Crane Company ("Crane," NYSE: CR) today announced its financial
results for the first quarter of 2023 and updated its full-year
outlook. Crane operated as part of Crane Holdings, Co. for the
entire first quarter of 2023 prior to the separation transaction on
April 3, and the historical financial measures presented in this
release were derived from Crane Holdings, Co.'s accounting records
and are presented on a carve-out basis. Crane Holdings, Co.'s (now
renamed Crane NXT, Co.) consolidated results are included as an
appendix to this release, and will be reflected as the historical
results of Crane in future filings, with the Payment &
Merchandising Technologies segment presented as discontinued
operations.
First Quarter 2023 Highlights
- Pro forma earnings per diluted share (EPS) of $1.08, and
Adjusted EPS of $1.25.
- Core year-over-year sales growth of 8% and core year-over-year
backlog growth of 17%.
- GAAP operating profit margin of 16.8%, and record adjusted
operating profit margin of 18.5%.
- Raising Adjusted EPS guidance to a range of $3.60-$3.90, from
prior range of $3.40-$3.70.
- Declaring second quarter dividend of $0.18 per share.
Max Mitchell, Crane President and Chief Executive Officer
stated: “Our separation represents yet another major achievement
and milestone in Crane's history. For decades, we have delivered
consistent and differentiated execution, strengthening our business
by continued investments in our technology development and through
value-creating acquisitions. The separation was the logical next
step in our multi-decade journey from a holding company to an
integrated operating company, and now into two separate strong and
focused independent technology leaders. Today, each is well
positioned to outperform in its respective markets, and each is
equipped with strong management teams to drive continued success. I
am incredibly proud of how the corporate organization executed on
the separation; on-schedule and according to plan. My sincere
thanks to the corporate team for their hard work and effort over
the last year."
“Now that the separation is complete, Crane Company is a
streamlined and more focused business, better positioned to tailor
investment and capital allocation strategies to our two strategic
growth platforms and to attract an investor base fully aligned with
our strong growth and exceptional financial profile. The market's
reaction since we announced the separation in March of last year
validates our strategy, with substantial value already unlocked,
and we are confident that significant value creation lies
ahead."
Mr. Mitchell concluded: "And Crane is off to a fantastic start
as a newly independent company. We delivered very strong first
quarter results, including 8% core sales growth and a record 18.5%
adjusted operating profit margin. These results are another example
of how we have positioned our businesses to deliver accelerating
growth with our consistent and differentiated execution."
First Quarter 2023 Results
First quarter sales declined 5%, with 8% core sales growth more
than offset by an 11% impact from the May 2022 divestiture of Crane
Supply and a 2% impact from unfavorable foreign exchange. Operating
profit margin increased 380 basis points to 16.8% driven by higher
pricing and volumes, as well as productivity and strong execution.
Adjusted operating profit margin increased 460 basis points to
18.5%.
Summary of First Quarter 2023 Results
First Quarter
Change
(unaudited, dollars in millions)
2023
2022
$
%
Net sales
$
514
$
539
$
(25
)
(5
)%
Core sales
45
8
%
Foreign exchange
(9
)
(2
)%
Divestiture impact
(62
)
(11
)%
Operating profit
$
86
$
70
$
16
23
%
Adjusted operating profit*
$
95
$
75
$
20
27
%
Operating profit margin
16.8
%
13.0
%
380bps
Adjusted operating profit margin*
18.5
%
13.9
%
460bps
*Please see the attached Non-GAAP Financial Measures tables
Cash Flow and Other Financial Metrics
During the first quarter of 2023, cash used for operating
activities was $72 million, capital expenditures were $9 million,
and free cash flow (cash provided by operating activities less
capital spending) was negative $81 million. Adjusted free cash flow
(free cash flow excluding cash outflows related to the separation
transaction) was negative $69 million. (Please see the attached
non-GAAP Financial Measures tables.)
As of March 31, 2023, the Company's carve-out financial
statements reflected cash of $292 million with no debt
outstanding.
Subsequent to the quarter-end and the separation, Crane issued a
$300 million term loan and used a portion of the proceeds to pay a
$275 million dividend to Crane NXT, Co. In addition, approximately
$83 million of cash attributed to Crane Company in its carve-out
financial statements was transferred to Crane NXT, Co. as part of
the April 3, 2023 separation transaction.
As of April 4, 2023, Crane Company's cash balance was
approximately $235 million with total gross debt of $300
million.
