CR - Earnings call transcript Q4 2018

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Operator

Greetings and welcome to the Crane Company Fourth Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jason Feldman, Director of Investor Relations. sir. you, Thank

begin. You may

Jason Feldman

this operator Maue, fourth and am Welcome you, Executive our morning Feldman, our Max President and Chief good XXXX earnings Financial our Chief call On quarter Relations. I and of to we release have Director Mitchell, Rich Thank Officer Investor everyone. morning, our conference Jason call. Officer.

call to remarks, after will respond questions. We prepared will which few start with a off our we

comparable like XX. of forward-looking statements. calendars, because year. this your That at this us of Just April some pertaining a after also our call of we call is we Relations Investor last be cautionary the which Report, Annual the the filings invite reserve for to later the the we directly on to you little would will normal at April morning timing contact the of GAAP our some you results like press for place Annual on One XX. also during our me and the forward-looking call the if would a first and quarter XX-K and using the I the a close end on accompanying Please available of bottom event tables www.craneco.com attend February will the on refer XX reminder, may Day We of release conference. language section. comments morning at to both report make release item conference in the Investor to with numbers, a in the than slide holidays bit our presentation, which and of non-GAAP website statements. to subsequent Also you include our numbers at are are to earnings reconciled

call the turn me Max. to over let Now,

Max Mitchell

Jason. delivered record In XXXX, another results. you, we of financial year Thank

last $X.XX, our increased in XXXX. press release EPS of reported night, which record XX% year have adjusted from outlined we As full

to excluding pension a compared Currency the growth repositioning EPS, XXXX, cash XX% CapEx $XXX despite Adjusted with $XXX last higher and increased compared to XX acquisition increased operating $X.XX the XX% improved record free and discrete year Sales billion of an $X.X included up of flow well discretionary to $X.XX, and benefit. to organic contribution with Fourth was XX% Crane as actions. tax margins XX% special sales core million XXXX, X% of our XX.X%. as record Our recent associated fourth X% increased quarter growth. sales million, items, of basis points compared with quarter

of opportunities Day I and in am what $X midpoint our outlined are upside EPS years X guidance the last $X.XX adjusted from at a and strong story, Investor of executing to event. well, XX% with growth initial with March XXXX multiyear adjusted achieving to introduced us in potential approximately our commitments XX% on achieve base of was capital on guidance X, We of excited XX% of XXXX have and At towards with and to $X.XX a solid we growth targets. XXXX are XXXX year’s proud halfway today our XXXX we deployment. EPS additional extremely results performance EPS than The delivering from starting shows you the last first we of consistent shared combination more that that growth we Investor year’s beyond. reflects extremely track objective. step the The am $X.XX long-term from with towards night we in our to we XXXX ahead I very our target about forecast by of our Day, last on XXXX XXXX an XXXX,

for taking growth years to I to are is positioned the actions businesses, turn that we of want highlight ahead. our profitable again I to Crane Before ensure

First, focus of success than more investing time projects when growth. have had we for rates with long-term think active we continue can’t to a we higher do on I today.

of As reform we further, growth discussed These last bill year the portion the redeployed down the a and over of we projects XXXX. on incremental tax course XXXX will from benefits growth accelerate to initiatives. the even are have progressing wind investments

Second, we to the our we with are creating In is off That transaction our Crane strong last a in sheet. start. balance of acquired history. Currency, largest acquisition value year, January fantastic second

we in shares in during all flexibility We confidence an repurchased dividend, million substantial our with is for $XX in while these outlook. our investments, eminent, also opportunistically actions have of yesterday, increase next we nothing XX% announced XXXX. our sheet reflecting today of And our our Even balance acquisition.

of to continue execution. cadence with Crane we run disciplined a Third,

will previously continuous improvement profitability in certain facility cadence productivity, created new worked were of footprint Payment and well our at a Electronics, the Merchandising actions meet to better improve in XXXX, refined the for strategy Handling, our we our thoughtfully that and execution, original driving consolidations plan very a of These we As drive & of our in years to be across will on future in serve our initiated repositioning with has progressing customers our will and activities our these the are are on Aerospace businesses. annualized & XXXX. with and us our run-rate for as also track expected and repositioning Investing approximately Fluid profitable $X.XX ahead. discussed capital, achieve end and for of this continue ongoing businesses These and focus line EPS competitiveness end position proactive. targeted combined actions growth opportunities growth, They deploying by to discipline is requirements. growth

Fluid are better points X% trough XXXX. XXX with of and do results growth businesses, further expansion. improvement were and backlog last in to organic year than and levels basis rates Handling now our XXXX expected above Turning Order meaningfully margin expect we levels

rate and industrial with recovery likely slower core growth by drivers to prior Chemical soft strongest steadily gains We with power refining sluggish. share the and than X% XXXX still to growth positive, be the expect of in continue are that market still general in end-markets but grow growth driven and cycles.

initiatives and relative substantial on business, in that of to this slow Payment margins growth in Performance we very on leverage would & as mid-teens on our seeing deliver good and construction are business. Overall, to are Currency. we expectations growth at Technologies municipal growth continue the markets moving the to side in of outperformance the outstanding we will On environment, well Canadian forward. return and characterize to with positive, in I Merchandising but core track mixed. was non-res UK. we however, trends In the good XXXX rates Crane operationally the both markets U.S. to overall business, in slowing commercial continue execute

repeat, of exceeded the impressive. ability of While to integration support attributable a of outperformance to may was that progressing met which to the The all Crane portion business that of order smoothly Malta up customer customer our in Sweden moving expectations. Currency and very large team’s is was while banknote from a ramp or production not has

