Crane Co. Reports Second Quarter Results; Increases Quarterly Dividend by 20%; Raises Annual EPS Guidance

Crane Co. (NYSE: CR), a diversified manufacturer of highly engineered industrial products, reports second quarter 2007 net income was $45.7 million, or $.75 per share. These results included a $7.6 million pretax provision ($5.4 million after tax, or $0.09 per share) in connection with a previously disclosed civil false claims proceeding by the U.S. Government for which a settlement agreement has been substantially negotiated but not yet executed. Excluding the provision, second quarter 2007 earnings per share would have been $.84, exceeding the high end of the Company’s guidance of $.74 to $.82. Second quarter 2006 net income was $44.5 million, or $.71 per share. Including the $7.6 million pretax provision, second quarter 2007 operating profit of $71.8 million rose 9% compared to $66.1 million in the prior year quarter. Excluding the provision, second quarter 2007 operating profit of $79.4 million would have risen 20% compared to $66.1 million in the prior year quarter. Second quarter 2007 miscellaneous income was $0.9 million. Second quarter 2006 miscellaneous income of $4.4 million benefited from a $4.1 million overall gain resulting from the sale of two businesses and certain unused property. Excluding the $7.6 million pretax provision in 2007 and the miscellaneous gain of $4.1 million in 2006, income before income taxes would have increased 20% to $74.4 million in the second quarter of 2007 compared with $61.8 million in 2006, and earnings per share would have increased 25% to $.84 compared with $.67 in 2006. Please see the attached Non-GAAP schedule for details. Second quarter 2007 sales increased $102.7 million, or 18%, including core business growth of $42.3 million (8%), sales from acquired businesses (net of divestitures) of $48.1 million (8%) and favorable foreign currency translation of $12.3 million (2%). Order backlog at June 30, 2007 totaled $739 million, 16% higher (15% higher excluding acquisitions) than the backlog of $637 million at June 30, 2006 and 9% higher than $677 million at December 31, 2006. "I am pleased with our operating performance this quarter. Our second quarter operating results, excluding the one-time charge for the anticipated settlement with the Government, were considerably ahead of the second quarter of 2006,” said Crane Co. president and chief executive officer, Eric C. Fast. "Strong year-over-year improvement in operating profits and margins in our Engineered Materials business and the positive impact of the 2006 acquisitions on our Merchandising Systems businesses were key drivers of our results. The 20% increase in our quarterly dividend and the increase in our annual earnings guidance reflect confidence in our future performance.” Cash Flow and Financial Position Cash provided by operating activities was $33.9 million in the second quarter of 2007 compared to $50.3 million last year, reflecting increased working capital requirements to support higher sales, and higher net asbestos payments. Net debt to total capitalization was 21.3% at June 30, 2007, compared to 22.2% at December 31, 2006. In the second quarter of 2007, the Company repurchased 226,260 shares of its common stock on the open market at a cost of $10 million. (Please also see the attached Condensed Statement of Cash Flows and the Non-GAAP Financial Measures.) Dividend Increase On July 23, 2007, the Company announced a 20% increase in the quarterly dividend from $.15 per share to $.18 per share, for an indicated annual dividend rate of $.72 per share. The new dividend rate will become effective with the third quarter 2007 dividend. This is the third consecutive year the Company has increased its dividend. Segment Results All comparisons below refer to the second quarter 2007 versus the second quarter 2006, unless otherwise specified. Aerospace & Electronics   Second Quarter Change (dollars in millions) 2007 2006 Sales $ 160.2 $ 141.5 $ 18.7 13 % Operating Profit $ 24.4 $ 26.0 ($ 1.6 ) (6 %) Profit