Document K6d59z5GxonkOm2NZgYrQx8n6

-k>N}O Contents Annual Meeting Form 10-K Financial hignlignts . Letter to shareholders Financial statements Financial review ..................................................................... 11 Analysis of summary of operations ....................................... 16 Review of operations.............................................................. 18 _ The Crane Co. 1980 annual meeting will be held on Monday, April 28,1980, in Rooms B and C, 2nd Floor, Morgan Guaranty Trust Company of New York, 522 Fifth Avenue, New York City, at 10 A.M. ___________________________________________ _________ Copies of Form 10-K for the year 1979, which are to be filed with the Securities and Exchange Commission, are available without charge to each shareholder of the Company upon written request made to the Secretary, 300 Park Avenue, New York, New York 10022. On the Cover _______________________ Workmen are converting the kiln at Medusa's Charlevoix plant to the more fuel-efficient preheating, flash calcining process. This is part of the $56 million expansion and modernization program which will increase capacity approximately 80% while reducing fuel cost-per-ton by one-third. 1V7V Annual Report Crane Co., celebrating its 125th anniversary in 1980, is a diversified manufacturer ofproductsfor basic industry. The company's business is organized in six segments: Crane Domestic, CF&I Steel Corporation, Medusa Corporation, Huttig Sash & Door Company, Crane Canada Limited and Inter national Operations. Principal products include steel, cement, fluid andpollution control equipment, build ing products, aircraft and aerospace systems. Fluid Control Steel Building Products Operations Crane Domestic Crane-U.S.A. New York, New York R. S. Evans, Executive Vice President & General Manager Hydro-Aire Division Burbank, California B. J. Barnes, Vice President & General Manager Cavalier Corporation Chattanooga, Tennessee W. W. Williams, President CF&I Steel Corporation Pueblo, Colorado R. J. Slater, President Huttig Sash & Door Company St. Louis, Missouri S. P. Wells, President Medusa Corporation Cleveland. Ohio W. M. Troutman, President Crane Canada Limited Montreal, Canada G. A. Kelly, President International Crane Australia Pty. Limited St. Marys, Sydney. Australia P. J. Farrell, Managing D-rectm Crane Ltd. London, England Leslie V. Chater, Chairman J.M.Fraser, Managing Director Crane-Deming de Mexico S.A. Monterrey, Mexico L. B. Obeso, General Manager CRTX 0436 To Our Shareholders: Crane Co. sales 7/ere 51.573.199,000 m 1979 compared -vith SI 227.449.000 in 1978. Net income for the year rose 55.6 percent to S55.029.000 from $35,355,000 a year earlier. Net income per share was $5.50 compared with $3.44 in 1978. Depreciation for the year amounted to $73,869,000 compared with $51,189,000 in 1978. Capital expenditures were $85,315,000 in 1979 compared with $57,403,000 in 1978. The company's improved performance reflects the inclusion of Medusa Corporation results from April 1,1979 and increased earnings from steel, aerospace and international operations. Medusa, a major producer of cement and aggregates, is an impor tant part of.Crane's long-term plan to maintain a strong position in basic industries. Medusa owns or controls most of the raw materials required for its operations. To meet the requirements of an agreement with the Federal Trade Commission, Medusa plans to sell its Dixon, Illinois cement plant and, in December, an agreement of sale was made with Lone Star Industries Inc. The capacity lost by this divestiture will, however, be offset by the expansion and modernization of the Charlevoix, Michigan plant. This project is on schedule for completion this summer. Located on Lake Michigan, the Charlevoix plant has the advantage of being able to ship by lake carrier to serve the Great Lakes market. Medusa is continuing several additional projects to improve prof itability. By year-end, two obsolete high-cost cement facilities and some marginal aggregates operations had been closed. Organiza tional changes have been made to improve sales, marketing and plant operations. CF&I Steel Corporation's results improved in 1979 and the outlook for earnings growth remains favorable. The new rail mill has been completed and startup costs, for the most part, have been elimi nated. Rail capacity has been increased by 50 percent and demand for rails continues to be strong. With the expansion of drilling activity in the west, the market for oil country tubular products is also en couraging. CF&I has begun a program to upgrade production of casing and tubing. Huttig Sash & Door Company sales and earnings held up well in 1979 despite weakness in housing starts. Branches in the southeast and sunbelt states continued to perform well. New facilities which were opened during the year also contributed to the increase in sales. With the exception of specialty aircraft and aerospace operations, which achieved record sales and earnings, 1979 was a difficult year for Crane's Domestic Operations. Action has been taken, however, to strengthen these activities. Crane Supply, the company's wholesale distribution network, has been scaled down to improve profitability. Twenty-six branches were sold in August. Crane Canada and International Operations performed well during the year. While operations in the Netherlands were sold in June, in creased sales in the United Kingdom more than offset the contribution that had been made by the Dutch operation. CRTX 0437 Crane enters the 1980s with strong ccerattng ana !tnanc;ai posi tions. The company's investment in the natural resources needea to produce steel and cement should provide some hedge against inflation. Crane also continues to hold one million shares of Atlantic Richfield Company common stock as a long-term investment. Although the acquisition of Medusa with cash and subordinated debentures increased Crane's debt in 1979, the company has made good progress in retiring outstanding long-term debt. In.November, the Board increased the quarterly cash dividend rate from 35 to 40 cents per share. During 1979, shareholders received cash dividends of $1.45, and a two percent stock dividend. This compared with $1.37 the previous year. In February 1980, Crane again paid a two percent stock dividend, the twelfth year that such a stock dividend has been paid. At the annual meeting in April 1979, Robert S. Evans, Executive Vice President, was elected to the Board of Directors. William M. Troutman, who has been with Medusa Corporation since 1961, was named President of the cement company in May. Ronald K. leirvik joined Crane in January 1980 as Vice President and General Manager of the Valves & Fittings Division. As we celebrate Crane's 125th anniversary this year, we sincerely thank the company's shareholders, employees, customers and suppliers for their continuing support. Respectfully submitted, D. C. Fabiani, President February 20,1980 T. M. Evans, Chairman CRTX 0438 a''- 3-.Cs Z -S Consolidated Statement of Income For Years Ended December 31 Net Sales Operating Costs and Expenses: Cost of sales Selling, general and administrative Depreciation Operating Profit Other Income (Deductions): Interest--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 1979 $1,573,199,215 1,272,213,938 125,107,617 73,868,510 1,471,190,065 102,009,150 (38,386,297) 5,836,380 (2,012,890) (34,562,807) 67,446,343 12,417,572 $ 55,028,771 $5.50 $5.29 1973 $1,227,449,118 999,751,793 108,845,415 51,188,976 1,159,786.184 67,662,934 (25,186.280) 5.782,013 2,203.251 (17.201,016) 50,461.918 15.106.504 S 35 355.414 $3 