ------- Accrued postretirement benefit-- end of year $43,071 $43,066 $42,570 ======= ======= =======
The cost of covered benefits was assumed to increase 11.1% for 1995, and then to decrease gradually to 5.2% by 2007 and remain at that level thereafter. In 1994, the cost of covered benefits was assumed to increase 12% for 1994, and then to decrease gradually to 6% by 2007 and remain at that level thereafter. An increase in the assumed health care cost trend rate by one percentage point would increase the accumulated postretirement benefit obligation by approximately $2.8 million at December 31, 1995 and the net periodic cost by approximately $.3 million for the year. The discount rate used in determining the accumulated postretirement benefit obligation was 7.5% in 1995, 8.25% in 1994, and 7.25% in 1993. The company participates in several multi-employer insurance plans, which provide benefits to certain employees under collective bargaining agreements. Total contributions to these plans were approximately $2,602,000 in 1995, $2,320,000 in 1994, and $2,193,000 in 1993. PENSIONS The company and most of its subsidiaries have defined benefit pension plans for their employees and directors. The plans generally provide benefit payments using a formula based on length of service and final average compensation, except for some hourly employees for whom the benefits are a fixed amount per year of service. The company's policy is to fund at least the minimum amount required by the applicable regulations. The pension plan for salaried employees in Canada was changed in 1993 from a defined benefit to a defined contribution money purchase plan, resulting in a curtailment gain of approximately $3.1 million. The following table sets forth net periodic pension costs for company sponsored defined benefit plans.
(In thousands) 1995 1994 1993 Benefits earned during the period $ 8,004 $ 8,743 $ 7,305 Interest cost on projected benefit obligation 15,990 15,435 13,979 Actual return on plan assets (62,311) 6,678 (35,872) Net amortization and deferral 41,320 (27,468) 13,443 -------- -------- -------- Pension expense (income) $ 3,003 $ 3,388 $ (1,145) ======== ======== ========
22 The following table sets forth by funded status the amounts recognized in the company's balance sheet at December 31, for company sponsored defined benefit pension plans:
1995 1994 ---- ---- (In thousands) OVERFUNDED UNDERFUNDED Overfunded Underfunded ---------- ----------- --------- ----------- Actuarial present value of benefit obligation: Vested $190,472 $7,285 $168,177 $ 6,772 Non-vested 6,670 235 4,988 229 -------- ------ -------- ------- Accumulated benefit obligation 197,142 7,520 173,165 7,001 Effect of future pay increases 29,331 421 28,043 354 -------- ------ -------- ------- Projected benefit obligation 226,473 7,941 201,208 7,355 -------- ------ -------- ------- Assets and book accruals relating to such benefits: Funded assets at fair value 293,725 6,796 239,104 5,448 Book accruals, net (10,734) 892 (8,863) 1,604 282,991 7,688 230,241 7,052 Assets and book accruals greater (less) than projected benefit obligations $ 56,518 $ (253) $ 29,033 $ (303) ======== ====== ======== ======= Consisting of: Unrecognized net asset (liability) at date of adoption less amortization $ 11,801 $ (478) $ 12,072 $ (561) Unrecognized net gains (losses) 46,205 (754) 18,420 (1,269) Unrecognized prior service cost (1,488) -- (1,459) -- Adjustment required to recognize minimum liability -- 979 -- 1,527 -------- ------ -------- ------- $ 56,518 $ (253) $ 29,033 $ (303) ======== ====== ======== =======
The following rates were used to determine the projected benefit obligation:
1995 1994 1993 ---- ---- ---- U.S. Plans: Discount rate 7.50% 8.25% 7.25% Expected long-term rate of return on assets 8.75% 8.75% 8.25% Rate of compensation increase 4.75% 5.00% 4.75% Non-U.S. Plans: Discount rate 7.50%-8.25% 8.25%-8.50% 7.50%-8.25% Expected long-term rate of return on assets 8.25%-9.00% 8.25%-9.00% 8.25%-9.00% Rate of compensation increase 6.25%-6.50% 7.5% 7.5%
At December 31, 1995, substantially all plan assets are invested in listed stocks and bonds. These investments include common stock of the company which represents 4% 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 $1,724,000 in 1995, $1,533,000 in 1994, and $1,482,000 in 1993. A subsidiary of Crane, ELDEC Corporation, has a non-contributory target benefit (defined contribution) plan to provide retirement benefits for all eligible employees. The annual contribution is aimed at funding targeted retirement benefits for each eligible employee. The contributions for 1995, 1994, and 1993 were $1,899,000, $2,073,000 ($1,343,000 since acquisition), and $2,451,000, respectively. 23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The company and its subsidiaries sponsor savings and investment plans which are available to eligible employees of the company and its subsidiaries. In 1995, the company made contributions of approximately $4.2 million to the plans ($3.4 million and $2.4 million in 1994 and 1993, respectively). ACCRUED LIABILITIES (In thousands) December 31, 1995 1994 ---- ---- Employee-related expenses $ 46,281 $40,944 Insurance 17,305 16,755 Environmental 3,788 10,876 Warranty 8,485 8,213 Sales allowances 7,007 5,458 Interest 3,936 4,087 Taxes other than income 3,315 3,055 Pensions 3,777 4,023 Other 21,636 25,971 -------- -------- $115,530 $119,382 ======== ======== OTHER LIABILITIES (In thousands) December 31, 1995 1994 ---- ---- Environmental $ 11,863 $10,192 Insurance 3,337 4,346 Warranty 1,781 2,533 Employee benefits 1,057 665 Other 3,939 2,423 -------- ------- $ 21,977 $20,159 ======== ======= SHORT-TERM FINANCING As of