Crane Co. (NYSE: CR), a diversified manufacturer of highly engineered industrial products, reported that first quarter 2012 earnings per diluted share increased 8% to $0.88 compared to $0.81 in the first quarter of 2011. First quarter 2011 results include a gain of $4.3 million, or $0.05 per share, related to the sale of a building and the divestiture of a small product line.
First quarter 2012 sales of $658 million increased $47 million, or 8%, compared to the first quarter of 2011, resulting from a core sales increase of $48 million (8%), an increase in sales from acquisitions, net of divestitures, of $4 million (1%), and unfavorable foreign currency translation of $5 million (-1%).
First quarter 2012 operating profit increased 9% to $79.6 million, compared to $72.9 million in the first quarter of 2011, and operating profit margin increased to 12.1%, compared to 11.9% in the first quarter of 2011.
“Record first quarter earnings were driven by our Aerospace & Electronics and Fluid Handling segments, which are benefiting from their exposure to late cycle end markets,” said Crane Co. president and chief executive officer Eric C. Fast. “We have started off 2012 with robust demand in our later, longer cycle businesses, including strong orders and a growing backlog. We are on track to deliver full year EPS in line with our $3.75-$3.95 guidance and free cash flow in the range of $160-$190 million.”
Cash Flow and Financial Position
Cash used for operating activities in the first quarter of 2012 was $42.8 million, compared to cash used for operating activities of $16.2 million in the first quarter of 2011, reflecting an increase in working capital. The Company’s cash position at March 31, 2012 was $196 million, as compared to $245 million at December 31, 2011.
Segment Results
All comparisons detailed in this section refer to the first quarter 2012 versus the first quarter 2011.
| Aerospace & Electronics | |||||||||||||||||||
| First Quarter | Change | ||||||||||||||||||
| (dollars in millions) | 2012 | 2011 | |||||||||||||||||
| Sales | $175.2 | $161.9 | $13.2 | 8% | |||||||||||||||
| Operating Profit | $38.1 | $34.0 | $4.0 | 12% | |||||||||||||||
| Profit Margin | 21.7% | 21.0% | |||||||||||||||||
First quarter 2012 sales increased $13.2 million, or 8%, reflecting a $10.2 million (10%) improvement in Aerospace Group sales and an increase of $3.0 million (5%) in Electronics Group revenue. The Aerospace Group sales increase reflected higher OEM and aftermarket shipments for both commercial and military applications, while Electronics Group sales growth was primarily driven by strength in Power Solutions. Segment operating profit of $38.1 million increased by $4.0 million, or 12%, reflecting strong sales growth and margin improvement in Aerospace.
Aerospace & Electronics order backlog was $438 million at March 31, 2012, as compared to $411 million at December 31, 2011 and $455 million at March 31, 2011.
| Engineered Materials | |||||||||||||||||||
| First Quarter | Change | ||||||||||||||||||
| (dollars in millions) | 2012 | 2011 | |||||||||||||||||
| Sales | $58.2 | $61.8 | ($3.7) | (6%) | |||||||||||||||
| Operating Profit | $8.4 | $10.1 | ($1.7) | (17%) | |||||||||||||||
| Profit Margin | 14.5% | 16.4% | |||||||||||||||||
Segment sales of $58.2 million declined 6% compared to the first quarter of 2011, as a result of lower demand from transportation and recreational vehicle customers, slightly offset by a modest increase in building products sales. Operating profit decreased 17% primarily reflecting the lower sales.
Merchandising Systems
| First Quarter | Change | ||||||||||||||||||
| (dollars in millions) | 2012 | 2011 | |||||||||||||||||
| Sales | $87.7 | $94.9 | ($7.2) | (8%) | |||||||||||||||
| Operating Profit | $4.7 | $4.7 | - | 1% | |||||||||||||||
| Profit Margin | 5.4% | 4.9% | |||||||||||||||||
Merchandising Systems sales of $87.7 million decreased $7.2 million, or 8%, reflecting lower sales in Payment Solutions and, to a lesser extent, Vending. Operating profit of $4.7 million in 2012 includes costs incurred to settle a lawsuit. Solid productivity improvements offset the deleverage impact of the lower sales.
