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Crane Co. (CR), a diversified manufacturer of highly engineered
industrial products, reported that third quarter 2012 earnings per
diluted share from continuing operations on a GAAP basis increased 12%
to $.97 compared to $.87 in the third quarter of 2011. Third quarter
2012 results include $.02 per share of repositioning costs associated
with previously announced actions initiated in the second quarter to
improve the profitability of the Company in 2013. Excluding
repositioning costs, third quarter 2012 earnings per diluted share from
continuing operations increased 14% to $.99 compared to $.87 in the
third quarter of 2011. (Please see the attached Non-GAAP Financial
Measures table for pre-tax, after-tax and earnings per share amounts of
Special Items.)
Third quarter 2012 sales from continuing operations of $646 million were
approximately equal to the third quarter of 2011, with a core sales
increase of $13 million (2%), offset by unfavorable foreign currency
translation of $14 million (-2%).
Third quarter 2012 operating profit from continuing operations on a GAAP
basis (which includes the $1.4 million of repositioning costs) increased
8% to $86.6 million, compared to $80.3 million in the third quarter of
2011. Excluding repositioning costs, third quarter 2012 operating profit
from continuing operations increased 10% to $87.9 million, and operating
profit margin increased to 13.6%, compared to 12.4% in the third quarter
of 2011. (Please see the attached Non-GAAP Financial Measures table.)
"Crane reported record earnings per share in the third quarter, with
strong execution across the organization, and I am particularly pleased
with the margin improvement we achieved in our Fluid Handling segment,"
said Crane Co. president and chief executive officer Eric C. Fast. "We
are on track to complete our previously announced repositioning actions
by year end, which will positively impact 2013 earnings. Given our
cautious outlook on the global economy, we continue to drive
productivity initiatives and a cost conscious culture across the
Company."
Updated 2012 Guidance
Sales from continuing operations for 2012 are expected to increase
approximately 4%, or at the low end of the prior sales guidance range of
4-5%. 2012 EPS is expected to be in the lower half of the previously
communicated guidance range of $3.75 - $3.85, excluding Special Items.
The EPS guidance includes $0.04 associated with the first half profits
from discontinued operations, but excludes the gain from the sale of
these businesses and repositioning costs. Full year 2012 free cash flow
(cash provided by operating activities less capital spending) remains in
a range of $150 - $180 million.
Cash Flow and Financial Position
Cash provided by operating activities in the third quarter of 2012 was
$63.2 million, compared to $49.8 million in the third quarter of 2011.
Cash provided by operating activities in the first nine months of 2012
was $79.3 million, compared to $65.0 million in the first nine months of
2011. Free cash flow for the nine months of 2012 was $59.3 million,
compared to $37.3 million in the nine months of 2011. (Please see the
Condensed Statement of Cash Flows and Non-GAAP table.)
The Company repurchased 499,267 shares of its common stock during the
third quarter of 2012 at a cost of $20 million. The Company’s cash
position was $281 million at September 30, 2012, as compared to $252
million at June 30, 2012 and $245 million at December 31, 2011.
Repositioning Actions
In the second quarter, the Company initiated repositioning actions
primarily directed at improving the profitability of its European
businesses. Following a pre-tax charge of $14.7 million recorded in the
second quarter, the Company, as planned, incurred pre-tax repositioning
costs of $1.4 million, or $0.9 million on an after-tax basis ($0.02 per
share) in the third quarter of 2012. In addition to the amounts recorded
thus far, the Company expects to incur additional pre-tax repositioning
costs in the fourth quarter of 2012 of approximately $4 million, or
$0.04 per share, primarily associated with equipment relocation and
personnel costs in Fluid Handling. These repositioning actions are
expected to be completed by year end. Pre-tax savings associated with
all of these repositioning actions are expected to approximate $12
million annually for the Company beginning in 2013, of which $10 million
relates to Fluid Handling.
Segment Results
All comparisons detailed in this section refer to continuing operations
for the third quarter 2012 versus the third quarter 2011.
