Crane's (CR) CEO Max Mitchell on Q2 2014 Results - Earnings Call Transcript

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 |  About: Crane Co. (CR)
by: SA Transcripts

Crane (NYSE:CR)

Q2 2014 Earnings Call

July 29, 2014 10:00 am ET

Executives

Jason D. Feldman -

Max H. Mitchell - Chief Executive Officer, President and Director

Richard A. Maue - Chief Financial Officer, Principal Accounting Officer and Vice President of Finance

Analysts

Matt J. Summerville - KeyBanc Capital Markets Inc., Research Division

Brian Konigsberg - Vertical Research Partners, LLC

Matthew W. McConnell - Citigroup Inc, Research Division

Ajay Kejriwal - FBR Capital Markets & Co., Research Division

Operator

Good day, ladies and gentlemen, and welcome to the Crane Co.'s Second Quarter 2014 Earnings Call [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to Jason Feldman, Director of Relations. You may begin.

Jason D. Feldman

Thank you, operator, and good morning, everyone. Welcome to our second quarter 2014 earnings release conference call. I am Jason Feldman, Director of Investor Relations. On our call this morning, we have Max Mitchell, our President and Chief Executive Officer; and Rich Maue, our Chief Financial Officer. We will start off our call with a few prepared remarks. After which, we will respond to questions. Just a reminder, the comments that we make on this call today may include some forward-looking statements. We refer you to the cautionary language at the bottom of our earnings release and also on our annual report, 10-K and subsequent filings pertaining to forward-looking statements. Also during the call, we will be using some non-GAAP numbers, which are reconciled to the comparable GAAP numbers in tables at the end of our press release and accompanying slide presentation, both of which are available on our website at www.craneco.com in the Investor Relations section.

Now, let me turn the call over to Max.

Max H. Mitchell

Thank you, Jason. Good morning. As outlined in our press release last night, excluding special items, Crane's second quarter EPS was $1.15, consistent with our expectations and up 9% compared to the second quarter of 2013. Sales of $750 million increased 15.6%, driven primarily by the acquisition of MEI, with slightly positive core growth and a modest tailwind from currency. We were very encouraged by Fluid Handling order activity in the second quarter, as well as by our backlog growth. The pace of order activity improved meaningfully through the quarter, including specific strength in the core process business. Unpredictable project delays in the process market add some timing risk, but we are very pleased with our progress and prospects. We believe we will continue to see improving trends in the process markets in the third and fourth quarter of this year, and we expect a stronger tailwind thereafter.

Fluid Handling core growth rates in the second half of 2014 will also benefit from substantially less challenging comparisons at the nuclear services business, given the timing of plant outages this year versus last year. Trends in our Aerospace & Electronics segment are also positive, with visibility to years of growth in the commercial OEM market, further expected recovery in the aerospace aftermarket and stabilization of the defense business. We attended the Farnborough Air Show earlier this month and remain excited about the level of activity we are seeing in this segment. Specifically, we see opportunities above and beyond the expected growth in OEM production rates, as we gain additional content on new platforms and find opportunities for upgrades to the existing fleet. We are also carefully and thoughtfully managing the balance between near-term margins and engineering costs needed to win new content, on platforms that can have 20-plus year lives. At payment and merchandising technologies, secular trends remain favorable for unattended payment, although certain end markets do exhibit uneven demand tied to the timing of customer capital spending. Engineered Materials saw very strong growth in the RV market. We expect growth in RV to decelerate as the industry returns to a more normal seasonal pattern, but we do expect the nonresidential construction part of this business to improve later this year. Overall, we believe that we've remained on track to deliver on our guidance of full year core growth up 1% to 3%. Operating profit, excluding special items, increased 15% from last year. Second quarter operating margin, excluding special items, was 14.6%, in line with our expectations.

The MEI integration continues to progress, and we are on track to deliver both $0.20 per share of accretion from MEI this year and $25 million of annualized synergies by the end of 2016. We are also making solid progress on our previously announced repositioning actions that will benefit 2015 and 2016. During the quarter, we divested a small water treatment business. This divestiture follows the 2012 sale of Azonix and completes our disposal of the noncore portions of the former Controls segment. Overall, we are pleased with the second quarter results, and we are reaffirming our 2014 EPS guidance of $4.55 to $4.75, excluding special items. Rich Maue will now take you through the businesses and provide some additional financial information.

Richard A. Maue

Thank you, Max. I'll turn now to segment comments, which compare the second quarter of 2014 to 2013, excluding special items, as outlined in our press release, slide presentation and the accompanying non-GAAP tables. In the second quarter, Fluid Handling sales of $325 million declined 2.8%, with a core sales decline of 3.2%. The core sales decline was primarily a result of unfavorable comparisons in our nuclear services business, which benefited from a strong nuclear outage season last year. Importantly, the comparisons for this business are substantially easier for the second half of 2014.