44 $3.30 Consolidated Statement of Earned Surplus For Years Ended December 31 1979 Balance at Beginning of Year Net income Dividends: Preferred shares--$3.75 per share Common shares: Cash--$1.45 per share ($1.37 in 1978) Stock--2%, market value of 197,008 shares (200,301 in 1978) Excess of Cost Over Par Value of Reacquired Shares--Net: 68 preferred (305 in 1978) and 200,000 common (462,400 in 1978) reacquired, less 33.250 issued under stock options (21,978 in 1978) Balance at End of Year $236,923,265 55,028,771 291,952,036 87,837 14,474,675 5,504,404 4,399,046 24,465,962 $267,486,074 1978 S231,049,733 35,355,414 266,405,147 88.241 14,043.605 5.081.636 10.268.400 29.481.682 $236,923,265 CRTX 0439 v.E 00 ana S-_,c s-ca' ss Consolidated Statement of Capital Surplus For Years Ended December 31 Balance at Beginning of Year Excess of debentures converted over par value of 52,323 common shares issued (89,813 in 1978) Excess of market value over par value of common shares issued as a 2% stock dividend Balance at End of Year 1979 $ 36,973,609 398,637 4,273,104 S 41,645,350 1978 S 32,494.625 649,229 3,829,755 $ 36,973,609 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 Increase in long-term debt Increase in capital leases--net Conversion of debt to common stock ' Decrease in long-term investments Disposals of property, plant and equipment Application of Funds: Additions to property, plant and equipment Acquisition of Medusa Corp. property plant and equipment--net Increase in long-term investments Increase in other assets--net Decrease in reserves and other liabilities Reduction in long-term debt Reacquisition of shares, less options exercised Cash dividends Net Source (Application) of Funds 1979 1978 S 55,028,771 73,868,510 3,645,777 (18,049) 132,525,009 114,920,550 6,808,922 729,200 61,180,342 10,412,786 326,576,809 S 35,355,414 51,188,976 2.082,257 2.254,712 90,881.359 34.250.CC0 10.649.431 ` *1 213.4C0 32.361.349 5 683,953 175.239.492 - 85,314,963 57,403.054 141,665,000 2,394,803 10,231,300 1,957,375 38,236,706 5,349,113 14,562,512 299,711,772 S 26,865,037* 61,180,342 5,486,166 10,475,934 31.959,312 12,987.865 14.131.846 193,624.519 S (18,385.027) ' Includes Medusa's working capital of 531,202,000 at March 31, 1979, less cash tender cost of SI 7, 232,000. 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 S 1,875,951 38,747,791 30,365,477 1,481,183 72,470,402 S (24.0C8.030) (5,594.022) 1810 676 312.440 (27.478.936) (3,791,285) 2,610,047 12,773,091 26,080,445 7,933,067 45,605,365 (6,701.215) (5.711,708) 3.S89.2S5 (2.524.913) 1.854.642 (9.093.909) Increase (Decrease) in Working Capital See Financial Review S 26,865,037 S (18.385.027) CRTX 0440 Consolidated Balance Sheet At December 31 Assets Current Assets: Cash Short-term investments, at lower of cost ormarket Accounts receivable, less allowances of 33,472,642 ($2,786,165 in 1978) Inventories, at lower of cost, principally last-in, first-out, or market. LIFO reserves amounted to $83,372,559 ($74,369,923 in 1978): Finished goods Work in process Raw materials and supplies Prepaid expenses Total Current Assets Investments and Other Assets: Investments (see page 11) Unamortized debt discount Construction fund Outlying lands Other assets Property, Plant and Equipment at Cost: Land Buildings and improvements Machinery and equipment Less accumulated depreciation 1979 1973 S 31,367,545 70,535,634 175,112,126 $ 51.702,431 48.324.797 136.364.335 84,660,137 53,316,042 38,900,550 176,876,729 74,197.648 45.075.142 27.238.462 146,511.252 3,996,853 457,888,887 2.515.670 385.418,485 45,811,803 8,240,982 4,293,119 1,224,283 6,057,722 65,627,909 104.097.3-12 6.920.407 6.255.408 1.228.425 783.256 119.784.838 34,799,160 208,387,435 856,244,060 1,099,430,655 21.692,903 166.343.598 575.164.290 763,200,791 580,693,139 518,737,516 387.078,758 376,122,033 $1,042,254,312 $881,325,356 CRTX 0441 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 page 10) Capital Leases: (see page 12) Industrial revenue bonds Other Deferred Income Taxes--Depreciation Reserves and Other Liabilities Redeemable Preferred Shares: Cumulative preferred shares, 3%%, par value S100: Authorized--35,202 shares (39,402 in 1978): Outstanding--23,388 shares (23,456 in 1978) Common Shareholders' Equity: Common shares, par value $6.25: Authorized--20,000,000 shares; Outstanding--9,949,472 shares (9,866,891 in 1978) after deducting 5,229,094 shares in treasury (5,029,094 in 1978) Capital surplus Earned surplus--S112,783,103 ($100,828,824 in 1978) is not restricted under a lonq-term debt indenture Total Common Shareholders' Equity See Financial Review 1979 1978 S 8,042,880 9,711,274 86,673,001 91,138,213 14,010,817 209,576,185 S 11,834,165 7,101,227 73,899,910 65,057,763 6.077.750 163.970,820 349,718,973 273,035,129 50,105,601 9,255,540 59,361,141 42.957,900 9,594,319 52.552,219 22,162,549 " 23 444 27,781,040 30.327.201 2,338,800 2.345,600 62,184,200 41,645,350 267,486,074 371,315,624 61,663X69 36,973,609 236.923.265 335,564.943 $1,042,254,312 $881,325,356 CRTX 0442 :S Details of Long-Term Debt At December 31 Crane Co.: 6'/2% Sinking fund debentures due 1992. $2,000,000 due annually 151/2% Bank term loan due 1984, $2,187,500 due quarterly, commencing August 31, 1980' 15'/4% Bank term loan due 1985, $1,500,000 due quarterly, commencing March 31, 1981* Subordinated debentures: 10'/2% Sinking fund debentures due 1994, $4,567,000 due annually 8% Sinking fund debentures due 1985, $8,241,000 due annually 7% Sinking fund debentures due 1993,5% due annually 7% Debentures due 1994 5% Convertible debentures due 1993, convertible at $12.50 per share (59,152 common shares reserved in 1979) 5% Convertible debentures due 1994, convertible at $14.37 per share (349,297 common shares reserved in 1979) CF&I Steel Corporation: 8% First mortgage and collateral trust bonds, sinking fund series due 1983, $1,000,000 due quarterly 15'/2% Bank term loan due 1985, $2,500,000 due quarterly, commencing August 1,1981* 8% Mortgage note due 1983, $71,429 due annually Medusa Corporation: 15%% Bank term loan due 1987, $1,000,000 due quarterly commencing September 30, 1982* 9%% Unsecured notes due 1991, $1,250,000 due annually 7.35% Unsecured note due 1987, $1,300,000 due annually 53/4% Convertible subordinated debentures due 1988 Other Huttig Sash & Door Company: 7'/2% Loan payable due 1980 Cavalier Corporation: 153/4% Bank term loan due 1983, $250,000 due quarterly* Crane Canada Limited: 53/4% Sinking fund debentures (collateralized by a general claim on property and assets), due 1985, $376,000 due annually International Operations: Bank term loan, due 1981 Bank term loan, due 1982 Other 'Fluctuating with minimum commercial lending rate 1979 1978 $ 21,409,000 30,625,000 S 22.526.000 35,000,000 30,000,000 82,034,000 57,276,900 40,771,600 11,855,400 48,259,000 30,000.000 87,526,000 _ 49,442,140 11,867.400 48,259,000 739,400 5,019,400 163,921,700 245,955,700 902.000 5.586.0C0 116.056.540 203,582,540 13,000,000 40,000,000 214,284 53,214,284 17,000.000 40.0C0.CC0 285,713 57,285.713 20,000,000 13,750,000 9,100,000 172,000 577,885 43,599,885 2,500,000 -- -- -- -- -- -- 131,860 3,500,000 3,762,000 4,089,800 -- -- 687,104 687,104 $349,718,973 2.040,000 510.000 1,895,216 4,445.216 $273,035,129 CRTX 0443 d 3'-c$-c ares Financial Review and Accounting Policies Consolidation The consolidated financial statements include all sub sidiaries, with foreign currencies translated at the appropriate rates. Subsidiaries operating outside the United States and Canada represented 7 percent of shareholders' equity in 1979, approximately the same as in 1978. The operations of