Margin 15.2 % 18.4 % The second quarter 2007 sales increase of $18.7 million reflected a sales increase of $15.8 million in the Aerospace Group and an increase of $2.9 million in the Electronics Group. Segment operating profit declined as a result of the decrease in the Aerospace Group. Aerospace Group sales of $106.4 million increased $15.8 million, or 17%, from $90.6 million in the prior year period. Resistoflex Aerospace, which was sold in May 2006, had sales of $1.9 million in the second quarter of 2006. Excluding Resistoflex Aerospace, sales increased $17.7 million or 20% over the second quarter of 2006. As expected, the $1.7 million decrease in operating profit resulted from higher engineering spending of $6.9 million largely on programs to be completed in the next six to twelve months, which more than offset the profits associated with higher sales. Electronics Group sales of $53.8 million increased $2.9 million, or 6%, due to higher sales in power, microwave and microelectronic solutions. Operating profit was equal to the second quarter of 2006. Strong orders this year in the custom power, microelectronics and electronic manufacturing services businesses resulted in the Electronics backlog at the end of the second quarter being $154 million, or 8%, higher than the prior year. The Aerospace & Electronics segment backlog was $394 million at June 30, 2007 compared with $370 million at June 30, 2006 and $397 million at December 31, 2006. Engineered Materials   Second Quarter Change (dollars in millions) 2007 2006 Sales $ 87.7 $ 82.3 $ 5.4 7 % Operating Profit $ 17.9 $ 13.2 $ 4.7 36 % Profit Margin 20.4 % 16.0 % Second quarter 2007 sales were higher than the prior year period as sales of $14.6 million from Noble Composites, acquired in September 2006, more than offset lower volumes to the Company’s traditional recreational vehicle, transportation and building products customers. Operating profit in 2007 increased as the benefit of the Noble acquisition, lower product support costs in the recreational vehicle market and improved manufacturing efficiencies offset the impact of lower volume in the base business. Merchandising Systems   Second Quarter Change (dollars in millions)   2007     2006   Sales $ 100.6 $ 53.6 $ 47.0 88 % Operating Profit $ 11.9 $ 4.5 $ 7.4 164 % Profit Margin 11.8 % 8.3 % Merchandising Systems sales increased $47.0 million, or 88%, driven primarily by increased sales of $35.4 million from the Telequip, Dixie-Narco, and Automatic Products acquisitions. Overall operating profit, including the favorable impact of the acquisitions, improved by $7.4 million as a result of higher margins and effective leverage of the strong sales growth in traditional international payment systems markets. Fluid Handling   Second Quarter Change (dollars in millions) 2007 2006 Sales $ 281.4 $ 250.0 $ 31.4 13 % Operating Profit $ 33.4 $ 29.9 $ 3.5 12 % Profit Margin 11.9 % 12.0 % Second quarter 2007 sales increased $31.4 million, or 13%, including $21.9 million (9%) of core sales and favorable foreign currency translation of $9.5 million (4%). Operating profit increased $3.5 million, or 12%. Margins remained at 12% reflecting more price competitive project work and investments in new products and systems to support future growth. The Fluid Handling segment backlog was $259 million at June 30, 2007, compared with $199 million at June 30, 2006 and $211 million at December 31, 2006. The 30% increase in backlog over the second quarter of 2006 reflects increased global demand particularly from the chemical / pharmaceutical and energy industries, and generally higher demand from many commercial applications. Controls   Second Quarter Change (dollars in millions) 2007 2006 Sales $ 31.2 $ 30.9 $ 0.3 1 % Operating Profit $ 2.9 $ 3.3 ($0.4 ) (12 %) Profit Margin 9.1 % 10.5 % On flat sales, operating profit declined $0.4 million primarily because of planned new product and new market development costs. Third Quarter and Full Year 2007 Guidance Management provided earnings guidance of $0.72 - $0.80 for the third