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Crane Co (NYSE:CR)
Q4 2019 Earnings Call
Jan 28, 2020, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings and welcome to the Crane Fourth Quarter 2019 Earnings Conference Call. [Operator Instructions] It's now my pleasure to introduce your host, Jason Feldman. Please go ahead, sir.

Jason D. Feldman -- Director of Investor Relations

Thank you, operator, and good day everyone. Welcome to our fourth quarter 2019 earnings release conference call. I'm Jason Feldman, Director of Investor Relations. On our call this morning, we have Max Mitchell, our President and Chief Executive Officer; and Rich Maue, our Senior Vice President and Chief Financial Officer. We will start off our call with a few prepared remarks, after which we will respond to questions.

Just a reminder, the comments we make on this call may include some forward-looking statements. We refer you to the cautionary language at the bottom of our earnings release and also in our annual report, Form 10-K and subsequent filings pertaining to forward-looking statements.

Also during the call, we will be using some non-GAAP numbers, which are reconciled to the comparable GAAP numbers and tables at the end of our press release and accompanying slide presentation, both of which are available on our website at www.craneco.com in the Investor Relations section. Please also mark your calendars for our February 27th Investor Day event in New York City. Please contact me directly if you would like to attend.

Now, let me turn the call over to Max.

Max H. Mitchell -- President & Chief Executive Officer

Thank you, Jason. It was an eventful quarter with -- and year with a lot of moving pieces, and Rich and I have quite a bit to cover before we get to Q&A. So let me get right into it.

We had a very strong close to the year, particularly from a free cash flow perspective. And 2019 was another year of record financial results, though somewhat lower than we originally expected when the year started. As outlined in our press release last night, we reported record full year adjusted EPS of $6.02, up slightly from 2018. Sales of $3.3 billion, decreased 2% compared to 2018, but we delivered a record $325 million of free cash flow, up 7% compared to last year. Operating margin, excluding special items, also reached a record 15%, a 50 basis point improvement from last year.

Fourth quarter EPS, excluding special items, was $1.58 per share compared to $1.64 in the fourth quarter of last year. In addition, during the quarter, we used part of our record free cash flow to repurchase $80 million of our shares in the fourth quarter. We announced a 10% dividend increase yesterday, reflecting confidence in our long-term outlook and solidly within our targeted payout range of 25% to 30%.

We initiated a new round of repositioning in our Fluid Handling business, which will generate $10 million of savings in 2022, incremental to the repositioning actions we began at the end of 2017. And after making the decision to pursue CIRCOR last spring, and that process concluding unsuccessfully by August, we were subsequently invited by CIRCOR to participate in the process for the sale of their Instrumentation & Sampling business. We signed a definitive agreement to acquire this Fluid Handling business in late December and we expect it to close within the next week.

We also announced today that we acquired Cummins Allison in our Payment business, which closed on December 31, 2019. And even after all the activity over the last quarter, our balance sheet remained strong and we retained substantial flexibility for further capital deployment.

Looking ahead, we have a lot of exciting opportunities in 2020, but also a few near-term demand challenges. Based on our current outlook, we expect 2020 adjusted EPS of $6.20 to $6.50 with free cash flow of $330 million to $360 million. This guidance includes the impact of Boeing's 737 MAX production pause, as well as the previously discussed impact of the US government's currency destocking. Assuming both of these items resolve themselves in 2020, as we currently do, we would expect -- still expect to achieve 2021 adjusted EPS target of $7.50 to $8.00, barring any macroeconomic surprises.

Before I turn it over to Rich for some additional financial details, let me discuss some added highlights of 2019, our recent acquisition activity and our 2020 outlook. Starting with the 2019 environment and our operational performance, we executed extremely well in a challenging period. We adjusted quickly and effectively to unexpected changes in demand, both in Engineered Materials and at Crane Currency. We also continued to aggressively invest for organic growth while continuing to drive efficiency and productivity throughout our businesses.

We will discuss more at Investor Day about [Phonetic] a lot of exciting activity across our businesses on growth initiatives, continued execution on technology roadmaps across Aerospace & Electronics, new retail solutions at Crane Payment Innovations, new technology advancements and continued wins at Currency, and new product introductions across Fluid Handling.

Our earnings last year were impacted by two market-related issues. As we discussed last quarter, the US government demand for Crane Currency substrate was impacted during the third and fourth quarter due to customer excess inventory. We provided a lot of detail on this topic during our last earnings call and there isn't much new to report. We believe that the destocking process is well under way and we continue to expect a reversion to a more normal demand levels in the US government's next fiscal year, which starts October 1, 2020. The rest of Crane Currency and our Crane Payment Innovations business both had very good years.

We also saw a weaker-than-expected demand in Engineered Materials related to recreational vehicles, with dealers reducing their inventory levels over the last year or so. We believe this process is close to complete and we expect volumes to decline only slightly next year. Elsewhere across our portfolio, the year unfolded much as expected with Fluid Handling volumes approximately in line with expectations. At Fluid Handling, we overdelivered on productivity and repositioning initiatives with margins better than expected. At Aerospace & Electronics, demand was stronger than expected in 2019, particularly for the aftermarket. Consequently, both sales and margins exceeded our expectations.

