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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2001
[_] 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.
(Exact name of registrant as specified in its charter)
Delaware 13-1952290
(State or other (I.R.S. Employer
jurisdiction of
incorporation or Identification No)
organization)
100 First Stamford Place, Stamford, CT 06902
(Address of principal executive offices, including zip code)
(203) 363-7300
(Registrant's telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on
------------------- which registered
Common Stock, par value New York Stock Exchange
$1.00
Preferred Share Purchase New York Stock Exchange
Rights
Securities registered pursuant to Section 12(g) of the Act:
81/2% senior notes due March 2004
63/4% senior notes due October 2006
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if the disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Based on the average stock price of $23.58 on January 31, 2002 the aggregate
market value of the voting stock held by nonaffiliates of the registrant was
$1,409,597,828.
The number of shares outstanding of the registrant's common stock, $1.00 par
value was 59,779,382 at January 31, 2002.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual report to shareholders for the year ended December
31, 2001 and portions of the proxy statement for the annual shareholders
meeting to be held on April 22, 2002 are incorporated by reference into Parts
I, II, III and IV of this Form 10-K Annual Report.
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PART I
Item 1. Business
Crane Co. ("Crane" or the "Company") is a diversified manufacturer of highly
engineered industrial products. Founded in 1855, Crane employs over 9,600
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, aggressively pursue operational and strategic linkages among our
businesses, 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 18 acquisitions.
During 2001, the Company completed seven acquisitions at a total cost of
$191 million. In February 2001, the Company acquired Ventech Controls, Inc.
located in Houston, Texas. This valve repair business provides both shop repair
and remanufacture of control valves and instruments. The acquisition of Ventech
significantly enhances Crane Valve Services' capabilities in the Houston
market, the largest valve service market in North America. Also in February
2001, the Company acquired the fiberglass reinforced panel business of UK-based
Laminated Profiles Ltd. as part of its strategic initiative to penetrate the
European transportation and recreational vehicle markets. This acquisition
provides the Company's Kemlite subsidiary with a quality manufacturing
facility, an established distribution system and an enhanced market position in
Europe. In April 2001, the Company acquired the Industrial Flow Group of Alfa
Laval Holding AB (renamed Crane Process Flow Technologies) which includes the
Saunders brand of diaphragm valves manufactured in the UK and India and the
DEPA brand of air operated diaphragm pumps manufactured in Germany. Crane
Process Flow Technologies focuses on the development, production and
distribution of valves, pumps and related components in high value-added
applications. In June 2001, the Company acquired the Xomox valve business from
Emerson Electric for $145 million. Xomox supplies high-end, application-driven,
sleeved-plug valves, lined valves, high performance butterfly valves, and
actuators to the chemical, pharmaceutical and other process industries. Xomox
has major manufacturing facilities in the United States, Mexico, Germany, and
Hungary and operates 22 service centers in the Americas, Europe and Asia. In
addition, Xomox holds a 49% interest in an Indian joint venture that
manufactures and markets plug valves for the Indian and other international
markets. The Xomox acquisition brings global brand names with strong market
positions that are complementary to the Company's existing product lines.
During the third quarter of 2001, the Company acquired the aerospace hose
product line of Teleflex Fluid Systems and Resistoflex GmbH. AeroHose, based in
Lantana, Florida, is a leading supplier of Teflon(R)-braided, high-pressure
hose assemblies utilized in both commercial and military aircraft as well as
ground support systems. AeroHose products are complementary in technology and
application to those of Crane's Resistoflex division in Jacksonville, Florida.
Resistoflex GmbH, based in Germany, is a leading manufacturer of
Teflon(R)-lined, steel-piping products serving chemical and pharmaceutical
markets in Europe. This acquisition provides Resistoflex with European-based
manufacturing operations to complement its facilities in North America and Asia
enhancing its capabilities to serve its customers in the chemical processing
industry worldwide. In December 2001, the Company acquired the patents and
other intellectual property of Trinity Airweighs, obtaining a system to measure
aircraft weight and center of gravity. Preliminary estimates of goodwill for
the 2001 acquisitions amounted to $74 million.
