Document 9LqJGBpgJXDxGkOE6EQdoVyep

PLAINTIFF'S EXHIBIT CRA-30 CRANE CO. ANNUAL REPORT 1976 FLUID AND POLLUTION CONTROL STEEL BUILDING PRODUCTS AEROSPACE AND AIRCRAFT PRODUCTS CRTX 0353 CRANECO. ANNUAL REPORT 1976 . i;c '-'-Fluid and Poll"u.tvion.Ctvon.tro l Products iWr.R- LJ: BWiller, VyiceWPresidWent & WiS! ' Y.a yes'' _ > ; Fittings I'' -' '.{General Manager ' . - ... . . .: :.12 Analysis of summary of operations . I--It i/4 A ipa I 1 * mj*i n * 1% * ``J j f% ' 1 / ., - Oil casing and tubular products - Merchant shapes and structural .... ^ Wire and wire products Aerospace and Aircraft Products ;. ;Skid-contrbI braking systems r.v Valves, pumps, controls and other Pueblo, Colorado 1R. J. Slater, President -: meeting .will be held Monday, April 25,1977, . in the First Floor Meeting Room, :i ..Bankers Trust Company, 280 Park 10-K for the year 1976, be filed with the Exchange Commission, CRTX 0354 FINANCIAL HIGHLIGHTS Sales ........................................................ Income before income taxes .... Net income.............................................. Cash dividends................................ . Net working capital................................ Total assets................................ . . . . Common shareholders'equity . . . . Common shares outstanding at year end 1976 $1,087,606,000 76.778.000 47.959.000 12.316.000 .217,731,000 760.561.000 282.456.000 10,030,897 1975 $1,119,494,000 114.202.000 63.608.000 10.183.000 223.076.000 722.201.000 262.898.000 10,039,024 RATIOS AT YEAR END Net income to sales................................................................................... Current ratio............................................................................................ 4.4% 2.3 5.7% 2.3 PER COMMON SHARE Net income............................ Cash dividends................... Common shareholders' equity Net income per common share would amount to S4.38 (SS.4S in 197S) assuming conversion of subordinated debentures. $ 4.70* 1.20 28.16 $ 6.17t .98+ 25.67+ $7-- Net Income per Sharet 6.17 Si.SO-- Cash Dividend per Sharet $30-Shareholders'Equity 28.16 1972 1973 1974 1975 1976 1972 1973 1974 1975 1976 tAdjusted for 2% stock dividend in February, 1976 and 2-for-1 stock split in May, 1976. 1972 1973 1974 1975 1976 CRTX 0355 TO OUR SHAREHOLDERS; Safes for 1976 were $1,087,606,000, com pared with $1,119,494,000 in 1975. Net income was $47,959,000, or $4.70 per com mon share, compared with 1975 net income of $63,608,000, or $6.17 per common share. Crane's earnings decline was attributable primarily to the company's inability to re cover increased steel production costs through higher prices. The fluid and pollu tion control business experienced only a moderate decline in operating performance, despite sluggish demand for capital equip ment, while aerospace and building products operations performed at higher levels than in 1975. Investment in plant modernization and environmental improvement approximated $82.5 million in 1976, compared with $52.5 million the prior year. Included in the 1976 amount was $71.1 million expended by CF&I Steel Corporation. During 1977 expenditures will remain near the current high level, and will be concentrated largely in the com pany's steelmaking operations. The pre viously announced expansion and moderni zation of rail mill facilities at the Pueblo, Colorado steel mill is proceeding on sched ule and, when completed in 1979, will in crease the mill's rail finishing capacity by approximately 50 percent. The program to develop additional raw material supplies, primarily metallurgical coal for the produc tion of coke, will make steelmaking opera tions nearly self-sufficient in raw materials when completed. During the year CF&I Steel Corporation arranged an eight and one-half year $40 mil lion term loan at an interest rate of 'A per cent above prime. The loan is repayable from August, 1981 through May, 1985 in equal quarterly installments. In March, 1976 the company concluded its exchange offer for common shares of The Anaconda Company in the ratio of $20 prin cipal amount of Crane Co. 8 percent Sub ordinated Sinking Fund Debentures due December 1,1985 for each share of Ana conda common stock tendered. Crane acquired 4,120,230 common shares of The Anaconda Company and issued a total of $82,404,600 principal amount of subordi nated debentures. Subsequent to this acqui sition, Atlantic Richfield Company and The Anaconda Company agreed to a merger, which was completed on January 12,1977. As a result of the merger, Crane received a cash dividend of $24,721,380, subject to dividend tax of 7V2 percent, and 2,060,115 Atlantic Richfield common shares in a taxfree exchange. The total cash dividends paid to Crane... shareholders during 1976 amounted to $1.20 per share, an increase of 22 percent over 1975 cash dividends of 98 cents per share, as adjusted. The company again paid a 2 per cent stock dividend in February, 1977. On behalf of the Board of Directors, we again express our thanks to the shareholders, employees, customers and suppliers. Respectfully submitted, D. C. Fabiani, President February 18,1977 77 T.M. Evans, Chairman D. C. Fabiani, President T. M. Evans, Chairman 2 CRTX 0356 CONSOLIDATED STATEMENT OF INCOME FOR YEARS ENDED DECEMBER 31 Net Sales............................................................................................ Operating Costs and Expenses including depreciation of $36,380,436 ($35,784,198 in 1975): ' Cost of sales................................................................................... Selling, general and administrative.............................................. . . Operating Profit.............................................................................. . . Other Income (Deductions): Interest--net................................................................................... . . Gain on disposal of capital assets--net..................................... . . Dividend income on investments.............................................. . . Miscellaneous--net..................................................................... . . Income Before Income Taxes....................................................... . . Provision for Income Taxes............................................................ . . Net Income....................................................................................... Net income per common share: Average shares outstanding.................................................. . . Assuming conversion of debentures.............................................. CRANE CO. and subsidiar.es 1976 1975 $1,119,493,984 104,881,682 1,007,010,874 80,594,923 888,594,766 105,161,503 993,756,269 125,737,715 (18,764,292) 15,618,436 2,609,300 (3,280,255) (3,816,811) 76,778,112 28,819,335 $4.70 4.38 (11,153,219) 1,732,981 389,329 (2,505,357) (11,536.266) 114,201,449 50.593,656 $ 63,607,793 $6.17 5.45 CONSOLIDATED STATEMENT OF EARNED SURPLUS FOR YEARS ENDED DECEMBER 31 1976 Balance at Beginning of Year $ 181,442,574 Net Income 47,958,777 229,401,351 1975 $ 144,593,494 63,607,793 208,201,287 Dividends: Preferred shares--$3.75 per share....................................................... Common shares: Cash--$1.20 per share ($.98 in 1975).............................................. 5tock--2%, market value of 203,220 shares (220,110 in 1975) Excess of Cost Over Par Value of Reacquired Shares--Net: 146 preferred (1,572 in 1975) and 755,900 common (941,222 in 1975) reacquired, less 48,655 issued under stock options (57,174 i n 1975).................................................................................. Balance at End of Year.............................................................................. 90,575 12,224,986 5,976,700 18,547,553 36,839,814 $ 192,561,537 92,260 10,091,206 2,991,645 13,583,602 26,758,713 $ 181,442,574 See Financial Review. CRTX 0357 3 CONSOLIDATED BALANCE SHEET AT DECEMBER 31 ASSETS Current Assets: Cash.......................................................................................................... Short-term investments, at lower of cost or market............................ Accounts receivable, less allowances of $2,665,872 ($2,477,014 in 1975)....................................................... Inventories, less LIFO reserves of $61,022,801 ($58,117,563 in 1975), at lower of cost or market: Finished goods.............................................................................. Work in process.............................................................................. Raw materials and supplies....................................................... Prepaid expenses................................................................................... Total current assets............................................................ 1976 $ 36,193,742 78,440,074 129,243,861 77,359,437 38,331,439 18,661,468 134,352,344 2,545,492 380,775,513 1975 $ 21,093,617 87,934,270 126,709,491 83,807,441 47,872,510 24,958,282 156,638,233 1,946,678 394,322,289 Investments and Other Assets: The Anaconda Company, cost of 4,120,230 common shares (3,282,401 in 1975) (see page 10)................................................. Unamortized debt discount on 8% debentures (see page 7) . . . Outlying lands....................................................................................... Miscellaneous............................................................................. 71,576,716 11,375,050 1,232,364 2,310,892 86,495,022 57,105,259 11,711,644 1,239,854 2,123,553 72,180,310 Property, Plant and Equipment at Cost: Land.......................................................................................................... Buildings and improvements....................................................................... Machinery and equipment....................................................................... 20,384,729 130,368,796 479,213,975 629,967,500 Less accumulated depreciation................................................................... 336,677,394 293,290,106 $760,560,641 18,713,012 126,863,312 432,770,948 578,347,272 322,649,045 255,698,227 $722,200,826 CRTX 0358 4 CRANE CO. and subsidiaries LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current maturities of long-term debt.................................................. Loans payable to banks.......................................................................... Accounts payable................................................................................... Accrued payrolls, taxes and other liabilities..................................... U.S. and foreign taxes on income....................................................... Total current liabilities.................................................. Long-Term Debt (see details on page 7)................................................... Deferred Income Taxes.............................................................................. Reserves and Other Liabilities................................................................ Minority Interest in Subsidiaries............................................................ Shareholders' Equity: Preference stock of Glenfield & Kennedy Holdings Limited, 5y2% . Cumulative preferred shares, 33A%, par value $100 (redeemable): Authorized--47,159 shares (50,919 in 1975); outstanding--24,043 shares (24,189 in 1975) afterdeducting23,116 shares in treasury (26,730 in 1975)....................... ........................................ Serial preferred shares, parvalue $5: Authorized--600,000 shares............................................................ Common shareholders' equity: Common shares, parvalue $6.25: Authorized--20,000,000 shares; outstanding--10,030,897 shares (10,039,024 in 1975) after de ducting 4,185,594 shares in treasury (3,429,694 in 1975). . . Capital surplus.................................................................................. Earned surplus-573,241,372 ($66,177,514 in 1975) is not restricted under a long-term debt indenture........................... Total common shareholders' equity................................ Total shareholders' equity.............................................. 1976 $ 17,692,397 18,040,916 69,093,557 55,038,089 3,179,443 163,044,402 260,866,023 32,720,214 6,968,782 10,400,634 1,700,000 1975 $ 13,134,891 11,564,805 65,526,357 58,801,501 22,218,441 171,245,995 239,112,445 26,613,269 6,894,705 10,997,305 2,020,000 2,404,300 2,418,900 62,693,106 27,201,643 62,743,900 18,711,733 192,561,537 282,456,286 286,560,586 $760,560,641 181,442.574 262,898.207 267,337,107 $722,200,826 See Financial Review. CRTX 0359 CONSOLIDATED STATEMENT OF CAPITAL SURPLUS FOR YEARS ENDED DECEMBER 31 1976 1975 Balance at Beginning of Year..................................................................... Excess of subordinated debentures converted over par value of 495,898 common shares issued (661,980 in 1975)....................... Excess of market value over par value of common shares issued as 2% stock dividend............................................................ $ 18,711,733 3,783,335 4,706,575 S 12,081,834 4,888,942 1,740,957 Balance at End of Year $ 27,201,643 $ 18,711,733 CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION FOR YEARS ENDED DECEMBER 31 Source of Funds: Operations: Net income.............................................................................. . Depreciation.............................................................................. ..... Amortization of debt discount................................................... Other, net........................................................................................ . . . . 1976 $ 47,958,777 36,380,436 3,352,778 6,296,522 1975. S 63,607,793 35,784,198 105,000 11,722,093 93,988,513 111,219,084 Increase in long-term debt, less original issue discount . . . .. Conversion of debt to common stock.......................................... Disposals of property, plant and equipment................................. Reduction (increase) in investments and other assets.................. . . . . . Application of Funds: Additions to property, plant and equipment............................ Investment in The Anaconda Company.................................... Reduction in long-term debt....................................................... Reacquisition of shares, less options exercised....................... Cash dividends.............................................................................. Reduction in reserves, minority interest and other................... . . . . . . . . . . . . 55,600,396 6,903,600 8,557,899 (179,849) 164,870,559 82,530,214 14,471,457 36,863,002 23,323,337 12,315,561 712,171 170,215,742 85.090,163 9,032,700 5,107,363 13,779,508 224,228,820 52,458,375 57,105,259 32,945,301 19,572,486 10,183,466 9,604,788 181,869,675 Net Source (Application) of Funds .................................................. . . $ (5,345,183) S 42,359,145 Increase (Decrease) in Components of Working Capital: Current assets: Cash and short-term investments......................................... . . Accounts receivable................................................................ . . Inventories.............................................................................. . . Prepaid expenses..................................................................... Current liabilities: Current maturities of long-term debt.................................... Loans payable to banks........................................................... Accounts payable.................................................................... Accrued payrolls, taxes and other liabilities....................... U.S. and foreign taxes on income......................................... . . . . . . . . $ 5,605,929 2,534,370 (22,285,889) (13,546,776) 4,557,506 3,567,200 (3,763,412) (19,038,998) (8,201,593) S 57,188,502 (4,584,169) (3,789,218) (1,165,6581 47,649,457 8,365,910 (7,426,316) 10,414,504 10,131,888 (16,195,674) 5,290,312 Increase (Decrease) in Working Capital......................................... S 42,359,145 See Financial Review. 6 CRTX 0360 DETAILS OF LONG-TERM DEBT AT DECEMBER 31 Crane Co.: 6'/2 % Sinking fund debentures due 1992, $2,000,000 due annually, after deducting $4,337,000 in treasury in 1976 ............................ 6'/t% Bank term loan due 1980, $1,875,000 due quarterly, fluctuating with minimum commercial lending rate .... Miscellaneous................................................................................... Subordinated debentures: 8% Sinking fund debentures due 1985, $8,241,000 due annually, after deducting $3,291,000 in treasury in 1976 (see page 4) . . 