CRANE CO. FINANCIAL OVERVIEW

Transcription

1 CRANE CO. FINANCIAL OVERVIEW RICHARD MAUE CHIEF FINANCIAL OFFICER 1

2 Financial Overview 2017 Results 2018 Outlook Multi-Year Outlook Capital Deployment 2

3 2017 Operating Results ($ Millions, Except per Share Amounts) 2017 Change Net Sales $2,786 +1% Operating Profit* $423 +6% Operating Margin* 15.2% +70 bps Net Income* $274 +9% EPS* $ % Free Cash Flow** $269 +1% 7% EPS Growth Driven by Productivity and Volume * 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

4 Financial Overview 2017 Results 2018 Outlook Multi-Year Outlook Capital Deployment 4

5 2018 Guidance ($ Millions, Except per Share Amounts) G Change*** Net Sales $2,786 $3, % EPS* $4.53 $5.35 $ % Free Cash Flow** $269 $220 $250 (13%) 2018G Core Growth +2% to +4% Acquisitions +15% FX Translation +0.5% Total Sales Change +18.5% Other 2018 Guidance Details Adjusted tax rate of ~22% Corporate expense of ~$60 million Net interest expense* of ~$55 million Diluted share count of ~61 million Capital expenditures of $125 million * 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. 5

6 2018 Adjusted EPS Guidance Tax, net of Investments $5.45 $0.50 ($0.25) $0.15 $0.10 $0.42 $ Adjusted EPS* Core Business Tax Benefit Growth Investments Crane Currency Repositioning 2018G Midpoint* * Excludes Special Items. Please see non-gaap Financial Measures tables for details. 6

7 Financial Performance Total Sales ($ Billions) Operating Profit** ($ Millions) $3.5 $3.3 $500 $484 $3.0 $2.5 $2.0 $2.2 $2.5 $2.6 $2.6 $2.9 $2.7 $2.7 $2.8 $400 $300 $241 $309 $335 $375 $426 $391 $398 $423 $1.5 $200 $1.0 $0.5 $100 $ G* $ G* Organic Growth % +4.3% +0.0% 0.3% (1.2%) 2.0% 1% 3% Margin** 11.1% 12.3% 13.0% 14.5% 14.6% 14.3% 14.5% 15.2% 14.7% Solid Long-term Track Record * Reflects midpoint of guidance range. ** Excludes Special Items. Please see non-gaap Financial Measures tables for details. 7

8 2018 Growth Outlook Core Growth % of Crane (2018G*) G* Comments 33% Fluid Handling (6%) (6%) +2% +3% + Early stages of slow recovery + Growth initiatives 37% Payment & Merchandising Technologies +6% +9% +6% +2% + Strong underlying Payment demand - Challenging comparisons 22% Aerospace & Electronics 0% +8% (7%) +5% + Commercial OE accelerating + Microwave project - Widebody, Cabin, M&U 8% Engineered Materials +1% +1% +7% +2% +Solid end markets today - Late in RV cycle * Reflects midpoint of guidance range. 8

9 2018 Adjusted Segment Margin* Story G** Comments Fluid Handling Payment & Merchandising Technologies Aerospace & Electronics Engineered Materials 12.4% 12.0% 12.0% 13.0% 15.4% 18.2% 20.8% 16.5% 21.0% 20.1% 21.8% 21.5% 19.0% 19.1% 18.0% 18.0% + Volume + Productivity - Growth investments - Crane Currency impact - Growth investments + Productivity + Volume - Growth investments - Microwave mix + Volume + Productivity + Productivity + Volume - Raw materials (resin) Expect Margin Improvement in 2018 ex-accelerated Growth Investments * Excludes Special Items. Please see non-gaap Financial Measures tables for details. ** Reflects midpoint of guidance range. 9

10 Financial Overview 2017 Results 2018 Outlook Multi-Year Outlook Capital Deployment 10

11 EPS Contribution* Multi-Year Outlook: Layers of Growth 6% 8% Underlying Core EBIT Growth $0.50 $0.50 $0.35 $0.35 $0.35 $0.20 $1.00 $0.25 $0.10 $ Crane Currency Accretion Repositioning Benefits Tax Reform net of Investments Additional Upside from Capital Allocation * Excludes Special Items. Please see non-gaap Financial Measures tables for details. 11

