Document N2D7OmjDd3jMEmpjwa5Z8zmQw

CRANE CO. ANNUAL REPORT 1955 PLAINTIFF'S EXHIBIT CRA-20 1 CRTX0118 CRTX0119 To The Shareholders We are pleased to report to you that Crane Co.'s sales 3nd earnings in 1966 reached new highs for recent years. Net sales in 1966 amounted to $405.9 million, the highest in the history of the Company. This represents an increase of $35.8 million, or 9.7%, over 1965. Net income was $11,251,000, or $4.45 a share, com pared with $7,991,000, or $3.08 a share, the previous /ear, an increase of 40.8%. Net income wa's the highest .n ten years, and a new record for common share earnings. Cash flow from operations (net income plus deprecia:ion) amounted to $19.4 million, or $7.72 a share, corn ered with $15.8 million, or $6.22 a share, in 1965. Common shareholders' net income to average equity ose to 9.0% in 1966, the highest in history, from 6.4% he year before. Common shareholders' equity per share vas $51.07 at 1966 year end, a new high, and an increase >f $3.11 per share over 1965. During 1966, the Company paid quarterly dividends jf $.40 per common share. In November, 1966, the Hoard of Directors declared a 20% common stock divi dend on common shares outstanding December 20, vhich was paid on December 30, 1966. The Company's present intention is to continue the $.40 quarterly diviJend rate on the shares now outstanding. The increase in sales reflects the high level of indusrial activity in the world-wide economy and the Company's ncreased emphasis on the manufacture and sale of indusrial products. Approximately two-thirds of the Company's ales were industrial products-valves, pumps, water treatnent systems and allied equipment. Net income rose at a ligher rate than sales because of the high level of operaions of our industrial products, and the discontinuance )f several marginal operations and product lines, here md abroad. At the year-end the Company's backlog of orders was 27% higher than the previous year-end. North American operations produced 65.8% of con;olidated earnings and represented 87.3% of consol iiated equity, substantially the same as in 1965. Pension costs charged against operations in 1966 /ere $2,176,000, compared with $640,000 in 1965. This ncrease reflects a charge of $1,081,000 for pension costs icurred under the Company's United States trusteed ension plans, the first contribution made since 1959. During the year, the Company continued to broaden :s industrial product base through the acquisition for ash in May of all the common stock of Glenfield & Ken edy Holdings Limited of Kilmarnock, Scotland, a major lanufacturer of waterworks valves and water treatment quipment, with plants in Scotland, England and South frica. Glenfield & Kennedy also has 5Vfe% preference tock outstanding of $2,800,000 and 5%% loan stock ue in 1982 of $4,388,000. In December, 1966, Crane acquired for cash all the common shares of the Acheson Manufacturing Company of Rankin, Pennsylvania, a manufacturer of fittings. Through a tender offer, the Company acquired approx imately 22% of Sawhill Tubular Products, Inc., of Sharon, Pennsylvania, fabricators of a wide range of steel pipe and tubing. Our search continues for the acquisition of companies and/or product lines in fields where we have experience and know-how and in fields that are compatible with our own. In 1966, the Company, and virtually every other man ufacturer of plumbing fixtures, was indicted by a Federal Grand Jury, charging certain violations of the Sherman Antitrust Act. The Company has denied these charges. The Government filed an accompanying civil complaint at the same time. In addition, three separate actions have been filed by other parties against the same group of plumbing manufacturers, including Crane, claiming treble damages on the same grounds. The Company intends to defend vigorously all of these suits. We have been advised by counsel that the ultimate effect of these actions should not materially affect Crane's financial position or earnings. On behalf of the Board of Directors, we wish to express our gratitude to the many persons-customers, share holders and employees-who made 1966 a significant year for the Company. Respectfully submitted, March 17,1967 D. C. Fabiani, President T~. h. T. M. Evans, Chairman T. M. Evans and D. C. Fabiani discuss operations in the Company's New York Executive Office. CRTX0120 i i I CRTX0122 CRTX0123 il I SfcTife c>. C* it v;?]r(if?ittfe hjrzj-=) )(??)' *j' *)i>;;Msfe il Iri -life Tfeliljj ft7 B iiY)i .'eWt m 'iaSHEMCJfv tjii( )r *li[fS?.K? 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' Sa>fefeti)3fe! 3 fet-Si ?is*). :pi39fefl fe tpo'l 5*fe9ii!imi?y ^yfepfc Tfia ;s - :y-*XB''ifi5)'P5i> fefeira viiJB't 33feUpSS 33*1 V/llii * ?vpSTgDi> jaa3feyi^33i> jfraiB .