XXXX, the very the is excited are segment. for prospects I am execution and to productivity this trends underlying about business for Crane payment the Looking business on initiatives extremely continued strong. growing Currency with base

the seeing broad-based strength solutions, retail are for continued in we sector. particularly productivity Specifically, our

on from to face Our continued solutions productivity. wage saturation, have as challenges rates proven rising and retailers value e-commerce a increasingly store they to proposition focused are

retailers, traction innovated We this which solutions for space, gaining solution, Europe. Paypod is including smaller introducing new throughout our in have also

large of narrow-body strong X.X% number microwave seeing will in well up offerings. large nearing connectivity over These well vending completion growth defense long-term. margins aircraft We continue businesses in and our are attractive growth well us we in our cashless radar platforms, dynamic including of the platforms of substantially and development growth deliver are improve. the also continue to as above in the expectations years as & programs volumes both strong Aerospace and completed from exceeded to segment XX.X% guidance. major Max, positioning growth CXXX ground-based our successfully has business the for original XXX accompanied to our margins XXXX. or as benefit AXXXneo, We a Core EX. for second program that aircraft and models, Electronics continue of following a executed ramp our in gaming end-markets new the our of and This investment solid set new

lower continued correction. was and of In Execution forward. a suffered on the the I looking our and that for technologies under channel the solid well largely pivoting Engineered on prospects in complete. vehicle correction we proactively number through are businesses about focus great will portfolio is customers Materials, challenging growth a recreational sometime aircraft At the cycle to we that remain our next-generation development ensuring a we of year We next the partner have summary, for believe volumes critical decade. as we excited had inventory next am market a a

and improving executing for Our and The are acquisition a markets. Crane first per in core Currency business year $X on had accretion we XXXX. of share by is track well leveraging great

making are great Repositioning dividend we this our raising ensure reflecting are the have right that our future cost investments improve growth will actions to on confidence XX%. by across footprint that progress We outlook and we our business. growth position yesterday and our in we support announced

the additional the through turn and will Let information details. businesses over Maue me and call some Rich you guidance take to now provide financial who

Rich Maue

Max. you, Thank

free guidance expected operating and movement begin segment has operating our of on income margins, a EPS on income with discussing pension impact line income financial non-operating expense. statement. income into is operating present XXXX please amended expense results FASB line and cash movement of in certain results and consistent and non-service that all pension impact no below requires the the of cost no It that guidance, elements flow. I the the out absolutely our and Before simply profit note the profit of change will This components

provided details by our basis, and appendix, base impact to margins this with historical a at in substantial on for to change slides about everyone comparing to basis segment additional with guidance. reconciliation On have majority consolidated our showing a quarter points Page in Fluid operating XX with XXXX XX, the the provide XX reduces We Handling. the

points. the if on For XXX impact margin no or EPS XXXX is basis cash Fluid is Handling, free there impact in Again, flow. restated

special full operating ahead with of XXX XXX basis by year December year. non-GAAP XX% impact. compared a million, Operating the I Now, profit full a On outlook. $XXX accompanying margins our compared XX.X%, to sales segment quarter reflecting items my to while quarter board. sales periods performance core for in to $XX exchange Handling core XXXX the press I Handling, impact this margins additional X.X% from million X%, Fluid the increased adjusting details offset increased the basis, and in guidance, XXXX. otherwise, excluding at to year will million partially at Handling will our XXXX X%, XX.X%, comments increased Fluid of comparable our teams results $XXX be the was X% fourth points end as results. foreign Starting our last performance of of XXXX, $XXX by year. both comparing business presentation After divestiture backlog Fluid in of XX% slightly to X% release, fourth slide Unless end outlined year mentioned of of million tables. our growth with an some backlog foreign a across original points the also excellent and to Fluid morning on unfavorable turning about up of our XXXX compared up to full unit exchange, delivered Handling basis growth provide prior and sales with

exchange, foreign increased XXXX XXXX. X% in to Excluding full compared year orders

accounting total Looking Handling offset from by X% X% unfavorable with expect foreign we XXXX, and by new There basis forward a good we for product sales segment our exchange. points Day with look you to to more pension next of operating Fluid margins activity growth change, and event. X% impact repositioning the in lot Adjusting driven of productivity leverage, at Investor to that is approximately XXX improve a sharing partially benefits. month of development expect we growth core XX% exciting to

X%. XX% of Currency increased core of Crane and X% primarily XX.X% Merchandising & On our to Currency a reflecting Payment quarter core margins year fourth basis the segment than than guidance year, basis by impact XX.X%, X% Crane impact Currency. more basis, in the our expected with million of XXX original margins Payment offset sales of sales now declined quarter and XXX foreign unfavorable Merchandising by line prior guidance Moving expected to of increased to by partially full points primarily the performance driven Crane sales driven the compared strong exceeded primarily growth at operating better by of exchange Technologies, acquisition. points Fourth & $XXX

expect X% including segment decline to For a sales reduction. core X%, we XXXX,

two segment customer remember Currency. projects the X% XXXX the in underlying headwinds, any over of at there Absent customer However, X%, growth strength XXXX when guidance. one At in unusually were you range those large at be view at XXXX XXXX, up that and business that are reflecting core guidance, continued would should look one mid not to Payment our and large grow present, single-digit in this contribution from consistent with our we including the the Currency Crane long-term. segment

