Crane Co. Reports Operating Results (10-Q)

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Aug 06, 2009
Crane Co. (CR, Financial) filed Quarterly Report for the period ended 2009-06-30.

Crane Co. is a diversified manufacturer of highly engineered industrial products. Crane provides products and solutions to customers in the aerospace electronics hydrocarbon processing petrochemical chemical power generation automated merchandising transportation and other markets. The Company has five business segments: Aerospace & Electronics Fluid Handling Engineered Materials Merchandising Systems and Controls. Crane Co. has a market cap of $1.27 billion; its shares were traded at around $21.71 with a P/E ratio of 10.1 and P/S ratio of 0.5. The dividend yield of Crane Co. stocks is 3.7%.

Highlight of Business Operations:

Concerns about global economic growth for industrial businesses and disruptions in the financial markets have had a significant adverse impact on end markets as well as our operating results and cash flow through the first six months of 2009. During the second quarter of 2009, we experienced a 21% sales decline which exceeded the 18% decline in the first quarter. Reflecting on our operating results for the second quarter 2009 and our expectation of a difficult operating environment for the remainder of the year, we continue to pursue opportunities to ensure our cost structure is properly aligned to demand and to maximize cash flow. We now expect to generate approximately $125 million of cost savings in 2009, compared to our previous estimate of $75 million. We continue to maintain a strong capital structure and liquidity position with $233 million in cash, a $300 million revolving credit agreement (of which $265 million is available) and no near-term debt maturities.

Operating profit was $45.5 million in the second quarter 2009 compared to $86.3 million in the comparable period of 2008. The decline in operating profit was broad-based and driven largely by core business declines in Fluid Handling and Merchandising Systems. Operating profit margins were 8.3% in the second quarter 2009 compared to 12.4% in the comparable period of 2008. Operating profit in the second quarter of 2009 included restructuring charges of $2.3 million.

Aerospace Group sales of $87.7 million decreased $20.5 million, or 18.9%, from $108.3 million in the prior year period. This was largely attributable to declines in commercial original equipment manufacturer (OEM) product sales of 28.4% from the same period last year, which were partially offset by higher military product sales (OEM and spares) and modernization and upgrade product sales. During the second quarter of 2009, sales to OEMs and sales to aftermarket customers were 57.8% and 42.2%, respectively, of total sales, compared to 65.5% and 34.5%, respectively, in the same period last year. Operating profit declined by $2.9 million in the second quarter of 2009, compared to the second quarter of 2008 which was due to the lower OEM sales volumes and the absence of the prior year $5.6 million engineering claim recovery, partially offset by a $7.1 million decline in engineering expenses and savings associated with cost reduction initiatives.

Electronics Group sales of $59.3 million increased $1.5 million, or 2.6%, from $57.8 million in the prior period year primarily driven by stable demand on key military programs. Operating profit increased by $3.5 million in the second quarter of 2009, compared to the second quarter of 2008 due largely to higher sales volumes, strong program execution and savings associated with cost reduction initiatives.

Read the The complete ReportCR is in the portfolios of David Dreman of Dreman Value Management, Charles Brandes of Brandes Investment.