This Quarterly Report on Form 10-Q contains information about Crane Co., some of which includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements other than historical information or statements about our current condition. You can identify forward-looking statements by the use of terms such as "believes," "contemplates," "expects," "may," "could," "should," "would," or "anticipates," other similar phrases, or the negatives of these terms.

Reference herein to "Crane", "we", "us", and, "our" refer to Crane Co. and its subsidiaries unless the context specifically states or implies otherwise. References to "core business" or "core sales" in this report include sales from acquired businesses starting from and after the first anniversary of the acquisition, but exclude currency effects. Amounts in the following discussion are presented in millions, except employee, share and per share data, or unless otherwise stated.

We have based the forward-looking statements relating to our operations on our current expectations, estimates and projections about us and the markets we serve. We caution you that these statements are not guarantees of future performance and involve risks and uncertainties. In addition, we have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. There are a number of other factors that could cause actual results or outcomes to differ materially from those addressed in the forward-looking statements. The factors that we currently believe to be material are detailed in Part II, Item 1A of this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011 filed with the Securities and Exchange Commission and are incorporated by reference herein.

Overview

We are a diversified manufacturer of highly engineered industrial products. Our business consists of five segments: Aerospace & Electronics, Engineered Materials, Merchandising Systems, Fluid Handling and Controls. Our primary markets are aerospace, defense electronics, non-residential construction, recreational vehicle ("RV"), transportation, automated merchandising, chemical, pharmaceutical, oil, gas, power, nuclear, building services and utilities.

Our strategy is to grow the earnings and cash flows of niche businesses with leading market shares, acquire businesses that fit strategically with existing businesses, aggressively pursue operational and strategic linkages among our businesses, build a performance culture focused on productivity and continuous improvement, continue to attract and retain a committed management team whose interests are directly aligned with those of our shareholders and maintain a focused, efficient corporate structure.

Outlook - Continuing Operations

Our sales depend heavily on industries that are cyclical in nature, or are subject to market conditions which may cause customer demand for our products to be volatile. These industries are subject to fluctuations in domestic and international economies as well as to currency fluctuations, inflationary pressures, and commodity costs.

The global economy remains uncertain due, in part, to persistent high unemployment in the U.S. and Europe, a weak U.S. and European housing market, government budget reduction plans, concerns over the deepening European sovereign debt crisis and slowing economies in China and India. Although a slower global economy is likely, we believe we are positioned to achieve profitable growth in 2012. We expect a combination of limited market growth and gains in market share to drive profitable growth in 2012, albeit at a reduced, year-over-year rate compared to 2011. We expect further improvements in our longer, late cycle businesses within Fluid Handling and Aerospace & Electronics while our outlook is relatively stable, in aggregate, for our short cycle businesses (Engineered Materials and Merchandising Systems), with the potential for slight improvement in 2012. Specifically, in 2012, we expect core sales from continuing operations to increase 6% to 7%, sales from acquisitions to increase less than 1% and unfavorable foreign exchange of 2%. In aggregate, we expect total year-over-year sales growth of 4% to 5%.

In response to weak European economic conditions as well as opportunities to enhance our cost structure in certain businesses, in the second quarter of 2012, we recorded $14.7 million of restructuring charges associated with repositioning actions designed to improve profitability, primarily in the European portion of the Fluid Handling segment and, to a lesser extent in our Engineered Materials and Merchandising Systems segments. We expect to record an additional $5 million of charges in the second half of 2012 related to these initiatives. The Company expects pre-tax cash payments of approximately $5 million in 2012 and an additional $10 million in 2013 pertaining to the restructuring charges, which the Company will fund with cash generated from operations. Approximately $12 million in annualized savings associated with these initiatives will largely commence in 2013.

Aerospace & Electronics

In 2012, we continue to believe market conditions in the aerospace industry will remain positive and, accordingly, we expect to achieve higher sales and profits than 2011 in our Aerospace Group, as we benefit from higher build rates for large commercial aircraft, new products and an expanded global sales force. In addition, we expect aftermarket sales in the second half of 2012 to remain consistent with the first half of 2012. We forecast reasonably stable results for our Electronics Group despite reductions in overall defense spending, as we continue to expect growth in our commercial business, which comprises about 39% of Electronics sales, to offset a slight decline in defense related sales.

