Crane Co. Reports Fourth Quarter and Full-Year Results; Provides 2008 EPS Guidance of $3.45 to $3.60

Crane Co. (NYSE: CR), a diversified manufacturer of highly engineered industrial products, today reported fourth quarter 2007 net income was $45.2 million, or $0.74 per diluted share. Excluding special items, net income was $47.3 million, or $0.77 per diluted share, compared to $38.0 million, or $0.61 per diluted share in the fourth quarter of 2006. Fourth quarter 2007 operating profit was $64.8 million. Excluding special items, operating profit in the fourth quarter of 2007 was $64.6 million, an increase of $11.1 million, or 21%, from $53.5 million in the 2006 fourth quarter. Fourth quarter 2007 sales increased $84.3 million, or 15%, including core business growth of $43.2 million (8%), sales from acquired businesses (net of divestitures) of $16.3 million (3%) and favorable foreign currency translation of $24.8 million (4%). The special items for the quarter and full year are detailed in the accompanying non-GAAP table. For the full year 2007, the Company reported a net loss of $62.3 million, or $1.04 per share, which included a previously disclosed $254 million after-tax provision, or $4.22 per share, to extend its asbestos liability to 2017. Net income in 2006 was $165.9 million, or $2.67 per diluted share. Excluding special items in 2007 and 2006, 2007 net income was $195.1 million, or $3.19 per diluted share, compared to $160.9 million, or $2.59 per diluted share in 2006. Sales for 2007 rose to $2.6 billion, an increase of 16% over 2006. "In the fourth quarter, our operating profit grew 21% and operating margin improved by 50 basis points. Strong performance in our Fluid Handling and Merchandising Systems businesses, along with a lower than expected tax rate, more than offset higher engineering investment in our Aerospace & Electronics segment,” said Crane Co. President and Chief Executive Officer, Eric C. Fast. "We made significant progress in 2007, with full-year sales growing 16% and an even stronger increase in operating profit before special items. We enter 2008 with a record $283 million of cash, substantially strengthened businesses and see opportunities to continue our growth initiatives.” Special Items Included in Fourth Quarter 2007 Results Fourth quarter 2007 net income of $45.2 million and $0.74 per share includes a net after-tax gain of $18.4 million ($0.30 per share) related to the previously disclosed consolidation of the Company’s remaining foundry operations in the UK and Canada and an after-tax gain of $5.8 million ($0.10 per share) associated with the sale of the Company’s share of the Industrial Motion Control, LLC joint venture. These gains were substantially offset by 1) an after-tax charge of $12.3 million ($0.20 per share) related to an increase in the Company’s expected liability at its Goodyear, AZ Superfund site, 2) the $3.6 million ($0.06 per share) residual tax effect related to the impact of the third quarter 2007 asbestos charge on the Company’s effective tax rate for the remainder of 2007, and 3) a tax provision of $10.4 million ($0.17 per share) related to the Company’s recent determination of a potential repatriation of approximately $194 million of foreign cash balances. Excluding these items, fourth quarter 2007 net income was $47.3 million or $0.77 per diluted share. Please see the attached schedule of Non-GAAP Financial Measures for details. The tax rate in the fourth quarter 2007 was 32.2%, primarily reflecting lower than expected foreign taxes offset partially by the net cost of the special items discussed above. The 2006 fourth quarter tax rate of 26.7% reflected the favorable impact of the reinstatement of the federal research