During 2000, the Company completed two acquisitions at a total cost of $11.9
million. In March 2000, the Company acquired Streamware Corporation, a
privately-held company based in Norwood, Massachusetts, which is a leading
provider of business management software and market analysis tools for the
vending and food
2
service industry. In December 2000, the Company acquired the assets of the
Valve Repair Division of Groth Corporation. Located in Houston, Texas, the
Valve Repair Division provides both shop and field testing and repair services
for a broad range of valve types and is an authorized repair facility for many
leading valve manufacturers. Goodwill in 2000 amounted to $8.5 million and is
being amortized over 15 years.
During 1999, the Company completed one acquisition at a total cost of $33
million. In October 1999, the Company acquired Stentorfield, Ltd., which is
based in Chippenham, England. Stentorfield is a premier designer and
manufacturer of hot and cold beverage vending machines, serving the U.K. and
European market with a broad line of full-size and tabletop products for the
hotel, restaurant, office coffee service and vending industries. Stentorfield
is known in the industry to provide high-quality, reliable and easily serviced
products and excellent customer service. This business was integrated with the
Company's Crane Merchandising Systems business, which is the leading North
American designer and manufacturer of full-line vending machines, for snack,
food and beverage. Goodwill acquired in 1999 amounted to $24.3 million and is
being amortized over 20 years.
During 1998, the Company completed four acquisitions at a total cost of $178
million. In May 1998, 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 1998, 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 1998, 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. Goodwill acquired in 1998 amounted to $130
million and is being amortized over a period ranging from 15 to 20 years.
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 1997, the Company acquired Polyvend Inc., a
manufacturer of snack and food vending machines. Polyvend was completely
integrated into the Company's Crane Merchandising Systems division,
significantly expanding its sales distribution channels. In April 1997, 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 1997, the Company
acquired certain operations and product lines of Stockham Valves & Fittings,
Inc. The acquired product lines and related manufacturing operations have been
integrated into the Company's valve businesses. Goodwill acquired in 1997
amounted to $20 million and is being amortized over a period ranging from 15 to
20 years.
DIVESTITURES
In the past five years, the Company has divested nine businesses. In
September 2001, the Company sold Powers Process Controls for its carrying
value. The Company also sold its Canadian Crane Plumbing business in 2001
recording an after-tax loss of approximately $8.5 million from this transaction
in 2001. Proceeds from the sale of the businesses were approximately $20
million. During the third quarter of 2001, Crane and Emerson Electric Co.
announced the formation of a joint venture involving Emerson's Commercial Cam
unit and Crane's Ferguson business unit. Crane and Emerson contributed their
respective operations into a new company, Industrial Motion Control Holdings,
LLC. Crane also contributed $12 million of cash into the venture. The
investment in the joint venture amounts to $19.6 million at year-end 2001 and
is included in Other Assets on the Balance Sheet. The Ferguson/Camco joint
venture is being accounted for on the equity basis.
3
In May 2000, the Company sold its interest in Powec AS, a Norwegian
manufacturer of power supplies for the telecommunications industry. In
addition, the Company's wholly owned ELDEC Corporation subsidiary sold its
related telecommunications power supply product line to the same purchaser.
Total consideration for both transactions was $45.6 million. In April 1999, the
Company sold Southwest Foundry, acquired as part of the Stockham Valves and
Fittings, Inc. transaction, for $400,000. In December 1999, the Company sold
its Crane Defense Systems business for $6.4 million in cash and a $750,000
note. In 1998, the Company sold two foundry operations acquired as part of the
Stockham Valves and Fittings Inc. transaction. Accu-Cast, Inc. and the
Aliceville Foundry were sold for a total of $4.3 million. In 1997, the Company
sold its Valve Systems and Controls division for $7.5 million in cash and $1.5
million in preferred stock.
DISCONTINUED OPERATIONS
On December 16, 1999, the Company distributed all of the shares of its
Huttig Building Products ("Huttig") subsidiary to shareholders of the Company
on the basis of one share of Huttig for every 4.5 shares of Crane Co. common
stock. Prior to this spin-off distribution, Huttig repaid an intercompany loan
of $68 million to the Company, which the Company used to pay down debt. The
Wholesale segment was discontinued when Huttig was spun off.