Medusa Corporation, a 96 percent owned subsidiary, are fully consolidated using the purchase method from April 1,1979, the date Crane acquired effective control. Results of operations on a pro forma basis, assuming Medusa was acquired as of December 31,1978, would be: Sales $ 1,606,000,000; net income $52,159,000; per com mon share $5.21. The demand for cement and aggregates is strongest in the second and third quarters of the year, and the first and fourth quarters experience seasonal slacking. In 1978, as a result of a Consent Order, only cash divi dends on the 43 percent common shares then owned were recorded as income. Pro forma statistics for the year ended December 31.1978 have not been compiled because of significant differences in accounting policies between Crane and Medusa prior to acquisition, and changes in organizational structure and producing plants subsequent to acquisition by Crane. Investments and Other Assets Long-term investments are valued, in the aggregate, at the lower of cost or market. At December 31,1978, Crane held 1,300,100 shares, 43 percent of the outstanding common shares of Medusa Corporation. In January, 1979, Crane purchased, pursuant to a tender offer, 1,712,000 Medusa Corporation common shares in exchange for $10 cash and $40 principal amount of Crane Co. 10'/2% Subordinated Sinking Fund Debentures due February 1,1994 for each common share of Medusa tendered. The total cost was $142,090,000 of which $78,574,000 was cash and the balance in debentures. On December 11,1978, Crane and the staff of the Federal Trade Commission (FTC) reached agreement upon the terms of a Hold Separate Agreement and upon the substan tive terms of a Consent Order to be submitted to the FTC for approval. The Hold Separate Agreement permitted Crane to consummate its tender offer without litigation with the FTC and required Crane not to influence or seek to influence in any way Medusa's management or the conduct of Medusa's business, vote its shares of Medusa common stock or seek representation on the Medusa Board until the earlier of the Annual Meeting of Medusa or final approval or rejection of the proposed Consent Order. The Consent Order also required the divesture of Medusa's cement plant at Dixon, Illinois as a going concern. On December 10,1979 Medusa entered into an agreement to sell this plant to another cement company, subject to FTC final approval, prior to March 15,1980 for $10,000,000, an amount which approximates the fair value assigned. Details of Long-Term Investments are as follows: 1979 1978 Atlantic Richfield Company--1.000.000 common shares, excluding 100,000 common shares in 1979 (300,000 in 1978) included with short-term investments Medusa Corporation--1,300,100 common shares Deferred income taxes on unrealized gain Other (in thousands) S47.500 $47,500 -- 61,180 (4.083) 2,395 (4 083) -- $45,812 $104,597 Property, Plant and Equipment The basis of charging depreciation for buildings, plant and equipment acquisitions was stepped up to the accelerated method from the straight-line method during 1977 in order to provide a better matching of costs and revenues in an in flationary environment. This method of computing depreciation eliminates a substantial reporting difference between financial and income tax basis. The Company leases a portion of its warehouse buildings, several manufacturing facilities (primarily through industrial revenue bonds) and certain of its vehicles and equipment under capital and operating leases running from one to thirty years. Certain leases may be renewed for periods of from three to twenty-five years and provide for an option to purchase or for reduced annual rental payments of minimal amounts. Property, plant and equipment includes the following amounts for capitalized leases at December 31,1979 and 1978: December 31. 1979 1978 (in thousands) Buildings and improvements Machinery and equipment Less accumulated amortization $21,870 50.697 72.567 15.790 $56,777 $20,857 38.498 59 355 I' 936 $47 4-9 Pensions Current service and interest costs are funded annually and prior service costs are funded on a 10 percent basis. Pension plans in the United States are in compliance with the Em ployee Retirement Income Security Act of 1974. Pension costs charged against operating income were $46,501.000 in 1979, compared with $34,691.000 in 1978. The increase from 1978 was primarily due to the inclusion of Medusa Corporation and costs relating to terminated operations. CRTX 0444 Based upon latest estimates as of December 31, 1979. vested benefits exceeded pension plan assets and balance sheet accruals by $51,000.000 ($ 106,000,000 at December 31,1978) before future income tax credits. An adjustment was made in 1979 to the interest rate and salary scale assumptions to align these more closely to past experiences and to anticipated future experience. These adjustments had no effect on the pension provision during 1979, but caused a significant reduction in the amount of vested benefits at December 31,1979. Miscellaneous--Net Gain on investments--net Termination of certain operations Disposal of capital assets--net Minority interest Foreign exchange adjustments Loss on repurchase of debentures Other Components 1979 1978 (in thousands) $ 2.547 (1.427) (1.379) (1.733) 485 (178) (328) $8,079 (5.243) 969 (701) (659) (168) (74) $(2,013) $2,203 Long- and Short-Term Financing At December 31,1979, the principal amounts of long-term debt repayments.net of amounts held in treasury, required for the next five years were 58,043,000 in 1980, $35,751,000 in 1981, $47,705,000 in 1982,552,232,000 in 1983 and $42,519,000 in 1984. At year-end there were $106,000,000 of unused short-term credit lines available with domestic and foreign banks, and such lines are subject to annual review. Covenants contained in a long-term debt indenture require the Company to (i) maintain consolidated working capital of at least $185,000,000 and consolidated tangible net worth of at least $250,000,000; (ii) restrict payments of cash divi dends; and (iii) restrict issuance of additional senior funded debt. Reserves and Other Liabilities Deferred income taxes--other Minority interest in subsidiaries Pension and wage benefits P.etainage on long-term contracts Miscellaneous Components 1979 1978 (in thousands) $ 6.446 18.917 1.698 30 690 $27,781 $13,658 12,010 2,353 382 1,924 $30,327 Income Taxes United States income taxes have not been provided on undistributed earnings of foreign subsidiaries, since foreign tax credits available on any portion of these earnings not required for indefinite reinvestment are such that no signifi cant tax would be payable upon distribution. A reconciliation of consolidated income cefore -nccme taxes to the provision for income taxes (federal, state and foreign) is as follows: 1979 1978 Income before income taxes Less permanent tax adjustments: Depletion Nontaxable domestic dividends Nontaxable foreign income Nontaxable net capital gains Original issue bond discount Foreign exchange adjustments Other (in thousands) $67,446 $50,462 7.589 5.232 6,494 1.138 660 535 (2.281) 3 290 4 314 _ 370 720 ,272) 776 19.367 9 798 Taxable income for accounting purposes 48,079 10 664 Composite tax @ 48% (50% in 1978) Less investment tax credit realized 23.078 (0.660 20 332 5 225 $12,413 5 '5 '07 The foregoing provision includes (dreign !axes.o( . $4,091,000 and $4,568,000, and state taxes of S2.702. CCO and $1,673,000 in 1979 and 1978, respectively. The provision for income taxes is composed of the following: 1979 `9~3 Deferred income taxes Current income taxes ;.r. trouser OS,' Si2.304) $ 2 520 55 222 