December 31, 1995, the company had $236 million in domestic and foreign uncommitted, unsecured lines of credit of which $216 million was unused. The weighted average interest rate for short-term borrowings at December 31, 1995 and 1994 was 6.76% and 6.70%, respectively. These lines of credit are typically available for borrowings up to 364 days and are renewable at the option of the lender. Short-term obligations of $11.9 million and $58.8 million at December 31, 1995 and 1994, respectively, were classified as long-term debt since the company has entered into finance agreements that permit it to refinance short- term obligations on a long-term basis. LONG-TERM FINANCING (In thousands) December 31, 1995 1994 ---- ---- CRANE CO.: Senior debt: 8 1/2% notes due 2004 $100,000 $100,000 Original issue discount (686) (769) Deferred financing costs (562) (630) -------- -------- 98,752 98,601 -------- -------- 7 1/4% notes due 1999 150,000 150,000 Original issue discount (238) (308) Deferred financing costs (1,568) (2,039) -------- -------- 148,194 147,653 -------- -------- Various bank loans 11,900 54,400 -------- -------- TOTAL CRANE CO. 258,846 300,654 -------- -------- SUBSIDIARIES: Industrial revenue bonds 904 3,444 Capital lease obligations 2,343 2,831 Various bank loans 18,618 24,372 Other 1,153 1,260 -------- -------- TOTAL SUBSIDIARIES 23,018 31,907 -------- -------- Total long-term debt 281,864 332,561 Less current portion 771 1,272 -------- -------- Long-term debt net of current portion $281,093 $331,289 ======== ======== At December 31, 1995, the principal amounts of long-term debt repayments required for the next five years are $771,000 in 1996, $626,000 in 1997, $511,000 in 1998, $169,092,000 in 1999, and $12,320,000 in 2000. As of December 31, 1995, Crane Co. had $200 million in contractually committed lines of credit, under a long-term bank credit facility which expires in August 2000. There were no borrowings outstanding under this facility at year end 1995. Commitments under the facility are for general corporate purposes and to provide bridge financing for acquisitions. In addition, the company has other international long-term credit arrangements with banks totaling $22.9 million of which $22.5 million was outstanding at December 31, 1995. The effective interest rates at December 31, 1995 were 5.81% and 6.79% on the domestic and foreign bank loans, respectively. The long-term credit facilities contain certain financial and restrictive covenants, including limitations on indebtedness and liens. In June 1994, the company issued $150 million 7 1/4% Senior Notes due 1999. Incorporating the effects of underwriting fees, original issue discount and the cost of a treasury lock agreement, the effective cost of this financing was 7.6%. This public debt was issued under the company's $300 million shelf registration as filed with the Securities and Exchange Commission in May 1994. 24 Financial Instruments--The company periodically enters into interest rate swap agreements to manage its exposure to interest rate changes and to lower the overall cost of borrowings. All interest rate swaps are subject to market risk as interest rates fluctuate. No new interest rate swap agreements were executed in 1995 and 1994. At December 31, 1995 and 1994, the company had no interest rate swap contracts outstanding. Two outstanding agreements with notional amounts of $20 million each which converted the company's interest rate exposure from fixed to floating were terminated and recognized in 1994 at a loss of $487,000. FAIR VALUE OF FINANCIAL INSTRUMENTS The following disclosure of the estimated fair value of financial instruments was made in accordance with the requirements of SFAS No.107. The estimated fair value amounts have been determined by the company using available market information and appropriate valuation methodologies. (In thousands) December 31, 1995 1994 Estimated Estimated Carrying Fair Carrying Fair Amount Value Amount Value -------- --------- -------- --------- Assets: Investments $ 5,067 $ 5,067 $ 10,000 $ 10,000 Liabilities: Short-term debt 16,130 16,130 22,258 22,258 Long-term debt 281,093 300,313 331,289 322,059 Investments--In 1995 the company sold its shares of Mid Ocean Limited. The company purchased an equity investment in Powec, a Norwegian manufacturer. The carrying value of Powec approximates the company's interest in its underlying net assets. Short-term and long-term debt rates currently available to the company for debt with similar terms and remaining maturities are used to estimate the fair value for debt issues that are not quoted on an exchange. COMMITMENTS AND CONTINGENCIES The company leases certain facilities, vehicles and equipment under capital and operating leases with various terms. Certain leases contain renewal or purchase options. Future minimum payments, by year, and in the aggregate, under these leases with initial or remaining terms of one year or more consisted of the following at December 31, 1995: Minimum Capital Operating Sublease (In thousands) Leases Leases Income Net 1996 $ 554 $11,315 $1,065 $10,804 1997 448 9,060 717 8,791 1998 366 6,550 485 6,431 1999 215 4,994 172 5,037 2000 204 3,243 160 3,287 Thereafter 1,077 9,001 309 9,769 ------ ------- ------ ------- Total minimum lease payments 2,864 $44,163 $2,908 $44,119 ======= ====== ======= Interest (521) Present value $2,343* ====== * Includes $420 due within one year. The weighted average interest rate for capital leases is 7.54%. Rental expense for all operating leases was $16,567,000, $16,164,000, and $15,865,000 for 1995, 1994 and 1993, respectively. The cost of assets capitalized under leases is as follows at December 31: (In thousands) 1995 1994 ---- ---- Buildings and improvements $ 7,056 $ 7,671 Machinery and equipment 7,619 8,286 ------- ------- 14,675 15,957 Less accumulated depreciation 12,278 13,181 ------- ------- $ 2,397 $ 2,776 ======= ======= The company has established insurance programs to cover product and general liability losses. These programs have deductible amounts of $5 million before coverage begins, with the exception of aircraft products which have first dollar coverage. The company does not deem its deductible exposure to be material. At December 31, 1995, the company had received certain proposed notices of adjustment to federal income tax and was 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 adverse effect on the company's financial condition and results of operations. 