CRANE CO. FINANCIAL OVERVIEW

Transcription

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

2 Financial Overview 2016 Results 2017 Outlook Free Cash Flow and Capital Deployment Long Term Outlook 2

3 2016 Operating Results ($ Millions, except per share amounts) 2016 Change Net Sales $2,748 - Operating Profit* $398 +2% Operating Margin* 14.5% +20 bps Net Income* $251 +4% Free Cash Flow** $ % EPS* $ % 3% EPS Growth Driven by Productivity and Synergy Savings * 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 2016 Report Card What Happened Oil & Gas prices stabilized Strengthening Payment & Merchandising end markets Unfavorable FX Softening aerospace aftermarket Solid execution We Responded Strong productivity and disciplined pricing Continued investments for growth Patience and discipline on M&A Results Strong 14.5% margin*, on flat sales Realized last tranche of MEI synergies and repositioning savings Core growth and margin expansion at Payment & Merchandising Technologies Successful execution of the Space Fence program, while continuing to invest Fluid Handling margins held at 12% despite challenging markets Delivering on Commitments and Investing for the Long Term * Excludes Special Items. Please see non-gaap Financial Measures tables for details. 4

5 Financial Performance Total Sales ($ Billions) Operating Profit** ($ Millions) $3.0 $2.5 $2.0 $2.2 $2.5 $2.6 $2.6 $2.9 $2.7 $2.7 $2.7 $500 $400 $300 $309 $335 $375 $426 $391 $398 $422 $1.5 $241 $200 $1.0 $0.5 $100 $0.0 Organic Growth G* % +4.3% +0.0% 0.3% (1.2%) 2.0% 1% $ G* +120 bps! Margin** 11.1% 12.3% 13.0% 14.5% 14.6% 14.3% 14.5% 15.7% * Reflects midpoint of guidance range. ** Excludes Special Items. Please see non-gaap Financial Measures tables for details. Solid Long-term Track Record 5

6 Adjusted Margin* Adjusted Margin* More Than a Decade of CBS-Driven Results Continuous pursuit of excellence in everything we do Proud of years of solid performance on costs and margins Payment & Merchandising Technologies Fluid Handling 20% 1640 bps Improvement; Further Opportunity 20% 2016 More Than Double 2003 Margin Level 16% 16% 12% 12% 8% 8% 4% 4% 0% 0% * Excludes Special Items. Please see non-gaap Financial Measures tables for details. 6

7 Ongoing Internal Investments Engineering investments driving profitable growth» Sophisticated engineering capabilities» Continue to improve engineering efficiency Capital spending discipline» Consistently below 2% of sales while still investing for growth» Spike in 2016 to support Aerospace testing facility, and investing in Kaohsiung facility in 2017 Engineering ($M and % Sales) Capex ($M and % Sales) $ % $70 2.3% $140 $120 $100 $80 $60 $40 $20 3.2% $83 4.3% 4.6% 4.5% $125 $125 $ % $ % 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% $60 $50 $40 $30 $20 $10 1.1% $29 1.5% 1.4% $44 $40 1.9% 1.9% $51 $50 1.8% 1.3% 0.8% 0.3% $ G 0.0% $ G -0.2% 7

8 Financial Overview 2016 Results 2017 Outlook Free Cash Flow and Capital Deployment Long Term Outlook 8

9 2017 Guidance ($ Millions, except per share amounts) G Change*** Net Sales $2,748 $2,690 (2%) EPS* $4.23 $4.30 $ % Free Cash Flow** $267 $220 $250 (12%) 2017G Core Growth 0% to +2% Divestiture (0.5%) FX Translation (3%) Total Sales Change ~(2%) Other 2017 Guidance Details Adjusted tax rate of 31.3% Corporate expense of $58 million Net interest expense of $36 million Diluted share count of ~60 million Capital expenditures of $50 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. 9

10 2017 Growth Outlook Core Growth % of Crane (2017G*) G* Comments 35% Fluid Handling (1%) (6%) (6%) (2%) = Process end markets at trough 29% Payment & Merchandising Technologies (1%) +6% +9% +11% + Strong underlying growth + Big Payment project 26% Aerospace & Electronics 0% 0% +8% (5%) - Space Fence roll-off + Commercial OE accelerating 10% Engineered Materials +9% +1% +1% +1% +Solid end markets * Reflects midpoint of guidance range. 10

