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Crane Co. Reports Third Quarter Results

Third Quarter 2015 Highlights:

STAMFORD, Conn.--(BUSINESS WIRE)-- Crane Co. (NYSE:CR), a diversified manufacturer of highly engineered industrial products, reported third quarter 2015 earnings of $0.97 per diluted share, compared to $0.47 per share in the third quarter of 2014. Excluding Special Items in both years, third quarter 2015 earnings per diluted share were $1.03, compared to $1.12 in the third quarter of 2014. (Please see the attached Non-GAAP Financial Measures tables.)

Third quarter 2015 sales were $670 million, a decrease of 8% compared to $727 million in the third quarter of 2014. The sales decline was comprised of a $36 million, or 5%, impact from unfavorable foreign exchange; a core sales decline of $19 million, or 3%; and a divestiture impact of $2 million.

Operating profit in the third quarter was $93 million, up 95% compared to the third quarter of 2014. Excluding Special Items, third quarter operating profit was $97 million, down 10% compared to the third quarter of 2014. (Please see the attached Non-GAAP Financial Measures tables.)

"Consistent with our commentary last quarter, Fluid Handling sales and orders remain depressed. Customers continue to defer capital spending, and there is continued uncertainty and lack of predictability in our end markets," said Max Mitchell, Crane Co. President and Chief Executive Officer. "Given the ongoing market softness, we are reducing the high end of our EPS guidance range for the year."

Mr. Mitchell continued, "While Fluid Handling market conditions remain challenging, we were pleased with the continued solid performance at our Payment & Merchandising Technologies and Engineered Materials businesses, as well as sequential improvement at Aerospace & Electronics."

Segment Results

All comparisons detailed in this section refer to operating results for the third quarter 2015 versus the third quarter 2014, excluding Special Items.

Fluid Handling

    Third Quarter   Change
(dollars in millions) 2015   2014  
Sales $ 265 $ 314 $ (50 ) (16 )%
 
Operating Profit $ 29 $ 48 $ (19 ) (39 )%
Operating Profit, before Special Items* $ 31 $ 49 $ (18 ) (37 )%
 
Profit Margin 11.1 % 15.3 %
Profit Margin, before Special Items* 11.8 % 15.7 %
 
*Please see the attached Non-GAAP Financial Measures tables
 

Sales decreased $50 million, driven by $24 million, or 8%, of unfavorable foreign exchange, and a $26 million, or 8%, core sales decline. Adjusted operating margin declined to 11.8%, primarily reflecting the impact of lower volumes, and to a lesser extent, competitive pricing and unfavorable product mix. Fluid Handling order backlog was $279 million at September 30, 2015, compared to $311 million at December 31, 2014 and $350 million at September 30, 2014.

Payment & Merchandising Technologies

    Third Quarter   Change
(dollars in millions) 2015   2014  
Sales $ 171 $ 181 $ (10 ) (6 )%
 
Operating Profit $ 25 $ 25 $ %
Operating Profit, before Special Items* $ 27 $ 27 $ 1 %
 
Profit Margin 14.8 % 13.9 %
Profit Margin, before Special Items* 16.1 % 15.0 %
 
*Please see the attached Non-GAAP Financial Measures tables
 

Sales decreased $10 million driven by unfavorable foreign exchange of $11 million, or 6%, and a divestiture impact of $2 million, or 1%, partially offset by core sales growth of $3 million, or 2%. Adjusted operating margin expanded 110 basis points to 16.1%, driven primarily by acquisition synergies, higher volumes, and strong productivity.

Aerospace & Electronics

    Third Quarter   Change
(dollars in millions) 2015   2014    
Sales $ 172 $ 167 $ 5 3 %
 
Operating Profit $ 37 $ 30 $ 7 22 %
Operating Profit, before Special Items* $ 37 $ 32 $ 5 14 %
 
Profit Margin 21.3 % 17.9 %
Profit Margin, before Special Items* 21.4 % 19.2 %
 
*Please see the attached Non-GAAP Financial Measures tables
 

Sales increased $5 million, driven by a 3% increase in core sales. The core sales increase reflects improvement in sales to both the commercial and defense markets. Adjusted operating margin improved 220 basis points to 21.4%, primarily reflecting higher volumes, a more favorable product mix, and lower costs. Aerospace & Electronics order backlog was $460 million at September 30, 2015, compared to $422 million at December 31, 2014 and $405 million at September 30, 2014.

Engineered Materials

    Third Quarter   Change
(dollars in millions) 2015   2014  
Sales $ 63 $ 65 $ (2 ) (3 )%
 
Operating Profit $ 13 $ 9 $ 4 39 %
 
Profit Margin 19.9 % 14.0 %
 

Sales decreased $2 million, driven by lower sales to the recreational vehicle market, partially offset by higher sales to the transportation market. Operating margin increased 590 basis points to 19.9%, primarily reflecting strong productivity and lower material costs, partially offset by the lower volumes.