quarter of 2007, compared to actual earnings per share of $0.74 in the third quarter of 2006, which included a $4.9 million pretax benefit, or $0.05 per share, from a reimbursement from the Department of Defense for environmental clean-up costs. Management increased its earnings guidance for the full year 2007 from a range of $2.80 - $2.95 per share to $2.90 - $3.05 per share; this guidance is for normal business operations and excludes items such as the $0.09 per share provision for the anticipated settlement with the U.S. Government. Including that provision, the Company’s earnings guidance for the full year 2007 is $2.81 - $2.96 per share. As previously disclosed, the Company will discontinue providing quarterly earnings guidance in 2008. Management continues to expect free cash flow (cash flow from operations less capital expenditures) in 2007 will be in the range of $175-$190 million. Please see the Non-GAAP Financial Measures table attached to this press release for details. Additional information with respect to the Company’s asbestos liability and related accounting provisions and cash requirements is set forth in the Current Report on Form 8-K filed with a copy of this press release. Conference Call Crane Co. has scheduled a conference call to discuss the second quarter’s financial results on Tuesday, July 24th, 2007 at 10:00 A.M. (Eastern). All interested parties may listen to a live webcast of the call at http://www.craneco.com. An archived webcast will also be available to replay this conference call directly from the Company’s website. Crane Co. is a diversified manufacturer of highly engineered industrial products. Founded in 1855, 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, Engineered Materials, Merchandising Systems, Fluid Handling, and Controls. Crane has approximately 12,000 employees in North America, South America, Europe, Asia and Australia. Crane Co. is traded on the New York Stock Exchange (NYSE:CR). For more information, visit www.craneco.com. This press release may contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. These statements present management’s expectations, beliefs, plans and objectives regarding future financial performance, and assumptions or judgments concerning such performance. Any discussions contained in this press release, except to the extent that they contain historical facts, are forward-looking and accordingly involve estimates, assumptions, judgments and uncertainties. There are a number of factors that could cause actual results or outcomes to differ materially from those addressed in the forward-looking statements. Such factors are detailed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006 and subsequent reports filed with the Securities and Exchange Commission. CRANE CO. Income Statement Data (in thousands, except per share data)   Three Months Ended Six Months Ended June 30, June 30, 2007 2006 2007 2006 Net Sales: Aerospace & Electronics $ 160,172 $ 141,453 $ 308,564 $ 280,993 Engineered Materials 87,712 82,345 175,461 168,295 Merchandising Systems 100,563 53,625 197,927 106,182 Fluid Handling 281,411 249,995 544,535 492,173 Controls 31,244 30,904 63,006 60,233 Intersegment Elimination (205) (171) (378) (343) Total Net Sales $ 660,897 $ 558,151 $ 1,289,115 $ 1,107,533   Operating Profit: Aerospace & Electronics $ 24,365 $ 25,967 $ 45,391 $ 48,373 Engineered Materials 17,933 13,151 33,971 28,890 Merchandising Systems 11,912 4,462 21,543 8,214 Fluid Handling 33,396 29,931 64,537 55,409 Controls 2,855 3,254 5,202 4,793 Corporate * (18,664) (10,675) (30,448) (22,372) Total Operating Profit 71,797 66,090 140,196 123,307   Interest Income 989 903 2,302 1,611 Interest Expense (6,901) (5,496) (13,769) (11,023) Miscellaneous- Net ** 931 4,422 2,744 5,681 Income Before Income Taxes 66,816 65,919 131,473 119,576 Provision for Income Taxes 21,080 21,456 42,092 37,714 Net Income $ 45,736 $ 44,463 $ 89,381 $ 81,862   Share Data: Net Income per Diluted Share $ 0.75 $ 0.71 $ 1.46 $ 1.32   Average Diluted Shares Outstanding 60,882 62,338 61,096 62,192 Average Basic Shares Outstanding 59,767 60,995 60,039 60,876   Supplemental Data: Cost of Sales $ 452,273 $ 376,423 $ 875,957 $ 747,923 Selling, General & Administrative 136,827 115,638 272,962 236,303 Depreciation and Amortization *** 15,492 11,532 31,068 26,797 Stock Compensation Expense 3,072 4,037 7,376 8,119   * Second quarter 2007 operating profit includes a $7.6 million provision for an expected legal settlement.   ** Second quarter 2006 miscellaneous- net includes a net gain of $4.1 million consisting of $8.3 million from the sales of Resistoflex Aerospace and Westad offset by $4.2 million from the sale of unused property resulting from prior plant consolidations and certain legal costs associated with previous divestitures.   *** Amount included within cost of sales and selling, general & administrative costs. CRANE CO. Condensed Balance Sheets (in thousands)   June 30, December 31, 2007 2006   ASSETS Current Assets Cash and Cash Equivalents $ 135,075 $ 138,607 Accounts Receivable 387,656 330,146 Current Insurance Receivable - Asbestos 21,000 52,500 Inventories 331,384 313,259 Other Current Assets 65,088 45,897 Total Current Assets 940,203 880,409   Property, Plant and Equipment 282,040 289,555 Long-Term Insurance Receivable - Asbestos 145,608 170,400 Other Assets 397,436 385,384 Goodwill 721,376 704,736   Total Assets $ 2,486,663 $ 2,430,484   LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Notes Payable and Current Maturities of Long-Term Debt $ 917 $ 9,505 Accounts Payable 184,850 161,270 Current Asbestos Liability 70,000 70,000 Accrued Liabilities 205,018 196,723 Income Taxes 22,024 24,428 Total Current Liabilities 482,809 461,926   Long-Term Debt 398,211 391,760 Deferred Tax Liability 95,407 89,595 Long-Term Asbestos Liability 418,483 459,567 Other Liabilities 116,512 109,033 Shareholders' Equity 975,241 918,603   Total Liabilities and Shareholders' Equity $ 2,486,663 $ 2,430,484 CRANE CO. Condensed Statements of Cash Flows (in thousands)   Three Months Ended Six Months Ended June 30, June 30, 2007 2006 2007 2006 Operating Activities: Net income $ 45,736 $ 44,463 $ 89,381 $ 81,862 Income from joint venture (1,528 ) (1,458 ) (2,545 ) (3,219 ) Gain on divestitures * - (8,267 ) - (8,267 ) Depreciation and amortization 15,492 11,532 31,068 26,797 Stock-based compensation expense 3,072 4,037 7,376 8,119 Cash (used for) provided by operating working capital (20,484 ) (1,249 ) (46,132 ) (34,148 ) Other   (2,448 )   1,002     (23,599 )   5,198   Subtotal 39,840 50,060 55,549 76,342 Asbestos related payments, net of insurance recoveries   (5,972 )   220     15,208     (9,080 ) Total provided by operating activities   33,868     50,280     70,757     67,262     Investing Activities: Capital expenditures (14,868 ) (8,611 ) (21,831 ) (17,001 ) Proceeds from disposition of capital assets 204 1,618 11,236 2,854 Proceeds from divestitures - 25,880 - 25,880 Payment for acquisition, net of cash acquired   150     (63,727 )   145     (149,065 ) Total used for investing activities   (14,514 )   (44,840 )   (10,450 )   (137,332 )   Financing Activities: Dividends paid (8,989 ) (7,669 ) (18,039 ) (15,292 ) Reacquisition of shares on the open market (10,000 ) (12,958 ) (50,001 ) (24,999 ) Stock options exercised - net of shares reacquired 7,531 10,247 7,144 18,643 Excess tax benefit from stock-based compensation 1,437 5,059 2,127 6,775 Repayment of debt, net   (10,430 )   (74 )   (8,697 )   (276 ) Total used for financing activities   (20,451 )   (5,395 )   (67,466 )   (15,149 )   Effect of exchange rate on cash and cash equivalents   2,251     3,618     3,627     4,991   Increase (decrease) in cash and cash equivalents 1,154 3,663 (3,532 ) (80,228 ) Cash and cash equivalents at beginning of period   133,921     96,501     138,607     180,392   Cash and cash equivalents at end of period $ 135,075   $ 100,164   $ 135,075   $ 100,164     * Gain from divestiture of Resistoflex Aerospace and Westad of $8.3 million. CRANE CO. Order Backlog (in thousands)   June 30, March 31, December 31, June 30, 2007 2007 2006 