Rich Maue, Crane Executive Vice President and Chief Financial
Officer, added: "We are emerging from the separation with a strong
balance sheet and robust free cash flow generation. We will deploy
our capital with the same strict financial and strategic discipline
that we have always employed, prioritizing internal investments for
growth followed by M&A and returns to shareholders. Today,
Crane has more than $1 billion in acquisition capacity, and we see
numerous opportunities for value-creating acquisitions to further
accelerate our growth, with the ability to generate enhanced
returns given our track record of successful acquisition
integration and synergy generation."
First Quarter 2023 Segment Results
All comparisons detailed in this section refer to operating
results for the first quarter 2023 versus the first quarter
2022.
Aerospace & Electronics
First Quarter
Change
(unaudited, dollars in millions)
2023
2022
$
%
Net sales
$
180
$
157
$
23
15
%
Operating profit
$
38
$
28
$
10
34
%
Operating profit margin
20.9
%
17.9
%
300bps
Sales of $180 million increased 15% compared to the prior year.
Operating profit margin of 20.9% increased 300 basis points from
last year, primarily reflecting the impact of higher volumes and
pricing. Aerospace & Electronics' order backlog was $645
million as of March 31, 2023 compared to $613 million as of
December 31, 2022, and $508 million as of March 31, 2022.
Process Flow Technologies
First Quarter
Change
(unaudited, dollars in millions)
2023
2022
$
%
Net sales
$
271
$
311
$
(40
)
(13
)%
Core sales
30
10
%
Foreign exchange
(8
)
(3
)%
Divestiture impact
(62
)
(20
)%
Operating profit
$
63
$
49
$
14
29
%
Adjusted operating profit*
$
64
$
51
$
13
25
%
Operating profit margin
23.3
%
15.7
%
760bps
Adjusted operating profit margin*
23.4
%
16.3
%
710bps
*Please see the attached Non-GAAP Financial Measures tables
Sales of $271 million decreased 13%, with 10% core sales growth
more than offset by a 20% impact from the divestiture of Crane
Supply and a 3% impact from unfavorable foreign exchange. Record
operating profit margin increased 760 basis points to 23.3% driven
by strong pricing, volume growth, productivity and execution.
Record adjusted operating profit margin increased 710 basis points
to 23.4%. Process Flow Technologies order backlog was $363 million
as of March 31, 2023 compared to $369 million as of December 31,
2022, and $372 million as of March 31, 2022.
Engineered Materials
First Quarter
Change
(unaudited, dollars in millions)
2023
2022
$
%
Net sales
$
62
$
70
$
(8.0
)
(12
%)
Operating profit
$
11
$
13
$
(2
)
(15
%)
Operating profit margin
18.3
%
19.0
%
(70bps)
Sales of $62 million decreased 12% compared to the prior year.
Operating profit margin declined by 70 basis points to 18.3%,
driven by lower volumes.
Raising 2023 Outlook and Guidance
Mr. Mitchell concluded: “Our portfolio of strong technology
driven businesses is well positioned for growth, and we have
demonstrated consistently differentiated execution across a wide
range of market conditions. As a result, we remain confident in our
ability to navigate the current environment despite some mixed
demand signals in certain end markets and ongoing supply chain
challenges in aerospace and defense end markets. Considering all of
those factors, as well as our strong performance in the first
quarter, we are raising our adjusted EPS guidance by $0.20 to a
range of $3.60 to $3.90, from the prior range of $3.40-$3.70. Our
momentum continues, and we will continue to drive growth and deploy
capital with clear line-of-sight to delivering long-term
sustainable value creation for our shareholders."
Key assumptions for our revised guidance include:
- Total sales growth of approximately 5% (prior +3%) and core
sales growth of approximately 4% to 6% (prior +3% to +5%).
- Adjusted operating margin of ~14.5% (prior 14.1%).
- Corporate cost of ~$70 million (prior $65 million).
- Net non-operating expense of ~$16 million (unchanged).
- Adjusted tax rate of ~23% (unchanged).
- Diluted shares of ~57.3 million (unchanged).
Additional details of our outlook and guidance are included in
the presentation that accompanies this earnings release available
on our website at www.craneco.com in the "investors" section.
Declaring Second Quarter Dividend
Crane announced its quarterly dividend of $0.18 per share for
the second quarter of 2023. The dividend is payable on June 8, 2023
to shareholders of record as of May 31, 2023.
Conference Call
Crane has scheduled a conference call to discuss the first
quarter financial results on Thursday, May 11, 2023 at 10:00 A.M.
(Eastern). All interested parties may listen to a live webcast of
the call at 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.