-; - - CRANE CO.: Worldwide Stabilization and Control & of Moving Objects Through its A Hydro-Aire Divi- P sion in Burbank,Cali fornia, Crane has become a major supplier to the nation's . aerospace program and to the manu facturers of commercial and military aircraft. Its products-anti-skid brak ing systems, hydraulic components, pneumatic subsystems and booster and transfer pumps-stabilize. and control moving objects in the aero space and aircraft industries. This division had satisfactory re sults in 1966, reporting increases in both sales and earnings over the previous year. These results capital ize on a decade of product develop ment, applications engineering and investment in future growth. Its out look for the foreseeable future is most promising. Growing Demand Virtually every jet aircraft produced -military or commercial-utilizes Hydro-Aire's aircraft brake con trol system which helps make landings safer and smoother. Largely responsible for Hydro-Aire's favorable re sults in 1966 has been the growing demand for Crane products in the commercial air transport market. It is expected that sales volume from this market will continue at a high level into the late 1970's. In addition, an increased volume is anticipated from military aircraft production as well as the growing cilivilian air freight industry. In the aerospace and ballistic mis siles programs, long-range commit ments to programs which require Hydro-Aire equipment offer a bright future to this division. Included among these products are HydroAire's new line of liquid coolant pumps for fuel cells and environ mental cooling as well as electrohydraulic power packages and vari able drive hydraulic pumps. Future Prospects The trend in both of these markets, i.e. aircraft and aerospace, is upward as far as forecasts :3n reasor.ac!/ project. A substantial portion of this division's backlog is in commercial rather than military applications. In addition, the growth of com mercial air freight will increase this percentage over the next five years as further efforts are made to pene trate this market. Investment in new equipment in 1966 enabled this division to manu facture many components required for its products that it formerly pur chased. The program to improve "inhouse" capabilities will continue in 1967, along with the continuing product research and development program designed to improve HydroAire's position as an aircraft and aerospace components manufacturer. A Hytrol anti-skid servo valve, used in brake control systems for aircraft, is being tested during manufacture. Fluid Control The design and manufacture of systems and devices, pumps, valves and fittings with meters and allied equipment for controlling the flow of fluids, constitute the major portion of Crane's business. In 1966, sales of these systems and products accounted for more than 50 per cent of total sales. With the increasing demand for Crane equipment from many industries such as chemical, petroleum and power generation, sales of these products will continue to increase. In view of the projected growth of its principal customers, the Company will continue to emphasize this seg ment of its business through expan sion and improvement of facilities and equipment and through expend ing considerable amounts on research and development. The chemical industry, for instance, is forecasting a substantial increase in capital expenditures in 1967. The need to expand is even more apparent in the petroleum and petrochemical indus tries, where more equipment is re quired to explore offshore areas, to drill deeper for new reserves and to take advantage of new processing techniques. In both of these indus tries, international markets are grow ing at a faster rate than domestic markets. Residential water meters, a new line for Crane in the United States, offer the company a tremendous potential. Crane's manufacturing, sales and distribution facilities for fluid con trol systems and products are inter national, enabling it to manufacture, sell, install and service on a world wide basis. Pump Lines Broadened Crane is a leading supplier of water system pumps, sewage pumps and turbine and centrifugal pumps for chemical processing, petrochemical and varied industrial applications. In 1966, it introduced a new line of pumps conforming to standards set up by the chemical industry and known as AVS (American Voluntary Standards) pumps. The Company can now offer a far broader line to the chemical processing industry. To meet the increased demand for pumps, and to provide increased capacity for the manufacture of residential water meters, the facility at Rogers, Arkansas, was expanded at a cost of over $1 million. Crane's Chempump products-"canned