25 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 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 $15 million at December 31, 1995, which was fully accrued. Not included in the accrual is the cost of cleaning one site for approximately $3.6 million for which a full escrow was established when the property was acquired in 1993. The company spent $10.3 million on environmental costs in 1995, of which $7.0 million was spent in settling Crane's liabilities in the San Fernando Valley Superfund sites in Burbank and Glendale, California. Crane expects to pay remediation costs of approximately $3 million in 1996. 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; however, the required remedial actions being implemented or engineered are not individually or in the aggregate expected to be material. The company has also been advised by the Environmental Protection Agency (EPA) that it is a potentially responsible party (PRP) with respect to the Roebling Steel Company Superfund site in Roebling, New Jersey previously operated by a former subsidiary, CF&I Steel Corporation. The company has advised the EPA that it was not an owner or operator of the site and has rejected all assertions of PRP status. Crane Co. is a defendant in a class action arising out of the contamination of a creek in eastern Ohio by a chemical pesticide sold under the trade name Mirex. This chemical was not manufactured or sold by Crane but was manufactured by another company, also a defendant, at a site adjacent to a Crane facility. The complaint seeks compensatory damages of $10 million and a like amount in punitive damages against Crane, and compensatory damages of $100 million and a like amount in punitive damages against the manufacturer. Crane has asserted cross-claims for contamination of its property and for indemnification against any liability to the plaintiffs against the manufacturer, its foreign parent company and the seller of the pesticide that arranged for its manufacture. The lawsuit is currently scheduled for trial in November 1996. Based on data from environmental studies available to date, the company believes that it not only has meritorious defenses to the plaintiffs' class action but also has valid claims against the other parties. Accordingly, the company believes that these actions are not likely to have a material effect on its results of operations or financial condition. Crane Co. is a defendant in a lawsuit under the False Claims Act seeking treble damages and attorneys' fees in connection with the assumption by the Pension Benefit Guarantee Corporation of the unfunded pension liabilities (allegedly $270 million) of CF&I Steel Corporation. The company believes the allegations are without merit and will be dismissed either pursuant to the company's pending motions for summary judgment or at trial, which is currently scheduled for June 1996. Accordingly, the company believes the lawsuit is not likely to have a material effect on the company's results of operations or financial condition. In January 1996, the company's subsidiary Crane Canada, Inc. was served as the defendant in an action, which is seeking class certification, alleging damages to property from water escaping from toilet tanks manufactured by Crane Canada. Crane Canada has settled past claims for property damage arising from water escaping from cracked toilet tanks on a case by case basis. At December 31, 1995 approximately 1,000 known claims were outstanding. At the present time, the company does not have sufficient information to determine whether the new legal action will have a material impact on its liabilities. Based on the historical trends for claims related to cracked toilet tanks and the experience of Crane Canada in resolving such claims, the company believes that it has established sufficient accruals and that pending and reasonably anticipated future claims are not likely to have a material effect on its results of operations or financial condition. As of December 31, 1995, Crane Co. was a defendant (among a number of defendants, typically 15 to 40) in approximately 9,500 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. Of these claims, approximately 8,500 were filed in 1995. Because of the unique factors inherent in each case and the fact that most are in preliminary stages, the company lacks sufficient information upon which judgments can be made as to their validity or ultimate disposition. Based on the limited information available to the company and its experience in the disposition of lawsuits of this type, the company believes that pending and reasonably anticipated future asbestos actions are not likely to have a material effect on its results of operations or financial condition. ACQUISITIONS, DIVESTITURES AND INVESTMENTS The company always 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 possibly dispose of operations when consistent with its overall goals