About Crane Company
Crane Company has delivered innovation and technology-led
solutions for customers since its founding in 1855. Today, Crane is
a leading manufacturer of highly engineered components for
challenging, mission-critical applications focused on the
aerospace, defense, space and process industry end markets. The
Company is comprised of two strategic growth platforms, Aerospace
& Electronics and Process Flow Technologies, as well as the
Engineered Materials segment. Crane has approximately 7,000
employees in the Americas, Europe, the Middle East, Asia and
Australia. For more information, visit www.craneco.com.
Forward-Looking Statements Disclaimer
This press release contains forward-looking statements within
the meaning of the federal securities laws. Forward-looking
statements include all statements that are not historical
statements of fact and those regarding our intent, belief, or
expectations, including, but not limited to: statements regarding
Crane’s portfolio composition and its relationship with Crane NXT,
Co. following the business separation; benefits and synergies of
the separation transaction; strategic and competitive advantages of
Crane; future financing plans and opportunities; and business
strategies, prospects and projected operating and financial
results. We caution investors not to place undue reliance on any
such forward-looking statements.
Words such as “anticipate(s),” “expect(s),” “intend(s),”
“believe(s),” “plan(s),” “may,” “will,” “would,” “could,” “should,”
“seek(s),” and similar expressions, or the negative of these terms,
are intended to identify such forward-looking statements. These
statements are based on management’s current expectations and
beliefs and are subject to a number of risks and uncertainties that
could lead to actual results differing materially from those
projected, forecasted or expected. Although we believe that the
assumptions underlying the forward-looking statements are
reasonable, we can give no assurance that our expectations will be
attained.
Risks and uncertainties that could cause actual results to
differ materially from our expectations include, but are not
limited to: changes in global economic conditions (including
inflationary pressures) and geopolitical risks, including
macroeconomic fluctuations that may harm our business, results of
operation and stock price; the continuing effects from the COVID-19
pandemic on our business and the global and U.S. economies
generally; information systems and technology networks failures and
breaches in data security, theft of personally identifiable and
other information, non-compliance with our contractual or other
legal obligations regarding such information; our ability to source
components and raw materials from suppliers, including disruptions
and delays in our supply chain; demand for our products, which is
variable and subject to factors beyond our control; governmental
regulations and failure to comply with those regulations;
fluctuations in the prices of our components and raw materials;
loss of personnel or being able to hire and retain additional
personnel needed to sustain and grow our business as planned; risks
from environmental liabilities, costs, litigation and violations
that could adversely affect our financial condition, results of
operations, cash flows and reputation; risks associated with
conducting a substantial portion of our business outside the U.S.;
being unable to identify or complete acquisitions, or to
successfully integrate the businesses we acquire, or complete
dispositions; adverse impacts from intangible asset impairment
charges; potential product liability or warranty claims; being
unable to successfully develop and introduce new products, which
would limit our ability to grow and maintain our competitive
position and adversely affect our financial condition, results of
operations and cash flow; significant competition in our markets;
additional tax expenses or exposures that could affect our
financial condition, results of operations and cash flows;
inadequate or ineffective internal controls; specific risks
relating to our reportable segments, including Aerospace &
Electronics, Process Flow Technologies and Engineered Materials;
the ability and willingness of Crane and Crane NXT, Co. to meet
and/or perform their obligations under any contractual arrangements
that are entered into among the parties in connection with the
separation transaction and any of their obligations to indemnify,
defend and hold the other party harmless from and against various
claims, litigation and liabilities; and the ability to achieve some
or all the benefits that we expect to achieve from the separation
transaction.
Readers should carefully review Crane’s financial statements and
the notes thereto, as well as the section entitled “Risk Factors”
in Item 1A of Crane’s Annual Report on Form 10-K for the year ended
December 31, 2022 and the other documents Crane and its
subsidiaries file from time to time with the SEC. Readers should
also carefully review the “Risk Factors” section of the information
statement filed as an exhibit to Crane’s registration statement on
Form 10. These filings identify and address other important risks
and uncertainties that could cause actual events and results to
differ materially from those contained in the forward-looking
statements.
These forward-looking statements reflect management’s judgment
as of this date, and Crane assumes no (and disclaims any)
obligation to revise or update them to reflect future events or
circumstances.
We make no representations or warranties as to the accuracy of
any projections, statements or information contained in this
document. It is understood and agreed that any such projections,
targets, statements and information are not to be viewed as facts
and are subject to significant business, financial, economic,
operating, competitive and other risks, uncertainties and
contingencies many of which are beyond our control, that no
assurance can be given that any particular financial projections
ranges, or targets will be realized, that actual results may differ
from projected results and that such differences may be material.
