Crane Co. Reports Record First Quarter Results

Crane Co. Reports Record First Quarter Results

STAMFORD, Conn.--(BUSINESS WIRE)-- Crane Co. (NYSE: CR  ) , a diversified manufacturer of highly engineered industrial products, reported first quarter 2013 earnings from continuing operations of $0.99 per diluted share, compared to $0.86 in the first quarter of 2012. First quarter 2013 results included transaction costs of $2.9 million, or $0.05 per share, related to the $820 million pending acquisition of MEI Conlux Holdings. Excluding these costs, first quarter 2013 earnings per diluted share were $1.04, compared to $0.86 in the first quarter of 2012. (Please see the attached Non-GAAP Financial Measures table.)

First quarter 2013 sales of $628 million decreased $18 million, or 2.8%, compared to $646 million in the first quarter of 2012, resulting from a core sales decline of $15.5 million, or 2.4%, and unfavorable foreign exchange of $2.5 million, or 0.4%. Operating profit in the first quarter increased 11.0% to $86.9 million, compared to $78.3 million in the first quarter of 2012, and operating profit margin increased to 13.8%, compared to 12.1% in the first quarter of 2012. Excluding the transaction-related costs, first quarter operating profit increased 14.7% to $89.8 million, and operating profit margin increased to 14.3%. (Please see the attached Non-GAAP Financial Measures table.)

“We are pleased to report record first quarter EPS of $1.04 per share, excluding the MEI transaction costs,” said Crane Co. chief executive officer, Eric C. Fast. “Despite the decline in sales, the impact of our 2012 repositioning actions, continued focus on productivity and solid execution led to record earnings and continued strong operating margin expansion in the first quarter. While we remain cautious on the global economic environment, our backlog position and improving order and quote activity during the quarter supports our full year 2013 sales and earnings guidance. We continue integration planning in connection with the acquisition of MEI, and look forward to a successful closing in the second quarter.”

Cash Flow and Financial Position

Cash used for operating activities in the first quarter of 2013 was $20.4 million, compared to cash used for operating activities in the first quarter of 2012 of $42.8 million. The Company’s cash position was $384.6 million at March 31, 2013, as compared to $423.9 million at December 31, 2012.

Segment Results

All comparisons detailed in this section refer to continuing operations for the first quarter 2013 versus the first quarter 2012. Beginning in the first quarter 2013, the operating results of Barksdale and Crane Environmental, previously a part of the Controls segment, are included in the Fluid Handling segment. Prior period amounts have been restated for comparative purposes.

Aerospace & Electronics

      First Quarter       Change
(dollars in millions)

  2013  

   

  2012  

   
 
Sales $164.9 $175.2 ($10.3) -6%
 
Operating Profit $40.1 $38.1 $2.0 5%
 
Profit Margin 24.3% 21.7%
 

First quarter 2013 sales decreased $10.3 million, or 6%, reflecting a $4.7 million decline (4%) in Aerospace Group sales and a decline of $5.6 million (8%) in Electronics Group sales. The Aerospace Group sales decrease reflected lower commercial spares activity and the completion of a military upgrade program in 2012. The decline in Electronics Group sales primarily reflected delays in defense–related programs. Segment operating profit increased 5% and margins improved to 24.3%, driven by strong cost control, and lower engineering expense. Aerospace & Electronics order backlog was $398 million at March 31, 2013, compared to $378 million at December 31, 2012 and $438 million at March 31, 2012.

Engineered Materials

      First Quarter       Change
(dollars in millions)

  2013  

   

  2012  

   
 
Sales $60.2 $58.2 $2.1 4%
 
Operating Profit $8.6 $8.4 $0.2 2%
 
Profit Margin 14.2% 14.5%
 

Segment sales of $60.2 million were 4% higher than the first quarter of 2012, reflecting higher sales to recreational vehicle equipment manufacturers. Operating profit increased 2% and margins were 14.2%, reflecting the impact of the higher sales and savings associated with repositioning actions taken in 2012, partially offset by higher material costs.