and strategies. During 1995, the company completed three acquisitions at a cost of $9.4 million. In February the company, through its Barksdale subsidiary, acquired Unimess GmbH, a German-based manufacturer of a full line of solid state pressure switches and transducers, level switches and indicating systems, and flow measurement and control components for specialized instrumentation requirements in numerous industrial processes. In the fourth quarter, the company acquired Process Systems, Inc. based in Michigan. Process Systems 26 is a manufacturer of vertical turbine pumps and accessories for industrial applications. In November 1995, the company acquired Kessel PTE Ltd., a fluoropolymer plastic lined pipe manufacturer with facilities in Singapore, Malaysia and Thailand. In September, ELDEC made a 47% equity investment in Powec, a Norwegian manufacturer of power conditioning products and systems. During 1994, the company completed three acquisitions at a cost of $240 million, including debt. In May the company, through its wholly-owned subsidiary Huttig Sash & Door Company, acquired a moulding and millwork manufacturing operation in Prineville, Oregon. In April the company purchased Mark Controls Corporation, a manufacturer of automatic and manually operated valves, specialized electronic and mechanical instruments and controls, regulators, and pneumatic and electronic controllers. In March the company acquired ELDEC Corp., whose products are used worldwide on nearly every aircraft model and include: proximity switches and sensing systems, power conversion equipment, fuel flow measurement systems, data acquisition, monitoring and control equipment; flat panel displays and integrated modular systems. In 1993, the company completed five acquisitions at a cost of approximately $106 million, which included Burks Pumps and Filon. The three remaining acquisitions included two Huttig distribution businesses and the purchase of Perflow by Crane U.K., Ltd. In 1994, the company sold Modulinc, the fiber optic channel product line of ELDEC and excess ELDEC facilities for $14.3 million. In December, 1994, Huttig sold its window manufacturing business for $2.4 million. The Huttig transaction excluded real estate and receivables. During March, 1993 the company sold the precision ordnance business of its subsidiary, Unidynamics/Phoenix, Inc. for $6 million. 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. STOCK OPTIONS AND STOCK AWARD PLANS A summary of stock option transactions follows: Number of Shares 1995 1994 1993 - ---------------- ---- ---- ---- Outstanding January 1 1,505,669 1,277,674 1,215,966 Options granted 336,000 349,500 287,000 Options cancelled (47,000) (38,563) (8,500) Options exercised (396,575) (82,942) (216,792) Outstanding December 31 1,398,094 1,505,669 1,277,674 At December 31, 1995, options for 847,844 shares were exercisable and 854,447 shares were available for grant. Per share option prices ranged from $10.13 to $34.44. The company's Restricted Stock Award Plan provides for awards of common stock to key officers and employees, subject to resale restrictions. The restrictions on outstanding awards are scheduled to lapse upon the achievement of certain performance objectives or over time. In 1993, the shareholders approved an amendment to the company's Restricted Stock Award Plan, extending the expiration date from April 30, 1993 to May 30, 1998 and increasing as of May 10, 1993 the common shares available for grant to 500,000 shares. The company awarded 303,900 shares in 1995, of which 129,000 shares were awarded with restrictions based on lapse of time. As of December 31, 1995, 72,100 shares are available for future awards. Pursuant to the Non-Employee Director Restricted Stock Plan, non-employee directors received 2,320 shares of company stock as a group in 1995. Directors who are not full-time employees of the company receive the portion of their annual retainers which exceeds $15,000 in shares of common stock. The shares are issued each year after the company's annual meeting, are forfeitable if the director ceases to remain a director until the company's next annual meeting, and may not be sold for a period of five years, or until the director leaves the Board. PREFERRED SHARE PURCHASE RIGHTS In 1988, the company distributed one preferred share purchase right for each outstanding share of common stock. The preferred rights were not exercisable when granted and may only become exercisable under certain circumstances involving actual or potential acquisitions of the company's common stock by a person or affiliated persons. Depending upon the circumstances, if the rights become exercisable, the holder may be entitled to purchase shares of the company's Series A Junior Participating Preferred Stock, or shares of common stock of the acquiring person. Preferred shares purchasable upon exercise of the rights will not be redeemable. Each preferred share will be entitled to preferential rights regarding dividend and liquidation payments, voting power, and, in the event of any merger, consolidation or other transaction in which common shares are exchanged, preferential exchange rate. The rights will remain in existence until June 27, 1998, unless they are earlier terminated, exercised or redeemed. The company has authorized five million shares of $.01 par value preferred stock. ANALYSIS BY SEGMENT OF BUSINESS An analysis of sales, operating profit, assets, capital expenditures and depreciation and amortization appears on page 28 and 29. 27 ANALYSIS BY SEGMENT (In thousands) Crane Co. is a diversified manufacturer of engineered industrial products and the largest American distributor of doors, windows and millwork.
