Crane Co. Financial Overview. Richard Maue, Chief Financial Officer

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Transcription:

Crane Co. Financial Overview Richard Maue, Chief Financial Officer

AGENDA 2018 Results 2019 Outlook Multi-Year Outlook Capital Deployment 2

FULL-YEAR 2018 EARNINGS SUMMARY $ Millions except per share amounts 2018 2017 Change Sales $3,345 $2,786 +20% Operating Profit* $506 $423 +20% Operating Margin* 15.1% 15.2% (10 bps) Earnings per Share* $5.99 $4.53 +32% Free Cash Flow** $305 $269 +14% Additional Details 2018 Core Growth +2.8% Acquisitions, net +16.9% FX Translation +0.4% Total Sales Change +20.1% 2018 Diluted EPS: GAAP $5.50 M&A Related Items $0.40 Repositioning $0.18 Impact of Tax Law Change ($0.09) Diluted EPS: non-gaap $5.99 * 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

2018 SEGMENT RESULTS vs. ORIGINAL GUIDANCE* Core Sales Growth Segment Margin** 2018 Actual Original Guidance Change 2018 Actual Original Guidance Change Fluid Handling +4.3% +3% +130 bps 13.1% 13.0% +10 bps Payment & Merchandising Technologies +1.6% +2% (40 bps) 17.6% 16.5% +110 bps Aerospace & Electronics +7.5% +5% +250 bps 22.3% 21.5% +80 bps Engineered Materials (11.7%) +2% NM 15.6% 18.0% (240 bps) Crane Co. +2.8% +2% to +4% (20 bps) 15.1% 14.7% +40 bps * Original segment guidance as provided on January 30, 2018. ** Excludes Special Items. Please see non-gaap Financial Measures tables for details. ALL THREE GLOBAL GROWTH PLATFORMS EXCEEDED EXPECTATIONS IN 2018 4

AGENDA 2018 Results 2019 Outlook Multi-Year Outlook Capital Deployment 5

2019 SUMMARY GUIDANCE $ Millions except per share amounts 2018 2019G Change*** Net Sales $3,345 $3,296 (2%) EPS* $5.99 $6.25 - $6.45 +6% Free Cash Flow** $305 $335 - $365 +15% 2019G Other 2019 Guidance Details Core Growth (2%) to +1% Acquisitions FX Translation (1.5%) Total Sales Change (2%) Adjusted tax rate of ~21% Corporate expense of ~$65 million Net interest expense of ~$45 million Non-operating income of ~$15 million Diluted share count of ~61.1 million Capital expenditures of ~$90 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 EPS and Free Cash Flow guidance ranges. 6

2019 EPS* GUIDANCE +13% Non-Repeating Benefits from 2018 * Excludes Special Items. Please see non-gaap Financial Measures tables for details. 7

FINANCIAL PERFORMANCE Total Sales ($ Billions) $2.2 $2.5 $2.6 $2.6 $2.9 $2.7 $2.7 $2.8 $3.3 $3.3 Operating Profit* ($ Millions) $304 $341 $373 $410 $379 $384 $409 $485 $521 $244 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019G** 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019G Core Growth +0.6% +9.8% +4.3% +0.0% +0.3% (1.2%) 2.0% 1.1% 2.8% (0.5%) Operating Margin* 11.2% 12.1% 13.2% 14.4% 14.0% 13.8% 14.0% 14.7% 14.5% 15.8% SOLID LONG-TERM TRACK RECORD * Excludes Special Items. Please see non-gaap Financial Measures tables for details. ** Reflects midpoint of core growth guidance range. 8

2019 GROWTH OUTLOOK Core Growth % of Crane (2019G*) 2015 2016 2017 2018 2019G* Comments 34% Fluid Handling (6%) (6%) +2% +4% +4% + Growth initiatives + Continued moderate market growth 35% Payment & Merchandising Technologies +6% +9% +6% +2% (7%) - Challenging comparisons + Strong underlying demand 24% Aerospace & Electronics 0% +8% (7%) +8% +4% + Commercial OE accelerating + Solid defense spending - Microwave project comparison - Initial provisioning timing 7% *Reflects midpoint of guidance range. Engineered Materials +1% +1% +7% (12%) Flat - RV retail / wholesale demand soft + Solid execution and pricing PAYMENT & MERCHANDISING TECHNOLOGIES CORE GROWTH UP 3% TO 5% EXCLUDING TWO LARGE CUSTOMER PROJECTS IN 2018 9

2019 SEGMENT MARGIN* OUTLOOK Segment Margin* 2015 2016 2017 2018 2019G Comments Fluid Handling Payment & Merchandising Technologies Aerospace & Electronics Engineered Materials 11.6% 10.9% 11.1% 11.7% 13.0% 15.1% 17.9% 20.5% 17.4% 19.0% 21.0% 20.1% 21.8% 22.2% 23.5% 19.0% 19.1% 18.0% 15.5% 15.0% + Volume + Productivity + Facility consolidation + Productivity + Facility consolidation - Volume + Volume + Productivity + Facility consolidation - Volume - Raw materials (resin) + Productivity and price * Excludes Special Items. Please see non-gaap Financial Measures tables for details. EXPECT 130 BASIS POINT IMPROVEMENT IN CONSOLIDATED OPERATING MARGIN 10