2006   Aerospace & Electronics $ 393,708 $ 405,792 $ 396,799 $ 370,267 Engineered Materials 18,544 17,437 13,198 18,617 Merchandising Systems 32,260 33,231 33,170 15,190 Fluid Handling 259,144 237,144 210,532 198,650 Controls   35,701   33,224   22,982   34,162 Total Backlog $ 739,357 $ 726,828 $ 676,681 $ 636,886 CRANE CO. Non-GAAP Financial Measures (in thousands) Percent Change Three Months Ended Six Months Ended Three Months Ended Six Months Ended June 30, June 30, June 30, 2007 2006 2007 2006 2007 2007 INCOME ITEMS: Net Sales $660,897 $558,151 $1,289,115 $1,107,533 18.4% 16.4%   Operating Profit $71,797 $66,090 $140,196 $123,307 8.6% 13.7% Settlement Provision - Pre-Tax * 7,600 - 7,600 - Operating Profit before Expected Settlement $79,397 $66,090 $147,796 $123,307 20.1% 19.9%   Operating Profit Margin : *** Operating Profit 10.9 % 11.8 % 10.9 % 11.1 % Settlement Provision - Pre-Tax * 1.1 % - 0.6 - Operating Profit before Expected Settlement 12.0 % 11.8 % 11.5 % 11.1 %   Miscellaneous -Net $931 $4,422 $2,744 $5,681 Net Gain on Sales - Pre-Tax ** - (4,100) - (4,100) Miscellaneous -Net before Net Gain on Sales $931 $322 $2,744 $1,581   Income Before Taxes $66,816 $65,919 $131,473 $119,576 1.4% 9.9% Settlement Provision - Pre-Tax * 7,600 - 7,600 - Net Gain on Sales - Pre-Tax ** - (4,100) - (4,100) Income Before Taxes before Settlement and Net Gain on Sales $74,416 $61,819 $139,073 $115,476 20.4% 20.4%   Net Income $45,736 $44,463 $89,381 $81,862 2.9% 9.2% Settlement Provision - Net of Tax * 5,396 - 5,396 - Net Gain on Sales - Net of Tax ** - (2,315) - (2,315) Net Income before Expected Settlement and Net Gain on Sales $51,132 $42,148 $94,777 $79,547 21.3% 19.1%   Per Diluted Share: Net Income $0.75 $0.71 $1.46 $1.32 5.6% 10.6% Settlement Provision - Net of Tax * 0.09 - 0.09 - Net Gain on Sales - Net of Tax ** - (0.04) - (0.04) Net Income before Expected Settlement and Net Gain on Sales $0.84 $0.67 $1.55 $1.28 25.4% 21.1%   * Second quarter 2007 operating profit includes a $7.6 million provision for an expected legal settlement.   ** Net Gain of $4.1 million consists of $8.3 million from the sales of Resistoflex Aerospace and Westad offset by $4.2 million from the sale of unused property resulting from prior plant consolidations and certain legal costs associated with previous divestitures.   *** Operating Profit Margin equals Operating Profit/Net Sales. June 30 December 31, 2007 2006 BALANCE SHEET ITEMS Notes Payable and Current Maturities of Long-Term Debt $ 917 $ 9,505 Long-Term Debt   398,211     391,760   Total Debt 399,128 401,265 Less Cash and Cash Equivalents   (135,075 )   (138,607 ) Net Debt 264,053 262,658 Shareholders' Equity   975,241     918,603   Total Capitalization $ 1,239,294   $ 1,181,261   Percentage of Net Debt to Total Capitalization 21.3 % 22.2 % Three Months Ended Six Months Ended Year Ended June 30 June 30 December 31, 2007 2006 2007 2006 2007 2006 (Estimated) CASH FLOW ITEMS Cash Provided from Operating Activities before Asbestos - Related Payments $ 39,840 $ 50,060 $ 55,549 $ 76,342 $240,000 - 255,000 $ 222,258 Asbestos Related Payments, Net of Insurance Recoveries (5,972 ) 220 (16,292 ) (9,080 ) (51,500 ) (40,563 ) Equitas Receipts   -     -     31,500     -     31,500     -   Cash Provided from Operating Activities 33,868 50,280 70,757 67,262 $ 220,000 - 235,000 181,695 Less: Capital Expenditures   (14,868 )   (8,611 )   (21,831 )   (17,001 )   (45,000 )   (27,171 ) Free Cash Flow $ 19,000   $ 41,669   $ 48,926   $ 50,261   $175,000 - 190,000 $ 154,524     Certain non-GAAP measures have been provided to facilitate comparison with the prior year.   Free cash flow provides supplemental information to assist management and investors in analyzing the Company's ability to generate positive cash flow.   Free cash flow is considered a measure of cash generation and should be considered in addition to, but not as a substitute for, other measures reported in accordance with generally accepted accounting principles and may be inconsistent with similar measures presented by other companies.