Document ZBRYJRmRRdgQnm4j19vg7GD0Z

Annual Report 1982 i i I f Ii CRTX 0533 Annual Meeting The Crane Co. annual meeting will be held at 10 A.M., Mon day, April 25,1983, in Rooms B and C, 2nd Floor, Morgan Guaranty Trust Company of New York, 522 Fifth Avenue, New York, New York. Form 10-K Copies of Form 10-K for 1982, which is to be filed witn the Securities and Exchange Commission, are available without charge to each Crane shareholder upon written re quest to the Secretary, 300 Park Avenue, New York, New York 10022. 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 3ank of America National Trust and Savings Association Los Angeles, California 90054 Auditors Deloitte Haskins & Sells New York, New York 10048 Executive Offices Crane Co. 300 Park Avenue New York, New York 1C022 Telephone: (212) 980-3600 CRTX 0534 Financial Highlights Crane Co. and Subsidiaries Net Sales................................................... . . . Net Income (Loss).................................... ... Per Common Share*............................ ... Common Shareholders' Equity................ ... Per Common Share............................. . . . Cash Dividends Declared Per Common Share............................. . .. Common Shares Outstanding................ . .. 1982 $1,126,398,000 $ (3,343,000) $ (.33) $ 380,995,000 $38.18 19811 $1,611,342,000 $ 53,811,000 $ 5.17 $ 415,747,000 $40.53 $ 1.60 9,978,052 $ 1.67 10,056,539 t Per share amounts adjusted for 2% stock dividends. ' Assuming conversion of subordinated debentures, net income (loss) per common share would amount to $(.33), $5.01 in 1981, $3.90 in 1980. 1980t $1,527,600,000 $ 42.596,000 $ 4.03 $ 395.912,000 $37.54 $ 1 54 10,137.980 Crane Co. is a diversified manufacturer ofproductsfor basic industryThe company's business is organized in six segments: Crane Domestic, CF&I Steel Corporation, Medusa Corporation, Huttig Sash & Door Company, Crane Canada Inc. and International Operations. Principal products include steel, cement, fluid andpollution control equipment, building products, aircraft and aerospace systems. Contents Financial Highlights.................................................................................... 1 Letter to Shareholders................................................................................ 2 Consolidated Statements of Income........................................................ 3 Consolidated Balance Sheets................................................................... 4 Consolidated Statements of Changes in Financial Position.................. 6 Consolidated Statements of Earned and Capital Surplus....................... 7 Details of Long-Term Debt......................................................................... 8 Financial Review......................................................................................... 9 Auditors' Opinion...................................................................................... 11 Management's Discussion....................................................................... 13 Analysis by Segment.................................................................................. 15 Operating Review.................................................................... 18 Directors and Officers....................................................... Inside Back Cover CRTX 0535 1 To Our Shareholders: In 1982, Crane Co. experienced its most difficult year since the depression of the 1930's. The full impact was felt worldwide and caused many industries served to reduce or postpone capital spending. Net sales were $1,126,398,000, down 30 percent from the $1,611,342,000 reported in 1981. Management supplemented vigorous operating expense reductions with actions to realize gains on investments, dispose of underutilized capital assets and purchase annuities for retirees. These actions partially offset operating losses. The company suffered a net loss of $3,343,000, or 33 cents per share, compared with net income of $53,811,000, or $5.17 per share, last year. Depreciation expense was $72,896,000 compared with $86,788,000 in 1981. ! Net interest expense was approximately $4,096,000 below the prior year after capitalization of $5,644,000 of interest expense related to major capital projects in accordance with Statement of ' Financial Accounting Standards No. 34, and long-term debt was reduced by $22,254,000 in 1982. : During the year, operations were curtailed where possible to meet business conditions and material, : labor and administrative costs were reduced across all operations. i Capital expenditures were $117,145,000 compared with $67121,000 in 1981. The major part was | devoted to the construction of a new continuous caster and seamless tube mill at CF&I Steel Corporation. Work on the latter facility has been suspended at an appropriate mid-point pending improvement in business conditions. Crane Domestic's results were below the prior year, largely due to the depressed demand for fluid and pollution control products. *' Sales at CF&I Steel Corporation were down 50 percent, primarily reflecting the sharp fall-off in demand ' for oil country tubular goods and railroad products, resulting in a net loss for the year. | The low level of construction activity again affected Medusa Corporation's sales and caused a net loss j for the year. The York, Pennsylvania white cement plant and marginal aggregates operations were j profitably disposed of or closed. j Huttig Sash & Door Company's sales and earnings were slightly below 1981 lev als. The opening of two ; new branches in the Sunbelt and increased penetration of the replacement and remodeling business reinforced Huttig's position during the homebuilding recession. . ' Crane Canada Inc. did not perform as well in 1982 because of that country's deteriorating economy ; and construction strikes in four provinces. International Operations were slightly improved. " Crane declared cash dividends of $1.60 per share in 1982 as well as a two percent stock dividend. : The fourth quarter dividend was paid in January 1983. In February 1983, the company will pay its fifteenth annual two percent stock dividend. At the January 1983 meeting of the board, Dwight C. Minton, chairman and chief executive officer of ' Church & Dwight Co., Inc., and Richard S. Forte, general partner of Forte Cashmere Company, were elected directors of the company. On behalf of the board of directors, we wish to express our thanks to the company's shareholders, employees, customers and suppliers for their continued support during these difficult times. Respectfully submitted, February 1, 1983 2 R. J. Slater President T. M. Evans Chairman CRTX 0536 Consolidated Statements of Income Crane Co. and Subsidiaries \ I For Years Ended December 31 1982 1981 1980 Net Sales...................................................................................... I I Operating Costs and Expenses: Cost of sales................................................................................... Selling, general and administrative............................................. Depreciation................................................................................... Operating Profit (Loss) ............................................................. I I Other Income (Deductions): Interest expense--net of interest income of $7,282,959, $13,895,489 and $11,283,886 in 1982,1981 and 1980......... Dividend income on investments................................................. Miscellaneous--net (see page 10)............................................... '| Income (Loss) Before Taxes .................................................... i Provision (Benefit) for Income Taxes (see page 11) ................ ii Net Income (Loss)..................................................................... $1,126,398,260 $1,611,342,365 $1,527,600,364 987,982,259 115,381,504 72,895,528 1,176,259,291 1,286,318,307 125.304,137 86,787,925 1,498,410,369 1,239.432,959 123,372,587 81,672,886 1,444,478,432 (49,861,031) 112,931,996 83,121,932 (19,640,493) 6,463,480 34,345,545 21,168,532 (28,692,499) (25,349,929) (23,736,758) 6,113,135 (9,900,709) (27,524,332) 85,407,664 31,596,999 (32J 87.247) 4,476.778 7.312,023 (20,398,446) 62,723,486 20,127,391 S (3,342,570) $ 53,810,665 $ 42,596.095 Net income (loss) per common share: Average shares outstanding ................................................... Assuming conversion of debentures...................................... $(.33) $(.33) $5.17 $5.01 S4.03 S3.90 See Financial Review i CRTX 0537 3 Consolidated Balance Sheets Crane Co. and Subsidiaries At December 31 Assets Current Assets: Cash......................................................................................................................... Short-term investments, at lower of cost or market............................................. Accounts receivable, less allowance of $2,457,668 ($2,868,043 in 1981) . . . Refundable income taxes (see page 11)............................................................ Inventories, at lower of cost, principally last-in first-out, or market; LIFO reserves amounted to $77,053,482 ($92,752,575 in 1981): Finished goods.............................................................................................. Work in process....................................................................... ...................... Raw materials and supplies.......................................................................... Prepaid expenses............................. Total Current Assets 1982 1981 S 14,413,030 64,911,330 119,954,289 21,700,000 S 16.126.641 57.604.416 183.167.206 83,542,718 21,503,829 27,524,440 132,570,987 2,427,143 355,976,779 86.141.904 41.517.146 35.427 637 163.086.687 3.237.337 423,222.287 Investments and Other Assets: Investments (market $50,400,000; $142,250,000 in 1981) (see page 9) Unamortized debt discount....................................................................... Construction fund....................................................................................... Outlying lands.............................................................................................. Other assets................................................................................................ 26,050,080 3,726,739 1,832,468 1,217,543 3,095,467 35,922,297 87,691 252 4.317 855 3.017.236 1.217.549 3.600.729 100.344.621 Property, Plant and Equipment at Cost: Land.......................................................... Buildings and improvements ............... Machinery and equipment.................... Less accumulated depreciation 27,874,325 193,100,064 896,263,551 1,117,237,940 651,959,630 465,278,310 S 857,177,386 31.046.359 194.003.212 857.471.364 1,082.520.935 643.424.347 439.096.588 S 962.663.496 CRTX 0538 4 Liabilities and Shareholders' Equity 1982 1981 Current Liabilities: Current maturities of long-term debt.............................................................. . . Loans payable to banks.........!....................................................................... . . Accounts payable............................................................................................... . . Accrued liabilities (see page 10)........................................................................ . U.S. and foreign taxes on income..................................................................... . Total Current Liabilities...................................................... . ` $ 13,471,077 11,042,071 65,767,313 75,223,476 1,932,961 167,436,898 $ 3,816,255 15,206,057 87,163.062 99.969.437 17,565,769 223,720,580 Long-Term Debt (see page 8).............................................................................. . Capital Leases: (see page 10) Industrial revenue bonds.................................................................................. , Other.................................................................................................................... . 189,281,972 48,695,691 8,447,850 57,143,541 211,535 507 55,696.999 9.52-L585 65.221.584 Deferred Income Taxes--Depreciation............................................................ . Reserves and Other Liabilities (see page 10)................................................. . I I Redeemable Preferred Shares: Cumulative preferred shares, 33U/o, par value $100: Authorized--24,223 shares (27,963 in 1981); Outstanding--1,651 shares (2,833 in 1981)................................................. . I Common Shareholders' Equity: Common shares, par value $6.25: Authorized--20,000,000 shares; Outstanding--9,978,052 shares (10,056,539 in 1981) after deducting 5,974,781 shares in treasury (5,677,335 in 1981) .................... . Capital surplus.................................................................................................... . Earned surplus--$49,345,969 ($157,866,350 in 1981) is not restricted under a long-term debt indenture................................................. . Currency translation adjustment (see page 9)................................................. . Total Common Shareholders' Equity.................................... . 18,804,864 43,349,936 17,736.167 28.419,448 165,100 283.300 62,362,825 60,742,128 268,583,058 (10,692,936) 380,995,075 62.853,369 55,688.760 301,243,194 (4,038,413) 415,746.910 S 857,177,386 S 962,663.496 See Financial Review CRTX 0539 5 Consolidated Statements of Changes in Financial Position Crane Co. and Subsidiaries For Years Ended December 31 Source of Funds: Operations: Net Income (Loss)...................................................................... Depreciation.............................................................................. Deferred income taxes ............................................................ Amortization of debt discount ................................................. Pension provision..................................................................... Other--net ................................................................................ Increase in long-term debt............................................................ Increase (decrease) in reserves and other liabilities.................. Conversion of debt to common stock........................................ Decrease in long-term investments............................................. Disposals of property, plant and equipment--net.................... Decrease (increase) in other assets--net.................................... i Application of Funds: Additions to property, plant and equipment............................... Increase in long-term investments............................................... Decrease (increase) in capital leases--net ............................... Reduction in long-term debt........................................................ Reacquisition of shares, less options exercised......................... Cash dividends declared ............................................................ Currency translation adjustments............................................... Net Source (Application) of Funds............................................ t Increase (Decrease) in Components of Working Capital: Current assets: Cash and short-term investments............................................. Accounts receivable................................................................. Refundable income taxes........................................................ Inventories................................................................................... Prepaid expenses..................................................................... Current liabilities: Current maturities of long-term debt........................................ Loans payable to banks............................................................ Accounts payable..................................................................... Accrued liabilities....................................................................... U.S. and foreign taxes on income.......................................... Increase (Decrease) in Working Capital................................. 1982 1981 1980 $ (3,342,570) 72,895,528 (3,591,309) 1,091,116 9,500,000 (844,788) 75,707,977 80,106,174 10,269,066 268,600 81,945,899 17,985,084 806,332 267,089,132 $ 53,810,665 86,787,925 (864,259) 1,345,332 -- 1,668,234 142,747,897 -- 1.060,234 645,900 -- 11,170,378 (1,475,519) 154,148,890 $ 42,596.095 81,672.886 (174.798) 2,077,795 -- 1,284.848 127,456.326 334,220 . (2,993,746) 612.075 1,638,289 22,043.664 1,611.228 150,702.556 117,145,494 18,671,647 8,078,043 102,359,709 9,179,606 15,961,936 6,654,523 278,050,958 S (10,961,826) 67,120.651 29,841.556 719,539 73,898,051 15,247,140 17,380.423 4,038,413 208,245,773 S (54,096,883) 55079.618 13.676.182 (6.579.932) 64,619 635 2,322.854 16.293,361 -- 145,416.668 S 5,285.868 $ 5,593,303 (63,212,917) 21,700,000 (30,515,700) (810,194) (67,245,508) $ (40,230,334) 4,412,005 -- (2,945,191) (792,036) (39,555,556) S 12,058.212 - 3,643.075 -- (10,844.851) 32.520 4.888 956 9,654,822 (4,163,986) (21,395,749) (24,745,961) (15,632,808) (56,283,682) 5 (10,961,826) (8.017,634) 4,962,797 (566,552) 18,827,566 (664,850) 14.541,327 S (54,096.883) 3,791 CC9 531 556 1,056 613 (9.9SS.342) 4.219 SC2 (396.9321 S 5.285.883 See Financial Review 6 CRTX 0540 Consolidated Statements of Earned Surplus Crane Co. and Subsidiaries Balance at Beginning of Year Net Income (Loss)............... Dividends Declared: Preferred shares--$3.75 per share............................................ Common shares: Cash--$1.60 per share ($1.67 in 1981 and $1.54 in 1980)... Stock--2%, market value of 199,193 shares (202,630 in 1981 and 198,447 in 1980)................................................... Excess of Cost Over Par Value of Reacquired Shares--Net: 1,182 preferred (20,443 in 1981 and 112 in 1980) and 297446 common (367280 in 1981 and 80,961 in 1980) reacquired, less 609 common issued under stock options (37108 in 1981 and 27,917 in 1980).......................................................... Balance at End of Year...................................................... : ... $301,243,194 (3,342,570) 297,900,624 $284,292,588 53,810,665 338,103,253 $267,486,074 42.596,095 310.082,169 6,191 15,955,745 6,151,080 79,960 17,300,463 8,344,303 37,344 16,211,017 7,513.203 7,204,550 29,317,566 S268,583,058 11,135,333 36,860,059 $301,243,194 1,973.017 25J89.581 $284,292,583 Consolidated Statements of Capital Surplus Crane Co. and Subsidiaries For Years Ended December 31 Balance at Beginning of Year.................................................... Excess of debentures converted over par value of 19,157 common shares issued (46,101 in 1981 and 43,105 in 1980). Excess of market value over par value of common shares issued as a 2% stock dividend................................................. Balance at End of Year............................................................... 1982 1981 I960 $ 55,688,760 147,244 4,906,124 $ 60,742,128 $ 48,257,058 353,836 7,077,866 $ 55.688,760 $ 41.645,350 338,799 6,272.9C9 $ 48.257.05- See Financial Review CRTX 0541 Details of Long-Term Debt Crane Co. and Subsidiaries Crane Co.: 6'/2% Sinking fund debentures due 1992, $2,000,000 due annually, after deducting $2,089,000 in treasury in 1982 Bank term loan........................................................................ * Bank term loan due 1985, $1,500,000 due quarterly, commencing March 31,1983 ........................................... * Bank term loan due 1989, $1,875,000 due quarterly, commencing September 1, 1985 ...................................... Subordinated debentures: 10'/2/o Sinking fund debentures due 1994, $4,567,000 due annually, after deducting $8,557,400 in treasury in 1982........... 8% Sinking fund debentures due 1985, $8,241,000 due annually, after deducting $921,380 in treasury in 1982............................... 7% Sinking fund debentures due 1993, 5% due annually, after deducting $1,199,000 in treasury in 1982 .................................... 7% Debentures due 1994, after deducting $3,818,000 in treasury in 1982.............................................................................................. 5% Convertible debentures due 1993, convertible at $12.50 per share (40,772 common shares reserved in 1982) .:........... 5% Convertible debentures due 1994, convertible at $14.37 per share (259,052 common shares reserved in 1982)............. Medusa Corporation: 9%% Unsecured notes........................................................................................... 7.35% Unsecured note........................................................................................... 5%% Convertible subordinated debentures........................................................ Other......................................................................................................... ................. Crane Canada Inc.: 5%% Collateralized sinking fund debentures, due 1985, $357,000 due annually, after deducting $346,000 in treasury in 1982 .................................................................................................... Other Operations: Miscellaneous........................................................................................................... * Floating with lending rate, which was 9.735% at December 31,1982. S 17,911,000 12,000,000 30,000,000 59,911,000 $ 18,179,000 13.125.000 18,000,000 49.304.000 46,243,500 16,480,920 11,541,400 48,259,000 509,650 3,722,575 126,757,045 186,668,045 -- -- 72,000 36,570 108,570 52.211.900 24,721,380 11.541.400 48.259.000 560.C00 3.940.825 141.234,505 190,538,505 11.250,000 6,500,000 121,000 289,760 18.160.760 2,494,800 2,608,242 ..............10,557 $ 189,281,972 ______ 228,000 S 211.535.507 CRTX 0542 Financial Review Crane Co. and Subsidiaries Consolidation . The consolidated financial statements include all subsidi aries, with foreign currencies translated in accordance with Statement of Financial Accounting Standards No. 52. Currency translation adjustments for the years 1982 and 1981 were $6,654,523 and $4,038,413, respectively. Sub sidiaries operating outside the United States and Canada represented approximately 7 percent of common share holders' equity at December 31,1982 and 1981. During 1982, inventory quantities were reduced primarily as a result of the severe recession. The LIFO effect on 1982 operations, primarily recognized in the fourth quarter, was a reduction in costs of approximately $20,000,000. This was partially offset by a charge of $7,500,000 from identification and disposal of excess and obsolete stock. Investments Long-term investments are valued, in the aggregate, at the lower of cost or market. Details of long-term investments at December 31 were as follows: 1982 1981 revenue bonds) and certain of its vehicles and equipment under capital and operating leases with terms of from one to thirty years. Certain leases may be renewed for periods of from three to twenty-five years and provide either an option to purchase or reduced annual rental payments of minimal amounts. Property, plant and equipment included the following amounts for capitalized leases at December 31: 1982 1981 (in thousands) Buildings and improvements................ ........ Machinery and equipment.................. ........ Less accumulated depreciation........ ........ 323,534 64,524 88,058 33,779 354,279 $24,365 63.225 87,590 23.119 $59,471 1 1 Capitalized interest during the construction of active major capital projects amounted to $5,644,000 in 1982. The amount of such interest not capitalized in prior years was immaterial. i (in thousands) Pensions -- - Atlantic Richfield Company--1,200.000 The company'and its subsidiaries have pension pians wmch common shares (2,000,000 in 1981) ........ 328,500 347,500 cover substantially all of their employees. Pension expense Deferred income taxes on unrealized gain ... (2,450) (4,083) ($12,106,000 in 1982, $37,291,000 in 1981 and Ferro Corporation (1,034,800 common $43,463,000 in 1980) is actuarially determined and includes shares).......................................... Harsco Corporation (963,114 common shares)............................................................. --27n,o6r2m9al cost and amortization of prior service costs over -- 15,900 periods not exceeding forty years (generally ten years prior Other................................................................. -- 745 to 1982). The 1982 decrease in pension expense relates to 326,050 $87,691 reduced amortization of prior service costs to recognize the largely funded status of the plans and the amortization of ac tuarial gains arising from the purchase of annuities for cer i i During 1982, the company sold 800,000 Atlantic Richfield Company common shares in open market transactions for $34,200,000, resulting in an after-tax gain of $8,208,000. In September, 1982 the company sold to Harsco Con poration all its holdings in Harsco for $17,567,000 cash, resulting in an after-tax gain of $900,000. In November, 1982 the company sold to Ferro Corpora i tion its 22.4 percent interest in Ferro for $52,521,000 cash, resulting in an after-tax gain of $2,417,000. These investment gains amounted to $22,074,000 before tain retiree groups. Adjustments were made in 1981 to the interest rate and salary scale assumptions to align these more closely to past experience and to anticipated future experience. The weighted average rate of return assumed in deter mining the actuarial present value of accumulated plan benefits was approximately 8 percent for 1982 and 1981. A comparison, at December 31, of accumulated plan benefits and net assets available for benefits for the,compa ny's pension plans is presented below: 1982 1981 i tax (after tax $11,525,000). i Property, Plant and Equipment The company provides for depreciation of plant and equip Actuarial present value of accumulated plan benefits: Vested ....................................... (in thousands) 3253,214 $467 022 ment at accelerated rates in order to provide a better match Nonvested.................................. 9,731 3.350 ing of costs and revenues. The company leases a portion of its warehouse buildings, i several manufacturing facilities (primarily through industrial Net assets available for benefits...................................... 3262,945 3299,587 5^75 372 $423,305 CRTX 0543 9 Crane Co. and Subsidiaries Miscellaneous-Net For Years Ended December 31 1982 1981 1980 Gain on investments--net (see page 9)............................ . Gain on disposal of capital assets--net.................. . Termination of certain operations.............................. . Gain on repurchase of long-term debt........................ . Minority interest.......................... . Other .......................................... . (in thousands) S 22,074 $ , 56 $ 5,015 12,076 6,274 * (4,333) (16,717) 2,690 (1.084) 2,838 659 1,032 2,511 (1,774) (251) 984 (1.076) 783 S34.346 $ (9,901) $ 7,312 The 1982 gain on disposal of capital assets primarily con sisted of sales of various Medusa Corporation cement and aggregates facilities for a total of $28,897,000 cash, result ing in an after-tax gain of $3,568,000; sale of a Huttig Sash & Door Company leasehold at an after-tax gain of $752,000; and sales of certain Crane Domestic locations for $1,319,000 cash, resulting in an after-tax gain of $606,000. consolidated working capital (as defined, including long term investments at lower of cost or market) of at least $185,000,000 and consolidated tangible net worth of at least $325,000,000, (ii) restrict payments of cash dividends and (iii) restrict issuance of additional senior funded debt. Planned capital construction in excess of $140,000.000, to modernize and expand CF&I Steel Corporation's capacity to produce oil country tubular products, has been brought to an orderly curtailment. A $70,000,000 CF&I revolving credit agreement, entered into in January, 1981 for the pur pose of partially funding the project, was terminated in 1982, and $50,000,000 borrowed thereunder was repaid. CF&I obtained these funds from the company under a promissory note and security agreement. Using primarily the proceeds from the sale of certain capi tal assets, Medusa Corporation prepaid $20,300,000 of outstanding notes payable and $1,000,000 of industrial revenue bonds. Reserves and Other Liabilities AtDecember31 1982_ . , 1S81 Accrued Liabilities At December 31 Payrolls...................... Pensions .................... Taxes other than income Interest........................ Employee benefits .... Insurance.................... Dividends .................. Capital lease obligations Other.......................... 