1995 1994 1993 ---------------------------------------------------------------- Amount % Amount % Amount % ---------------------------------------------------------------- Net Sales: Industry Segments: Fluid Handling $ 343,751 19 $ 309,969 18 $ 197,656 15 Aerospace 216,161 12 160,843 10 99,587 7 Engineered Materials 202,073 11 201,868 12 161,759 12 Crane Controls 131,127 7 87,973 5 35,009 3 Merchandising Systems 183,082 10 168,543 10 166,668 13 Wholesale Distribution 710,844 40 730,646 44 655,218 49 Other 11,520 1 12,501 1 14,945 1 ---------- --- ---------- --- ---------- --- 1,798,558 100 1,672,343 100 1,330,842 100 Intersegment Sales (16,248) (18,877) (20,637) ---------- ---------- ---------- $1,782,310 $1,653,466 $1,310,205 ========== ========== ========== Geographic Region: United States $1,428,495 78 $1,348,285 80 $1,031,724 77 Canada 173,312 10 161,492 10 171,576 13 Other International 208,885 12 164,224 10 135,752 10 ---------- --- ---------- --- ---------- --- 1,810,692 100 1,674,001 100 1,339,052 100 Interregional Sales (28,382) (20,535) (28,847) ---------- ---------- ---------- $1,782,310 $1,653,466 $1,310,205 ========== ========== ========== Operating Profit: Industry Segments: Fluid Handling $ 19,723 12 $ 19,062 16 $ 8,855 9 Aerospace 56,030 35 31,316 26 31,159 32 Engineered Materials 22,911 15 22,987 19 15,493 16 Crane Controls 11,322 7 4,438 4 865 1 Merchandising Systems 23,573 15 23,167 19 17,998 18 Wholesale Distribution 25,032 16 20,007 17 22,679 23 Other (629) -- (749) (1) 789 1 ---------- --- ---------- --- ---------- --- 157,962 100 120,228 100 97,838 100 ---------- ---------- ---------- Corporate (15,150) (10,347) (12,279) Intersegment Elimination 136 8 297 ---------- ---------- ---------- $142,948 $ 109,889 $ 85,856 ========== ========== ========== Geographic Region: United States $ 143,672 91 $ 114,091 95 $ 94,751 97 Canada 3,094 2 2,623 2 3,930 4 Other International 11,332 7 3,522 3 (546) (1) ---------- --- ---------- --- ---------- --- 158,098 100 120,236 100 98,135 100 Corporate (15,150) (10,347) (12,279) ---------- ---------- ---------- $142,948 $ 109,889 $ 85,856 ========== ========== ==========
See Notes to Consolidated Financial Statements 28
Crane Co. 1995 1994 1993 Amount % Amount % Amount % Assets: Industry Segments: Fluid Handling $ 261,201 27 $ 240,789 25 $174,789 26 Aerospace 166,599 18 169,303 18 59,289 9 Engineered Materials 100,579 11 101,069 11 113,326 17 Crane Controls 128,523 13 122,353 13 21,321 3 Merchandising Systems 88,936 9 87,846 9 82,396 12 Wholesale Distribution 197,528 21 222,876 23 207,716 31 Other 10,796 1 12,608 1 12,638 2 -------- --- ---------- --- -------- --- 954,162 100 956,844 100 671,475 100 Corporate 44,249 51,201 72,690 -------- ---------- -------- $998,411 $1,008,045 $744,165 ======== ========== ======== Geographic Region: United States $760,536 80 $ 781,136 82 $513,649 76 Canada 86,163 9 83,653 9 84,194 13 Other International 107,463 11 92,055 9 73,632 11 -------- --- ---------- --- -------- --- 954,162 100 956,844 100 671,475 100 Corporate 44,249 51,201 72,690 -------- ---------- -------- $998,411 $1,008,045 $744,165 ======== ========== ======== Capital Expenditures: Industry Segments: Fluid Handling $ 5,678 $ 7,825 $ 5,935 Aerospace 3,589 2,671 2,001 Engineered Materials 3,177 6,384 4,227 Crane Controls 3,174 2,043 880 Merchandising Systems 9,161 6,484 10,663 Wholesale Distribution 1,451 2,580 8,615 Other 146 112 169 Corporate 227 100 6,348 -------- ---------- -------- $26,603 $ 28,199 $ 38,838 ======== ========== ======== Geographic Region: United States $ 20,522 $ 19,176 $ 31,999 Canada 1,975 2,726 3,182 Other International 4,106 6,297 3,657 -------- ---------- -------- $26,603 $ 28,199 $ 38,838 ======== ========== ======== Depreciation and Amortization: Industry Segments: Fluid Handling $ 10,866 $ 10,029 $ 5,107 Aerospace 9,896 9,133 3,137 Engineered Materials 5,499 6,558 5,896 Crane Controls 6,760 5,199 2,325 Merchandising Systems 4,929 4,736 3,605 Wholesale Distribution 6,534 6,493 5,279 Other 493 655 694 Corporate 3,788 1,888 3,377 -------- ---------- -------- $48,765 $ 44,691 $ 29,420 ======== ========== ======== Geographic Region: United States $ 40,915 $ 37,632 $ 22,372 Canada 3,051 3,202 3,264 Other International 4,799 3,857 3,784 -------- ---------- -------- $48,765 $ 44,691 $ 29,420 ======== ========== ========