3 037 512.418 515 '07 Leases Future minimum payments, by year, and in the aggregate, under capitalized leases and operating leases with initial or remaining terms of one year or more consisted of the following at December 31,1979: Capital leases 1980 1981 1982 1983 1984 1985 & beyond Total minimum lease payments Interest Present value $ 6.285 6.214 6.191 8.019 5.921 68.296 100.926 (39.238) 5 61.688 Portion: Current Long-Term 5 2.327 59.361 S 61.688 Minimum Operating sublease leases income Net (in thousands) 3 5 496 5 2.047 4 330 1 873 3.310 1,456 2 678 1019 1,358 297 8.035 153 3 2 '34 2 '56 8 c4; 9 673 "462 75 173 S26 707 5 6 350 - * - - - -j CRTX 0445 Rental expense was as follows for all leases not capitalized: Rentals on operating leases: Minimum Contingent Sublease income 1979 1978 (in thousands) SI 3.934 $12,719 2,160 764 ___ (905)_____ (587)' SI 5.189 $12,896 Stock Options A summary of stock option transactions follows: Outstanding January 1,1979 2% Stock dividend Options granted Options expired Options exercised Outstanding December 31.1979 Number of Shares Price Per Share 121.253 S 8.61 -- $34.65 2.368 -- 1,000 30.69 (5.618) 10.59 -- 33.71 (33.250) 8.61 -- 32.04 85.753 S18.40 -- S34.65 At December 31,1979 options for 64,418 shares were exercisable and 38,589 shares were available for grant. In 1978, options for 31,110 were granted and options for 21,978 were exercised. Shares and per share statistics have been adjusted for the 2 percent stock dividend. The plan is not a compensatory plan which would require charges to income. Analysis by Segment of Business An analysis by segment of sales, operating profit and assets plus additional segment information regarding capital ex penditures and depreciation appears on page 17. Segment description by products and industries served is given on pages 18 through 27. Estimated Replacement Cost Information (Unaudited) 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 31,1979 and 1978, together with estimated depreciation 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 estimates with respect to replace ment cost. 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.reftect any cost savings from improved equipment. Auditors' Opinion To the Shareholders of Crane Co. We have examined the consolidated balance sheet of Crane Co. and subsidiaries as of December 31,1979 and the re lated consolidated statements of income, earned surplus, capital surplus and changes in financial position for the year then ended. Our examination was made in accordance with generally accepted auditing standards and, accord ingly. included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. The consolidated financial statements of Crane Co. and subsidiaries for the year ended December 31, 1978 were examined by other auditors whose report, dated January 22,1979, expressed an unqualified opinion on those statements. In our opinion, such financial statements present fairly the consolidated financial position of Crane Co. and suosid'ar.es at December 31,1979 and the consolidated results cf tresr operations and changes in financial position for the year then ended, in conformity with generally accepted accourfng principles applied on a basis consistent with that of the preceding year. New York, New York January 28,1980 / CRTX 0446 Supplemental Information on the Effects of General Inflation (Unaudited) As required by the Financial Accounting Standards Board (FASB) Statement No. 33, "Financial Reporting and Changing Prices," the supplemental information concerning the effects of general inflation is set forth in the tables below. The Consumer Price Index (CPI), which has been selected, may or may not reflect the effects of inflation experienced by the Company; therefore, the data provided is extremely difficult to evaluate and should only be utilized in a very general way. The generaf inflation data has been stated in constant 1979 dollars applying the CPI to the historical cost information. The supplemental information on general inflation is not a com prehensive application of inflation accounting and only re flects: (1) the effect on inventories and properties (excluding natural resource reserves) and related cost of goods sold and depreciation expense, and (2) the effect on certain monetary assets and liabilities. The effect of this adjustment on cost of sales is minimal since the historical inventories have been principally determined on the LIFO basis, which matches current sales dollars witn cur rent inventory replacement cost. The effect of this adiustment on depreciation was determined by applying the actual CPI to the year of acquisition of properties and calculating the de preciation on a straight-line basis, without benefit of income tax deductions, for the difference between historical and general inflation depreciation. The adjustment to certain monetary accounts was deter mined with reference to converting opening and closing 1979 balances by the actual and average CPI. Since closing CPI exceeded the average CPI for 1979 and monetary liabilities exceeded monetary assets, the result was a notional gain. This gain represents the decline in book value of net monetary liabilities. The notional gain will not be recognized until long term debt, for example, is repaid with deflated dollars (re duced purchasing power dollars). However, since approxi mately 134 million dollars of debt fluctuates with lending rates, and these tend to follow inflation, the effect of this will be charged to income as incurred. Consolidated Statement of Income Year Ended December 31,1979 Net Sales Cost of Sales Depreciation Selling, General and Administrative Other Deductions (Income) Provision for Income Taxes Net Income Per Common Share Unrealized Gain in Purchasing Power from Holding Net Monetary Liabilities Net Assets at Year-End As Reported in Primary Statements Adjusted For General Inflation (In Thousands) $1,573,199 S1.573.199 1,272,214 73,868 125,108 34,563 12,417 1.272.214 86.143 125.108 34.563 12,417 1,518,170 1.530,445 $ 55,029 S 42.754 $5.50 $4.27 $ 371,316 $48,431 $ 605,131 Five Year Comparison of Selected Financial Data Adjusted for General Inflation (In Constant 1979 Dollars) 1979 Net sales Per Common Share Dividends: Cash" Stock Market Price--Year-End Average Consumer Price Index $1,573,199 $1.45 2% $33'A 217.4 1978 $1,365,647 1977 (In Thousands) $1,358,088 1976 $1,386,777 $1.52 2% $28'/2 195.4 $1.50 2% $313/4 181.5 $1.45 2% $37 170.5 1975 $1,509,789 $1.24 2% S32'/4 161.2 * Adjusted for 2% stock dividends CRTX 0447 Quarter 1979 1st 2nd 3rd 4th va ojC; Quarterly Results for the Year (Unaudited) (In Thousands) Sales Gross Profit Net Income $ 313,558 431,512 427,712 400,417 $1,573,199 $ 40,594 63,066 64,009 60,832 $228,501 $ 8,145 16,402 17,031 13,451 $55,029 ' 1978 1st 2nd 3rd 4th $ 287,880 322,655 311,299 305,615 $1,227,449 $ 37,583 47,055 44,614 49,172 $178,424 $ 5,145 11,417 8,492 10,301 $35,355 Net income Per Common Share Primary Fully Diluted $ .81 1.64 1.70 1.35 $5.50 $ .78 1.57 1.64 1.30 $5 29 $ .49 1.11 .83 1.01 $3.44* $ 47 1.06 .79 .98 33.30* Market and Dividend Information--Common Shares Quarter 1st 2nd 3rd 4 th New York Stock Exchange Price Per Share 1979 1978 High Low High Low $32% 32% 36'/2 36% $25% 28 28% 30 $28% 31% 37 34% $24% 26% 26% 23 'Adjusted tor 2% stock dividend in February, 1979 Dividends Per Share 1979 1978* $ .35 .35 .35 .40 $1.45 $ 35 .34 .34 .34 51 37 Five Year Summary of Operations (In Thousands) Net Sales Depreciation Operating Profit Interest Expense Income Before Income Taxes Income Taxes Net Income Net Income per Common Share: Average Shares Outstanding