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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(x) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
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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
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CRANE CO.
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(Exact name of registrant as specified in its charter)
Delaware 13-1952290
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No)
100 First Stamford Place, Stamford, CT 06902
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 363-7300
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
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Common Stock, par value $1.00 New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
8 1/2% senior notes due March 2004
6 3/4% senior notes due October 2006
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if the disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ( )
Based on the average stock price of $19.41 on January 31, 2000 the aggregate
market value of the voting stock held by nonaffiliates of the registrant was
$962,788,784.
The number of shares outstanding of the registrant's common stock, $1.00 par
value was 61,974,291 at January 31, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Portions of the annual report to shareholders for the year ended December 31,
1999 and portions of the proxy statement for the annual shareholders meeting to
be held on April 10, 2000 are incorporated by reference into Parts I, II, III
and IV of this Form10-K Annual Report.
PART I
Item 1. Business
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Crane Co. ("Crane" or the "Company") is a diversified manufacturer of
engineered industrial products. Founded in 1855, Crane employs over 9,000 people
in North America, Europe, Asia and Australia.
STRATEGY
The company's strategy is to grow the earnings of niche businesses with
high market share, build an aggressive and committed management team whose
interests are directly aligned to those of the shareholders, and maintain a
focused, efficient corporate structure.
ACQUISITIONS
In the past five years, the company has completed 14 acquisitions. In
October 1999, the company acquired Stentorfield, Ltd., based in Chippenham,
England, for $33 million. Stentorfield is a premier designer and manufacturer of
hot and cold beverage vending machines, serving the U.K. and European market
with a broad line of full size and tabletop products, for the hotel, restaurant,
office coffee service and vending industries. Stentorfield is known in the
industry to provide high quality, reliable and easily serviced products and
excellent customer service. This business was integrated with Crane's National
Vendors business, which is the leading North American designer and manufacturer
of full line vending machines, for snack, food and beverage. The acquisition
provides the means for National Vendors to satisfy the growing U.K. and European
demand for a broader "one-stop" product offering, consisting of Stentorfield's
drinks machines and National Vendors' snack and food machines.
During 1998 the company completed four acquisitions at a total cost of $178
million. In May, the company acquired Environmental Products USA, Inc. This
business manufactures membrane-based water treatment systems for industrial,
commercial and institutional markets. In August, the company acquired Sequentia
Holdings, Inc., a manufacturer of fiberglass-reinforced plastic panels for the
construction and building products markets. Sequentia complements the company's
Kemlite subsidiary, which provides fiberglass-reinforced plastic panels for the
transportation and recreational vehicle markets. In September, the company
acquired Liberty Technologies, Inc. which develops, manufactures, markets and
sells valve, motor, engine and compressor condition monitoring products and
related services to the nuclear power generation and industrial process markets
worldwide. Liberty complements the company's nuclear valve business which
provides valves, valve diagnostic equipment and related services to the nuclear
power industry, and its Dynalco Controls business, which provides sensors,
instrumentation, control products and automation systems for use in industrial
engine applications. Also in September, the company acquired the Plastic-Lined
Piping Products ("PLPP") division of The Dow Chemical Company. PLPP was
integrated with the company's Resistoflex division, which supplies lined pipe
and valves to the chemical process and industrial markets.
During 1997, the company completed four acquisitions at a total cost of $70
million, including assumed debt. In March, the company acquired the
transportation products business of Sequentia, Incorporated. This business,
which produces fiberglass-reinforced plastic panels for the truck body, trailer
and container market, has been integrated with the company's Kemlite subsidiary.
Also in March, the company acquired Polyvend Inc., a manufacturer of snack and
food vending machines. Polyvend was completely integrated into Crane's National
Vendors division significantly expanding its sales distribution channels. In
April, the company acquired the Nuclear Valve Business of ITI MOVATS from
Westinghouse. MOVATS is a leading supplier of valve diagnostic equipment and
valve services to the commercial nuclear power industry. In December the company
acquired certain operations and product lines of Stockham Valves & Fittings,
Inc. The acquired product lines and related manufacturing operations have been
integrated into the company's engineered valve business and its commercial
bronze and iron valve business.