Merchandising Systems

      First Quarter       Change
(dollars in millions)

  2013  

   

  2012  

   
 
Sales $89.5 $87.7 $1.8 2%
 
Operating Profit $10.2 $4.7 $5.5 116%
 
Profit Margin 11.4% 5.4%
 

Merchandising Systems sales of $89.5 million increased $1.8 million, or 2%, with strong sales in Payment Solutions, partially offset by a decline in Vending Solutions. Operating profit and margins increased in both businesses, reflecting productivity gains, the impact of higher sales in Payment Solutions, and the absence of a $1.5 million legal settlement charge in Vending Solutions in 2012.

Fluid Handling

      First Quarter       Change
(dollars in millions)

  2013  

   

  2012  

   
 
Sales $313.0 $324.6 ($11.6) -4%
 
Operating Profit $45.9 $43.1 $2.8 7%
 
Profit Margin 14.7% 13.3%
 

First quarter 2013 sales declined $11.6 million, or 4%, which included a core sales decline of $9.6 million (-3%), and unfavorable foreign exchange of $2 million (-1%). The core sales decline was driven by weak orders in certain short cycle businesses and project delays in 2013. Segment operating margin improved to 14.7% from 13.3% in 2012, reflecting strong execution, productivity gains and savings associated with the repositioning actions taken in 2012. Fluid Handling order backlog grew to $365 million at March 31, 2013, compared to $343 million at December 31, 2012 and $353 million at March 31, 2012.

2013 Guidance Reaffirmed

The Company reaffirmed its 2013 guidance which was provided on January 28, 2013. Core sales are expected to grow 1% to 3% (excluding acquisition and foreign exchange impacts). Earnings per share in 2013 are estimated to be in a range of $4.10 to $4.30, representing an increase of 11%-16% over 2012 earnings per diluted share of $3.70 (before Special Items and on a continuing operations basis, which excludes profits from discontinued operations of $0.05 per share in 2012). The 2013 guidance does not include potential impacts from the pending acquisition of MEI. Excluding inventory step-up and one-time transaction and integration costs, the Company expects MEI to be accretive to earnings within the first year of acquisition by approximately $0.25 per share, including $0.05 in synergies. The Company expects 2013 free cash flow (cash provided by operating activities less capital spending) to be in the range of $190 - $220 million, including the effect of asbestos related cash flows.

Please see 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 first quarter financial results on Tuesday, April 23, 2013 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 four business segments: Aerospace & Electronics, Engineered Materials, Merchandising Systems, and Fluid Handling. 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, 2012 and subsequent reports filed with the Securities and Exchange Commission.

CRANE CO.
Income Statement Data
(in thousands, except per share data)
         

 

Three Months Ended

 

March 31,

2013 2012
Net Sales:
Aerospace & Electronics $ 164,882 $ 175,168
Engineered Materials 60,230 58,159
Merchandising Systems 89,461 87,675
Fluid Handling 312,998 324,611
Total Net Sales $ 627,571 $ 645,613
 
Operating Profit from Continuing Operations:
Aerospace & Electronics $ 40,111 $ 38,069
Engineered Materials 8,574 8,409
Merchandising Systems 10,165 4,713
Fluid Handling 45,891 43,078
Corporate (17,841) (15,972)
Total Operating Profit from Continuing Operations 86,900 78,297
 
Interest Income 632 395
Interest Expense (6,718) (6,711)
Miscellaneous- Net (120) (347)
Income from Continuing Operations Before Income Taxes 80,694 71,634
Provision for Income Taxes 22,752 20,660
Income from Continuing Operations 57,942 50,974
 
Profit from Discontinued Operations attributable to common shareholders (a) - 1,263
 
Profit from Discontinued Operations attributable to common shareholders, net of tax (a) - 822
 