Assuming Conversion of Debentures Dividends per Common Share: Cash Stock 1979 $1,573,199 73,869 102,009 43,247 67,446 (12,417) $ 55.029 1978 $1,227,449 51.189 67.663 29,802 50.462 (15,107) $ 35.355 1977 $1,133,822 44,192 67,119 23,574 78,795 (12,624) $ 66.171 1976 $1,087,606 36,380 80,595 22.699 76.778 (28,819) $ 47.959 1975 31.119.49^ JO. id125.73c <5.90; 1 `4.202 (50.59- $ 63.6Cc $5.50 5.29 1.45 2% $3.44 3.30 1.37 2% $6.26 5.94 1.25 2% $4.43 4.15 1.14 2% ___ 3b.B 5.11 92 2i CRTX 0448 Anuh.M.s of Summan of Operations Sales Consolidated sales for 1979 were SI.573.199.000, 28.2 per cent higher than 1978. Medusa Corporation's operations were included from April 1,1979. Sales of Medusa were $251,750,000 and accounted for 72.8 percent of the in crease. Crane Domestic sales were 2.0 percent below the 1978 level mainly due to the sale of 26 wholesaling branches in the third quarter of 1979, partially offset by much higher market demand for the aerospace product lines. CF&I Steel Corporation sales increased 17.3 percent in 1979 due to higher shipments of rolled products and increased selling prices on all product lines. Huttig Sash & Door Company's sales were 4.6 percent higher than in 1978, primarily due to additional branches. Crane Canada sales were 11.4 percent above 1978 primarily due to increased valves and fittings activity at its wholesaling branches. International sales in 1979 only include the Netherlands operations until sold during the month of June. Increased sales of the United Kingdom operation more than offset this decrease. Consolidated sales for 1978 were $1,227,449,000, 8.3 percent higher than 1977. Crane Domestic sales were 10.3 percent above the 1977 level, mainly due to the addition of the vending machine product line in 1978 and higher aero space and building products demand, CF&I Steel Corpora tion sales increased 7.5 percent in 1978 due to additional shipments of wire and rolled products, moderately higher selling prices on all products, partially offset by lower rail tonnage due to the modernization program. Huttig Sash & Door Company's sales were 20.0 percent higher than in 1977, reflecting substantially higher sales at its Florida branches and higher price realization. Crane Canada's sales in local currency were about the same as last year. Inter national Operations' sales increase of 8.4 percent over a year ago was attributable to improved price realization. Certain international operations were terminated in 1978 and their sales are included for only ten months. Operating Profit Consolidated operating profit in 1979 increased 50.8 percent from 1978. Medusa Corporation was included in the 1979 results from April 1 and represents 60.5 percent of the in crease. Crane Domestic's operating profit in 1979 increased 13.3 percent from 1978. Profitability of the aerospace product lines increased with the much higher demand in 1979. Valve product income was well below the 1978 levels. The sale of the 26 wholesaling branches of Crane Domestic, which had annual sales of S60.000.000 and modest profits, resulted in a net gain. The gain arose primarily from the sale of inventory above its carrying value which was reduced by certain costs incurred as a result of the sale. CF&I Steel Corporation had increased shipments and prices, which were partially offset by higher energy and labor costs and rail mill startup, which resulted in a 37.4 percent increase in operating profit over 1978. Huttig Sash & Door Company's operating profit in 1979 decreased 4.3 percent reflecting higher direct and bulk shipments which carry iower trading margins Crane Canada, with continuing improved margins m the district on business, had an operating profit increase in 1979 over 1978 of 37.1 percent. International operating profit increased 39.3 percent over 1978 due to higher profits in the United Kingdom operations and not incurring in 1979 the losses on operations terminated during 1978. Consolidated operating profit for 1978 remained about the same as 1977. Crane Domestic showed an increase of 12.4 percent over 1977, primarily due to higher aerospace and distribution profits and the addition of the vending machine product line. CF&I Steel Corporation had a 25.8 percent decline in operating profit in 1978. primarily due to higher costs caused by the rail mill startup expense and higher depreciation. Huttig Sash & Door Company's operating profit in 1978 increased 24.5 percent over 1977, reflecting a signifi cant increase in sales. Crane Canada's operating profit in creased 21.0 percent over 1977 due primarily to improved margins in the distribution business. International operating profit increased 8.0 percent over 1977, primarily due to higher profits in the United Kingdom operations, partially offset by losses at certain operations eliminated in 1978. Depreciation Depreciation expense increased 44.3 percent over 1978. The inclusion of Medusa Corporation from April 1,1979 caused 72.2 percent of this increase and the completion of the rail mill and other capital expenditures at CF&I Steel Corporation caused the balance. Depreciation expense increased 15.8 percent in 1978 over. 1977, primarily due to the company's continuing capital ex penditure program, particularly at CF&I Steel Corporation's Pueblo plant. Other Income (Deductions) Interest expense in 1979 increased 45.1 percent from 1978, due to debentures issued for Medusa Corporation, the con solidation of Medusa's interest, the inclusion of a full year's interest on a $30,000,000 term loan and an increase in the prime lending rate. Interest expense in 1978 increased 26.4 percent from 1977, largely due to an increase in the prime lending rate and the inclusion of a full year's interest on a $35,000,000 term loan. Miscellaneous--Net in 1979 was a net expense of $2,013,000 compared to income of S2.203.000 m 1978 See page 12, "Miscellaneous--Net," for details. Income Taxes Income taxes in 1979 were at an effective rate of 18.4 percent compared with 29.9 percent for 1978. The lower rate in 1979 was primarily because of the application of larger investment tax credits relating to capital expenditures, higher depletion and non-taxable income. The effective tax rate for 1978 was higher than 1977 due to more income being subject to maximum tax rates and less investment tax credits realized. CRTX 0449 ics-c a'.-s Analysis hy Segment (in Tncusanas) Net Sales: Crane Domestic CF&I Steel Corporation Medusa Corporation Huttig Sash & Door Crane Canada Limited International Operations Total Net Sales Operating Profit: Crane Domestic CF&I Steel Corporation Medusa Corporation Huttig Sash & Door Crane Canada Limited International Operations Corporate Total Operating Profit Assets: Crane Domestic CF&I Steel Corporation Medusa Corporation Huttig Sash & Door Crane Canada Limited International Operations Corporate Total Assets 1979 Amount % 1978 Amount % 1977 Amount % 1976 Amount % 1975 Amount % $ 348,154 557,231 251,750 190,222 139,736 86,106 22 35 16 12 9 6 $1,573,199 100 $ 355,328 29 475,143 39 -- 181,905 125,387 89,686 15 10 7 $1,227,449 100 $ 322,187 441,869 -- 151,628 135,383 82.755 29 39 13 12 7 $1,133,822 100 $ 325,897 413,054 -- 116,328 151,030 81,297 30 38 11 14 7 $1,087,606 100 $ 355,341 32 427,900 38 __ 80.495 157,386 98,372 7 14 9 $1,119,494 100 $ 27,857 25 $ 25,315 23 20,779 19 18,035 16 9,186 8 10,182 9 111,354 100 (9,345) $ 102,009 $ 24,585 32 18,431 24 -- 18,838 25 6,701 9 7,310 10 75,865 100 $ (8,202) 67,663 S 21,869* 29 $ 24,855* 34 -- 15,133 20 5,540 8 6,766 9 74,.163 100 (7,044) 67,119* $ 31,648 29,611 -- 10,861 8,448 8,520 36 $ 33 12 9 10 38,081 67,788 __ 5.110 15.995 7.841 28 