7% Sinking fund debentures due 1993,5% due annually, after deducting $3,768,000 in treasury in 1976 ................................ 7% Debentures due 1994, after deducting $3,818,000 in treasury in 1976 ................................................................................... 5% Convertible debentures due 1993, convertible at $12.50 per share (182,656 common shares reserved in 1976), after deducting $5,991,000 in treasury in 1976 ........................................................... 5% Convertible debentures due 1994, convertible at $14.37 per share (497,091 common shares reserved in 1976), after deducting $32,213,000 in treasury in 1976 ....................................................... CF&I Steel Corporation: 8% First mortgage and collateral trust bonds, sinking fund series due 1983, $1,000,000 due quarterly..................................... 6'A % Bank term loan due 1985, $2,500,000 due quarterly commencing in 1981, fluctuating with minimum commercial lending rate.............................................................................. 8% Mortgage note due 1983, $71,429 due annually .... Huttig Sash & Door Company: 7V'2% Loan payable, due 1980, $43,953 due quarterly.................. Foreign Subsidiaries: Crane Canada Limited sinking fund debentures: 53A % (collateralized by a general claim on property and assets), due 1985, $435,600 due annually, after deducting $435,600 in treasury in 1976 .............................................................................. Crane Ltd. (England): Bank term loan due 1977, fluctuating with bank rate.................. Bank term loan due 1978, fluctuating with bank rate.................. 15'/2% Bank term loan, fluctuating with bank rate, $680,000 due annually in 1980 and 1981................................ Clenfield & Kennedy Holdings Limited: 53/4% Unsecured loan stock due 1982 .................................... Miscellaneous....................................................................................... CRANE CO. and subsidiaries 1976 1975 $ 27,663,000 20,625,000 48,288,000 $ 28,205,000 28,125,000 158,424 56,488,424 65,922,600 13,563,400 48,259,000 2,283,200 7,143,200 137,171,400 185,459,400 25,000,000 40,000,000 428,571 65,428,571 483,485 59,083,200 13,886,400 48,360,000 3,829,100 12,500,900 137,659.600 194,148,024 29,000,000 _ 29,000,000 703,251 5,662,800 -- -- 1,360,000 1,006,861 1,464,906 9,494,567 $260,866,023 5.883,920 3,636,000 1,022,860 - 2,527,769 2,190,621 15,261,170 $239,112,445 CRTX 0361 7 FINANCIAL REVIEVVand accounting policies Consolidation The consolidated financial statements include all subsidiaries, and accounts carried in foreign cur rencies have been translated at the appropriate rates. Subsidiaries operating outside the United States and Canada had net sales of $81,297,000 in 1976, compared with $98,372,000 in 1975. In 1976 net in come from foreign operations amounted to $1,950,000 (before a $5,100,000 provision--see "Gain on Disposal of Capital Assets--Net"), compared with $3,415,000 in 1975. These subsidiaries represented 10.0 percent of shareholders' equity in 1976, down from 11.9 percent in 1975. Plant Improvement in 1976, $82,530,000 was invested in improving production facilities, principally at the Pueblo, Colo rado steel mill and other domestic facilities. The cost of property, plant and equipment is depreciated over estimated useful lives on the straight-line method. Generally, for income tax pur poses, depreciation is determined by accelerated de preciation methods as permitted under tax regula tions, and deferred income taxes are recognized for the difference. Pensions Pension costs charged against operations for the retirement plans maintained by the company and its subsidiaries were $34,549,000 in 1976, compared with $39,104,000 in 1975. Also charged to operations in 1976 was an additional pension cost of $811,000, compared with $4,452,000 in 1975 relating to certain retirees. Based upon latest estimates as of December 31, 1976, vested benefits exceeded pension plan assets and balance sheet accruals by $120,000,000 ($143,000,000 at December 31,1975) before future income tax benefits. These decreases were principally due to the high level of funding and revisions to actuarial factors. Current service and interest costs are funded an nually and prior service costs are funded on a 10-year basis. Pension plans in the United States are in com pliance with the Employee Retirement Income Security Act of 1974. Gain on Disposal of Capital Assets--Net The gain in 1976 included $19,960,000 arising from the sale of one steam coal property, less provisions of $1,122,000 for surplus and inactive buildings and equipment and $5,100,000 for termination expendi tures and operating losses of an international plant. After provisions for minority interest and income taxes, the net gain from these items amounted to $8,148,000. Miscellaneous Deductions Components are as follows: Minority Interest Loss on Foreign Exchange Loss (Gain) on Repurchase of Debentures Loss (Gain) on Investments-net Other 1976 1975 (in thousands) $1,680 $1,907 1,514 157 675 (668) 79 $3,280 (1,668) 2(024' 85 $2,505 Long- and Short-Term Financing Long-term debt was increased by $58,617,000 during 1976, principally by the negotiation of a $40,000,000 unsecured eight and one half year bank term loan for CF&I Steel and the issuance of $16,757,000 of 8 percent Subordinated Sinking Fund Debentures due 1985 in exchange for an additional 837,829 shares of The Anaconda Company. The original issue debt discount of $3,016,000 on the additional 1985 debentures is included with Invest ments and Other Assets. Long-term debt was reduced by $36,863,000 during 1976, compared with $32,945,000 during 1975. The 1976 decrease included $6,904,000 of debentures that were converted. Covenants contained in instruments under which the company has outstanding indebtedness: (i) re quire the company to maintain consolidated working capital of at least $150,000,000; (ii) require the com pany to maintain consolidated tangible net worth of at least $200,000,000; (iii) restrict payment of cash dividends; and (iv) restrict the issuance of additional senior funded debt (as of December 31,1976 the company could issue no additional senior funded debt). 8 CRTX 0362 CRANE CO. and subsidiaries At December 31,1976, the principal amounts of long-term debt repayments required for the next five years were 517,692,000 in 1977, $20,623,000 in 1978, , $22,284,000 in 1979, $21,218,000 in 1980, and $20,614,000 in 1981. At December 31,1976 there were $73,060,000 of unused short-term credit lines available with domes tic and foreign banks, and such lines are subject to annual review. Reserves and Other Liabilities A summary of reserves and other liabilities follows: 1976 1975 Pension and wage benefits Relining and rebuilding of blast furnaces Retainage on long-term contracts Miscellaneous (in thousands) 52,530 53,774 543 1,798 2,098 1,018 -- 2,103 56.969 56,895 Income Taxes A reconciliation of consolidated income before income taxes to the provision for income taxes (federal, state and foreign) is as follows: 1976 1975 Income before income taxes Permanent tax adjustments: Depletion Original issue bond discount Nontaxable net capital gains Nontaxable domestic dividends Unrealized foreign exchange loss Other (in thousands) 576,778 5114,202 3,942 840 4,213 2,216 (1,514) (609) 2,554 1,080 1,979 331 (157) 1,185 9,088 6,972 Taxable income for accounting purposes Tax @ 50% (composite rate) Less investment tax credit realized 567,690 5107,230 33,845 53,615 5,026 3,021 528,819 5 50,594 The provision for income taxes is composed of the following: Tax effect of timing differences: Depreciation Pension expenses Other 1976 1975 (in thousands) 5 2,370 5 2,577 408 5,968 1,808 1,231 Total deferred taxes Current income taxes paid or payable 4,586 24.233 9,776 40,818 Provision for income taxes 528,819 5 50,594 The foregoing provision includes foreign taxes of $5,423,000 and $8,300,000, and state taxes of $2,062,000 and $2,392,000, in 1976 and 1975, re spectively. United States income taxes have not been pro vided on undistributed earnings of foreign subsidi aries, since foreign tax credits available on any portion of these earnings not required for indefinite reinvestment are such that no significant tax would be payable upon distribution. Leases Rental expense was as follows for all leases for the years ended December 31,1976 and 1975: 1976 1975 (in thousands) Rentals on noncapitalized financing leases: Minimum S 4,906 5 4,759 Contingent 766 617 Rentals on operating leases: Minimum . 