Updated 2015 Guidance

The Company revised its 2015 earnings per share guidance, excluding Special Items, to a range of $4.10-$4.20, from its prior range of $4.10-$4.30. Full year core sales are now expected to be down approximately 1%. On a GAAP basis, EPS is now expected to be $3.87-$3.97. Full year 2015 free cash flow (cash provided by operating activities less capital spending) guidance is expected to be $190 to $210 million, compared to a prior range of $190 to $220 million. (Please see the attached Non-GAAP Financial Measures tables.)

Non-GAAP Items

Special Items in the third quarter of 2015 included $2 million in after-tax charges, or $0.03 per share, related to repositioning activities, and $2 million, or $0.03 per share, of after-tax restructuring and integration-related charges associated with the MEI acquisition. Special Items in the third quarter of 2014 consisted of the following after-tax charges: $36 million, of $0.61 per share, reflecting an update to projected remediation costs for certain legacy environmental liabilities; $2 million, or $0.04 per share, related to repositioning activities; and $1 million, or $0.01 per share, related to the MEI acquisition. Special Items in the third quarter of 2014 also included a $1 million, or $0.01, gain on a real estate divestiture. For additional information, please see the attached Non-GAAP Financial Measures tables.

Additional Information

Please see the Non-GAAP Financial Measures tables 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 third quarter financial results on Tuesday, October 27, 2015 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. Slides that accompany the conference call will be available on 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 hydrocarbon processing, petrochemical, chemical, power generation, unattended payment, automated merchandising, aerospace, electronics, transportation and other markets. The Company has four business segments: Fluid Handling, Payment & Merchandising Technologies, Aerospace & Electronics and Engineered Materials. Crane has approximately 11,500 employees in the Americas, Europe, the Middle East, 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, 2014 and subsequent reports filed with the Securities and Exchange Commission.

(CR-E)

 
CRANE CO.
Income Statement Data
(in millions, except per share data)
       
Three Months Ended Nine Months Ended
September 30, September 30,
2015 2014 2015 2014
Net Sales:
Fluid Handling $ 264.7 $ 314.5 $ 832.2 $ 949.8
Payment & Merchandising Technologies 170.6 181.1 529.0 534.8
Aerospace & Electronics 171.7 167.2 500.4 513.7
Engineered Materials 62.9   64.7   198.4   196.1  
Total Net Sales $ 669.9   $ 727.4   $ 2,060.0   $ 2,194.3  
 
Operating Profit (Loss):
Fluid Handling $ 29.4 $ 48.1 $ 96.2 $ 144.8
Payment & Merchandising Technologies 25.2 25.1 72.5 51.2
Aerospace & Electronics 36.5 29.9 98.2 98.3
Engineered Materials 12.5 9.0 39.0 29.6
Corporate (10.4 ) (8.6 ) (36.5 ) (41.5 )
Environmental Provision -   (55.8 ) -   (55.8 )
Total Operating Profit 93.2 47.7 269.4 226.7
 
Interest Income 0.5 0.4 1.4 1.1
Interest Expense (9.1 ) (9.6 ) (28.5 ) (29.1 )
Miscellaneous - Net (0.3 ) 0.3   (0.2 ) (1.4 )
Income Before Income Taxes 84.3 38.9 242.1 197.3
Provision for Income Taxes 27.1   10.7   77.7   60.3  
Net income before allocation to noncontrolling interests 57.2 28.2 164.4 137.0
 
Less: Noncontrolling interest in subsidiaries' earnings 0.3 0.1 0.7 0.5
       
Net income attributable to common shareholders $ 56.9   $ 28.1   $ 163.7   $ 136.5  
 
Share Data:
Earnings per Diluted Share $ 0.97 $ 0.47 $ 2.78 $ 2.28
 
Average Diluted Shares Outstanding 58.8 59.9 58.8 59.7
Average Basic Shares Outstanding 58.1 59.0 58.0 58.8
 

Supplemental Data:

Cost of Sales $ 431.1 $ 475.8 $ 1,341.9 $ 1,421.3
Selling, General & Administrative 141.4 143.6 431.2 460.7
Environmental Provision - 55.8 - 55.8
Repositioning Charges (see non-GAAP measures) 2.0 3.4 11.7 11.6
Acquisition Related Charges (see non-GAAP measures) 2.2 1.1 5.8 18.3
Depreciation and Amortization * 16.5 18.0 49.9 58.0
Stock-Based Compensation Expense * 5.0 5.4 15.8 15.9
 
* Amount included within Cost of Sales and Selling, General & Administrative costs.
 