50 4 12 6 89,088 100 134.815 100 (8.493) - (9.077) 80,595 5 125,738 $ 129,411 400,217 237,442 60,486 58,985 45,074 14 $ 142,347 43 402,900 25 -- 7 57,220 6 51,429 5 45,805 20 $ 139,551 58 391,442 -- 8 50,960 7 53,084 7 60,651 20 $ 116,731 56 353,309 -- 7 36,135 8 61.033 9 60,345 18 $ 124,369 56 308.814 -- 6 29.360 10 62.859 10 69.680 21 52 5 10 12 931,615 100 699,701 100 695,688 100 627,553 100 595.082 100 110.639 181,624 179,521 133,008 127.119 $1,042,254 $ 881,325 $ 875,209 $ 760,561 $ 722.201 Capital Expenditures: Crane Domestic CF&I Steel Corporation Medusa Corporation Huttig Sash & Door Crane Canada Limited International Operations Total Capital Expenditures 1979 S 4,214 34,999 36.262 2,998 2,188 4.654 $85,315 1978 $ 3,770 45,131 -- 2,334 1,514 4,654 $57,403 Depreciation: Crane Domestic CF&I Steel Corporation Medusa Corporation Huttig Sash & Door Crane Canada Limited International Operations Total Depreciation 1979 $ 7,653 44,235 16.370 1,297 1.655 2.659 $73,869 1978 s 8,037 37.942 > 81 i oyt> 2.333 351. *39 * Changed from straight-ime to ac ceferated depreciation, which increased depreciation by S862.000 and S4.676.0C0, '05C6C*..V6 / a total of 35.538.000 in 1977. CRTX 0450 Crane Domestic Fluid and Pollution (.'rune Domestic, through ox Control Products operations--Vuhes& Fill inns. Ccerat.ng 'esuits for the Kngineered Products, Valves & Fittings and Engi Plumbing. Crane Supply, neered Products Divisions Hydro-Aire and Cavalier-- were disappointing in 1979. manufactures and markets a Demand for valves in major variety of industrial products. markets--power, chemical, petrochemical and pulp and paper industries--showed lit tle increase and is expected to remain constant in 1980. During the year, the Valves & Fittings Division experi enced a ten-week strike at one plant and operating problems at two other facilities. Action has been taken to correct this situation and a more aggres sive marketing policy has been adopted. In addition to being one of the three largest American suppliers of gate, globe and check valves, Crane has in creased its manufacturing capability for ball and butterfly valves. These quarter-turn products have been well-received in industrial markets because of advan tages in weight, cost and ease of installation. Demand for the Engineered Products Division's Deming industrial, water system and agricultural pumps continued at high levels and is expected to be steady in 1980. Produc tion problems, which affected 1979 results, should be cor rected by the end of this year. Deming's domestic water sys tems manufacturing opera (Top) Deming vertical pro cess pumps furnish water for a curtain wall in the paint-spraying operation at a metalworking plant. tions have been expanded and located at a new facility in Winter Haven, Florida. (Bottom) A leakproof Dynapump circulates the solu tion used in a solar-powered residential air conditioning system. ;n!979 sales of Crempumo lesKorccf canned motor pumps to the chemical pro cess industries increased. This improved business helped offset a slowdown in demand for nuclear applications. Shipments of Cochrane water and wastewater treat ment equipment also rose in 1979 and the product line was expanded with the acquisition of several new fluid monitoring products. Principal markets include the chemical process, pulp and paper and metal finishing industries and municipalities. Continued growth is expected as metal finishers must meet new fed eral effluent guidelines. Building Products The Plumbing Division's sales increased despite a 14 per cent decline in housing starts. Through the Classic Home Products Division, Crane has entered the growing remod eling and replacement mar kets. While housing starts are expected to continue drop ping through mid-1980, the company's retail presence should help offset reduced demand from residential building markets. Wholesaling Operations In August, the company sold twenty-six Crane Supply wholesale branches. The re maining twelve outlets have been strengthened and will continue to serve industrial and construction markets with Crane valves, fittings, pumps and plumbing products as well as related products from other manufacturers. Specialty Products * ' ' ------- - ...... achieved records n !9'5 Hydrc-A,re oraxe centre: S/Stems. fuel and hydraulic pumps and other accesso ries, designed lo improve air craft safety and dependability, are found on virtually all com mercial transport aircraft and the majority of military and general aviation craft. Expan sion in airline travel in 1979 and unparalleled growth in new equipment orders for business aircraft and com mercial transports pushed production to an all-time nigh. In 1979, Hydro-Aire's new all-digital Mark IV automatic braking control system was chosen for Boeing's 757 and 767 airplanes. Hydro-Aire products de signed for jet and turboprop aircraft include power brake/ anti-skid packages and invermot'or fuel boost pumps. Certification testing is under way with Cessna's Citation III and Gates' leariet 55 with ad vanced anti-skid contrcis and with Canadair's CL-600 with new cartridge mvermotor fuel boost pumps. Sales of Cavalier Corpora tion's refrigerated, coinoperated soft-drink vending machines were lower than a year ago. The company's machines, sold to soft drink bottlers in the United States and Canada, are used in supermarkets, service sta tions and other high traffic lo cations. Cavalier will intro duce a redesigned macn ~e -n 1980, which should make the company more competitive CRTX 0451 (Top) Cochrane CBA units aid in heat recovery and keep plywood driers operat ing at peak efficiency in a West Coast plant. (Center) Crane plumbing fixtures were selected for the Alabama Blue Cross/ Blue Shield building in Birmingham. (Bottom) Brake control valves being tested in Hy dro-Aire's new hydraulic manufacturing and testing facility. (Right) Crane valves are used throughout this major petrochemical plant on the Gulf Coast. CRTX 0452 CF&I Steel Corporation CF&I. one of the largest >erticaily integrated steel manufacturers in the west ern United States, provides products for transportation, petroleum, mining, con struction and agribusiness markets. The company's mines and quarries supply most of its own coking coal, ,ron ore, limestone and dolomite. Water necessary "or mining and manufacuring is obtained from :xtensive and valuable ;ompany-owned or con.rolled water rights. Operations CFil 3 operating resets .vere strong ,n 1979, Rail ana ac cessory shipments exceeded those of the previous year even though production was affected by the rail mill expan sion program. The three-year, S85 million project to expand and modernize the rail mill was completed in early summer. Sales of Ipng length rail-- more than twice standard length--increased as several railroads began modifying welding plants to handle this product. During the year CF&I made initial commercial shipments of CROMORAIL, a highstrength alloy rail. Demand for rail products is expected to remain strong as the Western railroads upgrade trackage to meet energy de velopment needs. Sales of CF&l's oil country casing and tubing remained at capacity in 1979. While drilling declined nationally, the number of rigs in the Rocky Mountain area increased to an all-time high and activity in the southwest rebounded late in the year. The long-term out look for this market appears excellent. Rolled product shipments approached record levels as construction, metalworking and agricultural equipment industries provided strong jemand Cril"a3 '"crc.