9,317 9.009 Contingent 235 338 515,224 514,723 Rental expense has been reduced by rental income from subleases of $1,354,000 during 1976 and $1,591,000 during 1975. Financing leases are defined as those in which the initial term of the lease substantially covers the useful economic life of the property or assures recovery of the lessors' investment. All others are considered operating leases. The company and subsidiaries lease buildings and equipment under noncancelable leases providing for annual rentals as follows: Total 1977 5 8,186 1978 7,257 1979 6,265 1980 5.273 1981 4,739 1982-86 19.963 1987-91 18.416 1992-96 9,778 1997-beyond 1,834 Financing Leases Operating Leases Machinery Machinery Build- and Build- and ings Equipment ings Equipment (in thousands) 5 960 5 4.141 51.949 1,241 3,791 1,510 1,483 3,417 1,026 1,458 2,953 832 1,468 2,607 661 5,802 12,566 1,582 5,405 12,485 526 1,969 7,804 5 1,834 51,136 715 339 30 3 13 - -- CRTX 0363 FINANCIAL REVIEWa.ND ACCOUNTING POLICIES (continued) The foregoing amounts have been reduced for rental income from noncancelable subleases by approximately $1,196,000 in 1977 and lesser amounts thereafter (total reduction $4,931,000). Certain of the leases may be renewed for periods of from 3 to 20 years and provide for an option to purchase or for annual rental payments of minimal amounts. The estimated present values of the net fixed mini mum rental commitments for all noncancelable financing leases, net of noncancelable subleases, are as follows: December 31 1976 1975 Buildings Machinery and equipment Subleases (in thousands) $15,327 $14,852 30,009 30,741 (2,214) (2,095) Net present value $43,122 $43,498 The weighted average interest rate used in the computation was 6.3 percent and ranged from 4 per cent to 12.75 percent. If all financing leases had been capitalized, net income for the years ended December 31,1976 and 1975 would not have been significantly affected. Stock Options A summary of option transactions follows: Outstanding January 1,1976 2% Stock dividend Options granted Options expired Options exercised Outstanding December 31,1976 Number of Price shares per share 143,838 2,618 39,600 (12,294) (48,655) 125,107 $ 7.46-23.53 ---- 25.25-36.75 8.98-34.00 7.46-23.53 $ 8.10-36.75 At December 31,1976, options for 61,068 shares were exercisable and 82,039 shares were available for grant. In 1975 options for 29,172 shares were granted and options for 57,174 shares were exercised. Shares and per share statistics have been adjusted for the 2 percent stock dividend, and 2-for-1 stock split in 1976. The plan is not a compensatory plan which would require charges to income. Estimated Replacement Cost Information In compliance with the rules of the Securities & Exchange Commission, the company has estimated the cost of replacing its plant and equipment as of December 31,1976, together with estimated depreci ation based on replacement cost for the year then ended. The company's Annual Report on Form 10-K (a copy of which is available upon request) contains unaudited estimates with respect to replacement cost. The company principally uses the LIFO method for inventory valuation so that substantially all in ventory profits caused by inflation have been elimi nated from net income. The replacement cost estimates in the company's Form 10-K are not necessarily indicative of either the amounts for which the assets could be sold, or the company's intent to replace such assets nor are they representative of costs that might be incurred in a future period, nor do they reflect any cost savings from improved equipment. Litigation Crane's lawsuit against American Standard, Inc. and Blyth & Company, Inc., arising out of the merger of Westinghouse Air Brake Company in 1968, re mains pending. The case is presently awaiting deci sion by the Federal District Court with respect to the assessment of Crane's damages and other appropriate relief, but the company is unable to predict the outcome of the matter. Subsequent Event Subsequent to the year end, The Anaconda Com pany merger with Atlantic Richfield Company was completed on January 12,1977. As a result of the merger. Crane received a cash dividend of $24,721,380, subject to a dividend taxof7V2 percent, and 2,060,115 Atlantic Richfield common shares in a tax free exchange for 4,120,230 common shares of The Anaconda Company. In accordance with Accounting Principles Board Opinion No. 29, an additional non-recurring substantial gain will be required to be reported in the first quarter of 1977, even though an actual sale of this common stock has not taken place. The amount of this additional ac counting gain will depend upon the value assigned by the company to the Atlantic Richfield common shares received. 10 CRTX 0364 Quarterly Results for the Year (Unaudited) (in thousands) Quarter Sales Gross Profit 1976 1st $ 270,048 $ 47,732 2nd 285,217 47,969 3rd 271,559. 43,611 4th 260,782 46,165 $1,087,606 $185,477 1975 1st 2nd 3rd 4th $ 281,369 288,367 278,832 270,926 $1,119,494 $ 60,669 57,502 54,528 58,200 $230,899 Net Income $11,960 18,520* 8,113 9,366 $47,959 $14,886 16,321 15,848 16,553 $63,608 CRANE CO. and subsidiaries Net Income per Common Share Primary Fully Diluted $1.16 1.81 .80 .93 $4.70 $1.07 1.68 .76 .87 $4.38 $1.44 1.57 1.55 1.61 $6.17** $1.24 1.39 1.37 1.45 $5.45** Market and Dividend Information--Common Shares Quarter 1st 2nd 3rd 4th New York Stock Exchange Price per Share 1976 1975+ High Low High Low $39% 3 7Vz $23% 30% $20% 26'A $13% 19Va 39% 29% 26% 23V4 26% 24% 20% 20% Dividends per Share 1976 1975** $ .30 .30 .30 .30 $1.20 $.20 .20 .24 .34 $.98 See page 8-Gain on disposal of capital assets-net. 'Adjusted tor 2% stock dividend in February, 1976 and a 2-for-1 stock split in May, 1976. tAdjusted for 2-for-1 stock split in May, 1976. REPORT OF INDEPENDENT AUDITORS To the Shareholders of Crane Co. We have examined the consolidated balance sheet of Crane Co. and subsidiaries as of December 31,1976 and 1975, and the related consolidated state ments of income, earned surplus, capital surplus and changes in financial position for the years then ended. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. We did not examine the financial statements of CF&I Steel Corporation, a consolidated subsidiary, which state ments were examined by other independent certified public accountants whose reports thereon have been furnished to us. Total assets and net sales of CF&I Steel Corporation constituted approximately 47% and 38%,respectively, of the related consolidated totals in 1976 (43% and 38% in 1975). Our opinion expressed herein, insofar as it is related to the amounts included for the foregoing subsidiary, is based solely upon the reports of the other inde pendent certified public accountants. In our opinion, based upon our examinations and the aforementioned reports of other indepen dent certified public accountants, the financial state ments referred to above present fairly the consoli dated financial position of Crane Co. and subsidiaries at December 31,1976 and 1975, and the consolidated results of their operations and changes in financial position for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis. New York, N.Y. January 24,1977 ^ CRTX 0365 11 ANALYSIS OF SUMMARY OF OPERATIONS Consolidated sales for 1976 were $1,087,606,000, 2.8 percent below the 1975 level. Crane Domestic sales decreased 8.3 percent from the prior year due to the lower demand for capital goods in its major market areas and the related decline in the industrial distribution business. CF&I Steel Corporation sales decreased 3.5 percent, primarily due to a change in product mix. Although the sale of rails, wire and rolled products increased 9.5 percent in 1976, the overall decrease was primarily the result of a deteri oration in the market for oil-field tubing and casing. Sales of Huttig Sash & Door Company increased 44.5 percent in 1976, reversing a 10.3 percent decline in 