pumps" or "zero leakage pumps"handle corrosive, toxic or other prob lem fluids throughout industry. In 1966, a new line of intensifier acces sories was developed to enable high speed pumps to do the job which has only been possible in the past with lower speed pumps. This new con cept broadens Crane's pump market in the fields of refrigeration, chlorine and other low flash point fluids. Crane is forecasting an increase in sales in this product line in .1967. The chemical industry continues to expand, Government space and nuclear programs will continue at a high level and several new pump lines, including a metering pump, will be introduced in 1967. New Chem/Meter pump is used in processing industries and water treatment to add predetermined, measured amounts of liquid accurately and automatically. i Aerial view shows the extent of the Kilmarnock (Scotland) works, the principal plant of Glenfield & Kennedy. CRTX0126 Valve Facilities Expanded Crane is the largest valve manufac turer in the world. Its products range from standard to engineered, special service valves for many industries, including the defense, power genera tion, chemical, petroleum and water works fields, and in diameters from Vi-inch to 170-inches. Even larger diameters can be made to special requirements. One significant development in 1966 was the completion of a $2 million expansion and modernization program in the steel foundry at the Indian Orchard, Massachusetts, valve plant. The results of this program are already apparent in terms of higher output and increased efficiency in the production of stainless steel and alloy cast steel valves. As industrial processing utilizes higher tempera tures and pressures or more corro sive fluids, the demand for these valves will continue to increase. An expansion program has been started in Chicago for new machin ing for the manufacture of brass valves. This equipment will enable Crane to reduce production time and costs. New Product Developments Under the direction of the Research and Development Center in Chicago, several new developments took place in 1966. New alloy valves provide Crane with a more complete line of corrosion-resistant valves. Additions were made to broaden the ball, but terfly and globe valve lines. Globe and gate valves for cryogenic and compressible gas service were devel oped. Engineering work was com pleted on larger water meter sizes, thus broadening the line. Product lines for the chemical processing industries were strengthened, includ ing the new AVS chemical pump, a new canned motor pump, new meter ing pumps, a new hot oil pump, and the development of regenerative tur bine pumps. In 1967, Crane will continue to stress the study of redesign and improvement in the bronze valve line, including production equipment. Its line of stainless steel valves will be expanded to further widen the mar ket for this product in the chemical, petroleum and process industries. Work will continue on redesigning cast iron gate valves aiming at lignter weight, more compactness and lower cost. Considerable effort will be devoted to developing meters for the industrial market. Research and development work will continue to extend the Chempump canned motor pump to larger sizes. On the metering pump, where pre cision and cost are factors, a product development program is underway on lower-priced models which will give Crane a greater penetration in the chemical, petroleum and water treat ment markets. Outside of the United States, Crane's business in fluid control sys tems and products has grown rapidly and is expected to accelerate in the future. Canadian Business Increased Shipments of valves and fittings in Canada, in 1966, were substantially ahead of a year ago. Sale's *',vere made to several major pulp and paper projects. Of these, shipments to the world's largest integrated pulp mill-- at Lac Quevillon in Northern Quebec Crane's AVS pump line will Handle a wide variety of corrosive and non .corrosive liquids, ranging from water to nydrccarfcons to slurries. An expanding line of alloy steel valves offers processing industry users the advantages of compact size and high strength to meet increasing pressure and/or temperature service. This aluminum sample case makes it easy for salesmen to demonstrate features of new bronze globe valves developed for cryogenic service. CRTX0127 FIui<I Ciontrol/wr- j -were the most significant. The fur ther expansion of the Athabaska Tar Sand Development in Northern Alberta, where oil is being extracted from tar sands, resulted in sizeable sales of Crane products. In Canada, because of the increase in business, Crane Canada Limited continues to expand and modernize its facilities. Completion early in 1966 of the $1 million moderniza