Crane Co., which owns Crane Merchandising Systems and other engineered industrial products, reported that second quarter 2012 earnings per diluted share increased 26 percent to $1.07 compared to $0.85 in the second quarter of 2011.
Sales for Merchandising Systems, the company’s vending manufacturing business, were $97.6 million, having increased $3.6 million, or 4 percent, reflecting higher sales in vending and, to a lesser extent, payment solutions. Operating profit before special items increased $4.3 million, reflecting strong margin improvement in both vending and payment solutions.
Second quarter 2012 results include a $0.31 per share gain associated with divestitures, partially offset by $0.20 per share of repositioning charges associated with productivity actions to improve the profitability of the company in 2013. Excluding special items (divestiture gains and repositioning charges), second quarter 2012 earnings per diluted share increased 13 percent to $0.96 compared to $0.85 in the second quarter of 2011. The company expects to incur additional equipment relocation and personnel costs related to these repositioning actions of approximately $0.06 per share in the second half of 2012. The after-tax net gain from the second quarter divestitures is expected to exceed full year after-tax repositioning costs. Pre-tax savings associated with these actions are expected to approximate $12 million annually beginning in 2013.
Second quarter 2012 sales from continuing operations of $658 million increased $24 million, or 4 percent, compared to the second quarter of 2011, resulting from a core sales increase of $35 million (6 percent) and an increase in sales from acquired businesses of $7 million (1 percent), partially offset by unfavorable foreign currency translation of $18 million (-3%).
Second quarter 2012 operating profit from continuing operations on a GAAP basis (which includes $14.7 million of repositioning charges) decreased 12 percent to $69.4 million, compared to $78.9 million in the second quarter of 2011. Excluding repositioning charges, second quarter 2012 operating profit from continuing operations increased 7 percent to $84.1 million, and operating profit margin increased to 12.8 percent, compared to 12.5 percent in the second quarter of 2011.
"The company executed well in the second quarter, with continued operating improvement year over year as well as targeted actions to drive further improvements in 2013. Reflecting our confidence in the Company's future, we are increasing the quarterly dividend by 8 percent," said Crane Co. president and chief executive officer Eric C. Fast in a prepared statement. "We have narrowed our EPS guidance range and reduced the midpoint by $0.05, reflecting two small divestitures in the second quarter. Our repositioning actions directly address costs in our European fluid handling businesses, strengthening our confidence for 2013."
In June 2012, the company divested two businesses, positively impacting second quarter 2012 EPS by $0.31. The associated gain of $18.3 million on an after-tax basis is included in the "Gain from Discontinued Operations" section on the income statement. The divested businesses had profit from operations in the second quarter of 2012 of $1.6 million on an after-tax basis, or $0.03 per share, which is included in the "Profit from Discontinued Operations" section on the accompanying income statement.
lAzonix Corpo. was sold to Cooper Industries (NYSE: CBE) on June 19, 2012 for $43.4 million. Azonix designs and manufactures intrinsically safe computer devices for extreme environments and was formerly part of the controls segment. In the first half of 2012,
Azonix had sales and pre-tax profit from operations of $17.1 million and $2.5 million, respectively.
Certain assets and operations of Crane's valve service center in Houston, Texas were sold to Furmanite Corp. on June 28, 2012 for $9.3 million. This service center, formerly part of the fluid handling segment, had sales and pre-tax profit from operations in the first half of 2012 of $8.4 million and $1.3 million, respectively.
The company recorded pre-tax repositioning charges of $14.7 million in the second quarter of 2012, or $11.9 million on an after-tax basis. Of these repositioning charges, $11.4 million (on a pre-tax basis) is associated with actions to improve fluid handling profitability. The charges, which negatively impacted second quarter 2012 EPS by $0.20, included severance and other costs related to the anticipated transfer of certain manufacturing operations from higher cost to lower cost company facilities, and other staff reduction actions. The actions include an expected reduction of approximately 200 employees, or about 2 percent of Crane's global workforce. Within the European portion of the fluid handling segment, the company expects a reduction of approximately 150 employees, or 7 percent of that workforce.
In addition to the amounts recorded in the second quarter, the company expects to incur additional pre-tax charges related to these actions in the second half of 2012 of approximately $5 million, or $0.06 per share, associated with equipment relocation and personnel costs primarily in fluid handling. Pre-tax savings associated with all of these repositioning actions are expected to approximate $12 million annually for the company beginning in 2013, of which $10 million relates to fluid handling.
As part of the company's repositioning actions, management plans to consolidate the manufacturing of certain products and optimize engineering resources in the payment solutions portion of the segment. In addition, a charge was recorded in connection with the anticipated sale of a property in St. Louis, Mo. related to the previous plant consolidation in South Carolina. Repositioning charges of $2.3 million on a pre-tax basis were recorded in the second quarter of 2012. Pre-tax savings associated with these actions are expected to approximate $1 million annually beginning in 2013.
