Crane Co. Q4 2019 · 2020-01-29 · FORWARD-LOOKING STATEMENTS–DISCLAIMER The information in this presentation includes “forward-looking statements” within the meaning of the

Crane Co. Q4 2019

Earnings Release Call

FORWARD-LOOKING STATEMENTS–DISCLAIMER

The information in this presentation includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements other than historical information or statements about our current condition. You can identify forward-looking statements by the use of terms such as “believes,” “contemplates,” “expects,” “may,” “could,” “should,” “would,” or “anticipates,” other similar phrases, or the negatives of these terms. We have based the forward-looking statements relating to our operations on our current expectations, estimates and projections about us and the markets we serve. We caution you that these statements are not guarantees of future performance and involve risks and uncertainties. In addition, we have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. Accordingly, actual outcomes and results may differ materially from what we have expressed or forecast in the forward-looking statements. Any differences could result from a variety of factors, including those detailed on Page 1 of our Annual Report on Form 10-K for 2018 and in our subsequent disclosures filed with the Securities and Exchange Commission.

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FULL-YEAR 2019 EARNINGS SUMMARY

FY 2019 FY 2018 Change

Sales $3,283 $3,346 (2%)

Operating Profit* $494 $485 +2%

Operating Margin* 15.0% 14.5% +50 bps

Earnings per Share* $6.02 $5.99 +1%

Free Cash Flow** $325 $305 +7%

FY 2019

Core Growth (0.4%)

Acquisitions, net +0.1%

FX Translation (1.6%)

Total Sales Change (1.9%)

FY 2019

Diluted EPS: GAAP $2.20

Asbestos Provision $2.98

Repositioning $0.43

Environmental and Other $0.41

Diluted EPS: non-GAAP $6.02

Additional Details

* Excludes Special Items. Please see non-GAAP Financial Measures tables for details.

** Free cash flow is defined as cash provided by operating activities less capital spending. Please see non-GAAP Financial Measures tables for details. 3

$ Millions except per-share amounts

FULL-YEAR 2019 SEGMENT RESULTS

2019 Sales Growth Composition Segment Margin*

Core M&A, net FX Total 2018 2019 Change

Fluid Handling +3.9% <(0.1%) (2.4%) +1.4% 11.7% 13.6% +190 bps

Payment & Merchandising

Technologies(6.1%) +0.3% (2.0%) (7.9%) 17.4% 16.2% (120 bps)

Aerospace & Electronics +7.5% -- (0.1%) 7.4% 22.2% 24.1% +190 bps

Engineered Materials (14.2%) -- -- (14.2%) 15.5% 12.9% (260 bps)

Crane Co. (0.4%) +0.1% (1.6%) (1.9%) 14.5% 15.0% +50 bps

* Excludes Special Items. Please see non-GAAP Financial Measures tables for details. 4

FY 2019 SEGMENT RESULTS vs. ORIGINAL GUIDANCE**

2019 Core Sales Growth Segment Margin*

2019 Actual

Original Guidance

Change2019

ActualOriginal

GuidanceChange

Fluid Handling +3.9% +4% (10 bps) 13.6% 13.0% +60 bps

Payment & Merchandising Technologies (6.1%) (7%) +90 bps 16.2% 19.0% (280 bps)

Aerospace & Electronics +7.5% +4% +350 bps 24.1% 23.5% +60 bps

Engineered Materials (14.2%) Flat NM 12.9% 15.0% (210 bps)

Crane Co. (0.4%) (2%) to +1% +10 bps 15.0% 15.8% (80 bps)


** Original segment guidance as provided on January 29, 2019. 5

Q4 2019 EARNINGS SUMMARY

Q4 2019 Q4 2018 Change

Sales $838 $840 (0%)



Earnings per Share* $1.58 $1.64 (4%)

Free Cash Flow** $205 $158 +30%

Q4 2019

Core Growth +0.3%

Acquisitions, net (0.0%)



Q4 2019

GAAP net loss per share ($1.89)

Asbestos Provision $3.04

Repositioning $0.15

Environmental and Other $0.30

Diluted EPS: non-GAAP $1.58

Additional Details


** Free cash flow is defined as cash provided by operating activities less capital spending. Please see non-GAAP Financial Measures tables for details.