LONG-TERM FINANCING
In September 1998, the Company sold $100,000,000 of 63/4% notes that will
mature on October 1, 2006. During April 1992, the Company sold $100,000,000
81/2% notes that will mature on March 15, 2004. In February 2002, the Company
entered into a two-year interest rate swap agreement with JPMorgan Chase Bank
which converts $100 million of 81/2% fixed-rate debt to LIBOR plus 4.985%
floating rate debt.
BUSINESS SEGMENTS
See page 33 of the Annual Report to Shareholders for year ended December 31,
2001, for sales, operating profit and assets employed by each business segment.
AEROSPACE
The Aerospace segment consists of ELDEC, Hydro-Aire/Lear Romec and
Interpoint.
ELDEC designs, manufactures and markets custom position indication and
control systems, proximity sensors, pressure sensors, true mass fuel flowmeters
and power conversion systems for the commercial transport, business, regional,
general aviation, military, repair and overhaul and electronics markets. These
products are custom designed for specific aircraft to meet technically
demanding requirements of the aerospace industry. ELDEC has facilities in
Redmond, Washington, one in England and one in France.
Hydro-Aire designs, manufactures and sells aircraft brake control and
anti-skid systems, including electro-hydraulic servo valves and manifolds,
embedded software and rugged electronic controls, hydraulic control valves,
landing gear sensors and fuel pumps as original equipment to the commercial
transport, business, regional, general aviation, military and government
aerospace, repair and overhaul markets. In addition, Hydro-Aire designs and
manufactures systems similar to those above for the retrofit of aircraft with
improved systems and manufactures replacement parts for systems installed as
original equipment by the aircraft manufacturer. All of these products are
largely proprietary to Hydro-Aire and, to some extent, are custom designed to
the requirements and specifications of the aircraft manufacturer or program
contractor. These systems and replacement parts are sold directly to aircraft
manufacturers, airlines, governments, and aircraft maintenance and overhaul
companies.
4
Lear Romec, which became an "internal acquisition" of Hydro-Aire during the
year, designs, manufactures and sells lubrication and fuel pumps for aircraft,
aircraft engines and radar cooling systems for the commercial and military
aerospace industries. Lear Romec has a leading share of the non-captive market
for turbine engine lube and scavenge oil pumps. Lear Romec also manufactures
fuel boost and transfer pumps for commuter and business aircraft.
Interpoint designs, manufactures and sells standard and custom miniature
(hybrid) DC-to-DC power converters and custom miniature (hybrid) electronic
circuits for applications in commercial, space and military aerospace, medical
technology, fiber optic and medical technology industries. Interpoint has
facilities in Redmond, Washington and in Taiwan.
The segment employs 1,900 people and had assets of $252.4 million at
year-end. The order backlog totaled $250.3 million at December 31, 2001.
ENGINEERED MATERIALS
The Engineered Materials segment consists of: Kemlite/CorTec, Resistoflex
and Polyflon.
Kemlite manufactures fiberglass-reinforced plastic panels for use,
principally by the transportation industry, in refrigeration and dry-van truck
trailers and recreational vehicles. Kemlite products are also sold to the
commercial construction industry for food processing, fast-food restaurant and
supermarket applications, to institutions where fire rated materials with low
smoke generation and minimum toxicity are required, and for residential
construction. Kemlite sells its products directly to the truck trailer and
recreational vehicle manufacturers. Sequentia manufactures
fiberglass-reinforced plastic panels for the construction and building products
markets. Kemlite uses distributors to serve its commercial construction market
and some segments of the recreational vehicle market. Sequentia's Grand
Junction, Tennessee and Houston, Texas plants were added to Kemlite's plants in
Joliet, Illinois and Jonesboro, Arkansas. CorTec, which became an "internal
acquisition" of Kemlite's during the year, manufactures fiberglass-reinforced
laminated panels serving the truck and truck trailer segment of the
transportation industry and for specialty applications.
Resistoflex is engaged in the design, manufacture and sale of
corrosion-resistant, plastic-lined steel pipes, fittings, tanks, valves,
expansion joints and hose used primarily by the pharmaceutical, chemical
processing, pulp and paper, ultra pure water and waste management industries.