Engineered Materials

In our Engineered Materials segment, sales were lower than expected during the first half of 2012, reflecting difficult competitive conditions and production delays, notably in our transportation business. In addition, we continue to see challenging end market conditions, particularly in Europe, and in response, we recorded restructuring charges of $1.1 million related to closing a small facility in England. We expect to incur an additional $2 million of charges related to these actions in the second half of the year. Accordingly, in 2012, we now expect a modest decline in sales volume and lower operating profit.

Merchandising Systems

In 2012, we continue to expect relatively flat sales for our Merchandising Systems segment, reflecting modest core growth offset by unfavorable foreign exchange translation. In Payment Solutions, we expect sales to increase modestly due to a gradual improvement in market demand for new products. In Vending Solutions, we expect revenue to remain close to 2011 levels, reflecting continued economic uncertainty. As part of our repositioning actions, we plan to consolidate the manufacturing of certain products and optimize engineering resources within our Payment Solutions business. In connection with these initiatives, restructuring charges of $2.3 million were recorded in the second quarter of 2012. Operating profit is expected to improve (inclusive of the restructuring charges), led by productivity initiatives across the segment.

Fluid Handling

For 2012, in our Fluid Handling segment, we expect further sales growth over 2011 levels primarily led by recovery in our Energy and ChemPharma business units, which are benefiting from exposure to their late cycle end markets and an expanded sales force. We expect unfavorable foreign exchange translation. While we expect maintenance, repair & overhaul ("MRO") as well as project businesses to be improved over 2011, activity has recently decelerated. Market conditions in Europe are somewhat depressed, particularly for certain short cycle portions of the Fluid Handling segment, reflecting economic uncertainty. In addition, demand from global power markets has softened, with some customers delaying delivery dates. In response to these weaker end market conditions and opportunities to reduce cost at certain European facilities, we recorded $11.4 million of restructuring charges in the second quarter related to the transfer of certain manufacturing operations from higher cost to lower cost Company facilities and

other staff reduction actions. We expect to incur an additional $3 million of charges related to these actions in the second half of the year. Accordingly, we expect only a modest improvement in operating profit over 2011.

Controls

In our Controls segment, while European markets have softened, we continue to anticipate growth in the oil and gas and transportation end markets, resulting in higher sales and operating profit in 2012 compared to 2011.

Results from Continuing Operations - Three Month Periods Ended June 30

All comparisons below refer to the second quarter 2012 versus the second quarter
2011, unless otherwise specified.

Second quarter of 2012 compared with second quarter of 2011



                                                     Second Quarter                  Change
(dollars in millions)                              2012          2011           $             %
Net sales                                         $ 657.7       $ 633.2       $ 24.5           3.9 %

Operating profit from continuing operations          69.4          78.9         (9.5 )       (12.0 )

Restructuring charge *                               14.7            -

Operating margin from continuing operations          10.5 %        12.5 %

Other income (expense):
Interest income                                       0.5           0.4          0.1          16.7
Interest expense                                     (6.8 )        (6.4 )       (0.4 )        (5.5 )
Miscellaneous - net                                  (0.4 )        (0.3 )       (0.1 )       (21.0 )

                                                     (6.7 )        (6.3 )       (0.4 )        (5.6 )

Income from continuing operations before
income taxes                                         62.7          72.5         (9.8 )       (13.5 )
Provision for income taxes                           19.9          22.7         (2.8 )       (12.5 )


Income from continuing operations                    42.8          49.8         (7.0 )       (14.0 )

* Restructuring charges are included in operating profit and operating margin.

