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Crane Co. Reports First Quarter 2020 Results and Provides Update on COVID-19 Impact

Crane Co. (NYSE: CR), a diversified manufacturer of highly engineered industrial products, reported first quarter 2020 GAAP earnings per diluted share (EPS) of $1.05, compared to $1.36 in the first quarter of 2019. Excluding Special Items, first quarter 2020 EPS was $1.15, compared to $1.45 in the first quarter of 2019. We estimate that COVID-19 related factors reduced both GAAP and adjusted EPS in the first quarter by approximately $0.15-$0.20. (Please see the attached Non-GAAP Financial Measures tables for a detailed reconciliation of reported results to adjusted measures.)

First quarter 2020 sales were $798 million, a decline of 4% compared to the first quarter of 2019. The sales decline was comprised of an $80 million, or 10%, decline in core sales and $7 million, or 1%, of unfavorable foreign exchange, partially offset by a $54 million, or 7%, benefit from acquisitions. We believe that the core sales decline was largely attributable to COVID-19 related factors. Including $2.5 million of acquisition-related deferred revenue, sales in the first quarter of 2020 were $800 million, and the acquisition benefit was $56 million. (Please see the attached Non-GAAP Financial Measures tables for a detailed reconciliation of reported results to adjusted measures.)

First quarter 2020 operating profit was $89 million, compared to $114 million in the first quarter of 2019. Operating profit margin was 11.1%, compared to 13.7% last year. Excluding Special Items, first quarter 2020 operating profit was $96 million, compared to $120 million last year. Excluding Special Items, operating profit margin was 12.0%, compared to 14.4% last year. (Please see the attached Non-GAAP Financial Measures tables for a detailed reconciliation of reported results to adjusted measures.)

Max Mitchell, Crane Co. President and Chief Executive Officer stated: "Our businesses all executed extremely well in the quarter despite the impacts of COVID-19 on demand, and on our supply chain and operations. In this difficult period, I have been incredibly proud of Crane's 12,000 global associates who have responded quickly and effectively to the challenges posed by this pandemic. Crane Co. is fortunate to have a deep and experienced leadership team that has managed through multiple downturns in the past, as well as a strong balance sheet with ample liquidity, and a diverse portfolio of strong and durable businesses. I am highly confident in the strength and resilience of Crane’s portfolio, and in our long-term outlook."

Cash Flow, Liquidity, and Other Financial Metrics

Cash used for operating activities in the first quarter of 2020 was $36 million, compared to a use of $100 million in 2019. Capital expenditures in the first quarter of 2020 were $8 million, compared to $20 million last year. First quarter 2020 free cash flow (cash provided by operating activities less capital spending) was negative $43 million reflecting normal seasonality, and compared to negative $120 million last year.

The Company's cash position was $303 million at March 31, 2020, compared to $394 million at December 31, 2019. Total debt was $1,221 million at March 31, 2020, compared to $991 million at December 31, 2019. Neither cash nor debt balances reflect the $343 million 364-day term loan which closed on April 16, 2020.

Rich Maue, Crane Co. Senior Vice President and Chief Financial Officer, added: "Crane Co. is in a solid financial position, with a strong balance sheet and substantial liquidity. We recently further enhanced our liquidity position with a $343 million term loan. As of April 16, 2020, we have liquidity of approximately $811 million, comprised of $549 million in cash, and $262 million available under our revolving credit facility. We expect that we will reduce leverage naturally over the course of 2020."

First Quarter 2020 Segment Results

All comparisons detailed in this section refer to operating results for the first quarter 2020 versus the first quarter 2019.

Fluid Handling

 

 

First Quarter

 

Change

(dollars in millions)

 

2020

 

2019

 

 

 

 

Sales

 

$

 

257

 

 

$

 

274

 

 

$

 

(17

)

 

(6

%)

 

 

 

 

 

 

 

 

 

Operating Profit

 

$

 

28

 

 

$

 

34

 

 

$

 

(6

)

 

(18

%)

Operating Profit, before Special Items*

 

$

 

31

 

 

$

 

36

 

 

$

 

(5

)

 

(14

%)

 

 

 

 

 

 

 

 

 

Profit Margin

 

 

10.9

%

 

 

12.5

%

 

 

 

 

Profit Margin, before Special Items*

 

 

12.2

%

 

 

13.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

*Please see the attached Non-GAAP Financial Measures tables

Sales of $257 million decreased $17 million, or 6%, driven by a $23 million, or 9%, decline in core sales and a $3 million, or $1%, impact from unfavorable foreign exchange, partially offset by a $9 million, or 3%, benefit from an acquisition. Operating profit margin declined to 10.9%, compared to 12.5% last year, primarily reflecting lower volumes and higher acquisition-related and integration charges related to the January 2020 I&S acquisition, partially offset by productivity and repositioning benefits. Excluding Special Items, operating margin declined to 12.2%, compared to 13.3% last year. Fluid Handling order backlog was $293 million at March 31, 2020, compared to $267 million at December 31, 2019, and compared to $285 million at March 31, 2019.