2
PART I
Item 1. Business (continued)
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During 1996, the company acquired two companies. In mid-October, the
company acquired Interpoint Corporation in a tax-free merger in which the
company issued 1,094,312 shares of Crane common stock and assumed $26 million in
debt. Interpoint is a leader in the design and manufacture of standard and
custom miniature DC-to-DC power converters with applications in aerospace and
medical technology industries. In late October the company acquired Grenson
Electronics Ltd. of Daventry, England. Grenson Electronics produces low voltage
power conversion electronics for aerospace, defense and industrial markets.
During 1995, the company completed three acquisitions at a total cost of
$9.4 million. In February the company, through its Barksdale Control Products
GmbH subsidiary, acquired Unimess GmbH, a German-based manufacturer of solid
state pressure switches and transducers, level switches and indicating systems,
and flow measurement and control components for specialized instrumentation. In
the fourth quarter, the company, through its Crane Pumps & Systems subsidiary,
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 and
Thailand.
DIVESTITURES
In the past five years, the company has divested six businesses. In April
1999, the company sold Southwest Foundry, acquired as part of the Stockham
Valves and Fittings, Inc. transaction, for $.4 million. In December 1999, the
company sold its Crane Defense Systems business for $6.4 million in cash and a
$.8 million note. In 1998, the company sold two foundry operations acquired as
part of the Stockham Valves and Fittings Inc. transaction. Accu-Cast, Inc. in
Chattanooga, TN and the Aliceville Foundry in Aliceville, AL were sold for a
total of $4.3 million. In 1997, the company sold its Valve Systems and Controls
division for $7.5 million in cash and $1.5 million in preferred stock. In March
of 1996, the company sold Empire Foundry.
DISCONTINUED OPERATIONS
On December 6, 1999, the company's Board of Directors approved the spin-off of
its Huttig Building Products ("Huttig") subsidiary effective December 16, 1999,
to shareholders of record as of December 8, 1999. Huttig common shares were
distributed on a basis of one share of Huttig for every 4.5 shares of Crane Co.
common stock. Prior to the spin-off, Huttig repaid an intercompany loan of $68
million to the company, which the company used to pay down debt. The Wholesale
segment was discontinued when Huttig was spun off.
LONG-TERM FINANCING
In September 1998 the company sold $100,000,000 of 6 3/4% notes that will
mature on October 1, 2006. During April 1992 the company sold $100,000,000 8
1/2% notes that will mature on March 15, 2004.
BUSINESS SEGMENTS
See pages 27 and 28 of the Annual Report to Shareholders for year ended
December 31, 1999 for sales, operating profit and assets employed of each
business segment.
3
PART I
Item 1. Business (continued)
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ENGINEERED MATERIALS
The Engineered Materials segment consists of five businesses: Kemlite,
CorTec, Resistoflex, Polyflon and Crane Plumbing.
Kemlite manufactures fiberglass-reinforced plastic panels for use
principally by the transportation industry in refrigeration and dry van truck
trailers and recreational vehicles. Kemlite products are also sold to the
commercial construction industry for food processing, fast food restaurant and
supermarket applications, to institutions where fire rated materials with low
smoke generation and minimum toxicity are required and to residential
construction. Kemlite sells its products directly to the truck trailer and
recreational vehicle manufacturers. Sequentia manufactures fiberglass-reinforced
plastic panels for the construction and building products markets. Kemlite uses
distributors to serve its commercial construction market and some segments of
the recreational vehicle market. Sequentia's Grand Junction, Tennessee and
Houston, Texas plants were added to Kemlite's plants in Joliet, Illinois and
Jonesboro, Arkansas.
CorTec manufactures fiberglass-reinforced laminated panels serving the
truck and truck trailer segment of the transportation industry. CorTec markets
its products directly to the truck and truck trailer manufacturers.
Resistoflex is engaged in the design, manufacture and sale of corrosion-
resistant, plastic-lined steel pipes, fittings, tanks, valves, expansion joints
and hose used primarily by the pharmaceutical, chemical processing, pulp and
paper, ultra pure water and waste management industries. It also manufactures
high-performance, separable fittings for operating pressures to 8,000 PSI used
primarily in the aerospace industry. Resistoflex sells its industrial products
through distributors who provide stocking and fabrication services to industrial
users in the United States. Its aerospace products are sold directly to the
aerospace industry. Resistoflex also manufactures plastic-lined pipe products at
its Singapore plant serving the Asian chemical processing and the Asian
pharmaceutical industries.