Fluid Handling
| First Quarter | Change | ||||||||||||||||||
| (dollars in millions) | 2012 | 2011 | |||||||||||||||||
| Sales | $301.9 | $264.1 | $37.7 | 14% | |||||||||||||||
| Operating Profit | $39.6 | $35.5 | $4.2 | 12% | |||||||||||||||
| Profit Margin | 13.1% | 13.4% | |||||||||||||||||
First quarter 2012 sales increased $37.7 million, or 14%, which included a core sales increase of $37.4 million (14%), $4.4 million from the acquisition of WTA (2%), and unfavorable foreign currency translation of $4.1 million (-2%). Sales were broadly higher across Fluid Handling end markets. Orders from ChemPharma and Energy customers strengthened markedly on both a year over year and sequential basis. Operating profit increased to $39.6 million while operating margin declined slightly to 13.1%, reflecting throughput inefficiencies in certain European operations. Backlog increased to $338 million at March 31, 2012, compared to $314 million at December 31, 2011 and $305 million at March 31, 2011.
Controls
| First Quarter | Change | ||||||||||||||||||
| (dollars in millions) | 2012 | 2011 | |||||||||||||||||
| Sales | $35.0 | $28.2 | $6.8 | 24% | |||||||||||||||
| Operating Profit | $4.7 | $3.1 | $1.6 | 51% | |||||||||||||||
| Profit Margin | 13.4% | 11.0% | |||||||||||||||||
First quarter 2012 sales of $35.0 million increased 24%, primarily reflecting improvement in industrial, transportation and upstream oil and gas related demand. Operating profit increased 51%, reflecting leverage of the higher sales volume.
Full Year 2012 Guidance
As detailed at our February Investor Day Conference, sales for 2012 are expected to increase approximately 3-5% driven by a core sales increase of 5-6%, incremental sales from the WTA acquisition of less than 1%, partially offset by unfavorable foreign exchange of approximately 2%. 2012 earnings guidance is a range of $3.75 - $3.95 per diluted share, reflecting revenue and profit growth across all segments. The Company’s 2012 free cash flow (cash provided by operating activities less capital spending) guidance of $160 - $190 million includes the effect of asbestos related cash flows.
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 first quarter financial results on Tuesday, April 24, 2012 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 11,000 employees in North America, South America, Europe, Asia and Australia. Crane Co. is traded on the New York Stock Exchange (NYSE:CR). For more information, visit www.craneco.com.
This press release may contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. These statements present management’s expectations, beliefs, plans and objectives regarding future financial performance, and assumptions or judgments concerning such performance. Any discussions contained in this press release, except to the extent that they contain historical facts, are forward-looking and accordingly involve estimates, assumptions, judgments and uncertainties. There are a number of factors that could cause actual results or outcomes to differ materially from those addressed in the forward-looking statements. Such factors are detailed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011 and subsequent reports filed with the Securities and Exchange Commission.
| CRANE CO. | |||||||||
| Income Statement Data | |||||||||
| (in thousands, except per share data) | |||||||||
| Three Months Ended | |||||||||
| March 31, | |||||||||
2012 | 2011 | ||||||||
| Net Sales: | |||||||||
| Aerospace & Electronics | $ | 175,168 | $ | 161,936 | |||||
| Engineered Materials | 58,159 | 61,832 | |||||||
| Merchandising Systems | 87,675 | 94,878 | |||||||
| Fluid Handling | 301,886 | 264,142 | |||||||
| Controls | 34,991 | 28,232 | |||||||
| Total Net Sales | $ | 657,879 | $ | 611,020 | |||||
| Operating Profit (Loss): | |||||||||