1975 from the 1974 results. Huttig's market areas-- the South, Southeast, Southwest and Midwest--were benefited by a higher level of single-family housing starts and the expansion of home improvement and remodeling activity. Crane Canada Limited sales in 1976 decreased 4.0 percent due to a general slow down in the Canadian economy coupled with the restrictions imposed by wage and price controls.instituted in late 1975. Unfavorable foreign exchange fluctuations and the elimination of a marginal opera tion were largely responsible for a 17.4 percent de cline in sales of International operations during 1976. Consolidated sales for 1975 decreased 2.1 percent from 1974, principally due to low demand for building products of Crane Domestic. This reduced demand, however, was partially offset by increased sales of fluid and pollution control products. CF&I Steel Corporation's 1975 sales declined 2.5 percent from the 1974 level. The latter results included sales from operations that have since been terminated. Consolidated operating profit in 1976 decreased 35.9 percent from 1975, primarily due to the inability to recover higher operating costs through price in creases. Crane Domestic's operating profit declined 16.9 percent as a result of lower sales and product mix. CF&I Steel Corporation experienced the sharpest decrease in operating profit, 56.3 percent. This decline was attributable to higher employment, material, maintenance and other costs which, due to current market conditions, were not recovered through increased selling prices. Huttig Sash & Door Company's operating profit increased more than 100 percent over 1975 results, reflecting the substantial increase in sales volume. Crane Canada Limited's operating profit declined 47.2 percent following a decline in sales as well as an accompanying change in product mix and profitability. During 1976 Inter national operating profit improved slightly, despite lower sales, due to the elimination of an inefficient operation. Consolidated operating profit in 1975 improved 4.0 percent over 1974, which was attributable to higher volume and improved margins for fluid and pollution control products. These factors were partially offset by lower margins for steel products and decreased sales of building products. The in crease in corporate expenses in 1975 was primarily due to litigation costs relating to VVABCO and Anaconda. Interest expense in 1976 increased 42.7 percent, -- - due to the issuance in late 1975 and early 1976 of $82,404,600 principal amount of 8 percent Sub ordinated Debentures given in exchange for 4,120,230 common shares of The Anaconda Company. In addi tion, CF&I Steel Corporation arranged a $40,000,000 term loan to partially finance its capital expenditure program. During 1975 interest expense decreased by 16.0 percent because of lower outstanding debt and a general decline in interest rates. Income before taxes decreased 32.8 percent in 1976 as a direct result of lower operating profit and higher interest expense. This decrease was partially offset by greater gains on disposal of capital assets and dividend income. Income before taxes for 1975 in creased 17.3 percent over 1974 due to higher operat ing profit, lower interest expense and the absence of loss on disposal of capital assets in 1975. Income taxes for 1976 were at an effective tax rate of 37.5 percent compared with 44.3 percent for 1975. Higher investment credits earned in 1976 and higher permanent tax savings in relation to fully taxed in come caused this decrease in the effective tax rate for the year just ended. The effective tax rate for 1975 was higher essentially because of greater income before taxes subject to maximum income tax rates and lower investment credits. 12 CRTX 0366 FIVE YEAR SUMMARY OF OPERATIONS UN THOUSANDS) CRANE CO. and subsidiaries 1976 1975 1974 1973 1972 Net Sales..................................... . Depreciation.......................................... Operating Profit.......................................... Interest Expense..................................... Income Before Income Taxes ...... Income Taxes.............................................. Extraordinary Credit................................. Net Income................................................... . $1,087,606 36,380 80,595 22,699 76,778 (28,819) $ 47,959 Net Income per Common Share* Average Shares Outstanding . . . . Assuming Conversion of Debentures . Cash Dividend per Common Share* , $4.70 4.38 1.20 `Adjusted for 2% stock dividends, and 2-for-1 stock split in 1976. $1,119,494 35,784 125,738 15,905 114,202 (50,594) -- $ 63,608 $6.17 5.45 .98 $1,144,031 34,880 120,885 18,933 97,354 (41,221) -- $ 56,133 $5.31 4.20 .67 $947,093 30,163 50,973 19,406 32,558 (11,981) -- $ 20,577 $1.89 1.49 .45 $844,395 28,277 35,050 19,476 17,354 (4,901) 2,020 $ 14,473 $1.29 1.04 .38 ANALYSIS OF NET SALES AND OPERATING PROFIT (IN THOUSANDS) 1976 1975 1974 1973 1972 Amount % Amount %_ Amount % Amount % Amount % Net Sales Crane Domestic................... $ 325,897 30 $ 355,341 32 $ 377,312 33 $ 319,423 34 $299,389 36 CF&I Steel Corporation . . 413,054 38 427,900 38 438,721 38 342,814 36 282,039 33 Huttig Sash & Door Company Crane Canada Limited . . . International Operations . . 116,328 11 151,030 14 81,297 7 80,495 157,386 98,372 7 14 9 89,762 155,869 82,367 8 14 7 93,904 10 115,190 12 75,762 8 84,300 102,324 76,343 10 12 9 Total Net Sales................... $1,087,606 100 $1,119,494 ioo $1,144,031 100 $ 947,093 ioo $844,395 ioo Operating Profit Crane Domestic.................. CF&I Steel Corporation . . Huttig Sash & Door Company Crane Canada Limited . . . International Operations . . Corporate............................ Total Operating Profit . . $31,648 36 29,611 33 10,861 12 8,448 9 8,520 10 89,088 100 (8,493) $80,595 $ 38,081 28 67,788 50 5,110 4 15,995 12 7,841 6 134,815 100 (9,077) $125,738 $ 28,532 22 75,261 59 7,253 6 13,437 11 3,025 2 127,508 100 (6,623) $120,885 $ 9,433 17 27,016 48 9,062 16 6,452 11 4,551 8 56,514 100 (5,541) $50,973 $ 7,776 20 15,304 38 6,419 16 5,112 13 5,202 13 39,813 ICO (4,763) $35,050 CRTX 0367 13 CRANE DOMESTIC Crane's domestic operations provide basic industry with a broad range of capital goods. Fluid and pollu tion control products--valves, fittings, pumps and water conditioning systems--principally serve petro leum, chemical, power, pulp and paper, and munici pal markets. Crane also supplies plumbing and related building products for construction markets as well as aircraft systems and accessories for the aero space industry. Fluid and Pollution Control Products Demand for Crane fluid and pollution control products softened somewhat in 1976, with the result that sales and earnings did not keep pace with the records set the prior year. This softening occurred primarily in the company's industrial valve markets as customers worked off high inventory levels estab lished in 1975. Sales of pump products, however, increased. The petroleum, chemical, power, and pulp and paper industries, which constitute Crane's primary industrial markets, did not experience the increases in capital equipment expenditures which had been expected during 1976. Spending was consistently lower than these industries had anticipated, as com-, panies waited to test the strength and duration of the economic recovery before committing large sums to expansion. However, once new capacity and replacement needs again achieve priority, the mar kets Crane serves, which are basic to the nation's economic system, should again experience betterthan-average growth. Throughout the year major attention was focused upon production economies at manufacturing facili ties to meet a lower level of demand. At the same time, Crane continued to invest in facility improve ment. These improvements place the company in an excellent position to maximize market potential when capital spending again curves upward. During 1976 the Valves and Fittings Division expe rienced its second-best earnings year despite lesser demand. Tight cost controls coupled with manufac turing efficiencies contributed to these good results. The company introduced a moderately priced gen eral service butterfly valve designed for broad appli cation in commercial and industrial piping systems. This product, together with the high performance ball valve