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Crane Co. Reports Second Quarter Results; Increases Dividend 8%; Announces Repositioning Actions To Improve 2013 Performance; Adjusts 2012 EPS Guidance To $3.75–$3.85, Excluding Special Items

Cash Flow and Financial Position

Cash provided by operating activities in the second quarter of 2012 was $58.9 million, compared to $31.4 million in the second quarter of 2011. Cash provided by operating activities in the first half of 2012 was $16.1 million, compared to $15.2 million in the first half of 2011. Free cash flow for the first half of 2012 was $2.3 million, compared to negative $3.1 million in the first half of 2011. (Please see the Condensed Statement of Cash Flows and Non-GAAP table.)

The Company repurchased 772,325 shares of its common stock during the second quarter of 2012 at a cost of $30 million, compared to 421,300 shares in the second quarter of 2011 for $20 million. The Company’s cash position was $252 million at June 30, 2012, as compared to $196 million at March 31, 2012 and $245 million at December 31, 2011.

Updated 2012 Guidance

Sales from continuing operations for 2012 are expected to increase 4-5% driven by a core sales increase of 6-7% and sales related to the WTA acquisition of less than 1%, partially offset by unfavorable foreign exchange of approximately 2% . The revised full year sales guidance reflects strong first half sales growth in Fluid Handling and Aerospace and a stable outlook for the second half. The updated 2012 earnings per share guidance range excluding Special Items is $3.75 - $3.85, a reduction of $0.05 to the midpoint of the previously communicated guidance range ($3.75 - $3.95), primarily reflecting the absence of second half earnings from the divestitures completed in the second quarter. The Company’s 2012 EPS guidance on a GAAP basis is $3.80 - $3.90. The Company reduced its 2012 free cash flow (cash provided by operating activities less capital spending) guidance to $150 - $180 million from $160 - $190 million, reflecting the divestitures and expected cash outflow related to the repositioning actions. The table below shows the original guidance provided in February 2012, the effects of the divestitures (now characterized as discontinued operations), other changes that are primarily related to end market conditions, and the revised guidance for 2012 (excluding repositioning charges).

           

2012 GUIDANCE UPDATE

     
2011 2012
Continuing Operations
Excluding Revised
Special Original Discont'd Other Guidance
Sales GAAP Items* Guidance Operations Changes ***
 
Aerospace & Electronics $ 678 $ 678 $ 700 $ - $ 10 $ 710
Engineered Materials 220 220 225 - (10 ) 215
Merchandising Systems 374 374 375 - - 375
Fluid Handling 1,140 1,140 1,220 (17 ) ** 17 1,220
Controls   88     88     130     (35 ) **   -     95  
Total Crane $ 2,500   $ 2,500   $ 2,650   $ (52 ) $ 17   $ 2,615  
 

Operating Profit

Aerospace & Electronics $ 146 $ 146 $ 155 $ - $ 3 $ 158
Engineered Materials 30 30 32 - (3 ) 29
Merchandising Systems 30 30 35 - 2 37
Fluid Handling 150 150 175 (3 ) ** (7 ) 165
Controls 11 11 16 (5 ) ** 3 14
Corporate   (330 )   (58 )   (63 )   -     -     (63 )
Total Crane $ 37   $ 309   $ 350   $ (8 ) $ (2 ) $ 340  
 

Operating Profit Margin

Aerospace & Electronics 21.5 % 21.5 % 22.1 % 22.3 %
Engineered Materials 13.5 % 13.5 % 14.2 % 13.5 %
Merchandising Systems 8.1 % 8.1 % 9.3 % 9.9 %
Fluid Handling 13.1 % 13.1 % 14.3 % 13.5 %
Controls   12.7 %   12.7 %   12.3 %   14.9 %
Total Crane   1.5 %   12.3 %   13.2 %   13.0 %
 
* Excludes an asbestos charge of $242 million and an environmental charge of $30 million.
 
** The full year impact of the discontinued operations was calculated by annualizing the first half 2012 sales and operating profit of the two businesses divested in June 2012.
 
*** Excludes repositioning charges.
 

Segment Results

All comparisons detailed in this section refer to continuing operations for the second quarter 2012 versus the second quarter 2011.

             
Aerospace & Electronics
 
Second Quarter Change
(dollars in millions) 2012 2011
 
Sales $178.6 $171.5 $7.1 4%
 
Operating Profit $38.9 $37.2 $1.8 5%
 
Profit Margin 21.8% 21.7%
 

Second quarter 2012 sales increased $7.1 million, or 4%, reflecting a $6.8 million (7%) improvement in Aerospace Group sales and a slight increase of $0.3 million in Electronics Group revenue. The Aerospace Group sales increase reflected higher OEM and aftermarket shipments and an increase in both commercial and military sales. Segment operating profit of $38.9 million increased by $1.8 million, or 5%, reflecting the Aerospace sales growth, and operating margin improved slightly to 21.8%.

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