While all financial projections, estimates and targets are
necessarily speculative, we believe that the preparation of
prospective financial information involves increasingly higher
levels of uncertainty the further out the projection, estimate or
target extends from the date of preparation. The assumptions and
estimates underlying the projected, expected or target results are
inherently uncertain and are subject to a wide variety of
significant business, economic and competitive risks and
uncertainties that could cause actual results to differ materially
from those contained in the financial projections, estimates and
targets. The inclusion of financial projections, estimates and
targets in this press release should not be regarded as an
indication that we or our representatives, considered or consider
the financial projections, estimates and targets to be a reliable
prediction of future events.
(Financial Tables Follow)
CRANE COMPANY (A Business of
Crane Holdings, Co. Prior to the April 3, 2023 Separation
Transaction)
Condensed Statements of
Operations Data
(unaudited, in millions, except
per share data)
Three Months Ended
March 31,
2023
2022
Net
sales:
Aerospace & Electronics
$
180.1
$
157.2
Process Flow Technologies
271.4
311.3
Engineered Materials
62.3
70.4
Total net sales
$
513.8
$
538.9
Operating profit
(loss):
Aerospace & Electronics
$
37.7
$
28.1
Process Flow Technologies
63.3
49.0
Engineered Materials
11.4
13.4
Corporate
(26.1
)
(20.3
)
Total operating profit
$
86.3
$
70.2
Interest income
$
0.9
$
0.3
Interest expense
(6.6
)
(0.7
)
Related party interest income
2.5
3.7
Miscellaneous (expense) income, net
(3.8
)
2.8
Income before income taxes
79.3
76.3
Provision for income taxes
17.5
22.2
Net income
$
61.8
$
54.1
Pro forma earnings per diluted share
(a)
$
1.08
$
0.93
Pro forma average diluted shares
outstanding(a)
57.3
57.9
Pro forma average basic shares
outstanding(a)
56.5
57.1
Supplemental
data:
Cost of sales
$
307.0
$
347.0
Selling, general & administrative
120.5
121.7
Transaction related expenses (b)
11.5
6.0
Repositioning related charges, net (b)
0.2
1.7
Depreciation and amortization (b)
9.6
8.7
Stock-based compensation expense (b)
4.0
3.8
(a) The weighted average shares
outstanding presented are those of Crane Holdings, Co. as March 31,
2023, for purposes of calculating earnings per diluted share of
Crane Company.
(b) Amounts included within Cost of sales
and/or Selling, general & administrative costs.
CRANE COMPANY (A Business of
Crane Holdings, Co. Prior to the April 3, 2023 Separation
Transaction)
Condensed Balance
Sheets
(unaudited, in millions)
March 31, 2023
December 31,
2022
Assets
Current assets
Cash and cash equivalents
$
292.0
$
426.9
Accounts receivable, net
315.6
271.4
Inventories, net
334.1
294.2
Other current assets
146.1
137.9
Total current assets
1,087.8
1,130.4
Property, plant and equipment, net
250.1
248.3
Other assets
200.7
195.6
Goodwill
693.1
690.9
Total assets
$
2,231.7
$
2,265.2
Liabilities and Crane net investment
Current liabilities
Short-term borrowings
$
—
$
399.6
Accounts payable
152.7
179.5
Accrued liabilities
215.6
259.9
Income taxes
12.6
6.8
Total current liabilities
380.9
845.8
Long-term deferred tax liability
47.7
45.5
Other liabilities
240.2
232.2
Total Crane net investment and
noncontrolling interest
1,562.9
1,141.7
Total liabilities and Crane net investment
and noncontrolling interest
$
2,231.7
$
2,265.2
CRANE COMPANY (A Business of
Crane Holdings, Co. Prior to the April 3, 2023 Separation
Transaction)
Condensed Statements of Cash
Flows
(unaudited, in millions)
Three Months Ended
March 31,
2023
2022
Operating activities:
Net income
$
61.8
$
54.1
Depreciation and amortization
9.6
8.7
Stock-based compensation expense
4.0
3.8
Defined benefit plans and postretirement