$ Millions except per-share amounts

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Q4 2019

Core Growth (0.4%)

Divestiture (0.1%)



Q4 2019 Q4 2018 Change

Sales $277 $280 (1%)



Backlog $267 $280 (5%)


FLUID HANDLING

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$ Millions

• Compared to Q3 2019, sequential FX neutral backlog down (4%) and FX neutral orders down (5%)

• Compared to Q4 2018, year-over-year FX neutral backlog down (5%) and FX neutral orders up +1%

• Full year 2019 FX neutral orders flat compared to 2018

Q4 2019 Highlights

Q4 2019

Core Growth +1.5%


Total Sales Change 0.6%

Q4 2019 Q4 2018 Change

Sales $315 $313 +1%

Operating Profit* $55 $57 (2%)

Operating Margin* 17.6% 18.1% (50 bps)


PAYMENT & MERCHANDISING TECHNOLOGIES

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$ Millions

• Closed Cummins Allison acquisition on December 31, 2019

Q4 2019 Highlights

Q4 2019

Core Growth +3.1%

FX Translation –

Total Sales Change +3.1%


AEROSPACE & ELECTRONICS

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Q4 2019 Q4 2018 Change

Sales $203 $197 +3%



Backlog $567 $447 +27%

$ Millions

Q4 2019 Highlights

Q4 2019

OE Sales +3%

Aftermarket Sales +4%

OE/Aftermarket Mix 71% / 29%

• OE growth led by both military and commercial transportation • Very strong military aftermarket growth offset slightly softer commercial spare and commercial modernization & upgrade

ENGINEERED MATERIALS

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Q4 2019 Q4 2018 Change

Sales $43 $51 (14%)

Operating Profit $4 $5 (24%)

Operating Margin 9.4% 10.7% (130 bps)

Q4 2019

Core Growth (14.4%)

FX Translation –


Q4 2019

Recreational Vehicle Sales (27%)

Building Products Sales Flat

Transportation Sales (17%)

• RV wholesale sales remain weak as channel inventory correction continues

$ Millions

Q4 2019 Highlights

* Free cash flow is defined as cash provided by operating activities less capital spending. Please see non-GAAP Financial Measures tables for details. Full-year 2018 Free cash flow includes a $28 million discretionary pension contribution in Q3 2018.

** Excludes Special Items. Please see non-GAAP Financial Measures tables for details.

CASH FLOW, BALANCE SHEET AND TAX

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Q4 2019 Q4 2018 Better/(Worse)

Cash Provided from Operating Activities $223 $191 $32

Capital Expenditures ($18) ($33) $15

Free Cash Flow* $205 $158 $47

Effective (GAAP) Tax Rate 22.9% 14.7% (820 bps)

Non-GAAP (adjusted) Tax Rate** 20.5% 15.9% (460 bps)

Total Debt $991 $949 ($42)

Cash $394 $343 $51

FY 2019 FY 2018 Better/(Worse)

Cash Provided from Operating Activities $394 $414 ($20)

Capital Expenditures ($69) ($109) $40

Free Cash Flow* $325 $305 $20

$ Millions

* Excludes Special Items. Please see non-GAAP Financial Measures tables for details. ** Free Cash Flow is defined as Cash Provided by Operating Activities, less Capital Spending. Please see non-GAAP Financial Measures tables for details.