It also manufactures high-performance, separable fittings for operating
pressures to 8,000 PSI used primarily in the aerospace industry. Resistoflex
sells its industrial products through distributors who provide stocking and
fabrication services to industrial users in the United States. Its aerospace
products are sold directly to the aerospace industry. Resistoflex also
manufactures plastic-lined pipe products at its Singapore plant serving the
Asian chemical processing and the Asian pharmaceutical industries.
Polyflon manufactures microwave laminates, high voltage RF capacitors,
radomes and circuit processing for wireless communication, magnetic resonance
imaging, microwave and radar system manufacturers.
Crane Plumbing was sold in September 2001, recording an after-tax loss of
approximately $8.5 million.
This segment had assets of $206.7 million at December 31, 2001 and employed
1,200 people. Order backlog at year-end 2001 was $15.1 million.
MERCHANDISING SYSTEMS
The Merchandising Systems segment has two operating units: Crane
Merchandising Systems, designs and manufactures a complete line of vending
merchandisers for the food service vending market; and National Rejectors, Inc.
GmbH ("NRI"), which manufactures electronic coin validators in Buxtehude,
Germany for the automated merchandising and gambling/amusement markets in
Europe.
5
Crane Merchandising Systems 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. Crane
Merchandising Systems manufactures its products in Bridgeton, Missouri. Crane
Merchandising Systems' 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. This
unit also includes Streamware Corporation, a leading provider of business
management software and market analysis tools for the vending and food service
industry. Streamware's VendMAX is a fully integrated software/hardware solution
that offers operators cash accountability, inventory control and improved
merchandising capabilities.
NRI is among the relatively few makers of coin validators that supplies
European countries with validators programmed for the new euro coins that went
into circulation at the start of 2002.
Merchandising Systems employs 1,300 people and had assets of $139.6 million
at year-end 2001. Order backlog totaled $31.1 million at December 31, 2001.
FLUID HANDLING
The Fluid Handling segment consists of the Crane Valves, Crane Valves-U.K.,
Valve Services, Crane Pumps & Systems, Crane Environmental and Crane Supply
businesses. The Crane Valves and Crane Valves-U.K. businesses, with six
manufacturing facilities in North America as well as operations in the United
Kingdom, Germany, Japan, Australia, Norway, India, Hungary, China and
Indonesia, sell a wide variety of commodity and special purpose valves and
fluid control products for the chemical and hydrocarbon processing,
petrochemical, pharmaceutical, power generation, marine, general industrial and
commercial construction industries. Products are sold under the trade names
Crane, Saunders, Jenkins, Pacific, Xomox, DEPA, Westad, Flowseal, Centerline,
Stockham, Triangle and Duocheck. The Company's Valve Service business, with two
manufacturing facilities in North America, provides valves, valve diagnostic
equipment and related services to the nuclear power, chemical and hydrocarbon
processing and power generation industries.
Crane Pumps and Systems has seven manufacturing facilities in the United
States. Pumps are manufactured under the trade names Deming, Weinman, Chempump,
Burks, Chem/Meter, Barnes, Sellers and Process Systems. Pumps are sold to a
broad customer base which includes chemical and hydrocarbon processing,
automotive, municipal, industrial and commercial wastewater, power generation,
commercial heating, ventilation and air-conditioning industries and original
equipment manufacturers. Crane Environmental has manufacturing facilities in
Pennsylvania and Florida and serves the water and wastewater treatment market.
Its products are sold under the trade names Cochrane and Environmental Products.
Crane Supply, a distributor of plumbing supplies, valves and piping in
Canada, maintains thirty-five branches throughout Canada.
Products in this group are sold directly to end users through Crane's sales
organization and through independent distributors and manufacturers
representatives.
The Fluid Handling segment employs 4,800 people and had assets of $544.0
million at December 31, 2001. Fluid Handling order backlog totaled $147.8
million at December 31, 2001.
CONTROLS
This segment consists of: Barksdale and Azonix/Dynalco. The companies in
this segment design, manufacture and market industrial and commercial products
that control flows and processes in various industries including
transportation, petroleum, chemical, construction, food and beverage and power
generation.
6
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.
In 2001, Azonix and Dynalco were combined in an "internal acquisition" under
common leadership. Azonix/Dynalco designs and manufactures rotational speed
sensors, temperature and pressure instruments and monitors for rugged
environments, microprocessor-based engine and mechanism controls.