tion of valve production in Montreal has provided increased capacity and reduced costs. The Marieville plant tripled its capacity, providing manu facturing facilities for a full range of pumps and allied equipment to meet the growing commercial and indus trial demand in Canada. British Add to Facilities Crane Ltd. (England) had a satisfac tory year in 1966. Sales of this sub sidiary will benefit from the increased drilling activities in the North Sea. Drilling and exploration companies have been purchasing pumps, valves and other equipment from Crane. As oil and gas produc tion is brought in, petrochemical companies will also add to their facilities, thus providing a broader market for Crane products. To meet growing demand, Crane Ltd.continued to expand and upgrade its facilities. The Aycliffe plant was expanded, providing additional man ufacturing space for the production of boilers. A new branch warehouse was opened in London. And, the Bur gess Hill, Sussex, research and devel opment center was expanded. This facility is doing application engineer ing for Crane products sold in the United Kingdom. Glenfield & Kennedy Broadens Markets The acquisition of Glenfield & Ken nedy Holdings Limited provided Crane with new products, new mar kets and additional manufacturing, research and development facilities. Long known as an innovator in flow control systems and equipment, Glenfield & Kenred/ succi.'es fi-tration equipment, a large /anety of valves, gates and allied equipment. These have wide application in muni cipal water systems, conventional and nuclear power stations, hydro-electric plants and many process industries. Fluid control systems and prod ucts are manufactured in plants in Scotland, England and South Africa. One of Glenfield & Kennedy's facili ties,a steel foundry, will enable Crane Ltd. to manufacture its own steel valve castings. The South Africa plant in Benoni, Crane's first manu facturing facility in that country, strengthens the Company's position in this market area. It is currently producing cast iron gate valves, and will add a line of cast steel gate valves by mid-1967. On the European Continent, Crane's two subsidiaries in the fluid control field-Crane, S.A. France and Crane--FISA, S.A., Spain--continued to upgrade their product lines aYrd'to expand and modernize manufactur ing facilities. This Chapman two*port slide valve, weighing approximately 28,000 lbs., will control regenerator gases at 1200'F in a California oil refinery. Because urethane foam hardens immediately on exposure to air, conventional pumps could not be used in this installation. A Crane Chempump was chosen, has operated continuously for over 35,000 hours without maintenance. CRTX0128 Water Treatment The treatment of water is a growing international problem. The water shortage is becoming acute, not only in the United States, but ail over the world. Water pollution control is a vital national concern, and both Gov ernment and industry have instituted large scale programs to make better use of water resources. And, as the population increases, sewage and industrial waste treatment becomes more critical, too. Crane has long been a leader in engineering and manufacturing fil tration equipment and specialized water conditioning systems such as clarification equipment, deaerators, ion exchangers and demineralizers. Through its Cochrane operation and Glenfield & Kennedy, Crane will expand into these areas both at home and abroad. Cochrane Treatment Systems Sales of Cochrane's "Filterex" sys tems in 1966 were at a high level. These systems enable industrial and municipal users to process contami nated liquids for re-use. In water shortage areas or where pollution is a problem, this equipment has proven itself to photographic film and pulp and paper companies such as Eastman Kodak Co. in Rochester, New York, the St. Regis Paper Co. in Monticello, Mississippi, the Fibreboard Paper Co. of Antioch, Califor nia, and the Thilmuny Pulp & Paper Co. of Kaukauna, Wisconsin. The potential for the sale of these systems is excellent.The steel, paper, beverage, chemical and oil industries are all large .vaier users. In addit-cn to requiring equipment to transport and purify water, they are now taking steps to avoid pollution of their own water supplies. The demand for warm process sof teners, such as lime and soda plants, continued at a high level and large chemical, paper and steel producers are among the companies that are reducing both their boiler problems and water contaminants with Coch rane systems. Numerous orders for water demineralizing equipment, the field which Cochrane has pioneered, were received from the public utility industry including the Public Service Co. of New Hampshire, the Public Glenfield & Kennedy Hydraulics Laboratory at Kilmarnock, snowing the test floor, des.gn and drawing office (left) and the model gallery ir\ the background. * The St. Laurent des Eaux project, France's first nuclear power station, installed Cochrane equipment. All valves for this plant were supplied by Crane S.A. (France). Photothequ* E.O.F.