Management’s Discussion and Analysis of Financial Condition and Results of Operations Sales decreased $2 million, or 1%, compared to the prior year, including unfavorable foreign currency translation of $6 million, or 2%, partially offset by a core sales increase of $4 million, or 1%. The increase in core sales reflected higher sales in our Vending Solutions businesses, particularly to bottlers. We also experienced higher core sales in our Payment Solutions business reflecting higher sales volume in the vending and retail vertical markets. Operating profit of $34 million increased 11% in 2012 compared to 2011. The operating profit increase is primarily due to solid pro- ductivity gains, the absence of a non-recurring purchase accounting charge associated with our Money Controls acquisition in 2011 and the impact of higher sales volume, partially offset by $4 million of restructuring and related charges recorded in 2012, as well as the costs to settle a lawsuit in 2012. 2011comparedwith2010. Merchandising Systems sales increased by $76 million from $298 million in 2010 to $374 million in 2011. Operating profit increased by $13 million from $17 million in 2010 to $30 million in 2011. Operating profit included net restructuring charges of $3 million in 2010. Operating margins were 8.1% in 2011 compared with 5.6% in 2010. Sales increased $76 million, or 25%, compared to the prior year, including a sales increase resulting from the acquisition of Money Controls of $53 million, or 18%, a core sales increase of $14 million, or 4%, and favorable foreign currency translation of $9 million, or 3%. The increase in core sales reflected higher sales in both our Payment Solutions and Vending businesses. Operating profit of $30 million increased $13 million in 2011 compared to 2010. The operating profit increase is primarily due to the impact of the higher sales, continued improvements in operat- ing efficiencies, and the absence of restructuring costs incurred in 2010. The increase was partially offset by higher raw material costs and the absence of the favorable impact of a patent litigation settlement received in 2010. * The restructuring and related charges are included in operating profit and operating margin. 2012comparedwith2011. Fluid Handling sales increased by $55 million from $1.140 billion in 2011 to $1.196 billion in 2012. Operating profit decreased by $2 million from $150 million in 2011 to $148 million in 2012. Our operating profit in 2012 included restructuring charges of $13 million. Operating margins were 12.4% in 2012 compared with 13.1% in 2011. Sales increased $55 million, or 5%, including a core sales increase of $73 million, or 6%, and an increase in sales from the acquisition of W.T. Armatur GmbH & Co. KG (“WTA”) of $12 million, or 1%, partially offset by unfavorable foreign currency translation of $30 million, or 3%. Backlog was $327 million at December 31, 2012, an increase of 4% from $314 million at December 31, 2011. Crane Valve Group (“Valve Group”) includes the following busi- nesses: Crane ChemPharma & Energy Flow Solutions and Building Services & Utilities. Valve Group sales increased 3% to $888 million in 2012 from $864 million in 2011, including a core sales increase of $39 million, or 5% and an increase in sales from the acquisition of WTA of $12 million, or 1%, partially offset by unfavorable foreign currency translation of $26 million, or 3%. The Crane Chem- Pharma & Energy Flow Solutions business experienced a significant increase in sales reflecting strong demand in the North America chemical industry as well as price increases, partially offset by unfavorable foreign exchange and weaker end markets in Europe. Building Services & Utilities sales decreased, driven by a decline in volume, primarily reflecting a softer commercial building con- struction end market in the United Kingdom and weaker end mar- kets in Europe and, to a lesser extent, unfavorable foreign exchange. Crane Pumps & Systems sales of $83 million were flat in 2012 compared to 2011. Crane Supply revenue increased $30 million to $224 million, or 15% in 2012, from $194 million in 2011 due to higher sales volume resulting from growth in commercial construction and mining activity in Canada, partially offset by unfavorable foreign exchange as the Canadian dollar weakened against the U.S. dollar. Fluid Handling operating profit decreased $2 million, or 1%, com- pared to 2011, reflecting restructuring and related charges of $13 million in 2012, higher manufacturing costs in certain Euro- pean manufacturing operations, and to a lesser extent, the impact of unfavorable exchange, partially offset by leverage on the higher core sales. 2011comparedwith2010. Fluid Handling sales increased by $133 million from $1.008 billion in 2010 to $1.140 billion in 2011. Operating profit increased by $28 million from $121 million in 2010 to $150 million in 2011. The 2010 operating profit included restructuring charges of $3 million. Operating margins were 13.1% in 2011 compared with 12.1% in 2010. Sales increased $133 million, or 13%, including a core sales increase of $83 million, or 8.3%, favorable foreign currency trans- lation of $39 million, or 3.9%, and an increase in sales from the acquisition of W.T. Armatur GmbH & Co. KG (“WTA”) of $10 mil- lion, or 1.0%. Backlog was $314 million at December 31, 2011, an increase of 15% from $272 million at December 31, 2010. Valve Group sales increased 14% to $864 million in 2011 from $759 million in 2010, including a core sales increase of $67 million, or 9%, favorable foreign currency translation of $28 million, or 4%, and an increase in sales from the acquisition of WTA of $10 million, or 1%. Crane Energy sales increased significantly compared to the prior year primarily due to higher volume associated with our later- cycle, project based process valve applications in the power and refining industries and, to a lesser extent, favorable foreign exchange. Our Crane ChemPharma business experienced a sig- nificant increase in sales reflecting increased demand from the chemical industry, primarily due to strong market conditions in the Americas as well as favorable MRO trends which benefited from healthy plant operating rates and catch-up maintenance. Building Services & Utilities sales experienced a moderate increase, driven by favorable foreign exchange and price increases, which were partially offset by a slight decline in volume, reflecting primarily a (in millions, except %) 2012 2011 2010 Net Sales $ 1,196 $ 1,140 $ 1,008 Operating Profit 148 150 121 Restructuring and Related Charges* 13 — 3 Assets 955 909 830 Operating Margin 12.4% 13.1% 12.1% FLUID HANDLING 22