Payment & Merchandising Technologies

 

 

First Quarter

 

Change

(dollars in millions)

 

2020

 

2019

 

 

 

 

Sales

 

$

 

297

 

 

$

 

304

 

 

$

 

(6

)

 

(2

%)

Sales, including acquisition-related deferred revenue*

 

$

 

300

 

 

$

 

304

 

 

$

 

(4

)

 

(1

%)

 

 

 

 

 

 

 

 

 

Operating Profit

 

$

 

26

 

 

$

 

43

 

 

$

 

(17

)

 

(39

%)

Operating Profit, before Special Items*

 

$

 

31

 

 

$

 

47

 

 

$

 

(16

)

 

(34

%)

 

 

 

 

 

 

 

 

 

Profit Margin

 

 

8.9

%

 

 

14.2

%

 

 

 

 

Profit Margin, before Special Items*

 

 

10.3

%

 

 

15.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

*Please see the attached Non-GAAP Financial Measures tables

 

 

 

 

Sales of $297 million decreased $6 million, or 2%, driven by a $47 million, or 15%, decline in core sales and a $4 million, or 1%, impact from unfavorable foreign exchange, partially offset by a $44 million, or 15%, benefit from an acquisition. Including $2.5 million of acquisition-related deferred revenue, sales in the first quarter of 2020 were $300 million. Operating profit margin declined to 8.9%, from 14.2% last year, primarily reflecting lower core volumes, unfavorable mix, and higher acquisition-related and integration charges related to the Cummins Allison acquisition, partially offset by productivity and repositioning benefits. Excluding Special Items, operating profit margin declined to 10.3%, from 15.4% last year.

Aerospace & Electronics

 

 

First Quarter

 

Change

(dollars in millions)

 

2020

 

2019

 

 

 

 

Sales

 

$

 

193

 

 

$

 

195

 

 

$

 

(2

)

 

(1

%)

 

 

 

 

 

 

 

 

 

Operating Profit

 

$

 

44

 

 

$

 

45

 

 

$

 

(1

)

 

(2

%)

Operating Profit, before Special Items*

 

$

 

44

 

 

$

 

45

 

 

$

 

(2

)

 

(4

%)

 

 

 

 

 

 

 

 

 

Profit Margin

 

 

22.7

%

 

 

23.0

%

 

 

 

 

Profit Margin, before Special Items*

 

 

22.7

%

 

 

23.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

*Please see the attached Non-GAAP Financial Measures tables

Sales of $193 million decreased $2 million, or 1%, driven by lower core sales. Operating profit margin declined to 22.7%, from 23.0% last year, primarily reflecting lower core volumes, partially offset by strong productivity. Excluding Special Items, operating profit margin declined to 22.7%, from 23.3% last year. Aerospace & Electronics' order backlog was $548 million at March 31, 2020, compared to a record $567 million at December 31, 2019, and compared to $487 million at March 31, 2019.

Engineered Materials

 

 

First Quarter

 

Change

(dollars in millions)

 

2020

 

2019

 

 

 

 

Sales

 

$

 

51

 

 

$

 

60

 

 

$

 

(9

)

 

(15

%)

 

 

 

 

 

 

 

 

 

Operating Profit

 

$

 

7

 

 

$

 

9

 

 

$

 

(3

)

 

(27

%)

 

 

 

 

 

 

 

 

 

Profit Margin

 

 

13.6

%

 

 

15.8

%

 

 

 

 

Sales decreased $9 million, or 15%, driven primarily by lower sales to Recreational Vehicle customers. Operating margin declined to 13.6%, from 15.8% last year, primarily reflecting lower volumes.

Updating Full Year Outlook

In light of uncertainty regarding the potential impact of the COVID-19 pandemic on demand and operations, Crane Co. is withdrawing all elements of its previously issued full-year 2020 earnings guidance that was originally provided on January 27, 2020, and reiterated at its 2020 Investor Conference held on February 27, 2020. This uncertainty poses unique and substantial challenges for normal forecasting methodologies, making it difficult to accurately project future financial results.

