Crane Co. Reports First Quarter Results and Raises 2018 EPS Guidance
First Quarter 2018 Highlights:
-
GAAP earnings per diluted share (EPS) of $1.13 compared to $1.05 last
year; excluding Special Items, EPS of $1.31 increased 25% compared to
2017. -
Raising 2018 GAAP EPS guidance to a range of $4.75-$4.95 vs. prior
range of $4.65-$4.85; excluding Special Items, raising 2018 EPS
guidance to a range of $5.45-$5.65 vs. prior range of $5.35-$5.55. -
Revising 2018 free cash flow guidance (cash provided by operating
activities less capital spending) to $240-$270 million vs. prior range
of $220-$250 million.
STAMFORD, Conn.–(BUSINESS WIRE)–Crane Co. (NYSE: CR), a diversified manufacturer of highly engineered
industrial products, reported first quarter 2018 earnings per diluted
share (EPS) of $1.13, compared to $1.05 per diluted share in the first
quarter of 2017. Excluding Special Items, first quarter 2018 EPS
increased 25% to $1.31. (Please see the attached Non-GAAP Financial
Measures tables.)
First quarter sales were a record $799 million, an increase of 19%
compared to $673 million in the first quarter of 2017. The sales
increase was comprised of a $103 million, or 15%, benefit from
acquisitions, and a $28 million, or 4%, benefit from favorable foreign
exchange, partially offset by a core sales decline of $5 million, or 1%.
Operating profit in the first quarter was $94 million, up slightly
compared to $93 million in the first quarter of 2017. Excluding Special
Items, operating profit in the first quarter was $112 million, an
increase of 16% compared to $97 million in the first quarter of 2017.
(Please see the attached Non-GAAP Financial Measures tables.)
The effective tax rate in the first quarter was 18.6%, down from 28.1%
in the first quarter of 2017. Excluding Special Items, the effective tax
rate in the first quarter was 18.9%. The lower tax rate in the first
quarter of 2018 was a result of the 2017 Tax Cuts and Jobs Act.
Max Mitchell, Crane Co. President and Chief Executive Officer commented:
"On the heels of record results last year, we are off to a solid start
in 2018. At Fluid Handling, end markets continue to gradually improve,
and we are executing well and gaining market share. Core margins
improved at Payment & Merchandising Technologies, and sales were in-line
with our expectations on challenging comparisons. Aerospace &
Electronics also started the year strong, with growth across the segment
driving good operating leverage. Overall, we are tracking modestly ahead
of the midpoint of our previously issued guidance, and we continue to
pursue opportunities that could provide further upside."
Mr. Mitchell continued, "beyond the core business, our repositioning
activities and the Crane Currency acquisition integration are
progressing as expected, and we are making good progress on our growth
initiatives. We are pleased with our results year-to-date and we remain
excited about our multi-year earnings growth outlook, although our
optimism is tempered somewhat by heightened uncertainty related to the
global trade environment. Balancing these factors, we are raising our
2018 EPS guidance, excluding Special Items, to $5.45-$5.65, from our
prior range of $5.35-$5.55." (Please see the attached Non-GAAP Financial
Measures tables.)
Cash Flow and Other Financial Metrics
Cash provided by operating activities in the first quarter of 2018 was
$74 million, compared to $4 million in the first quarter of 2017. Free
cash flow (cash provided by operating activities less capital spending)
was $47 million in the first quarter of 2018, compared to a use of ($6)
million in the first quarter of 2017. (Please see the attached Non-GAAP
Financial Measures tables.)
The Company's cash position was $642 million at March 31, 2018, compared
to $706 million at December 31, 2017. Total debt was $1,411 million at
March 31, 2018, compared to $743 million at December 31, 2017. The
increase in total debt reflects the financing associated with the
January 10, 2018 acquisition of Crane Currency.
Segment Results
All comparisons detailed in this section refer to operating results for
the first quarter 2018 versus the first quarter 2017.
Fluid Handling
| First Quarter | Change | |||||||
| (dollars in millions) | 2018 | 2017 | ||||||
| Sales | $ | 267 | $ | 240 | $ | 27 | 11 | % |
| Operating Profit | $ | 28 | $ | 24 | $ | 4 | 15 | % |
| Operating Profit, before Special Items* | $ | 32 | $ | 27 | $ | 5 | 19 | % |
| Profit Margin | 10.5 | % | 10.2 | % | ||||
| Profit Margin, before Special Items* | 12.1 | % | 11.3 | % | ||||
| *Please see the attached Non-GAAP Financial Measures tables | ||||||||
Sales increased $27 million, driven by $14 million, or 6%, of favorable
foreign exchange, $7 million, or 3%, core growth, and a $6 million, or
2.5%, contribution from acquisitions. Operating margin increased to
10.5%, compared to 10.2% last year, primarily reflecting leverage on
higher volumes and productivity, partially offset by unfavorable mix.