along long-term & to However, it driven productivity basis shipments. Crane will range Even at segment our revenue see higher target of with reductions Currency. we the by the the portions is in segment, Payment points margins we future XX%, increase XXX decline, cost XXXX volumes possible Merchandising some from that with to within expect and upside quickly approximately

declined is As for job year Crane of did team we by business’ at basis remain $X this sales in product track last are Electronics with Max the points X% the smoothly consistent mentioned, we quarter to forward. operating EPS million. the margins potential XXX Currency XXXX. on an progressing really mix about accretion and quarter. moving to expected increased excited and Aerospace & The integration $XXX outstanding Segment XX.X%, Fourth

commercial of sales and sales XX% commercial sales was OE the across aftermarket at transportation mix execution last compared softer sales. driven was to basis repair than strength points above to Aerospace backlog to XXXX. year well large up X.X% to million million aftermarket of military with this quarter offset On end XX.X%, increased & to more XX% and military military The by hard the spares $XXX to $XXX to guidance XX% fourth from Aftermarket original increased shipments. a Specifically, end upgrade declined with compared OE and basis, a year. full margins XX% by modernization, X% X% XX solid Electronics both team. the our testament work at XXXX and and

with Operating For growth inventory be largely XXX reflecting the sales declined believe Electronics, segment sales to year. XX.X%. margins margins which core XX.X%, to sales declined $XX we XX% XXXX, On primarily volumes. operating prior XX% with expect sales primarily we the to margins related X% a & XX.X%, Materials’ an Aerospace declined from full fourth up RV points to was quarter basis, at Engineered lower basis year XX% down The in channel of correction decline to complete. million.

While the challenging the the markets year, on were was last decline sales rate sharp de-leverage team and unexpected executed a impressive. well

expect For XX%. basis XXXX, with sales margins down we XX flat points to

EPS Turning $X.XX overall more is Max XXXX as guidance, items guidance, $X.XX. special on now detail our mentioned, excluding our for of to revised to

XXXX of assumes core sales total down approximately guidance billion slightly. $X.X Our with sales

X% to of more in net we and on Guidance impact projects large two effective sales are $XX of of & diluted single-digit from a and mid improve impact of the tax Merchandising the to core forecast expense last from expect XX.X%, customer performance. range would count Excluding million. non-operating guidance an be Payment year, Overall, exchange share business margins also reflective points assumes foreign low XXX basis the underlying $XX of to rate expenses XX.X%. of a million, operating corporate unfavorable XX.X million sales

that All of slide presentation in these provided are this details accompanies call. the

discussed solid expectations our XXXX discretionary at elevated million cash previously the flow along support in facility new and included contribution, and those for repatriation to free actions. a flow $XX our capital capital Malta in free was extremely improvement approximately in XXXX $XXX puts of cash strong was cash strong repositioning position. spending execution of the financial above free with an extremely Our two further The us in flow working million. and strong items, conversion reflecting and cash pension combination offshore cash XXX% performance. Adjusting free XXXX,

to adjusted the EBITDA. largest second gross our credit year the metrics X.Xx already at debt pre-acquisition acquisition history, are to about Just levels our back after company’s in

We activity opportunities. are have robust on a of pipeline working additional potential and substantial acquisition for we target actively capacity

our repurchased reflecting investment night further in and XX announced increase of last sheet. during the dividend, strength to our grade an also confidence XXXX of XX% balance shares We million our our and outlook

in of XXXX, million, XX% was free $XXX higher million. in earnings we at at X% planning in for in or Overall, record $XXX are take to and expenditures the cash what to million. Operator, expect another around decline we from and an XXXX. of the midpoint for up flow Following range we $XX levels year further to of settling spending and performance XXXX a $XX expect very are we questions. million impact with next sales from range even pleased capital are lower better approximately XXXX, year XXXX, the our We do these reflecting of performance capital ready of

Operator

Thank you.

session. be now conducting will Thank Instructions] you. [Operator a question-and-answer We

the Our proceed question. with first Please Summerville of question from Matt line comes D.A. Davidson. with your

Drew Haroldson

is everyone. This for Matt. morning, Good Haroldson Drew on

of Just quick questions a couple here.

of given First, or UK embedded guidance? in anything are in around is current are Handling total makes the Europe and up revenues the the for XX% Europe concerned it the somewhere from you is Fluid for assumptions that XX% of your that generated business, about What inconsequential? Brexit are noise

Max Mitchell

and nothing we this for might to respect this no, our specific our into time. no, significant overall assumptions of So we that our don’t concerns a feel confident guidance at a any Brexit very built that at have perspective, guidance says. what changes feel set from year good next the taking But place. we be have operating what We plan us with reviews through level confidence point,

Drew Haroldson

it. could Got a impact to you update quick follow-up, in just quick tariff then provide a And XXXX? the

Rich Maue

disclosed majority Handling Fluid that we overall million residing exposure actions, have think in roughly, that $XX for million what I from business. The in our that with the October. talked business offsetting a it of and $XX total exposure. Yes, substantially to respect substantial price covers We we about no to change had

Drew Haroldson

you. Thank Got it.

Rich Maue

You are welcome.

Drew Haroldson

Thanks Drew.

Operator

from question the proceed Jones Our of Please with Nathan Stifel. line next your question. comes with

Nathan Jones

everyone. morning, Good

Max Mitchell

Good morning, Nathan.