1982 1981 (in thousands) $21,626 $32,837 -- 9,288 8,404 10,214 5,804 6,194 8,311 9,165 6,161 6,128 3,991 5,029 6,196 1,998 14,730 19,116 $75,223 $99,969 Minority interest........................................... .. Deferred income taxes--other................. .... Termination provision............ ............... .... Retainage on long-term contracts..........' . ... Pension and wage benefits..................... . .. . Miscellaneous.............................................. . .. (in thousands) $16,287 Si 7.866 2,487 6.184 1,660 1.925 4,137 1.730 14,482 154 4,297 560 $43,350 328.419 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 follow ing at December 31, 1982; Long- and Short-Term Financing At December 31,1982, the principal amounts of long-term debt repayments, net of amounts held in treasury, required for the next five years were $13,471,000 in 1983, $17,248,000 in 1984, $27,270,000 in 1985, $14,613,000 in 1986 and $14,586,000 in 1987. At year-end there were available with domestic and for eign banks $100,523,000 in short-term credit lines of which $89,481,000 was unused at that time. At December 31, 1982, cash balances of $5,050,000 were maintained under informal compensating balance agreements in connection with term loans and credit lines. Withdrawal of these com ! pensating balances was not legally restricted; however, sub stantial compliance was made with these arrangements in 1982. These credit lines are subject to annual review. At December 31,1982, the aggregate amount of subsidi ary earnings available for dividends was $193,968,000. Covenants contained in a long-term debt indenture, as amended during 1982, require the company to (i) maintain 1983........................ 1984........................ 1985........................ 1986........................ 1987........................ Thereafter................ Total minimum lease payments. . Interest .................. Present value.......... Portion: Current................ Long-term............ Minimum Capital Operating Sublease Leases Leases Income Net S10.577 8.121 9,108 9.053 8,747 48.503 (in thousands) S 8.090 SI,444 s i 7.223 6.699 801 14.019 4.791 668 13.23' 3.146 397 11.302 1.881 249 10 379 7.146 1.014 54 635 94.109 S31,753 (30.769) S63.3J0 S4.573 51 2` 259 S 6.196 57.144 S63.340 CRTX 0544 10 Crane Co. and Subsidiaries The weighted average interest rate for capital leases is 6.6%. The 1982 deferred tax provision primarily reflects a benefit These obligations mature in varying amounts through 2009. relating to pension expense. Rental expense was as follows for all operating leases: 1982 1981 1980 Stock Options A summary of stock option transactions follows: Minimum.......... Contingent ___ Sublease income (in thousands) SI 6,086 $14,474 $12,440 489 557 597 (1,161) (609) (826) 515,414 $14,422 $12,211 Outstanding January 1, 1982 .................................... 2/o Stock dividend............................................... Options granted ................................................... Number of Shares 34,380 663 -- Options expired..................................................... 6,209 ! Income Taxes United States income taxes have not been provided on un Options exercised................................................. Outstanding December 31,1982 ............................ 609 28,225 distributed earnings of foreign subsidiaries, since foreign tax credits available on the portion of these earnings not re quired for indefinite reinvestment are adequate to eliminate i any substantial federal taxes on normal distributions. A reconciliation of income (loss) before taxes to the j provision (benefit) for income taxes (federal, state and forj eign) is as follows: At December31,1982, options for 22,681 shares were exercisable and none were available for grant. Shares and per share prices (ranging from $22.45 to $37.39) have been adjusted for 2 percent stock dividends. In 1981, options for 37,108 shares were exercised. The plan is not a compensa tory plan which would require charges to income. i j Income (loss) before taxes: Domestic................................ Foreign.................................. Statutory federal tax at 46/o----Increase (reduction) from: Investment tax credits realized.. Depletion................................ Nontaxable domestic dividends Indefinite DISC income deferral. Foreign, state and local taxes .. Minimum tax.......................... Minority interest and goodwill amortization........................ Other...................................... Provision (benefit) for income taxes...................................... Percentage of income (loss) before taxes........................ 1982 1981 1980 (in thousands) 5(32,555) $73,421 $48,097 3,863 11.987 14,626 (28,692) 85,408 62,723 (13,198) 39,288 28,853 (8,652) (434) (2,527) (699) (1,592) 2,003 (3,685) (1,773) (2,390) (1.103) 1.242 -- (4,209) (2,829) (1,750) -- (32) 172 142 1,260 938 (393) (1.242) (1.016) 5(25,350) $31,597 $20,127 (88.4)% 37.0 % 32.1% i The foregoing provision (benefit) includes foreign taxes of $1,096.000,34,852,000 and $5,671,000, and state taxes ; of $(997,000), S3,882.000 and $2,155,000 in 1982, 1981 and 1980, respectively. ! The company incurred a loss for tax purposes of approxi' mately $39,000,000 in 1982. As a result of the carryback of this loss to prior years, the company has filed for a refund ; of S21,700.000. i The provision (benefit) for income taxes is composed of ! the following: I 1982 1981 1980 (in thousands) Deferred income taxes (benefit) .. $ (3,591) $ (864) $ (175) Current income taxes (benefit) ... (21,759) 32,461 20,302 S(25,350) S31,597 $20,127 Analysis by Segment of Business An analysis of sales, operating profit (loss), assets, capital expenditures and depreciation appears on page 15. Segment description by products and industries served is given on pages 18 through 24. Auditors' Opinion To the Shareholders of Crane Co. We have examined the consolidated balance sheets of Crane Co. and subsidiaries as of December 31.1982 and 1981, and the related consolidated statements of income, earned surplus, capital surplus and changes in financial position for each of the three years in the period ended December 31. 1982. 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. In our opinion, such financial statements present fairly the consolidated financial position of Crane Co. and subsidiaries at December 31,1982 and 1981, and the consolidated resu.ts of their operations and changes in financial position for eacr of the three years in the period ended December 31,1982. in conformity with generally accepted accounting principles applied on a consistent basis. New York, New York January 24,1983 CRTX 0545 Five Year Summary of Selected Financial Data Crane Co. and Subsidiaries Years Ended December 31 Net Sales.......................................................... Depreciation.................................................. Operating Profit (Loss).................................. Interest Expense........................................... Income (Loss) Before Taxes..................... Income Taxes............................................... Net Income (Loss)........................................ 1982 $1,126,398 72,896 (49,861) 26,923 (28,693) 25,350 $ (3,343) 1981 $1,611,342 86,788 112,932 37,632 85,408 (31,597) $ 53,811 1980 $1,527,600 81,673 83,122 43.471 62.723 (20,127) $ 42,596 1979 $1,573,199 73,869 102,009 43,247 67,446 (12,417) $ 55,029 1978 $1,227,449 51.139 67,663 29.802 50.462 (15.107) $ 35.355 Net Income (Loss) Per Common Share:* Average Shares Outstanding...................... Assuming Conversion of Debentures......... $(.33) (.33) $5.17 5.01 $4.03 3.90 $5.18 5.00 S3 24 3 12 Dividends Declared Per Common Share: Cash'............................................................ Stock............................................................... $1.60 2% $1.67 2% $1.54 2% SI.37 2% SI,29 2C/b Assets............................................................... Long-Term Debt.......................................... Capital Leases............................................... $ 857,177 189,282 57,144 $ 962,663 211,536 65.222 $1,004,117 285,434 65,941 SI,042.254 349,719 59.361 3 381,325 273.035 52.552 Common Shareholders' Equity Total................................................................. Per Common Share'.................................... $ 380,995 38.18 $ 415,747 40.53 $ 395,912 37.54 $ 371,316 35.17 s 335.565 31.42 'Adjusted for 2% stock dividends j Market and Dividend Information--Common Shares I Crane Co. and Subsidiaries ! i Quarter 1st ... 2nd .. 3rd... 4th ... New York Stock Exchange Price Per Share 1982 High Low 1981 High Low S36'/4 29% 25% 29 S23 22'/a 17% 20'k S46% 45% 43% 36% $38'/2 38'/s 32% 32% At December 31, 1982 there were approximately 10.096 holders of Crane Co. common stock. 'Adjusted for 2% stock dividend in February, 1982. Dividends Per Share 1982 1981 S .40 .40 .40 .40 $1.60 S 39 39 39 50 SI 67 CRTX 0546 12 Quarterly Results for the Year (Unaudited) Crane Co. and Subsidiaries (In Thousands) Quarter 1982 . 1st........................................... ......................... 2nd......................................... ......................... 3rd........................................... ......................... 4th........................................... ......................... Net Sales $ 316,756 297,224 271,731 240,687 $1,126,398 Gross Profit $ 34,245 19,932 4,720 8,451 $ 67,348 Net Income (Loss) $ 5,651 (3,233) (6,421) 660 $ (3,343) ! Net Income (Loss) Per Common Share Primary Fully Diluted $ .56 (.32) (.64) .07 $ (.33) $ .55 (.32) (64) .07 $ (.33) i 1981 1st........................................... ........................ 