Crane Co. Reports Second Quarter Results; Increases Dividend 10%

STAMFORD, Conn.--(BUSINESS WIRE)--

Crane Co. CR, a diversified manufacturer of highly engineered industrial products, reported second quarter 2014 earnings of $1.00 per diluted share, compared to $0.93 per share in the second quarter of 2013. Second quarter 2014 results included Special Items of $9.3 million in after-tax charges, or $0.15 per share. Second quarter 2013 results included Special Items of $7.3 million in after-tax charges, or $0.13 per share. Excluding these Special Items in both years, second quarter 2014 earnings per diluted share increased 9% to $1.15, compared to $1.06 in the second quarter of 2013. (Please see the attached Non-GAAP Financial Measures table for additional details.)

Special Items in the second quarter of 2014 consisted of the following after-tax charges: $2.5 million, or $0.04 per share, related to the December 2013 acquisition of MEI; $1.4 million, or $0.02 per share, related to previously disclosed repositioning activities; $4.2 million, or $0.07 per share, related to the settlement of the previously disclosed environmental lawsuits by certain homeowners in Roseland, New Jersey; and $1.1 million, or $0.02 per share, related to the divestiture of a small business. Special Items in the second quarter of 2013 included transaction-related costs of $7.3 million, or $0.13 per share, related to the acquisition of MEI.

Second quarter 2014 sales of $750.1 million increased $101.4 million, or 15.6%, compared to $648.7 million in the second quarter of 2013, resulting from a core sales increase of $0.6 million, or 0.1%; sales from acquisitions, net of divestitures, of $93.8 million, or 14.5%; and favorable foreign exchange of $6.9 million, or 1.1%.

Operating profit in the second quarter increased 9.8% to $97.6 million, compared to $88.8 million in the second quarter of 2013. Excluding Special Items, second quarter operating profit increased 14.8% to $109.9 million, compared to $95.7 million in the second quarter of 2013. (Please see the attached Non-GAAP Financial Measures table.)

“We are pleased to report second quarter EPS of $1.15, excluding Special Items,” said Crane Co. president and chief executive officer Max Mitchell. “We were encouraged by second quarter order activity and backlog growth, particularly at Fluid Handling, and we continue to expect stronger sales growth in the second half of 2014. We believe that we remain on track to achieve our 2014 objectives, and are reaffirming our previously issued 2014 full year guidance, excluding Special Items. The MEI integration and previously announced repositioning activities are progressing smoothly and position us for solid earnings growth in 2015 and 2016. Reflecting continuing confidence in our long-term outlook, we have increased our dividend for the fifth consecutive year.”

Cash Flow and Other Financial Metrics

Cash provided by operating activities for the second quarter of 2014 was $64.2 million, compared to $30.9 million in the second quarter of 2013. Cash provided by operating activities for the six months ended June 30, 2014 was $45.3 million, compared to $10.5 million in the six months ended June 30, 2013. Capital expenditures in the second quarter of 2014 were $11.3 million, compared to $6.6 million in the second quarter of 2013. The Company's cash position was $314.2 million at June 30, 2014, compared to $270.6 million at December 31, 2013. Total debt was $903.0 million at June 30, 2014, compared to $875.0 million at December 31, 2013.

Divestiture

In June 2014, the Company divested a non-core Fluid Handling business. The $1.6 million pre-tax loss on the sale is included in the “Other income / expense” section of the accompanying income statement. The divested business generated sales of approximately $15 million in 2013.

Segment Results

All comparisons detailed in this section refer to operating results for the second quarter 2014 versus the second quarter 2013, excluding Special Items.

Fluid Handling
				Second Quarter									Change
(dollars in millions)				2014					2013
Sales				$	324.5				$	333.8			($9.3	)			-2.8	%
Operating Profit				$	52.2				$	54.2			($2.0	)			-3.7	%
Operating Profit, before Special Items*				$	52.7				$	54.2			($1.5	)			-2.7	%
Profit Margin					16.1	%				16.2	%
Profit Margin, before Special Items*					16.2	%				16.2	%
*Excludes $0.5 million of repositioning charges in the second quarter of 2014

Second quarter 2014 sales decreased $9.3 million, or -2.8%, which included a core sales decline of $10.8 million, or -3.2%, and a divestiture impact of $2.4 million, or -0.7%, partially offset by favorable foreign exchange of $4.0 million, or 1.2%. The core sales decline was driven primarily by unfavorable comparisons for nuclear project based services, although comparisons ease in the second half of this year. Operating margin was flat at 16.2% as continued productivity gains and lower pension expense offset lower volumes. Fluid Handling order backlog was $369 million at June 30, 2014; after adjusting for the impact of the divestiture, comparable backlog was $345 million at March 31, 2014, $328 million at December 31, 2013 and $346 million at June 30, 2013. The year-over-year and sequential increase in backlog was broad-based across the portfolio.