Moving to our recent acquisition activity. We signed a definitive agreement to buy CIRCOR's Instrumentation & Sampling business for $172 million and the transaction should close in the next week. For 2020, we expect that this business will have sales of approximately $70 million with solid margins that will be modestly dilutive to the Fluid Handling segment in the near term due to our current estimate of intangible amortization. This business designs engineers and manufactures a broad range of critical fluid control instrumentation and sampling solutions with strong brands known for quality, performance and reliability. Products are primarily used in severe service environments with a substantial portion of sales driven by recurring replacement demand.

Instrumentation & Sampling is broadly diversified geographically and by end market with nearly 60% of sales in chemical, refining and petrochemical applications, and less than 25% related to upstream oil and gas. We will be integrating this business into our process valve business where we have an extremely strong management team that's experienced with acquisition and integration.

We also acquired Cummins Allison for $160 million. Cummins Allison has approximately $190 million in sales. And including intangible amortization, currently has mid-single-digit operating margins where we see substantial opportunity for improvement over the next few years. Cummins Allison is a leading provider of high-speed cash and coin counting and sorting machines, retail cash office solutions, along with a nationwide service network. About half their sales are generated from recurring revenue derived from service contracts. Their end markets are aligned with our existing Crane Payment Innovations' end markets, primarily focused on retail, financial services and gaming. However, where our payment business focuses on consumer facing applications, Cummins Allison's sales product is [Phonetic] primarily used in back-office applications.

Cummins Allison and CPI products are based on similar core technologies related to cash and coin sorting, counting and validation. And we expect sharing of technology and R&D across the two businesses. We see substantial synergies, most notably with material cost and supply chain, manufacturing productivity and R&D. Together, these acquisitions should be accretive to adjusted EPS by approximately $0.15 in 2020 with accretion increasing to $0.25 by 2022. Both acquisitions meet our strict acquisition-related financial criteria.

Our integration process is under way at Cummins Allison and we have a detailed plan ready for when we close on Instrumentation & Sampling. Given our balance sheet strength, our acquisition activity does not prevent us from consistently returning cash to shareholders. As I mentioned, we increased our dividend 10% yesterday and repurchased $80 million of shares last quarter. We have ample flexibility remaining to continue to deploy capital to grow the business, while also providing additional cash returns to our shareholders.

At this point, I'll turn it over to Rich for some additional financial commentary.

Richard A. Maue -- Senior Vice President & Chief Financial Officer

Thank you, Max, and good morning, everyone. As usual, I'll be providing segment comments that will compare the fourth quarter of 2019 to 2018 excluding special items, as outlined in our press release and slide presentation.

Starting with Fluid Handling, sales of $277 million declined 1% driven by a slight core decline and unfavorable foreign exchange. Fluid Handling operating profit increased 9% to $37 million, with operating margins of 13.5%, 120 basis points higher than last year, reflecting productivity and repositioning benefits. This was a very strong performance by the team in the quarter, again, driving very strong operating leverage while continuing to execute on repositioning actions as well as growth initiatives.

Fluid Handling order backlog was $267 million at the end of December compared to $280 million at the end of 2018, down 5% year-over-year on an FX-neutral basis. Orders also adjusted for foreign exchange declined 5% sequentially, but increased 1% year-over-year. Order and sales activity in the quarter was approximately in line with our expectations. On a full year basis, core growth was almost exactly in line with our original guidance, but we did outperform on margins, partly from certain repositioning actions being completed earlier than expected.

Looking ahead to 2020, while we expect a modest decline in our end markets, we are guiding to a flat core growth as we continue to deliver on our new product development and share gain initiatives. We expect margins to expand to approximately 14%, consistent with the framework we have provided at Investor Day over the last few years and reflecting slight margin dilution from the Instrumentation & Sampling acquisition given our current estimate of intangible amortization.

At Payment & Merchandising Technologies, sales of $315 million in the quarter increased 1% compared to the prior year, driven by 1.5% of core growth, partially offset by unfavorable foreign exchange. Segment operating profit of $55 million decreased 2% from last year, with operating margins of 17.6% compared to 18.1% last year.

Notably, however, margins did improve more than 300 basis points sequentially, reflecting higher sales volumes and cost control actions following the temporary reduction in US government currency demand. Margins were just slightly below our expectations in the quarter, largely as a result of product mix, where we had some incremental sales of international currency substrate in the quarter, which helped sales growth and operating profit, but at the expense of margins.

For 2020, we expect approximately 1% of core growth for this segment and approximately 16% of sales growth from the Cummins Allison acquisition, partially offset by approximately 1% of unfavorable foreign exchange. We expect 2020 adjusted segment margins of roughly 16%. Excluding the impact of the Cummins Allison acquisition, segment margins would be approximately 18%. Over the next few years, we expect to get Cummins Allison margins in line with the overall segment average, so there is no change to our long-term margin outlook for this segment of 18% to 22%.