29 MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING The accompanying consolidated financial statements of Crane Co. and subsidiaries have been prepared by management in conformity with generally accepted accounting principles and, in the judgment of management, present fairly and consistently the company's financial position and results of operations and cash flows. These statements by necessity include amounts that are based on management's best estimates and judgments and give due consideration to materiality. The accounting systems and internal accounting controls of the company are designed to provide reasonable assurance that the financial records are reliable for preparing consolidated financial statements and maintaining accountability for assets and that, in all material respects, assets are safeguarded against loss from unauthorized use or disposition. Qualified personnel throughout the organization maintain and monitor these internal accounting controls on an ongoing basis. In addition, the company's internal audit department systematically reviews the adequacy and effectiveness of the controls and reports thereon. The consolidated financial statements have been audited by Deloitte & Touche LLP, independent auditors, whose report appears on this page. INDEPENDENT AUDITORS' REPORT DELOITTE & TOUCHE LLP - ----------- [LOGO] TO THE SHAREHOLDERS OF CRANE CO. We have audited the accompanying consolidated balance sheets of Crane Co. and its subsidiaries as of December 31, 1995 and 1994, 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, 1995. 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. 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/ David S. Smith D. S. Smith Vice President--Finance and Chief Financial Officer We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Crane Co. and its subsidiaries at December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995 in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP Stamford, Connecticut January 22, 1996 30 Crane Co. FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA (In thousands except per share data)
Years Ended December 31, 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- NET SALES $1,782,310 $1,653,466 $1,310,205 $1,306,977 $1,302,532 Depreciation and Amortization 48,765 44,691 29,420 28,530 28,411 OPERATING PROFIT 142,948 109,889 85,856 45,244 78,902 Interest Expense 26,913 24,171 11,396 14,464 11,540 INCOME BEFORE TAXES 121,468 91,227 79,818 38,689 72,405 PROVISION FOR INCOME TAXES (45,131) (35,294) (30,925) (14,403) (27,412) ---------- ---------- ---------- ---------- ---------- INCOME FROM OPERATIONS $ 76,337 $ 55,933 $ 48,893 $ 24,286 $ 44,993(a) ========== ========== ========== ========== ========== INCOME PER COMMON SHARE Primary $ 2.50 $ 1.86 $ 1.62 $ .79 $ 1.42(a) Fully Diluted 2.49 1.85 1.61 .78 1.41(a) CASH DIVIDENDS PER COMMON SHARE $ .75 $ .75 $ .75 $ .75 $ .75 ASSETS $ 998,411 $1,008,045 $ 744,165 $ 630,211 $ 630,237 LONG-TERM DEBT $ 281,093 $ 331,289 $ 105,557 $ 111,048 $ 83,847 ---------- ---------- ---------- ---------- ---------- (a) Income before cumulative effect of a change in accounting for postretirement benefits other than pensions of $22,341 ($.70 per share). QUARTERLY RESULTS FOR THE YEAR (In thousands except per share data) Quarter Year ----------------------------------------------------------- First Second Third Fourth ----- ------ ----- ------- 1995 Net Sales $ 432,578 $ 451,479 $ 453,344 $ 444,909 $1,782,310 Cost of Sales 323,458 332,763 336,860 323,240 1,316,321 Depreciation and Amortization 10,001 9,977 9,903 9,736 39,617 ---------- ---------- ---------- ---------- ---------- Gross Profit $ 99,119 $ 108,739 $ 106,581 $ 111,933 $ 426,372 ---------- ---------- ---------- ---------- ---------- Net Income $ 13,275 $ 20,117 $ 22,029 $ 20,916 $ 76,337 Primary Net Income Per Share $ .44 $ .66 $ .71 $ .69 $ 2.50 ---------- ---------- ---------- ---------- ---------- 1994 Net Sales $ 331,705 $ 428,729 $ 451,108 $ 441,924 $1,653,466 Cost of Sales 259,754 324,769 339,806 329,083 1,253,412 Depreciation and Amortization 6,523 9,573 10,881 10,182 37,159 ---------- ---------- ---------- ---------- ---------- Gross Profit $ 65,428 $ 94,387 $ 100,421 $ 102,659 $ 362,895 ---------- ---------- ---------- ---------- ---------- Net Income $ 7,409 $ 15,666 $ 16,002 $ 16,856 $ 55,933 Primary Net Income Per Share $ .25 $ .52 $ .53 $ .56 $ 1.86 ---------- ---------- ---------- ---------- ---------- MARKET AND DIVIDEND INFORMATION-CRANE CO. COMMON SHARES New York Stock Exchange Composite Price Per Share Dividends Per Share 1995 1994 1995 1994 ---------------------------------------------------------------------------------------- Quarter HIGH LOW High Low - ------- ---- --- ---- ---- First $ 31 $ 25 7/8 $ 29 1/2 $ 24 3/4 $.1875 $ .1875 Second 38 5/8 30 1/8 27 1/4 24 1/8 .1875 .1875 Third 39 1/2 30 27 1/4 24 1/4 .1875 .1875 Fourth 38 3/8 32 3/4 27 7/8 24 7/8 .1875 .1875 $.75 $ .75
At December 31, 1995 there were approximately 6,000 holders of record of Crane Co. common stock. See Notes to Consolidated Financial Statements 31 SHAREHOLDER INFORMATION FORM 10-K Copies of Crane Co.'s report on Form 10-K for 1995 as filed with the Securities and Exchange Commission are available upon written request from the Secretary's Office at Crane Co., 100 First Stamford Place, Stamford, CT 06902 ANNUAL MEETING The Crane Co. annual meeting of shareholders will be held at 10:00 a.m. on Monday, May 6, 1996 at the Sheraton Stamford Hotel, One First Stamford Place, Stamford, CT 06902 in the Rainbow Meeting Room. STOCK LISTING Crane Co. common stock is traded on the New York Stock Exchange, listed under the symbol "CR". AUDITORS Deloitte & Touche LLP Stamford Harbor Park Stamford, CT 06902 EQUAL EMPLOYMENT OPPORTUNITY POLICY Crane Co. is an equal opportunity employer. It is the policy of the company to recruit, hire, promote and transfer to all job classifications without regard to race, color, religion, sex, age, disability or national origin. ENVIRONMENT, HEALTH & SAFETY POLICY Crane Co. is committed to protecting the environment and will strive to protect the biosphere by taking responsibility to prevent serious or irreversible environmental degradation through efficient operations and activities. Crane Co. recognizes environmental management among its highest priorities throughout the corporation, and has established policies and programs which are integral and essential elements of the business plan of each of the business units. Crane Co. will strive to minimize environmental, health and safety risks to all its employees, and to public health in the communities in which it operates, by utilizing safe technologies, training programs and emergency preparedness. Crane Co. will seek to continually improve the development, design and operation of its facilities through the efficient use of energy and the sustainable use of renewable resources, minimizing adverse environmental impact through waste reduction, recycling and responsible waste disposal. Crane Co. will manufacture and produce products or services that minimize environmental impact and that are safe when properly used and maintained, and will promote the adoption of these principles by its contractors and suppliers. Crane Co. will promptly communicate to all affected persons the known hazards and safeguards associated with its manufacturing processes and activities while utilizing good science and research to define and efficiently manage all significant risks. Crane Co. has committed management resources to these goals by adopting the above policies, and by establishing the position of Vice President-Environment, Health and Safety, which is responsible for assuring compliance, measuring environmental performance and conducting regular environmental audits in order to provide appropriate information to the Crane Co. management team and to regulatory authorities. STOCK TRANSFER AGENT AND REGISTRAR OF STOCK FIRST CHICAGO TRUST COMPANY OF NEW YORK Customer Service: 1-201-324-1225 Non-Postal Deliveries 14 Wall Street; Ste. 4680 New York, NY 10005 Dividend Reinvestment & Optional Payments P.O. Box 13531 Newark, NJ 07188-0001 General Correspondence & Changes of Address P.O. Box 2500 Jersey City, NJ 07303-2500 Transfer of Stock Certificates P.O. Box 2506 Jersey City, NJ 07303-2506 BOND TRUSTEE AND DISBURSING AGENT THE BANK OF NEW YORK Corporate Trust