2nd......................................... ........................ 3rd........................................... ........................ 4th........................................... ........................ $ 374,885 434,873 428,421 373,163 $1,611,342 $ 53,289 63,739 60,041 63,157 $240,226 $10,169 15,142 13,623 14,877 $53,811 $ .96 1.45 1.31 1.45 $5.17* $ .93 1.41 1.27 1 40 S5.01 See page 9 for discussion of pension expense and UFO effects during 1982 `Adjusted for 2/o stock dividend in February, 1982. . i Management's Discussion of Operations and Financial Condition Crane Co. and Subsidiaries . tii I Results of Operations Results of 1982 operations compared with 1981 reflected continued recession in the worldwide economy and de pressed conditions existing in the domestic construction and capital goods sectors to which major portions of the company's operations are directed. The cyclical and interest rate-sensitive industries in which the company participates have demonstrated significant declines compared with any previous business cycle. Crane Domestic sales and earnings were lower in 1982 than in the previous two years, primarily due to weakened market demand for fluid and pollution control products. Crane Domestic has continued programs to modernize production facilities, introduce competitive new products and dispose of certain marginal operations. These manage ment actions, together with continued dose alignment of expenses to operating levels, will enable Crane Domestic to serve existing and improved market demands more effectively. CF&I Steel Corporation sales, operating profit and income before taxes all registered sharp decreases in 1982 in con trast to the previous two years, with operating profit and in come before taxes turning to losses. Most of the decrease was caused by declines in business activity in the principal product lines of oil country tubular goods and railroad products. (continued on page 14) CRTX 0547 13 Management's Discussion of Operations and Financial Condition Crane Co. and Subsidiaries (continued from page 13) j Construction to increase production capacity of oil coun i try tubular goods was suspended at midpoint until demand j for tubular goods justifies the additional capacity. During i 1982, CF&I negotiated wage and benefit concessions j with the United Steelworkers of America that will allow the ! company to compete more effectively for its proportionate ' share of the depressed domestic markets. Demand for rails ; did not strengthen as expected in CF&l's market area. : Medusa Corporation sales were lower for the third con : secutive year as the construction and road building indus- j tries remained depressed, resulting in a net loss for 1982. : Several marginal Medusa facilities, particularly in the Aggrej gates Division, have been sold. Long-term profit improve- I ment programs at remaining operations have been pro ! gressing according to plan and are expected to contribute j substantially to operating results when demand for cement ! and aggregates improves from the abnormally low level j experienced in 1982. Huttig Sash & Door Company sales and earnings de- ! creased moderately from 1981 levels. Operating profit conj tinued to be adversely affected by lower margins necessary j to maintain a proportionate share of the market during the i residential construction slump that continued through 1982. Huttig's improved market penetration, strategic acquisition , j of new branches in the Sunbelt and successful substitution : of replacement and remodeling business were major con ! tributing factors to sales and profit performance, j Crane Canada Inc. results were lower than the prior two j years due to continuing weakness in overall economic j activity in Canadian markets. Demand from industrial and [ energy-related markets deteriorated during 1982, adding to j an already weak housing construction market. Business ac- i tivity normally returns to previous levels only when recovery j occurs in the Canadian economy, which traditionally follows i recovery in the United States by several months. ! Overall, International Operations showed sales and earn ! ings results similar to 1981. Stronger demand for industrial ! valves, fittings, pumps and castings in the United Kingdom i were coupled with improved operating efficiencies in 1982. ' Decreased demand in energy and mining-related markets in Australia and the sharply deteriorated Mexican economy ! were responsible for lower-than-expected sales and profits : in those smaller operations. ; Net interest expense decreased from 1981, primarily due ' to lower variable interest rates on a lower average monthly balance of borrowings as well as the capitalization of ap- ' proximately $6 million of interest related to active construc- tion projects. Interest income was approximately $7 million ; lower than 1981 due to lower average investments and ; lower yields. . The company sold a portion of its long-term common . stock investments, resulting in pre-tax gains of approxi- i mately $22 million. Certain excess or marginal capital assets j at Crane Domestic, Medusa and Huttig were disposed of at i pre-tax gains of approximately $12 million. Dispositions of ! various assets were generally part of the company's ongo ing programs to maintain modern, efficient operations and to align assets with strategic business opportunities. Operating losses, coupled with increased investment tax credits and higher dividend-received deductions,-resulted in tax losses available for carryback to earlier years. The tax re fund from this carryback resulted in a tax benefit for 1982, as compared to effective tax rates of 37% and 32% for 1981 and 1980, respectively. Liquidity and Capital Resources The company has depended primarily upon earnings and bank borrowings (including short-term credit lines) to furnish adequate capital to finance operations and working capital. However, in 1982, the company also utilized proceeds from sales of capital assets as well as long-term investments to help fund capital expansion and to reduce long-term cebt. Although the company's policy is that each business seg ment stands alone with respect to its own liquidity and capi tal resources, management deemed it advisable, in 1982, to provide a $50 million installment loan to CF&I to retire the $70 million revolving credit agreement originally entered into, of which $50 million was borrowed thereundeo-fcrihe purpose of partially funding the tube mill expansion pro.ect. This loan is secured by a pledge of the stock of those CF&| subsidiaries holding its principal non-steelmaking assets. In addition, the company has advanced $30 million to CF&I against its share of the tax refund which will result from the filing of the 1982 federal income tax return. These transac tions were entered into to afford CF&I greater flexibility in its operations. Over the last three years, depreciation incurred and pro ceeds from disposals have exceeded capital expenditures for most business segments. During this period, major expansion programs at Medusa and CF&I were largely completed and the remaining planned capital expenditure to expand CF&l's capacity to produce oil country tubular products has been suspended. Long-term debt has been decreased by approximately $22 million through various scheduled and optional reoayments. At December 31,1982, $42 million fluctuated with lending rates, compared with $31 million at the end of 1981. In addition to cash and short-term investments of approxi mately $79 million at the end of 1982, the company had long-term investments with an approximate market value of $50 million and $89 million of available unsecured credit lines. During the year, the company and its maior subsidiaries purchased annuities for certain retiree groups, thereby improving the funding status of pension plan liabilities fcr active employees with a net reduction in contributions re quired. Reduced amortization of prior service costs ;o rec ognize the largely funded status of the plans and the amorti zation of actuarial gains resulting from the purchase of tnese annuities, combined to reduce pension contributions by approximately $37 million and the provision for pension expense by approximately $25 million relating to 1982. CRTX 0548 14 Analysis By Segment Crane Co. and Subsidiaries (In Thousands) I I Net Sales: I Cra__n___e_r--vD__o___m_ estic................................................. .. CF&I Steel Corporation...................-................. Medusa Corporation.......................................... Huttig Sash & Door Company........................... Crane Canada Inc............................................... International Operations.................................... Total Net Sales............................................. .. Operating Profit (Loss): Crane Domestic................................................. CF&I Steel Corporation...................................... Medusa Corporation.......................................... Huttig Sash & Door Company........................... Crane Canada Inc............................................... International Operations.................................... .. Corporate.............................................................. Total Operating Profit (Loss)......................... .. 