At Aerospace & Electronics, we had a strong finish that capped off a great year in 2019. In the fourth quarter, sales increased 3% to $203 million, with segment margins of 23.8%, up 100 basis points compared to last year. On a full year basis, core growth was 7.5% with segment margins of 24.1%. In the quarter, total aftermarket sales increased 4%, driven heavily by military spares with commercial aftermarket down slightly on lower modernization and upgrade sales. Full year aftermarket sales were up 10% with strength across both military and commercial. OE sales increased 3% in the quarter, with similar growth rates on both military and commercial sides of the business.

Aerospace & Electronics backlog was $567 million at the end of 2019 compared to $447 million at the end of last year. This backlog is an all-time record for Crane Aerospace & Electronics. This business continues to perform extremely well with repositioning actions complete and executing daily, driving technology readiness and winning new business across all our solutions.

For 2020, we expect continued strong underlying performance but with the headwinds from the recent 737 MAX production pause. Based on best current production forecast from Boeing, we expect an EPS impact of approximately $0.25 per share in 2020. Until Boeing publicly communicates their build expectations, we are not going to provide any additional details on this topic. We believe this earnings impact is temporary and will disproportionately impact the first half of 2020 and it reflects absorption impacts resulting from the speed and magnitude of the change in production volumes. For the segment overall in 2020, we expect a 3% decline in core sales with segment margins of approximately 23.5%.

Engineered Materials sales decreased 14% to $43 million, driven by a decline in sales to RV customers. Operating margins declined to 9.4% due to the lower volumes and reflecting normal seasonality in the fourth quarter, solid performance by the team during a challenging period. In 2020, we expect a 1% decline in core sales as the RV market stabilizes during the next few months with segment margins of 13.5%.

Turning now to more detail on our total Company results and guidance. Our fourth quarter tax rate was 20.5% compared to 15.9% in the fourth quarter of 2018. In the quarter, free cash flow was $205 million compared to $158 million in the fourth quarter of last year. For the full year, we delivered record free cash flow of $325 million compared to $305 million last year. We are very comfortable with the strength of our balance sheet and we have substantial flexibility for capital deployment, as Max highlighted, both acquisitions and return of cash to shareholders in 2020.

In the quarter, we also trued up our asbestos liability estimate. This is a non-cash update that reflects trends and average settlement values since our last asbestos liability update on December 31, 2016. The liability estimate continues to cover all pending and future claims projected to be filed against us through the generally accepted end point of 2059. I would remind investors that the December 2016 liability estimate update was completed shortly after the New York State Court of Appeals issued its opinion in Dummitt versus Crane Co., and that update reflected our best estimate of the impact that Dummitt would have on asbestos claims in New York.

Based on our experience in the post-Dummitt litigation environment over the last three years, we're now able to further refine our estimates of settlement and indemnity payments and defense costs, resulting in an additional non-cash after-tax net asbestos provision of $181 million. Remember that this is an undiscounted number covering payments that will span more than 40 years.

Despite this update, there is no change in our near-term to medium-term outlook for annual average cash outflow. We continue to expect asbestos-related annual after insurance and tax cash outflow of approximately $40 million in 2020, consistent with the average cash outflow in recent years and with annual cash outflow of stable to gradually declining in the years ahead. While this is a lifetime estimate due to uncertainties in this asbestos litigation environment as well as uncertainties inherent in the estimation process, future reviews may result in additional adjustments to our total asbestos-related liability.

It's also important to remember that in addition to aggressively managing our asbestos liability case by case, we have also pursued a strategy to outgrow our asbestos liability for many years. And we have delivered strong free cash flow growth over the last decade as our asbestos-related cash outflow has declined. For context, our asbestos-related cash outflow net of insurance peaked in 2011 at $79 million. And in that year, we generated $115 million of free cash flow. In 2019, asbestos-related cash outflow net of insurance was $41.5 million and we generated a record $325 million in free cash flow. For additional information, please see the Company's Form 8-K filed with the SEC today.

Looking ahead to 2020, as Max mentioned, our EPS guidance, excluding special items, is in the range of $6.20 to $6.50. We also expect free cash flow in 2020 of $330 million to $360 million. There are some additional details in the slide presentation that is available on our website. But other key assumptions in our guidance are tax rate of 21.5%, corporate expense of $67 million, diluted share count of 60 million and capital expenditures of $75 million. Net non-operating expense is expected to be approximately $39 million, inclusive of $47 million of net interest expense.

Just some added color regarding the cadence of earnings throughout the year. Earnings will weighted toward the second half of 2020, primarily driven by three factors. A second half return to more normal production rates in our US currency business, a resumption of 737 MAX production and ramp up later in the year, and acquisition accretion, which will build incrementally as the year progresses.

For the first quarter specifically, we do expect a decline in EPS compared to the first quarter of 2019 with first quarter EPS at approximately 20% of our expected full year EPS. While this is a smaller first quarter earnings contribution than we typically see, the year-over-year first quarter decline is driven primarily again by the 737 MAX and the US currency comparison.

Let me turn it back over to Max for some additional comments before Q&A.

