Crane Co. (NYSE: CR), a diversified manufacturer of highly engineered industrial products, reported that third quarter 2010 earnings per diluted share increased 17% to $0.70, compared to $0.60 in the third quarter of 2009.
Third quarter 2010 sales of $560.7 million increased $10.0 million, or 1.8%, compared to the third quarter of 2009, resulting from a core sales increase of $19.7 million (3.6%), offset by unfavorable foreign currency translation of $8.2 million (1.5%) and a decrease in sales from divestitures, net of acquisitions, of $1.5 million.
Third quarter 2010 operating profit increased 13% to $62.9 million, compared to $55.5 million in the third quarter of 2009, and operating profit margin increased to 11.2%, compared to 10.1% in the third quarter of 2009.
“I am pleased with our third quarter results as core revenues increased 3.6% and represented the second consecutive quarter of year-over-year revenue growth, an indication that our businesses are continuing to recover, albeit at a modest rate,” said Crane Co. president and chief executive officer Eric C. Fast. “Given our solid performance through the first nine months of the year and expectations for continued strength in the fourth quarter, we are raising our 2010 earnings per share guidance to a range of $2.50–$2.60 per diluted share, compared to our previous range of $2.35–$2.50. Consistent with our prior guidance, we are assuming a $0.05 per share benefit from the expected reinstatement of the U.S. R&D tax credit retroactive to January 1, 2010.”
Cash Flow and Financial Position
As anticipated, cash used for operating activities in the third quarter of 2010 was $4.6 million, which included the effect of a previously disclosed $25 million discretionary pension contribution and higher working capital needs to support improving sales trends, compared to cash provided by operating activities of $80.0 million in the third quarter of 2009. Management continues to expect 2010 free cash flow (cash provided by operating activities less capital spending) to be in the $100–$115 million range. (Please see the Condensed Statement of Cash Flows and Non-GAAP table.) During the third quarter of 2010, the Company repurchased 567,758 shares of its common stock for approximately $20 million. The Company’s cash position at September 30, 2010 was $315.6 million, as compared to $335.5 million at June 30, 2010.
Segment Results
All comparisons detailed in this section refer to the third quarter 2010 versus the third quarter 2009.
Aerospace & Electronics | ||||||||||||||||
| Third Quarter | Change | |||||||||||||||
| (dollars in millions) | 2010 | 2009 | ||||||||||||||
| Sales | $ | 143.2 | $ | 136.9 | $ | 6.3 | 5 | % | ||||||||
| Operating Profit | $ | 25.4 | $ | 19.9 | $ | 5.4 | 27 | % | ||||||||
| Profit Margin | 17.7 | % | 14.6 | % | ||||||||||||
Third quarter 2010 sales increased $6.3 million, or 5%, reflecting a $5.2 million (7%) improvement in Aerospace Group sales and an increase of $1.1 million (2%) in Electronics Group revenue. Segment operating profit of $25.4 million increased by $5.4 million, or 27%, reflecting strong sales growth and margin improvement in the Aerospace Group.
Aerospace & Electronics order backlog was $402 million at September 30, 2010, as compared to $395 million at June 30, 2010.
Engineered Materials | ||||||||||||||||
| Third Quarter | Change | |||||||||||||||
| (dollars in millions) | 2010 | 2009 | ||||||||||||||
| Sales | $ | 54.9 | $ | 48.1 | $ | 6.8 | 14 | % | ||||||||
| Operating Profit | $ | 8.0 | $ | 7.5 | $ | 0.4 | 6 | % | ||||||||
| Profit Margin | 14.5 | % | 15.7 | % | ||||||||||||
Segment sales of $54.9 million increased 14% compared to the third quarter of 2009, as a result of robust demand in the recreational vehicle and transportation markets, while building products related sales were flat. Operating profit grew 6%, and margins declined 120 basis points on the higher sales due to increased raw material costs.
Merchandising Systems | |||||||||||||||||
| Third Quarter | Change | ||||||||||||||||
| (dollars in millions) | 2010 | 2009 | |||||||||||||||
| Sales | $ | 77.2 | $ | 75.9 | $ | 1.3 | 2 | % | |||||||||
| Operating Profit | $ | 6.3 | $ | 6.9 | ($0.7 | ) | (9 | %) | |||||||||
| Profit Margin | 8.1 | % | 9.1 | % | |||||||||||||
Merchandising Systems sales of $77.2 million increased $1.3 million, or 2%, primarily due to higher sales in Vending Solutions. Operating profit of $6.3 million was down $0.7 million, or 9%, as the prior year included one-time positive items of a legal settlement and the reduction of a liability estimate associated with the Company’s restructuring program.