| Aerospace & Electronics | $ | 38,069 | $ | 34,042 | |||||
| Engineered Materials | 8,409 | 10,143 | |||||||
| Merchandising Systems | 4,713 | 4,673 | |||||||
| Fluid Handling | 39,640 | 35,453 | |||||||
| Controls | 4,701 | 3,111 | |||||||
| Corporate | (15,972 | ) | (14,562 | ) | |||||
| Total Operating Profit | 79,560 | 72,860 | |||||||
| Interest Income | 395 | 290 | |||||||
| Interest Expense | (6,711 | ) | (6,622 | ) | |||||
| Miscellaneous- Net | (347 | ) | 3,625 | * | |||||
| Income Before Income Taxes | 72,897 | 70,153 | |||||||
| Provision for Income Taxes | 21,101 | 21,775 | |||||||
| Net income before allocations to noncontrolling interests | 51,796 | 48,378 | |||||||
| Less: Noncontrolling interest in subsidiaries' gains (losses) | 134 | (89 | ) | ||||||
| Net income attributable to common shareholders | $ | 51,662 | $ | 48,467 | |||||
| Share Data: | |||||||||
| Earnings per Diluted Share | $ | 0.88 | $ | 0.81 | |||||
| Average Diluted Shares Outstanding | 58,880 | 59,552 | |||||||
| Average Basic Shares Outstanding | 57,889 | 58,330 | |||||||
Supplemental Data: | |||||||||
| Cost of Sales | $ | 437,471 | $ | 397,850 | |||||
| Selling, General & Administrative | 140,848 | 140,310 | |||||||
| Depreciation and Amortization ** | 14,674 | 15,774 | |||||||
| Stock-Based Compensation Expense | 4,007 | 3,503 | |||||||
| * Primarily related to the sale of a building and the divestiture of a small product line in the three months ended March 31, 2011. |
| ** Amount included within cost of sales and selling, general & administrative costs. |
| CRANE CO. | ||||||
| Condensed Balance Sheets | ||||||
| (in thousands) | ||||||
March 31, | December 31, | |||||
| 2012 | 2011 | |||||
| ASSETS | ||||||
| Current Assets | ||||||
| Cash and Cash Equivalents | $ | 195,860 | $ | 245,089 | ||
| Accounts Receivable, net | 404,418 | 349,250 | ||||
| Current Insurance Receivable - Asbestos | 16,345 | 16,345 | ||||
| Inventories, net | 368,495 | 360,689 | ||||
| Other Current Assets | 64,092 | 60,859 | ||||
| Total Current Assets | 1,049,210 | 1,032,232 | ||||
| Property, Plant and Equipment, net | 284,289 | 284,146 | ||||
| Long-Term Insurance Receivable - Asbestos | 204,929 | 208,952 | ||||
| Other Assets | 485,268 | 497,377 | ||||
| Goodwill | 826,717 | 820,824 | ||||
| Total Assets | $ | 2,850,413 | $ | 2,843,531 | ||
| LIABILITIES AND EQUITY | ||||||
| Current Liabilities | ||||||
| Notes Payable and Current Maturities of Long-Term Debt | $ | 794 | $ | 1,112 | ||
| Accounts Payable | 184,319 | 194,158 | ||||
| Current Asbestos Liability | 100,943 | 100,943 | ||||
| Accrued Liabilities | 187,006 | 226,717 | ||||
| Income Taxes | 14,745 | 10,165 | ||||
| Total Current Liabilities | 487,807 | 533,095 | ||||
| Long-Term Debt | 398,958 | 398,914 | ||||
| Long-Term Deferred Tax Liability | 42,664 | 41,668 | ||||
| Long-Term Asbestos Liability | 770,443 | 792,701 | ||||
| Other Liabilities | 254,685 | 255,097 | ||||
| Total Equity | 895,856 | 822,056 | ||||
| Total Liabilities and Equity | $ | 2,850,413 | $ | 2,843,531 | ||
| CRANE CO. | ||||||||
| Condensed Statements of Cash Flows | ||||||||
| (in thousands) | ||||||||
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2012 | 2011 | |||||||
| Operating Activities: | ||||||||
| Net income attributable to common shareholders | $ | 51,662 | $ | 48,467 | ||||
| Noncontrolling interest in subsidiaries' gains (losses) | 134 | (89 | ) | |||||
| Net income before allocations to noncontrolling interests | 51,796 | 48,378 | ||||||
| Gain on divestiture | - | (4,258 | ) | |||||
| Depreciation and amortization | 14,674 | 15,774 | ||||||
| Stock-based compensation expense | 4,007 | 3,503 | ||||||
| Defined benefit plans and postretirement expense | 4,991 | 2,749 | ||||||
| Deferred income taxes | 8,544 | 6,893 | ||||||