and development tax credit. Order backlog at December 31, 2007 totaled $720 million, 6% higher (5% higher excluding acquisitions) than the backlog of $677 million at December 31, 2006. Cash Flow and Financial Position Cash provided by operating activities was $86.5 million in the fourth quarter of 2007, compared to $78.8 million in 2006. Net debt to net capitalization was 11.5% at December 31, 2007, compared to 22.2% at December 31, 2006. In the fourth quarter of 2007, the Company did not repurchase any shares of its common stock. (Please also see the attached Condensed Statement of Cash Flows and Non-GAAP Financial Measures.) Segment Results All comparisons below refer to the fourth quarter 2007 versus the fourth quarter 2006, unless otherwise specified. Aerospace & Electronics Fourth Quarter   Change (dollars in millions) 2007   2006   Sales $161.3 $145.9 $15.4 11% Operating Profit $17.7 $ 25.8 ($8.1) (31%) Profit Margin 11.0% 17.7%         The fourth quarter 2007 sales increase of $15.4 million reflected a sales increase of $8.3 million in the Aerospace Group and an increase of $7.1 million in the Electronics Group. Segment operating profit declined by $8.1 million as a result of higher engineering expenses of $10.4 million which were primarily related to products for the Boeing 787 program. Aerospace & Electronics segment backlog at the end of the fourth quarter was $393 million, slightly lower than the prior year because aerospace customers are now ordering more frequently and in smaller quantities. Engineered Materials Fourth Quarter   Change (dollars in millions) 2007   2006   Sales $74.8 $69.3 $5.5 8% Operating Profit $8.6 $11.7 ($3.1) (26%) Profit Margin 11.5% 16.9% The fourth quarter 2007 sales increase of $5.5 million reflects $9.9 million of sales related to the September 2007 acquisition of the composite panel business of Owens Corning, partially offset by lower volumes to the Company’s traditional recreational vehicle and transportation customers. Operating profit in 2007 decreased 26% primarily reflecting lower core business sales and higher raw material costs. Merchandising Systems Fourth Quarter   Change (dollars in millions) 2007   2006   Sales $91.8 $78.3 $13.5 17% Operating Profit $8.4 $ 0.4 $8.0 nm Profit Margin 9.1% 0.5% Strong organic sales growth of 17% was driven by increased sales in Vending Solutions, particularly in Europe, and continued strong global demand for Payment Solutions. Both the Vending and Payment Solutions businesses contributed to the strong increase in operating profit, reflecting continued improvement in the businesses acquired during 2006. Fluid Handling   Fourth Quarter   Change (dollars in millions) 2007   2006   Sales $300.9 $255.3 $45.6 18%   Operating Profit before Foundry Restructuring $38.2 $22.8 $15.4 68%   Profit Margin before Foundry Restructuring 12.7% 8.9%   Gain on Foundry Restructuring $19.1 - $19.1 -   Operating Profit $57.3 $22.8 $34.5 151%   Profit Margin 19.0% 8.9% Fourth quarter 2007 sales increased $45.6 million, or 18%, including $28.8 million (11%) of core sales and favorable foreign currency translation of $18.3 million (7%), partially offset by lower sales from a divested business of $1.5 million. Based on strong sales growth from the global chemical / pharmaceutical and energy industries, and generally higher demand from many commercial applications, operating profit before the restructuring gain increased $15.4 million, or 68%, and margins increased to 12.7%. In December 2007, the Fluid Handling segment recorded a net gain of $19.1 million ($18.4 million after-tax) related to the consolidation of foundry operations located in the UK and Canada, as it continues to transition to more low cost country sourcing