*** Reflects midpoint of guidance range.

2020 GUIDANCE SUMMARY

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$ Millions except per share amounts 2019 2020G Change***

Net Sales $3,283 $3,510 +7%

Earnings per Share* $6.02 $6.20-$6.50 +5%

Free Cash Flow** $325 $330 - $360 +6%

2020G

Core Growth (2%) to +1%

Acquisitions +8%

FX Translation (0.5%) to (1%)

Total Sales Change +7%

Other 2020 Guidance Details

◼ Adjusted tax rate of ~21.5%

◼ Corporate expense of ~$67 million

◼ Non-operating expense, net* of ~$39 million (inclusive of ~$47 million of net interest expense)

◼ Diluted share count of ~60 million

◼ Capital expenditures of $75 million

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2020 SEGMENT GUIDANCE

• GUIDANCE REFLECTS TEMPORARY MARGIN DILUTION FROM ACQUISITIONS IN FLUID HANDLING

AND PAYMENT & MERCHANDISING TECHNOLOGIES, AS WELL AS 737 MAX DELIVERY PAUSE»13

Core Growth Segment Margin*

2019 2020G 2019 2020G Change

Fluid Handling +4% Flat 13.6% 14.0% +40 bps

Payment & Merchandising Technologies (6%) +1% 16.2% 16.0% (20 bps)

Aerospace & Electronics +8% (3%) 24.1% 23.5% (60 bps)

Engineered Materials (14%) (1%) 12.9% 13.5% +60 bps

Crane Co. (0.4%) (2%) to +1% 15.0% 15.0% Flat


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ASBESTOS RESERVE HISTORY

• NO CHANGE TO MEDIUM-TERM OUTLOOK OF $40-50 MILLION ANNUAL CASH OUTFLOW(NET OF TAX AND INSURANCE)»

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Balance Sheet Items ($ millions) Sept. 30, 2007 Dec. 31, 2011 Dec. 31, 2016 Dec. 31, 2019

Asbestos Liability $1,055 $894 $696 $712

Insurance Receivable ($351) ($225) ($143) ($98)

Net Asbestos Liability $704 $668 $553 $614

Tax Benefit (Then-Current Tax Rate) ($250) ($234) ($194) ($129)

After-Tax Net Asbestos Liability (Then-Current Tax Rate) $454 $434 $359 $485

After-Tax Net Asbestos Liability (Current 21% Tax Rate) $556 $528 $437 $485

Covered Claims End Date 2017* 2021** 2059*** 2059***

* Covered “currently pending claims and future claims projected to be filed …through 2017”

** Covered “currently pending claims and future claims projected to be filed …through 2021”

*** Covered “currently pending claims and future claims projected to be filed …through 2059”

For additional information, please see the Company’s asbestos liability exposure in its Form 8-Ks filed with the SEC on October 22, 2007, January 24, 2012, January 30, 2017, and January 27, 2020

NON-GAAP INFORMATION

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NON-GAAP EXPLANATION

Certain non-GAAP measures have been provided to facilitate comparison with the prior year.

The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). However, management believes that non-GAAP financial measures which exclude certain non-recurring items present additional useful comparisons between current results and results in prior operating periods, providing investors with a clearer view of the underlying trends of the business. Management also uses these non-GAAP financial measures in making financial, operating, planning and compensation decisions and in evaluating the Company's performance.

In addition, Free Cash Flow provides 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. Non-GAAP financial measures, which may be inconsistent with similarly captioned measures presented by other companies, should be viewed in addition to, and not as a substitute for, the Company’s reported results prepared in accordance with GAAP.

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NON-GAAP FINANCIAL MEASURES: INCOME ITEMS (1/2)INCOME ITEMS Three Months Ended Twelve Months Ended Percent Change Percent Change

(in millions, except per share data) December 31, December 31, December 31, 2019 December 31, 2019

2019 2018 2019 2018 Three Months Twelve Months

Net sales 837.5$ 839.7$ 3,283.1$ 3,345.5$ (0.3%) (1.9%)

Operating (loss) proft (135.4) 110.1 210.4 441.3 NM (52.3%)

Percentage of sales -16.2% 13.1% 6.4% 13.2%

Special items impacting operating (loss) profit:

Asbestos provision 229.0 - 229.0 -

Environmental provision 18.9 - 18.9 -

Inventory step-up and backlog amortization - 0.3 - 9.1

Acquisition and integration related charges 1.5 8.4 5.2 19.8

Repositioning related charges 14.1 5.7 30.3 14.7

128.1$ 124.5$ 493.8$ 484.9$ 2.9% 1.8%

Percentage of sales 15.3% 14.8% 15.0% 14.5%

Net (loss) income attributable to common shareholders (112.6)$ 89.2$ 133.3$ 335.6$

Per Share (1.89)$ 1.46$ 2.20$ 5.50$ NM (60.0%)

Asbestos provision - net of tax 180.9 - 180.9 -

Per share 3.04$ 2.98$

Environmental provision - net of tax 14.9 - 14.9 -

Per share 0.25$ 0.25$

Inventory step-up and backlog amortization - net of tax - 0.2 - 6.9

Per share 0.00$ 0.11$

Acquisition and integration related charges - net of tax 1.2 6.5 3.8 15.1

Per share 0.02$ 0.11$ 0.06$ 0.25$

Repositioning related charges - net of tax 9.1 3.9 25.6 10.9

Per share 0.15$ 0.06$ 0.43$ 0.18$

Realized gain on marketable securities - net of tax - - (0.8) -

Per share (0.01)$

Incremental financing costs associated with acquisition - net of tax - - - 2.1

Per share 0.03$

Deconsolidation of joint venture - net of tax - - 0.8 -

Per share 0.01$

Impact of non-cash pension cost adjustment - net of tax * 1.8 - 6.3 -

Per share 0.03$ 0.10$

Impact of tax law change - 0.2 - (5.5)

Per share 0.00$ (0.09)$

95.3$ 100.0$ 364.8$ 365.1$ (4.7%) (0.1%)

Per basic share 1.60$ 1.68$ 6.10$ 6.12$ (4.8%) (0.3%)

Per diluted share 1.58$ 1.64$ 6.02$ 5.99$ (3.7%) 0.5%

* Impact of non-service pension cost adjustment related to a reduction in expected pension returns.

Special items impacting net (loss) income attributable to common shareholders:

Net income attributable to common shareholders before special items

Operating profit before special items

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NON-GAAP FINANCIAL MEASURES: INCOME ITEMS (2/2)

Average basic shares outstanding 59.5

Effect of diluted stock options 0.8

Average shares outstanding including the effect of stock options 60.3

Three Months Ended Twelve Months Ended

December 31, December 31,

Special items impacting provision for income taxes 2019 2018 2019 2018

(Benefit from) provision for income taxes - GAAP basis (33.3)$ 15.4$ 37.1$ 75.9$

Tax effect of asbestos provision 48.1 - 48.1 -

Tax effect of environmental provision 4.0 - 4.0 -

Tax effect of inventory step-up and backlog amortization - - - 2.2

Tax effect of acquisition and integration related charges 0.2 2.0 1.3 4.7

Tax effect of repositioning related charges 5.0 1.7 4.7 3.8

Tax effect of realized gain on marketable securities - - (0.3) -

Tax effect of incremental financing costs associated with acquisition - - - 0.6

Tax effect of deconsolidation of joint venture - - 0.4 -

Tax effect of impact of non-cash pension cost adjustment 0.6 - 2.0 -

Impact of tax law change - (0.2) - 5.5

24.6$ 18.9$ 97.3$ 92.7$

Totals may not sum due to rounding

Provision for income taxes - non-GAAP basis

In the three months ended December 31, 2019, average shares outstanding excluding the effect of diluted stock options were used to compute the per share amounts since this period was in a loss position.

Had net income attributable to common shareholders been reported for this period, average shares outstanding would have included the effect of diluted stock options when computing per share amounts (see

chart below).

When considering the effect of dilutive stock options on shares outstanding, net income attributable to common shareholders before special items is $1.58 per share for the three months ended December 31,

2019.