line, places Crane in an excellent position to benefit from the expanding quarter-turn valve mar ket, the fastest growing segment of the industry. Dur ing the year progress also was made in redesigning the stainless steel valve line to achieve higher product quality with less weight and material cost. The division's facility improvement program, carried out over the past five years, is near completion. Final phases include a new bronze casting center, which became operational in late 1976, and modernization of the company's steel casting center, which will be- * completed fn mid-1977. With the conclusion of this program. Crane will have valve manufacturing capa bilities second to none in the industry. In mid-1976 Crane consolidated all pump opera tions in order to better coordinate new product de velopment, marketing, engineering and facility utilization. One of the first results of this consolida tion was the introduction of the Chemtran chemical process pumps to the Chempump line. The addition of this product increases opportunities for standard pump sales in the chemical process industries, where Chempump presently enjoys a major share of the critical service, leakproof pump market. Record sales of Chempump units occurred during the year, with 14 CRTX 0368 sizable increases in shipments to the commercial nuclear market. Development of the Deming large solids handling pumps was completed last year, as six new sizes were added to the line. With engineering and production capabilities to meet virtually any solids handling ap plication, Deming now has entry to the growing municipal and industrial waste markets. Deming also introduced a new heavy duty in-line vertical process pump designed for ease of service and efficient space utilization. Again this year the Pump Division expects to increase sales to industrial markets. In addition to the new product potential for municipal and indus trial waste and chemical process applications, the division is seeking greater penetration of nuclear and fossil-fuel power markets. Cochrane Environmental Systems Division achieved record earnings last year. The division has expanded its line of ozone generating equipment and currently produces units capable of generating up to 100 lbs. of ozone per day. Orders for Cochrane ozonators were up sharply in 1976, reflecting a broadening accep tance of ozone in pollution abatement. In addition to bacterial destruction, ozone is capable of controlling odor and clarifying effluent color. Such characteristics make ozonation suitable for a number of chemical and food processing applications. Cochrane has stepped up its marketing program for the division's unique condensate booster system. This recycling system is designed with energy conserva tion features which can reduce industrial steam boiler fuel costs up to 20 percent. Crane Supply Company, Crane's wholly owned distribution network, offers industrial markets a full line of Crane fluid control equipment as well as related products of other manufacturers. The con tinuing lull in capital expenditures had a direct effect on the division's business, as both 1976 sales and earnings were below year-earlier levels. Inventories have been kept well in line with lower business activ ity, however, and with approximately 50 branches located across the country, Crane Supply is well posi tioned to benefit from increased capital spending when it occurs. Building Products Crane's Plumbing Division experienced stronger sales and earnings last year. This improvement is attributable both to the recovery in single family housing starts in 1976 and to production efficiencies implemented by the company during the industry's depressed years of 1974-75. Last year the Plumbing Division purchased Classic Brass Manufacturing Company, a maker of decorator plumbing brassware. The high-style Classic Brass designs and custom finishes utilized with Crane's quality engineering give the company a new, special ized product line which is particularly applicable to the growing home improvement and remodeling market. A second product introduced for these mar kets in-1976 is a line of combination vanity lavatories. As a further step toward meeting current decorating tastes. Crane also added two new colors, a warm cream and a deep brown earth-tone, to its decorator bathroom fixtures. Order levels were strong at 1976 year-end, an en couraging sign for the division. With single family starts expected to increase again in 1977 and a pickup anticipated in commercial and industrial construc tion, the outlook for building products is good. Aircraft and Aerospace Products Crane's Hydro-Aire Division designs and manu factures brake control systems, fuel and hydraulic pumps, controls and other accessories and systems for military, commercial and general aviation aircraft. Left to right: Cochrane water-treating equipment is used in this nuclear power plant. Crane steel valves are installed in this California refinery. Deming pumps are part of an extensive flood-control project near St. Louis. Chempump pumps coolant in system used to test radar and fire control of F-14 Tomcat fighters. Teakwood is a new decorator color for plumbing fixtures. CRTX 0369 15 Distinguished tor high reliability and long life, HydroAire's products are designed to improve the safety and dependability of aircraft performance. Sales and earnings increased in 1976, continuing the upward trend of the past few years. Broader penetration of the aircraft market has been quite successful, as Hydro-Aire substantially increased sales of the latest Hytrol Mark III anti-skid kit systems to general avia tion, commuter and military sectors of the market last year. The division also enjoyed increased sales to manu facturers of large commercial aircraft. During the latter half of 1976, the commercial airlines began re newing orders for new planes to replace their aging fleets. All of these existing production aircraft incor porate Hydro-Aire products. In the past several years the division has focused its research efforts upon developing microminiatur ized components for its electronic systems in order to achieve greater reliability. The manufacturing methods and test criteria for these devices are far more demanding than with conventional electronic circuits and, as a result, significant gains are achieved in performance. The division is now using micro miniaturized systems in the invermotor fuel pump and automatic braking and skid control systems, a factor which had a direct bearing on increased sales of these products last year. The outlook for both 1977 and beyond is quite favorable. The general aviation market continues to expand as use of lighter planes increases for energy exploration and for interurban transportation in de veloping nations. This factor, together with increasing need for replacement craft by commercial airlines, should continue to heighten demand for Hydro-Aire's products. CF&I STEEL CORPORATION CF&I serves the transportation, petroleum, mining, construction and agricultural industries, primarily in the Rocky Mountain area. A vertically integrated steel manufacturer, CF&I supplies its own coking coal, iron ore, limestone and dolomite from company-operated mines and quarries. A subsidiary, The Colorado & Wyoming Railway Company, transports raw materials to Pueblo from mines in Colorado and Wyoming. Operations The past year was a difficult one for the steel industry as low levels of capital spending and significant in creases in steel imports reduced demand for domestic steel products. The lower demand generated greater competitive pressures, which prevented CF&I from raising prices to offset increased labor and materials costs. As a result, sales and earnings were below 1975 levels. Sales of rails and accessories continued at the high rate established a year earlier. CF&I is one of only three standard rail manufacturers in the United States, and the outlook for rail products is excellent for both' ' the near and long term. The formation of ConRail and subsequent legislation assures the availability of gov ernment funds for needed track replacement and maintenance of the financially troubled northeastern railroads. The program will draw heavily upon the capacity of the two eastern rail manufacturers. Be cause of this demand, however, CF&I is in a position to gain a greater share of the midwestern rail market as well as complement ConRaiTs needs. In addition, high energy costs have increased the desirability of rail for economical freight and passenger transporta tion. Greater emphasis upon development of the nation's coal reserves for power generation will ne cessitate expansion of existing rail service for coal and related product haulage. 