The company’s current and best estimate of full-year 2020 GAAP EPS is $2.35-$3.60, and excluding Special Items, EPS of $3.00-$4.25. Sales are now expected to be $2.8-$3.0 billion, reflecting a core sales decline of approximately 17% to 22%. Full-year 2020 free cash flow (cash provided by operating activities less capital spending) is expected to be in a range of $200-$250 million. (Please see the attached non-GAAP Financial Measures tables.)

Additional Information

Additional information with respect to the Company’s asbestos liability and related accounting provisions and cash requirements is set forth in the Current Report on Form 8-K filed with a copy of this press release.

Conference Call

Crane Co. has scheduled a conference call to discuss the first quarter financial results on Tuesday, April 28, 2020 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 under Investors, Events & Presentations. 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 Co. provides products and solutions to customers in the chemicals, oil & gas, power, automated payment solutions, banknote design and production and aerospace & defense markets, along with a wide range of general industrial and consumer related end markets. The Company has four business segments: Fluid Handling, Payment & Merchandising Technologies, Aerospace & Electronics and Engineered Materials. Crane Co. has approximately 12,000 employees in the Americas, Europe, the Middle East, Asia and Australia. Crane Co. is traded on the New York Stock Exchange (NYSE:CR). For more information, visit www.craneco.com.

This press release may contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. These statements are based on the management’s current beliefs, expectations, plans, assumptions and objectives regarding Crane Co.’s future financial performance and are subject to significant risks and uncertainties. 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 these forward-looking statements. Such factors include, among others: uncertainties regarding the extent and duration of the impact of COVID-19 on many aspects of our business; changes in economic, financial and end-market conditions in the markets in which we operate; fluctuations in raw material prices; the financial condition of our customers and suppliers; economic, social and political instability, currency fluctuation and other risks of doing business outside of the United States; competitive pressures, including the need for technology improvement, successful new product development and introduction and any inability to pass increased costs of raw materials to customers; our ability to value and successfully integrate acquisitions, to realize synergies and opportunities for growth and innovation, and to attract and retain highly qualified personnel and key management; a reduction in congressional appropriations that affect defense spending and our ability to predict the timing and award of substantial contracts in our banknote business; adverse effects on our business and results of operations, as a whole, as a result of increases in asbestos claims or the cost of defending and settling such claims; adverse effects as a result of environmental remediation activities, costs, liabilities and related claims; investment performance of our pension plan assets and fluctuations in interest rates, which may affect the amount and timing of future pension plan contributions; and other risks noted in reports that we file with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and subsequent reports filed with the Securities and Exchange Commission. Such reports are available on the Securities Exchange Commission’s website (www.sec.gov). Crane Co. does not undertake to update any forward-looking statements.

(Financial Tables Follow)

CRANE CO.

Income Statement Data

(in millions, except per share data)

 

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

2019

Net sales:

 

 

 

 

 

Fluid Handling

 

 

$

 

256.7

 

 

$

 

273.7

 

Payment & Merchandising Technologies

 

 

 

297.4

 

 

 

303.8

 

Aerospace & Electronics

 

 

 

192.9

 

 

 

194.6

 

Engineered Materials

 

 

 

50.9

 

 

 

59.6

 

Total net sales

 

 

$

 

797.9

 

 

$

 

831.7

 

 

 

 

 

 

 

Operating profit (loss):

 

 

 

 

 

Fluid Handling

 

 

$

 

28.0

 

 

$

 

34.1

 

Payment & Merchandising Technologies

 

 

 

26.4

 

 

 

43.2

 

Aerospace & Electronics

 

 

 

43.8

 

 

 

44.8

 

Engineered Materials

 

 

 

6.9

 

 

 

9.4

 

Corporate

 

 

 

(16.5

)

 

 

(17.8

)

Total operating profit

 

 

 

88.6

 

 

 

113.7

 

 

 

 

 

 

 

Interest income

 

 

 

0.4

 

 

 

0.6

 

Interest expense

 

 

 

(12.5

)

 

 

(11.9

)

Miscellaneous, net

 

 

 

3.8

 

 

 

2.0

 

Income before income taxes

 

 

 

80.3

 

 

 

104.4

 

Provision for income taxes

 

 

 

17.5

 

 

 

21.9

 

Net income before allocation to noncontrolling interests

 

 

 

62.8

 

 

 

82.5

 

 

 

 

 

 

 

Less: Noncontrolling interest in subsidiaries' earnings

 

 

 

 

 

0.1

 

 

 

 

 

 

 

Net income attributable to common shareholders

 

 

$

 

62.8

 

 

$

 

82.4

 

 

 

 

 

 

 

Share data:

 

 

 

 

 

Earnings per diluted share

 

 

$

 

1.05

 

 

$

 