Excluding Special Items, operating margin was 12.1%, compared to 11.3%
last year. Fluid Handling order backlog was $281 million at March 31,
2018, $262 million at December 31, 2017, and $250 million at March 31,
2017.
Payment & Merchandising Technologies
| First Quarter | Change | ||||||||
| (dollars in millions) | 2018 | 2017 | |||||||
| Sales | $ | 292 | $ | 196 | $ | 97 | 50 | % | |
| Operating Profit | $ | 37 | $ | 38 | $ | (2 | ) | (5 | %) |
| Operating Profit, before Special Items* | $ | 49 | $ | 39 | $ | 10 | 26 | % | |
| Profit Margin | 12.5 | % | 19.6 | % | |||||
| Profit Margin, before Special Items* | 16.8 | % | 20.0 | % | |||||
| *Please see the attached Non-GAAP Financial Measures tables | |||||||||
Sales increased $97 million, or 50%, driven by sales from acquisitions,
with $13 million of favorable foreign exchange offsetting a $13 million
decline in core sales. The decline in core sales was primarily a result
of extraordinarily challenging comparisons to the prior year, with core
sales up 18% in the first quarter of 2017. Operating margin declined to
12.5%, from 19.6% last year, reflecting the impact of the Crane Currency
acquisition, restructuring and integration related charges, and the
impact of lower volumes. Excluding Special Items, operating margins of
16.8% declined from 20.0% last year.
Aerospace & Electronics
| First Quarter | Change | |||||||
| (dollars in millions) | 2018 | 2017 | ||||||
| Sales | $ | 170 | $ | 163 | $ | 7 | 4 | % |
| Operating Profit | $ | 34 | $ | 32 | $ | 2 | 8 | % |
| Operating Profit, before Special Items* | $ | 35 | $ | 32 | $ | 3 | 8 | % |
| Profit Margin | 20.1 | % | 19.4 | % | ||||
| Profit Margin, before Special Items* | 20.3 | % | 19.6 | % | ||||
| *Please see the attached Non-GAAP Financial Measures tables | ||||||||
Sales increased $7 million, or 4%, primarily driven by $7 million of
higher core sales with a slight benefit from favorable foreign exchange.
Operating margin increased to 20.1%, from 19.4% last year, primarily as
a result of higher volumes and productivity. Excluding Special Items,
operating margin increased 70 basis points to 20.3%. Aerospace &
Electronics order backlog was $381 million at March 31, 2018, $374
million at December 31, 2017, and $352 million at March 31, 2017.
Engineered Materials
| First Quarter | Change | ||||||||
| (dollars in millions) | 2018 | 2017 | |||||||
| Sales | $ | 70 | $ | 75 | $ | (5 | ) | (7 | %) |
| Operating Profit | $ | 12 | $ | 14 | $ | (2 | ) | (11 | %) |
| Profit Margin | 17.8 | % | 18.7 | % | |||||
Sales decreased $5 million, or 7%, driven primarily by lower sales to
the Recreational Vehicle market. Operating margin declined 90 basis
points to 17.8%, primarily reflecting lower volumes, partially offset by
strong productivity.
Raising 2018 Guidance
We are raising our 2018 full year GAAP EPS guidance to a range of
$4.75-$4.95, compared to the prior range of $4.65-$4.85. We now expect
2018 full year EPS, excluding Special Items, of $5.45-$5.65, compared to
the prior range of $5.35-$5.55. Full year 2018 free cash flow (cash
provided by operating activities less capital spending) is now expected
to be in a range of $240-$270 million, compared to the prior range of
$220-$250 million. (Please see the attached Non-GAAP Financial Measures
tables.)
Additional Information
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, 2018 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, banknote design and production,
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 12,000 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, 2017 and subsequent reports filed with
the Securities and Exchange Commission.