as part of its plan to further improve margins to 15%. The net gain reflects the profit on the sale of the Company’s operating facility in Ipswich, England, partially offset by foundry workforce reduction expenses associated with the restructuring program. The Company will lease back part of the Ipswich property for up to two years until the ongoing manufacturing and office activities are transferred to new premises. The Fluid Handling segment backlog was $243 million at December 31, 2007, 15% higher than $211 million at December 31, 2006, reflecting continued strong global demand. Controls Fourth Quarter   Change (dollars in millions) 2007   2006   Sales $37.1 $32.9 $4.2 12.9% Operating Profit $ 1.6 $ 2.7 ($1.1) (41.8%) Profit Margin 4.2% 8.2% The fourth quarter 2007 sales increase of $4.2 million reflects $3.5 million of sales related to the August 2007 acquisition of the Mobile Rugged Business division of Kontron America, Inc. Operating profit in 2007 decreased primarily due to integration expenses and intangible amortization related to the acquisition. Full Year 2008 Guidance The Company continues to see strong demand in Fluid Handling, which represents approximately 43% of sales, and expects demand to remain robust in its long-cycle Aerospace & Electronics segment. Both Merchandising Systems and Engineered Materials have been materially strengthened from acquisitions and with their industry-leading positions are expected to continue to execute on key growth initiatives. The Company forecasts diluted earnings per share will increase to $3.45 - $3.60 in 2008, a record year for the Company. This guidance includes an estimated annual tax rate of approximately 31%. The Company notes that its earnings growth will be lower in the first half of 2008, reflecting continued elevated levels of engineering spending for several Boeing 787 new product programs. Management expects cash flow provided from operating activities before asbestos in 2008 will be approximately $275 million, asbestos related payments net of insurance will be approximately $55 million, capital expenditures will be approximately $50 million and free cash flow will be $170 million. The 2008 estimated EBITDA will be $411 - $425 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 fourth quarter and full year financial results on Tuesday, January 29, 2008 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 Twelve Months Ended December 31, December 31, 2007 2006 2007 2006 Net Sales:         Aerospace & Electronics $ 161,296 $ 145,892 $ 628,859 $ 566,372 Engineered Materials 74,850 69,328 331,030 309,258 Merchandising Systems 91,838 78,253 388,227 257,818 Fluid Handling 300,860 255,302 1,135,843 999,413 Controls 37,119   32,877   135,212   124,028   Total Net Sales $ 665,963   $ 581,652   $ 2,619,171   $ 2,256,889     Operating Profit (Loss): Aerospace & Electronics $ 17,695 $ 25,767 $ 86,176 $ 99,181 Engineered Materials 8,626 11,700 58,339 50,252 Merchandising Systems 8,386 428 39,684 17,529   Fluid Handling 38,154 22,780 140,168 107,377 Foundry Restructuring 19,083   -   19,083   -   Total Fluid Handling 57,237 22,780 159,251 107,377 Controls 1,570 2,699 9,901 10,052 Corporate (9,837 ) (9,909 ) (51,945 ) (36,455 ) Environmental Provision (18,912 ) - (18,912 ) - Asbestos Provision -   -   (390,150 ) -   Total Operating Profit (Loss) 64,765 53,465 (107,656 ) 247,936   Interest Income 2,422 2,776 6,259 4,939 Interest Expense (6,790 ) (6,748 ) (27,404 ) (23,015 ) Miscellaneous- Net 6,313   2,333   9,906   9,474   Income (Loss) Before Income Taxes 66,710 51,826 (118,895 ) 239,334 Provision for Income Taxes 21,483   13,844   (56,553 ) 73,447   Net Income (Loss) $ 45,227   $ 37,982   $ (62,342 ) $ 165,887     Share