Payment & Merchandising Technologies
				Second Quarter									Change
(dollars in millions)				2014					2013
Sales				$	184.6				$	84.8			$	99.8			117.6	%
Operating Profit				$	18.6				$	8.9			$	9.8			110.2	%
Operating Profit, before Special Items*				$	21.4				$	8.9			$	12.5			140.8	%
Profit Margin					10.1	%				10.5	%
Profit Margin, before Special Items*					11.6	%				10.5	%
* Excludes $2.7 million of transaction- and integration-related expenses in the second quarter of 2014

Sales of $184.6 million increased $99.8 million, or 117.6%, driven primarily by $96.2 million of sales related to the MEI transaction, core sales growth of $0.9 million, or 1.1%, and favorable foreign exchange of $2.7 million, or 3.1%. Operating profit increased to $21.4 million in the quarter, primarily reflecting the impact of the MEI acquisition.

Aerospace & Electronics
				Second Quarter										Change
(dollars in millions)				2014					2013
Sales				$	177.6				$	172.4				$	5.2				3.0	%
Operating Profit				$	35.9				$	37.0					($1.2	)			-3.1	%
Operating Profit, before Special Items*				$	37.5				$	37.0				$	0.5				1.3	%
Profit Margin					20.2	%				21.5	%
Profit Margin, before Special Items*					21.1	%				21.5	%
* Excludes $1.6 million of repositioning charges in the second quarter of 2014

Second quarter 2014 sales increased $5.2 million, or 3.0%, reflecting a sales increase of $6.1 million, or 5.7%, in the Aerospace Group, and a sales decline of $0.9 million, or -1.3%, in the Electronics Group. The Aerospace Group sales increase primarily reflected stronger OEM sales activity. The decrease in Electronics Group sales was driven primarily by lower product shipments for defense applications. Operating profit increased $0.5 million, which included continuing higher levels of engineering spending and other program investments supporting new product development activities. Aerospace & Electronics order backlog was $397 million at June 30, 2014, compared to $361 million at December 31, 2013, and $403 million at June 30, 2013.

Engineered Materials
				Second Quarter										Change
(dollars in millions)				2014					2013
Sales				$	63.4				$	57.7				$	5.7			9.8	%
Operating Profit				$	9.8				$	9.2				$	0.6			6.5	%
Profit Margin					15.4	%				15.9	%

Sales of $63.4 million were 9.8% higher than the second quarter of 2013, driven by higher sales to recreational vehicle equipment manufacturers. Operating profit increased 6.5% to $9.8 million, primarily reflecting the impact of the higher sales, partially offset by negative product mix.

2014 Guidance Excluding Special Items Reaffirmed

The Company reaffirmed its 2014 guidance, excluding Special Items. Management continues to expect sales to approximate $3.0 billion, reflecting a core sales increase of 1% to 3% and earnings in a range of $4.55 - $4.75 per diluted share, excluding Special Items. Full year 2014 free cash flow (cash provided by operating activities less capital spending) is expected to be in a range of $225 to $250 million. (Please see the attached Non-GAAP Financial Measures table.)

The Company revised its 2014 earnings guidance on a GAAP basis to a range of $4.18-$4.38 per diluted share, from a range of $4.28 - $4.48 per diluted share. The revision is driven solely by the new Special Items recorded in the second quarter; the revised GAAP EPS guidance includes previously disclosed Special Items, as well as a $1.1 million after-tax charge, or $0.02 per share, related to the divestiture, and a $4.2 million after-tax charge, or $0.07 per share, related to a lawsuit settlement.

Additional Information

Please see 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, July 29, 2014 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 11,000 employees in North America, South America, Europe, Asia and Australia.

Crane Co. is traded on the New York Stock Exchange 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, 2013 and subsequent reports filed with the Securities and Exchange Commission.