AGENDA 2018 Results 2019 Outlook Multi-Year Outlook Capital Deployment www.craneco.com 11

MULTI-YEAR EPS* GROWTH VIEW $5.99 $6.35 $7.50 $8.00 $4.53 2017 2018 2019G** 2020 2021 * Excludes Special Items. Please see non-gaap Financial Measures tables for details. ** Reflects midpoint of EPS guidance range. 12

LONG-TERM FINANCIAL EXPECTATIONS BY SEGMENT Across-the-Cycle Target 2019G* Avg. Core Growth Segment Margin Core Growth Segment Margin** Fluid Handling Payment & Merchandising Technologies Aerospace & Electronics Engineered Materials +2% 4% 14%-19% 13% 18% Reflects new pension accounting +4% 13.0% +3% 5% 18% 22% (7%) 19.0% +3% 5% 21% 24% +4% 23.5% GDP 12% 16% Flat 15.0% * Reflects midpoint of guidance range. ** Excludes Special Items. Please see non-gaap Financial Measures tables for details. EXPECT LONG-TERM CORE EBIT GROWTH OF APPROXIMATELY 6% TO 8% 13

CRANE CURRENCY ON-TRACK FOR $1.00 EPS BY 2021 $0.28 Large Project * Excludes Special Items. Please see non-gaap Financial Measures tables for details. ROBUST PIPELINE OF PROJECTS FOR GROWTH 14

AGENDA 2018 Results 2019 Outlook Multi-Year Outlook Capital Deployment 15

STRUCTURAL FREE CASH CONVERSION* IMPROVING Free Cash Conversion 120% Free Cash Conversion (Excluding Asbestos) 120% 100% Average 102% 100% Average 99% Average 110% 80% Average 78% 84% 80% 60% 60% 40% 40% 20% 20% 0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 STRONG TRACK RECORD ON OPERATIONAL FREE CASH FLOW 0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 *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 Net Income excluding Special Items. Please see non-gaap Financial Measures tables for details. 16

2018 FREE CASH FLOW* CONVERSION $ Millions $365 $34 $367 $28 $305 100% FCF Conversion 84% FCF Conversion Net Income** Free Cash Flow* Discretionary Pension Contribution Malta/Repositioning Capex*** Adjusted 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 Net Income excluding Special Items. Please see non-gaap Financial Measures tables for details. ** Excludes Special Items. Please see non-gaap Financial Measures tables for details. *** Normalized capital expenditures are expected to be approximately $75 million per year after the completion of the Malta facility and the conclusion of repositioning activities. 17

2019 FREE CASH FLOW* CONVERSION $ Millions $388 $40 $378 $350 ($12) 90% FCF Conversion 95% 100% FCF Conversion Net Income** Free Cash Flow* Pension Contribution*** Malta/Repositioning Cash Costs*** Adjusted 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 Net Income excluding Special Items. Values represent the midpoint of 2019 guidance. Please see non-gaap Financial Measures tables for details. ** Excludes Special Items. Please see non-gaap Financial Measures tables for details. *** Normalized capital expenditures are expected to be approximately $75 million per year after the completion of the Malta facility and the conclusion of ongoing repositioning activities, and Normalized pension contribution should be approximately $15 million per year. Expected 2019 non-gaap repositioning operating expenses are $25 million. 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 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 Debt to EBITDA* 12/31/2017 ~2.7X Deploy cash balances and debt capacity Internal investments Acquisitions 1/31/2018 12/31/2018 ~4.1X ~2.5X COMMITTED TO CURRENT INVESTMENT GRADE RATING *Debt to EBITDA calculated using the methodology published by Moody s including adjustments for asbestos, pension, leases, Special Items and other adjustments. 20

COMMITMENT TO RETURN CASH 80% 70% 65% 67% 60% 50% 40% 30% 32% 39% 52% 23% 27% 47% 42% 19% 10% 31% 38% 9% 37% 14% Average Range 40% 50% 25% 20% 10% 33% 28% 29% 27% 28% 32% 31% 29% 23% 25% 0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019G* Dividend Payout Repurchase Payout *2019G based on adjusted EPS guidance midpoint of $6.35 and annual dividend of $1.56. WILL MAINTAIN DIVIDEND PAYOUT BETWEEN 25% 30%, BUT M&A PRIORITIZED OVER REPURCHASES IN RECENT YEARS 21

CAPITAL DEPLOYMENT POTENTIAL $2.5 $3.0 Billion Available from 2018 2021 Incremental Debt Capacity Repatriated Cash Operating Cash Flow Sources ADDITIONAL VALUE CREATION POTENTIAL M&A and/or Repurchases Dividends Dividends Capital Expenditures Capital Expenditures Uses ~$1.5B to $2B Available for M&A and/or Repurchases while Retaining Credit Metrics Consistent with Existing Investment Grade Rating 22

FOCUSED ON SUSTAINABLE SHAREHOLDER RETURN Performance Focus Growth (3% 5%) Earnings (>10%) FCF (100% of NI) Sustainable TSR Capital Deployment 23

www.craneco.com