Max H. Mitchell -- President & Chief Executive Officer

Thanks, Rich. I look forward to seeing many of you at our February 27 Investor Day. In addition to reviewing our core businesses, we will provide an update on our multi-year earnings growth outlook. The highlights are similar to what we have discussed in the past: We continue to execute extremely well in mixed markets; we continue to accelerate growth investments across Crane with increasing evidence of substantial traction; we will continue to prudently return cash to shareholders; and we are taking a more assertive approach to acquisitions while maintaining our strict capital discipline on inorganic growth.

We're also going to highlight how we think about our businesses and portfolio with Crane, with added insight into describing what we own and how we operate our assets, while also providing further examples of how we continue to use CBS as a differentiator in running our core business and how it will continue to drive M&A opportunities. Overall, it's a compelling story. And we look forward to sharing more with you next month.

Operator, we're now ready to take our first question.

Questions and Answers:

Operator

Thank you. We'll now be conducting a question-and-answer session. [Operator Instructions] Our first question today is coming from Ken Herbert from Canaccord. Your line is now live.

Ken Herbert -- Canaccord -- Analyst

Hi, good morning, Max and Rich and Jason.

Richard A. Maue -- Senior Vice President & Chief Financial Officer

Good morning, Ken.

Max H. Mitchell -- President & Chief Executive Officer

Good morning.

Ken Herbert -- Canaccord -- Analyst

Max, I just wanted to start off in Fluid Handling. I mean, you're guiding to basically flat core growth in 2020. Can you just unpack that a little bit for us in terms of expectations of share gains versus some of the expectations in some of the core end markets? Obviously, I know you've got the acquisition that's going to help there. But how should we think about the Fluid Handling core growth and some of the key moving pieces there?

Richard A. Maue -- Senior Vice President & Chief Financial Officer

Yes. So Ken, just -- I'll take the -- I'll take some of this. I would say, overall, just to sort of recap a little bit, we finished '19 sort of right in line with what we thought overall from a core growth perspective. As we exited the year, overall, when you look -- when you break it up and you look at process versus commercial, on the process side of the business, again, a solid year last year and now cascading into 2020, we do see a market that's going to continue to be down. We've been very successful throughout 2019 on core growth initiatives that helped to offset what was also a challenging end market, but we do expect end markets to be down in the process side in 2020. We are overcoming some of that down market with continued share gains with new product development and so forth.

If I look at the commercial side of the business, we had a very strong year last year as well, as part of that 4% core growth that we delivered and we'd see that just abating a bit. So that puts a little bit of added pressure when you compare it to 2019, so -- although we still see core growth across commercial not as great as we did in 2019.

Ken Herbert -- Canaccord -- Analyst

Okay, that's helpful. Thanks, Rich. And if I could just quickly on the MAX, can I -- the 737 MAX. Can I assume from your comments that you're effectively maintaining your cost structure and your head counts and everything else in anticipation of a production ramp in the second half of the year. Are you looking at any cost actions now to maybe help with some of the near-term mitigation?

Richard A. Maue -- Senior Vice President & Chief Financial Officer

No, we're not planning any cost reduction initiatives, Ken. So we're assuming this as temporary and we're going to continue to invest in the business.

Ken Herbert -- Canaccord -- Analyst

Okay, excellent. I'll pass it back there. Thanks, Rich.

Richard A. Maue -- Senior Vice President & Chief Financial Officer

Yes.

Operator

Thank you. Our next question is coming from Kristine Liwag from Bank of America. Your line is now live.

Kristine Liwag -- Bank of America -- Analyst

Hey, good morning guys.

Richard A. Maue -- Senior Vice President & Chief Financial Officer

Good morning.

Max H. Mitchell -- President & Chief Executive Officer

Good morning, Kristine.

Kristine Liwag -- Bank of America -- Analyst

For your 2021 EPS outlook of $7.50 to $8.00, can you clarify how much incremental M&A is embedded in this outlook, if there is any?

Richard A. Maue -- Senior Vice President & Chief Financial Officer

So that's a -- so for -- the overall $7.50 to $8.00, as we framed it up initially and continued to today, there isn't any expected further M&A accretion included in that number. So when you look at our guidance here of $6.35 at the midpoint and you assume, as we are, that there is the impact of the return of the 737 MAX as well as the return of demand in our USG business for currency, that's going to contribute somewhere around $0.60 a share. So from there you do the quick math on that, Kristine, and assume that our underlying business would grow somewhere between, I don't know, 7% to 9% from an EPS perspective, you can quickly get to that $7.50. So, while maybe perhaps a bit of a bias toward the $7.50, we feel pretty confident and there is other measures as you suggest to get us well beyond that number for 2021.

Kristine Liwag -- Bank of America -- Analyst

I see. I guess, I would have expected that with the two acquisitions that you've announced and your expected accretion from Cummins and IS -- I&S that there could be upside pressure to that range. Is there something else with the headwind?

Richard A. Maue -- Senior Vice President & Chief Financial Officer

Correct. And that's -- no, that's essentially -- you're correct. I'm not including the $0.25 -- the incremental accretion coming from Cummins Allison or CIRCOR in future years were not included in my numbers. So to your point, other M&A accretion that might occur post $6.35, further M&A, repurchase activity, other capital deployment is not included in that $7.50.