cost (credit)
5.5
(2.7
)
Deferred income taxes
2.4
5.6
Cash used for operating working
capital
(155.2
)
(134.4
)
Defined benefit plans and postretirement
contributions
(0.3
)
(0.8
)
Environmental payments, net of
reimbursements
(1.3
)
(1.3
)
Asbestos related payments, net of
insurance recoveries
—
(7.5
)
Other
1.9
0.2
Total used for operating activities
$
(71.6
)
$
(74.3
)
Investing activities:
Proceeds from disposition of capital
assets
$
0.1
$
—
Capital expenditures
(8.9
)
(10.5
)
Total used for investing activities
$
(8.8
)
$
(10.5
)
Financing activities:
Net borrowings from issuance of commercial
paper with maturities of 90 days or less
$
—
$
104.0
Repayment of term loan
(400.0
)
—
Net transfers from (to) parent
344.1
(189.8
)
Total provided used for financing
activities
$
(55.9
)
$
(85.8
)
Effect of exchange rate on cash and cash
equivalents
$
1.4
$
(2.8
)
Decrease in cash and cash equivalents
(134.9
)
(173.4
)
Cash and cash equivalents at beginning of
period
426.9
377.3
Cash and cash equivalents at end of
period
$
292.0
$
203.9
CRANE COMPANY (A Business of
Crane Holdings, Co. Prior to the April 3, 2023 Separation
Transaction)
Order Backlog
(unaudited, in millions)
March 31, 2023
December 31,
2022
September 30,
2022
June 30, 2022
March 31, 2022
Aerospace & Electronics
$
644.8
$
613.1
$
591.6
$
534.4
$
508.4
Process Flow Technologies
363.0
368.8
353.7
348.6
372.4
Engineered Materials
16.8
16.2
18.5
22.0
30.4
Total backlog
$
1,024.6
$
998.1
$
963.8
$
905.0
$
911.2
CRANE COMPANY (A Business of
Crane Holdings, Co. Prior to the April 3, 2023 Separation
Transaction)
Non-GAAP Financial
Measures
(unaudited, in millions, except
per share data)
Three Months Ended March
31,
2023
$
Pro forma per Share
(f)
Net sales (GAAP)
$
513.8
Adjusted Operating Profit and Adjusted
Operating Profit Margin
Operating profit (GAAP)
$
86.3
Operating profit margin (GAAP)
16.8
%
Special items impacting operating
profit:
Transaction related expenses,
11.5
Repositioning related charges, net
0.2
Stand-alone corporate costs(c)
(2.9
)
Adjusted operating profit (Non-GAAP)
$
95.1
Adjusted operating profit margin
(Non-GAAP)
18.5
%
Adjusted Net Income and Adjusted Net
Income per Share
Net income (GAAP)
$
61.8
$
1.08
Transaction related expenses
11.5
0.20
Repositioning related charges, net
0.2
—
Interest expense 2022 364-Day term
loan
5.9
0.10
Related party interest income(a)
(2.5
)
(0.04
)
Impact of pension curtailment, settlements
and non-service costs
4.3
0.07
Interest Expense 2023 Term Facility(b)
(4.8
)
(0.08
)
Standalone corporate costs(c)
(2.9
)
(0.05
)
Tax effect of the Non-GAAP adjustments
(1.9
)
(0.03
)
Adjusted net income (Non-GAAP)
$
71.6
$
1.25
Adjusted EBITDA and Adjusted EBITDA
Margin
Net income (GAAP)
$
61.8
Net income margin (GAAP)
12.0
%
Adjustments to net income:
Interest expense, net
3.2
Income tax expense
17.5
Depreciation
8.0
Amortization(d)
1.6
Miscellaneous expense, net
3.8
Transaction related expenses(e)
11.5
Adjusted EBITDA (Non-GAAP)
$
107.4
Adjusted EBITDA Margin (Non-GAAP)
20.9
%
(a) Related party interest with Crane NXT,
a business of Crane Holdings, Co.
(b) Represents interest expense, assuming
the $300 million term loan was obtained on January 1, 2023 and
outstanding for the entire period ended March 31, 2023.
(c) Represents adjustment to general and
administrative expenses assuming Crane Company was spun-off on
January 1, 2023 and was a stand-alone company for the entire period
ended March 31, 2023.
(d) Amortization includes $0.2 million of
deferred financing costs.
(e) Represents transaction‑related
expenses primarily associated with the separation.
(f) The weighted average shares
outstanding presented are those of Crane Holdings, Co. as March 31,
2023, for purposes of calculating earnings per diluted share of
Crane Company.