Aerospace & Electronics
Third Quarter Change
--------------- -------------
(dollars in millions) 2012 2011
------ ------
Sales $171.4 $172.2 ($0.8) (0%)
Operating Profit $39.8 $35.6 $4.2 12%
Profit Margin 23.2% 20.7%
Third quarter 2012 sales were similar to year ago levels, reflecting
flat Aerospace Group sales and a slight decline in Electronics Group
revenue. Within the Aerospace Group, both OEM and aftermarket
sales were approximately equal to the prior year. Segment operating
profit of $39.8 million increased by $4.2 million, or 12%, primarily
reflecting lower engineering spending, and operating margin improved to
23.2%.
Aerospace & Electronics order backlog was $393 million at September 30,
2012, as compared to $423 million at June 30, 2012 and $411 million at
December 31, 2011.
Engineered Materials
Third Quarter Change
--------------- ---------------
(dollars in millions) 2012 2011
------ ------
Sales $57.0 $53.1 $3.9 7%
Operating Profit $7.2 $5.9 $1.3 22%
Operating Profit, before Special Items* $8.3 $5.9 $2.4 41%
Profit Margin 12.7% 11.1%
Profit Margin, before Special Items* 14.7% 11.1%
* Repositioning charges primarily associated with the closure of a
manufacturing facility.
Segment sales of $57.0 million increased $3.9 million, or 7%, compared
to the third quarter of 2011, driven by higher sales to recreational
vehicle customers. Operating profit before Special Items increased 41%,
primarily reflecting the higher sales and effective cost controls.
As part of its repositioning actions, the Company closed a small
manufacturing facility in England. Repositioning costs of $1.1 million
on a pre-tax basis were incurred in the third quarter of 2012.
Merchandising Systems
Third Quarter Change
------------- --------------
(dollars in millions) 2012 2011
----- -----
Sales $92.5 $98.8 ($6.3) (6%)
Operating Profit $9.5 $10.8 ($1.3) (12%)
Profit Margin 10.3% 11.0%
Merchandising Systems sales of $92.5 million decreased $6.3 million, or
6%, reflecting lower sales in Vending and, to a lesser extent, Payment
Solutions. Operating profit decreased $1.3 million, reflecting
deleverage of the lower sales.
Fluid Handling
Third Quarter Change
--------------- ---------------
(dollars in millions) 2012 2011
------ ------
Sales $303.1 $299.1 $4.0 1%
Operating Profit $42.9 $39.9 $3.0 8%
Operating Profit, before Special Items* $43.1 $39.9 $3.2 8%
Profit Margin 14.2% 13.3%
Profit Margin, before Special Items* 14.2% 13.3%
* Repositioning charges primarily associated with transferring
production to lower cost Company facilities.
Third quarter 2012 sales increased $4 million, or 1%, including a core
sales increase of $15 million (5%), partially offset by unfavorable
foreign currency translation of $11 million (-4%). Before Special Items,
operating profit increased to $43.1 million and operating margin
increased from 13.3% to 14.2%, reflecting better project execution,
price increases, and improved productivity. Backlog was $331 million at
September 30, 2012, compared to $335 million at June 30, 2012 and $314
million at December 31, 2011.
The Company’s repositioning actions are primarily focused on its
European Fluid Handling operations, to reduce costs through headcount
reductions and process improvements, principally at its Krombach
operations in Kreuztal, Germany. In addition, as part of a continuing
cost reduction strategy, certain manufacturing operations are being
transferred from facilities in Germany to Company facilities in lower
cost regions. Repositioning costs of $0.2 million on a pre-tax basis
were recorded in the third quarter of 2012.
Controls
Third Quarter Change
------------- --------------
(dollars in millions) 2012 2011
----- -----
Sales $22.1 $23.8 ($1.8) (7%)
Operating Profit $2.8 $3.8 ($0.9) (25%)
Profit Margin 12.9% 15.9%
Third quarter 2012 sales from continuing operations of $22.1 million
decreased 7%. Operating profit decreased 25%, reflecting deleverage of
the lower sales volume.
Additional Information
Please see the condensed financial statements and the Non-GAAP Financial
Measures table attached to this press release for supporting details.
Additional information with respect to the Company’s asbestos liability
and related accounting provisions and cash requirements is set forth in
the Current Report on Form 8-K filed with a copy of this press release.