Kristine Liwag -- Bank of America -- Analyst

That's helpful. And following up on the 737 MAX, I think UTX said this morning that they will have a 90-day production pause and then they will go to a 21 per month rate through the rest of the year. Is that similar to what you are assuming in your MAX impact for the year?

Richard A. Maue -- Senior Vice President & Chief Financial Officer

Yes. Kristine, so we're not going to comment on specifics with respect to production rates and timing at this point. Potentially, we'll do that at Investor Day to the extent that we get further public clarity from Boeing that we expect hopefully this week.

Kristine Liwag -- Bank of America -- Analyst

Thank you very much.

Richard A. Maue -- Senior Vice President & Chief Financial Officer

You're welcome.

Operator

Thank you. Our next question is coming from Matt Summerville from D.A. Davidson. Your line is now live.

Matt Summerville -- D.A. Davidson -- Analyst

Thanks.

Richard A. Maue -- Senior Vice President & Chief Financial Officer

Good morning, Matt.

Matt Summerville -- D.A. Davidson -- Analyst

First on the Payment business, specifically to Cummins Allison. Can you talk about what the profit differential may look like between the service side of the business and the hardware side? And what would be the average duration of the service contracts for that company?

Max H. Mitchell -- President & Chief Executive Officer

On the service -- the life of the service. So, almost 75% of the installed base has an annual service agreement. So it's an evergreen kind of renewable service agreement. We're pretty excited, Matt. It was one of the strategic reasons for the deal, about 50% of revenue is this recurring revenue and service coming with the deal is about 43 branches and over 400 really talented associates in the field that we see some opportunity on not only the existing service business, but on how we're going to leverage that not only with other existing Crane product but also servicing some third-party opportunities that we already have identified. So it's a great piece of this business that we see synergies with the combined organization in terms of the margin profile.

Richard A. Maue -- Senior Vice President & Chief Financial Officer

I mean, the margin profile on the equipment is solid, I would say, sort of what you'd expect from a component type manufacturer with -- on the services side, I would say, modestly higher than what we're seeing on the equipment with opportunity in our view from a pricing perspective as we look out.

Matt Summerville -- D.A. Davidson -- Analyst

Is that the main structural issue? I guess, I'm surprised with 50% of that business being annuity-like service but the operating margins are only 5% and -- or mid-single digit, I think, is what you said, so I want to clarify that. So if it is mid-single digit, is that mid-single-digit number pre the incremental intangibles amortization or is that fully absorbed for that, just to be clear.

Richard A. Maue -- Senior Vice President & Chief Financial Officer

No, that's fully -- that includes the intangible amortization. So from our point of view and with the prepared comments regarding our target margin range and the opportunity that we see to bring that business there, this is what's exciting to us, frankly, about the business. We see a significant amount of potential to improve the margin profile.

Max H. Mitchell -- President & Chief Executive Officer

This was a well-run, absolutely respected family run business for many, many years that had different motivations and drivers. I think it's just an incredibly well-run organization with fantastic people. And we're going to be very careful and methodical on how we continue to grow and execute. But there is a lot of opportunities in the combined strength of Payment & Merchandising Technologies.

Matt Summerville -- D.A. Davidson -- Analyst

And if I can just sneak one more in, sticking with the Payment segment. Specifically to CPI, can you sort of talk about what the market overview is or end market overview is for that business? What you're seeing in retail, transportation, gaming, etc., and how that sort of calibrates to the segment organic guidance for the year? Thank you.

Richard A. Maue -- Senior Vice President & Chief Financial Officer

Sure. So just overall in the segment guidance, I think we're plus 1% for next year. We have a bit of the headwinds, obviously in 2020 continuing with the US government, so just overall that being a headwind to that 1%. The Payment business continues to look pretty good across most of the verticals that we have, Matt. So I would say continuing -- underlying trends in the various sectors that you mentioned in particular around even transport, retail and so forth -- gaming, some slight headwinds that we saw this year that we expect we should recover from. But overall, when I look across all the solutions, we feel pretty good about the business and we're going to see some of that continuation of core growth that we saw over the last couple of years.

Matt Summerville -- D.A. Davidson -- Analyst

Thanks, guys.

Max H. Mitchell -- President & Chief Executive Officer

Thanks, Matt.

Operator

Thank you. Our next question today is coming from Nathan Jones from Stifel. Your line is now live.

Nathan Jones -- Stifel -- Analyst

Good morning, everyone.

Max H. Mitchell -- President & Chief Executive Officer

Good morning, Nathan. Good morning.

Richard A. Maue -- Senior Vice President & Chief Financial Officer

Good morning.

Nathan Jones -- Stifel -- Analyst

Just following up on the US government destock. Do you guys have any intelligence or any additional information that would suggest that the government will go back to a more normal level of buying in 2021, other than looking at history and where things have been before to justify the outlook for next year?

Richard A. Maue -- Senior Vice President & Chief Financial Officer

Just extrapolating, you broke up a little bit, Nathan, but I think I got the gist of the question. Extrapolating, we still feel pretty solidly about that range of normal demand. And I think -- look, I mean, verbally, we're not going to know until the absolute order. That's not -- that will be the new number but I can tell you that in conversations with those at the bureau we certainly have an indication it's going to revert to a normal level and -- but nothing that has been definitive.

