CRANE CO.
Income Statement Data
(in thousands, except per share data)
Three Months Ended June 30, | Six Months Ended 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 | ||||||||||||
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| * 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. | ||||
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CRANE CO.
Condensed Balance Sheets
(in thousands)
| June 30, 2014 | December 31, 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 | ||||
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CRANE CO.
Condensed Statements of Cash Flows
(in thousands)
Three Months Ended June 30, | Six Months Ended 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 | ||||||||
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CRANE CO.
Order Backlog
(in thousands)
| June 30, 2014 | March 31, 2014 | December 31, 2013 | September 30, 2013 | June 30, 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. | ||||||||||
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CRANE CO.
Non-GAAP Financial Measures
(in thousands)
Three Months Ended June 30, | Six Months Ended June 30, | Percent Change June 30, 2014 | Percent Change June 30, 2014 | |||||||||||||||||||
| 2014 | 2013 | 2014 | 2013 | Three Months | Six Months | |||||||||||||||||
| INCOME ITEMS | ||||||||||||||||||||||
| 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 | — | ||||||||||||||||||
| Acquisition related integration costs (c) | 2,030 | — | 6,755 | — | ||||||||||||||||||
| Acquisition 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 | % | ||||||||||
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| (a) During the three and six 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 & Electronics 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. | |||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||
| June 30, | June 30, | 2014 Full Year Guidance | ||||||||||||||||||||||
| 2014 | 2013 | 2014 | 2013 | Low | High | |||||||||||||||||||
| CASH FLOW ITEMS | ||||||||||||||||||||||||
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. |
7