Conference Call
Crane Co. has scheduled a conference call to discuss the third quarter
financial results on Tuesday, October 23, 2012 at 10:00 A.M. (Eastern).
All interested parties may listen to a live webcast of the call at http://www.craneco.com.
An archived webcast will also be available to replay this conference
call directly from the Company’s website.
Crane Co. is a diversified manufacturer of highly engineered industrial
products. Founded in 1855, Crane provides products and solutions to
customers in the aerospace, electronics, hydrocarbon processing,
petrochemical, chemical, power generation, automated merchandising,
transportation and other markets. The Company has five business
segments: Aerospace & Electronics, Engineered Materials, Merchandising
Systems, Fluid Handling, and Controls. Crane has approximately 11,000
employees in North America, South America, Europe, Asia and Australia.
Crane Co. is traded on the New York Stock Exchange (CR). For more
information, visit www.craneco.com.
This press release may contain forward-looking statements as defined
by the Private Securities Litigation Reform Act of 1995. These
statements present management’s expectations, beliefs, plans and
objectives regarding future financial performance, and assumptions or
judgments concerning such performance. Any discussions contained
in this press release, except to the extent that they contain historical
facts, are forward-looking and accordingly involve estimates,
assumptions, judgments and uncertainties. There are a number of
factors that could cause actual results or outcomes to differ materially
from those addressed in the forward-looking statements. Such
factors are detailed in the Company’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2011 and subsequent reports filed with
the Securities and Exchange Commission.
CRANE CO.
Income Statement Data
(in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
------------- ------------- --------------- ---------------
Net Sales:
Aerospace & Electronics $ 171,368 $ 172,216 $ 525,127 $ 505,690
Engineered Materials 56,956 53,101 169,603 175,034
Merchandising Systems 92,489 98,815 277,741 287,703
Fluid Handling 303,080 299,118 903,617 845,929
Controls 22,088 23,838 73,192 66,209
------- ------- --------- ---------
Total Net Sales $ 645,981 $ 647,088 $ 1,949,280 $ 1,880,565
------- ------- --------- ---------
Operating Profit (Loss) from Continuing Operations:
Aerospace & Electronics $ 39,833 $ 35,640 $ 116,834 $ 106,839
Engineered Materials 7,226 5,919 21,178 25,192
Merchandising Systems 9,496 10,845 23,324 22,632
Fluid Handling 42,892 39,870 108,920 111,474
Controls 2,844 3,789 10,513 8,892
Corporate (15,707 ) (15,773 ) (46,511 ) (44,453 )
------- ---- ------- ---- --------- ---- --------- ----
Total Operating Profit from Continuing Operations 86,584 80,290 234,258 230,576
Interest Income 443 442 1,292 1,121
Interest Expense (6,618 ) (6,474 ) (20,114 ) (19,525 )
Miscellaneous- Net (6 ) (73 ) (704 ) 3,262 *
------- ---- ------- ---- --------- ---- ---------
Income from Continuing Operations Before Income Taxes 80,403 74,185 214,732 215,434
Provision for Income Taxes 23,997 22,966 64,515 66,936
------- ------- --------- ---------
Income from Continuing Operations 56,406 51,219 150,217 148,498
Profit from Discontinued Operations attributable to common - 1,826 3,777 4,343
shareholders (a)
Gain from Sales of Discontinued Operations attributable to common 1,385 - 29,445 -
shareholders (b)
Profit from Discontinued Operations attributable to common - 1,187 2,456 2,823
shareholders, net of tax (a)
Gain from Sales of Discontinued Operations attributable to common 900 - 19,176 -
shareholders, net of tax (b)
------- ------- --------- ---------
Gain / Profit from Discontinued Operations, net of tax 900 1,187 21,632 2,823
Net income before allocation to noncontrolling interests 57,307 52,406 171,850 151,321
Less: Noncontrolling interest in subsidiaries’ earnings 182 (134 ) 501 (123 )
Net income attributable to common shareholders $ 57,125 $ 52,540 $ 171,349 $ 151,444
======= ======= ========= =========
Share Data:
Earnings per share from Continuing Operations $ 0.97 $ 0.87 $ 2.56 $ 2.50
Earnings per share from Discontinued Operations 0.02 0.02 0.37 0.05
------- ------- --------- ---------
Earnings per Diluted Share $ 0.99 $ 0.89 $ 2.93 $ 2.55
======= ======= ========= =========
Average Diluted Shares Outstanding 57,873 59,058 58,435 59,330
Average Basic Shares Outstanding 57,123 58,048 57,565 58,202
Supplemental Data:
-----------------------------------------------------------------
Cost of Sales $ 424,954 $ 428,524 $ 1,290,671 $ 1,235,288
Selling, General & Administrative 133,089 138,274 408,250 414,701
Repositioning Charges 1,354 - 16,101 -
Depreciation and Amortization ** 13,174 15,581 43,122 47,208
Stock-Based Compensation Expense 4,402 3,858 12,860 11,132
* Primarily related to the sale of a building and the divestiture of
a small product line in the three months ended March 31, 2011.