Polyflon manufactures microwave laminates, high voltage RF capacitors,
radomes and circuit processing for the wireless communication, magnetic
resonance imaging, microwave and radar system manufacturers.
Crane Plumbing manufactures plumbing fixtures in Canada. Its products are
sold through distributors in Canada and it has a large share of the Canadian
plumbing fixtures market.
This group had assets of $250.0 million at December 31, 1999 and employed
1,700 people. Order backlog at year-end 1999 was $24.7 million.
4
PART I (continued)
Item 1. Business (continued)
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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 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 to
customers in the United States and Europe by company sales and marketing
personnel as well as distributors, and in other international markets through
independent distributors. In October 1999, the company acquired Stentorfield,
Ltd., based in Chippenham, England. Stentorfield is a premier designer and
manufacturer of hot and cold beverage vending machines, serving the U.K. and
European market with a broad line of full size and tabletop products, for the
hotel, restaurant, office coffee service and vending industries. Stentorfield is
known in the industry to provide high quality, reliable and easily serviced
products and excellent customer service. This business was integrated with
Crane's National Vendors business, which is the leading North American designer
and manufacturer of full line vending machines, for snack, food and beverage.
The acquisition provides the means for National Vendors to satisfy the growing
U.K. and European demand for a broader "one-stop" product offering, consisting
of Stentorfield's drinks machines and National Vendors' snack and food machines.
Merchandising Systems employs 1,350 people and had assets of $150.2 million
at year-end 1999. Order backlog totaled $18.3 million at December 31, 1999.
AEROSPACE
The Aerospace segment consists of ELDEC, Hydro-Aire, Lear Romec and
Interpoint.
ELDEC designs, manufactures and markets custom position indication and
control systems, proximity sensors, pressure sensors, true mass fuel flowmeters
and power conversion systems for the commercial, 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 and telecommunication industry. ELDEC has two
international facilities, one in England and one in France.
ELDEC also has a 45% equity investment in Powec A/S, a Norwegian
manufacturer of power conditioning products and systems for the commercial
wireless telecommunications market, whose products are complementary to the
products and complex power systems engineering capabilities at ELDEC.
Hydro-Aire designs, manufactures and sells aircraft brake control and anti-
skid systems, including electro-hydraulic servo valves and manifolds, embedded
software and rugged electronic controls, hydraulic control valves, landing gear
sensors and fuel pumps as original equipment for the commercial transport,
business and commuter, military, government and general aviation aerospace
markets. In addition, Hydro-Aire designs and manufactures systems similar to
those above for the retrofit of aircraft with improved systems and manufactures
replacement parts for systems installed as original equipment by the aircraft
manufacturer. All of these products are largely proprietary to Hydro-Aire and,
to some extent, are custom designed to the requirements and specifications of
the aircraft manufacturer or program contractor. These systems and replacement
parts are sold directly to aircraft manufacturers, airlines, governments, and
aircraft maintenance and overhaul companies.
5
PART I (continued)
Item 1. Business (continued)
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Lear Romec designs, manufactures and sells lubrication and fuel pumps for
aircraft, aircraft engines and radar cooling systems for the commercial and
military aerospace industries. Lear Romec has a leading share of the non-
captive market for turbine engine lube and scavenge oil pumps. Lear Romec also
manufactures fuel boost and transfer pumps for commuter and business aircraft.
Interpoint designs, manufactures and sells standard and custom miniature
(hybrid) DC-to-DC power converters and custom miniature (hybrid) electronic
circuits for applications in commercial, space and military aerospace industries
and in the medical technology industry. Interpoint has one international
facility in Taiwan.
The group employs 2,100 people and had assets of $269.2 million at year-
end. The order backlog totaled $232.6 million at December 31, 1999.
FLUID HANDLING
The Fluid Handling segment consists of Engineered Valves, Commercial
Valves, Valve Services, Crane Supply and pump and water treatment businesses.
The Crane Engineered and Commercial valve businesses, with four manufacturing
facilities in North America, as well as operations in the United Kingdom,
Australia, Norway, China and Indonesia, sell a wide variety of commodity and
special purpose valves and fluid control products for the chemical and
hydrocarbon processing, power generation, marine, general industrial and
commercial construction industries. Products are sold under the Crane, Jenkins,
Pacific, Westad, Flowseal, Center Line, Stockham, Triangle and Duo-Check brands.