1.36

 

 

 

 

 

 

 

Average diluted shares outstanding

 

 

59.6

 

 

60.7

 

Average basic shares outstanding

 

 

58.8

 

 

59.8

 

 

 

 

 

 

 

Supplemental data:

 

 

 

 

 

Cost of sales

 

 

$

 

513.3

 

 

$

 

528.0

 

Selling, general & administrative

 

 

 

196.0

 

 

 

190.0

 

Acquisition-related and integration charges 1

 

 

 

5.2

 

 

 

1.1

 

Repositioning related charges, net of gain on property sale 1

 

 

 

0.1

 

 

 

5.3

 

Depreciation and amortization 1

 

 

 

29.9

 

 

 

27.7

 

Stock-based compensation expense 1

 

 

 

5.8

 

 

 

5.5

 

 

1 Amounts included within cost of sales and selling, general & administrative costs.

Totals may not sum due to rounding

CRANE CO.

Condensed Balance Sheets

(in millions)

 

 

March 31,

2020

 

December 31,

2019

Assets

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

 

$

 

302.8

 

 

$

 

393.9

 

Accounts receivable, net

 

 

543.5

 

 

 

555.1

 

Current insurance receivable - asbestos

 

 

14.1

 

 

 

14.1

 

Inventories, net

 

 

489.5

 

 

 

457.3

 

Other current assets

 

 

96.3

 

 

 

79.5

 

Total current assets

 

 

1,446.2

 

 

 

1,499.9

 

 

 

 

 

 

Property, plant and equipment, net

 

 

607.1

 

 

 

616.3

 

Long-term insurance receivable - asbestos

 

 

80.1

 

 

 

83.6

 

Other assets

 

 

766.0

 

 

 

751.5

 

Goodwill

 

 

1,565.2

 

 

 

1,472.4

 

 

 

 

 

 

Total assets

 

$

 

4,464.6

 

 

$

 

4,423.7

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

Current liabilities

 

 

 

 

Short-term Borrowings

 

$

 

378.7

 

 

$

 

149.4

 

Accounts payable

 

 

250.2

 

 

 

311.1

 

Current asbestos liability

 

 

65.0

 

 

 

65.0

 

Accrued liabilities

 

 

350.2

 

 

 

378.2

 

Income taxes

 

 

13.5

 

 

 

13.0

 

Total current liabilities

 

 

1,057.6

 

 

 

916.7

 

 

 

 

 

 

Long-term debt

 

 

842.2

 

 

 

842.0

 

Long-term deferred tax liability

 

 

53.3

 

 

 

55.8

 

Long-term asbestos liability

 

 

631.3

 

 

 

646.6

 

Other liabilities

 

 

472.7

 

 

 

486.3

 

 

 

 

 

 

Total equity

 

 

1,407.5

 

 

 

1,476.3

 

 

 

 

 

 

Total liabilities and equity

 

$

 

4,464.6

 

 

$

 

4,423.7

 

 

Totals may not sum due to rounding

...

CRANE CO.

Condensed Statements of Cash Flows

(in millions)

 

 

 

Three Months Ended

March 31,

 

 

2020

 

2019

Operating activities:

 

 

 

 

Net income attributable to common shareholders

 

$

 

62.8

 

 

$

 

82.4

 

Noncontrolling interest in subsidiaries' earnings

 

 

 

 

0.1

 

Net income before allocations to noncontrolling interests

 

 

62.8

 

 

 

82.5

 

Loss on deconsolidation of joint venture

 

 

 

 

1.2

 

Depreciation and amortization

 

 

29.9

 

 

 

27.7

 

Stock-based compensation expense

 

 

5.8

 

 

 

5.5

 

Defined benefit plans and postretirement credit

 

 

(1.8

)

 

 

(2.0

)

Deferred income taxes

 

 

6.1

 

 

 

5.4

 

Cash used for operating working capital

 

 

(123.7

)

 

 

(203.4

)

Defined benefit plans and postretirement contributions

 

 

(1.5

)

 

 

(4.3

)

Environmental payments, net of reimbursements

 

 

(2.7

)

 

 

(1.6

)

Other

 

 

1.3

 

 

 

(1.7

)

Subtotal

 

 

(23.8

)

 

 

(90.7

)

Asbestos related payments, net of insurance recoveries

 

 

(11.7

)

 

 

(9.7

)

Total used for operating activities

 

 

(35.5

)

 

 

(100.4

)

 

 

 

 

 

Investing activities:

 

 

 

 

Payments for acquisitions, net of cash acquired

 

 

(172.0

)

 

 

Proceeds from disposition of capital assets

 

 

2.4