** Amount included within cost of sales and selling, general &
administrative costs.
(a) Amounts represent the operating profit, and after-tax profit,
from the Houston Service Center and Azonix Corporation businesses
divested in June 2012.
(b) Amounts represent the pre-tax and after-tax gains from the June
2012 sales of both the Houston Service Center and the Azonix
Corporation.
CRANE CO.
Condensed Balance Sheets
(in thousands)
September 30, December 31,
2012 2011
------------- ------------
ASSETS
Current Assets
Cash and Cash Equivalents $ 280,536 $ 245,089
Accounts Receivable, net 403,688 349,250
Current Insurance Receivable - Asbestos 16,345 16,345
Inventories, net 366,845 360,689
Other Current Assets 65,063 60,859
------------- ------------
Total Current Assets 1,132,477 1,032,232
Property, Plant and Equipment, net 271,384 284,146
Long-Term Insurance Receivable - Asbestos 199,264 208,952
Other Assets 456,934 497,377
Goodwill 812,453 820,824
------------- ------------
Total Assets $ 2,872,512 $ 2,843,531
============= ============
LIABILITIES AND EQUITY
Current Liabilities
Notes Payable and Current Maturities of Long-Term Debt $ 1,114 $ 1,112
Accounts Payable 173,328 194,158
Current Asbestos Liability 100,943 100,943
Accrued Liabilities 217,261 226,717
Income Taxes 28,618 10,165
------------- ------------
Total Current Liabilities 521,264 533,095
Long-Term Debt 399,048 398,914
Long-Term Deferred Tax Liability 42,545 41,668
Long-Term Asbestos Liability 722,962 792,701
Other Liabilities 253,941 255,097
Total Equity 932,752 822,056
------------- ------------
Total Liabilities and Equity $ 2,872,512 $ 2,843,531
============= ============
CRANE CO.
Condensed Statements of Cash Flows
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
-------------- -------------- -------------- --------------
Operating Activities:
Net income attributable to common shareholders $ 57,125 $ 52,540 $ 171,349 $ 151,444
Noncontrolling interest in subsidiaries’ earnings 182 (134 ) 501 (123 )
------- ------- -- ------- ------- --
Net income before allocations to noncontrolling interests 57,307 52,406 171,850 151,321
Gain on divestiture (1,385 ) - (29,445 ) (4,258 )
Restructuring - Non Cash 16 - 2,777 -
Depreciation and amortization 13,174 15,581 43,122 47,208
Stock-based compensation expense 4,402 3,858 12,860 11,132
Defined benefit plans and postretirement expense 4,796 1,811 14,769 5,403
Deferred income taxes 8,674 8,219 24,417 21,739
Cash provided by (used for) operating working capital 11,292 8,479 (79,322 ) (76,912 )
Defined benefit plans and postretirement contributions (1,642 ) (6,696 ) (4,463 ) (17,054 )
Environmental payments, net of reimbursements (3,953 ) (2,601 ) (11,256 ) (8,735 )
Other (8,696 ) (7,654 ) (6,005 ) (5,617 )
------- -- ------- -- ------- -- ------- --
Subtotal 83,985 73,403 139,304 124,227
Asbestos related payments, net of insurance recoveries (20,834 ) (23,612 ) (60,051 ) (59,233 )
------- -- ------- -- ------- -- ------- --
Total provided by operating activities 63,151 49,791 79,253 64,994
------- ------- ------- -------
Investing Activities:
Capital expenditures (6,164 ) (9,421 ) (19,944 ) (27,703 )
Proceeds from disposition of capital assets 396 190 2,254 4,720
Payment for acquisition, net of cash acquired - (35,594 ) - (35,594 )
Proceeds from divestiture 934 - 53,599 1,000
------- ------- ------- -------
Total provided by (used for) investing activities (4,834 ) (44,825 ) 35,909 (57,577 )
------- -- ------- -- ------- ------- --
Financing Activities:
Dividends paid (15,923 ) (15,098 ) (45,998 ) (41,957 )
Reacquisition of shares on open market (20,000 ) - (49,991 ) (49,999 )
Stock options exercised - net of shares reacquired - 2,913 8,426 19,937
Excess tax benefit from stock-based compensation (45 ) 347 3,233 5,706