Azonix/Dynalco's products are used worldwide in a variety of applications for
various industries, including transportation, power generation, oil, gas,
petrochemical, chemical, pharmaceutical, agriculture and metal processing. It
also manufactures operator interfaces and measurement and control systems for
hazardous and harsh applications, intelligent data acquisition products,
high-precision thermometers and calibrators.
The products in this segment are sold directly to end users and engineering
contractors through the Company's own sales force and cooperatively with sales
representatives, stocking specialists and industrial distributors.
Controls had assets of $73.8 million at December 31, 2001, and employs 400
people. On December 31, 2001, Crane Controls had a backlog of $18.4 million.
Ferguson was contributed to a joint venture called Industrial Motion Control
Holdings LLC, in the third quarter of 2001, formed with Emerson Electric Co's
Commercial Cam unit.
COMPETITIVE CONDITIONS
The Company's lines of business are conducted under actively competitive
conditions in each of the geographic and product areas they serve. Because of
the diversity of the classes of products manufactured and sold, they do not
compete with the same companies in all geographic or product areas.
Accordingly, it is not possible to estimate the precise number of competitors
or to identify the principal methods of competition. Although reliable
statistics are not available, the Company believes that it is an important
supplier to a number of market niches and geographic areas.
The Company's products have primary application in the aerospace,
hydrocarbon processing, petrochemical, chemical, power generation, automated
merchandising and transportation industries. As such, they are dependent upon
numerous unpredictable factors, including changes in market demand, general
economic conditions and capital spending. Because these products are also sold
in a wide variety of markets and applications, the Company does not believe it
can reliably quantify or predict the possible effects upon its business
resulting from such changes.
Seasonality is a factor in the Canadian operations. Net sales in Canada and
assets related to Canadian operations were 11.6% and 4.7% and 13.9% and 7.1% of
the respective 2001 and 2000 consolidated amounts.
The Company's engineering and product development activities are directed
primarily toward improvement of existing products and adaptation of existing
products to particular customer requirements. While the Company owns numerous
patents and licenses, none are of such importance that termination would
materially affect its business. Product development and engineering costs
totaled approximately $55.6 million in 2001, $55.0 million in 2000, and $58.9
million in 1999. Included in these amounts were approximately $4.7 million,
$6.7 million and $7.4 million received by the Company in 2001, 2000 and 1999,
respectively, for customer sponsored research and development.
7
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.
FORWARD LOOKING STATEMENTS
Throughout the Annual Report to Shareholders, particularly in the
President's Letter to Shareholders and Management's Discussion and Analysis of
Operations, the Company makes numerous statements about expectations of future
performance and market trends and statements about plans and objectives and
other matters which because they are not historical fact, may constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995.
In addition, the Company and its representatives may, from time to time,
make written or oral forward-looking statements including statements contained
in the Company's filings with the Securities and Exchange Commission and in its
reports to shareholders which can be identified by the use of forward-looking
terminology such as "believes", "contemplates", "expects", "may", "will",
"could", "should", "would" or "anticipates" or the negative thereof or
comparable terminology.
All forward-looking statements speak only as of the date on which such
statements are made and involve risk and uncertainties that exist in the
Company's operations and business environment and are not guarantees of future
performance. The Company assumes no obligation to update any of these
forward-looking statements, whether as a result of new information or future
events. As a responsibility to our investors, the Company will make reasonable
efforts at timely disclosure of future facts and circumstances which may affect
such statements.
Because the Company wishes to take advantage of the "safe harbor" provision
of the Private Securities Litigation Reform Act of 1995, readers are cautioned
to consider the following important risk factors that could affect the
Company's businesses and cause actual results to differ materially from those
projected.
General
A substantial portion of the sales of the Company's business segments are
concentrated in industries which are cyclical in nature. Because of the
cyclical nature of these businesses, their results are subject to fluctuations
in domestic and international economies as well as to currency fluctuations and
unforeseen inflationary pressures. Reductions in the business levels of these
industries would negatively impact the sales and profitability of the affected
business segments.
