Crane Co. (NYSE: CR), a diversified manufacturer of highly engineered industrial products, reported that second quarter 2010 earnings per diluted share increased 41% to $0.67, compared to $0.47 in the second quarter of 2009. Excluding Special Items, second quarter 2010 earnings per diluted share increased 33% to $0.66 compared to $0.50 in the second quarter of 2009. (Please see the attached Non-GAAP Financial Measures table.)
Second quarter 2010 sales of $552.8 million increased $7.3 million, or 1.3%, compared to the second quarter of 2009, resulting from a core sales increase of $6.3 million (1.2%) and favorable foreign currency translation of $1.6 million, partially offset by a decrease in sales from divestitures, net of acquisitions, of $0.6 million.
Second quarter 2010 operating profit increased 44% to $65.3 million compared to $45.5 million in the second quarter of 2009. Excluding Special Items, second quarter 2010 operating profit increased 36% to $64.4 million compared to $47.3 million in the second quarter 2009, and second quarter 2010 operating profit margin increased 300 basis points to 11.7% compared to 8.7% in the second quarter of 2009. (Please see the attached Non-GAAP Financial Measures table.)
Order backlog was $714 million at June 30, 2010, compared to $664 million at December 31, 2009, and $697 million at June 30, 2009.
“I am very pleased with our second quarter results. Revenues increased on a year-over-year basis for the first time in eight quarters, with each of our business segments having favorable operating profit and margin comparisons to the second quarter of 2009,” said Crane Co. president and chief executive officer, Eric C. Fast. “Based on our solid first half performance and confidence in the future, we are raising our 2010 earnings per share guidance to a range of $2.35–$2.50 per diluted share compared to our prior guidance of the high end of $2.15–$2.35 and increasing the quarterly dividend by 15%, or $0.03 per share, to $0.23 per share.”
Cash Flow and Financial Position
Cash provided by operating activities in the second quarter of 2010 totaled $47.1 million compared to $30.4 million in the second quarter of 2009. Free cash flow (cash provided by operating activities less capital spending) for the second quarter of 2010 was $42.8 million, compared to $22.9 million in the prior year. The Company’s cash position at June 30, 2010 was $335.5 million, as compared to $372.7 million at December 31, 2009, and $233.0 million at June 30, 2009. (Please see the Condensed Statement of Cash Flows and Non-GAAP table.) During the second quarter of 2010, the Company repurchased 313,500 shares of its common stock for approximately $10 million. The Company also made a discretionary pension contribution of $25 million into its U.S. defined benefit plan in early July in order to reduce its 2011 expected contributions and to improve the funded status of the plan. The Company now expects its 2010 free cash flow to be in the $100–$115 million range, reflecting an improved outlook offset by the discretionary pension contribution. This compares to the previous free cash flow guidance of $125 million, which did not include the discretionary pension contribution.
Segment Results
All comparisons detailed in this section refer to the second quarter 2010 versus the second quarter 2009.
Aerospace & Electronics | |||||||||||||||||
Second Quarter | Change | ||||||||||||||||
(dollars in millions) | 2010 | 2009 | |||||||||||||||
Sales | $139.3 | $147.0 | ($7.7 | ) | -5 | % | |||||||||||
Operating Profit | $26.2 | $19.1 | $ | 7.1 | 37 | % | |||||||||||
Profit Margin | 18.8 | % | 13.0 | % | |||||||||||||
Second quarter 2010 sales decreased $7.7 million, or 5%, reflecting a $1.9 million decrease in Aerospace Group sales and a decrease of $5.8 million in Electronics Group revenue. The 2% Aerospace sales decline reflected slightly lower OEM and aftermarket activity. Electronics Group sales declined 10%, in part due to timing of certain shipments, which are expected to occur in the third and fourth quarters. Segment operating profit of $26.2 million increased by $7.1 million, or 37%, primarily driven by lower engineering spending in the Aerospace Group.
Aerospace & Electronics order backlog was $395 million at June 30, 2010 and included $26 million associated with the Merrimac acquisition completed during the first quarter of 2010, as compared to $351 million at December 31, 2009, and $383 million at June 30, 2009 which included $17 million associated with the GTC divestiture completed in the fourth quarter of 2009.