Department: 1-800-438-5473 101 Barclay Street New York, NY 10286 DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN Crane offers shareholders the opportunity to participate in a Dividend Reinvestment and Stock Purchase Plan. The plan provides two convenient methods for increasing your investment in Crane Co. common shares, without paying fees and commissions. DIVIDEND REINVESTMENT: for all or part of your dividends on Crane common shares; and VOLUNTARY CASH PAYMENTS: of any amount from $10 to a maximum of $5,000 a month. Under terms of the Plan, First Chicago Trust Company of New York will act as agent for shareholders interested in purchasing additional Crane common shares automatically, on a regular basis. The details of this plan and its benefits to you as a Crane shareholder are described in a brochure available by writing to: FIRST CHICAGO TRUST COMPANY OF NEW YORK Dividend Reinvestment Plan Crane Co. Post Office Box 2598 Jersey City, NJ 07303-2598 32 DIRECTORS MONE ANATHAN, III [2] President, Filene's Basement Corp. Retailer E. THAYER BIGELOW, JR. [1,2] President and Chief Executive Officer Time Warner Cable Programming Inc. ROBERT S. EVANS [1] Chairman and Chief Executive Officer of the Company RICHARD S. FORTE [2] President, Forte Cashmere Company, Inc. Importer and Manufacturer DORSEY R. GARDNER [2,3] President, Kelso Management Co., Inc. Investment Management JEAN GAULIN [3] Chairman and Chief Executive Officer Ultramar Corporation DWIGHT C. MINTON [1,3] Chairman, Church & Dwight Co., Inc. Manufacturer of Consumer and Specialty Products CHARLES J. QUEENAN, JR. [2] Partner, Kirkpatrick & Lockhart LLP Attorneys at Law BORIS YAVITZ [1,3] Dean Emeritus, Columbia University Graduate School of Business CORPORATE OFFICERS ROBERT S. EVANS Chairman and Chief Executive Officer L. HILL CLARK President and Chief Operating Officer ROBERT J. MULLER, JR. Executive Vice President GIL A. DICKOFF Treasurer AUGUSTUS I. duPONT Vice President, General Counsel and Secretary ANTHONY D. PANTALEONI Vice President, Environment, Health and Safety RICHARD B. PHILLIPS Vice President, Human Resources MICHAEL L. RAITHEL Controller DAVID S. SMITH Vice President, Finance and Chief Financial Officer [1] Member of the Executive Committee [2] Member of the Audit Committee [3] Member of the Organization and Compensation Committee [Logo] CRANE(R) CRANE CO. EXECUTIVE OFFICES 100 First Stamford Place Stamford, CT 06902 (203) 363-7300 EX-21 4 SUBSIDIARIES OF REGISTRANT EXHIBIT 21 CRANE CO. EXHIBIT D TO FORM 10-K ANNUAL REPORT FOR THE YEAR ENDED DECEMBER 31, 1995 SUBSIDIARIES OF REGISTRANT The following is a list of active subsidiaries of the registrant and their jurisdictions of incorporation. All of these subsidiaries are wholly- owned, directly or indirectly, and all are included in the consolidated financial statements. The names of several other subsidiaries have been omitted as they would not, if considered in the aggregate as a single subsidiary, constitute a significant subsidiary. Subsidiaries of subsidiaries are indicated by indentation. Crane Australia Pty., Limited Australia Crane Canada Inc. Canada Crane Limited Great Britain Crane Pumps & Systems, Inc. Delaware Dyrotech Industries, Inc. Delaware ELDEC Corporation Delaware Huttig Sash & Door Company Delaware Kemlite Company, Inc. Delaware Mark Controls Corporation Delaware Barksdale GmbH Germany Powers Process Controls Limited Canada Westad Industri A.S. Norway UniDynamics Corporation Delaware Crane, GmbH Germany National Rejectors, Inc. GmbH Germany Ferguson Machine Company, S.A. Belgium Unidynamics/St. Louis, Inc. Delaware Unidynamics/Phoenix, Inc. Delaware EX-23 5 AUDITORS' CONSENT EXHIBIT E INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement No. 33- 44688 on Form S-8, Post-Effective Amendment No. 2 to Registration Statement No. 33-18251 on Form S-8, Registration Statement No. 33-22700 on Form S-8 and Post- Effective Amendment No. 7 to Registration Statement No. 33-22904 on Form S-8 of our reports dated January 22, 1996, appearing in and incorporated by reference in this Annual Report on Form 10-K of Crane Co. for the year ended December 31, 1995. /s/ Deloitte & Touche LLP Stamford, Connecticut March 18, 1996 -----END PRIVACY-ENHANCED MESSAGE-----