16 CRTX 0370 Demand for oil country casing and tubing declined sharply in 1976. The inability of oil and gas producers to raise prices on new domestic supplies caused a slowdown in new oil exploration programs. Distribu tors were able to meet demands for tubular products primarily from existing inventories, and therefore re duced their mill orders throughout the year. The long term projection for oil country products appears opti mistic. The nation's energy requirements are steadily increasing, and new sources of petroleum must be developed. Wire products experienced a gain in sales last year as a result of increased demand for certain products in light manufacturing and residential construction markets. If the expected recovery in industrial and commercial construction materializes, wire product sales should increase further. The heavy construction lag had a negative effect upon sales of structural and cutting edge products. In addition to the slow pace of industrial building, re stricted government spending on highway construc tion programs softened demand for these products. The current economic recovery has not yet gen erated sufficient strength or confidence to cause any notable expansion in most of the industries CF&I serves. When an upturn does occur, CF&l's strong market position and product mix should result in a resumption of the company's recent growth trend. Facilities A $23 million expansion of the Pueblo plant's steel making facilities was completed in 1976. These addi tions, which include a second electric furnace and a six-strand continuous caster, have increased CF&l's basic steelmaking capacity from 1.6 million ingot tons to 1.9 million ingot tons annually. Prompted by growing demand for standard rail, construction was started last year on a major expan sion and modernization of the companv's rail mill fa cilities. This program will be completed in early 1979 and will increase CF&l's rail production capacity by approximately 50 percent. In addition to greater ca pacity, the new facility will provide important econ omies in production costs of rails, tubular products, bars and wire products. The first phase is well into construction and is expected to be completed late this year. This initial stage includes manufacturing capability for long length rails and modernized rail finishing. CF&I will have the first mill in the United States capable of rolling rails up to 25 meters tong, more than twice the current standard length. During 1976 improvements were made in the tubu lar manufacturing facilities, which will result in signifi cant cost reductions. Included in these improvements are new cut-off machines and a new coupling shop. Plans are now being developed for the installation of additional tubular billet conditioning facilities and heat treating capacity, which will increase production capacity for high grade oil country goods. New equip ment has been installed at the wire mill, which in creases capacity and product quality. Further major improvements at the mill are currently under study. At the Sunrise, Wyoming iron ore mine, a beneficiation plant became operational early this year. The plant separates iron-bearing ore from waste rock at the mine site, thereby reducing shipping costs and im proving the efficiency of blast furnace operations. CF&I continues to develop its raw material supplies. The new Maxwell Coal Mine, located in southern Colorado, is currently under development and will come into production in 1977. This mine will meet the Pueblo plant's full requirements for high volatile metallurgical coal. Plans are underway to enable the company to become self-sufficient in supplying its Left to right: Production of microelectronic components at Hydro-Aire. Second electric furnace in operation at CF&l's Pueblo mill. Structure to house the rail mill expansion is nearing completion. Development work at the portal of the new Maxwell Coal Mine. All automatic in-line rolling at the 11-inch bar mill is controlled from this pulpit. CRTX 0371 17 low volatile metallurgical coal, as well. CF&I has ob tained leases, subject to government approval, and has begun preliminary engineering on development of a low volatile coal mine at Bokoshe, Oklahoma. In addition to upgrading manufacturing and mining capabilities, CF&I has advanced its air quality im provement program. New facilities to control fugitive dust emissions were installed at the ore preparation area in 1976, and a new baghouse cleaning system was added to the lime plant. Major emission control im provements are being installed on the basic oxygen furnace. These include a new electrostatic precipita tor on the furnace's main stack and facilities to control emissions generated during charging and tapping operations. In May, 1976 CF&I completed the sale of 640 acres of fee lands and underground mineral interests in ap proximately 7,560 acres in Carbon County, Wyoming. This property, which contains nonmetallurgical steam coal, was sold for a total cash price of $20 mil lion. CF&I has reserved all oil and gas rights. Current ly, the company owns more than 350,000 outlying acres in the Rocky Mountain area, which offer poten tial for further natural resource development. HUTTIG SASH & DOOR COMPANY Huttig manufactures and distributes millwork and allied building products primarily to residential con struction markets. Huttig's branches are concentrated in the South, Southeast, Southwest and Midwest, the fastest growing residential construction areas in the country. Huttig performed at record levels in 1976 as earn ings doubled on a 45 percent sales advance. For the first time in the company's 91-year history, sales ex ceeded $100 million. The year's strong rebound in home building activity meant increased demand for all of Huttig's products. In addition, the company's 28 branches are strategic ally located in the high residential growth states of the Sunbelt and Midwest. These areas captured a higher-. than-average portion of the home construction mar ket last year, a trend which is expected to continue in future years. Huttig also has benefited from the expansion in home improvement and remodeling--a domestic mar ket which increased an estimated 15 percent in 12.76 alone. The pressures of steeply rising home .rices together with accelerating maintenance and energy costs continue to generate greater activity in this area. Sales of energy-saving units made a strong contri bution to 1976 results. Among these were insulated metal door entrance systems and insulated window units. The latter product line, first manufactured by Huttig last year, was particularly well received. To meet increased demand for insulated windows, Huttig established glazing facilities for these window units at two southern branches. Plans are underway to estab-* lish similar operations in the Midwest in 1977. Huttig also is building a new larger facility at its Rockford, Illinois branch to consolidate operations more effi ciently while better serving this expanding business region. To further penetrate southern markets, plans are underway to establish new branch operations in Tennessee and South Carolina during 1977. The current economic outlook points to further ' growth in home building throughout 1977. With a firmly established position in its market areas, Huttig should continue to perform well. 18 CRTX 0372 CRANE CANADA Crane Canada Limited manufactures and distributes valves, pumps, pollution control and water condition ing equipment for basic industrial applications as well as plumbing fixtures, fittings and related products for the construction industry. Primary Canadian markets parallel those in the United States. The rapid expansion of the Canadian economy halted abruptly in the spring of 1976, signaling a pe- ' riod of slower growth in capital spending. As a result, sales of Crane Canada's valves and pumps did not meet prior year levels. Water treatment equipment, however, experienced