CRANE COMPANY (A Business of
Crane Holdings, Co. Prior to the April 3, 2023 Separation
Transaction)
Non-GAAP Financial Measures by
Segment
(unaudited, in millions)
Three Months Ended March 31,
2023
Aerospace &
Electronics
Process Flow
Technologies
Engineered Materials
Corporate
Total Company
Net sales
$
180.1
$
271.4
$
62.3
$
—
$
513.8
Operating profit (GAAP)
$
37.7
$
63.3
$
11.4
$
(26.1
)
$
86.3
Operating profit margin (GAAP)
20.9
%
23.3
%
18.3
%
16.8
%
Special items impacting operating
profit:
Transaction related expenses
—
—
—
11.5
11.5
Repositioning related charges, net
—
0.2
—
—
0.2
Stand-alone corporate cost
adjustment(a)
—
—
—
(2.9
)
(2.9
)
Adjusted operating profit
$
37.7
$
63.5
$
11.4
$
(17.5
)
$
95.1
Adjusted operating profit margin
20.9
%
23.4
%
18.3
%
18.5
%
Three Months Ended March 31,
2022
Net sales
$
157.2
$
311.3
$
70.4
$
—
$
538.9
Operating profit (GAAP)
$
28.1
$
49.0
$
13.4
$
(20.3
)
$
70.2
Operating profit margin (GAAP)
17.9
%
15.7
%
19.0
%
13.0
%
Special items impacting operating
profit:
Transaction related expenses
—
—
—
6.0
6.0
Repositioning related charges, net
—
1.7
—
—
1.7
Stand-alone corporate cost
adjustment(b)
—
—
—
(3.2
)
$
(3.2
)
Adjusted operating profit
$
28.1
$
50.7
$
13.4
$
(17.5
)
$
74.7
Adjusted operating profit margin
17.9
%
16.3
%
19.0
%
13.9
%
(a) Represents adjustment to general and
administrative expenses assuming Crane Company was spun-off on
January 1, 2023 and was a stand-alone company for the entire period
ended March 31, 2023.
(b) Represents adjustment to general and
administrative expenses assuming Crane Company was spun-off on
January 1, 2022 and was a stand-alone company for the entire period
ended March 31, 2022.
Totals may not sum due to rounding
CRANE COMPANY (A Business of
Crane Holdings, Co. Prior to the April 3, 2023 Separation
Transaction)
Adjusted Free Cash
Flow
(unaudited, in millions, except
per share data)
Three Months Ended March
31,
Cash Flow Items
2023
Cash used for operating activities
$
(71.6
)
Less: Capital expenditures
(8.9
)
Free cash flow
$
(80.5
)
Adjustments:
Transaction-related expenses(a)
$
11.5
Adjusted free cash flow
$
(69.0
)
(a) Represents transaction-related expenses primarily associated
with the separation.
Crane Company reports its financial results in accordance with
U.S. generally accepted accounting principles (“GAAP”). This press
release includes certain non-GAAP financial measures, including
adjusted operating profit, adjusted operating margin, adjusted EPS,
Free Cash Flow and Adjusted Free Cash Flow, that are not prepared
in accordance with GAAP. These non-GAAP measures are an addition,
and not a substitute for or superior to, measures of financial
performance prepared in accordance with GAAP and should not be
considered as an alternative to operating income, net income or any
other performance measures derived in accordance with GAAP. We
believe that these non-GAAP measures of financial results
(including on a forward-looking or projected basis) provide useful
supplemental information to investors about Crane Company. Our
management uses certain forward looking non-GAAP measures to
evaluate projected financial and operating results. However, there
are a number of limitations related to the use of these non-GAAP
measures and their nearest GAAP equivalents. For example, other
companies may calculate non-GAAP measures differently or may use
other measures to calculate their financial performance, and
therefore our non-GAAP measures may not be directly comparable to
similarly titled measures of other companies.
Reconciliations of certain forward-looking and projected
non-GAAP measures for post-separation Crane Company, including
Adjusted EPS, and Adjusted segment margin to the closest
corresponding GAAP measure are not available without unreasonable
efforts due to the high variability, complexity and low visibility
with respect to the charges excluded from these non-GAAP measures,
which could have a potentially significant impact on our future
GAAP results. For post-separation Crane Company, these forward
looking and projected non-GAAP measures are calculated as
follows:
- "Adjusted operating margin" is calculated as adjusted operating
profit divided by sales. Adjusted operating profit is calculated as
operating profit before Special Items which include repositioning
related charges and transaction related expenses such as tax
charges, professional fees, and incremental costs related to the
separation. We believe that non-GAAP financial measures that
exclude these items provide investors with an alternative metric
that can assist in predicting future earnings and profitability
that are complementary to GAAP metrics.