12 Long-Term Financial Expectations by Segment Across-the-Cycle Target 2018G* Avg. Organic Growth Segment Margin Organic Growth Segment Margin** Fluid Handling +2% 4% 14% 19% +3% 13.0% Payment & Merchandising Technologies +3% 5% 18% 22% +2% 16.5% Aerospace & Electronics +3% 5% 21% 24% +5% 21.5% Engineered Materials GDP 12% 16% +2% 18.0% Expect Long-Term Core EBIT Growth of Approximately 6% to 8% * Reflects midpoint of guidance range. ** Excludes Special Items. Please see non-gaap Financial Measures tables for details. 12

13 2018 Crane Currency Accretion ($ millions) $74 ($45) ($16) ($3) $ G 18% of $410m Sales Depreciation & Amortization Interest Expense Tax 2018 Net Income Contribution Potential Upside from Repeat of a Portion of Large Contract * Excludes Special Items. Please see non-gaap Financial Measures tables for details. 13

14 2021 Crane Currency Accretion ($ millions) $61 $20 $15 $10 ($4) $ Net income Contribution* Depreciation / Other Volume Productivity Malta 2021 Net Income Contribution Confident in $1.00 EPS Contribution by 2021 * Excludes Special Items. Please see non-gaap Financial Measures tables for details. 14

15 Financial Overview 2017 Results 2018 Outlook Multi-Year Outlook Capital Deployment 15

16 Structural Free Cash Conversion* Improving Free Cash Conversion Free Cash Conversion (Excluding Asbestos) 120% 120% 100% 80% 60% Average 79% Average 102% 115% 110% 105% Average 117% 40% 20% 0% 100% 95% 90% Average 99% Strong Track Record on Operational Free Cash Flow * Free Cash Flow is defined as Cash Provided by Operating Activities less Capital Spending. Free Cash Flow conversion is defined as Free Cash Flow divided by adjusted Net Income. Please see non-gaap Financial Measures tables for details. 16

17 2018 Free Cash Flow* Walk ($ millions) ($23) One-Time Headwinds ($25) $103 ($50) $269 $31 ($35) ($35) $ Free Cash Flow Tax Reform Core Growth, Working Capital, Other Interest Expense and Related Fees Capex (Crane Currency Run-Rate) Capex (Malta, Repositioning, Investments) Repositioning and Growth Investments M&A Integration Costs 2018G Free Cash Flow Major Headwinds Are Temporary * Free Cash Flow is defined as Cash Provided by Operating Activities less Capital Spending. 2018G reflects midpoint of guidance range. 17

18 Capital Deployment Priorities Maintain Investment Grade Credit Rating, While Funding: Internal investments to drive organic growth» Capital Expenditures» Research & Development» Sales & Marketing Acquisitions to enhance growth Competitive returns to shareholders» Target total payout ratio of 40% 50% Growing dividends in-line with earnings Opportunistic share repurchases Pension and legacy liability requirements Focus on Both Organic and Inorganic Growth 18

19 Target Leverage Levels Target 2x 3x adjusted debt to EBITDA, excluding Special Items» Adjusted debt = Gross financial debt + Pension liability + After-tax net asbestos Deploy cash balances and debt capacity» Internal investments» Acquisitions Repatriation expected to accelerate deleveraging Committed to Current Investment Grade Rating 19

20 Commitment to Return Cash 80% 70% 60% 50% 40% 30% 20% 10% 0% 65% 67% 52% Target Range 32% 47% 39% 42% 23% 38% 19% 10% 31% 27% 9% 25% 33% 28% 29% 27% 28% 32% 31% 29% 25% G* Dividend Payout Repurchase Payout Will Maintain Dividend Payout Between 25% 30%, but M&A Prioritized Over Repurchases in Recent Years *2018G based on adjusted EPS guidance midpoint of $5.45 and annual dividend of $

21 Capital Deployment Potential $2.5 $3.0 Billion Available from Incremental Debt Capacity Repatriated Cash Operating Cash Flow Sources M&A and/or repurchases Dividends Capital expenditures Uses ~$1.5B to $2B Available for M&A and/or Repurchases while Retaining Credit Metrics Consistent with Existing Investment Grade Rating Dividends Capital Expenditures Additional Value Creation Potential 21

22 Summary 1 Record performance 2 Markets improving / relentless focus on productivity 3 Disciplined capital allocation with strong free cash flow 4 Exciting multi-year outlook 22

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