Engineered Materials | ||||||||||||||||
Second Quarter | Change | |||||||||||||||
(dollars in millions) | 2010 | 2009 | ||||||||||||||
Sales | $58.6 | $41.8 | $16.9 | 40 | % | |||||||||||
Operating Profit | $10.2 | $4.6 | $5.6 | 122 | % | |||||||||||
Profit Margin | 17.3 | % | 11.0 | % | ||||||||||||
Segment sales of $58.6 million increased 40% compared to the second quarter of 2009, as a result of stronger demand in the recreational vehicle market and, to a lesser extent, sales growth in the transportation and building products markets. Strong operating profit and operating margins reflected the impact of higher sales volumes and a reduced cost base.
Merchandising Systems | |||||||||||||||
Second Quarter | Change | ||||||||||||||
(dollars in millions) | 2010 | 2009 | |||||||||||||
Sales | $74.5 | $73.3 | $1.2 | 2 | % | ||||||||||
Operating Profit | $8.1 | $6.7 | $1.4 | 21 | % | ||||||||||
Profit Margin | 10.9 | % | 9.1 | % | |||||||||||
Merchandising Systems sales of $74.5 million increased $1.2 million, or 2%, reflecting higher sales in Vending Solutions which more than offset a sales decline in Payment Solutions. The operating profit increase was primarily attributable to the favorable impact of the final payment of a previously-disclosed patent litigation settlement and the absence of prior year restructuring charges.
Fluid Handling | |||||||||||||||
Second Quarter | Change | ||||||||||||||
(dollars in millions) | 2010 | 2009 | |||||||||||||
Sales | $254.6 | $263.1 | ($8.5 | ) | -3 | % | |||||||||
Operating Profit | $32.2 | $27.1 | $5.1 | 19 | % | ||||||||||
Profit Margin | 12.6 | % | 10.3 | % | |||||||||||
Second quarter 2010 sales decreased $8.5 million, or 3%, which included a core sales decline of $10.4 million (4%), partially offset by favorable foreign currency translation of $1.9 million (1%). The second quarter 2010 core sales decline of 4% compares favorably to the 13% decline experienced in the first quarter of 2010. Continued weakness and delays in later-cycle project activity in the energy and chemical markets were only partially offset by improving trends in MRO activity. Fluid Handling operating profit margins increased to 12.6% from 10.3% in the prior year, primarily reflecting a lower cost base, and to a lesser extent, a more favorable sales mix.
Fluid Handling backlog was $258 million at June 30, 2010, compared to $250 million at December 31, 2009, and $256 million at June 30, 2009.
Controls | |||||||||||||
Second Quarter | Change | ||||||||||||
(dollars in millions) | 2010 | 2009 | |||||||||||
Sales | $25.8 | $20.3 | $5.4 | 27% | |||||||||
Operating Profit (Loss) | $0.8 | ($1.7 | ) | $2.6 | NM | ||||||||
Profit Margin | 3.2 | % | -8.5 | % | |||||||||
Second quarter 2010 sales of $25.8 million increased 27%, primarily reflecting improvement in transportation and oil & gas related demand. In July 2010, the Company divested its Wireless Monitoring Solutions business. The financial impact of this transaction was immaterial to the Company’s results of operation and financial condition.
Additional Information
Please see the condensed financial statements and 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 second quarter financial results on Tuesday, July 27, 2010 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 five business segments: Aerospace & Electronics, Engineered Materials, Merchandising Systems, Fluid Handling, and Controls. Crane has approximately 10,000 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, 2009 and subsequent reports filed with the Securities and Exchange Commission.