NON-GAAP FINANCIAL MEASURES: SEGMENT DATA (1/2)

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(in millions)

For the three months ended December 31, 2019 Fluid Handling

Payment &

Merchandising

Technologies

Aerospace &

Electronics Engineered Materials Corporate Total Company

Net sales 277.0$ 314.6$ 202.5$ 43.4$ -$ 837.5$

Operating profit (loss) - GAAP 24.9 52.5 48.0 4.1 (264.9) (135.4)

Asbestos provision, net - - - - 229.0 229.0

Environmental provision, net - - - - 18.9 18.9

Acquisition and integration related charges 0.6 0.8 - - 0.1 1.5

Repositioning related charges 11.8 2.1 0.2 - - 14.1

Operating profit (loss) before special items 37.3$ 55.4$ 48.2$ 4.1$ (17.0)$ 128.1$

Percentage of sales 13.5% 17.6% 23.8% 9.4% 15.3%

For the three months ended December 31, 2018 Fluid Handling

Payment &

Merchandising

Technologies

Aerospace &


Net Sales 279.7$ 312.8$ 196.5$ 50.7$ -$ 839.7$

Operating profit (loss) - GAAP 30.8 46.1 44.2 5.4 (16.4) 110.1

Inventory step-up and backlog amortization - 0.3 - - - 0.3

Acquisition and integration related charges - 8.4 - - - 8.4




For the three months ended September 30, 2019

Payment &

Merchandising

Technologies

Net sales 248.9$

Operating profit - GAAP 35.1

Acquisition and integration related charges 0.1

Repositioning related charges 0.9

Operating profit before special items 36.1$

Percentage of sales 14.5%


NON-GAAP FINANCIAL MEASURES: SEGMENT DATA (2/2)

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(in millions)

For the twelve months ended December 31, 2019 Fluid Handling

Payment &

Merchandising

Technologies

Aerospace &


Net sales 1,117.4$ 1,158.3$ 798.8$ 208.6$ -$ 3,283.1$


Asbestos provision, net - - - - 229.0 229.0

Environmental provision, net - - - - 18.9 18.9

Acquisition and integration related charges 0.6 2.4 - - 2.2 5.2




For the twelve months ended December 31, 2018 Fluid Handling

Payment &

Merchandising

Technologies

Aerospace &


Net sales 1,101.8$ 1,257.0$ 743.5$ 243.2$ $— 3,345.5$


Inventory step-up and backlog amortization 0.4 8.7 - - - 9.1

Acquisition and integration related charges - 19.8 - - - 19.8


Operating profit (loss) before special items 129.2 218.2 165.2 37.8 (65.5) 484.9



NON-GAAP FINANCIAL MEASURES: GUIDANCE & CASH FLOW

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2020 Earnings Per Share Guidance Low High

Earnings per share - GAAP basis 5.75$ 6.05$

Repositioning costs 0.10 0.10

M&A related, net 0.35 0.35

Earnings per share - non-GAAP basis 6.20$ 6.50$

CASH FLOW ITEMS: Three Months Ended Twelve Months Ended Twelve Months Ended

December 31, December 31, December 31,

2019 2018 2019 2018 Low High 2011

Cash provided by operating activities

before asbestos-related payments 235.4$ 208.9$ 435.4$ 477.7$ 455.0$ 485.0$ 229.1$

Asbestos-related payments, net of insurance recoveries (12.5) (17.5) (41.5) (63.9) (50.0) (50.0) (79.3)

Cash provided by operating activities 222.9 191.4 393.9 413.8 405.0 435.0 149.8

Less: Capital expenditures (17.9) (33.2) (68.8) (108.8) (75.0) (75.0) (34.7)

Free cash flow 205.0$ 158.2$ 325.1$ 305.0$ 330.0$ 360.0$ 115.1$


(in millions, except per share data)

2020 Full Year Guidance

2020 Full Year Guidance

Jason D. Feldman

Director of Investor Relations203-363-7329

Documents

Crane Co. Q4 2019 · 2020-01-29 · FORWARD-LOOKING STATEMENTS–DISCLAIMER The information in this presentation includes “forward-looking statements” within the meaning of the