Rich Maue

Nathan. morning, Good

Nathan Jones

like in that couple color start the – the they book in or anything third the in think Handling, to to just environment bit rates X% last I neutral at give Just there little project off quarters? at down would can this on you thought why FX quarter, a you Is Fluid should the those order were down declined seasonality stable improving typically least any or have orders of point. sequentially, be over be if the order have

Rich Maue

I hit a of seasonality you think see in typically We Yes, it Nathan. do fourth bit the quarter.

think are numbers right had are excluding in just around sequential that QX correct. I I we X% mentioned, foreign range mid your QX in a single-digit here on below and exchange. basis,

So see our well a commercial both as was think across our the process that side seasonality We correct. of typically of bit as business. I little

Nathan Jones

of rest Is there give versus on of the in terms side any the color you the business were where of the better worse or quarters? additional order process rates couple over can last

Rich Maue

say think I some general second momentum Power, a no the I in continuing first be there, particular say or and half U.S. positive us. and that General strong in overall second particularly bit that weak of the to particular would with signs. little again second would in the the Chemical and in the in industrial, the and China same change in half, regard. would is half, just China thing I no in in necessarily first Yes, same of half, Americas particularly through softness. the say that a consistency same half there U.S., shift in and – I strength the strong really the think to for continues are where of show matter. continued we year, for compared second seeing that I to terms just

Nathan Jones

underlying there? or like no So in it changes the structure seeing trends that the sounds market real you’re

Rich Maue

think Nathan overall message. the that’s I that’s right

Nathan Jones

in you particular, that takeaways was fair business Okay I having that and things can to make of some ask I XX I of that a those then upside and XXXX comfort that I that that and those on facility discovered wondering are there probably might accretion? of kinds and think and improvements a push amount you’ve there’s be Payment owned the little $X you and been Malta, that Currency, guess, the had there I’m in acquiring you the you some the that $X that that & Merchandising in months accretion you things business learned and in by imagine that to over any productivity business one if bit you’ve post of would things can give I of on

Rich Maue

not know this say, not say the for that not look would ability execute highly drive say Yes, opportunities to $X do look, drive we would the fairly at we and at change I’d point in you going confident I confidence for we to that as point are well about don’t going say, opportunities out. update number feel but our this to think us the would we’re and number I have additional to look, rather the results I we I way you want for and in I point look

Max Mitchell

mentioned, I kind I so mention my of appreciate see this the opportunity point, as chasing and not at have also to roadmap the adjust team of I’m our the but... to-date we’re comment that robust Rich delivering we are to team enough really we a but got target Nathan, proud do accretion what it we can

Nathan Jones

the understand. will I color. I fair Okay pass it enough. Thanks on. for

Max Mitchell

Thanks, Sure. Nathan.

Operator

line question. next from Karas UBS. with comes Damian of Our question with the your Please proceed

Max Mitchell

Good Damian. morning,

Damian Karas

good morning, everyone. Hi,

Max Mitchell

Good morning.

Damian Karas

is could this that in past some you the the encounter I business, point anything or could Crane ultimately is year? through ask potentially but that suggested about guess changed, at thinking the the repeat of you of at it in XXXX wondering, I’m project appears, you to some just could thing Currency so any if So, do come projects I’m just that point and about wanted large just there that that’s had a kind chance there funnel that previously of show extend back customer this is effectively I potentially the lumpy up that or

Max Mitchell

purposes, we it’s have that higher have we that what and those just large Damian, terms with from due that an share the the just update that maybe don’t looking it, customers the most for said there customer that not important sales still impact in projects expectations we large XXXX. orders tracking this any that demand uncertainty other we knowing at impact lumpiness it’s I for appropriately very has process about, risky uncertain into hit might would I highlighted and very, point of these guidance say of we of but that and bulk XXXX, having what on think we anything further is as the with offset cycle out think continue the that, long levels in of we’ve script further we’re stripped of feel with we how Day, be thinking would consistent funnel then some the year a in to very bullish other Investor upside chasing can in of progresses, some some negotiations we’re firm this guided ’XX will with at likely and I and I as hope that well it’s we’re to and team I’m supplement projects might about the pleased and

Rich Maue

stronger upper-single-digit I solid would a for or we at is actually mention demand If I XXXX. – the that, what in profile and sales number, little it’s just last as offer the mid-single-digit bit Payment, you in for number a here as guidance mid-single and just up XXXX core perspective solid jump profile project from also could is than too one-time the a excluding look

Damian Karas

on through Okay, You’ve the number you uplift pieces from so your Fluid this on kind in about thanks. talked incrementals points of guiding Handling margins the year, have XXXX? see XX XX copper, I’m price that just price on on some tailwind potential got of year? points concerned of in that’s about And some That’s the could neutral you restated to touching steel, some expectation up been iron you helpful. that but core back XXX benefits past alloy, the walk are points a basis the me, excuse deflation repositioning and in and the in any bronze, segment of neutral, this this any you still have but things change actually cost seen you’ve about some curious moving

Rich Maue

good no, question. Yes

the drive covering X% XXXX you we’re plan. we’re are implied would is a the XX% looking leverage, OP primarily, just are actions if about cited volume we’re those it’s basis, think the that’s offsetting quite dilutive a that and that at at of us to and our they say I the those XX% our offset margins, leverage plus on rate at so line top benefits while look guide you and driving a at leverage incrementals are headwinds is that we’re help repositioning when for X% so pricing because guidance margin have leverage I sales other we in feel what then repositioning to productivity and contributing rates significantly rate the X% bit essentially we confident leveraging growth right, restated those a the actions to

Damian Karas

on. pass will it I thanks. Okay

Rich Maue

expectation any terms the plan. in of In deflation significant have deflation, of we material don’t any

Max Mitchell

Damian. Thanks,

Damian Karas

guys. Thanks it. Got

Operator

with of question. the America. your Bank Our of Liwag Kristine next with proceed Please line question comes from

Kristine Liwag

guys. morning, Good

Max Mitchell

Good morning.