Second quarter 2012 sales increased $24.5 million, or 3.9%, compared to the second quarter of 2011. Core business sales for the second quarter increased approximately $36.3 million, or 5.8%. Sales also increased $6.4 million, or 1.0%, due to the net impact of divestitures and acquisitions. The impact of currency translation decreased reported sales by approximately $18.2 million, or 2.9%, as the U.S. dollar strengthened against other major currencies in the second quarter of 2012 compared to the second quarter of 2011. Net sales related to operations outside the U.S. were 41.0% and 41.1% of total net sales for the quarters ended June 30, 2012 and 2011, respectively.

Operating profit from continuing operations was $69.4 million in the second quarter 2012 compared to $78.9 million in the same period of 2011. The decrease in operating profit reflected declines in our Fluid Handling and Engineered Materials segments, partially offset by improved performance in our Merchandising Systems, Aerospace & Electronics and Controls segments. Operating profit margins were 10.5% in the second quarter of 2012, compared to 12.5% in the comparable period in 2011. Operating profit in the second quarter of 2012 included restructuring charges of $14.7 million associated with repositioning actions designed to improve profitability beginning in 2013.

Our effective tax rate is affected by a number of items, both recurring and discrete, including the amount of income we earn in different jurisdictions and their respective statutory tax rates, changes in the valuation of our deferred tax assets and liabilities, changes in tax laws, regulations and accounting principles, the continued availability of statutory tax credits and deductions, the continued reinvestment of our overseas earnings, and examinations initiated by tax authorities around the world.

Our effective tax rate attributable to continuing operations of 31.8% for the three months ended June 30, 2012 is higher than our effective tax rate attributable to continuing operations of 31.3% for the three months ended June 30, 2011 primarily due to the statutory expiration of the U.S. federal research tax credit as of December 31, 2011, partially offset by lower taxes on our non-U.S. earnings.

Results from Discontinued Operations - Three Month Periods Ended June 30



                                                               Three Months Ended
                                                                    June 30,
  (dollars in millions)                                        2012           2011
  Income from Continuing Operations                          $    42.8       $  49.8
  Discontinued Operations:
  Income from Discontinued Operations, net of tax                  1.6           0.7
  Gain from Sales of Discontinued Operations, net of tax          18.3            -

  Discontinued Operations, net of tax                             19.9           0.7

  Net income before allocation to noncontrolling interests   $    62.7       $  50.5

For the three months ended June 30, 2012, we reported two divested businesses as discontinued operations on our Condensed Consolidated Statement of Operations. On June 19, 2012, we sold Azonix Corporation ("Azonix"), which was formerly part of the Controls segment, to Cooper Industries for $43.4 million, resulting in an after tax gain of $13.6 million. In the three months ended June 30, 2012, Azonix had sales and pre-tax profit from operations of $8.5 million and $1.6 million, respectively. On June 28, 2012, we sold certain assets and operations of the Company's valve service center in Houston, Texas, which was formerly part of the Fluid Handling segment, to Furmanite Corporation for $9.3 million, resulting in an after tax gain of $4.6 million. In the three months ended June 30, 2012, the service center had sales and pre-tax profit from operations of $4.8 million and $0.9 million, respectively.

Segment Results of Continuing Operations Three Month Periods Ended June 30

The following information should be read in conjunction with our condensed consolidated financial statements and related notes. The segment results exclude the operating results of discontinued operations for all periods presented.

Aerospace & Electronics



                                         Second Quarter             Change
              (dollars in millions)    2012         2011
              Sales                   $ 178.6      $ 171.5      $ 7.1       4.1 %
              Operating profit        $  38.9      $  37.2      $ 1.8       4.8 %
              Operating margin           21.8 %       21.7 %

The second quarter 2012 sales increase of $7.1 million reflected sales increases of $6.8 million and $0.3 million in the Aerospace Group and Electronics Group, respectively. The segment's operating profit increased $1.8 million, or 4.8%, in the second quarter of 2012 when compared to the same period in the prior year, driven by strong sales growth and margin improvement in the Aerospace Group which more than offset a decrease in the Electronics Group.