--Mr. Brig*ud CRTX0130 Service Electric & Gas Co. of Ne;v Jersey and the Pennsylvania Power & Light Co. During 1966, Crane received a research and development contract from the Office of Saline Water, U. S. Department of Interior. Under the auspices of the OSW, Crane is inves tigating methods for the pretreat ment of brackish water to improve the economics of desalination by electro-dialysis process procedures. Nuclear Power Markets Crane has placed considerable em phasis on the growing atomic-nuclear market as public utility companies and others install nuclear power Two Microstraining units were installed at the Jerome Park Reservoir, Bronx, New York. They remove micro-organtsms before drinking water is supplied to New York City from this service reservoir. plants at an increasing rate. Coch rane equipment, used to assist in heat exchange and radiation control problems, is now being used in over fifty such installations. Some of the more interesting installations include the nuclear ship S.S. Savannah; the Indian Point Station of the Consoli dated Edison Co. of New'York; the Camen Project in Italy,- the large Hanford nuclear facility, owned by the Atomic Energy Commission and operated by the General Electric Co.; the largest boiling water type nuclear plant in France, the Electricite de France St. Laurent des Eaux Station; and the Tarapur Atomic Power Plant in India. Microstraining Equipment Glenfield & Kennedy provides an in ternational network of products and services to a variety of industries utilizing flow control and water treat ment equipment. Glenfield & Ken nedy's important i,r.e :r.e .-.ster (potable and process) and sewage fields is the microstrainer. This line of rotary drum filters provides con tinuous automatic mechanical re moval of microscopic and other suspended matter in water and the tertiary treatment of sewage. Crane manufactures water treat ment equipment and systems in the United States, Canada and Scotland. An expansion program at Crane's Cochrane plant in King of Prussia, Pennsylvania, is presently underway to meet the increased demands for its products. When completed, this will increase manufacturing space, and provide additional machine tool capabilities and broader test fa cilities. This 40-ton Cochrane Oemineralizer is being installed at the Kodak Park Works, Rochester, New York, along with a condensate filtering system. Working together, they remove iron, copper & hardness from boiler water. CRTX0131 17 Comfort Conditioning and Sanitary Control Crane has long been a leader in sup plying the building and construction industries with quality plumbing, heating and air conditioning prod ucts and systems. It has more re cently been increasingly active in the home improvement and renovation markets, supplementing normal sales to the new housing market, which has been at a low level. Crane's position in this important segment of its overall business remains strong. Approximately onethird of the Company's total sales are generated by plumbing, heating and air conditioning products. As in the past, Crane's leadership stems from its many innovations and high quality products. Crane's line includes lavatories, bathtubs, water closets, kitchen sinks, laundry tubs, water fountains, plumbing brass and bathroom acces sories, residential and light commer cial boilers, baseboard heaters, warm air furnaces and air conditioners, and Crane Chef combination refrigeratorrange-sink units. New Products Well Received At the recent show of the National Association of Home Builders held in Chicago, Crane previewed a variety of new products. Its sculptured bath tub, a harbinger of new design in bathroom fixtures, highlighted the display. With a wide sculptured back giving plenty of shoulder and hip room, the new tub incorporates such other features as an integral grab bar, slip-resistant bottom and a flat rim for safe and easy entry and exit. Crane was the first in the industry to incorporate ideas such as these rec ommended in a study on the bath room prepared by Cornell University. Other new fittings and fixtures which were well received by the trade included the "Neu-Criterion" water closet, designed with modern lowsilhouette line and incorporating an exclusive longer flushing valve,- a water closet designed for easy instal lation in slab construction houses and high-rise buildings with concrete A general view of the assembly area