Crane Co. Reports Third Quarter Results

Crane Co. (NYSE: CR), a diversified manufacturer of highly engineered industrial products, reported third quarter 2019 GAAP earnings per diluted share (EPS) of $1.19 compared to $1.59 per diluted share in the third quarter of 2018. Excluding Special Items, third quarter 2019 EPS of $1.40 compared to $1.62 in the third quarter of 2018. (Please see the attached Non-GAAP Financial Measures tables for a detailed reconciliation of reported results to adjusted measures.)

Third quarter 2019 sales were $772 million, a decrease of 10% compared to the third quarter of 2018. The sales decrease was comprised of a $69 million, or 8%, decline in core sales, a $12 million, or 1%, impact from unfavorable foreign exchange, and a $2 million impact from divestitures.

Third quarter 2019 operating profit was $109 million, a decline of 12% compared to $124 million in the third quarter of 2018. Operating profit margin was 14.2% compared to 14.5% last year. Excluding Special Items, third quarter 2019 operating profit was $114 million, a decline of 14% compared to $133 million in the third quarter of 2018. Excluding Special Items, operating profit margin of 14.8% compared to 15.5% 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 commented: "Operationally, we delivered another solid quarter of results. However, at Crane Currency, U.S. Government sales and orders were well below our expectations. During our 3rd quarter, the Federal Reserve issued its annual Currency Print Order to the Bureau of Engraving and Printing; that order for finished banknotes to be delivered during the Federal Reserve’s next fiscal year ending September 30, 2020, was 18% lower than for fiscal 2019, attributed primarily to ‘the intentional use of accumulated unissued inventory.’ We have worked closely with our customer over the last several weeks to gain a deeper understanding of the situation. While U.S. currency in circulation continues to grow, modest overproduction in recent years has resulted in excess inventory, and our shipments will remain at reduced levels during a period of destocking. These inventory adjustments have happened in the past, and we do expect our shipments to revert back to normal levels in the following fiscal year. Consequently, we are reducing our 2019 EPS guidance, excluding Special Items, to a range of $5.90-$6.10, from our prior range of $6.25-$6.45. We remain very excited about the medium- and long-term demand profile for Crane Currency - both with the U.S. Government, as well as with our international customers - and we see many opportunities for growth and profit improvement at this business."

Third Quarter 2019 Segment Results

All comparisons detailed in this section refer to operating results for the third quarter 2019 versus the third quarter 2018.

Sales decreased $3 million, or 1%, driven by $7 million, or 2%, of unfavorable foreign exchange, partially offset by $4 million, or 1.5%, of core growth. Operating margin increased to 12.8%, compared to 10.9% last year, primarily reflecting productivity, repositioning benefits and lower restructuring and related charges. Excluding Special Items, operating margin increased to 13.8%, a 90 basis point increase compared to 12.9% last year. Fluid Handling order backlog was $272 million at September 30, 2019, $280 million at December 31, 2018, and $298 million at September 30, 2018.

Sales decreased $79 million, or 24%, driven by $71 million, or 22%, of core decline, $5 million, or 2%, of unfavorable foreign exchange and a $2 million impact from a divestiture. Operating margin declined to 14.1%, from 17.5% last year, primarily reflecting lower volumes, partially offset by productivity, repositioning benefits and lower acquisition related charges. Excluding Special Items, operating margins declined to 14.5% from 18.5% last year.

Sales increased $8 million, or 4%, driven by higher core sales. Operating margin improved to 23.9%, from 22.4% last year, primarily reflecting productivity and operating leverage on higher volumes. Excluding Special Items, operating margin improved to 24.4%, from 22.5% last year. Aerospace & Electronics' order backlog was $564 million at September 30, 2019, $447 million at December 31, 2018, and $445 million at September 30, 2018.

Sales decreased $10 million, or 17%, driven primarily by lower sales to Recreational Vehicle customers. Operating margin declined to 11.8%, from 14.5%, primarily reflecting lower volumes.

Updating Full Year 2019 Guidance

We are updating our full year 2019 GAAP EPS guidance to a range of $5.55-$5.75 compared to our prior range of $6.00-$6.20 primarily reflecting lower expected Crane Currency sales to the U.S. Government. Excluding Special Items, we are reducing our full year 2019 EPS guidance to a range of $5.90-$6.10 compared to our prior range of $6.25-$6.45.

Full year 2019 free cash flow (cash provided by operating activities less capital spending) is now expected to be in a range of $285 million to $315 million, compared to our prior range of $335 million to $365 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 third quarter financial results on Tuesday, October 29, 2019 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 are detailed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 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)

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