Aerospace Group sales of $110.9 million increased $6.8 million, or 6.5%, from $104.1 million in the prior year period. The increase was due to higher original equipment manufacturers ("OEM") product sales of 8.0% and higher aftermarket product sales of 4.5%. The OEM sales increase reflects higher commercial product sales associated with

business jets and large aircraft while sales associated with regional aircraft declined slightly. The aftermarket sales increase primarily reflects higher commercial and military modernization and upgrade product sales. During the second quarter of 2012, sales to OEMs and sales to aftermarket customers were 58.0% and 42.0%, respectively, of total sales, compared to 57.2% and 42.8%, respectively, in the same period last year. Aerospace operating profit increased by $2.4 million in the second quarter of 2012, compared to the second quarter of 2011, primarily due to leverage on the higher sales volume.

Electronics Group sales of $67.7 million increased $0.3 million, or 0.4%, from $67.4 million in the prior year period reflecting higher Power Solution sales offsetting declines in Microwave and Microelectronic sales. Operating profit decreased $0.6 million compared to the second quarter of 2011, primarily reflecting a less favorable product mix.

Engineered Materials



                                      Second Quarter               Change
            (dollars in millions)    2012         2011
            Sales                   $  54.5      $ 60.1      $ (5.6 )       (9.3 %)
            Operating profit        $   5.5      $  9.1      $ (3.6 )      (39.3 %)
            Restructuring charge*   $   1.1      $   -
            Operating margin           10.2 %      15.2 %

* Restructuring charges are included in operating profit and operating margin.

Second quarter 2012 sales of $54.5 million decreased $5.6 million, or 9.3%, reflecting lower sales to our transportation-related customers and, to a lesser extent, our international and building product customers. We experienced a 28.7% sales decrease to our transportation-related customers reflecting difficult competitive conditions and customer production delays. Sales to our building products customers decreased by 4.6% reflecting soft commercial construction markets. Sales to our traditional RV manufacturers remained flat compared to prior year. Operating profit in the second quarter of 2012 decreased $3.6 million, or 39.3%, primarily as a result of lower sales. Operating profit in the second quarter of 2012 included restructuring charges of $1.1 million. Our restructuring actions include the anticipated closure of a small manufacturing facility in the United Kingdom, which had total sales of $8 million in 2011. We expect to supply selected European customers from plants located in the United States.

Merchandising Systems



                                        Second Quarter              Change
              (dollars in millions)    2012         2011
              Sales                   $  97.6      $ 94.0      $ 3.6        3.8 %
              Operating profit        $   9.1      $  7.1      $ 2.0       28.1 %
              Restructuring charge*   $   2.3      $   -
              Operating margin            9.3 %       7.6 %

* Restructuring charges are included in operating profit and operating margin.

Second quarter 2012 sales increased $3.6 million, or 3.8%, reflecting a core sales increase of $6.7 million, or 7.1%, partially offset by unfavorable foreign currency translation of $3.1 million, or 3.3%. We experienced higher sales in our Vending Solutions business, and to a lesser extent in our Payment Solutions business. Operating profit in the second quarter of 2012 increased $2.0 million, or 28.1%, reflecting strong margin improvement resulting from productivity gains, in both Vending and Payment Solutions, partially offset by restructuring charges of $2.3 million. As part of our restructuring actions, management plans to consolidate the manufacturing of certain products and optimize engineering resources in the Payment Solutions portion of the segment. In addition, a charge was recorded in connection with the anticipated sale of a property in St. Louis, Missouri related to a previous plant consolidation to South Carolina.

Fluid Handling



                                      Second Quarter                Change
           (dollars in millions)    2012         2011
           Sales                   $ 302.3      $ 286.1      $  16.2          5.7 %
           Operating profit        $  26.8      $  36.9      $ (10.0 )      (27.2 %)
           Restructuring charge*   $  11.4      $    -
           Operating margin            8.9 %       12.9 %

* Restructuring charges are included in operating profit and operating margin.