1982 Amount /o 1981 Amount % 1980 Amount o.'o $ 260,590 362,835 149,010 147,747 134,838 71,378 $1,126,398 23 32 13 13 12 7 100 $ 298,671 723,768 183,914 160,669 165,183 79,137 $1,611,342 19 45 11 10 10 5 100 S 303.702 614,003 214,392 156,678 150.875 87.950 SI 527.600 20 40 14 10 10 6 100 $ 14,424 33 (57,972) (134) (16,272) (37) 7,461 17 2,605 6 6,357 15 (43,397) (100) (6,464) $ (49,861) $ 24,120 20 76,873 64 (7,742) (6) 10,130 8 10,932 9 6,222 5 120.535 100 (7,603) $ 112,932 S 26.037 29 33.686 37 940 1 10.732 12 10.345 11 9,158 - 10 30 SS3 100 (7.776) S 83,122 Assets: Crane Domestic................................................... . . CF&I Steel Corporation........................................ Medusa Corporation............................................ Huttig Sash & Door Company............................. Crane Canada Inc................................................. International Operations...................................... 1 Corporate Total Assets Crane Domestic.......................................... ........... CF&I Steel Corporation............................... ........... Medusa Corporation.................................... ........... Huttig Sash & Door Company.................... ........... Crane Canada Inc......................................... ........... international Operations............................. ........... Total........................................................ ........... $ 94,407 374,425 133,805 60,133 55,020 42,394 760,184 96,993 $ 857,177 12 49 18 8 7 6 100 $ 106,556 . 393,504 182,457 58,145 66,793 47,344 12 46 21 7 8 6 854,799 100 107.864 $ 962,663 S 112,543 390.199 204.259 61.260 61.489 51,514 881,264 122.853 SI.004,117 13 44 23 7 7 6 100 Capital Expenditures 1982 1981 1980 $ 6,919 97,336 7,194 1,945 1,045 2,706 $ 6,765 47,182 5,920 2,352 3,159 1,743 $ 5,427 31,903 . 11,662 1.088 1,719 3.281 $117,145 $67,121 $55,080 ________ Depreciation 1982 1981 i960 S 6,354 41,645 19,320 1.700 1,674 2,203 S 6,112 52,872 21 734 1.574 1 782 2.714 S 6.530 -5 - ` 0 23 323 1 423 ` Sc" 2.353 $72,896 S86.788 S31.673 i CRTX 0549 Impact of Inflation (Unaudited) Crane Co. and Subsidiaries The supplemental information reflecting the effects of infla tion as measured through "Constant Dollars" and "Current Cost" methods is set forth in the following tables. The supplemental information concerning the effects of inflation under either of the two methods is not a compre hensive application of inflation accounting and only reflects: (1) the effect on inventories and properties (excluding natu ral resource reserves prior to 1980) and related cost of goods sold and depreciation expense, and (2) the effect of general inflation on certain monetary assets and liabilities. Both of the methods inherently involve the use of assump tions, approximations and estimates and. therefore, the re sulting measurements should be viewed in that context and not as precise indications of the effects of inflation particu larly as it relates to the company. Constant Dollars This method attempts to measure the effect of increases in the general price level, as measured by the U. S. Govern ment Consumer Price Index for All Urban Consumers (CPI) on the purchasing power of the dollar. The general inflation (Constant Dollars) data has been stated in average 1982 dollars by applying the CPI to the historical cost information. An adjustment to certain monetary assets and liabilities is made with reference to converting opening and closing year-end balances by the actual and average CPI. Current Cost This method attempts to measure the effect of specific price changes experienced by the company. In estimating current costs various methods such as published indices for specific types modified to local conditions, approximate replace ment costs and appraisals are used. The adjustments on cost of sales, under either method, are minimal since the historical inventories have been deter mined principally on the UFO basis, which matches current sales dollars with current inventory replacement cost. The effect of the general inflation adjustment on properties was determined by applying the CPI to the historical cost in the year of acquisition. The comparable adjustment on a current cost basis was determined through the use of spe cific price indices, particularly as to the steel and cement industries, appraisals, replacement cost, unit of space costing and recoverable amount valuation. Depreciation ex pense for both adjustments was calculated by applying the straight-line method to the respective adjusted property amounts already determined, without benefit of income tax deductions, for the difference between historical cost depreciation and either constant dollars or current cost depreciation. Unrealized Gain in Purchasing Power Since the closing CPI for both 1982 and 1981 exceeded the average CPI for those years and monetary liabilities ex ceeded monetary assets, the results were notional gains. These gains represent the decline in book value of net mon etary liabilities. The notional gains will not be recognized until long-term debt, for example, is repaid with deflated dollars (reduced purchasing power dollars). However, since approximately $42 million of debt ($31 million in 1981) fluctu ates with lending rates, and these tend to follow inflation, the effect of this will be charged to income as incurred. Mineral Reserves The company's present mineral reserves are expected to be in adequate supply for its steel and cement operations for the foreseeable future. Production of coal and iron ore for use in steel operations has been suspended due to current economic factors. Under normally competitive conditions, this production must be received at cost or at a slight profit for the finished steel and cement products to earn a reason able profit. Proven mineral reserves at December 31 were: Coal.............................. .. Iron Ore........................ .. Limestone/Dolomite .... . . Stone and Sand............ .. Proven Reserves Production 1982 1981 1982 (Thousands of Tons) 36,000 36,000 221 21,500 22,500 -- 737,637 1,070,175 6,838 65,417 121,750 2,382 1931 662 72 9.326 2.870 l i 16 CRTX 0550 Consolidated Statement of Income Adjusted for Changing Prices (In Thousands) Year Ended December 31,1982 Net Sales...................................... Cost of Sales.................................. Depreciation.................................. Selling, General and Administrative Other Income--net.......................... Provision (Benefit) for Income Taxes Net Income (Loss) .................................. Per common share.......................... Unrealized gain in purchasing power from holding net monetary liabilities.............. Effect on inventory and property, plant and equipment held during the year: General inflation ................................ Specific price changes .................... Difference.......................................... Current cost: Inventory................................................ Property, Plant and Equipmentnet of depreciation.............................. As Reported in Primary Statement $1,126,398 987,982 72,896 115,382 (21,169) (25,350) 1,129,741 $ (3,343) $(.33) Five Year Comparison of Selected Supplementary Financial Data Adjusted for Effects of Changing Prices (In Thousands of Average 1982 Dollars) Years Ended December 31 1982 1981 Net Sales As reported.......................................................... Adjusted for general inflation........................... $1,126,398 $1,611,342 1,126,398 1,711,311 Net Income (Loss) As reported.......................................................... Adjusted for general inflation........................... Adjusted for specific price cnanges............ S (3,343) (28,988) (33,186) $ 53.81135.844 28.303 Net Income (Loss) per common share' As reported.......................................................... Adjusted for general inflation........................... Adjusted for specific price changes............ Unrealized gain in purchasing power from holding net monetary liabilities...................... Net assets at year-end As reported.......................................................... Adjusted for general inflation........................... Adjusted for specific price cnanges............ Difference between general inflation and specific price changes on inventory and property, plant and equipment...................... Casn dividends declared per common share* As reported.......................................................... Adjusted for general inflation........................... Market price per common share at year-end As reported.......................................................... Adjusted for general inflation........................... Average Consumer Price Index ................. 'Adjusted for 2% stock dividends $ (.33) (2.90) (3.32) $5.17 3.44 2.71 $ 10,599 $ 24,399 $ 380,995 754,244 796,793 $ 415.747 839.016 940.471 $ 45,200 SI .60 1.60 S24.13 24.13 289.1 $ 28,500 $1.67 1.77 $36.00 38.23 272.4 Adjusted For General Inflation (Constant Dollars) $1,126,398 987,982 98.541 115,382 (21,169) (25,350) 1,155,386 $ (28.988) $(2.90) $ 10.599 Adjusted For Changes in Specific Prices (Current Cost) $1,126,398 987.982 102.739 115.382 (21.169) (25.350) 1.159 584 S (33 186) Si 3.32) 3 10 599 S *700) S _ 45.200 3 3C- 023 1980 $1,527,600 1.790.659 1979 SI,573,199 2.093.498 9~3 Si.22' 4Z9 1.31" 303 $ 42.596 29,841 19,378 $ 55.029 58.589 *16.8 44 S4.03 2.82 1.83 $ 46.686 $ 395.912 871.146 995.136 S5.18 5,52 4 40 S 64.449 S 371,316 393 369 1 ' 04.336 $ 102.800 SI.54 1.81 $44.75 52 46 246 8 S 20.200 Si 37 1.82 S33.25 44 25 917 * S' 73 4 9` 325 53 37 95 ?