Rich Maue

Good morning.

Kristine Liwag

interested are through speaking, bolt-on Currency? expect make you acquisitions are broadly growing to did you you Max, existing in you with where make Do businesses on acquisitions acquisitions? other looking like transformational or Crane to

Max Mitchell

the Kristine, focus Handling, with So, within & Fluid I bolt-ons we priorities, to Merchandising continue on Technologies. Payment think will A&E

also – Crane Currency was that. of adjacencies and example have looking far we at an We not near are

major the lines segments, and along adjacencies near continue as three bolt-ons forward. will prioritizing we in So we move those

Kristine Liwag

hit the XXXX outlook backlog are and you that you that how your That’s And much makes expected Handling, quarter sequentially XXXX Fluid in seeing backlog? revenue that X% in already were is helpful. can was of X% in down X% the what and down you confident core in growth of orders

Rich Maue

Yes.

when we’re quarter look fourth a year-over-year we FX-neutral an you up then just backlog so basis, this hitting that a an XXXX X%. sure, just we’re Fluid fourth a did frankly, under match the X% and as you up the X% combination us what sequential the of order as seasonal you against with then Handling, at we’re that in look Kristine, of mainly the at just coupled we we’re of that where little that up X%, and profile on look each we pretty for in so target earlier, is up growth and about a as in profile here our order sort solid backlog up if continued in bit a hoping a to to the for backlog see momentum core So, seeing X% X% FX-neutral make think bit little take of we up bit and on on year-over-year about XX% X%, quarters year-over-year quarter we business have basis talked but cautious year supports decline

Kristine Liwag

other And the on the expectations revenue XXXX already backlog? how much in the of Okay. question

Rich Maue

total so For that maybe know, Handling, XX% of you business, business number, or be guessing other of that like I’d the to of is XX% maybe Fluid Kristine, a XX% as that. total, but short-cycle you more of something it’s process being kind XX% honestly, give

Kristine Liwag

Great. Thank you, guys.

Max Mitchell

Thanks, Kristine.

Operator

from your proceed Please comes line Herbert Ken question. next Our of with the question Genuity. with Canaccord

Max Mitchell

Ken. morning, Good

Ken Herbert

Hi, good morning everybody.

Rich Maue

morning. Good

Ken Herbert

on the... follow-up I wanted to just

Max Mitchell

Good morning.

Ken Herbert

you that have Aerospace the morning. question three much now, four good of some the detail that the Wanted backlog in have maybe any especially as backlog and more as we’re out you’ve in business between can side segment quarters I you military as mean, but Yes, follow-up be gains the maybe strong parse or is well would improvement last in or had backlog to build of specifically rates the that helpful. on on & seeing share commercial the that growth on Electronics, within really granularity some taken growth

Rich Maue

growth building, broad-based growth a been it’s to so fairly been something the widespread it color between think about sort so driver will contributing more Ken, you so aftermarket that it’s as it’s it’s beyond been in a in specific fairly for just widespread, throughout relation a quarter-to-quarter particular it’s as the movements widespread, in military aftermarket of we overarching hasn’t largest kind retrofit, that and been doubt, backlog it’s narrow now spare to right, OEM, little some that mean just sure have hard balanced OEM right, give the was backlog, commercial it’s think but on to we basis is part really it’s the after of I relative commercial that’s I bit right military, OEM a transport there it also body that an such be between without widespread, side, the solid. being a nice XXXX probably even spares, Yes, is the spares, that that, more so of

Ken Herbert

market is then Is fair gains? specific that’s it versus say it of Now, majority helpful. Crane to share that the

Rich Maue

engine this the Well, I EX, the then XXX, these than I platforms works the won so XXX, body we’re on are know we that programs and things you better mean, for the all but had. think we’ve wins how now, all that narrow sure these these most

Max Mitchell

we’ll be for No, Investor Day I one Ken, think market the just you. a no, answer added to us it’s put detail is let question, great that not let and prepared for clearly this it’s gains around some answer it’s us share

Ken Herbert

That’s capacity your M&A but specifically I arise? level under-levered now are can to or more appreciate of us heading the then can on you helpful. question mean, this follow I bolt-ons just maybe what finally from think capital of obviously up just mean, terms deploy sort Okay, reset in relatively much allocation into you XXXX broader again is but leverage Max, to year, the you just they the I perfect. M&A and how a a And you’ve if from opportunities standpoint got comfort

Rich Maue

that take I’ll Ken. Yes,

beyond So in capacity de-leverage to we’d would acquiring, expect are of in right mean, we’re from how and of where EBITDA just we terms that right X.Xx, billion today looking look of that as billion something we $X billion, you currently out that sit we or now so we when I through sort for $X.X as XXXX XXXX-XXXX around be excess look at range, there. XXXX well and we into that at there, the $X even at build

Ken Herbert

queue. the Thanks, great. in That’s get I’ll Rich. back

Rich Maue

Ken. Thanks,

Operator

from proceed line of question. Our question with Robert comes the Barry your Buckingham. with Please next

Robert Barry

guys. Hey, Good morning.