(Financial Tables Follow)

CRANE CO.
Income Statement Data
(in thousands, except per share data)
						Three Months Ended																			Six Months Ended
						June 30,																			June 30,
							2014									2013										2014								2013
Net Sales:
Fluid Handling						$				324,514					$				333,776						$			635,351					$			646,774
Payment & Merchandising Technologies										184,604									84,831									353,696								174,291
Aerospace & Electronics										177,554									172,392									346,514								337,275
Engineered Materials										63,424									57,747									131,365								117,977
Total Net Sales						$				750,096					$				648,746						$			1,466,926					$			1,276,317
Operating Profit (Loss):
Fluid Handling						$				52,200					$				54,202						$			96,701					$			100,094
Payment & Merchandising Technologies										18,644									8,868									26,091								19,033
Aerospace & Electronics										35,885									37,041									68,442								77,152
Engineered Materials										9,771									9,172									20,564								17,746
Corporate *										(18,920)									(20,437)									(32,832)								(38,279)
Total Operating Profit										97,580									88,846									178,966								175,746
Interest Income										365									519									753								1,151
Interest Expense										(9,764)									(7,245)									(19,573)								(13,963)
Miscellaneous- Net										(1,514)				**					406									(1,718)				**				286
Income Before Income Taxes										86,667									82,526									158,428								163,220
Provision for Income Taxes										26,758									27,112									49,647								49,864
Net income before allocation to noncontrolling interests										59,909									55,414									108,781								113,356
Less: Noncontrolling interest in subsidiaries' earnings										212									540									400								691
Net income attributable to common shareholders						$				59,697					$				54,874						$			108,381					$			112,665
Share Data:
Earnings per Diluted Share						$				1.00					$				0.93						$			1.82					$			1.92
Average Diluted Shares Outstanding										59,843									58,828									59,664								58,594
Average Basic Shares Outstanding										58,883									57,908									58,682								57,684
Supplemental Data:
Cost of Sales						$				487,537					$				426,025						$			945,491					$			835,844
Selling, General & Administrative										159,174									127,022									317,110								254,986
Repositioning Charges (see non-GAAP measures)										2,146									-									8,196								-
Acquisition Related Charges (see non-GAAP measures)										3,659									6,853									17,163								9,741
Depreciation and Amortization ***										18,158									13,014									39,933								25,724
Stock-Based Compensation Expense										4,942									5,007									10,589								10,386

*		Corporate includes $6.5 million for a settlement of a lawsuit recorded in June 2014. Corporate also included acquisition related cost of $0.9 million and $6.9 million for the three months ended June 30, 2014 and 2013, respectively and $2.0 million and $9.7 million for the six months ended June 30, 2014 and 2013, respectively.
**		Includes $1.6 million pre-tax loss on sale of a small business divested in June 2014.
***		Amount included within cost of sales and selling, general & administrative costs.

CRANE CO.
Condensed Balance Sheets
(in thousands)
						June 30,										December 31,
						2014										2013
ASSETS
Current Assets
Cash and Cash Equivalents					$			314,192							$			270,643
Accounts Receivable, net								467,497										437,541
Current Insurance Receivable - Asbestos								22,783										22,783
Inventories, net								401,510										368,886
Other Current Assets								55,111										49,239
Total Current Assets								1,261,093										1,149,092
Property, Plant and Equipment, net								305,681										305,055
Long-Term Insurance Receivable - Asbestos								139,197										148,222
Other Assets								679,468										707,922
Goodwill								1,247,324										1,249,316
Total Assets					$			3,632,763							$			3,559,607
LIABILITIES AND EQUITY
Current Liabilities
Notes Payable and Current Maturities of Long-Term Debt					$			153,806							$			125,826
Accounts Payable								237,549										229,828
Current Asbestos Liability								88,038										88,038
Accrued Liabilities								242,400										223,148
Income Taxes								2,127										2,062
Total Current Liabilities								723,920										668,902
Long-Term Debt								749,192										749,170
Long-Term Deferred Tax Liability								51,683										76,041
Long-Term Asbestos Liability								570,753										610,530
Other Liabilities								211,488										240,291
Total Equity								1,325,727										1,214,673
Total Liabilities and Equity					$			3,632,763							$			3,559,607