(Financial Tables Follow)
| CRANE CO. | ||||
| Income Statement Data | ||||
|
(in millions, except per share data) |
||||
| Three Months Ended | ||||
| March 31, | ||||
| 2018 | 2017 | |||
| Net sales: | ||||
| Fluid Handling | $ | 266.6 | $ | 239.6 |
| Payment & Merchandising Technologies | 292.4 | 195.5 | ||
| Aerospace & Electronics | 170.4 | 163.4 | ||
| Engineered Materials | 69.7 | 74.9 | ||
| Total net sales | $ | 799.1 | $ | 673.4 |
| Operating profit (loss): | ||||
| Fluid Handling | $ | 28.1 | $ | 24.4 |
| Payment & Merchandising Technologies | 36.5 | 38.4 | ||
| Aerospace & Electronics | 34.2 | 31.7 | ||
| Engineered Materials | 12.4 | 14.0 | ||
| Corporate | (16.9 | ) | (15.2 | ) |
| Total operating profit | 94.3 | 93.3 | ||
| Interest income | 0.8 | 0.5 | ||
| Interest expense | (14.6 | ) | (9.0 | ) |
| Miscellaneous income | 3.9 | 3.1 | ||
| Income before income taxes | 84.4 | 87.9 | ||
| Provision for income taxes | 15.7 | 24.6 | ||
| Net income before allocation to noncontrolling interests | 68.7 | 63.3 | ||
| Less: Noncontrolling interest in subsidiaries' earnings | — | 0.2 | ||
| Net income attributable to common shareholders | $ | 68.7 | $ | 63.1 |
| Share Data: | ||||
| Earnings per diluted share | $ | 1.13 | $ | 1.05 |
| Average diluted shares outstanding | 61.0 | 60.3 | ||
| Average basic shares outstanding | 59.7 | 59.3 | ||
|
Supplemental Data: |
||||
| Cost of sales | $ | 521.2 | $ | 429.5 |
| Selling, general & administrative | 177.6 | 150.6 | ||
| Acquisition related charges | 5.2 | — | ||
| Repositioning charges | 0.8 | — | ||
| Depreciation and amortization * | 27.9 | 17.4 | ||
| Stock-based compensation expense * | 5.6 | 5.6 | ||
|
*Amount included within Cost of sales and Selling, general & administrative costs. |
||||
| CRANE CO. | ||||
| Condensed Balance Sheets | ||||
|
(in millions) |
||||
|
March 31,
2018 |
December 31,
2017 |
|||
| ASSETS | ||||
| Current assets | ||||
| Cash and cash equivalents | $ | 642.3 | $ | 706.2 |
| Accounts receivable, net | 493.5 | 418.4 | ||
| Current insurance receivable – asbestos | 25.0 | 25.0 | ||
| Inventories, net | 406.5 | 349.3 | ||
| Other current assets | 69.6 | 19.6 | ||
| Total current assets | 1,636.9 | 1,518.5 | ||
| Property, plant and equipment, net | 600.8 | 282.4 | ||
| Long-term insurance receivable – asbestos | 83.3 | 90.1 | ||
| Other assets | 726.6 | 495.6 | ||
| Goodwill | 1,442.9 | 1,206.9 | ||
| Total assets | $ | 4,490.5 | $ | 3,593.5 |
| LIABILITIES AND EQUITY | ||||
| Current liabilities | ||||
| Short-term borrowings and current maturities of long-term debt | $ | 272.7 | $ | 249.4 |
| Accounts payable | 252.4 | 247.4 | ||
| Current asbestos liability | 85.0 | 85.0 | ||
| Accrued liabilities | 300.5 | 252.1 | ||
| Income taxes | 1.4 | 3.6 | ||
| Total current liabilities | 912.0 | 837.5 | ||
| Long-term debt | 1,138.5 | 494.1 | ||
| Long-term deferred tax liability | 100.8 | 44.9 | ||
| Long-term asbestos liability | 510.6 | 520.3 | ||
| Other liabilities | 380.5 | 348.2 | ||
| Total equity | 1,448.1 | 1,348.5 | ||
| Total liabilities and equity | $ | 4,490.5 | $ | 3,593.5 |
| CRANE CO. | ||||
| Condensed Statements of Cash Flows | ||||
|
(in millions) |
||||
|
Three Months Ended
March 31, |
||||
| 2018 | 2017 | |||
| Operating activities: | ||||
| Net income attributable to common shareholders | $ | 68.7 | $ | 63.1 |
| Noncontrolling interest in subsidiaries' earnings | — | (0.2 | ) | |
| Net income before allocations to noncontrolling interests | 68.7 | 63.3 | ||
| Depreciation and amortization | 27.9 | 17.4 | ||
| Stock-based compensation expense | 5.6 | 5.6 | ||
| Defined benefit plans and postretirement credit | (3.9 | ) | (2.1 | ) |