The company's Valve Service business, with two manufacturing facilities in North
America, provides valves, valve diagnostic equipment and related services to the
nuclear power, hydrocarbon, chemical processing and power generation industries.
Crane Pumps has eight manufacturing facilities in the United States. Pumps are
manufactured under the Deming, Weinman, Chempump, Burks, Chem/Meter, Barnes,
Sellers 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 manufacturing facilities in
Pennsylvania and Florida and serves the water and wastewater treatment market.
Its products are sold under the Cochrane and Environmental Products names. Crane
Supply, a distributor of plumbing supplies, valves and piping in Canada,
maintains thirty-five branches throughout Canada and distributes Crane
manufactured products in that country. Crane Supply also distributes products
that are both complementary to and competitive with Crane's own manufactured
products.
This group employs over 3,000 people and had assets of $330.5 million at
December 31, 1999. Fluid Handling order backlog totaled $79.5 million.
Products in this group are sold directly to end users through Crane's sales
organization and through independent distributors and manufacturers
representatives.
6
PART I (continued)
Item 1. Business (continued)
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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.
Barksdale manufactures solid state and electromechanical pressure switches
and transducers, level switches and continuous level indicators, temperature
switches, and directional control valves that serve a broad range of commercial
and industrial applications. It has manufacturing and marketing facilities in
the United States and Germany.
Powers Process Controls designs, manufactures and markets water mixing and
thermal shock protection shower systems, commercial and residential plumbing
brass, correctional water controllers, process controllers and instrumentation,
process control valves and temperature regulators for industrial applications
and the commercial and institutional construction industry.
Dynalco Controls designs and manufactures rotational speed sensors,
temperature and pressure instruments and monitors for rugged environments,
microprocessor based engine and mechanism controls. Dynalco's products are used
worldwide by industries in a variety of applications, including stationary
natural gas engines, power generation, oil and gas production and transmissions,
and agriculture equipment.
Azonix manufactures operator interfaces and measurement and control systems
for hazardous and harsh applications, intelligent data acquisition products,
high-precision thermometers and calibrators for the oil and gas, petrochemical,
chemical, pharmaceutical and metal processing industries.
Ferguson designs and manufactures in the United States and through Ferguson
Machine Co. S.A. in Europe, precision index and transfer systems for use on and
with machines that perform automatic forming, assembly, metal cutting, testing
and inspection operations. Products include mechanical and electronic index
drives, pick-and-place robots, in line transfer machines, rotary tables, press
feeds and custom cams.
The products in this segment are sold directly to end users, and
engineering contractors through the company's own sales forces and cooperatively
with sales representatives, stocking specialists and industrial distributors.
Crane Controls had assets of $129.2 million at December 31, 1999, and
employs 900 people. On December 31, 1999, Crane Controls had a backlog of $28.3
million.
7
PART I (continued)
Item 1. Business (continued)
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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 the Canadian operations. Net sales in Canada and
assets related to Canadian operations were 13.19% and 7.85% of the respective
1999 consolidated amounts.
The company's engineering and product development activities are directed
primarily toward improvement of existing products and adaptation of existing
products to particular customer requirements. While the company owns numerous
patents and licenses, none are of such importance that termination would
materially affect its business. Product development and engineering costs
totaled approximately $58.9 million in 1999, $70.9 million in 1998, and
$56.3million in 1997. Included in these amounts were approximately $7.4 million,
$15.8 million and $9.6 million received by the company in 1999, 1998 and 1997,
respectively, for customer sponsored research and development.
The company is not dependent on any single customer nor are there any
issues at this time regarding available raw materials for inventory.
Costs of compliance with federal, state and local laws and regulations
involving the discharge of materials into the environment or otherwise relating
to the protection of the environment are not expected to have a material effect
upon the company's capital expenditures, earnings or competitive position.
8
PART I (continued)
Item 1. Business (continued)
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FORWARD LOOKING STATEMENTS
--------------------------
Throughout the Annual Report to Shareholders, particularly in the Letter to
Shareholders and Management's Discussion and Analysis of Operations, the company
makes numerous statements about expectations of future performance and market
trends, and statements about plans and objectives and other matters, which
because they are not historical fact may constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
In addition, the company and its representatives may from time to time make
written or oral forward-looking statements, including statements contained in
the company's filings with the Securities and Exchange Commission and in its
reports to shareholders, which can be identified by the use of forward-looking
terminology such as "believes", "contemplates", "expects", "may", "will",
"could", "should", "would" or "anticipates" or the negative thereof or
comparable terminology.