CRANE CO.
Condensed Statements of Cash Flows
(in thousands)
						Three Months Ended																Six Months Ended
						June 30,																June 30,
						2014								2013								2014								2013
Operating Activities:
Net income attributable to common shareholders						$		59,697						$		54,874						$		108,381						$		112,665
Noncontrolling interest in subsidiaries' earnings								212								540								400								691
Net income before allocations to noncontrolling interests								59,909								55,414								108,781								113,356
Restructuring - Non Cash								588								-								954								-
Depreciation and amortization								18,158								13,014								39,933								25,724
Stock-based compensation expense								4,942								5,007								10,589								10,386
Defined benefit plans and postretirement expense								(2,942	)							1,416								(5,850	)							2,359
Deferred income taxes								5,904								1,447								10,642								9,647
Cash provided by (used for) operating working capital								14,896								(15,884	)							(54,426	)							(114,418	)
Defined benefit plans and postretirement contributions								(8,257	)							(7,705	)							(13,018	)							(10,521	)
Environmental payments, net of reimbursements								(1,987	)							(1,970	)							(4,670	)							(5,475	)
Other								(9,200	)							(1,344	)							(16,909	)							8,427
Subtotal								82,011								49,395								76,026								39,485
Asbestos related payments, net of insurance recoveries								(17,827	)							(18,447	)							(30,752	)							(28,940	)
Total provided by operating activities								64,184								30,948								45,274								10,545
Investing Activities:
Capital expenditures								(11,297	)							(6,566	)							(20,690	)							(12,039	)
Proceeds from disposition of capital assets								834								91								1,065								287
Proceeds from divestiture								2,081								-								2,081								-
Proceeds from acquisition								6,100								-								6,100								-
Total used for investing activities								(2,282	)							(6,475	)							(11,444	)							(11,752	)
Financing Activities:
Dividends paid								(17,677	)							(16,194	)							(35,293	)							(32,338	)
Stock options exercised - net of shares reacquired								4,095								9,653								7,847								20,042
Excess tax benefit from stock-based compensation								2,320								1,994								7,465								4,922
Change in short-term debt								10,000								12,905								28,000								12,905
Total provided by (used for) financing activities								(1,262	)							8,358								8,019								5,531
Effect of exchange rate on cash and cash equivalents								3,278								3,448								1,700								(7,353	)
Increase (decrease) in cash and cash equivalents								63,918								36,279								43,549								(3,029	)
Cash and cash equivalents at beginning of period								250,274								384,639								270,643								423,947
Cash and cash equivalents at end of period						$		314,192						$		420,918						$		314,192						$		420,918

CRANE CO.
Order Backlog
(in thousands)
						June 30,								March 31,								December 31,								September 30,								June 30,
						2014								2014								2013								2013								2013
Fluid Handling *						$			369,483					$			350,720					$			333,860					$			355,192					$			349,545
Payment & Merchandising Technologies **									69,857								58,787								51,888								23,901								25,641
Aerospace & Electronics									396,835								397,541								361,323								381,830								403,400
Engineered Materials									17,017								16,624								14,661								12,572								14,122
Total Backlog						$			853,192					$			823,672					$			761,732					$			773,495					$			792,708

*		Includes Order Backlog of $5.4 million at March 31, 2014, $5.5 million at December 31, 2013, $4.1 million at September 30, 2013 and $4.0 million at June 30, 2013 pertaining to a business divested in June 2014.
**		Includes $39.3 million, $37.0 million and $31.9 million of Order Backlog as of June 30, 2014, March 31, 2014 and December 31, 2013, respectively, pertaining to the MEI/Conlux business acquired in December 2013.

CRANE CO.
Non-GAAP Financial Measures
(in thousands)
	INCOME ITEMS								Three Months Ended													Six Months Ended																				Percent Change							Percent Change
									June 30,																June 30,																	June 30, 2014							June 30, 2014
									2014								2013								2014								2013									Three Months							Six Months
Net Sales									$			750,096					$			648,746					$			1,466,926					$			1,276,317						15.6	%						14.9	%
Operating Profit												97,580								88,846								178,966								175,746						9.8	%						1.8	%
Percentage of Sales												13.0	%							13.7	%							12.2	%							13.8	%
Special Items impacting Operating Profit:
Acquisition transaction costs (a)												-								6,853								-								9,741
Acquisition related inventory and backlog amortization (b)												-								-								4,790								-
Acquistion related integration costs (c)												2,030								-								6,755								-
Acquistion related restructuring costs (d)												1,629								-								5,617								-
Repositioning charges (e)												2,146								-								8,196								-
Lawsuit settlement charge (f)												6,500								-								6,500								-
Operating Profit before Special Items									$			109,885					$			95,699					$			210,824					$			185,487						14.8	%						13.7	%
Percentage of Sales												14.6	%							14.8	%							14.4	%							14.5	%
Net Income Attributable to Common Shareholders									$			59,697					$			54,874					$			108,381					$			112,665
Per Share									$			1.00					$			0.93					$			1.82					$			1.92						6.9	%						-5.5	%
Special Items impacting Net Income Attributable to Common Shareholders:
Acquisition transaction costs - Net of Tax (a)												-								6,853								-								9,741
Per Share																	$			0.12													$			0.17
Acquisition related inventory and backlog amortization - Net of Tax (b)												-								-								3,018								-
Per Share																									$			0.05
Acquisition related integration costs - Net of Tax (c)												1,626								-								4,835								-
Per Share									$			0.03													$			0.08
Acquisition related restructuring costs - Net of Tax (d)												914								-								3,894								-
Per Share									$			0.02													$			0.07
Repositioning charges - Net of Tax (e)												1,446								-								5,776								-
Per Share									$			0.02													$			0.10
Lawsuit settlement charge - Net of Tax (f)												4,225								-								4,225								-
Per Share									$			0.07													$			0.07
Loss on business divestiture - Net of Tax (g)												1,055								-								1,055								-
Per Share									$			0.02																0.02
Withholding taxes related to acquisition funding (h)												-								460								-								460
Per Share																	$			0.01													$			0.01
Net Income Attributable To Common Shareholders Before Special Items									$			68,963					$			62,187					$			131,184					$			122,866						10.9	%						6.8	%
Per Share									$			1.15					$			1.06					$			2.20					$			2.10						9.0	%						4.9	%