- "Adjusted EPS" is calculated as adjusted net income divided by
post-separation diluted shares. Adjusted net income is calculated
as net income adjusted for Special Items which include transaction
related expenses such as tax charges, professional fees, and
incremental costs related to the separation; interest expense on
the 364-day term loan related to the 2022 asbestos transaction;
repositioning related charges; pre-separation related party
interest income; the impact of pension curtailments and
settlements; and, standalone corporate cost and interest expense.
We believe that non-GAAP financial measures adjusted for these
items provide investors with an alternative metric that can assist
in predicting future earnings and profitability that are
complementary to GAAP metrics.
We believe that each of the following non-GAAP measures provides
useful information to investors regarding the Company’s financial
conditions and operations:
- "Adjusted Operating Profit" and "Adjusted Operating Margin" add
back to Operating Profit items which are outside of our core
performance, some of which may or may not be non-recurring, and
which we believe may complicate the interpretation of the Company’s
underlying earnings and operational performance. These items
include income and expense such as: transaction related expenses,
repositioning related (gains) charges, and a standalone corporate
cost adjustment to reflect our estimate of what corporate costs
would have been had the separation transaction occurred at the
beginning of the period. These items are not incurred in all
periods, the size of these items is difficult to predict, and none
of these items are indicative of the operations of the underlying
businesses. We believe that non-GAAP financial measures that
exclude these items provide investors with an alternative metric
that can assist in predicting future earnings and profitability
that are complementary to GAAP metrics.
- "Adjusted Net Income" and "Adjusted EPS" exclude items which
are outside of our core performance, some of which may or may not
be non-recurring, and which we believe may complicate the
presentation of the Company’s underlying earnings and operational
performance. These measures include income and expense items that
impacted Operating Profit such as: transaction related expenses,
repositioning related (gains) charges, and a standalone corporate
cost adjustment to reflect our estimate of what corporate costs
would have been had the separation transaction occurred at the
beginning of the period. Additionally, these non-GAAP financial
measures exclude income and expense items that impacted Net Income
and Earnings per Diluted Share such as: interest expense on the 364
Day term loan related to the 2022 asbestos transaction, the impact
of pension curtailments and settlements, pre-separation related
party interest income, and a standalone interest expense
adjustment. These items are not incurred in all periods, the size
of these items is difficult to predict, and none of these items are
indicative of the operations of the underlying businesses. We
believe that non-GAAP financial measures that exclude these items
provide investors with an alternative metric that can assist in
predicting future earnings and profitability that are complementary
to GAAP metrics.
- "Adjusted EBITDA" adds back to net income: net interest
expense, income tax expense, depreciation and amortization,
miscellaneous expense, net, and Special Items including transaction
related expenses. "Adjusted EBITDA Margin" is calculated as
adjusted EBITDA divided by net sales. We believe that adjusted
EBITDA and adjusted EBITDA margin provide investors with an
alternative metric that may be a meaningful indicator of our
performance and provides useful information to investors regarding
our financial conditions and results of operations that is
complementary to GAAP metrics.
- “Free Cash Flow” and “Adjusted Free Cash Flow” provide
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. Free Cash Flow is calculated as cash
provided by operating activities less capital spending. Adjusted
Free Cash Flow is calculated as Free Cash Flow adjusted for certain
cash items which we believe may complicate the interpretation of
the Company’s underlying free cash flow performance such as certain
transaction related cash flow items related to the separation
transaction. These items are not incurred in all periods, the size
of these items is difficult to predict, and none of these items are
indicative of the operations of the underlying businesses. We
believe that non-GAAP financial measures that exclude these items
provide investors with an alternative metric that can assist in
predicting future cash flows that are complementary to GAAP
metrics.
APPENDIX
CRANE HOLDINGS, CO.
Pre-Separation Condensed, Consolidated Statements of Operations
(UNAUDITED)
Three Months Ended
March 31,
(in millions, except per share data)
2023
2022
Net sales
$
842.9
$
871.5
Operating costs and expenses:
Cost of sales
481.3
526.2
Selling, general and administrative
209.4
198.3
Operating profit
152.2
147.0
Other (expense) income:
Interest income
1.0
0.3
Interest expense
(17.0
)
(11.1
)
Miscellaneous (expense) income, net
(2.4
)
3.5
Total other expense, net
(18.4
)
(7.3
)
Income before income taxes
133.8
139.7
Provision for income taxes
28.1
34.7
Net income attributable to common
shareholders
$
105.7
$
105.0
Earnings per share:
Basic
$
1.87
$
1.84
Diluted
$
1.84
$
1.81
Average shares outstanding:
Basic
56.5
57.1
Diluted
57.3
57.9
Dividends per share
$
0.47
$
0.47
CRANE HOLDINGS, CO.