| Cash used for operating working capital | (103,503 | ) | (67,250 | ) | ||||
| Defined benefit plans and postretirement contributions | (1,183 | ) | (4,779 | ) | ||||
| Environmental payments, net of reimbursements | (2,579 | ) | (4,593 | ) | ||||
| Other | (1,319 | ) | 142 | |||||
| Subtotal | (24,572 | ) | (3,441 | ) | ||||
| Asbestos related payments, net of insurance recoveries | (18,235 | ) | (12,725 | ) | ||||
| Total used for operating activities | (42,807 | ) | (16,166 | ) | ||||
| Investing Activities: | ||||||||
| Capital expenditures | (7,165 | ) | (8,138 | ) | ||||
| Proceeds from disposition of capital assets | 172 | 4,553 | ||||||
| Proceeds from divestiture | - | 1,000 | ||||||
| Total used for investing activities | (6,993 | ) | (2,585 | ) | ||||
| Financing Activities: | ||||||||
| Dividends paid | (15,090 | ) | (13,474 | ) | ||||
| Reacquisition of shares on open market | - | (29,999 | ) | |||||
| Stock options exercised - net of shares reacquired | 8,426 | 12,552 | ||||||
| Excess tax benefit from stock-based compensation | 2,947 | 3,952 | ||||||
| Change in short-term debt | (318 | ) | (76 | ) | ||||
| Total used for financing activities | (4,035 | ) | (27,045 | ) | ||||
| Effect of exchange rate on cash and cash equivalents | 4,606 | 6,017 | ||||||
| Decrease in cash and cash equivalents | (49,229 | ) | (39,779 | ) | ||||
| Cash and cash equivalents at beginning of period | 245,089 | 272,941 | ||||||
| Cash and cash equivalents at end of period | $ | 195,860 | $ | 233,162 | ||||
| CRANE CO. | |||||||||||||||
| Order Backlog | |||||||||||||||
| (in thousands) | |||||||||||||||
March 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||
| 2012 | 2011 | 2011 | 2011 | 2011 | |||||||||||
| Aerospace & Electronics | $ | 437,822 | $ | 410,794 | $ | 409,284 | $ | 431,799 | $ | 454,559 | |||||
| Engineered Materials | 11,129 | 11,110 | 9,879 | 13,087 | 13,826 | ||||||||||
| Merchandising Systems | 30,033 | 15,212 | 20,929 | 26,898 | 25,008 | ||||||||||
| Fluid Handling | 337,538 | * | 313,715 | * | 328,757 | * | 323,045 | 305,255 | |||||||
| Controls | 29,770 | 27,120 | 32,145 | 30,323 | 24,015 | ||||||||||
| Total Backlog | $ | 846,292 | $ | 777,951 | $ | 800,994 | $ | 825,152 | $ | 822,663 | |||||
| * Includes Order Backlog of $7.5 million at March 31, 2012, $7.1 million at December 31, 2011 and $5.4 million at September 30, 2011 pertaining to the 2011 acquisition of WTA. |
| CRANE CO. | ||||||||
| Non-GAAP Financial Measures | ||||||||
| (in thousands) | ||||||||
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2012 | 2011 | |||||||
CASH FLOW ITEMS | ||||||||
| Cash Used for Operating Activities | ||||||||
| before Asbestos - Related Payments | $ | (24,572 | ) | $ | (3,441 | ) | ||
| Asbestos Related Payments, Net of Insurance Recoveries | (18,235 | ) | (12,725 | ) | ||||
| Cash Used for Operating Activities | (42,807 | ) | (16,166 | ) | ||||
| Less: Capital Expenditures | (7,165 | ) | (8,138 | ) | ||||
| Free Cash Flow | $ | (49,972 | ) | $ | (24,304 | ) | ||
| 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 principle payments on the Company's long-term debt. Non-GAAP financial measures, which may be inconsistent with similarly captioned measures presented by other companies, should be viewed in addition to, and not as a substitute for, the Company’s reported results prepared in accordance with GAAP. |
| Non-GAAP financial measures, which may be inconsistent with similarly captioned measures presented by other companies, should be viewed in the context of the definitions of the elements of such measures we provide and in addition to, and not as a substitute for, the Company’s reported results prepared in accordance with GAAP. |
Contacts:
Richard E. Koch, 203-363-7352
Director,
Investor Relations and Corporate Communications
www.craneco.com