CRANE CO. | |||||||||||||||||
Income Statement Data | |||||||||||||||||
(in thousands, except per share data) | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
2010 | 2009 | 2010 | 2009 | ||||||||||||||
Net Sales: | |||||||||||||||||
Aerospace & Electronics | $ | 139,299 | $ | 146,995 | $ | 272,944 | $ | 298,942 | |||||||||
Engineered Materials | 58,646 | 41,772 | 112,401 | 79,925 | |||||||||||||
Merchandising Systems | 74,527 | 73,331 | 144,698 | 145,026 | |||||||||||||
Fluid Handling | 254,587 | 263,083 | 502,376 | 529,573 | |||||||||||||
Controls | 25,755 | 20,310 | 50,686 | 47,163 | |||||||||||||
Total Net Sales | $ | 552,814 | $ | 545,491 | $ | 1,083,105 | $ | 1,100,629 | |||||||||
Operating Profit: | |||||||||||||||||
Aerospace & Electronics | $ | 26,215 | $ | 19,099 | $ | 50,704 | $ | 36,331 | |||||||||
Engineered Materials | 10,172 | 4,580 | 18,712 | 6,067 | |||||||||||||
Merchandising Systems | 8,110 | 6,675 | 13,079 | 9,655 | |||||||||||||
Fluid Handling | 32,152 | 27,059 | 60,141 | 63,826 | |||||||||||||
Controls | 825 | (1,731) | 951 | (1,317) | |||||||||||||
Corporate | (12,170) | (10,190) | (25,003) | (31,186) | * | ||||||||||||
Total Operating Profit | 65,304 | 45,492 | 118,584 | 83,376 | |||||||||||||
Interest Income | 236 | 465 | 461 | 1,308 | |||||||||||||
Interest Expense | (6,657) | (6,780) | (13,383) | (13,549) | |||||||||||||
Miscellaneous- Net | (604) | 529 | (625) | 2,240 | |||||||||||||
Income Before Income Taxes | 58,279 | 39,706 | 105,037 | 73,375 | |||||||||||||
Provision for Income Taxes | 18,116 | 11,901 | 31,690 | 22,141 | |||||||||||||
Net income before allocations to noncontrolling interests | 40,163 | 27,805 | 73,347 | 51,234 | |||||||||||||
Less: Noncontrolling interest in subsidiaries' earnings | 122 | 38 | 72 | 157 | |||||||||||||
Net income attributable to common shareholders | 40,041 | 27,767 | 73,275 | 51,077 | |||||||||||||
Share Data: | |||||||||||||||||
Earnings per Diluted Share | $ | 0.67 | $ | 0.47 | $ | 1.23 | $ | 0.87 | |||||||||
Average Diluted Shares Outstanding | 59,894 | 58,728 | 59,716 | 58,643 | |||||||||||||
Average Basic Shares Outstanding | 58,909 | 58,459 | 58,777 | 58,458 | |||||||||||||
Supplemental Data: | |||||||||||||||||
Cost of Sales | $ | 361,779 | $ | 369,537 | $ | 714,050 | $ | 751,546 | |||||||||
Selling, General & Administrative | 125,731 | 130,462 | 250,471 | 265,707 | |||||||||||||
Depreciation and Amortization ** | 15,408 | 14,779 | 29,845 | 29,832 | |||||||||||||
Stock-Based Compensation Expense | 3,172 | 2,374 | 6,344 | 4,436 | |||||||||||||
* Includes a charge of $7.25 million related to the settlement of a lawsuit. | |||||||||||||||||
** Amount included within cost of sales and selling, general & administrative costs. |
CRANE CO. | ||||||||||
Condensed Balance Sheets | ||||||||||
(in thousands) | ||||||||||
June 30, | December 31, | |||||||||
2010 | 2009 | |||||||||
ASSETS | ||||||||||
Current Assets | ||||||||||
Cash and Cash Equivalents | $ | 335,529 | $ | 372,714 | ||||||
Accounts Receivable, net | 295,336 | 282,463 | ||||||||
Current Insurance Receivable - Asbestos | 35,300 | 35,300 | ||||||||
Inventories, net | 299,219 | 284,552 | ||||||||
Other Current Assets | 73,026 | 71,317 | ||||||||
Total Current Assets | 1,038,410 | 1,046,346 | ||||||||
Property, Plant and Equipment, net | 274,232 | 285,224 | ||||||||
Long-Term Insurance Receivable - Asbestos | 192,625 | 213,004 | ||||||||
Other Assets | 395,084 | 406,346 | ||||||||
Goodwill | 766,512 | 761,978 | ||||||||
Total Assets | $ | 2,666,863 | $ | 2,712,898 | ||||||
LIABILITIES AND EQUITY | ||||||||||
Current Liabilities | ||||||||||
Notes Payable and Current Maturities of Long-Term Debt | $ | 1,032 | $ | 1,078 | ||||||
Accounts Payable | 152,533 | 142,390 | ||||||||
Current Asbestos Liability | 100,300 | 100,300 | ||||||||
Accrued Liabilities | 211,178 | 218,864 | ||||||||