Fluid Handling | ||||||||||||||||
| Third Quarter | Change | |||||||||||||||
| (dollars in millions) | 2010 | 2009 | ||||||||||||||
| Sales | $ | 255.8 | $ | 266.8 | ($11.0 | ) | (4 | %) | ||||||||
| Operating Profit | $ | 33.2 | $ | 34.9 | ($1.7 | ) | (5 | %) | ||||||||
| Profit Margin | 13.0 | % | 13.1 | % | ||||||||||||
Third quarter 2010 sales decreased $11.0 million, or 4.2%, which included unfavorable foreign currency translation of $6.2 million (2.4%) and a core sales decline of $4.8 million (1.8%). The third quarter 2010 core sales decline of 1.8% compared favorably to the 13% and 4% declines experienced in the first and second quarters of 2010, respectively. Sales stabilized at approximately $255 million in the second and third quarters of 2010, and backlog remained healthy at $267 million at September 30, 2010, compared to $258 million at June 30, 2010, and $250 million at December 31, 2009. Despite the third quarter sales decline, segment operating profit margins remained strong at 13.0%.
Controls | ||||||||||||||||
| Third Quarter | Change | |||||||||||||||
| (dollars in millions) | 2010 | 2009 | ||||||||||||||
| Sales | $ | 29.6 | $ | 23.1 | $ | 6.5 | 28 | % | ||||||||
| Operating Profit (Loss) | $ | 1.9 | ($1.7 | ) | $ | 3.6 | NM | |||||||||
| Profit Margin | 6.6 | % | (7.2 | %) | ||||||||||||
Third quarter 2010 sales of $29.6 million increased 28%, primarily reflecting improvement in industrial transportation and oil & gas related demand. Operating profit of $1.9 million showed meaningful improvement over 2009.
During the quarter, the Company divested two small parts of the Controls Group: the Wireless Monitoring Solutions business, and the diagnostics product line of Dynalco. The net gain associated with these divestitures is included in Miscellaneous – Net on the accompanying Income Statement.
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 third quarter financial results on Tuesday, October 26, 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 | Nine Months Ended | ||||||||||||||||
| September 30, | September 30, | ||||||||||||||||
| 2010 | 2009 | 2010 | 2009 | ||||||||||||||
| Net Sales: | |||||||||||||||||
| Aerospace & Electronics | $ | 143,161 | $ | 136,896 | $ | 416,105 | $ | 435,838 | |||||||||
| Engineered Materials | 54,904 | 48,065 | 167,305 | 127,990 | |||||||||||||
| Merchandising Systems | 77,199 | 75,879 | 221,897 | 220,905 | |||||||||||||
| Fluid Handling | 255,842 | 266,810 | 758,218 | 796,383 | |||||||||||||
| Controls | 29,608 | 23,060 | 80,294 | 70,223 | |||||||||||||
| Total Net Sales | $ | 560,714 | $ | 550,710 | $ | 1,643,819 | $ | 1,651,339 | |||||||||
| Operating Profit: | |||||||||||||||||
| Aerospace & Electronics | $ | 25,368 | $ | 19,928 | $ | 76,072 | $ | 56,259 | |||||||||
| Engineered Materials | 7,965 | 7,530 | 26,677 | 13,597 | |||||||||||||
| Merchandising Systems | 6,261 | 6,914 | 19,340 | 16,569 | |||||||||||||
| Fluid Handling | 33,197 | 34,882 | 93,338 | 98,708 | |||||||||||||
| Controls | 1,949 | (1,667 | ) | 2,900 | (2,984 | ) | |||||||||||
| Corporate | (11,861 | ) | (12,134 | ) | (36,864 | ) | (43,320 | ) | * | ||||||||
| Total Operating Profit | 62,879 | 55,453 | 181,463 | 138,829 | |||||||||||||
| Interest Income | 299 | 270 | 760 | 1,578 | |||||||||||||
| Interest Expense | (6,738 | ) | (6,821 | ) | (20,121 | ) | (20,370 | ) | |||||||||
| Miscellaneous- Net | 1,522 | 83 | 897 | 2,323 | |||||||||||||