 
CRANE CO.
Condensed Balance Sheets
(in millions)
   
September 30, December 31,
2015 2014
 
ASSETS
Current Assets
Cash and Cash Equivalents $ 335.2 $ 346.3
Accounts Receivable, net 430.1 410.9
Current Insurance Receivable - Asbestos 20.5 20.5
Inventories, net 401.6 369.7
Other Current Assets 52.9 47.8
Total Current Assets 1,240.3 1,195.2
 
Property, Plant and Equipment, net 280.1 290.3
Long-Term Insurance Receivable - Asbestos 113.1

126.8

Other Assets 593.6 647.3
Goodwill 1,175.6 1,191.3
 
Total Assets $ 3,402.7 $ 3,450.8
 
LIABILITIES AND EQUITY
Current Liabilities
Notes Payable and Current Maturities of Long-Term Debt $ 97.7 $ 100.8
Accounts Payable 221.0 228.8
Current Asbestos Liability 79.0 79.0
Accrued Liabilities 242.5 225.8
Income Taxes 12.1 5.6
Total Current Liabilities 652.3 640.0
 
Long-Term Debt 749.2 749.2
Long-Term Deferred Tax Liability 41.6 46.3
Long-Term Asbestos Liability 484.7 534.5
Other Liabilities

364.5

410.1

 
Total Equity 1,110.4 1,070.6
 
Total Liabilities and Equity $ 3,402.7 $ 3,450.8
 
 

CRANE CO.

Condensed Statements of Cash Flows

(in millions)

       
Three Months Ended Nine Months Ended
September 30, September 30,
  2015     2014     2015     2014  

Operating Activities:

Net income attributable to common shareholders $ 56.9 $ 28.1 $ 163.7 $ 136.5
Noncontrolling interest in subsidiaries' earnings   0.3     0.1     0.7     0.5  
Net income before allocations to noncontrolling interests 57.2 28.2 164.4 137.0
Environmental Provision - 55.8 - 55.8
Restructuring - Non Cash 0.1 - 1.5 1.0
Depreciation and amortization 16.5 18.0 49.9 58.0
Stock-based compensation expense 5.0 5.4 15.8 15.9
Defined benefit plans and postretirement expense (6.1 ) (2.9 ) (9.7 ) (8.8 )
Deferred income taxes 15.4 (7.0 ) 23.4 3.7
Cash provided by (used for) operating working capital 8.1 7.1 (46.6 ) (47.3 )
Defined benefit plans and postretirement contributions (7.3 ) (9.7 ) (15.4 ) (22.7 )
Environmental payments, net of reimbursements (6.0 ) (3.9 ) (13.6 ) (8.6 )
Other   (1.9 )   (7.4 )   (17.8 )   (24.2 )
Subtotal 81.1 83.6 151.9 159.6
Asbestos related payments, net of insurance recoveries   (11.4 )   (15.4 )   (36.2 )   (46.2 )
Total provided by operating activities   69.7     68.2     115.7     113.4  
 

Investing Activities:

Capital expenditures (8.1 ) (11.5 ) (28.2 ) (32.2 )
Proceeds from disposition of capital assets - 3.9 1.9 5.0
Proceeds from divestiture - - - 2.1
Proceeds from acquisition   -     -     -     6.1  
Total used for investing activities   (8.1 )   (7.6 )   (26.4 )   (19.0 )
 

Financing Activities:

Dividends paid (19.2 ) (19.5 ) (57.4 ) (54.8 )
Reacquisition of shares on open market - - (25.0 ) -
Stock options exercised - net of shares reacquired 0.3 0.9 7.3 8.7
Excess tax benefit (shortfall) from stock-based compensation - 0.4 (0.2 ) 7.9
Repayment of credit facility - (39.0 ) (100.0 ) (11.0 )
Proceeds from issuance (repayment) of commercial paper   (25.0 )   -     97.0     -  
Total used for financing activities   (43.8 )   (57.2 )   (78.3 )   (49.1 )
 

Effect of exchange rate on cash and cash equivalents

  (8.8 )   (16.0 )   (22.1 )   (14.3 )

Increase (decrease) in cash and cash equivalents

8.9 (12.5 ) (11.1 ) 31.0

Cash and cash equivalents at beginning of period

  326.3     314.2     346.3     270.6  

Cash and cash equivalents at end of period

$ 335.2   $ 301.7   $ 335.2   $ 301.7  
 
 
CRANE CO.
Order Backlog
(in millions)
         
September 30,

  June 30,  

  March 31,  

December 31, September 30,
2015 2015 2015 2014 2014
 
Fluid Handling $ 278.6 $ 287.3 $ 304.3 $ 311.1 $ 349.6
Payment & Merchandising Technologies 55.5 61.1 68.1 68.3 58.8
Aerospace & Electronics 459.9 448.1 446.1 422.1 404.8
Engineered Materials   13.7   15.4   18.6   16.7   14.4
Total Backlog $ 807.8 $ 811.9 $ 837.2 $ 818.1 $ 827.7
 