Change in short-term debt - (806 ) - (1,336 )
------- ------- -- ------- ------- --
Total used for financing activities (35,968 ) (12,644 ) (84,330 ) (67,649 )
------- -- ------- -- ------- -- ------- --
Effect of exchange rate on cash and cash equivalents 5,888 (12,504 ) 4,615 (1,526 )
------- ------- -- ------- ------- --
Increase (decrease) in cash and cash equivalents 28,237 (20,182 ) 35,447 (61,758 )
Cash and cash equivalents at beginning of period 252,299 231,365 245,089 272,941
------- ------- ------- -------
Cash and cash equivalents at end of period $ 280,536 $ 211,183 $ 280,536 $ 211,183
== ======= == ======= == ======= == =======
CRANE CO.
Order Backlog
(in thousands)
September 30, June 30, March 31, December 31, September 30,
2012 2012 2012 2011 2011
--------------- ------------- ------------- --------------- ---------------
Aerospace & Electronics $ 392,862 $ 423,282 $ 437,822 $ 410,794 $ 409,284
Engineered Materials 11,357 13,884 11,129 11,110 9,879
Merchandising Systems 19,957 23,587 30,033 15,212 20,929
Fluid Handling 330,824 334,696 337,538 * 313,715 * 328,757 *
Controls 17,296 16,187 29,770 ** 27,120 ** 32,145 **
------- ------- ------- ------- -------
Total Backlog $ 772,296 $ 811,636 $ 846,292 $ 777,951 $ 800,994
====== ======= ==== ======= ==== ======= ====== ======= ====== =======
* Includes Order Backlog of $2.9 million at March 31, 2012, $1.9
million at December 31, 2011 and September 30, 2011 pertaining to a
business divested in June 2012.
** Includes Order Backlog of $11.3 million at March 31, 2012, $9.6
million at December 31, 2011 and $11.8 million at September 30, 2011
pertaining to a business divested in June 2012.
CRANE CO.
Non-GAAP Financial Measures
(in thousands)
Three Months Ended Nine Months Ended Percent Change Percent Change
September 30, September 30, September 30, 2012 September 30, 2012
----------------------------- --------------------------------- ------------------- -------------------
2012 2011 2012 2011 Three Months Nine Months
-------------- -------------- ---------------- ---------------- ------------------- -------------------
INCOME ITEMS
-------------------------------------------------------------------
Net Sales $ 645,981 $ 647,088 $ 1,949,280 $ 1,880,565 -0.2 % 3.7 %
Operating Profit from Continuing Operations 86,584 80,290 234,258 230,576 7.8 % 1.6 %
Percentage of Sales 13.4 % 12.4 % 12.0 % 12.3 %
Special Items impacting Operating Profit
from Continuing Operations:
-------------------------------------------------------------------
Repositioning Charges (a) 1,354 16,101
Operating Profit from Continuing Operations before Special Items $ 87,938 $ 80,290 $ 250,359 $ 230,576 9.5 % 8.6 %
== ======= == ======= == ========= == =========
Percentage of Sales 13.6 % 12.4 % 12.8 % 12.3 %
Net Income Attributable to Common Shareholders $ 57,125 $ 52,540 $ 171,349 $ 151,444
Per Share $ 0.99 $ 0.89 $ 2.93 $ 2.55 11.0 % 14.9 %
Special Items impacting Net Income
Attributable to Common Shareholders:
-------------------------------------------------------------------
Repositioning Charges - Net of Tax (a) 948 12,828
Per Share $ 0.02 $ 0.22
Gain on Divestitures - Net of Tax (b) (900 ) (19,176 )
Per Share $ (0.02 ) $ (0.33 )
Net Income Attributable To Common Shareholders Before Special Items $ 57,173 $ 52,540 $ 165,001 $ 151,444 8.8 % 9.0 %
== ======= == ======= == ========= == =========
Per Basic Share $ 1.00 $ 0.91 $ 2.87 $ 2.60
Per Diluted Share $ 0.99 $ 0.89 (c) $ 2.82 $ 2.55 11.0 % 10.6 %
(a) The Company incurred repositioning charges in the second quarter
and third quarter of 2012, associated with productivity actions. The
charges included severance and impairment costs related to the
shutdown of certain facilities, the transfer of certain
manufacturing operations, and staff reduction actions.
