STAMFORD, CT -- Crane Co.'s third quarter witnessed an increase in operating margin and an improvement in the company's cash position, largely occasioned by cost reductions and enhanced efficiency. Third-quarter income attributable to common shareholders totaled $35.1 million, or 60¢ a diluted share, compared with prior-year third quarter figures of $36.1 million, or 60¢ a diluted share.
Crane Merchandising Systems, Crane Co.'s vending machine and payment systems unit, reported a sales decrease of $17.7 million, or 19%, reflecting continued difficult market conditions. Sales of "payment solutions" declined substantially more than vending machines, the company said. Operating profit declined as de-leverage on the reduced sales more than offset the favorable impact of a legal settlement and the reduction of a liability estimate associated with the company's restructuring program.
Sales for the quarter declined 19% to $75.9 million from $93.6 million in the third quarter of 2008. Operating profit was $6.9 million, which includes $1.5 million of restructuring gains, compared with $10.9 million in the prior-year quarter. Profit margin dipped to 9.1% from 11.6% in last year's third quarter.
The consolidation of Crane's vending machine production from St. Louis, MO, to its Williston, SC, facility is expected to be complete by the end of the year. Crane Merchandising Systems' headcount has been reduced 21% compared with the yearend 2007 level, and further reductions will occur as plant consolidation is wrapped up. (The Williston facility was acquired when Crane purchased Dixie-Narco in 2006.)
"We are pleased with our performance this quarter," said Crane Co. president and chief executive Eric C. Fast. "Despite a 14% decline in sales from the third quarter of 2008, our operating profit and earnings per share were flat compared with 2008, primarily reflecting our success in realigning our cost base.
"Our operating margin improved by 160 basis points, to 10.1%, as compared to 8.5% a year ago," he continued. "While sales in Engineered Materials, Merchandising Systems, Fluid Handling and Controls were lower than the prior-year quarter, they improved slightly from the second quarter this year. Total Aerospace & Electronics segment sales have been declining for the past year, primarily because of weaker demand in our long-cycle Aerospace business."
The company has been very successful in reducing expenses during the downturn, Fast explained. "In July, we estimated our cost savings would be in excess of $125 million. We now expect that our cost savings for 2009 will exceed $150 million and believe this productivity will provide excellent operating leverage in 2010. Excluding the two acquisitions in 2008, headcount has been reduced by 2,050 people, or 17% since yearend 2007, of which 150 occurred in the third quarter of this year and additional headcount reductions are expected in the fourth quarter."
As a result, he said, Crane has increased the lower end of its earnings-per-share guidance range from $1.75-$2.05 to $1.90-$2.05, on the basis of generally accepted accounting principles. "With $305 million in cash, a $300 million revolving bank credit agreement, and no near-term debt maturities, we have a solid financial foundation to continue to manage through the current environment and we are positioned for growth as our end markets recover," Fast concluded.
Founded in 1855, Crane provides products and solutions to customers in aerospace, electronics, hydrocarbon processing, petrochemical, chemical, power generation, automated merchandising and transportation, among other markets.
Headquartered in St. Louis, Crane Merchandising Systems is composed of two solution-providing segments that enable seamless integration of equipment, vending management software and payment systems. Crane Vending Solutions, whose brands include National Vendors, Dixie-Narco, Automatic Products, GPL and Stentorfield, is a leading machine manufacturer. Crane's Streamware business unit, which develops and markets management software, is part of the vending segment.
Crane Payment Solutions is an alliance of Crane-owned companies CashCode, National Rejectors Inc. GmbH (NRI) and Telequip Corp. These businesses offer a wide range of innovative, reliable currency systems; all three are key suppliers to markets including global vending, gaming, retail and transportation.