I can also say that anecdotally, we've been tracking this. Now, we don't expect any change. There's very little change with the order rate once it's given and so that's going to be very, very stable through the year. But we are anecdotally hearing that the destocking is well on track and as expected.

Nathan Jones -- Stifel -- Analyst

Okay. Outside of the -- that the -- impact from that this year, I think Payment & Merchandising growth number at plus 1% is actually, I think, very solid and probably demonstrates pretty good growth in the business outside of that. Are you guys able to quantify the impact of this destock on the overall segment growth for the year? What's the underlying growth in the other businesses?

Richard A. Maue -- Senior Vice President & Chief Financial Officer

So I mean, I think what I would say, Nathan, just as -- I would agree with what you're saying, to be at plus 1%, notwithstanding the headwind with the US government, we're seeing continued momentum on the international side of the Currency business would be the one thing that I would clearly point to, but also, like I just mentioned in response to Matt's question, with respect to the underlying end markets in our Payment business, we're continuing to see continued traction and solid demand across those solutions. So I would say it's a combination of those two factors.

Nathan Jones -- Stifel -- Analyst

Okay. Just one more on the acquisitions. You talked about Cummins Allison getting up to segment average level profitability going forward. My quick back of the envelope math would imply that, that's an additional [Indecipherable] accretion there. I would assume that there's got to be some cost synergy opportunities with CIRCOR business. I'm wondering why 2022 would only be $0.25 of total accretion from those two acquisitions. Is there to [Phonetic] take longer to get Cummins Allison up to those margins [Indecipherable] conservatism built into that estimate?

Richard A. Maue -- Senior Vice President & Chief Financial Officer

Yes. No, that's a good question, Nathan. I would say that we feel -- I would say, we feel very comfortable with the $0.25. We'd like to see things play out a little bit, but I would say that we're very comfortable with hitting the $0.25 per share target that we laid out today.

Nathan Jones -- Stifel -- Analyst

Okay, that's it from me. Thanks very much.

Max H. Mitchell -- President & Chief Executive Officer

Thanks, Nathan.

Operator

Thank you. Our next question is coming from Robert Barry from Buckingham Research Group. Your line is now live.

Robert Barry -- Buckingham Research Group -- Analyst

Hey, guys. Good morning.

Max H. Mitchell -- President & Chief Executive Officer

Good morning.

Robert Barry -- Buckingham Research Group -- Analyst

So I just wanted to clarify on the 737. The $0.25 impact is for some undefined amount of time that this pause occurs?

Richard A. Maue -- Senior Vice President & Chief Financial Officer

So we based our [Speech Overlap] so we based our estimate pursuant to feedback and what you'd normally expect us to be receiving from our customers. So, in response to that, we've laid out a pretty thoughtful cadence of that production pause in our 2020 operating plan and our guidance. So there are specifics. I just -- we'd rather not comment on them until we allow our customer to publicly disclose what their production plans are.

Max H. Mitchell -- President & Chief Executive Officer

But it is the rate that's been publicly disclosed today -- I'm sorry, that has been privately disclosed today. If others are communicating that, we prefer not to until we have more confidence around that. I think the way to think about this to, Rob, is on a worst-case basis, if production literally went to zero for the entire year, we would still feel comfortable with the low end of our range.

Robert Barry -- Buckingham Research Group -- Analyst

Got it, OK. So the $0.25 is kind of at the midpoint and that if it was a worst-case scenario, it just kind of bring you down to the low end of the range?

Richard A. Maue -- Senior Vice President & Chief Financial Officer

That's right.

Robert Barry -- Buckingham Research Group -- Analyst

Okay, that's helpful. And any thoughts on this virus and how that could impact the business? I mean, maybe just from what you've seen in the past with SARS or something like that? I know it's still early but just big picture, how are you thinking about that and is there any contingency in the guidance for that?

Max H. Mitchell -- President & Chief Executive Officer

There is no contingency in the guidance for the Coronavirus. I think this is something that everyone is watching carefully. I know we are -- and gathering intelligence. Having lived through SARS as well and understanding the ramifications, I think watching this play out, it was -- it's been quiet the first week because it happened to be conducted over the Chinese New Year when things were already down, when things were quiet, when the government was able to continue to ratchet up some countermeasures and then we saw the spread into a couple of other countries on a minor basis.

I think we're in close contact with our Chinese -- our leadership in China that is making some calls. We've extended slightly the Chinese New Year in terms of returning that matches the government actions. I think there's something that's going to play out here real time day to day, Rob, and is a concern, but it's going to impact -- it's something that we're all going to have to face -- be faced with and deal with shortly, depending on the continued severity, spread, so forth.

I think, as I think about this, the risk is not so much with our -- from a materiality standpoint. It is not so much with our existing facilities and dependencies, it's more the broader supply chain. It's going to be, what happens in the Chinese supply chain all in. And when I think about that, some of the end segments that are a little more dependent than others would be, Fluid Handling, Payment & Merchandising, that -- and that -- yes, A&E, very little and Engineered Materials, nothing. So that's kind of how I'm thinking about it. There is going to be a lot to learn everyday as we move forward. And I'm sure investors are all in tune with this as well.