All forward-looking statements speak only as of the date on which such
statements are made and involve risk and uncertainties that exist in the
company's operations and business environment and are not guarantees of future
performance. The company assumes no obligation to update any of these forward-
looking statements, whether as a result of new information or future events. As
a responsibility to our investors, the company will make reasonable efforts at
timely disclosure of future facts and circumstances which may affect such
statements.
Because the company wishes to take advantage of the "safe harbor" provision
of the Private Securities Litigation Reform Act of 1995, readers are cautioned
to consider the following important risk factors that could affect the company's
businesses and cause actual results to differ materially from those projected.
General
A substantial portion of the sales of the company's business segments are
concentrated in industries which are cyclical in nature. Because of the cyclical
nature of these businesses, their results are subject to fluctuations in
domestic and international economies, as well as to currency fluctuations and
unforeseen inflationary pressures. Reductions in the business levels of these
industries would impact negatively on the sales and profitability of the
affected business segments.
While the company is a principal competitor in most of its markets, all of
its markets are highly competitive. The company's competitors in many of its
business segments can be expected in the future to improve technologies, reduce
costs and develop and introduce new products, and the ability of the company's
business segments to achieve similar advances will be important to their
competitive positions. Competitive pressures, including those discussed above,
could cause one or more of the company's business segments to lose market share
or could result in significant price erosion, either of which would have an
adverse effect on the company's results of operations.
The company's acquisition program entails the potential risks inherent in
assessing the value, strengths, weaknesses, contingent or other liabilities and
potential profitability of acquisition candidates and in integrating the
operations of acquired companies. There can be no assurance that suitable
acquisition opportunities will be available in the future, that the company will
continue to acquire businesses or that any business acquired will be integrated
successfully or prove profitable.
9
PART I (continued)
Item 1. Business (continued)
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Forward Looking Statements (continued)
- --------------------------
Net sales and assets related to operations outside the United States were
34.8% and 21.9% of the respective 1999 consolidated amount. Such operations and
transactions entail the risks associated with conducting business
internationally, including the risk of currency fluctuations, slower payment of
invoices, adverse trade regulations and possible social and economic
instability. While the full impact of this economic instability cannot be
predicted, it could have a material adverse effect on the company's revenues and
profitability.
Certain of the company's business segments are dependent upon highly
qualified personnel, and the company generally is dependent upon the continued
efforts of key management employees. Particularly in light of the current tight
labor market, the company's prospects would be adversely affected by an
inability to retain its key personnel.
New factors emerge from time to time, and it is not possible for management
to predict all of such factors. Further, management cannot assess the impact of
each such factor on the business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements.
The "Year 2000" issue concerned the potential exposures related to the
automated generation of business and financial misinformation resulting from the
application of computer programs which have been written using two digits,
rather than four, to define the applicable year of business transactions.
Suppliers, customers and creditors of the company also faced Year 2000 issues.
The discussion of the Impact of the Year 2000 contained on Page 34 of the
company's 1999 Annual Report under Management's Discussion and Analysis of
Operations is incorporated herein by reference.
Engineered Materials
In the Engineered Materials segment, sales and profits could fall if there
were a decline in demand for truck trailers, recreational vehicles or building
products, for which Crane companies produce fiberglass-reinforced panels.
Profits could be squeezed as well by unanticipated increases in resin and
fiberglass material costs, by unforeseen fluctuations in the Canadian dollar,
and by any inability on the part of Crane's companies to maintain their position
in product cost and functionality against competing materials.
Merchandising Systems
Results at Crane's U.S.-based vending machine business could be reduced by
delays in launching or supplying new products or an inability to achieve new
product sales objectives. Results at Crane's Germany-based coin validation
machine business could be affected by changes in demand stemming from the advent
of the Euro, the planned new European currency, as well as by unforeseen
fluctuations in the value of the Deutschemark versus the U.S. dollar.