Net income before allocation to noncontrolling interests 57,942 51,796
 
Less: Noncontrolling interest in subsidiaries' earnings 151 134
   
Net income attributable to common shareholders $ 57,791 $ 51,662
 
Share Data:
Earnings per share from Continuing Operations $ 0.99 $ 0.86
Earnings per share from Discontinued Operations - 0.01
Earnings per Diluted Share $ 0.99 $ 0.88
 
Average Diluted Shares Outstanding 58,389 58,880
Average Basic Shares Outstanding 57,479 57,889
 

Supplemental Data:

Cost of Sales $ 409,819 $ 429,625
Selling, General & Administrative 130,852 137,691
Depreciation and Amortization * 12,710 14,674
Stock-Based Compensation Expense 5,379 4,007
 
* 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.

CRANE CO.
Condensed Balance Sheets
(in thousands)
               

  March 31,  

December 31,
2013 2012
 
ASSETS
Current Assets
Cash and Cash Equivalents $ 384,639 $ 423,947
Accounts Receivable, net 372,252 333,330
Current Insurance Receivable - Asbestos 33,722 33,722
Inventories, net 359,623 352,725
Other Current Assets 34,880 36,797
Total Current Assets 1,185,116 1,180,521
 
Property, Plant and Equipment, net 260,313 268,283
Long-Term Insurance Receivable - Asbestos 159,659 171,752
Other Assets 441,098 455,530
Goodwill 803,917 813,792
 
Total Assets $ 2,850,103 $ 2,889,878
 
LIABILITIES AND EQUITY
Current Liabilities
Notes Payable and Current Maturities of Long-Term Debt $ 1,127 $ 1,123
Accounts Payable 174,182 182,731
Current Asbestos Liability 91,670 91,670
Accrued Liabilities 178,507 220,678
Income Taxes 13,189 15,686
Total Current Liabilities 458,675 511,888
 
Long-Term Debt 399,137 399,092
Long-Term Deferred Tax Liability 35,178 36,853
Long-Term Asbestos Liability 681,609 704,195
Other Liabilities 302,211 310,474
 
Total Equity 973,293 927,376
 
Total Liabilities and Equity $ 2,850,103 $ 2,889,878
 
CRANE CO.
Condensed Statements of Cash Flows
(in thousands)
           
Three Months Ended
March 31,
2013 2012
Operating Activities:
Net income attributable to common shareholders $ 57,791 $ 51,662
Noncontrolling interest in subsidiaries' earnings   151     134  
Net income before allocations to noncontrolling interests 57,942 51,796
Depreciation and amortization 12,710 14,674
Stock-based compensation expense 5,379 4,007
Defined benefit plans and postretirement expense 943 4,991
Deferred income taxes 8,200 8,544
Cash used for operating working capital (98,534 ) (103,503 )
Defined benefit plans and postretirement contributions (2,816 ) (1,183 )
Environmental payments, net of reimbursements (3,505 ) (2,579 )
Other   9,771     (1,319 )
Subtotal (9,910 ) (24,572 )
Asbestos related payments, net of insurance recoveries   (10,493 )   (18,235 )
Total used for operating activities   (20,403 )   (42,807 )
 
Investing Activities:
Capital expenditures (5,473 ) (7,165 )
Proceeds from disposition of capital assets   196     172  
Total used for investing activities   (5,277 )   (6,993 )
 
Financing Activities:
Dividends paid (16,144 ) (15,090 )
Stock options exercised - net of shares reacquired 10,389 8,426
Excess tax benefit from stock-based compensation 2,928 2,947
Change in short-term debt   -     (318 )
Total used for financing activities   (2,827 )   (4,035 )
 
Effect of exchange rate on cash and cash equivalents   (10,801 )   4,606  
Decrease in cash and cash equivalents (39,308 ) (49,229 )
Cash and cash equivalents at beginning of period     423,947     245,089  
Cash and cash equivalents at end of period   $ 384,639   $ 195,860  
 
CRANE CO.
Order Backlog from Continuing Operations
(in thousands)
         