| Income Before Income Taxes | 57,962 | 48,985 | 162,999 | 122,360 | |||||||||||||
| Provision for Income Taxes | 16,359 | 13,832 | 48,049 | 35,973 | |||||||||||||
| Net income before allocations to noncontrolling interests | 41,603 | 35,153 | 114,950 | 86,387 | |||||||||||||
| Less: Noncontrolling interest in subsidiaries' earnings | 96 | 45 | 168 | 202 | |||||||||||||
| Net income attributable to common shareholders | 41,507 | 35,108 | 114,782 | 86,185 | |||||||||||||
| Share Data: | |||||||||||||||||
| Earnings per Diluted Share | $ | 0.70 | $ | 0.60 | $ | 1.92 | $ | 1.47 | |||||||||
| Average Diluted Shares Outstanding | 59,525 | 58,842 | 59,645 | 58,703 | |||||||||||||
| Average Basic Shares Outstanding | 58,608 | 58,472 | 58,710 | 58,462 | |||||||||||||
Supplemental Data: | |||||||||||||||||
| Cost of Sales | $ | 373,171 | $ | 365,482 | $ | 1,087,221 | $ | 1,117,028 | |||||||||
| Selling, General & Administrative | 124,664 | 129,775 | 375,135 | 395,482 | |||||||||||||
| Depreciation and Amortization ** | 14,751 | 14,025 | 44,596 | 43,857 | |||||||||||||
| Stock-Based Compensation Expense | 3,306 | 2,266 | 9,650 | 6,702 | |||||||||||||
| * 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) | ||||||||||
| September 30, | December 31, | |||||||||
| 2010 | 2009 | |||||||||
| ASSETS | ||||||||||
| Current Assets | ||||||||||
| Cash and Cash Equivalents | $ | 315,564 | $ | 372,714 | ||||||
| Accounts Receivable, net | 330,681 | 282,463 | ||||||||
| Current Insurance Receivable - Asbestos | 35,300 | 35,300 | ||||||||
| Inventories, net | 315,291 | 284,552 | ||||||||
| Other Current Assets | 74,076 | 71,317 | ||||||||
| Total Current Assets | 1,070,912 | 1,046,346 | ||||||||
| Property, Plant and Equipment, net | 273,487 | 285,224 | ||||||||
| Long-Term Insurance Receivable - Asbestos | 187,420 | 213,004 | ||||||||
| Other Assets | 385,506 | 406,346 | ||||||||
| Goodwill | 778,180 | 761,978 | ||||||||
| Total Assets | $ | 2,695,505 | $ | 2,712,898 | ||||||
| LIABILITIES AND EQUITY | ||||||||||
| Current Liabilities | ||||||||||
| Notes Payable and Current Maturities of Long-Term Debt | $ | 1,424 | $ | 1,078 | ||||||
| Accounts Payable | 155,286 | 142,390 | ||||||||
| Current Asbestos Liability | 100,300 | 100,300 | ||||||||
| Accrued Liabilities | 224,066 | 218,864 | ||||||||
| Income Taxes | 4,365 | 4,150 | ||||||||
| Total Current Liabilities | 485,441 | 466,782 | ||||||||
| Long-Term Debt | 398,691 | 398,557 | ||||||||
| Long-Term Deferred Tax Liability | 38,521 | 29,578 | ||||||||
| Long-Term Asbestos Liability | 651,476 | 720,713 | ||||||||
| Other Liabilities | 162,240 | 203,566 | ||||||||
| Total Equity | 959,136 | 893,702 | ||||||||
| Total Liabilities and Equity | $ | 2,695,505 | $ | 2,712,898 | ||||||
| CRANE CO. | |||||||||||||||||||
| Condensed Statements of Cash Flows | |||||||||||||||||||
| (in thousands) | |||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| September 30 | September 30 | ||||||||||||||||||
| 2010 | 2009 | 2010 | 2009 | ||||||||||||||||
| Operating Activities: | |||||||||||||||||||
| Net income attributable to common shareholders | $ | 41,507 | $ | 35,108 | $ | 114,782 | $ | 86,185 | |||||||||||
| Noncontrolling interest in subsidiaries' earnings | 96 | 45 | 168 | 202 | |||||||||||||||
| Net income before allocations to noncontrolling interests | 41,603 | 35,153 | 114,950 | 86,387 | |||||||||||||||
| Gain on divestiture | (1,015 | ) | - | (1,015 | ) | - | |||||||||||||