Data: Net Income (Loss) per Diluted Share $ 0.74   $ 0.61   $ (1.04 ) $ 2.67     Average Diluted Shares Outstanding 61,221 61,880 60,037 62,103 Average Basic Shares Outstanding 60,093 60,839 60,037 60,906   Supplemental Data: Cost of Sales - Operations $ 454,597 $ 399,657 $ 1,776,157 $ 1,525,633 Environmental Provision 18,912 - 18,912 - Asbestos Provision - - 390,150 - Selling, General & Administrative 146,772 128,530 560,691 483,320 Foundry Restructuring 19,083 - 19,083 - Depreciation and Amortization 16,570 15,229 61,310 54,285 Stock Compensation Expense 4,074 3,595 15,247 14,883 CRANE CO. Condensed Balance Sheets (in thousands)         December 31,   December 31, 2007 2006   ASSETS Current Assets Cash and Cash Equivalents $ 283,370 $ 138,607 Accounts Receivable 345,176 330,146 Current Insurance Receivable - Asbestos 33,600 52,500 Inventories 327,719 313,259 Other Current Assets 47,757 45,897 Total Current Assets 1,037,622 880,409   Property, Plant and Equipment 292,683 289,555 Long-Term Insurance Receivable - Asbestos 306,557 170,400 Long-Term Deferred Tax Assets 220,370 171,164 Other Assets 253,510 214,220 Goodwill 766,550 704,736   Total Assets $ 2,877,292 $ 2,430,484   LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Notes Payable and Current Maturities of Long-Term Debt $ 548 $ 9,505 Accounts Payable 177,978 161,270 Current Asbestos Liability 84,000 70,000 Accrued Liabilities 230,295 196,723 Income Taxes 731 24,428 Total Current Liabilities 493,552 461,926   Long-Term Debt 398,301 391,760 Deferred Tax Liability 31,880 89,595 Long-Term Asbestos Liability 942,776 459,567 Other Liabilities 125,980 109,033 Shareholders' Equity 884,803 918,603   Total Liabilities and Shareholders' Equity $ 2,877,292 $ 2,430,484 CRANE CO. Condensed Statements of Cash Flows (in thousands)                     Three Months Ended Twelve Months Ended December 31, December 31, 2007 2006 2007 2006 Operating Activities: Net income $ 45,227 $ 37,982 $ (62,342 ) $ 165,887 Asbestos provision - - 390,150 - Environmental provision 18,912 - 18,912 - Foundry restructuring (27,838 ) - (27,838 ) - Gain on sale of joint venture (4,144 ) - (4,144 ) - Income from joint venture (1,524 ) (1,116 ) (5,322 ) (5,641 ) Loss/(Gain) on divestitures - 453 975 (8,478 ) Depreciation and amortization 16,570 15,229 61,310 54,285 Stock-based compensation expense 4,074 3,595 15,247 14,883 Deferred income taxes 27,602 95 (112,641 ) 5,049 Cash (used for) provided by operating working capital 32,210 34,782 (7,322 ) (835 ) Other   (7,065 )   (1,635 )   (23,954 )   (2,892 ) Subtotal 104,024 89,385 243,031 222,258 Asbestos related payments, net of insurance recoveries   (17,509 )   (10,606 )   (10,198 )   (40,563 ) Total provided by operating activities   86,515     78,779     232,833     181,695     Investing Activities: Capital expenditures (13,757 ) (4,859 ) (47,169 ) (27,171 ) Proceeds from sale of equity investment 32,996 - 32,996 - Proceeds from disposition of capital assets 36,827 1,786 48,437 5,103 Proceeds from divestitures - - 2,005 26,088 Payment for acquisition, net of cash acquired   (332 )   (47,903 )   (65,498 )   (282,637 ) Total used for investing activities   55,734     (50,976 )   (29,229 )   (278,617 )   Financing Activities: Dividends paid (10,823 ) (9,131 ) (39,651 ) (33,596 ) Reacquisition of shares on the open market - (22,499 ) (50,001 ) (59,998 ) Stock options exercised - net of shares reacquired 4,955 2,264 15,057 22,870 Excess tax benefit from stock-based compensation 2,897 113 6,978 7,688 Issuance of Debt - 25,087 - 96,377 Net increase / decrease in short-term debt   (24,184 )   9,173     (8,992 )   9,228   Total used for financing activities   (27,155 )   5,007     (76,609 )   42,569     Effect of