Second quarter 2012 sales increased $16.2 million, or 5.7%, including an increase in core sales of $22.9 million, or 8.0%, and a sales increase resulting from the acquisition of WTA of $7.4 million, or 2.6%, offset by unfavorable foreign currency exchange of $14.1 million, or 4.9%. The core sales performance reflected sales growth in our later, long cycle ChemPharma business as well as growth in our Crane Supply business. Operating profit in the second quarter of 2012 decreased $10.0 million, or 27.2%, reflecting restructuring charges of $11.4 million and higher manufacturing costs in certain European manufacturing operations, partially offset by higher sales. Our restructuring actions are primarily focused on our European Fluid Handling operations, to reduce costs through headcount reductions and process improvements, principally at our Krombach operations in Kreuztal, Germany. In addition, as part of a continuing cost reduction strategy, certain manufacturing operations will be transferred from facilities in Germany to Company facilities in lower cost regions.

Controls



                                        Second Quarter              Change
              (dollars in millions)    2012         2011
              Sales                   $  24.7      $ 21.4      $ 3.3       15.5 %
              Operating profit        $   3.8      $  2.7      $ 1.1       39.6 %
              Operating margin           15.3 %      12.7 %

The second quarter 2012 sales increase of $3.3 million, or 15.5%, reflected continued improvement in transportation and oil and gas related demand. Operating profit increased $1.1 million, or 39.6%, reflecting the leverage on the higher sales.

Results from Continuing Operations - Six Month Periods ended June 30

All comparisons below refer to the first six months of 2012 versus the first six
months of 2011, unless otherwise specified.

Year-to-date period ended June 30, 2012 compared to year-to-date period ended
June 30, 2011



                                                      Year-to-Date                    Change
(dollars in millions)                             2012            2011            $            %
Net sales                                       $ 1,303.3       $ 1,233.5       $ 69.8          5.7

Operating profit from continuing operations         147.7           150.3         (2.6 )       (1.7 )

Restructuring charge *                               14.7              -

Operating margin from continuing operations          11.3 %          12.2 %

Other income (expense):
Interest income                                       0.8             0.7          0.2
Interest expense                                    (13.5 )         (13.1 )       (0.4 )
Miscellaneous - net                                  (0.7 )           3.3         (4.0 )

                                                    (13.3 )          (9.0 )       (4.3 )


Income from continuing operations before
income taxes                                        134.3           141.3         (6.9 )
Provision for income taxes                           40.5            44.0         (3.5 )


Income from continuing operations               $    93.8       $    97.3       $ (3.5 )       (3.6 )

* Restructuring charges are included in operating profit and operating margin.

Year to date 2012 sales increased $69.8 million, or 5.7%, over the same period in 2011. Year to date 2012 core business sales increased approximately $82.7 million, or 6.7%. Year to date 2012 sales increased $10.8 million, or 0.9% due to the impact of acquisitions, net of divestitures. The impact of currency translation decreased reported sales by approximately $23.7 million, or 1.9%, as the U.S. dollar strengthened against other major currencies in the first six months of 2012 compared to the same period in 2011. Net sales related to operations outside the U.S. for the six month periods ended June 30, 2012 and 2011 were 41.0% and 40.1% of total net sales, respectively.

Operating profit was $147.7 million in the first six months of 2012, compared to $150.3 million in the comparable period of 2011. The decrease in operating profit includes restructuring charges reflecting declines in our Fluid Handling and Engineered Materials segments, partially offset by improved performance in our Merchandising Systems, Aerospace & Electronics and Controls segments. Operating profit margins were 11.3% in the first six months of 2012, compared to 12.2% in the comparable period of 2011.

Miscellaneous - net decreased by $4.0 million in the first six months of 2012 compared to the same period of 2011. The decrease primarily reflected the absence of a net gain primarily associated with the sale of a building in Ontario, Canada in 2011 and the divestiture of a small product line in 2011.

Our effective tax rate is affected by a number of items, both recurring and discrete, including the amount of income we earn in different jurisdictions and their respective statutory tax rates, changes in the valuation of our deferred tax assets and liabilities, changes in tax laws, regulations and accounting . . .