Max Mitchell

Rob. are you? morning, Good How

Robert Barry

to too please, like go I record, any the the to For of would Malta summer.

Max Mitchell

record. the For

Rich Maue

can you Maybe join Nathan.

Robert Barry

on with you’re now? a Fluid offsetting getting just Fluid actually impact So price few you price tariff mentioned things in the in so follow-ups

Rich Maue

to through been continue was a we have and see we for big to ‘XX, it in expect we driver ‘XX. Yes, are clearly us that

Robert Barry

Got project, from when you it. And the how large just about the came that said about to everyone, to P&L? was kind into it of currency that’s headwind $X.XX level much earnings, set it

Rich Maue

just a it’s probably Yes, little bit of north that.

Robert Barry

it. this on there lapping too year? I project microwave were projects in large Got Aero you And big or a think remind can you that was me, one

Rich Maue

little it one to there prior well, big year, improvement profile a XXXX baked was a it’s it as a that’s was into guidance there bit. as margin the because but down our had, mix there headwind also us bit did not as our next we contributing that did Yes,

Robert Barry

actually about correctly, line mean, it. Got to was that ballpark? I top I it the points maybe remember is worth X if

Rich Maue

Over half starting X of ‘XX in second ‘XX. years,

Robert Barry

Got it.

in is the So X.X? year-over-year headwind ‘XX about just

Rich Maue

about right. think I that’s

Robert Barry

and give of And for the of this is seasonality it. on could to normal? be some us cadence earnings that year there Got what if color you XXXX like earnings just the versus normal you expected

Rich Maue

would but Investor a we more we is largely said. added make I of you will ordinary bit nothing through hey, we at QX say be and refresh cadence color, bit little bit years, what going get the little Day there’s of would year right the the I around I terribly that balanced this to softer Yes, cadence earnings little going some but a be to year out the saying, sure to a say guide and is in it’s that everybody

Robert Barry

Max, Got in it. opening comments your think I guess I And just finally, –

Rich Maue

in every way by way, meant the I I that balanced is what mean by the is progression What – It’s and historically a equal right. QX the same. sure, what Rob, there By as not I by from quarter sorry, mean mean take is by regard you through that me to case. that that’s it’s QX is, make the didn’t just balanced each not quarter,

Robert Barry

thinking I like allocation there of? percentage should normal is Okay. be we a mean,

Max Mitchell

Investor Rob. color, given give to Anymore some that more guidance, we’ve we’ll for where try Day, but let’s take [ph]

Robert Barry

Okay.

you I Max mentioned was lastly, perspective. think, an Just M&A there nothing that from in the eminent comments, opening

the got is given what sounds your curious – just on good, nothing appetite cash, on what’s cash was and Just eminent you’ve some M&A flow repos,

Max Mitchell

– buyback. a shareholders look if we never We’ll to returning – capacity. towards we we’ll early I at use, balanced to pre-announce. think continue If to Yes, we’ll real cash we approach have our I certainly it major never at think put can’t – any that that, it’s be looking

So, look remain in it an remains but optimistic certainly there – for XXXX. opportunities that I option, we’ll

Robert Barry

on Thanks again Congrats finish. for Alright. Great. care. Take solid Thanks. kind of a that.

Max Mitchell

Thank you, Rob.

Operator

of line Vertical proceed with your Linzey Partners. with question Research comes the next Our from Brett Please question.

Brett Linzey

Hi, good morning, guys.

Max Mitchell

morning. Good

Brett Linzey

to specifically the growth pretty in broad-based just come Hey, want the terms and mean, that on I CPI, I CPI seeing and to Paypod Payments of tried then assumption might for like activity What’s how back more your for you like be have that size guess sounds it’s it large look opportunity strength you’re year and funnel there. the and could to today? the what

Max Mitchell

well. a progressing sizing in Well, you units. the we’ll the in overall, units terms give growth of market terms in funnel XX the We’ve the funnel, of in on chance got funnel, XXX have we’ve got some color field terms the how more it’s but a but we’re We’ll side, of of already.

pleased to-date. the progress We’re with

Rich Maue

side Payments we add in growth I on going the to see headwind specific the we that XXXX, that a even with are core to and we headwind would growth notwithstanding so here have, low the single-digit What have.

Brett Linzey

XXXX? conditions you challenges, on Okay. there might opportunities self-checkout And retail the state the of then any update have and in

Max Mitchell

It it’s strong. broad-based been I to continues and strengthen. continues mean, remain to

optimistic. we’re So,

out. I couldn’t get Sorry, it

Brett Linzey

year. then your adjustments I said and you I your but of customers to What’s the what I is given know telling you’re ask the to Okay. channel Engineered Materials did is what really want there? level our visibility and guiding confidence just organic flat an you? de-stock And what’s question, you’ve RV, have in seen think sales for the

Max Mitchell

I Materials, they’re and marketplace top-down of of to flat at kind Engineered would at that the through to the consumer that continue for de-stocking this and should bit not QX of of Within down. what see bottoms-up for up wholesale retail, level, try from There fairly we’ve looking triangulating for back bode retail strong. were say remains bounce shows well the the ‘XX. we’re a with and flat from Well, anywhere slightly early indications And the balance what think we seeing, still I attended, the to when projections be prudent a we seeing. triangulate, we at year. sell-through while taken well then us a and think a look we’re through was kind

of units range at XXX,XXX to that think prudent. a I little we’ve RVIA units. at be to data We’ve into the XXX,XXX dialed end just low of looked a

we’ve any got think have and it we guidance of balance think we QX properly. then. be don’t that So, worse proper set we We expect the it leads through the to

Brett Linzey

a But then bottom clear improved maybe still Okay. as QX is back you think QX, finding some half? the there and in inventory activity

Max Mitchell

towards QX. QX, more recover moving We’re it by starts to

Brett Linzey

Alright, guys. Okay. great. Thanks

Max Mitchell

Alright, Brett. you. Thank

Rich Maue

Thanks.