exchange rate on cash and cash equivalents   6,028     6,720     17,768     12,568   Increase (decrease) in cash and cash equivalents 121,122 39,530 144,763 (41,785 ) Cash and cash equivalents at beginning of period   162,248     99,077     138,607     180,392   Cash and cash equivalents at end of period $ 283,370   $ 138,607   $ 283,370   $ 138,607   CRANE CO. Order Backlog (in thousands)     December 31, December 31, 2007 2006   Aerospace & Electronics $ 392,822 $ 396,799 Engineered Materials 14,802 13,198 Merchandising Systems 34,093 33,170 Fluid Handling 242,591 210,532 Controls   35,273   22,982 Total Backlog $ 719,581 $ 676,681 CRANE CO. Non-GAAP Financial Measures (in thousands, except for per share amounts)             Percent Change INCOME ITEMS Three Months Ended Twelve Months Ended Three and Twelve Months Ended December 31, December 31, December 31, 2007 2006 2007 2006 2007   2007   Net Sales $665,963 $581,652 $2,619,171 $2,256,889 14.5 % 16.1 %   Operating Profit (Loss) - GAAP $64,765 $53,465 ($107,656 ) $247,936 Special Items impacting Operating Profit: Asbestos Provision - Pre-Tax (a) - - 390,150 - Environmental Provision (b) 18,912 - 18,912 - Environmental Reimbursement (c) - - - (4,900 ) Foundry Restructuring Gain - Pre-Tax (d) (19,083 ) - (19,083 ) - Government Settlement - Pre-Tax (e) -   -   7,600   -   Operating Profit before Special Items - Non-GAAP $64,594   $53,465   $289,923   $243,036   20.8 % 19.3 %   Percentage of Sales 9.7 % 9.2 % 11.1 % 10.8 %   Net Income (Loss) - GAAP $45,227 $37,982 ($62,342 ) $165,887 Per Share $0.74 $0.61 ($1.04 ) $2.67   Special Items impacting Net Income:   Asbestos Provision - Net of Tax (a) 3,597 - 253,597 - Per Share $0.06 $4.22   Environmental Provision - Net of Tax (b) 12,293 - 12,293 - Per Share $0.20 0.20   Environmental Reimbursement - Net of Tax (c) - - - (3,185 ) Per Share ($0.05 )   Foundry Restructuring Gain - Net of Tax (d) (18,402 ) - (18,402 ) - Per Share ($0.30 ) ($0.31 )   Government Settlement - Net of Tax (e) - - 5,396 - Per Share $0.09   Gain on Sale of Partnership Interest - Net of Tax (f) (5,846 ) - (5,846 ) - Per Share ($0.10 ) ($0.10 )   Tax Provision on Undistributed Foreign Earnings (g) 10,400 - 10,400 - Per Share $0.17 $0.17   Net Gain on Divestitures - Net of Tax (h) - - - (1,779 ) Per Share ($0.03 )         Net Income before Special Items - Non-GAAP $47,269   $37,982   $195,096   160,923.00   24.5 % 21.2 % Per Basic Share $0.79 $0.62 $3.25 $2.64   Per Diluted Share $0.77 $0.61 $3.19 $2.59 25.8 % 23.2 %   In the twelve months ended December 31, 2007, 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 been reported for the period, Average Shares Outstanding would have included the effect of diluted stock options when computing the per share amount (see chart below). Twelve Months Ended December 31, 2007 Average Basic Shares Outstanding 60,037 Effect of Diluted Stock Options 1,093   Average Shares Outstanding including the effect of Stock Options 61,130   When considering the effect of dilutive stock options on shares outstanding, Net Income before Special Items is $3.19 per share for the twelve months ended December 31, 2007.   Three Months Ended Twelve Months Ended Full Year December 31, December 31, 2008 Guidance Range EBITDA (Non-GAAP) 2007   2006   2007   2006   Low   High   Net Income (Loss) $45,227 $37,982 ($62,342 ) $165,887 $214,500 $224,000   Non-GAAP Adjustments: Depreciation and amortization 16,570 15,229 61,310 54,285 69,000 69,000 Amortization of stock based compensation 4,074 3,595 15,247 14,883 15,700 15,700 Asbestos provision - pre-tax (a) - - 390,150 - - - Environmental provision (b) 18,912 - 18,912 - - - Environmental reimbrusement (c) - - - (4,900 ) - - Foundry restructuring