While the Company is a principal competitor in most of its markets, all of
its markets are highly competitive. The Company's competitors in many of its
business segments can be expected in the future to improve technologies, reduce
costs and develop and introduce new products, and the ability of the Company's
business segments to achieve similar advances will be important to their
competitive positions. Competitive pressures, including those discussed above,
could cause one or more of the Company's business segments to lose market share
or could result in significant price erosion, either of which could have an
adverse effect on the Company's results of operations.
The Company's acquisition program entails the potential risks inherent in
assessing the value, strengths, weaknesses, contingent or other liabilities and
potential profitability of acquisition candidates and in integrating the
operations of acquired companies. There can be no assurance that suitable
acquisition opportunities will be available in the future, that the Company
will continue to acquire businesses or that any business acquired will be
integrated successfully or prove profitable.
8
Net sales and assets related to operations outside the United States were
41.3% and 29.9% and 36.3% and 20.9% of the respective 2001 and 2000
consolidated amounts. Such operations and transactions entail the risks
associated with conducting business internationally, including the risk of
currency fluctuations, slower payment of invoices, adverse trade regulations
and possible social and economic instability. While the full impact of this
economic instability cannot be predicted, it could have a material adverse
effect on the Company's revenue and profitability.
Certain of the Company's business segments are dependent upon highly
qualified personnel, and the Company generally is dependent upon the continued
efforts of key management employees.
New factors emerge from time to time, and it is not possible for management
to predict all of such factors. Further, management cannot assess the impact of
each such factor on the business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from
those contained in any forward-looking statements.
Aerospace
A significant fall off in demand for air travel or a decline in airline
profitability generally could result in reduced aircraft orders and could also
cause the airlines to scale back their purchases of repair parts from Crane
companies. The companies could also be impacted if major aircraft
manufacturers, such as Boeing which represents approximately 20% and 21% of the
segment's revenue in 2001 and 2000, respectively, encountered production
problems, or if pricing pressure from aircraft customers caused the
manufacturers to press their suppliers to lower prices. Sales and profits could
face erosion if pricing pressure from competitors increased, if planned new
products were delayed, if finding new aerospace-qualified suppliers grew more
difficult, or if required technical personnel became harder to hire and retain.
Aerospace segment results could be below expectations if further slowing of the
U. S. economy causes customers to delay or cancel spare parts or aircraft
orders.
Engineered Materials
In the Engineered Materials segment, sales and profits could fall if there
were a decline in demand for truck trailers, recreational vehicles or building
products for which Crane's companies produce fiberglass-reinforced panels.
Profits could be adversely affected as well by unanticipated increases in resin
and fiberglass material costs and by any inability on the part of Crane's
companies to maintain their position in product cost and functionality against
competing materials.
Merchandising Systems
Results at Crane's U.S.-based vending machine business could be reduced by
delays in launching or supplying new products or an inability to achieve new
product sales objectives. Results at Crane's German-based coin validation
machine business could be affected by changes in demand stemming from the
advent of the euro, the new European currency, as well as by unforeseen
fluctuations in the value of the euro or other European currencies versus the
U.S. dollar.
Fluid Handling
Crane's companies could face increased price competition from larger
competitors. Further slowing of the U.S. economy could reduce sales and
profits, particularly if projects for which Crane's companies are suppliers or
bidders are cancelled or delayed, or if the Company's ability to source product
from international sources is impeded. At Crane's foreign operations, reported
results in U.S. dollar terms could be eroded by an unanticipated weakening of
currency of the respective operations.
9
Controls
A number of factors could affect the Controls segment's results. Lower sales
and earnings could result if Crane's companies can not maintain their cost
competitiveness, encounter delays in introducing new products or fail to
achieve their new product sales objectives. Results could decline because of an
unanticipated decline in demand for Crane products from the industrial
machinery, oil and gas or heavy equipment industries, or from unforeseen
product obsolescence.
Item 2. Properties
Total Manufacturing Facilities Number Area
------------------------------ ------ -----------------
Aerospace
United States.......... 5 572,000 sq. ft.
International.......... 3 37,000 sq. ft.
Engineered Materials
United States.......... 10 1,209,000 sq. ft.
International.......... 2 160,000 sq. ft.
Merchandising Systems
United States.......... 1 463,000 sq. ft.
Other International...... 2 131,000 sq. ft.
Fluid Handling
United States.......... 13 1,157,000 sq. ft.