11 2017 Margin* Story G** Comments Fluid Handling 15.6% 12.4% 12.0% 12.0% - Lower Volume + Productivity and Repositioning Payment & Merchandising Technologies 13.0% 15.4% 18.2% 20.5% + Strong volume growth + Ongoing productivity Aerospace & Electronics 20.9% 21.0% 20.1% 22.2% + Mix post-space Fence + Winding down of R&D + Productivity Engineered Materials 14.5% 19.0% 19.1% 19.0% + Productivity + Raw materials (Resin) - Pricing Expect 120 bps of Margin Improvement in 2017 * Excludes Special Items. Please see non-gaap Financial Measures tables for details. ** Reflects midpoint of guidance range. 11

12 2017 Earnings Per Share Guidance ($0.15) Non-Segment Related +$0.45 ($0.10) $4.43 $4.23 Change in Operating Profit 2016A* Core Growth & Net Productivity Currency Shares/Tax 2017G** Core Growth & Strong Productivity Offsets Non-Operational Items * Excludes Special Items. Please see non-gaap Financial Measures tables for details. ** Reflects midpoint of guidance range. 12

13 Financial Overview 2016 Results 2017 Outlook Free Cash Flow and Capital Deployment Long Term Outlook 13

14 Quickly Outgrowing a Shrinking Liability (in $ Millions) Free Cash Flow* Net Asbestos Payments** $ % CAGR $300 $250 $250 $200 $200 $150 $150 $100 $50 $100 $50 (3%) CAGR $ G $ G Free Cash Flow Growing While Asbestos Payments Shrinking * Free Cash Flow is defined as Cash Provided by Operating Activities less Capital Spending. Please see non-gaap Financial Measures tables for details. ** Asbestos payments are net of insurance recovery and tax benefit. 14

15 Free Cash Conversion Improving Free Cash Conversion Free Cash Conversion (Excluding Asbestos) 120% 120% 100% Average 91% 100% Average 100% Average 105% 80% Average 79% 80% 60% 60% 40% G 40% G Structural Improvement in Free Cash Conversion * 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. 15

16 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 16

17 Disciplined Capital Spending Target Capital Spending ~1.5% 2.0% of Sales Going Forward 2.0% 1.9% 1.9% 1.6% 1.5% 1.4% 1.2% 1.1% 0.8% 0.4% 0.0% G* Safety Productivity Growth Investments Support Profitable Growth * Reflects midpoint of guidance range. 17

18 Acquisition Focus Business Focus Comment Fluid Handling Fragmented market creates opportunities Focus on process valves and adjacencies Crane Payment Innovations Continue to explore potential adjacencies Aerospace & Electronics Attractive industry growth profile Numerous potential adjacencies Market valuations challenging 18

19 Acquisition Criteria Strategic criteria» Strengthens existing business, or is a near-adjacency» Manufacturers of highly engineered products» Markets where Crane s scale is a competitive advantage» Accretive to Crane s organic growth rate Financial criteria» Positive NPV using risk adjusted rate» Ideally accretive to adjusted EPS in first year» At or above Crane target margin and free cash profile (including potential) Disciplined Approach to Acquisitions 19

20 Maintain Investment Grade Rating Target 2x 3x adjusted debt to EBITDA» Adjusted debt = Gross financial debt + pension liability + after-tax net asbestos 3.0x 2.0x Adjusted Debt to EBITDA EBITDA excludes Special Items Deploy cash balances and debt capacity 1.0x» Internal investments» Acquisitions 0.0x Appropriate Leverage for Current Credit Rating 20

21 Financial Overview 2016 Results 2017 Outlook Free Cash Flow and Capital Deployment Long Term Outlook 21

22 Long-Term Financial Expectations by Segment Across-the-Cycle Target 2017G* Avg. Organic Growth Segment Margin Organic Growth Segment Margin Fluid Handling +2% 4% 14% 19% (2%) 12.0% Payment & Merchandising Technologies +3% 5% 17% 20% 18% 22% +11% 20.5% Aerospace & Electronics +4% 5% +3%-5% 21% 23% 21% 24% (5%) 22.2% Engineered Materials GDP 12% 16% +1% 19.0% Growth and Margin Opportunities Across the Portfolios * Reflects midpoint of guidance range. 22

23 Summary 1 Great businesses positioned for long-term growth 2 Continuous focus on productivity and self-help will drive margin growth 3 Disciplined capital allocation, with strong free cash flow 4 Both organic and inorganic growth opportunities Goal of EPS Growth Above Market 23

24 US / Canada 96% 24