| Depreciation and amortization | 14,751 | 14,025 | 44,596 | 43,857 | |||||||||||||||
| Stock-based compensation expense | 3,306 | 2,266 | 9,650 | 6,702 | |||||||||||||||
| Deferred income taxes | 17,693 | 12,107 | 30,913 | 14,891 | |||||||||||||||
| Cash (used for) provided by operating working capital | (35,721 | ) | 33,659 | (56,367 | ) | 13,037 | |||||||||||||
| Other | (29,051 | ) | * | 5,029 | (39,772 | ) | * | (4,361 | ) | ||||||||||
| Subtotal | 11,566 | 102,239 | 102,955 | 160,513 | |||||||||||||||
| Asbestos related payments, net of insurance recoveries | (16,167 | ) | (22,253 | ) | (43,652 | ) | (34,788 | ) | ** | ||||||||||
| Total (used for) provided by operating activities | (4,601 | ) | 79,986 | 59,303 | 125,725 | ||||||||||||||
| Investing Activities: | |||||||||||||||||||
| Capital expenditures | (5,199 | ) | (3,827 | ) | (13,589 | ) | (21,259 | ) | |||||||||||
| Proceeds from disposition of capital assets | 143 | 1,001 | 185 | 3,326 | |||||||||||||||
| Proceeds from divestitures | 4,615 | - | 4,615 | - | |||||||||||||||
| Payment for acquisition - net of cash acquired | - | - | (51,167 | ) | - | ||||||||||||||
| Total used for investing activities | (441 | ) | (2,826 | ) | (59,956 | ) | (17,933 | ) | |||||||||||
| Financing Activities: | |||||||||||||||||||
| Dividends paid | (13,453 | ) | (11,695 | ) | (37,011 | ) | (35,079 | ) | |||||||||||
| Reacquisition of shares on open market | (19,999 | ) | - | (29,989 | ) | - | |||||||||||||
| Stock options exercised - net of shares reacquired | 3,962 | (546 | ) | 16,351 | (299 | ) | |||||||||||||
| Excess tax benefit from stock-based compensation | 851 | 131 | 1,820 | 131 | |||||||||||||||
| Change in short-term debt | 834 | (960 | ) | (2,299 | ) | (16,365 | ) | ||||||||||||
| Total used for financing activities | (27,805 | ) | (13,070 | ) | (51,128 | ) | (51,612 | ) | |||||||||||
| Effect of exchange rate on cash and cash equivalents | 12,882 | 7,824 | (5,369 | ) | 16,868 | ||||||||||||||
| Increase (decrease) in cash and cash equivalents | (19,965 | ) | 71,914 | (57,150 | ) | 73,048 | |||||||||||||
| Cash and cash equivalents at beginning of period | 335,529 | 232,974 | 372,714 | 231,840 | |||||||||||||||
| Cash and cash equivalents at end of period | $ | 315,564 | $ | 304,888 | $ | 315,564 | $ | 304,888 | |||||||||||
| * Includes a $25 million discretionary pension contribution. | |||||||||||||||||||
| ** Includes a $14.5 million insurance settlement receipt from the Highlands Insurance Company. | |||||||||||||||||||
| CRANE CO. | |||||||||||||||||||||
| Order Backlog | |||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||
| September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||||||||
| 2010 | 2010 | 2010 | 2009 | 2009 | |||||||||||||||||
| Aerospace & Electronics | $ | 401,585 | * | $ | 394,554 | * | $ | 388,169 | * | $ | 351,004 | $ | 369,898 | ** | |||||||
| Engineered Materials | 11,367 | 12,496 | 14,810 | 12,070 | 8,454 | ||||||||||||||||
| Merchandising Systems | 18,044 | 20,346 | 21,947 | 23,522 | 23,574 | ||||||||||||||||
| Fluid Handling | 266,578 | 257,840 | 253,946 | 249,901 | 252,333 | ||||||||||||||||
| Controls | 27,575 | 28,711 | 26,910 | 27,958 | 27,292 | ||||||||||||||||
| Total Backlog | $ | 725,149 | $ | 713,947 | $ | 705,782 | $ | 664,455 | $ | 681,551 | |||||||||||
