CRANE CO. ANNOUNCES THIRD QUARTER RESULTS
Fluid Handling benefited from the 2001 acquisitions of Crane Process Flow Technologies and Xomox and stronger power generation and marine markets.
STAMFORD, CONNECTICUT - October 18, 2001 - Crane Co. (NYSE: CR) today announced solid third quarter operating results showing a 26% increase in earnings per diluted share on an operating basis over the prior year. Net income for the third quarter of 2001 was $26.4 million or $.44 per share (excluding a loss on disposal of a business of $8.5 million or $.14 per share), compared with $21.4 million or $.35 per share for the third quarter of 2000.
Operating profit for the third quarter of 2001 increased 25% to $46.9 million on sales of $426.2 million compared with $37.7 million on sales of $363.1 million for the third quarter of 2000. Operating profit margins were 11.0% for the third quarter of 2001 compared with 10.4% for the third quarter of 2000. Cash earnings per share (net income excluding non-operating items and goodwill amortization) were $.51 for the third quarter of 2001, compared with $.42 for the third quarter of 2000.
For the nine months ended September 30, 2001, net income (excluding a non-cash special charge and a loss on disposal of a business aggregating $12.5 million or $.21 per share) was $83.1 million or $1.38 per share an increase of 5% over the $1.31 per share for the nine months ended September 30, 2000 ($96.9 million or $1.57 per share including non-operating gains). The special charge relates to the retirement of R. S. Evans as the Company's Chief Executive Officer and represents stock-based retirement costs that previously were being amortized to an anticipated retirement at age 65. The loss on disposal of a business relates to the disposal of the Crane Plumbing business in Canada. During the nine months ended September 30, 2000, a minority investment in a telecommunications power supply venture was sold, generating a non-operating gain of $16.2 million or $.26 per share.
Operating profit for the nine months ended September 30, 2001 was $145.6 million (excluding the special charge) on sales of $1.2 billion compared with $140.6 million on sales of $1.1 billion in 2000. Operating profit margins for the nine months ended September 30, 2001, excluding the special charge, were 12.0% compared with 12.4% for the nine months ended September 30, 2000. Cash earnings per share (excluding the special charge, non-operating items and goodwill amortization) were $1.59 for the nine months ended September 30, 2001 compared with $1.52 for the same period in 2000. Order backlog at September 30, 2001 totaled $518.6 million, an increase of $55.8 million, or 12%, from September 30, 2000 and generally unchanged from the June 30, 2001 level.
On September 28, 2001 the Company sold Powers Process Controls for its carrying value.
The Company has also sold its Canadian Crane Plumbing business recording an after-tax loss of approximately $8.5 million from this transaction in the third quarter 2001. The business has been unprofitable since 1999.
Both Powers Process Controls and Crane Plumbing were not considered strategic core businesses.
During the third quarter Emerson Electric Co. and Crane announced the formation of a joint venture involving Emerson's Commercial Cam unit and Crane's Ferguson business unit. Emerson and Crane contributed their respective operations into a new company, Industrial Motion Control Holdings, LLC. Crane also contributed $12 million of cash into the venture. The new company will continue to go to market under the well-known CAMCO and Ferguson brand names. The Ferguson/Camco joint venture will be accounted for on the equity basis.
During the third quarter of 2001 the Company acquired the aerospace hose product line of Teleflex Fluid Systems and Resistoflex GmbH in transactions totaling approximately $11 million. The hose product line will be integrated into Crane Resistoflex's Jacksonville, Florida facility during the fourth quarter of 2001. Resistoflex GmbH is a manufacturer of Teflon-lined piping products serving the chemical and pharmaceutical markets in Europe.
Continued strong results in Aerospace and Fluid Handling were partially offset by a decline in Engineered Materials. Results in the Merchandising System segment were flat. The Aerospace businesses benefited from stable aircraft production levels and aftermarket shipments in the third quarter. Fluid Handling benefited from the 2001 acquisitions of Crane Process Flow Technologies and Xomox and stronger power generation and marine markets. The Engineered Materials segment was impacted by the slowdown in the economy as it affected the truck trailer and chemical processing industries. Merchandising Systems results were mixed, with strong results at NRI offsetting continued weak performance at National Vendors due to difficult market conditions for the domestic automated vending industry.
Fluid Handling sales increased $53.9 million, or 47%, to $168.7 million for the third quarter of 2001 compared with the third quarter of 2000. Operating profit increased $5.1 million to $11.4 million in the third quarter of 2001 versus $6.3 million in the third quarter of 2000. Operating profit margins were 6.8% in the third quarter of 2001 compared with 5.5% in the third quarter of 2000. Crane's valve businesses increased sales by $58.9 million and operating profit by $6.7 million of which $4.0 million was contributed by the 2001 acquisitions of Xomox and Flow Technologies and the remainder was improved performance at the existing valve business units. Order backlog at September 30, 2001 was $150.6 million, an increase of $62.7 million or 71% from September 30, 2000 due to the addition of the Xomox and Flow Technologies backlog of $41.0 million and valve orders from the power generation and marine markets. Fourth quarter results for this segment will be negatively impacted by costs associated with the consolidation of the Crane Pumps Decatur, Illinois facility into the Piqua, Ohio facility which will total $1.2 million and lower orders in the short cycle businesses sold through distribution. Overall segment results should show improvement in the fourth quarter of 2001 over the prior year reflecting a strong order backlog in the marine and power generation markets, higher valve service revenue and the addition of Xomox and Flow Technologies.
Crane's financial position remains strong. Net debt to capital was 34.7% at September 30, 2001 compared with 37.7% at June 30, 2001. Operating activities generated $63 million in cash flow for the third quarter of 2001 allowing the company to invest $12 million in the joint venture, $11 million for acquisitions, $10 million in capital equipment, reduce debt by $24 million and return $6 million to the shareholders through a dividend.
The $20 million proceeds for the two businesses sold were received in October 2001 and are not reflected in the above financial ratios. The Company expects net debt to capital to be approximately 30% at year end 2001.
Outlook for 4th Quarter of 2001 and Year 2002
Although third quarter results were strong as planned, the severe downturn in our commercial aerospace business after the events of September 11th and the ripple effect this has had on our short cycle Valve, Engineered Materials and Merchandising Systems businesses, have resulted in a revised outlook for the fourth quarter of 2001 and the year 2002. We currently expect fourth quarter results to be down approximately 30% from the $.44 per share reported a year ago.
The drastic nature of the September 11th events makes it difficult to accurately project the effect on our customers and our businesses. However, as we move into 2002, we expect a gradual improvement in operating results from quarter to quarter as confidence in the economy improves, increasing Aerospace aftermarket shipments and orders in our short cycle Valve, Engineered Materials and Merchandising Systems businesses. We do not expect, however, that these improvements will be able to completely offset the significant decline in commercial and regional jet production levels in 2002 from 2001 or the strong results at NRI in 2001 from the euro conversion. We view 2002 as a year to strengthen the market position of our existing businesses utilizing our strong cash flow and the flexibility of our balance sheet.
These projections do not include the favorable impact of the change in accounting for goodwill in 2002. Goodwill amortization in 2001 will total approximately $18 million or $.29 per share.
Crane Co. is a diversified manufacturer of engineered industrial products.
Source: Crane Co.