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Crane Co.'s Merchandising Systems Posts 37% Q1 Sales Decline

Posted On: 4/21/2009

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Crane Co., Crane Merchandising Systems, Vending, Vending Machines, Automated Retailing, Coin-Op, Payment Systems, Eric Fast, Brad Ellis, National Vendors, Dixie-Narco, Automatic Products, GPL, CashCode, National Rejectors, Telequip

STAMFORD, CT -- Crane Co. reported that sales in its merchandising systems business unit declined $41.8 million, or 37%, in the first quarter of 2009. Sales for the period were $71.7 million, compared with $113.5 million for the same quarter in 2008.

The company said losses in its merchandising systems business reflect a sharp decline in vending sales and, to a lesser extent, weaker sales in its payment solutions business.

Operating profit and margins declined significantly reflecting the "deleverage" on reduced sales, Crane said. Operating profit plunged $11.2 million, or 79%, to $3 million. Profit margins were 4.2% compared with 12.5% in the 2008 fourth quarter.

In response to lower demand, headcount at the merchandising business unit has been reduced approximately 21% compared with year-end 2007 levels. As part of a restructuring program, the company announced earlier this year that it will consolidate its vending machine production in its South Carolina plant during the fourth quarter.

Crane's companywide first-quarter net sales dropped $123.7 million, or 18%, to $555.1 million. Its first-quarter 2009 net income was $23.3 million, or 40¢ per diluted share, compared with first-quarter 2008 net income of $48.4 million, or $79¢ per diluted share.

(Net income for the quarter included an after-tax charge of $5 million, or 9¢ per share, related to a legal settlement announced on April 20; excluding this charge, first quarter 2009 net income would have been $28.1 million, or 48¢ per diluted share. Crane reached an agreement to settle a lawsuit brought by Coachmen Industries alleging failure of Crane's fiberglass-reinforced plastic material.)

Crane president and chief executive Eric C. Fast said the quarter's sales decline was most notable in the company's short-cycle businesses, particularly engineered materials and merchandising systems, which have been negatively affected by very difficult end-market conditions. While sales in these divisions were lower than expected, he indicated, company's cost-reduction program would offset the impact.

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. It has five business segments: Aerospace and Electronics, Engineered Materials, Merchandising Systems, Fluid Handling and Controls. The company has approximately 10,500 employees in North America, South America, Europe, Asia and Australia.

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 Solutions 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.

Crane Merchandising Systems, which produces much of its equipment in St. Louis, is consolidating all its vending machine manufacturing into its Williston, SC, plant. That facility was acquired when Crane purchased Dixie-Narco in 2006.

Since that acquisition, Crane reports, it has been driving continuous improvement actions and productivity increases across both North American plants under Crane Co.'s Operational Excellence program. The plant consolidation will facilitate operating synergies by establishing a "manufacturing supercenter" that can produce any type of vending or foodservice dispensing equipment, the company said.

The consolidation, which was expected to begin in March, will occur in phases. Crane promises that its high standards for product quality and delivery will not be compromised, and all sales, service and supplier points of contact will remain unchanged.

Crane Merchandising Systems president Brad Ellis said: "In spite of all the strategic and economic advantages associated with this consolidation, this has been a most difficult decision. We have many long-term dedicated employees in St. Louis, and we sincerely regret the impact this action may have on their lives."