Canada................. 2 140,000 sq. ft.
International.......... 16 2,001,000 sq. ft.
Crane Controls
United States.......... 3 175,000 sq. ft.
International.......... 1 27,000 sq. ft.
Leased Leases
Manufacturing Expiring
Facilities Through Number Area
------------- ------- ------ ----
United States...... 2009 8 429,000 sq. ft.
Canada............. 2002 1 13,000 sq. ft.
Other International 2007 8 263,000 sq. ft.
Other Facilities
Fluid Handling operates four valve service centers in the United States, of
which two are owned, and one distribution center in the United States. This
segment operates internationally forty four distribution and fourteen service
centers.
Crane Controls operates one distribution center internationally.
Merchandising Systems operates eight distribution centers in the United
States and six internationally.
Engineered Materials operates seven distribution centers in the United
States, of which one is owned, and two outside the United States.
In the opinion of management, these properties have been well maintained,
are in sound operating condition and contain all necessary equipment and
facilities for their intended purposes.
10
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 2001.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the registrant are as follows:
Business Experience Officer
Name Position During Past Five Years Age Since
---- -------- ---------------------- --- -----
Eric C. Fast President and President and Chief Executive Officer of the Company 52 1999
Chief Executive since April 2001, President and Chief Operating Officer
Officer from September 1999 to April 2001. Previously Co-
head of Global Investment Banking of Salomon Smith
Barney and a Managing Director of that firm since
1988.
Gil A. Dickoff Treasurer Treasurer of the Company since 1992, previously 40 1992
Assistant Treasurer.
Augustus I. duPont Vice President, Vice President and General Counsel and Secretary of 50 1996
General Counsel the Company since 1996.
and Secretary
Bradley L. Ellis Vice President-- Vice President--Chief Information Officer of the 33 1997
Chief Information Company since July 1997. Previously with the Business
Officer Systems consulting group of Arthur Andersen LLP, an
international provider of auditing and business
consulting services.
Elise M. Kopczick Vice President-- Vice President--Human Resources of the Company 48 2001
Human since January 2001. Previously President of the
Resources Company's Lear Romec division from August 1999 to
January 2001 and Vice President--Human Resources at
the Company's Hydro-Aire subsidiary from January
1996 to August 1999.
Thomas M. Noonan Vice President-- Vice President--Taxes of the Company since 47 1999
Taxes November 2001. Vice President Controller and Chief
Tax Officer of the Company from April 2000 to
November 2001, Vice President--Taxes of the
Company from September 1999 to April 2000. Director
of Taxes of the Company from March 1996 to
September 1999.
11
Business Experience Officer
Name Position During Past Five Years Age Since
---- -------- ---------------------- --- -----
Anthony D. Pantaleoni Vice President-- Vice President--Environment, Health & Safety of the 47 1989
Environment, Company since 1989.
Health & Safety
Michael L. Raithel Vice President-- Vice President--Finance and Chief Financial Officer 54 1985
Finance and of the Company since February 2000. Previously
Chief Financial Controller of the Company since 1985.
Officer
Joan Atkinson Nano Vice President-- Vice President, Controller of the Company since 46 2001
Controller November 2001. Previously Director New
Controllership Initiatives at GE Capital Corporation
(financial services) Since 2000. Previously employed
by Pitney Bowes from 1985 to 1999 as Director,
Worldwide Planning and Analysis from 1994 to 1999
and as Assistant Corporate Controller from 1988 to
1994.
12
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 40 through 41 of the 2001 Annual Report to Shareholders.
Item 6. Selected Financial Data.
The information required by Item 6 is hereby incorporated by reference to
Page 40 of the 2001 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 13 through 20 and pages 35 thru 39 of the 2001 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 20 of the 2001 Annual Report to Shareholders.
Item 8. Financial Statements and Supplementary Data.
The information required by Item 8 is hereby incorporated by reference to
Pages 21 through 34 and page 40 of the 2001 Annual Report to Shareholders.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by Item 10 is incorporated by reference to the
definitive proxy statement dated March 7, 2002, 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.
Item 11. Executive Compensation
The information required by Item 11 is incorporated by reference to the
definitive proxy statement dated March 7, 2002, 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 March 7, 2002, which the Company has filed
with the Commission pursuant to Regulation 14A.