Robert Barry -- Buckingham Research Group -- Analyst

Got it. So you don't see it as much of arrow kind of reducing travel, flight hours, aftermarket impact, it's more of...

Max H. Mitchell -- President & Chief Executive Officer

In terms of -- I was speaking specifically to supply. Yes, I was speaking specifically to supply chain demand, but -- in terms of impacting end markets for sure. I think the transportation industry, I think we're already seeing signs of travel -- reduce travel, so forth, that is going to play out. How deep, how severe? Early days.

Robert Barry -- Buckingham Research Group -- Analyst

Yes, just too early. I guess just lastly, I was wondering if you could help us on how we should think about the cadence of growth in Payment. I mean, frankly, after seeing 3Q down so much on the government contract destock, it was a little surprising to see 4Q kind of rebound. I mean, is it your -- should we model the Payment business like down in the first half and then up a lot, potentially in 4Q, if there is assumed return to normalcy in that contract or how should we think about the cadence of growth in Payment?

Richard A. Maue -- Senior Vice President & Chief Financial Officer

Yes. Rob, we'd rather not get too deep into this segment quarterly splits. I mean, we'll go down a lot of roads here with the different businesses. What we can do is make sure that we address this during Investor Day and provide that color for you so that things become a little bit more clear. It's a little bit more challenging, given even the moving pieces within that business itself between what's international and what's US government, and so you can really wind up unpacking quite a bit there. So if that's OK, we'd like to update everybody during Investor Day.

Robert Barry -- Buckingham Research Group -- Analyst

All right. All right, thank you. I'll pass it on.

Richard A. Maue -- Senior Vice President & Chief Financial Officer

Thanks, Rob.

Operator

Thank you. Our next question is coming from Damian Karas from UBS. Your line is now live.

Max H. Mitchell -- President & Chief Executive Officer

Good morning, Damian.

Damian Karas -- UBS -- Analyst

Hey, good morning, guys.

Max H. Mitchell -- President & Chief Executive Officer

Good morning.

Richard A. Maue -- Senior Vice President & Chief Financial Officer

Good morning.

Damian Karas -- UBS -- Analyst

So I wanted to ask you about Currency, thinking outside of the current destocking cycle going on at the US Fed. But just in general, could you maybe give us some additional color on the trends you're seeing and I guess what the project pipeline might look like for that business. Just wondering if there's anything promising that you've perhaps got some pretty good visibility on whether or not it's in your guidance for this year at this stage?

Max H. Mitchell -- President & Chief Executive Officer

Yes. I think just generally, international is doing very well -- very, very well. I mean, so we have the technology threat that we can sell both independently or with a finished banknote. That technology is differentiated from all competitors. It continues to play out and that value is understood in the marketplace. So there is a rich pipeline of opportunities both on what we are chasing, what we've bid on, what we're expecting, what we are winning. And I can tell you that we continue to take share not only in technology, but in finished banknotes. So that's a bright spot. The team continues to execute very well.

Damian Karas -- UBS -- Analyst

Okay. And shifting over to capital allocation. So you've completed these two acquisitions recently, December, and then also executed $80 million in buyback. How much capital do you think you have available to deploy this year? And are you considering any incremental buyback at this stage?

Richard A. Maue -- Senior Vice President & Chief Financial Officer

So Damian, post the acquisition activity, post the repurchases in the fourth quarter, we still have pretty good capacity here for M&A when I think about -- and there is a difference between capacity for M&A and capacity for repurchase. From an M&A point of view, call it, between $400 million and $500 million today but it grows pretty quickly once we get toward the end of 2020. You can envision actually being double that size by the end of the year with projected EBITDA levels and so forth. So from a repurchase point of view, it's going to be lower than that given you don't have any acquired EBITDA, but the short answer is, with that kind of M&A capacity you can envision a decent amount of repurchase to the extent we can locate any sufficient opportunities for that capital.

Damian Karas -- UBS -- Analyst

Okay, that's helpful. And one last quick one on the CIRCOR I&S acquisition here. I think if I heard you correctly, that's expected to contribute about $70 million to sales this year. And Max, you talked about that mostly being a replacement business. But I think if you kind of looked at the release that that business might have been in the low-80s a few years ago. So it seems like it's been down. Could you maybe just elaborate on what's going on there and what kind of growth profile you would expect for that business. Is it similar to Fluid Handling segment overall?

Max H. Mitchell -- President & Chief Executive Officer

Yes. I think that's what you can expect, similar to the existing end markets. I think it's been challenged with general end-market conditions to date. We've got a nice adjacency here with critical applications, same end markets and customers as our process valve business and focused on chemical -- petrochemical, 50% MRO, nice margins, just a solid business.

And we think that, in addition to just being a nice tuck-in, the right value, as we think about what Crane can bring, Instrumentation & Sampling, is the global presence. We just have a slightly stronger support structure globally, Saudi in particular. We're looking at accelerating some enhanced localization that we already have well under way. So that's just one example of how we think we're going to bring more as a combined entity.

