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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

Stocks in this article: CR

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 second quarter financial results on Tuesday, July 24, 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 (NYSE: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 Six Months Ended
June 30, June 30,
2012 2011 2012 2011
Net Sales:
Aerospace & Electronics $ 178,591 $ 171,538 $ 353,759 $ 333,474
Engineered Materials 54,487 60,101 112,647 121,933
Merchandising Systems 97,577 94,010 185,252 188,888
Fluid Handling 302,318 286,141 600,537 546,811
Controls 24,713   21,399   51,104   42,372  
Total Net Sales $ 657,686   $ 633,189   $ 1,303,299   $ 1,233,478  
 
Operating Profit (Loss) from Continuing Operations:
Aerospace & Electronics $ 38,931 $ 37,157 $ 77,001 $ 71,199
Engineered Materials 5,543 9,130 13,952 19,273
Merchandising Systems 9,115 7,114 13,828 11,787
Fluid Handling 26,836 36,856 66,028 71,605
Controls 3,784 2,712 7,669 5,103
Corporate (14,832 ) (14,118 ) (30,804 ) (28,680 )
Total Operating Profit from Continuing Operations 69,377 78,851 147,674 150,287
 
Interest Income 454 389 849 679
Interest Expense (6,785 ) (6,429 ) (13,496 ) (13,051 )
Miscellaneous- Net (351 ) (290 ) (698 ) 3,335   *
Income from Continuing Operations Before Income Taxes 62,695 72,521 134,329 141,250
Provision for Income Taxes 19,857   22,694   40,518   43,971  
Income from Continuing Operations 42,838 49,827 93,811 97,279
 
Profit from Discontinued Operations attributable to common shareholders 2,513 1,092 3,777 2,516
Gain from Sales of Discontinued Operations attributable to common shareholders 28,060 - 28,060 -
 
Profit from Discontinued Operations attributable to common shareholders, net of tax 1,633 710 2,456 1,636
Gain from Sales of Discontinued Operations attributable to common shareholders, net of tax 18,276   -   18,276   -  
Gain / Profit from Discontinued Operations, net of tax 19,909 710 20,732 1,636
 
Net income before allocation to noncontrolling interests 62,747 50,537 114,543 98,915
 
Less: Noncontrolling interest in subsidiaries' earnings 185 100 319 11
       
Net income attributable to common shareholders $ 62,562   $ 50,437   $ 114,224   $ 98,904  
 
Share Data:
Earnings per share from Continuing Operations $ 0.73 $ 0.84 $ 1.59 $ 1.64
Earnings per share from Discontinued Operations 0.34   0.01   0.35   0.03  
Earnings per Diluted Share (a) $ 1.07   $ 0.85   $ 1.95   $ 1.66  
 
Average Diluted Shares Outstanding 58,614 59,348 58,704 59,457
Average Basic Shares Outstanding 57,762 58,173 57,787 58,259
 

Supplemental Data:

Cost of Sales $ 436,095 $ 415,985 $ 865,717 $ 806,764
Selling, General & Administrative 137,467 138,353 275,161 276,427
Repositioning Charges 14,747 - 14,747 -
Depreciation and Amortization ** 15,274 15,853 29,948 31,627
Stock-Based Compensation Expense 4,451 3,771 8,458 7,274

 

* 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) Earnings per share amounts may not add due to rounding
 
 
CRANE CO.
Condensed Balance Sheets
(in thousands)
         

  June 30,  

December 31,
2012 2011
 
ASSETS
Current Assets
Cash and Cash Equivalents $ 252,299 $ 245,089
Accounts Receivable, net 416,116 349,250
Current Insurance Receivable - Asbestos 16,345 16,345
Inventories, net 363,933 360,689
Other Current Assets 65,358 60,859
Total Current Assets 1,114,051 1,032,232
 
Property, Plant and Equipment, net 273,640 284,146
Long-Term Insurance Receivable - Asbestos 202,107 208,952
Other Assets 465,560 497,377
Goodwill 806,170 820,824
 
Total Assets $ 2,861,528 $ 2,843,531
 
LIABILITIES AND EQUITY
Current Liabilities
Notes Payable and Current Maturities of Long-Term Debt $ 1,102 $ 1,112
Accounts Payable 180,809 194,158
Current Asbestos Liability 100,943 100,943
Accrued Liabilities 209,680 226,717
Income Taxes 27,407 10,165
Total Current Liabilities 519,941 533,095
 
Long-Term Debt 399,003 398,914
Long-Term Deferred Tax Liability 41,546 41,668
Long-Term Asbestos Liability 746,640 792,701
Other Liabilities 249,895 255,097
 
Total Equity 904,503 822,056
 
Total Liabilities and Equity $ 2,861,528 $ 2,843,531
 
     
CRANE CO.
Condensed Statements of Cash Flows

(in thousands)

 

Three Months Ended

Six Months Ended

June 30,

June 30,

 

2012

     

2011

   

2012

   

2011

 

Operating Activities:

Net income attributable to common shareholders $ 62,562 $ 50,437 $ 114,224 $ 98,904
Noncontrolling interest in subsidiaries' earnings   185     100     319     11  
Net income before allocations to noncontrolling interests 62,747 50,537 114,543 98,915
Gain on divestiture (28,060 ) - (28,060 ) (4,258 )
Restructuring - Non Cash 2,761 2,761
Depreciation and amortization 15,274 15,853 29,948 31,627
Stock-based compensation expense 4,451 3,771 8,458 7,274
Defined benefit plans and postretirement expense 4,982 843 9,973 3,592
Deferred income taxes 7,199 6,627 15,743 13,520
Cash provided by (used for) operating working capital 12,889 (18,141 ) (90,614 ) (85,391 )
Defined benefit plans and postretirement contributions (1,638 ) (5,579 ) (2,821 ) (10,358 )
Environmental payments, net of reimbursements (4,724 ) (1,541 ) (7,303 ) (6,134 )
Other   4,010     1,895     2,691     2,037  
Subtotal 79,891 54,265 55,319 50,824
Asbestos related payments, net of insurance recoveries   (20,982 )   (22,896 )   (39,217 )   (35,621 )
Total provided by operating activities   58,909     31,369     16,102     15,203  
 