10
PART I (continued)
Item 1. Business (continued)
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Forward Looking Statements (continued)
- --------------------------
Aerospace
A significant fall-off in demand for air travel or a decline in airline
profitability generally could result in reduced aircraft orders, and could also
cause the airlines to scale back their purchases of repair parts from Crane
companies. The companies could also be impacted if major aircraft manufacturers
encountered production problems, or if pricing pressure from aircraft customers
caused the manufacturers to press their suppliers to lower prices. Sales and
profits could face erosion if pricing pressure from competitors increased, if
planned new products were delayed, if finding new aerospace-qualified suppliers
grew more difficult, or if required technical personnel became harder to hire
and retain. Aerospace segment results could be below expectations if Asia's
economic problems lead to a further decline in aircraft orders, particularly
since the new, long-range Boeing aircraft favored for many Asian routes contain
a higher value of Crane-supplied equipment than other aircraft from Boeing and
other manufacturers.
Fluid Handling
Crane's companies could face increased price competition from larger
competitors. Further economic turmoil in Asia could reduce sales and profits,
particularly if projects for which Crane companies are suppliers or bidders are
cancelled or delayed, or if the companies' ability to source product from
international sources is impeded. At Crane's Canadian distribution operation,
reported results in U.S. dollar terms could be eroded by an unanticipated
weakening of Canada's currency.
Controls
A number of factors could affect the Controls segment's results. Lower
sales and earnings could result if Crane's companies can not maintain their cost
competitiveness, encounter delays in introducing new products, or fail to
achieve their new product sales objectives. Results could decline because of an
unanticipated decline in demand for Crane products from the industrial
machinery, oil and gas, and heavy equipment industries, or from unforeseen
product obsolescence.
11
PART I (continued)
Item 2. Properties
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TOTAL MANUFACTURING FACILITIES NUMBER AREA
------------------------------ ------ ----
Fluid Handling
United States 16 1,401,000 sq. ft.
Canada 2 140,000 sq. ft.
International 9 1,251,000 sq. ft.
Aerospace
United States 6 634,000 sq. ft.
International 3 40,000 sq. ft.
Engineered Materials
United States 10 1,235,000 sq. ft.
Canada 3 636,000 sq. ft.
International 1 10,000 sq. ft.
Crane Controls
United States 6 407,000 sq. ft.
International 2 63,000 sq. ft.
Merchandising Systems
United States 1 463,000 sq. ft.
Other International 2 109,000 sq. ft.
Leased Leases
Manufacturing Expiring
Facilities Through Number Area
---------- ---------- ------ ----
United States 2009 11 536,000 sq. ft.
Canada 2000 1 13,000 sq. ft.
Other International 2007 6 139,000 sq. ft.
Other Facilities
----------------
Fluid Handling operates six valve service centers in the United States, of which
three are owned, and three distribution centers in the United States. This
segment operates internationally thirty-nine distribution and three service
centers.
Crane Controls operates one distribution center internationally.
Merchandising Systems operates eight distribution centers in the United States
and seven internationally.
Engineered Materials operates eight distribution centers in the United States,
of which one is owned, and two internationally.
In the opinion of management, these properties have been well maintained, are in
sound operating condition, and contain all necessary equipment and facilities
for their intended purposes.
12
PART I (continued)
Item 3. Legal Proceedings
Neither the company, nor any subsidiary of the company has become a party
to, nor has any of their property become the subject of, any material legal
proceedings, other than ordinary routine litigation incidental to their
businesses.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of 1999.