Income Taxes | 10,660 | 4,150 | ||||||||
Total Current Liabilities | 475,703 | 466,782 | ||||||||
Long-Term Debt | 398,646 | 398,557 | ||||||||
Long-Term Deferred Tax Liability | 29,416 | 29,578 | ||||||||
Long-Term Asbestos Liability | 672,848 | 720,713 | ||||||||
Other Liabilities | 194,242 | 203,566 | ||||||||
Total Equity | 896,008 | 893,702 | ||||||||
Total Liabilities and Equity | $ | 2,666,863 | $ | 2,712,898 |
CRANE CO. | ||||||||||||||||||||||||
Condensed Statements of Cash Flows | ||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||||
June 30 | June 30 | |||||||||||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||||||||||
Operating Activities: | ||||||||||||||||||||||||
Net income attributable to common shareholders | $ | 40,041 | $ | 27,767 | $ | 73,275 | $ | 51,077 | ||||||||||||||||
Noncontrolling interest in subsidiaries' earnings | 122 | 38 | 72 | 157 | ||||||||||||||||||||
Net income before allocations to noncontrolling interests | 40,163 | 27,805 | 73,347 | 51,234 | ||||||||||||||||||||
Depreciation and amortization | 15,408 | 14,779 | 29,845 | 29,832 | ||||||||||||||||||||
Stock-based compensation expense | 3,172 | 2,374 | 6,344 | 4,436 | ||||||||||||||||||||
Deferred income taxes | 6,538 | (5,910 | ) | 13,220 | 2,784 | |||||||||||||||||||
Cash provided (used) for operating working capital | 11,041 | 6,997 | (20,646 | ) | (20,622 | ) | ||||||||||||||||||
Other | (12,876 | ) | (499 | ) | (10,721 | ) | (9,390 | ) | ||||||||||||||||
Subtotal | 63,446 | 45,546 | 91,389 | 58,274 | ||||||||||||||||||||
Asbestos related payments, net of insurance recoveries | (16,360 | ) | (15,191 | ) | (27,485 | ) | (12,535 | ) | * | |||||||||||||||
Total provided by operating activities | 47,086 | 30,355 | 63,904 | 45,739 | ||||||||||||||||||||
Investing Activities: | ||||||||||||||||||||||||
Capital expenditures | (4,271 | ) | (7,458 | ) | (8,390 | ) | (17,432 | ) | ||||||||||||||||
Proceeds from disposition of capital assets | 42 | 622 | 42 | 2,325 | ||||||||||||||||||||
Payment for acquisition - net of cash acquired | - | - | (51,167 | ) | - | |||||||||||||||||||
Total used for investing activities | (4,229 | ) | (6,836 | ) | (59,515 | ) | (15,107 | ) | ||||||||||||||||
Financing Activities: | ||||||||||||||||||||||||
Dividends paid | (11,815 | ) | (11,696 | ) | (23,558 | ) | (23,384 | ) | ||||||||||||||||
Reacquisition of shares on open market | (9,990 | ) | - | (9,990 | ) | - | ||||||||||||||||||
Stock options exercised - net of shares reacquired | 7,675 | 884 | 12,389 | 247 | ||||||||||||||||||||
Excess tax benefit from stock-based compensation | 578 | - | 969 | - | ||||||||||||||||||||
Change in short-term debt | (87 | ) | (6,089 | ) | (3,133 | ) | (15,405 | ) | ||||||||||||||||
Total used for financing activities | (13,639 | ) | (16,901 | ) | (23,323 | ) | (38,542 | ) | ||||||||||||||||
Effect of exchange rate on cash and cash equivalents | (13,273 | ) | 16,041 | (18,251 | ) | 9,044 | ||||||||||||||||||
Increase (decrease) in cash and cash equivalents | 15,945 | 22,659 | (37,185 | ) | 1,134 | |||||||||||||||||||
Cash and cash equivalents at beginning of period | 319,584 | 210,315 | 372,714 | 231,840 | ||||||||||||||||||||
Cash and cash equivalents at end of period | $ | 335,529 | $ | 232,974 | $ | 335,529 | $ | 232,974 | ||||||||||||||||
* Includes a $14.5 million insurance settlement receipt from the Highlands Insurance Company. |
CRANE CO. | ||||||||||||||||
Order Backlog | ||||||||||||||||
(in thousands) | ||||||||||||||||
June 30, | March 31, | December 31, | September 30 | June 30, | ||||||||||||
2010 | 2010 | 2009 | 2009 | 2009 | ||||||||||||
Aerospace & Electronics | $ | 394,554 | $ | 388,169 | $ | 351,004 | $ | 369,898 | $ | 383,335 | ||||||
Engineered Materials | 12,496 | 14,810 | 12,070 | 8,454 | 9,135 | |||||||||||