Operator

line Global. Our question. Liptak Please next comes the proceed Walter your with from Seaport with of question

Walter Liptak

thanks. Hi, morning. Good

Max Mitchell

Good morning.

Walter Liptak

by understand to is little could stick the I Payments mentioned wonder if just I that growth going a just that a and with large you to two the to think – offset customer, ramping I customers opening that I’ll then and within little But clear customer a off want coming a a – maybe said in want – provide – detail, there, about with detail bit little are coming customer, you’re a single-digit. we stick I and large you think you morning remarks that? large out. ex good I there more payment be bit Can the low large

Rich Maue

Yes, sure.

sizable were then Payment overall about low top-line have Currency. we’re that businesses question up was that earlier in came we it question in core Innovations, delivered ‘XX, ‘XX, very on because Payment we The Innovations see specific a retail pretty we business that to we and to Crane Innovations. a going Now, headwind specific notwithstanding a we Payment, still Crane that going that ‘XX single-digit, that Payment to see and was & single-digit Merchandising which growth rate, low to that or Payment in often was three Payment to comment just have on have a Technologies, we – Merchandising, Crane within comment was so the Crane refer first Crane so

nice that’s driving in projects rephrase two we overall terms customer decline with to therefore of And X% in the not that core business. we repeating for were next those programs had us. headwinds, it’s that this the ‘XX the Just very overall headwind have in year, large

those you If overall the Payment growing range. were in to is X% underlying all those, for exclude projects, to were two exclude if of X% to you business the

that hopeful answers that, I question, Walt? that So, – think I’m your

Walter Liptak

Yes, it. Okay. got

– for Okay. Thanks

Rich Maue

Yes.

still the going anybody any is growth we’re across unique to to there planning replacing, that wins of are broad-based one-time on customer XXXX. we seeing way we’re that X% we’re The program terms isn’t that in There any banking large demand business. In just X% on. drive one core isn’t that underlying

Walter Liptak

I Okay, you say, but you’re heard maybe customer, that. large great. thought didn’t I you ramping a say

Rich Maue

No.

Walter Liptak

what price bit Okay, cost I headwind then back think you if great. we from overall little could XXXX it because Overall, get XXXX. do a kind at and in cost, to just in of wonder, looking and up XXXX price recovery about and of And an of then was profits there XXXX? kind

Rich Maue

but would net-net, ‘XX. offset able to teams I the gross we It our was we XXXX, to do material/inflation way a was in – there all in responded XXXX. expect There were say excellent through same. an headwinds no. – headwind,

price to offset for confident able more offsetting than inflation that. be planning we headwinds. normal are the regular that us a is hit tariffs our around bit, And of We productivity to will but and cadence feel material then very we

Walter Liptak

Okay, great. that sounds

slowing, one, you for no impacts Europe, into Okay. related And about a I or in you UK? We’ve of one last actually factored have talked you’re hearing Brexit Europe. then guidance what Europe about been impact. some your bit little wonder, Rest to seeing

Max Mitchell

– depending Technologies sense Europe. Payment of Merchandising in we’re business strong is about. actually think it’s it’s talking mixed quite the I & what in Walt,

business, food the East, little get it’s Middle soft. a in some when think you mixed business, then UK-based slightly and it’s side commercial of of the the I to

little & but So, the actually on mix, a strong. Payment even Merchandising

Walter Liptak

for answers. Thanks Appreciate it. Okay. the

Rich Maue

Walt. Thanks,

Max Mitchell

Walt. Thanks,

Operator

[Operator Instructions] Our with is question next question. question Jones with Please your proceed Nathan from Stifel. a follow-up

Nathan Jones

guys. Hi,

Max Mitchell

Nathan.

Rich Maue

Yes, sir.

Nathan Jones

to Jason busy know, to I off, first go too much Malta. Just is back

he thought. Rob there, than go my to wants more if than offer services happy I’m over just So, to

Max Mitchell

Here you go.

Nathan Jones

you get Payment projects Just Merchandising. call here mid-single-digit a on couple to you could least of that. follow-up these questions. large have I in know, the on ex bit guys a talk at & Maybe about talked growth know a What’s more little focused seem you’ve I And these a create that made seeing in where Payment projects noise traction. of that in the large of areas bit continued within some outside Merchandising. there growth driving you’re lot investments & it? little core about we in

Max Mitchell

– software-as-a-service, more Compass lot just significant you’ve the – Malvern. intersection from of [ph, highlighted side, extension solutions, to in we the I those that’s – on – Sync Easitrax to TELUS, opportunities, [ph] think connected But to on heard launches some a our what – of and from number Griffin color applications you’re And an Malvern, payment and of it’s cashless Yes. but but solution. connectivity, sensors a at give new get this I’ll February Alley going product here the for I solutions, on brands those XX, of it’s that attended terms in product

features just new And mentioned, our and that chasing. technology into and what opportunities very on all casinos of in are that purely protection. U.S. again, this with the and funnel about already the in We’re not moving that I a remind Day. as solutions of the long that the having provides, we’ll on technology, February side you I on the When based we chasing, games – valuing are Easitrax only are on in investment value the converting gaming, internationally, but Currency the connected Investor we proposition brand think are customers side Crane solutions

it quite in software, this on sensing, terms of hardware, again Nathan. connectivity, broad-based in highlight So, all cashless – February is and really we’ll solutions, XX,