| Deferred income taxes | 12.7 | (0.1 | ) | |
| Cash used for operating working capital | (18.6 | ) | (62.8 | ) |
| Defined benefit plans and postretirement contributions | (4.5 | ) | (2.1 | ) |
| Environmental payments, net of reimbursements | (2.3 | ) | (2.0 | ) |
| Other | (8.5 | ) | 1.0 | |
| Subtotal | 77.1 | 18.2 | ||
| Asbestos related payments, net of insurance recoveries | (2.9 | ) | (14.7 | ) |
| Total provided by operating activities | 74.2 | 3.5 | ||
| Investing activities: | ||||
| Capital expenditures | (27.5 | ) | (9.6 | ) |
| Proceeds from disposition of capital assets | 0.3 | — | ||
| Payment for acquisition, net of cash acquired | (672.3 | ) | — | |
| Total used for investing activities | (699.5 | ) | (9.6 | ) |
| Financing activities: | ||||
| Dividends paid | (20.9 | ) | (19.6 | ) |
| Stock options exercised – net of shares reacquired | 4.5 | 12.8 | ||
| Proceeds received from issuance of commercial paper | 272.7 | — | ||
| Proceeds received from issuance of long-term debt | 550.0 | — | ||
| Proceeds received from issuance of short-term debt | 100.0 | — | ||
| Repayment of long-term debt | (250.0 | ) | — | |
| Repayment of short-term debt | (100.0 | ) | — | |
| Debt issuance costs | (5.4 | ) | — | |
| Total provided by (used for) financing activities | 550.9 | (6.8 | ) | |
| Effect of exchange rate on cash and cash equivalents | 10.5 | 8.0 | ||
| Decrease in cash and cash equivalents | (63.9 | ) | (4.9 | ) |
| Cash and cash equivalents at beginning of period | 706.2 | 509.7 | ||
| Cash and cash equivalents at end of period | $ | 642.3 | $ | 504.8 |
| CRANE CO. | ||||||||||||||
| Order Backlog | ||||||||||||||
|
(in millions) |
||||||||||||||
|
March 31,
2018 |
December 31,
2017 |
September 30, 2017 |
June 30, 2017 |
March 31, |
||||||||||
| Fluid Handling | $ | 281.2 | * | $ | 262.1 | * | $ | 268.8 | * | $ | 258.9 | * | $ | 249.8 |
| Payment & Merchandising Technologies | 301.0 | ** | 76.4 | ** | 87.6 | ** | 87.0 | ** | 85.8 | |||||
| Aerospace & Electronics | 381.2 | 373.6 | 348.4 | 328.2 | 352.4 | |||||||||
| Engineered Materials | 13.4 | 13.6 | 13.9 | 14.9 | 17.8 | |||||||||
| Total Backlog | $ | 976.8 | $ | 725.7 | $ | 718.7 | $ | 689.0 | $ | 705.8 | ||||
|
* Includes $4.2 million, $3.4 million, $3.5 million and $4.1 million as of each of March 31, 2018, December 31, 2017, September 30, 2017 and June 30, 2017, respectively, of backlog pertaining to the Westlock business acquired in April 2017. |
|
** Includes $211.2 million as of March 31, 2018 of backlog pertaining to the Crane Currency business acquired in January 2018 and $0.2 million, $0.2 million, $0.2 million and $0.3 million as of March 31, 2018, December 31, 2017, September 30, 2017 and June 30, 2017, respectively, of backlog pertaining to the Microtronic business acquired in June 2017. |
| CRANE CO. | ||||||
| Non-GAAP Financial Measures | ||||||
|
(in millions, except per share data) |
||||||
|
Three Months Ended March 31, |
Percent |
|||||
| 2018 | 2017 |
Three |
||||
|
INCOME ITEMS |
||||||
| Net sales | $ | 799.1 | $ | 673.4 | 18.7 | % |
| Operating profit | 94.3 | 93.3 | 1.0 | % | ||
| Percentage of sales | 11.8 | % | 13.9 | % | ||
|
Special items impacting operating profit: |
||||||
| Inventory step-up and backlog amortization | 6.6 | — | ||||
| Acquisition related charges | 5.2 | — | ||||
| Repositioning charges | 0.8 | — | ||||
| Impact from change in accounting principle* | 5.2 | 3.3 | ||||
| Operating profit before special items | $ | 112.1 | $ | 96.6 | 16.0 | % |
| Percentage of sales | 14.0 | % | 14.3 | % | ||
| Net income attributable to common shareholders | $ | 68.7 | $ | 63.1 | ||
| Per share | $ | 1.13 | $ | 1.05 | 7.7 | % |
|
Special items impacting net income |
||||||