Damian Karas -- UBS -- Analyst

That makes sense. Thanks guys.

Max H. Mitchell -- President & Chief Executive Officer

Thanks, Damian.

Operator

Thank you. Our next question is coming from Brett Linzey from Vertical Research Partners. Your line is now live.

Brett Linzey -- Vertical Research Partners -- Analyst

Hey, good morning, everyone.

Richard A. Maue -- Senior Vice President & Chief Financial Officer

Good morning.

Brett Linzey -- Vertical Research Partners -- Analyst

Just wanted to come back to Fluid Handling. Orders up 1% on a two-year stack. I mean, it's similar level to the Q3. So it doesn't appear there is a sharp erosion in the business. Could you just characterize the customer tone, expectations for capital budgets and some little bit more color on your market outlook for 2020 by vertical?

Richard A. Maue -- Senior Vice President & Chief Financial Officer

So yes, I would say -- I would agree with you, there is not some inflection point here that's overly negative by any means. When we look across the opportunities, the funnel of projects, small and large and whatever they might be, they are, I would say, consistent with what we've been seeing coming out of Q3 through Q4 and now as we look at our plans for 2020. So chemical, I would say, there is some stability there. The markets, perhaps, just a little bit down, but not in any significant way. Same with general industrial. I would sort of pack those two together. Refining, not a whole heck of a lot of real momentum. It's, I would say, also consistent, not particularly strong, I would say, if I was to compare that against the other two that I just mentioned. The other two were perhaps a little bit stronger in '19. So I would say, just overall, no significant inflection point down. It's just a modest market decline that we're projecting in process and we're offsetting it with share gains.

Max H. Mitchell -- President & Chief Executive Officer

We're going to give you more color, Brett, on -- in less than a month away on February 27. Brad Ellis will give a little more detail by vertical.

Brett Linzey -- Vertical Research Partners -- Analyst

Okay, great. And then maybe just one more on Fluid Handling. So the $10 million of incremental restructuring you're doing, how does that feather in over the next couple of years? I guess, what's the embedded assumption for 2020 because it looks like you're obviously still looking for some margin expansion there?

Richard A. Maue -- Senior Vice President & Chief Financial Officer

Yes. Most of those savings, almost all of it is going to be not in 2020. So that most of the activity is going to take place to actually restructure the business next year and even into the following year. So it will be -- those savings are substantially outside of 2020.

Brett Linzey -- Vertical Research Partners -- Analyst

Got it. Helpful. Okay, thanks a lot guys.

Richard A. Maue -- Senior Vice President & Chief Financial Officer

Yes.

Max H. Mitchell -- President & Chief Executive Officer

Thanks, Brett.

Operator

Thank you. [Operator Instructions] Our next question is coming from Nathan Jones from Stifel. Your line is now live.

Nathan Jones -- Stifel -- Analyst

Hey, guys. I'd just like to get an update on the Crane Currency accretion target of $1 [Phonetic] in 2021 to see whether you guys are on target to hit the dollar [Phonetic], short, better?

Richard A. Maue -- Senior Vice President & Chief Financial Officer

Yes. So I think, Nathan, what we've been saying in that regard is that we'll have our cost base set up to ensure that we can hit that dollar [Phonetic] by 2021. I would say the timing in terms of when the volumes are there for us is a little bit less clear. As we've talked about, there is a bit of lumpiness in the business. But without question our cost base is set up for us to achieve that dollar [Phonetic] by 2021.

Nathan Jones -- Stifel -- Analyst

Okay, thanks. That was all I had.

Richard A. Maue -- Senior Vice President & Chief Financial Officer

Okay.

Max H. Mitchell -- President & Chief Executive Officer

Thank you.

Operator

Thank you. We have reached end of our question-and-answer session. I'd like to turn the floor back over to Max for any further or closing comments.

Max H. Mitchell -- President & Chief Executive Officer

Thank you all for joining the call today. We have some temporary headwinds this year, but I'm excited about our outlook. And I believe Crane is extremely well positioned for the future. I cannot say enough about our incredible management teams across the globe and across our organizations. I look forward to seeing many of you at our Investor Day event, February 27, where I will share with you more about how we think about our businesses and our portfolio and how we see it evolving over time. In the words of the late great Congressmen and civil rights advocate, Elijah Cummings, you must have confidence in your competence. At Crane, I assure you we have both, extremely competent across our businesses and confident in our path in future. Thank you for your interest in Crane and have a great day.

Operator

[Operator Closing Remarks]

Duration: 50 minutes

Call participants:

Jason D. Feldman -- Director of Investor Relations

Max H. Mitchell -- President & Chief Executive Officer

Richard A. Maue -- Senior Vice President & Chief Financial Officer

Ken Herbert -- Canaccord -- Analyst

Kristine Liwag -- Bank of America -- Analyst

Matt Summerville -- D.A. Davidson -- Analyst

Nathan Jones -- Stifel -- Analyst

Robert Barry -- Buckingham Research Group -- Analyst

Damian Karas -- UBS -- Analyst

Brett Linzey -- Vertical Research Partners -- Analyst

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