Nathan Jones

connected money kinds Obviously, up? size, greater good a this incapable resources, catch these kinds greater in where you into out, software-as-a-service businesses you’re you’re these things get are your market share those ability competitors market. in these not opening solutions all of to up like likely a products the of that your Do to is given guys financial pumping something if high these add greater new of doing your your and invest feel you have markets to of that products very in to amount here most of you new are get

Max Mitchell

I point really share, cocky. never have get say scale solutions. innovating want a truly a to team want new from in this addition these generating and – high we’ve argue at clearly I But we’re overly never even that solutions. I market we scale advantage got the would never, in standpoint, And to that’s to a

in marketplace safe addition in into – that the marketplace investing of of space Japan are front-end Japanese to Europe tower a new pay retail and the broadly for more that example, solutions. is in some helping creating we and and Paypod OEM in moving market For that create on to the solution for the in and retail Japan

So well. just as to highlight that

Nathan Jones

then one one you last And on lower? a planned the same just for at little XXXX. Relative got that to you investments a are little growth XXXX level, bit bit higher

Max Mitchell

– This same, space? you’re roughly referring that the Payment you’re yes, about is to, talking what on the is this

Nathan Jones

out level about to – in portfolio in are company it’s of to they the in the figure XXXX trying in level a the just up whether or and were for where overall headwind I’m the No, nothing? over tailwind talking the to total? investments, I’m growth growth margins, XXXX margins investments of

Max Mitchell

in to them are overall to of where investment it’s to When across-the-board. our going modestly Crane, our it’s of from, think terms be you coming in say in most would about business, going I it’s it’s going be be Aerospace Yes, higher profile.

back we’re We’re not throughout. holding any basis and on investment core of opportunities growing our a on

to going be higher. it’s So,

Nathan Jones

much. very Thanks Cool.

Max Mitchell

Thanks, Nathan.

Operator

you. Thank

Rich Maue

– Just

Operator

ahead. go Sorry,

Rich Maue

build sort I throughout, a model bit little in the projects, heard Nathan, large your do just headwinds, of to the about this one-offs, I on what question, the asking this. and for people

number I beginning bit of delivered information $X.XX we in of we’ll at this if little you look of – As But and we to you versus you share is – that, that Venezuela the Investor growth the Day another out right. what expected that’s looking just pulled the compare large for something right. and this fourth additional at like XXXX, we out perhaps and way tax XX% of benefit that XX% contract the earnings well. accretion that $X.XX, on And of did this quarter, you’re the the you the a to XX%, out When XXXX, maybe a that’s from at as here $X.XX pull XXXX. beyond reported to coming the receive tax pulled like like year in of in the something

right. one-offs, that it to those really remove XX%, those them trying to the And that to to I’m listening or some we how isolate one-offs. providing of some answers $XXX the million, $XXX grew doing some to guidance, we $XXX if like another And would are it them. I’m of and something get imply wanted you here if to we’re to hopefully XX% Compare So, XX%, so million trying growing of $XXX we million call get that? million,

getting roughly it call discrete more investments, call productivity million, operations $X.XX. your in So, and business, question from to it that’s Sweden to $X.XX. another another moving investments, whatever roughly $XXX is, opportunity, that’s to I’m $XXX benefits probably Currency million, whether Malta and additional the it margin $X.XX got other Nathan, earlier plus I’ve items the from repositioning less

look pension, that I growing core from of And at $X.XX those roughly when one-time then the what’s miscellaneous and two earnings, be headwinds probably tax, items. could have items. got in items. I X% business, form core $X.XX I’m those So, business about bunch a Then you in the of one-offs my underneath doing? And of

contributing So maybe $X.XX. roughly

looking – how I and we pulling do X% earn what it’s way did of at think So XXXX. think about I just that’s another and back in XXXX in

you and helps. we’ll that out pull And more it on lay some for together again, Investor Day hopefully So information all.

Max Mitchell

good I a answer. bonus think appreciate Even – a Rich. so, That’s it, Nathan got though I walk.

Rich Maue

a got bonus he Yes, answer.

Max Mitchell

more any queue? questions Operator, in

Operator

further No, this questions we no time. have at

Max Mitchell

XX, XXXX, in We’ve on where Outstanding. City providing Thank and as you, are York of strong update across to share event informative growth and got operator. performance We execution. the I’m at many businesses about hope we associates. our our all lot in driving businesses our heroes our customer well current satisfaction, forward execution as February conditions. XX,XXX of to great innovation, team There market an to extremely Crane’s of you look Investor consistently see and Day discussion New an a proud

That’s what all. are there certainly once limit development, great Stanley said, great no here late exciting. new day. every a Thank you feels to so it the As around there happening. makes how the day, a that that’s and is is it things Have

Operator

teleconference. gentlemen, and conclude does Ladies this today’s

wonderful disconnect You day. for this and you participation may time. your lines a have at your Thank

Crane NXT (CXT) 29 Jan 192018 Q4 Earnings call transcript