Crane Co. ( CR)

8th Annual US Small/Mid Cap Conference

November 15, 2011 11:05 AM ET


Andrew Krawitt – VP, Treasurer and Principal Financial Officer


Unidentified Company Representative

Senior analyst covering the multi industry and electrical equipment group and Citi and we're delighted for you to join us and also our webcast listeners, we are kicking off the Citi Smith Cap Conference with Crane. Today from the company we have Andrew Krawitt who is the Principal Financial Officer and the Treasurer of Crane and has been the company since 2006 and previously he was the Director of Financial Planning at Analysis at Pepsi Co. Also here is Dick Koch, the Head of Investor Relations with Crane and let me hand the floor over to Andrew. Thank you.

Andrew Krawitt

Thanks Dean. Good morning. Crane is a diversified manufacturer of engineered industrial products and we tend to have a substantial presence in focus niche markets and by niche markets we mean markets that are typically less than 1 billion or 1.5 billion or so in size.

These businesses tend to have high returns and excess cash flow and we have a very disciplined process to redeploy that cash flow back into the businesses. Above all we want to conduct our business with integrity and honest dealings. This is a principal that dates back to our founder R.T. Crane in 1855. A lot of companies pay lip service to this but it really is in our culture at Crane.

We have become a much more integrated operating company from what historically was a holding company structure and in large part that's been facilitated by something we call the Crane business system and I'll talk about that a little bit later.

We make acquisitions to strengthen our existing businesses and in fact if you look at the company today revenues from businesses that we've acquired in the past dozen or so years make up about 45% of the company. We're focused on niche markets. So what are some examples of the niche markets that we are focused on? On the upper left you can see that in our aerospace business we serve a market of about $1 billion and that's across four solution sets there.

Another example is an engineering materials in the upper right, about a $700 million market that we serve and that's making fiber glass reinforced plastic panels. On the bottom you can see global payment solutions where we do coin and bill validation. That's about a $700 million market. And even in fluid handling which in total is a much larger market there are sub segments which have market sizes of a few hundred million dollars.

So it's not good enough to just have a focus in niche markets. We want to have a leading market share in those markets and some examples here, we're number one in Brake Controls in Aerospace & Electronics. We have the number one position supplying fiber glass reinforced plastic to the recreational vehicle industry and Merchandising Systems we're number one in vending in North America and we are the number two for payment solutions globally.

Fluid handling we have significant positions in the free plugged market and Europe for example (inaudible) and a number of other areas. So how do we have a leading market share in these focused niche markets? Well that's because of something we call proprietary technology. So for example for the 787 we developed a wireless electric brake control for the Boeing 787. This is something that had not been done before. Its technology that takes years and dollars to design and it creates a wide mode for competitors to try to get across.

From Payment Solutions perspective we have the ability to instantaneously validate whether a bill is a good bill or a bad bill, a coin is good coin or a bad coin and a hundred different currencies, something that is particularly important in say like Las Vegas for example. And we're on a number of different AML, Approved Manufactured Lists where customers know that we have the ability to provide high quality highly engineered products for their manufacturing facilities.

Two main parts of the Crane core strategy. First we want to grow profits from existing operations and that's in the context of an integrated operating company. So we want to leverage our intellectual capital across our business units. From a customer perspective we are aligned against our customers in terms of our vertical market focus and we're very interested in collection voice of the customer and doing what we need to do to address customer' needs.

Operational excellence is a key part of our culture. We have a systematic strategy deployment process. We do about 800 (inaudible) a year and we're passionate about standard work. In fact if you were to go to our facilities around the world you would see that our manufacturing cells are set up in very similar fashion.

In terms of strategic linkages we will take action if we look at our portfolio and something doesn’t seem to fit with what we want to do longer term. We'll take steps to trim that portfolio and we also do what we call internal mergers where it makes sense to put businesses together where we can better address customer needs or have cost advantages. We will do that as well.

So first we want to grow profits from existing operations and secondly we want to redeploy our cash flow to make acquisitions but we only want to make acquisitions that strengthen our existing businesses. So we're not interested in adding another leg to the stool and we have a very rigorous process to do this. We'll often times spend a lot of time looking at acquisitions which we may think is a good fit but if the value isn’t there we'll walk away from it.

Read the rest of this transcript for free on