(b) In June 2012, the Company divested of a business within the
Fluid Handling segment (Houston Service Center) and a business
within the Controls segment (Azonix Corporation). The associated
gains were included in the "Gain from Sale of Discontinued
Operations attributable to common shareholders, net of tax"
section on the accompanying Income Statement Data. In September
2012, the Company recorded a favorable price adjustment associated
with the Azonix Corporation divestiture.
(c) For the three months ended September 30, 2011, the $0.89 of
earnings per diluted share included $0.87 of earnings per diluted
share from continuing operations and $0.02 of earnings per diluted
share from discontinued operations.Therefore, the $0.99 of
earnings per diluted shares before Special Items for the three
months ended September 30, 2012 represents a 14% increase when
compared to the $0.87 of earnings per diluted share from
continuing operations for the three months ended September 30,
2011.
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
-------------- -------------- ---------------- ----------------
CASH FLOW ITEMS
-------------------------------------------------------------------
Cash Provided from Operating Activities before Asbestos - Related $ 83,985 $ 73,403 $ 139,304 $ 124,227
Payments
Asbestos Related Payments, Net of Insurance Recoveries (20,834 ) (23,612 ) (60,051 ) (59,233 )
------- -- ------- -- --------- -- --------- --
Cash Provided from Operating Activities 63,151 49,791 79,253 64,994
Less: Capital Expenditures (6,164 ) (9,421 ) (19,944 ) (27,703 )
------- -- ------- -- --------- -- --------- --
Free Cash Flow $ 56,987 $ 40,370 $ 59,309 $ 37,291
== ======= == ======= == ========= == =========
Certain non-GAAP measures have been provided to facilitate
comparison with the prior year.
The Company reports its financial results in accordance with U.S.
generally accepted accounting principles (GAAP). However, management
believes that non-GAAP financial measures which exclude certain
non-recurring items present additional useful comparisons between
current results and results in prior operating periods, providing
investors with a clearer view of the underlying trends of the
business. Management also uses these non-GAAP financial measures in
making financial, operating, planning and compensation decisions and
in evaluating the Company’s performance.
In addition, Free Cash Flow provides supplemental information to
assist management and investors in analyzing the Company’s ability
to generate liquidity from its operating activities. The measure
of Free Cash Flow does not take into consideration certain other
non-discretionary cash requirements such as, for example,
mandatory principal payments on the Company’s long-term debt.
Non-GAAP financial measures, which may be inconsistent with
similarly captioned measures presented by other companies, should
be viewed in addition to, and not as a substitute for, the
Company’s reported results prepared in accordance with GAAP.
Non-GAAP financial measures, which may be inconsistent with
similarly captioned measures presented by other companies, should
be viewed in the context of the definitions of the elements of
such measures we provide and in addition to, and not as a
substitute for, the Company’s reported results prepared in
accordance with GAAP.
SOURCE: Crane Co.
Crane Co.
Richard E. Koch, 203-363-7352
Director, Investor Relations and Corporate Communications
www.craneco.com
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