Investing Activities:

Capital expenditures (6,615 ) (10,144 ) (13,780 ) (18,282 )
Proceeds from disposition of capital assets 1,686 (23 ) 1,858 4,530
Payment for acquisition, net of cash acquired - - - -
Proceeds from divestiture   52,665     -     52,665     1,000  
Total used for investing activities   47,736     (10,167 )   40,743     (12,752 )
 

Financing Activities:

Dividends paid (14,985 ) (13,385 ) (30,075 ) (26,859 )
Reacquisition of shares on open market (29,991 ) (20,000 ) (29,991 ) (49,999 )
Stock options exercised - net of shares reacquired - 4,472 8,426 17,024
Excess tax benefit from stock-based compensation 331 1,407 3,278 5,359
Change in short-term debt   318     (454 )   -     (530 )
Total used for financing activities   (44,327 )   (27,960 )   (48,362 )   (55,005 )
 

Effect of exchange rate on cash and cash equivalents

  (5,879 )   4,961     (1,273 )   10,978  

Increase (decrease) in cash and cash equivalents

56,439 (1,797 ) 7,210 (41,576 )

Cash and cash equivalents at beginning of period

  195,860     233,162     245,089     272,941  

Cash and cash equivalents at end of period

$

252,299

 

$

231,365

 

$

252,299

 

$

231,365

 
 
 
CRANE CO.
Order Backlog
(in thousands)
 

 June 30, 

March 31, December 31, September 30,

 June 30, 

2012   2012 2011 2011 2011
 
Aerospace & Electronics $ 423,282 $ 437,822 $ 410,794 $ 409,284 $ 431,799
Engineered Materials 13,884 11,129 11,110 9,879 13,087
Merchandising Systems 23,587 30,033 15,212 20,929 26,898
Fluid Handling 334,696 * 337,538

 *

313,715

 *

328,757

 *

323,045
Controls   16,187     29,770

 **

  27,120

 **

  32,145

 **

  30,323

 **

Total Backlog $ 811,636   $ 846,292 $ 777,951 $ 800,994 $ 825,152
 
* Includes Order Backlog of $6.3 million at June 30, 2012, $7.5 million at March 31, 2012, $7.1 million at December 31, 2011 and $5.4 million at September 30, 2011 pertaining to the 2011 acquisition of WTA and $2.9 million at March 31, 2012, $1.9 million at December 31, 2011, September 30, 2011 and June 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, $11.8 million at September 30, 2011 and $12.4 million at June 30, 2011 pertaining to a business divested in June 2012.

 
 
CRANE CO.
Non-GAAP Financial Measures
(in thousands)
           
Three Months Ended Six Months Ended Percent Change Percent Change
June 30, June 30, June 30, 2012   June 30, 2012
  2012     2011     2012     2011   Three Months   Six Months

INCOME ITEMS

 
Net Sales $ 657,686 $ 633,189 $ 1,303,299 $ 1,233,478 3.9 % 5.7 %
 
Operating Profit from Continuing Operations 69,377 78,851 147,674 150,287 -12.0 % -1.7 %
Percentage of Sales 10.5 % 12.5 % 11.3 % 12.2 %
 

Special Items impacting Operating Profit from Continuing Operations:

Repositioning Charges (a) 14,747 14,747
               
Operating Profit from Continuing Operations before Special Items $ 84,124   $ 78,851   $ 162,422   $ 150,287   6.7 % 8.1 %
Percentage of Sales 12.8 % 12.5 % 12.5 % 12.2 %
 
Net Income Attributable to Common Shareholders $ 62,562 $ 50,437 $ 114,224 $ 98,904
Per Share $ 1.07 $ 0.85 $ 1.95 $ 1.66 25.6 % 17.0 %
 

Special Items impacting Net Income Attributable to Common Shareholders:

Repositioning Charges - Net of Tax (a) 11,880 11,880
Per Share $ 0.20 $ 0.20
 
Gain on Divestitures - Net of Tax (b) (18,276 ) (18,276 )
Per Share $ (0.31 ) $ (0.31 )
       
Net Income Attributable To Common Shareholders Before Special Items $ 56,166   $ 50,437   $ 107,828   $ 98,904   11.4 % 9.0 %
Per Basic Share $ 0.97 $ 0.87 $ 1.87 $ 1.70
Per Diluted Share $ 0.96 $ 0.85 $ 1.84 $ 1.66 12.8 % 10.4 %
 
(a) The Company incurred repositioning charges in the second 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 and a business within the Controls segment. 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.
 
      Three Months Ended   Six Months Ended
June 30, June 30,
  2012       2011     2012       2011  
 

CASH FLOW ITEMS

Cash Provided from Operating Activities
before Asbestos - Related Payments $ 79,891 $ 54,265 $ 55,319 $ 50,824
Asbestos Related Payments, Net of Insurance Recoveries   (20,982 )   (22,896 )   (39,217 )   (35,621 )
Cash Provided from Operating Activities 58,909 31,369 16,102 15,203
Less: Capital Expenditures   (6,615 )   (10,144 )   (13,780 )   (18,282 )
Free Cash Flow $ 52,294   $ 21,225   $ 2,322   $ (3,079 )
 
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.




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