13
Item 13. Certain Relationships and Related Transactions
The information required by Item 13 is incorporated by reference to the
definitive proxy statement dated March 7, 2002, 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, 2001 and 2000
and the related consolidated statements of income, changes in common
shareholders' equity and cash flows for the years ended December 31,
2001, 2000 and 1999 and the report thereon of Deloitte & Touche LLP
dated January 18, 2002 appearing on Pages 21 through 34 of Crane Co.'s
2001 Annual Report to Shareholders which will be furnished with the
definitive 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 11 Computation of net income per share.
Exhibit 13 Annual Report to shareholders for the year ended
December 31, 2001.
Exhibit 21 Subsidiaries of the Registrant.
Exhibit 23 Independent auditors' consent.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended December 31,
2001.
(c) Exhibits to Form 10-K:
There is incorporated by reference herein:
(3) (a) The Company's Certificate of Incorporation, as amended on May 25,
1999 contained in
Exhibit 3A to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999.
(b) The Company's By-Laws, as amended on January 24, 2000 contained in
Exhibit 3B to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999.
(4) Instruments Defining the Rights of Security Holders, including
Indentures:
(a) There is incorporated by reference herein:
(1) Preferred Share Purchase Rights Agreement contained in Exhibit
1 to the Company's Report on Form 8-K filed with the
Commission on July 6, 1998.
(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.
14
(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 1) and (Form 11) which
provide for the continuation of certain employee benefits upon a
change of control as contained in Exhibit C of the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1994.
(b) The indemnification agreements entered into with each director and
executive officer of the Company, the form of which is contained
in Exhibit C to the Company's definitive proxy statement filed
with the Commission in connection with the Company's April 27,
1987 Annual Meeting.
(c) The Crane Co. Retirement Plan for Non-Employee Directors contained
in Exhibit E to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1988.
(d) The Crane Co. 1998 Stock Option Plan contained in Exhibit 4.1 to
the Company's Registration Statement No. 333-50489 on Form S-8
filed with the Commission on April 20, 1998.
(e) The Crane Co. 1998 Restricted Stock Award Plan contained in
Exhibit 4.1 to the Company's Registration Statement No. 333-50487
on Form S-8 filed with the Commission on April 20, 1998.
(f) The Crane Co. 1998 Non-Employee Director Restricted Stock Award
Plan contained in Exhibit 4.1 to the Company's Registration
Statement No. 333-50495 on Form S-8 filed with the Commission on
April 20, 1998.
(g) The Crane Co. 2000 Non-Employee Director Stock Compensation Plan
contained in Exhibit 10(a) to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 2000.
(h) The employment agreement with Eric C. Fast contained in Exhibit
10(b) to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000.
(i) The Crane Co. 2001 Stock Incentive Plan contained in Exhibit 10(b)
to the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 2001.
(j) The employment agreement with Robert S. Evans contained in Exhibit
10(a) to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2001.
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: M. L. RAITHEL
-----------------------------
M. L. Raithel
Vice President-Finance and
Chief Financial Officer
Date 3/22/02
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
E. C. FAST M.L. RAITHEL
---------------------------------- ----------------------------------
E. C. Fast M. L. Raithel
President and Chief Vice President-Finance and
Executive Officer and a Director Chief Financial Officer
Date 3/22/02 (Principal Financial Officer and
Principal Accounting Officer)
Date 3/22/02
DIRECTORS
R.S. EVANS E.T. BIGELOW, JR. R.S. FORTE'
-------------------------- -------------------------- --------------------------
R.S. Evans E.T. Bigelow, Jr. R.S. Forte'
Date 3/22/02 Date 3/22/02 Date 3/22/02
D.R. GARDNER J. GAULIN --------------------------
-------------------------- -------------------------- W.E. Lipner
D.R.Gardner J. Gaulin Date 3/22/02
Date 3/22/02 Date 3/22/02
D.C. MINTON C.J. QUEENAN, JR. J.L.L. TULLIS
-------------------------- -------------------------- --------------------------
D.C. Minton C.J. Queenan, Jr. J.L.L. Tullis
Date 3/22/02 Date 3/22/02 Date 3/22/02
16