-ec .is market.ng flexibility by nstalling a new conditioning and billet inspection facility for volume production of special bar quality hot rolled carbon and alloy bars. This new equipment will increase capacity and reduce produc tion costs. Sales of wire products, such as baler and barbed wire, to agribusiness markets in creased during 1979. Despite a softening economy, the outlook for these products remains reasonably strong. Demand for mining prod ucts, used principally in iron ore, copper, uranium and molybdenum production, should remain stable. Facilities In 1979, CF&I invested $35 mil lion in capital spending pro grams to improve production facilities and achieve greater self-sufficiency in energy and raw materials. This followed capital expenditures of $120 million for major expansion projects during 1977 and 1978. CF&l's new rail mill is now fully operational, with most major startup problems re solved. The Pueblo plant now has rail producing capacity of 550,000 tons per year. A program to upgrade oil country products was begun during 1979 with the installa tion of a new carbide casing threader. New tubular product heat treat equipment is being designed and will be installed during late 1980 and early 1981. CF&I began engineering work in 1979 for a new under- meta- cca. a: 5c- ;s-e in easierr, 3- ancma Bokcshe Development ex- pencitures are expectea to total 513.5 million through 1983. In 1979. CF&I completed its program of major capital proj ects to comply with EPA and Colorado air and water stan dards. This ten-year program represents an investment of approximately 577 million for air and water pollution control It has added more than S10 million per year to the com pany's operating and mainte nance costs without providing any earnings increase. Today, the Pueblo facility is among the cleanest, if not the cleanest, integrated steel mill in North America. The Colorado & Wyoming Railway Company. CF&l's' common earner subsidiary, completed major track im provements during the year for all three of its divisions and installed an electronic scale at its Pueblo division. This rail way transports raw materials from CF&l's Colorado and Wyoming mines and serves other customers in the region. CF&I Energy Resources Company, established to de velop CF&l's natural re sources, signed an option for a long-term contract with a prominent mining company, which will develop and market 6,000 acres of bituminous coal reserves in Fremont County. Colorado. CRTX 0453 CF&I long length rails are welded into quarter-mile sections (top), then trans ported to the site (bottom) on special cars. (Right) The superior wall strength of CF&I seamless tubing makes it ideally suit ed to offshore drilling or deep holes like this one in Wyoming. sa Corporation a. one of the nation's ; cement companies, ;es portland, masonry ecialty cements, ;ates and bituminous te, and provides ay safety and inous road paving uction services. Prinnarkets are in the Lakes and Middle Atstates and in Georgia >rthern Florida, sa was acquired by early in 1979. jsa furnished all the ent for the Wallace in central Georgia. Aviiofihcrwimir ptantonSwiiionofUir Michigan show*the m preheater lowrandLat thefarleft, thesgosjffMrv cement Is stored:from ~ j6'3r, Medusa mace several changes ;o realign operations. Technical functions at the cement plants, sales and marketing efforts, and the aggregates company operating structure have been reorganized. Cor porate offices, as well as ce ment and aggregate head quarters. are now located in Cleveland Heights. his large quarry in Columus supplies crushed stone j the construction industry i central Ohio. Cement Markets for Medusa cement were moderately strong in 1979 although a slowdown in sales in all markets began late in the third quarter. Softening in residential sales is anticipated through mid-1980 as housing starts turn down during the first half Medusa Operations and Market Areas anc reccve'" S-C.vy our,eg the second naif and into 1981 Nonrestoential building, in cluding commercial and in dustrial construction projects, represents a substantial por tion of Medusa's market and is expected to be down in 1980. In the first half of the year, the company is scheduled to supply several large nonbuild ing projects, which will offset to some extent the slowdown in sales to the residential and nonresidential sectors. Medusa's market share in 1980 is expected to be about the same as in 1979. Medusa in 1979 invested $44 million in capital spending projects. A two-year, $56 mil lion program to modernize and expand the Charlevoix, Michigan plant is on schedule. The new facility began to pro duce cement in December 1979 and, with the addition of a new grinding mill, will be completed in the summer of 1980. This project will increase plant capacity approximately 80 percent and reduce fuel cost per ton about 33 percent. Because of the added low cost capacity at Charlevoix, it is possible to reach the market area formerly served by the Toledo. Ohio plant. This highcost, obsolete facility was shut down at year-end. Medusa also closed the Manitowoc, Wisconsin plant at year-end, but will continue to serve this plant's market area from other locations. The company continued to improve and replace out moded equipment at other facilities. During the year, a new crusher and an overland conveyor were installed at the Clinchfield, Georgia plant at a cost of over $2.5 million and air pollution control devices were installed at York, Penn sylvania. At Wampum. Pennsylvania over $3 million was spent for a new electro static precipitator and for construction Aggregates Demand for Medusa Aggre gates Company products was generally strong early in 1979. but declined in some local markets during the third and fourth quarters. Unfavorable weather during the construc tion season was an important factor in curtailing sales. Major products include crushed stone, sand and gravel for construction purposes. Agri cultural and industrial lime stone products are also sold in the eastern and midwestern United States. During the year, Medusa closed or sold several margi nal aggregates operations. Due to high transportation costs, the aggregates and. asphalt business is largely de termined by local economic conditions. In 1980, volume is expected to decline some what as many areas face uncertainties in local con struction projects and re duced road surfacing programs. Mobile and plant equipment replacement represents the largest portion of the aggre gates company's capital expenditures. Emphasis has been placed on cost reduction and production efficiency projects and on equipment to meet noise, water and dust pollution standards. Construction Services James H. Drew Corporation, a subsidiary operating in In diana and Missouri, installs guard rails, median barriers, fences, signs, traffic signals and lights for highways. 