March 31, December 31, September 30, June 30, March 31,
2013 2012 2012 2012 2012
 
Aerospace & Electronics $ 397,518 $ 378,152 $ 392,862 $ 423,282 $ 437,822
Engineered Materials 16,138 12,689 11,357 13,884 11,129
Merchandising Systems 21,399 14,686 19,957 23,587 30,033
Fluid Handling   365,231   343,370   348,120   350,883   353,099 *
Total Backlog $ 800,286 $ 748,897 $ 772,296 $ 811,636 $ 832,083
 
 
* Order Backlog from Continuing Operations excludes $14.2 million of order backlog pertaining to businesses divested in June 2012.
 
CRANE CO.
Non-GAAP Financial Measures
(in thousands)
       
Three Months Ended Percent Change
March 31, March 31, 2013
2013 2012 Three Months

INCOME ITEMS

 
Net Sales $ 627,571 $ 645,613 -2.8%
 
 
Operating Profit from Continuing Operations 86,900 78,297 11.0%
Percentage of Sales 13.8% 12.1%
 

Special Items impacting Operating Profit from Continuing Operations :

 
Non-deductible Acquisition Transaction Costs (a) 2,888 -
   
Operating Profit from Continuing Operations before Special Items $ 89,788 $ 78,297 14.7%
 
Percentage of Sales 14.3% 12.1%
 
 
Net Income Attributable to Common Shareholders $ 57,791 $ 51,662
Per Diluted Share $ 0.99 $ 0.88 12.8%
 

Special Items impacting Net Income Attributable to Common Shareholders :

 
 
Non-deductible Acquisition Transaction Costs (a) 2,888 -
Per Share $ 0.05 -
   
Net Income Attributable To Common Shareholders Before Special Items $ 60,679 $ 51,662 17.5%
Per Diluted Share $ 1.04 $ 0.88 18.4%
 
Profit from Discontinued Operations attributable to common shareholders, net of tax (b) - (822)
Per Share $ - $ (0.01)
   
Net Income Attributable To Common Shareholders Before Special Items from Continuing Operations $ 60,679 $ 50,840
Per Diluted Share $ 1.04 $ 0.86 20.4%
 
Three Months Ended
March 31,
2013 2012
Adjusted EBITDA Schedule (Non-GAAP)
 
Net Income Attributable To Common Shareholders Before Special Items from Continuing Operations $ 60,679 $ 50,840
 
Interest, Net 6,086 6,316
 
Provision for Income Taxes 22,752 20,660
 
Depreciation and Amortization 12,710 14,674
 
Stock Based Compensation 5,379 4,007
   
Adjusted EBITDA from Continuing Operations (Non-GAAP) $ 107,606 $ 96,497 11.5%
 
 
 
 
(a) During the three months ended March 31, 2013, the Company recorded non-deductible transaction costs associated with the potential acquisition of MEI.
 
(b) Amount represents the after-tax profit from the Houston Service Center and Azonix Corporation businesses which were divested in June 2012.
 
 
Three Months Ended
March 31,
2013 2012
 

CASH FLOW ITEMS

Cash Used for Operating Activities
before Asbestos - Related Payments $ (9,910) $ (24,572)
Asbestos Related Payments, Net of Insurance Recoveries   (10,493)   (18,235)
Cash Used for Operating Activities (20,403) (42,807)
Less: Capital Expenditures   (5,473)   (7,165)
Free Cash Flow $ (25,876) $ (49,972)
 
 
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.
 
The Company's definition of Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization) is net income before special items plus an add-back for net interest, provision for income taxes, depreciation, amortization and stock-based compensation. Adjusted EBITDA is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because Adjusted EBITDA provides additional information with respect to the Company’s operating 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.



Crane Co.
Richard E. Koch, 203-363-7352
Director, Investor Relations
and Corporate Communications
www.craneco.com

KEYWORDS:   United States  North America  Connecticut

INDUSTRY KEYWORDS:

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