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Crane's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Stocks in this article: CR

Now, let me turn the call over to Eric.

Eric Fast

Thank you, Dick. Crane reported record earnings per share in the second quarter. On core sales growth of 6%, we delivered earnings per share of $0.96, up 13% versus last year excluding the divestiture gains and repositioning charges. Operating margin, excluding the repositioning charges, increased to 12.8% versus 12.5% a year ago. Taking into account the absence of earnings for the balance of 2012 related to the divestitures we have reduced the midpoint of our 2012 earnings per share guidance range by $0.05.

Reflecting our continued confidence in the business, we are increasing the quarterly dividend by 8%. As part of our strategy to trim smaller non-core assets, we divested Azonix business from the Controls group, as well as a valve service center within Fluid Handling. Although Azonix is a small, very successful company with impressive niche technology, we were unable to leverage the business with other parts of Crane.

The sale of the valve service center is the third of three service centers that we previously owned. We sold the other two in the 2007, 2008 timeframe. These divestitures represent modest trimming of small disparate parts of the company that did not fit into our strategic vision. We are comfortable with our current portfolio of businesses, and have no plans for further divestitures at this time.

The repositioning actions that we’re announcing relate to the transfer of certain manufacturing operations from higher cost to lower cost company facilities and other staff reduction actions, principally in response to weak European economic condition. It is important to understand that we are in various stages of implementing these changes as European employment rules and protocols are complex and time consuming.

Thoughtful interaction with workers counsels is required, as well as appropriate communications to our own people. The repositioning actions are primarily focused on expanding operating margins in our European Fluid Handling business, as leverage on incremental sales in the first half has not [read] through as expected, and economic concerns in Europe will likely continue.

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