Pre-Separation Condensed,
Consolidated Balance Sheets
(UNAUDITED)
(in millions)
March 31, 2023
December 31, 2022
Assets
Current assets:
Cash and cash equivalents
$
510.2
$
657.6
Accounts receivable, net of allowance for
doubtful accounts of $16.9 as of March 31, 2023 and $14.1 as of
December 31, 2022
499.5
474.7
Inventories, net:
Finished goods
106.0
83.3
Finished parts and subassemblies
74.5
70.7
Work in process
42.3
39.9
Raw materials
270.1
245.9
Inventories, net
492.9
439.8
Other current assets
193.2
179.8
Total current assets
1,695.8
1,751.9
Property, plant and equipment:
Cost
1,268.9
1,250.8
Less: accumulated depreciation
760.9
740.9
Property, plant and equipment, net
508.0
509.9
Long-term deferred tax assets
9.9
8.3
Other assets
184.9
176.0
Intangible assets, net
406.5
416.6
Goodwill
1,530.9
1,527.5
Total assets
$
4,336.0
$
4,390.2
CRANE HOLDINGS, CO. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(UNAUDITED)
(in millions, except per share and share
data)
March 31, 2023
December 31, 2022
Liabilities and equity
Current liabilities:
Short-term borrowings
$
308.5
$
699.3
Accounts payable
247.1
286.6
Accrued liabilities
395.9
464.2
U.S. and foreign taxes on income
23.0
38.1
Total current liabilities
974.5
1,488.2
Long-term debt
880.7
543.7
Accrued pension and postretirement
benefits
153.9
153.2
Long-term deferred tax liability
161.1
162.4
Other liabilities
148.1
138.7
Total liabilities
2,318.3
2,486.2
Commitments and contingencies (Note
10)
Equity:
Preferred shares, par value $0.01;
5,000,000 shares authorized
—
—
Common shares, par value $1.00;
200,000,000 shares authorized, 72,440,983 shares issued
72.4
72.4
Capital surplus
376.8
373.8
Retained earnings
2,901.9
2,822.8
Accumulated other comprehensive loss
(487.8
)
(503.3
)
Treasury stock
(848.1
)
(864.3
)
Total shareholders’ equity
2,015.2
1,901.4
Noncontrolling interests
2.5
2.6
Total equity
2,017.7
1,904.0
Total liabilities and equity
$
4,336.0
$
4,390.2
Share data:
Common shares issued
72,440,983
72,426,389
Less: Common shares held in treasury
15,715,676
16,101,007
Common shares outstanding
56,725,307
56,325,382
CRANE HOLDINGS, CO. AND
SUBSIDIARIES
Pre-Separation Condensed,
Consolidated Statements of Cash Flows
(UNAUDITED)
Three Months Ended
March 31,
(in millions)
2023
2022
Operating activities:
Net income attributable to common
shareholders
$
105.7
$
105.0
Depreciation and amortization
28.6
28.6
Stock-based compensation expense
6.3
5.9
Defined benefit plans and postretirement
credit
5.3
(2.7
)
Deferred income taxes
(0.1
)
(0.9
)
Cash used for operating working
capital
(215.0
)
(183.7
)
Defined benefit plans and postretirement
contributions
(1.8
)
(2.8
)
Environmental payments, net of
reimbursements
(1.3
)
(1.3
)
Asbestos related payments, net of
insurance recoveries
—
(7.5
)
Other
1.5
3.9
Total used for operating activities
(70.8
)
(55.5
)
Investing activities:
Proceeds from disposition of capital
assets
0.1
—
Capital expenditures
(12.9
)
(13.0
)
Total used for investing activities
(12.8
)
(13.0
)
Financing activities:
Dividends paid
(26.6
)
(26.7
)
Reacquisition of shares on open market
—
(175.8
)
Stock options exercised, net of shares
reacquired
12.8
0.7
Debt issuance costs
(4.0
)
—
Net borrowings from issuance of commercial
paper with maturities of 90 days or less
—
104.0
Proceeds from term loan
350.0
—
Repayment of term loan
(400.0
)
—
Total used for financing activities
(67.8
)
(97.8
)
Effect of exchange rates on cash and cash
equivalents
4.0
(5.1
)
Decrease in cash and cash equivalents
(147.4
)
(171.4
)
Cash and cash equivalents at beginning of
period
657.6
478.6
Cash and cash equivalents at end of
period
$
510.2
$
307.2
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230510005561/en/
Jason D. Feldman Vice President, Treasury & Investor
Relations 203-363-7329 www.craneco.com
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