in Crane Ud/5 Certy (England) plant snows work on gas burners. Compact new gas boiler and new warm air furnace (rear) were among the models introduced early in 1967. floors; the new "Hymont" water closet for geriatric and nursing homes, with CRTX0132 several features to a.d the aged and infirmed; a new shower valve that eliminates sudden bursts of hot or cold water by mechanical rather than thermostatic means; a budget-priced shower head with a non-corrosive spray ring for long non-clog use; two new self-rimming, easily installed, porcelain enameled cast iron coun tertop lavatories-the "Charlotte" and the "April"; and, a new line of popu larly priced plumbing brass designed for greater ease of operation. Several new products will come into the market in 1967. Manufac ture has already begun on the new sculptured bathtub. A new line of gasfired warm air furnaces, incorporating many innovations, will be introduced, along with new, compact cast-iron gas boilers. Significant improvements in performance, serviceability, appear ance and manufacturing costs will result. The addition of a new high capacity baseboard heating unit gives the Company a full line of baseboard heaters, enabling it to cover the entire market. Design of a completely new line of residential air conditioning equipment was completed in 1966 and introduced early this year, thus strengthening Crane's competitive position. Market Position Strong The Company, in 1966, placed greater stress on home improvement and ren ovation in the light of a lower rate of new residential housing starts. This market is receiving increased empha sis from Crane's marketing and dis tribution organization, and the Com pany expects to improve its position here. Commercial and institutional con struction remained at a relatively high level. Crane was a principal sup plier of plumbing, heating and air conditioning equipment for many major projects in commercial, hospi tal and institutional construction. Its position in this area is good, and will be strengthened by new products just introduced. Sales and distribution facilities for plumbing, heating and air condi tioning products are maintained in the United States, Canada, Great Britain, France, Holland, Spain, Aus tralia and Germany. In Canada, Crane fixtures were selected for the $10 million expan sion of Sir George Williams Univer sity in Montreal. And 56 of the major pavilions at the Universal and Inter national Exhibition of 1967 (Expo '67) are equipped with the Com pany's plumbing fixtures and other products. In Bermuda, Crane plumbing fix tures, supplied by Crane Canada, were used throughout the Princess Hotel, one of Bermuda's most luxurious re sort hotels. In St. Louis, Crane hos pital and residential fixtures were specified for Queeny Tower, newest addition to the Barnes Hospital com plex. The largest urban renewal proj ect in the state of Wisconsin, Juneau Village in Milwaukee, used almost 3,000 of Crane's products. In Dallas, Crane fixtures were used in one of the newest and most elegant health and beauty spas--the Neiman-Marcus Greenhouse. And, the new 25-story Connecticut Mutual Insurance Com pany building in Chicago will be heated and air conditioned with Crane equipment. The Chatelaine "Home of Tomorrow*' at Expo *67 is completely equipped with plumbing and fixtures by Crane Canada. CRTX0133 1 CRANE CO. FACILITIES UNITED STATES OPERATING GROUPS Crane Group ----------------------------------- Chicago, Illinois W. D. Graham, Jr., Executive Vice President Crane Supply Company --------Chicago, Illinois E. L. Hannon, Jr., Vice President Hydro-Aire Division --------Burbank, California D. A. Lichty, Vice President Acheson Manufacturing Co. Rankin, Pennsylvania G. R. Acheson, Jr., President FOREIGN SUBSIDIARIES Crane Australia Pty. Limited -- St. Marys, N.S.W., Australia P. J. Farrell, Managing Director Crane Canada Limited -----------Montreal, Canada R. S. Reade, President Crane Ltd. --------------------------London, England David Burns, Managing Director Crane SA --------------------------Paris, France R. D. Halpin, General Manager Crane G.m.b.H. ---------------------Dusseldorf, Germany Klaus Alms, Manager Crane-Deming de Mexico S A -- Monterrey, Mexico H. F. McNiff, Manager Crane-FISA, S.A. -------------------3ilbao, Spain .. R. Kowalski, General Manager VFFIL1ATED COMPANY Jrane Nederland N.V. --------Jeventer, Netherlands 3. DeHorn, Managing Director Chempump, Microstraining and Crane Chef are Registered Trade Marks. CRTX 0134 1'rintcd in (/.S.A. 6 , V;: . - (*$&&& v'teatgi5iJ=j WE9ptgi-- 0ift : >nj5jTK;iro^^iTC*gi:' : .' i&irrgsj, i loriaK^!- `..- CRANE CO., 300 Park Avenue, New York, N.Y. 10022 VALVES PUMPS FITTINGS METERS WATER TREATMENT PLUMBING HEATING AIR CONDITIONING