gain - pre-tax (d) (19,083 ) - (19,083 ) - - - Government settlement - pre-tax (e) - - 7,600 - - - Gain on sale of partnership interest - net of tax (f) (4,144 ) - (4,144 ) - - - Interest expense, net 4,368 3,972 21,145 18,076 15,300 15,300 Provision for income taxes 21,483 13,844 (56,553 ) 73,447 96,400 100,600             EBITDA $87,407   $74,622   $372,242   $321,678   $410,900   $424,600   (a) During the three months ended September 30, 2007, the Company recorded an Asbestos provision of $390 million. During the three months ended December 31, 2007, the Company recorded a tax expense related to the Asbestos Provision recorded in the previous quarter.   (b) During the three months ended December 31, 2007, the Company recorded a charge related to an increase in the Company’s expected liability at its Goodyear, AZ Superfund site.   (c) During the three months ended September 30, 2006, the Company recorded a reimbursement from the US Government for environmental clean-up costs.   (d) During the three months ended December 31, 2007, the Company recorded a net restructuring gain related to the consolidation of its remaining foundry operations in the UK and Canada.   (e) During the three months ended June 30, 2007, the Company recorded a settlement with the US Government, regarding alleged civil violations of the False Claims Act.   (f) During the three months ended December 31, 2007, the Company recorded a gain on the sale of its share of the Industrial Motion Control, LLC joint venture.   (g) During the three months ended December 31, 2007, the Company recorded an income tax provision related to the potential repatriation of foreign cash.   (h) During the three months ended June 30, 2006, the Company recorded a gain of $4.5 million related to the divestiture of two businesses, which was offset by a $2.7 million charge related to the sale of unused property resulting from prior plant consolidations and certain legal costs associated with previous divestitures.     December 31,   December 31, 2007 2006 BALANCE SHEET ITEMS Notes Payable and Current Maturities of Long-Term Debt $ 548 $ 9,505 Long-Term Debt   398,301     391,760   Total Debt 398,849 401,265 Less Cash and Cash Equivalents   (283,370 )   (138,607 ) Net Debt 115,479 262,658 Shareholders' Equity   884,803     918,603   Net Capitalization $ 1,000,282   $ 1,181,261   Percentage of Net Debt to Net Capitalization 11.5 % 22.2 %   Shareholders' Equity $ 884,803 $ 918,603 Asbestos Provision, Net of Tax   253,597       -   Shareholders' Equity before Asbestos Provision, Net of Tax 1,138,400 918,603 Net Debt   115,479     262,658   Net Capitalization before Asbestos Provision, Net of Tax $ 1,253,879   $ 1,181,261   Percentage of Net Debt to Net Capitalization before Asbestos Provision, Net of Tax 9.2 % 22.2 %                   Three Months Ended Twelve Months Ended Full Year December 31 December 31 Guidance 2007 2006 2007 2006 2008   CASH FLOW ITEMS Cash Provided from Operating Activities before Asbestos - Related Payments, Net of Insurance $ 104,024 $ 89,385 $ 243,031 $ 222,258 $ 275,000 Asbestos Related Payments, Net of Insurance Recoveries (17,509 ) (10,606 ) (41,698 ) (40,563 ) (55,000 ) Equitas Receipts   -     -     31,500     -     -   Cash Provided from Operating Activities 86,515 78,779 232,833 181,695 220,000 Less: Capital Expenditures   (13,757 )   (4,859 )   (47,169 )   (27,171 )   (50,000 ) Free Cash Flow $ 72,758   $ 73,920   $ 185,664   $ 154,524   $ 170,000   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 and EBITDA provide supplemental information to assist management and investors in analyzing the Company’s ability to generate positive cash flow. 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.