1979 was the second best year in the company's history. Although funds for govern ment-financed highway con struction are down and eroded by inflation, more of the available money is being spent on safety systems. CRTX 0457 Huttig Sash & Door Company Huttig manufactures and distributes millwork and allied building products, primarily to residential construction markets. Its wholesale branches are con* centrated in the southeast, southwest and midwest United States. In 1379. energy-saving ,vindcw and door products accounted for a larger per centage of total sales than in previous years. Huttig was able to take ad vantage of the booming hous ing market in Florida with four strategically located distri bution warehouses. Other Huttig operations in the south east sunbelt states performed well during 1979. Results from midwest facilities, affected by the substantial decline in housing starts in that area, were not as strong as they had been in 1978. High interest rates and lack of available residential mort Modern shop area in new Lexington, Kentucky facil ity increased productivity. gage money .vere ms major causes of the decline in hous ing in the midwest. While the sunbelt states were affected by the same conditions, popu lation growth in these areas offset a portion of this decline. For 1980, housing starts are expected to decline even further during the first half, with a gradual improvement beginning in the late second quarter and continuing through the balance of the year. During 1979, Huttig opened a new distribution warehouse at Scottsbluff, Nebraska to serve parts of Nebraska, Wyoming, Colorado and South Dakota. This operation should produce sales and orcm.s n :330`c ca". a , st ance an anfc-patec sec re at other locations. The ccmoary also built a new facility at Cedar Rapids. Iowa to replace a smaller leased operation and moved the Knoxville branch to a larger, more mod ern building. The long-term forecast for residential construction is en couraging, but as in the past, the availability and cost of home mortgage funds will play a large part in the actual number of units constructed. Huttig plans to continue ex panding existing facilities and opening new ones to improve sales and services. CRTX 0458 Crane Canada Limited Crane Canada Limited manufactures and distrib utes valves, industrial pumps, and plumbing products for the construc tion industry, and water and waste treatment equipment for basic industrial applications. Crane Canada acnieved ccm strong sa-es ana profit im provement m 1979. Fluid and Pollution Control Demand for Valve and Industrial Division products strengthened during the year and continued growth is ex pected in 1980. Crane. Canada forecasts increased sales to the pulp and paper and metals mining industries as well as to municipalities. Demand for valves in the elec tric power and petroleum and gas production markets is also expected to remain at high levels. Building Products New residential construction, the major market for Crane's plumbing products, declined in 1979. Sales to commercial A large office headquarters building in England in stalled Crane valves and and institutional construction markets, however, were at higher levels than a year ago. pumps in its heating system. Some decline in housing de mand fcr Ciumo-ng s ex pected in 1960. .vmle Other construction demand is ex pected to remain stable. Wholesaling Operations Markets for industrial prod ucts distributed by the Crane Supply Division were strong in 1979, particularly in the energy-related growth area of western Canada. The Division achieved substantially higher sales to the chemical process, mining and exploration indus tries, and to steel mills and pulp and paper companies. Sales of plumbing products were steady. During the year, Crane Supply completed a new building in Regina, Sas katchewan to replace an older facility and to meet growing demand in this prairie region. Sales of valves, welding fit tings and flanges and steel pipe are expected to continue strong in 1980. Crane International Through operations in the United Kingdom, Australia and Mexico. Crane supplies valves, fittings and pumps to international chemical, petroleum, power and other industrial markets. During 1979, economic growth in the United Kingdom was slow as the country expe rienced accelerating inflation and high interest rates. Crane Ltd.'s international markets also showed little expansion because of the strong British currency. Bookings for most products in industrial and petrochemi cal markets in the United Kingdom, however, improved over last year. Sales of fittings and bronze valves, in particu lar, increased with greater market penetration. Despite rising inflation levels. Crane Ltd. was able to maintain margins for most products. Domestic demand is ex pected to remain reasonably strong m 1980; however, as is usual in the United Kingdom, results could be influenced by the labor situation. Crane Australia Pty. Limited continued to perform well and the outlook is encouraging. Demand for Crane valves should remain strong, as many large oil and gas refinery and aluminum projects, de ferred in 1979, are scheduled for 1980. Crane-Deming de Mexico. S.A., which manufactures pumps for industrial and ag ricultural markets, showed continuing improvement .n 1979. Plans are being formu lated to expand this operarcn in order to participate in the growing Mexican economy. CRTX 0459 (Top right) Crane Canada supplied bronze, iron and steel valves for this thermal generating station in Nova Scotia. (Bottom right) The new Les Terrasses de la Chaudtere complex in Hull, Quebec, is equipped with Crane plumbing fixtures, pumps and valves. (Below) Crane cast iron gate valves, equipped with Converto Gear operators, pro vide fire and foam service at an Australian refinery's loading dock. Directors Officers Langdon R Cook' President, Langdon P. Cook & Co., Incorporated, Municipal Bond Dealers William H. Donaldson" Dean of the School of Organization and Management and William S. Beinecke Professor of Management Studies, Yale University Robert S. Evans Executive Vice President of the Company Thomas M. Evans Chairman of the Company; Chairman- of the Executive Committee, H. K. Porter Company, Inc., Manufacturing; President, Evans & Co., Incorporated, Investments Dante C. Fabiani President of the Company Otto Fuerbringer' Magazine Editor and Consultant John D. Garrison Retired Partner, Lord, Day & Lord, Attorneys at Law Bruce A. Gimbel Director, National Aviation & Technology Corporation, Investments Samuel R. Sutphin Director, Norfolk & Western Railway Company, Scott Paper Company, Indiana Bell Telephone Company, Indiana National Corporation and other companies "Member of the Audit Committee Thomas M. Evans Chairman Dante C. Fabiani President Robert S. Evans Executive Vice President B. Jack Barnes Wee President & General Manager- Hydro-Aire Division William R. T. Crolius Vice President-Government Relations Wiliam C. Dackis Vice President & Assistant to the President Anthony K. Dickinson Vice President & General Manager- Plumbing Division Robert R. Foster Vice President & General Manager- Crane Supply Company John C Klein Vice President & General Manager- Engineered Products Division Ronald K. Leirvik Vice President & General Manager- Valves & Fittings Division James F. O'Brien, Jr. Wee President-Finance Mark R. Weil Wee President-Facilities & Real Estate Paul R. Hundt Secretary & General Counsel Richard J. Neville Treasurer R. Kenneth Whitley Controller CRTX 0461 CRANE CO. and Suosidianes Stock Listings Crane Co. common stock is traded on the New York and Pacific Stock Exchanges and the preferred stock is traded over the counter. Stock Transfer Agent Morgan Guaranty Trust Company of New York New York, New York 10015 Registrar of Stock The Chase Manhattan Bank, N.A. New York, New York 10015 Bond Trustees and Disbursing Agents Citibank, N.A. New York, New York 10015 Bank of America National Trust and Savings Association Los Angeles, California 90054 Auditors Deloitte Haskins & Sells New York. New York 10004 Executive Offices Crane Co., 300 Park Avenue New York, New York 10022 Telephone: (212) 980-3600 Equal Employment Opportunity Policy Crane Co. is an equal oppor tunity employer. It is the policy of the company to recruit, hire, promote and transfer to all job classifications without regard to race, color, religion, sex, age or national origin. DeSiQn: The Graohir* FvnroQcinn Inr* Maui Vrtrlr CRTX 0462