(a)		During the three and nine months ended June 30, 2013, the Company recorded transaction costs associated with the acquisition of MEI/Conlux.
(b)		During the three months ended March 31, 2014, the Company recorded inventory step-up and backlog amortization relating to the acquisition of MEI/Conlux.
(c)		During the three and six months ended June 30, 2014, the Company recorded integration costs associated with the acquisition of MEI/Conlux.
(d)		During the three and six months ended June 30, 2014, the Company recorded restructuring costs associated with the acquisition of MEI/Conlux.
(e)		During the three and six months ended June 30, 2014, the Company recorded repositioning charges associated with certain facility consolidation activities in our Fluid Handling and Aerospace & Electroncs segments. These charges primarily included severance and move costs related to the transfer of certain manufacturing operations.
(f)		During the three months ended June 30, 2014, the Company recorded a pre-tax $6.5 million charge related to the settlement of the previously disclosed environmental lawsuits by certain homeowners in Roseland, New Jersey.
(g)		During the three month ended June 30, 2014, the Company recorded a loss on the divestiture of a small business.
(h)		In the three months ended June 30, 2013, the Company incurred withholding taxes related to the cash marshalling activities supporting the acquisition of MEI.

											2014 Full Year Guidance
2014 Earnings Per Share Guidance								Low											High
Earnings Per Share - GAAP basis								$				4.18							$				4.38
Acquisition integration costs, inventory step-up and backlog amortization - Net of Tax(i)												0.22											0.22
Anticipated facility repositioning actions, net of real estate divestiture gains - Net of Tax (j)												0.05											0.05
Lawsuit settlement charge - Net of Tax(f)												0.07											0.07
Loss on business divestiture - Net of Tax (g)												0.02											0.02
Earnings Per Share - Non-GAAP basis								$				4.55							$				4.75

(i)		In connection with the MEI/Conlux acquisition, the Company expects to incur transaction and integration related costs, and inventory step up and backlog amortization charges in a range of $18 million to $21 million. The $0.22 represents the estimated Earnings Per Share impact for the mid-point of the $18 million to $21 million range.
(j)		In 2014, the Company expects to incur costs associated with facility repositioning actions related to the consolidation of certain smaller manufacturing sites and expects to record gains from the sale of certain Company owned real estate.

	CASH FLOW ITEMS						Three Months Ended																Six Months Ended
							June 30,																June 30,																2014 Full Year Guidance
							2014								2013								2014								2013								Low						High
Cash Provided from Operating Activities
before Asbestos - Related Payments							$			82,011					$			49,395					$			76,026					$			39,485					$			345,000			$			354,000
Asbestos Related Payments, Net of Insurance Recoveries										(17,827	)							(18,447	)							(30,752	)							(28,940	)							(70,000	)					(64,000	)
Cash Provided from Operating Activities										64,184								30,948								45,274								10,545								275,000						290,000
Less: Capital Expenditures										(11,297	)							(6,566	)							(20,690	)							(12,039	)							(50,000	)					(40,000	)
Free Cash Flow							$			52,887					$			24,382					$			24,584					$			(1,494	)				$			225,000			$			250,000
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.