| * Includes Order Backlog of $24.5 million in September 2010, $26.5 million in June 2010 and $22.4 million in March 2010 pertaining to the 2010 acquisition of Merrimac. | |||||||||||||||||||||
| ** Includes Order Backlog of $15.0 million in September 2009 pertaining to the General Technology Corporation which was divested in December 2009. | |||||||||||||||||||||
| CRANE CO. | |||||||||||||||||||||||||
| Non-GAAP Financial Measures | |||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | Percent Change | Percent Change | ||||||||||||||||||||||
| September 30, | September 30, | September 30, 2010 | September 30, 2010 | ||||||||||||||||||||||
| 2010 | 2009 | 2010 | 2009 | Three Months | Nine Months | ||||||||||||||||||||
INCOME ITEMS | |||||||||||||||||||||||||
| Net Sales | $ | 560,714 | $ | 550,710 | $ | 1,643,819 | $ | 1,651,339 | 1.8 | % | -0.5 | % | |||||||||||||
| Operating Profit | 62,879 | 55,453 | 181,463 | 138,829 | 13.4 | % | 30.7 | % | |||||||||||||||||
| Percentage of Sales | 11.2 | % | 10.1 | % | 11.0 | % | 8.4 | % | |||||||||||||||||
Special Items impacting Operating Profit: | |||||||||||||||||||||||||
| Lawsuit Settlement - Pre-Tax (a) | - | - | - | 7,250 | |||||||||||||||||||||
| Restructuring Charges (Gains)- Pre-Tax (b) | (415 | ) | 513 | (1,165 | ) | 2,360 | |||||||||||||||||||
| Operating Profit before Special Items | $ | 62,464 | $ | 55,966 | $ | 180,298 | $ | 148,439 | 11.6 | % | 21.5 | % | |||||||||||||
| Percentage of Sales | 11.1 | % | 10.2 | % | 11.0 | % | 9.0 | % | |||||||||||||||||
| Net Income Attributable to Common Shareholders | $ | 41,507 | $ | 35,108 | $ | 114,782 | $ | 86,185 | |||||||||||||||||
| Per Share | $ | 0.70 | $ | 0.60 | $ | 1.92 | $ | 1.47 | 16.9 | % | 31.1 | % | |||||||||||||
Special Items impacting Net Income Attributable to Common Shareholders: | |||||||||||||||||||||||||
| Lawsuit Settlement - Net of Tax (a) | - | - | - | 4,713 | |||||||||||||||||||||
| Per Share | $ | 0.08 | |||||||||||||||||||||||
| Restructuring Charges (Gains) - Net of Tax (b) | (348 | ) | 345 | (823 | ) | 1,787 | |||||||||||||||||||
| Per Share | $ | (0.01 | ) | $ | 0.01 | $ | (0.01 | ) | $ | 0.03 | |||||||||||||||
| Net Income Attributable To Common Shareholders Before Special Items | $ | 41,159 | $ | 35,453 | $ | 113,959 | $ | 92,685 | 16.1 | % | 23.0 | % | |||||||||||||
| Per Share | $ | 0.69 | $ | 0.60 | $ | 1.91 | $ | 1.58 | 14.8 | % | 21.0 | % | |||||||||||||
| (a) During the nine months ended September 30, 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. | |||||||||||||||||||||||||
| (b) Amounts represent restructuring charges (gains) in connection with the Restructuring Program. | |||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||||
| 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||||||
CASH FLOW ITEMS | |||||||||||||||||||||||||
| Cash Provided from Operating Activities | |||||||||||||||||||||||||
| before Asbestos - Related Payments | $ | 11,566 | $ | 102,239 | $ | 102,955 | $ | 160,513 | |||||||||||||||||
| Asbestos Related Payments, Net of Insurance Recoveries | (16,167 | ) | (22,253 | ) | (43,652 | ) | (34,788 | ) | * | ||||||||||||||||
| Cash Provided from Operating Activities | (4,601 | ) | 79,986 | 59,303 | 125,725 | ||||||||||||||||||||
| Less: Capital Expenditures | (5,199 | ) | (3,827 | ) | (13,589 | ) | (21,259 | ) | |||||||||||||||||
| Free Cash Flow | $ | (9,800 | ) | $ | 76,159 | $ | 45,714 | $ | 104,466 | ||||||||||||||||
| * 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