good demand, especially in the thermoelectric power generation sector. Crane Canada also has increased its share of the expanding markets for municipal and industrial effluent handling equipment. These markets offer better-than-average long term growth potential for the company's prod ucts as environmental pressures intensify. Although the need for industrial investment in new plant and equipment remains, economic controls which took effect in late 1975 may tend to slow busi ness expansion in 1977. These controls, however, have resulted in a substantial lowering of inflation. It is hoped that with a continuation of this trend controls will be eased somewhat, providing encouragement for a renewal of capital spending programs. Demand for plumbing products improved during the year, paced by a steady recovery in residential construction which more than offset a continuing weakness in commercial and industrial markets. Con sequently, sales of bathtubs and plumbing fittings were ahead of 1975 results. Sales of vitreous china fix tures, however, began to soften in the final six months of the year due to competition from low priced imports. Crane Supply Division, which distributes the com pany's products and related items of other manufac turers throughout Canada, performed below 1975 levels. Sales of plumbing products for residential con struction ran ahead of 1975. However, the major thrust of the division's business is directed toward in dustrial markets, and the weakness in these sectors contributed to lower overall sales and erosion of profit margins. With nearly 50 branches located coast-to-coast, Crane Supply is one of the largest distribution organizations in Canada. The division's performance should improve once a resumption of business investment materializes. CRANE INTERNATIONAL One of the largest valve and fittings manufacturers in Europe, with operations in the United Kingdom, France, Spain and The Netherlands, Crane is a leading supplier to petroleum, petrochemical, chemical, power, marine and municipal waterworks markets. An Australian valve plant serves that country, while a pump facility in Mexico sells to industrial and.agdcultural markets in Latin America. Problems of escalating material and labor costs and the consequent restriction of business capital invest ment which plagued most of the world's economies last year had an adverse effect upon sales and earnings of Crane's international operations. Additionally, cur rency devaluations in Mexico and Australia plus the lowered values of the pound, the franc and the peseta further depressed results when translated into U.S. currency values. Despite these pressures, however, performance improved in several areas. Left to right: Bag house at the sintering plant is part of CF&l's air quality improvement program. Tulsa, Oklahoma unit is one of Huttig's 28 branch locations. Assembly of window units at a Huttig branch. Crane plumbing fixtures were used throughout Montreal's Olympic Stadium and Village. Tufts Cove Station, one of four Nova Scotia power plants equipped with Crane valves. CRTX 0373 19 In the United Kingdom, where Crane manufactures industrial and municipal waterworks valves, pumps, fittings and steel castings, greater overall productivity resulted in higher earnings for Crane Ltd. even after foreign currency conversion. Results would have improved further if not for the poor productivity and continuing labor unrest at one manufacturing facility, which offset good performances at other locations. The United Kingdom increased export sales during the year, particularly to petrochemical and power customers in the Middle East. Crane Ltd. also estab lished a new valve service center at its Ipswich facility in 1976. Servicing, which covers all standard industrial valves, provides significant productivity improvement for customers. In France, Crane S.A. experienced an improved sales year in 1976. A month-long work stoppage com bined with a sharp drop in demand for low pressure standard steel valves caused a reduction in net earn ings. Sales of the company's high pressure steel valves and process safety valves were strong domestically and achieved greater penetration of export markets in the chemical, petrochemical, nuclear and fossil power industries. Crane S.A. expects further growth of high pressure valve export sales, particularly its newly de veloped high pressure ball valve. Continuation of the French government's domestic nuclear power pro gram offers additional market opportunity. Overall, the outlook for 1977 appears strong. Crane Nederland N.V., which manufactures valves, fittings, pipe and central heating products for residen tial, commercial and light industrial construction, experienced a sharp rise in 1976 sales and earnings. Major productivity gains plus heightened activity in light construction markets were responsible for these improvements. Changing political conditions, an inflation rate of nearly 20 percent, and the resultant economic insta bility made Spain a very poor environment for indus trial operations in 1976. Crane^FlSA, S.A. was no ex ception, as the company's valve business was off, particularly in domestic shipbuilding, refining and steel markets. However, Crane-FISA's export sales to chemical and petrochemical customers held up well, and the company continues to expand its export activities. Crane Australia Pty. Limited posted a good year in 1976, although results were slightly lower than 1975's record performance. Australia, too, experienced high inflation and a slower rate of capital investment as well as currency devaluation in the fall. Despite these conditions, valve shipments to refining and chemical processing customers remained strong. With the Aus tralian government implementing anti-inflationary measures and encouraging foreign investment in the country, Crane Australia's market growth is expected to continue. The performance of Crane-Deming de Mexico S.A., which manufactures pumps for industrial and agri cultural applications, improved during 1976 despite two devaluations of the Mexican peso. The company continues to expand its share of the industrial and . . irrigation pump markets, with the latter offering par ticularly strong growth potential. Left to right: Crane steel valves control flow in an Australian refinery. This pollution control station in Cheshire, England uses Crane valves and fittings exclusively. 20 CRTX 0374 ._|]ohn.D. Garrison j^*Pa'rtner, Lord, Day & Lord, Attorneys at Law i - |&UT;'T5ruce A. Cimbel 3|Director, National Aviation - &Tec/ino/ogy Corporation, investments Lewis A; Lapham m&V:?DiDreirecctotorr., BBaannkkeerrss Trust New York '. Corporation and other companies ' Joseph V. Quarles Director, Simmons Company, Manufacturing , Samuel R. Sutphin ' Director, Norfolk & Western Railway Company, Scott Paper Company, Indiana Bell Telephone Company, Indiana National Corporation and other companies Crane, CF&I, Chempump, Cochrane, Deming, Hydro-Aire and Hytrol are registered trademarks. Chemtran and Classic Brass are trademarks of Crane Co. Robert R. Foster " Wee President & General Manager- Crane Supply Company BOND TRUSTEES AND- '-----DISBURSING AGENTS Citibank, N.A. New York, New York 10015 Philip H. Gregware Vice President & General Manager-- ' Plumbing Division ; . Bank of America National Trust and :..; Savings Association-. Los Angeles, California 90054- John C. Klein ' '- Vice President & General Manager- Engineered Products Division James F. O'Brien, Jr. Vice President--Finance William H. Roberts Vice President & General Manager--- Valves & Fittings Division Mark R. Weil Vice President--Facilities & Real Estate Jonathan 'G'Henshaw Treasurer - Paul R. Hundt Secretary & General Counsel R. Kenneth Whitley Controller'-'". AUDITORS Ernst & Ernst New York, New York 10005 EXECUTIVE OFFICES/ T --. -.-: Crane Co., 300 Park Avenue New York, New York 10022 Telephone: (212) 980-3600- EQUAL EMPLOYMENTOPPORTUNITY POLICY Crane Co. is an equal opportunity employer. 11 is the policy of theCompany to recruit, hire, promote and transfer to all job classifications without regard to race, color, religion, sex, age or national origin. CRTX 0375 CRANE CO. 300 PARK AVENUE, NEW YORK, NY 10022 FLUID AND POLLUTION CONTROL STEEL BUILDING PRODUCTS AEROSPACE AND AIRCRAFT PRODUCTS CRANE CRTX 0376