= CRTX 0551 Operating Review Crane Domestic Deming pump sales were aiso severely depressed by the business downturn. To rane Domestic manufactures anddistributes a wide . meet this condition, stringent cost cutting Cvariety ofindustrialproducts. Five operations--Valves & Fittings, EngineeredProducts, Plumbing, Crane Supply. measures were taken, including reduc tions in personnel, unprofitable product lines and inventory. Labor negotiations andHydro-Aire--makeup thissegmentofthecompanyS busineaslsso. led to concessions that will improve efficiency and enhance the company's competitive position. Consolidation of the two Salem, Ohio plants was completed early in 1982 in or der to streamline operations. Programs to upgrade and standardize Deming prod uct lines were initiated and the distributor network strengthened. Demand for Chempump canned mo tor pumps in the chemical processing and domestic nuclear markets fell in 1982, but sales and earnings held up as the result of increased activity from the Navy nuclear program and rapid expan sion of the marine market. Development of the latter is a new area for Chempump and has an attractive future potential. Sales of water treatment systems by Cochrane were somewhat below 1981. Lower activity in the electric power gener ating market was partially offset by in creased business from the pulp and pa per industry. The modular demineralizer and filtering equipment product lines were expanded during the year. Moderate improvement is expected in Final adjustments are made in drill settings on one machining unit in a six-station turntable developed by Crane to machine bodies ofnew high performance steel butterfly valves. Fluid and Pollution Control Products Results from the Valves & Fittings and En gineered Products Divisions were disap pointing in 1982. Sales and earnings were off in the face of weak demand and stiff price competition brought on by de pressed business conditions. I the overall sales of fluid and pollution con trol products in 1983. Forecasts do not ; indicate a sharp spending rise in this capital-intensive market. However, contin ued implementation of cost reduction measures instituted in 1982 should resuit in a more satisfactory performance. With lower volume, valve operations Building Products concentrated on reducing expenses and Sales of plumbing products showed little controlling inventories. Continued em improvement as high interest rates con- i phasis on quarter-turn products, with the t-oueb to stc'e hc.ro build.ng a~d con ; extension of one butterfly valve line to struction activity. The Plumbing D-v^cn larger sizes and the introduction of a new introduced additional acrylic tubs ana ' ball valve, will enable the company to com other fixtures, strengthening both ts resi pete on a wider range of applications. dential and commercial lines. Valve sales were reorganized to place Increased automation during 1982 marketing responsibility for all quarter- helped raise productivity, and the installa i turn products and their actuators with a tion of computerized material resource i 1 separate Crane Controls sales force, planning (MRP) at the potteries has de i j Greater penetration of a growing market veloped more accurate production j segment is anticipated as a result of this scheduling and better quality control. I change. 18 CRTX 0552 I Wholesale Operations : Although sales were lower, Crane Supply operated at a profit in 1982 with the help . of cost savings and improved productiv| ity programs. The division sells valves, fittings, pumps, plumbing and related products. A new branch was opened in northern West Virginia to serve mpchanical conj tractors and industrial users in the upper . Ohio River Valley. Further expansion in . the Sunbelt region is planned. | | ! , j j i ! ! j Hydro-Aire 1 j The Hydro-Aire Division designs and ; j manufactures aircraft brake control sys- j | terns, fuel pumps and other accessories \ \ used throughout the aerospace industry. ; , While 1982 sales and earnings were off ; slightly, Hydro-Aire performed well. Com- j ; mercial and business aircraft markets felt j ; the effects of lower passenger travel and 1 | the high cost of money, and orders for ' j new equipment were off substantially. ; ' However, the military market provided a : stabilizing effect with increased orders ; and new retrofit programs. ' Development and certification of the ' new digital brake control system for Boeing's 757 and 767 aircraft were com- ; pleted during 1982. Customer deliveries ; of the 767 began in the latter part of the ; . year, and 757 deliveries will commence in j the first quarter of 1983. Also, the Cessna I Citation III completed certification with j I Hydro-Aire brake controls and fuel pump ' , equipment, with customer deliveries commencing during this period. Hydro-Aire expects 1983 sales to con tinue at the present level, with a strong upturn occurring during 1984. This will be due in part to the anticipated imorovement in the general economy, but more ! important, to the conversion by the air lines to more fuel-efficient aircraft. Military procurements are also expected to be strong during this period. Six Cochrane engineered modular demineralizers treat process waterfor a midwestern pharmaceuti cal manufacturer. These EMD units are pre-engineered in various sizesfor quick delivery and less ; costly installation. Commuter aircraft, in cluding many designed and built outside the U.S., are afast-growing marketfor Hydro-Aire braking controls andfuel pumps. CRTX 0553 CF&I Steel Corporation intense international competition, much |F&T, one ofthe largest vertically integratedsteel manu of which was government subsidized. Sales of rolled, mining and wire prod Gfacturers in the western UnitedStates, providesproducts for transportation, petroleum, mining, construction and ucts also declined but remained stronger than other lines. With the downturn in the economy, agribusiness markets. The company's mines and quarries supplCyF&I instituted an aggressive program its own coking coal, limestone anddolomite. Water necessaryfor mining and manufacturing is obtainedfrom company-owned or . ''-controlled waterrights. to reduce expenses in all areas. A new agreement was reached between the company and the United Steelworkers of America to modify collective bargaining agreements. It provides for substantial wage and benefit reductions during the period October 1, 1982 through Septem ber 30,1983 and creates a profit-sharing program for the employees. In another action, an agreement with the Steelwork ers reduced production incentive rates by 25 percent in May. Both were ratified by an overwhelming majority of the union membership. Improvements in steel production brought increased yields, contributing to the cost reduction program. Cost for raw materials was also cut significantly during the year. With the suspension of mining operations, lime plant, coke piant. basic oxygen furnace and blast furnace opera tions, new material consumption was shifted from coals and ores to cast and ferro scrap. CF&I completed a new six-strand con tinuous caster late in the year. Producing either round or square billets, this equip ment will help provide for more cost-effi cient operations. Construction on the new seamless tube mill was suspended at the CF&I shipment volume in 1982 was sig nificantly below the previous year, reflect ing the generally depressed state of the domestic steel industry. Each of the major markets served was affected. In addition Two 155-ton capacity la dles, mounted on a turret, transfer molten steelfrom thefitrnaces to the new continuous caster unit. approximate mid-point until improved business warrants its completion. Based on conservative industry fore casts, shipment levels are expected to in- to low demand, shipments were de pressed by distributor and end-user ef forts to minimize inventories. This was especially true in oil country goods sales, 'where large inventories built in the field during 1981 remained unsold and unused. Shipments of rail to domestic cus tomers were also affected by lower de mand as railroads deferred major track rehabilitation planned for 1982. Export markets for CF&I rail also weakened and available tonnage was subjected to j Torches cut 8-inch rounds ; from the continuous ! caster into pre-proI grammed lengths to meet I customer requirements | and maximize yield. 20 CRTX 0554 Medusa Corporation edusaproducesportlandandmasonry cements, aggre Mgates andasphalt, andprovides roadparingandhighway safety construction sendees. Itsprincipalmarketareas are the GreatLakes states, Georgia andnorthern Florida. .. wECM Finished rail is scanned for defects by 10 ultra sonic transducers which display the information on CRT screens, enabling the operator to evaluate the rail's quality. crease in 1983, but will remain below past years. CF&I will be able to respond rap idly to any increased demand in any, or all, of its product lines but 1983 will be a difficult year. In 1983 and beyond, demand for rail road products should increase. With a modern rail facility, updated technology The Medusa Challenger unloads cement at the and the upgrading of products and qual new Chicago terminal. ity, CF&I is well positioned to maintain j and bolster its dominant position in the j Western rail market. i opec.dl oai ana anoy products will . comprise a greater percentage of rolled , productsin 1983.The new continuous cast-! er will also serve the rod mill, permitting a number of wire products to be made from this more cost-efficient source. : The long-term demand for oil country i tubular goods is expected to grow during ( the mid- and late 80's in CF&l's market, i the area west of the Mississippi River and j including the energy-rich Overthrust Belt | of Montana, Wyoming and Utah. ; I The continued decline in construction I of all types, resulting from high interest | rates and the depressed economy, was j reflected in Medusa's 1982 results, i Cement shipments were below `.981 levels. The Great Lakes states, where ; most of Medusa's capacity is located ; were particularly hard hit. This lack o; j activity also caused prices to drop :c - unrealistically low levels throughout ` the company's markets. Sales at the aggregates, paving arc highway safety operations were aiso lower in 1982 with the slump in construc tion and cutbacks in federal and state funds for roadbuilding and public works programs. Overhead and operating costs were i closely monitored to effect reduct.ons CRTX 0555 21 wherever possible. Salary freezes were instituted, personnel cutbacks were accomplished and wage concessions negotiated in union contracts. The ce ment plant facility at York, Pennsylvania was sold and several aggregates oper ations were closed or profitably sold. A unique distribution terminal was completed in Chicago to serve northern Illinois and Indiana markets. A companyowned lake vessel was moored along side a truck loading facility constructed on shore and used to store cement shipped by water from the Charlevoix plant. Other capital spending was limited to maintenance needed to keep plants at high levels of efficiency. Medusa's outlook for 1983 and beyond is encouraging. With a continued decline | in interest rates, building construction ac| tivity is expected to gain momentum by j the second half of the year and carry for1 ward to meet the backlog of demand in ] the private and public sectors. Huttig Sash & Door Company uttig is a wholesale distributorofbuildingmaterials, with: Hspecial emphasis on windows, doors andrelatedmiUwork products. It has branches in the southeastern, south western andmidwestem states. Huttig Garden Door units, glazed with tem pered insulating glass, are being installed in new res idential construction in North Carolina. Huttig's 1982 results were affected by the inefficient aluminum sliding door, ,t has ! continuing recession in homebuilding. considerable potential as a replacement i With housing starts near a 36-year re unit as well as in new construction. Mar cord low nationally and falling in the Sun keting efforts will be accelerated this year. belt states more than they had in 1981, Huttig opened a new operation in new construction markets weakened Clearwater to better serve the growirg II considerably. west coast area of Florida. Acqu s ic". c; i ii The company's strategy of increasing a distribution business and winccw man penetration of the remodeling, replace ufacturing facility in Orangeburg. Seen ment, light commercial and institutional Carolina billed a void in Huttig's cc ,erage I I I markets played a big part in prevent ing sales and earnings from paralleling in the South Atlantic states. Until a recovery in resident's, cu- z ng the full decline in new residential con occurs, Huttig will continue to direct :s struction. efforts toward those other segments j A new product, the Huttig Garden that provide a smaller but more Stacie ' Door, was developed and test-marketed market base. ; in 1982. Designed to replace the energy- 22 CRTX 0556 Crane Canada Inc rane Canada manufactures anddistributes valves and Cplumbingproductsforconstruction and basic industrial applications. Crane Supply a network ofwholesale branches, is the company^ hugest division. , Sales and earnings declined as Canada ; experienced deteriorating economic j conditions during the year. With rising un- i employment, inflation and interest rates, j unused plant capacity greatly reduced ! industry's capital spending and housing I starts fell to their lowest level in 20 years. Demand in Crane Supply's markets was weak, and prolonged construction ' strikes in Ontario and the three western provinces cut further into the division's sales. | Throughout the year, particular atten- ' tion was given to reducing expenses in . all areas of Crane Canada's operations. ` Under a government-sponsored Work : Sharing Program, the workweeks of all ' employees were reduced. Wage freezes ' were also imposed and executive com pensation decreased. . Product development efforts were con- ' centrated on existing lines. Several'r.ew ; acrylic plumbing fixtures were introduced during the year. Fabricated pulp stock . valves underwent redesign, waterworks valves were upgraded and the quarter- _ turn ball and butterfly lines extended. It is forecast that 1983 will be another i difficult year for the Canadian economy. < Business investment spending is ex- j pected to continue to remain cautious, ; and new residential construction will not ' show any marked improvement as long ' as interest rates fluctuate at a high level. ' TorontoS new Atrium on Bay, a retail and office complex, is equipped with Crane plumbingfixtures. iI i i CRTX 0557 __j 23 . International Operations perations in the UnitedKingdom, Australia andMexico Osupply valves, fittings andpumps to internationalchem ical, petroleum, powerandother industrial markets. Cranepumps, installed in a nitrogen-pressurized high pressure system, sup ply hot water to a 60-acre site in England. I Crane Ltd. showed improved results ; even though the British economy was : stagnant in 1982. Export sales were up, ' an inventory management program be : gun earlier led to better customer service, and the company broadened its profit| able valve service and repair operations, i New product introductions included : a malleable iron valve line, and work . was started on an automated malleable foundry due to begin production in mid-1983. : While no significant upturn in the do ' mestic economy is expected in the com ing year, Crane Ltd. plans to continue its j emphases on export sales and product ! development and to expand its service and repair capabilities through a recent acquisition. Crane Australia Pty. Limited performed well, though it did not match the record results achieved in 1981. The boom in this country's natural resources develop ment, where Crane enjoys a strong posi tion in the valve market, has fallen off and is not expected to regain momentum in 1983. j Both sales and income were down for Crane-Deming de Mexico S.A. in 1982 as recession and devaluation of the peso devastated that economy. Demand for industrial and agricultural pumps manufac tured there will probably remain weak in the coming year. ; : ! ' j ; < , i 24 CRTX 0558 Directors , Theodore D. Brown Chairman, IntraWest Financial Corporation, Banking Langdon P. Cook' President, Langdon P. Cook & Co., _ Incorporated, Municipal Bond Dealers * Walter J. P. Curley Private Venture Capital Investments William H. Donaldson' Chairman and Chief Executive Officer, Donaldson Enterprises Incorporated, Management Corporation; former Dean of the School of Organization and Management and Professor of Manage ment Studies, Yale University Roberts. Evans" Executive Vice President of the Company Thomas M. Evans" Chairman of the Company; Chairman of the Executive Committee and Chief Executive Officer, H.K. Porter \ Company, Inc., Manufacturing; President, Evans & Co., Incorporated, Investments Dante C. Fabiani ' Retired President of the Company Richard S. Forte"* General Partner, Forte Cashmere ComI pany Importer and Manufacturer \ Dorsey R. Gardner* 1 President, Kelso Management Company, : investment Management i DwghtC. Minton'" Chairman of the Board and Chief Execu- , ;:ve Officer, Church & Dwight Co., Inc., Chemical Manufacturer ; Arthur A. Seeligson, Jr. j Independent Oil Producer and Investor, I President of Seeligson Oil Company; Man aging Partner of various other partnerships Rcben J. Slate'" President of the Company ! * Verrcer of And i Committee I yarrcs- o! `."5 E' ,e CoTnT.iitse 1 ' "Eec:-s3 2-1. *353 Officers Thomas M. Evans Chairman Robert J. Slater President Robert S. Evans Executive Vice President B. Jack Barnes Vice President & General Manager Hydro-Aire Division Gerald E. Bowers Vice President-Management Information Systems William R.T. Crolius Vice President-Government Relations William C. Dackis Vice President & Assistant to the President Robert R. Foster Vice President & General Manager Crane Supply Company Paul R. Hundt Vice President, Secretary & General Counsel Ronald K. Leirvik Vice President & General Manager Valves & Fittings Division John C. Martineau Vice President & General Manager Plumbing Division James F. O'Brien. Jr. Vice President-Finance Kenneth F. Webel Vice President & General Manager Engineered Products Division Richard J. Neville Treasurer Richard W. O'Donnell Controller Stock Listings Crane Co. common stock is traded on the New York and Pacific Stock Exchanges: the preferred stock is traded over the counter. 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 CF&I Steel Corporation Pueblo, Colorado F.J. Yaklich, Jr. President Huttig Sash & Door Company Chesterfield, Missouri S.P Wells President Medusa Corporation Cleveland, Ohio W.M. Troutman President Crane Canada Inc. Montreal, Canada G.A. Kelly President international Crane Australia Pty. Limited Sydney, Australia RJ. Farrell Managing Director Crane Ltd. London, England J.M. Fraser Managing Director Crane-Deming de Mexico S.A. Monterrey, Mexico W.M. Collins General Manager Equal Employment Opportunity Policy Crane Co. is an equal opportunity em ployer. It is the policy of the company to recruit, hire, promote and transfer to ail job classifications without regard to race, color, religion, sex, age or national origin. CRTX 0559 CRANE 3 Crane Co. 300 Park Avenue, New York, New York 10022 A supplier to basic industry Rails Tubular goods Valves and pumps Cement Building products Plumbing Aircraft components