 
CRANE CO.
Non-GAAP Financial Measures
(in millions, except per share data)

INCOME ITEMS

         
Three Months Ended Nine Months Ended Percent Change Percent Change
September 30, September 30, September 30, 2015 September 30, 2015
  2015     2014     2015     2014   Three Months Nine Months
 
 
Net Sales $ 669.9 $ 727.4 $ 2,060.0 $ 2,194.3 (7.9 %) (6.1 %)
 
 
Operating Profit 93.2 47.7 269.4 226.7 95.3 % 18.8 %
Percentage of Sales 13.9 % 6.6 % 13.1 % 10.3 %
 

Special Items impacting Operating Profit:

 
MEI acquisition related inventory and backlog amortization - - - 4.8
 

MEI acquisition related integration costs

2.2 1.0 5.6 7.7
 

MEI acquisition related restructuring costs

0.0 0.1 0.2 5.7
 
Repositioning charges 2.0 3.4 11.7 11.6
 
Lawsuit settlement charge - - - 6.5
 
Environmental Provision - 55.8 - 55.8
       
Operating Profit before Special Items $ 97.4   $ 108.0   $ 286.9   $ 318.8   (9.8 %) (10.0 %)
 
Percentage of Sales 14.5 % 14.9 % 13.9 % 14.5 %
 
 
Net Income Attributable to Common Shareholders $ 56.9 $ 28.1 $ 163.7 $ 136.5
Per Share $ 0.97 $ 0.47 $ 2.78 $ 2.28 106.5 % 21.8 %
 

Special Items Impacting Net Income Attributable to Common Shareholders:

 
MEI acquisition related inventory and backlog amortization - Net of Tax - - - 3.0
Per Share

 

$ 0.05
 
MEI acquisition related integration charges - Net of Tax 1.4 0.8 3.7 5.8
Per Share $ 0.02 $ 0.01 $ 0.06 $ 0.10
 
MEI acquisition related restructuring charges - Net of Tax 0.2 0.1 0.3 3.8
Per Share $ 0.00 $ 0.00 $ 0.00 $ 0.06
 
Repositioning charges - Net of Tax 1.9 2.3 9.0 8.1
Per Share $ 0.03 $ 0.04 $ 0.15 $ 0.13
 
Lawsuit settlement charge - Net of Tax - - - 4.2
Per Share $ - $ 0.07
 
Environmental Provision - Net of Tax - 36.3 - 36.3
Per Share $ 0.61 $ 0.61
 
Loss on business divestiture - Net of Tax - - - 1.1
Per Share $ - $ 0.02
 
Gain on real estate divestiture - Net of Tax - (0.7 ) - (0.7 )
Per Share $ (0.01 ) $ (0.01 )
       
Net Income Attributable To Common Shareholders Before Special Items $ 60.3 $ 66.8 $ 176.7 $ 198.0 (9.7 %) (10.8 %)
Per Share $ 1.03 $ 1.12 $ 3.00 $ 3.31 (8.0 %) (9.4 %)
 
CRANE CO.
Guidance
(in millions, except per share data)
             
2015 Full Year Guidance
 
2015 Earnings Per Share Guidance Low High
 
Earnings Per Share - GAAP basis $ 3.87 $ 3.97
 
MEI acquisition related integration and restructuring costs - Net of Tax 0.08 0.08
 
Repositioning actions - Net of Tax 0.15 0.15
   
Earnings Per Share - Non-GAAP basis $ 4.10   $ 4.20  
 
 

CASH FLOW ITEMS

 
Three Months Ended Nine Months Ended
September 30, September 30, 2015 Full Year Guidance
  2015     2014     2015     2014   Low High
Cash Provided by Operating Activities
before Asbestos - Related Payments $ 81.1 $ 83.6 $ 151.9 $ 159.6 $ 298.5 $ 298.5
Asbestos Related Payments, Net of Insurance Recoveries   (11.4 )   (15.4 )   (36.2 )   (46.2 )   (58.5 )   (48.5 )
Cash Provided by Operating Activities 69.7 68.2 115.7 113.4 240.0 250.0
Less: Capital Expenditures   (8.1 )   (11.5 )   (28.2 )   (32.2 )   (50.0 )   (40.0 )
Free Cash Flow $ 61.5   $ 56.7   $ 87.4   $ 81.3   $ 190.0   $ 210.0  
 
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.

Crane Co.
Jason D. Feldman, 203-363-7329
Director, Investor Relations
www.craneco.com

Source: Crane Co.

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