13
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 55 1974
Executive Officer Executive Officer of the company
since 1984 and previously
President of the company
Eric C. Fast President and President and Chief Operating 50 1999
Chief Operating Officer, previously Co-head of Global
Officer Investment Banking of Salomon Smith
Barney and a Managing Director of that
firm
Augustus I. duPont Vice President, Vice President and General 48 1996
General Counsel Counsel and Secretary of
and Secretary the company, previously Vice
President, General Counsel and
Secretary of Reeves Industries, Inc.,*
a manufacturer of apparel textiles
and industrial coated fabrics, from
May 1994 to December 1995
Bradley L. Ellis Vice President- Vice President - Chief 31 1997
Chief Information Information Officer of the
Officer company since July 1997, previously
with the Business Systems consulting
group of Arthur Andersen LLP, an
international provider of auditing and
business consulting services
John R. Packard Vice President- Vice President- Human 45 1999
Human Resources Resources of the company since
January 1999, previously Human
Resources Director for Fortune
Brands, Inc., a diversified consumer
products company
Anthony D. Pantaleoni Vice President- Vice President - Environment, 45 1989
Environment, Health & Safety of the company
Health & Safety
Michael L. Raithel (1) Vice President- Vice President - Finance 52 1985
Finance and Chief and Chief Financial Officer
Financial Officer and Controller of the company,
previously Vice President - Controller
of the company
(1) Effective February 18, 2000
14
PART I (continued)
EXECUTIVE OFFICERS OF THE REGISTRANT(continued)
Officer
Name Position Business Experience Age Since
- ------------------------ -------- ------------------- --- -------
Thomas M. Noonan Vice President- Vice President - Taxes since 45 1999
Taxes September 1999, previously Director
of Taxes of the company from March
1996 to September 1999, previously
Director of Taxes and Tax Counsel,
Loctite Corporation, a manufacturer of
sealants, adhesives and coatings
Gil A. Dickoff Treasurer Treasurer of the company, 38 1992
previously Assistant Treasurer
of the company
Certain Proceedings
- -------------------
* Reeves Industries, Inc., a corporation which Mr.duPont served as Vice
President, General Counsel and Secretary from May 1994 to December 1995,
filed a petition and Plan of Reorganization for a consensual debt
restructuring under Chapter 11 of the United States Bankruptcy Code on
November 21, 1997.
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters.
The information required by Item 5 is hereby incorporated by reference to
Pages 35 through 37 of the 1999 Annual Report to Shareholders.
Item 6. Selected Financial Data.
The information required by Item 6 is hereby incorporated by reference to
Pages 35 of the 1999 Annual Report to Shareholders.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The information required by Item 7 is hereby incorporated by reference to
Pages 6 through 14 of the 1999 Annual Report to Shareholders.
Item 7A. Quantitative and Qualitative Disclosures about Market Risks.
The information required by Item 7A is hereby incorporated by reference to
Page 34 of the 1999 Annual Report to Shareholders.
Item 8. Financial Statements and Supplementary Data.
The information required by Item 8 is hereby incorporated by reference to
Pages 15 through 35 of the 1999 Annual Report to Shareholders.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by Item 10 is incorporated by reference to the
definitive proxy statement dated February 28, 2000, which the company has filed
with the Commission pursuant to Regulation l4A except that such information with
respect to Executive Officers of the Registrant is included, pursuant to
Instruction 3, paragraph (b) of Item 401 of Regulation S-K, under Part I.
15
PART III (continued)
Item 11. Executive Compensation
The information required by Item 11 is incorporated by reference to the
definitive proxy statement dated February 28, 2000, which the company has filed
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 dated February 28, 2000, which the company has filed
with the Commission pursuant to Regulation 14A.
Item 13. Certain Relationships and Related Transactions
The information required by Item 13 is incorporated by reference to the
definitive proxy statement dated February 28, 2000, which the company has filed
with the Commission pursuant to Regulation 14A.
PART IV
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K
(a)(1) The consolidated balance sheets of Crane Co. and subsidiaries as of
December 31, 1999 and 1998 and the related consolidated statements of
income, changes in common shareholders' equity and cash flows for the
years ended December 31, 1999, 1998 and 1997 and the report thereon of
Deloitte & Touche LLP dated January 20, 2000 appearing on Pages 15
through 29 of Crane Co.'s 1999 Annual Report to Shareholders which will
be furnished with the company's proxy statement as required by Regulation
14A, Rule 14a-3(c), are incorporated herein by reference
(2) Financial statement schedules for which provision is made in the
applicable regulation of the Securities and Exchange Commission have been
omitted because they are not required under related instructions or are
inapplicable, or the information is shown in the financial statements and
related notes.
(3) Exhibits: Exhibit 3A Certificate of Incorporation, as amended on May
25, 1999.
Exhibit 3B By-laws, as amended on January 24, 2000.
Exhibit 11 Computation of net income per share.
Exhibit 13 Annual Report to shareholders for the year ended
December 31, 1999.
Exhibit 21 Subsidiaries of the Registrant.
Exhibit 23 Independent auditors' consent.