Merchandising Systems | 20,346 | 21,947 | 23,522 | 23,574 | 19,955 | |||||||||||
Fluid Handling | 257,840 | 253,946 | 249,901 | 252,333 | 256,467 | |||||||||||
Controls | 28,711 | 26,910 | 27,958 | 27,292 | 28,026 | |||||||||||
Total Backlog | $ | 713,947 | $ | 705,782 | $ | 664,455 | $ | 681,551 | $ | 696,918 |
CRANE CO. | |||||||||||||||||||||||||||
Non-GAAP Financial Measures | |||||||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | Percent Change | Percent Change | ||||||||||||||||||||||||
June 30, | June 30, | June 30, 2010 | June 30, 2010 | ||||||||||||||||||||||||
2010 | 2009 | 2010 | 2009 | Three Months | Six Months | ||||||||||||||||||||||
INCOME ITEMS | |||||||||||||||||||||||||||
Net Sales | $ | 552,814 | $ | 545,491 | $ | 1,083,105 | $ | 1,100,629 | 1.3 | % | -1.6 | % | |||||||||||||||
Operating Profit | 65,304 | 45,492 | 118,584 | 83,376 | 43.6 | % | 42.2 | % | |||||||||||||||||||
Special Items impacting Operating Profit: | |||||||||||||||||||||||||||
Lawsuit Settlement - Pre-Tax (a) | - | (500 | ) | - | 7,250 | ||||||||||||||||||||||
Restructuring Charges (Gains)- Pre-Tax (b) | (885 | ) | 2,295 | (750 | ) | 1,847 | |||||||||||||||||||||
Operating Profit before Special Items | $ | 64,419 | $ | 47,287 | $ | 117,834 | $ | 92,473 | 36.2 | % | 27.4 | % | |||||||||||||||
Percentage of Sales | 11.7 | % | 8.7 | % | 10.9 | % | 8.4 | % | |||||||||||||||||||
Net Income Attributable to Common Shareholders | $ | 40,041 | $ | 27,767 | $ | 73,275 | $ | 51,077 | |||||||||||||||||||
Per Share | $ | 0.67 | $ | 0.47 | $ | 1.23 | $ | 0.87 | 41.4 | % | 40.9 | % | |||||||||||||||
Special Items impacting Net Income
Attributable to | |||||||||||||||||||||||||||
Lawsuit Settlement - Net of Tax (a) | - | (325 | ) | - | 4,713 | ||||||||||||||||||||||
Per Share | $ | (0.01 | ) | $ | 0.08 | ||||||||||||||||||||||
Restructuring Charges (Gains) - Net of Tax (b) | (561 | ) | 1,692 | (475 | ) | 1,402 | |||||||||||||||||||||
Per Share | $ | (0.01 | ) | $ | 0.03 | $ | (0.01 | ) | $ | 0.02 | |||||||||||||||||
Net Income Attributable To Common Shareholders Before | $ | 39,480 | $ | 29,134 | $ | 72,800 | $ | 57,192 | 35.5 | % | 27.3 | % | |||||||||||||||
Per Share | $ | 0.66 | $ | 0.50 | $ | 1.22 | $ | 0.98 | 32.9 | % | 25.0 | % | |||||||||||||||
(a) During the three months ended March 31, 2009, the Company recorded a charge for the settlement of a lawsuit brought against the Company by a customer alleging failure of our fiberglass-reinforced plastic material. During the three months ended June 30, 2009, the Company recorded additional insurance recoveries associated with the aforementioned settlement. | |||||||||||||||||||||||||||
(b) Amounts represent restructuring charges (gains) in connection with the Restructuring Program. | |||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||||||||||
2010 | 2009 | 2010 | 2009 | ||||||||||||||||||||||||
CASH FLOW ITEMS | |||||||||||||||||||||||||||
Cash Provided from Operating Activities | |||||||||||||||||||||||||||
before Asbestos - Related Payments | $ | 63,446 | $ | 45,546 | $ | 91,389 | $ | 58,274 | |||||||||||||||||||
Asbestos Related Payments, Net of Insurance Recoveries | (16,360 | ) | (15,191 | ) | (27,485 | ) | (12,535 | ) | * | ||||||||||||||||||
Cash Provided from Operating Activities | 47,086 | 30,355 | 63,904 | 45,739 | |||||||||||||||||||||||
Less: Capital Expenditures | (4,271 | ) | (7,458 | ) | (8,390 | ) | (17,432 | ) | |||||||||||||||||||
Free Cash Flow | $ | 42,815 | $ | 22,897 | $ | 55,514 | $ | 28,307 | |||||||||||||||||||
* Includes a $14.5 million insurance settlement receipt from the Highlands Insurance Company. | |||||||||||||||||||||||||||
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 positive cash flow. 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. |
Contacts:
Richard E. Koch, 203-363-7352
Director, Investor
Relations
and Corporate Communications
www.craneco.com