| Inventory step-up and backlog amortization – net of tax | 5.1 | — | ||||
| Per share | $ | 0.08 | ||||
| Acquisition related charges – net of tax | 4.0 | — | ||||
| Per share | $ | 0.06 | ||||
| Repositioning charges – net of tax | 0.6 | — | ||||
| Per share | $ | 0.01 | ||||
| Incremental financing costs associated with acquisition – net of tax | 1.4 | — | ||||
| Per share | $ | 0.02 | ||||
| Impact of tax law change | 0.3 | — | ||||
| Per share | $ | 0.00 | ||||
| Net income attributable to common shareholders before special items | $ | 80.1 | $ | 63.1 | ||
| Per diluted share | $ | 1.31 | $ | 1.05 | 25.5 | % |
|
Special items impacting provision for income |
||||||
| Provision for income taxes – GAAP Basis | $ | 15.7 | $ | 24.6 | ||
| Tax effect of inventory step-up and backlog amortization | 1.5 | — | ||||
| Tax effect of acquisition related charges | 1.2 | — | ||||
| Tax effect of repositioning charges | 0.2 | — | ||||
| Tax effect of incremental financing costs associated with acquisition | 0.4 | — | ||||
| Impact of tax law change | (0.3 | ) | — | |||
| Provision for income taxes – non-GAAP basis | $ | 18.7 | $ | 24.6 | ||
|
Segment Information: |
For the three months ended March 31, 2018 | |||||||||
|
Fluid |
Payment & |
Aerospace |
Engineered |
Corporate |
Total |
|||||
| Net sales | $ | 266.6 | $ | 292.4 | $ | 170.4 | $ | 69.7 | $ | 799.1 |
| Operating profit – GAAP | 28.1 | 36.5 | 34.2 | 12.4 | (16.9 | ) | 94.3 | |||
| Inventory step-up and backlog amortization | 0.2 | 6.4 | 6.6 | |||||||
| Acquisition related charges | 5.2 | 5.2 | ||||||||
| Repositioning charges, net of gain on property sale | 0.4 | 0.2 | 0.2 | 0.8 | ||||||
| Impact from change in accounting principle* | 3.6 | 0.7 | 0.2 | 0.7 | 5.2 | |||||
| Operating profit before special Items | 32.3 | 49.0 | 34.6 | 12.4 | (16.2 | ) | 112.1 | |||
| Percentage of sales | 12.1 | % | 16.8 | % | 20.3 | % | 17.8 | % | 14.0 | % |
|
Segment Information: |
For the three months ended March 31, 2017 | |||||||||
|
Fluid |
Payment & |
Aerospace |
Engineered |
Corporate |
Total |
|||||
| Net sales | $ | 239.6 | $ | 195.5 | $ | 163.4 | $ | 74.9 | $ | 673.4 |
| Operating profit – GAAP | 24.4 | 38.4 | 31.7 | 14.0 | (15.2 | ) | 93.3 | |||
| Impact from change in accounting principle* | 2.7 | 0.6 | 0.3 | (0.3 | ) | 3.3 | ||||
| Operating profit before special items | 27.1 | 39.0 | 32.0 | 14.0 | (15.6 | ) | 96.6 | |||
| Percentage of sales | 11.3 | % | 20.0 | % | 19.6 | % | 18.7 | % | 14.3 | % |
|
* Represents the impact from the change in presentation of net periodic pension and postretirement benefit costs. |
| CRANE CO. | |||||||||
| Guidance | |||||||||
|
(in millions, except per share data) |
|||||||||
| 2018 Full Year Guidance | |||||||||
| 2018 earnings per share guidance | Low | High | |||||||
| Earnings per share – GAAP basis | $ | 4.75 | $ | 4.95 | |||||
| Repositioning costs | 0.15 | 0.15 | |||||||
| Acquisition integration costs | 0.55 | 0.55 | |||||||
| Earnings per share – non-GAAP basis | $ | 5.45 | $ | 5.65 | |||||
|
Three Months |
2018 Full Year |
||||||||
| 2018 | 2017 | Low | High | ||||||
|
Cash provided by operating activities before asbestos-related |
$ | 77.1 | $ | 18.2 | $ | 425.0 | $ | 455.0 | |
| Asbestos-related payments, net of insurance recoveries | (2.9 | ) | (14.7 | ) | (60.0 | ) | (60.0 | ) | |
| Cash provided by operating activities | 74.2 | 3.5 | 365.0 | 395.0 | |||||
| Less: capital expenditures | (27.5 | ) | (9.6 | ) | (125.0 | ) | (125.0 | ) | |
| Free cash flow | $ | 46.7 | $ | (6.1 | ) | $ | 240.0 | $ | 270.0 |
|
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. |
Contacts
Crane Co.
Jason D. Feldman, 203-363-7329
Director, Investor
Relations
www.craneco.com