(b) Reports on Form 8-K:
Filed 10/21/1999 The Company filed a Current Report on Form 8-K,
reporting on Item 5 thereof, the unaudited pro forma consolidated
balance sheet of the Registrant as of June 30, 1999 and the
unaudited pro forma consolidated statements of income for the
six-month period ended June 30, 1999 and for the year ended December
31, 1998. These pro forma financial statements reflect the pro
forma impact of the Huttig Building Products, Inc. spin-off.
Filed 12/23/1999 The Company filed a Current Report on Form 8-K,
reporting on Item 2 thereof, that on November 17, 1999, Crane
received a tax ruling from the IRS that the spin-off of Huttig would
be tax-free to Crane and its shareholders. On December 16, 1999,
Crane distributed all of the outstanding common stock of Huttig to
its shareholders of record as of the close of business on December
8, 1999.
16
PART IV (continued)
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(continued)
(c) Exhibits to Form 10-K:
(3) (a) The company's Certificate of Incorporation, as amended on May
25, 1999 (filed herewith as Exhibit 3A).
(b The company's By-Laws, as amended on January 24, 2000 (filed
herewith as Exhibit 3B).
(4) Instruments Defining the Rights of Security Holders, including
Indentures:
(a) There is incorporated by reference herein:
(1) Preferred Share Purchase Rights Agreement contained in
Exhibit 1 to the company's Report on Form 8-K filed with
the Commission on July 6, 1998.
(b) There is incorporated by reference herein:
1) Indenture dated as of April 1,1991 between the Registrant
and the Bank of New York contained in Exhibit 4.1 to the
company's report on Form 8-K filed with the Commission on
September 16, 1998.
(10)Material Contracts:
(iii)Compensatory Plans
There is incorporated by reference herein:
(a) The forms of Employment/Severance Agreement between the company
and certain executive officers (form I) and (form II) which
provide for the continuation of certain employee benefits upon
a change of control as contained in Exhibit C of the company's
annual report on Form 10-K for the fiscal year ended December
31, 1994.
(b) The E.V.A. incentive compensation plan contained in Exhibit B
to the company's annual report on Form 10-K for the fiscal year
December 31, 1994.
(c) 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.
(d) 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.
(e) The Crane Co. 1998 Stock Option Plan contained in Exhibit 4.1
to the company's Registration Statement No. 333-50489 on Form
S-8 filed with the Commission on April 20, 1998.
(f) The Crane Co. 1998 Restricted Stock Award Plan contained in
Exhibit 4.1 to the company's Registration Statement No. 333-
50487 on Form S-8 filed with the Commission on April 20, 1998.
(g) The Crane Co. 1998 Non-Employee Director Restricted Stock Award
Plan contained in Exhibit 4.1 to the company's Registration
Statement No. 333-50495 on Form S-8 filed with the Commission
on April 20, 1998.
All other exhibits are omitted because they are not applicable or the
required information is shown elsewhere in this Annual Report on Form 10-K.
17
SIGNATURES
Pursuant to the requirements of Section l3 or l5 (d) of the Securities Exchange
Act of l934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CRANE CO.
-------------------
(Registrant)
By /s/ M. L. Raithel
---------------------------
M. L. Raithel
Vice President-Finance and
Chief Financial Officer and Controller
Date 2/28/00
-------
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 and Chief Executive Officer and a Director
Date 2/28/00
-------
/s/ E. C. Fast /s/ M. L. Raithel
----------------------------- ---------------------------
E. C. Fast M. L. Raithel
President and Chief Vice President-Finance and
Operating Officer and a Director Chief Financial Officer and Controller
(Principal Financial Officer and
Principal Accounting Officer)
Date 2/28/00 Date 2/28/00
------- -------
DIRECTORS
/s/ E. T. Bigelow, Jr. /s/ R. S. Forte
----------------------- ----------------------
E. T. Bigelow, Jr. R. S. Forte
Date 2/28/00 Date 2/28/00
------- -------
/s/ D.R. Gardner /s/ J. J. Lee /s/
- ----------------------- ----------------------- ----------------------
D.R. Gardner J. J. Lee W. E. Lipner
Date 2/28/00 Date 2/28/00 Date 2/28/00
------- ------- -------
/s/ D. C. Minton /s/ C. J. Queenan, Jr. /s/
- ----------------------- ----------------------- ----------------------
D. C. Minton C. J. Queenan, Jr. J. L. L. Tullis
Date 2/28/00 Date 2/28/00 Date 2/28/00
------- ------- -------
18