Fluid Handling backlog was $369 million at the end of June, and after adjusting for the divestiture on the quarter, our backlog is up 13% versus the end of 2013 and up 7% compared to the same period last year. The increases are generally broad-based and following our experience earlier in the year, order momentum continued to improve sequentially as we move through the quarter. Specific to our Process Valve business, on a global basis, refining and power remain strong compared to last year, again, with continued momentum through the quarter. Most chemical end markets, however, remain soft. Specific to refining, North America and particularly China and the Middle East continue to be strong, while Europe remained soft. The power markets in North America, while we saw a modest increase in the quarter, on a year-to-date basis, orders remain weaker. We continue to see strength in the Middle East and China, although we did see some impact from delays in plant funding from the Chinese government. Specific to chemical end markets, while demand remains soft in the quarter, we played primarily in the later cycle portion of this end market. In recent months, we have seen improved bidding and order activity in North America and the China market remains strong. Overall, we expect to see continued improvement in our Process Valve business as the year progresses and into 2015. With respect to our commercial valve-related businesses, commercial construction and mining activity in Canada continues to be soft but has shown signs of stabilization, while our U.K. and Middle East-based businesses have seen continued positive order momentum over the last several months. Fluid Handling operating profit declined 3% to $53 million, with operating margins of 16.2% despite the sales decline.

The solid margin performance primarily reflected productivity gains, with some benefit from lower pension expense, partially offset by lower volume and unfavorable mix. We expect operating profit and margins to grow in the second half, driven by leverage on higher sales and our ongoing focus on productivity. Payment and merchandising technologies sales of $185 million increased $100 million or 118% versus the prior year, driven primarily by the MEI acquisition. Core sales rose 1.1% and currency translation increased sales by 3.1%. Crane payment innovation sales declined slightly, driven primarily by lower sales in the gaming end market. As we have previously discussed, the timing of capital spending from certain large customers can have significant near-term impacts on quarterly sales volumes, however, we saw strength in several areas. Sales into the retail end market improved after unfavorable year-over-year comparisons in the first quarter. The financial services vertical continues to see strong demand in emerging markets, and Conlux Japan showed solid growth and continued share gains. Going forward, we expect CPI sales to increase through the second half, reflecting improving sales across most end markets. Merchandising Systems sales increased in the high teens compared to the prior year, driven primarily by easier comparisons and strong activity from certain large customers. Segment operating profit of $21 million increased 141% from $9 million last year, primarily reflecting the impact of the MEI acquisition. Operating margin increased 110 basis points to 11.6%, from 10.5% in the same quarter last year.

The MEI integration is well underway, and we are on track to deliver $0.20 of accretion in 2014, including $7 million of synergies this year and an annual run rate of $25 million by 2016. In the second quarter, we realized roughly $20 million -- sorry, $2 million of pretax synergies, bringing year-to-date synergies to approximately $3 million, consistent with our expectations.

Aerospace & Electronics sales increased 3% to $178 million compared to $172 million in the second quarter of 2013. Segment operating profit increased 1% to $38 million, and operating margins decreased 40 basis points to 21.1% from 21.5% in the prior year. The decrease in margin was largely driven by increased engineering expense and other program investments supporting new product development. These investments are associated with key program wins and new product development investments that we've previously shared with you, along with costs related to bidding on new program opportunities. These remain conscious, strategic investments for growth. We continue to see new opportunities in the commercial aerospace business, as well as in the defense electronics markets, as certain projects are beginning to move forward now that there is greater clarity on the federal budget. Sales in the Aerospace Group of $113 million, an increase of 6% from the second quarter of last year. Commercial OEM sales increased 7%, driven by strong sales to large aircraft manufacturers. Total aftermarket sales increased slightly, driven by strong sales of military spares, largely offset by weaker modernization and upgrade sales.

Commercial spares improved in the low single-digit range. The OEM-to-aftermarket mix was 64.5% to 35.5%, versus 63% to 37% in the second quarter of last year. We expect the aftermarket mix to improve modestly as the year progresses. Electronics Group sales were $65 million, a 1% decline from the second quarter of 2013, driven primarily by lower defense-related shipments. We continue to believe that demand is relatively stable at current levels. Aerospace & Electronics backlog was $397 million at the end of the second quarter compared to $361 million at December 31, 2013, and $403 million at June 30, 2013. Engineering -- Engineered Materials sales increased $6 million, or 10%, to $63 million. Sales of our RV-related products increased 18% versus the prior year, as the RV OEM build rates remain strong, with both dealer and retail demand continuing through the quarter. Transportation-related sales rose 7% versus the prior year, and building products-related sales increased 2%, reflecting sluggish U.S. commercial construction end markets. While we are very pleased with our RV sales performance in the first half, year-over-year comparisons will get more difficult over the course of 2014, as we expect a return to a more traditional sales profile in the second half.

Operating profit increased $600,000 to $9.8 million, although operating margins fell 50 basis points to 15.4%, compared to 15.9% in the second quarter of 2013. The margin decline was primarily a result of negative product mix, partially offset by leverage on the higher volumes.

Turning now to more detail on total company results and forecasts. Foreign currency translation had a negligible impact on EPS in the first quarter. Our second quarter tax rate was 30.9% on a GAAP basis, compared to 32.9% in the second quarter of 2013. Excluding the impact of the special items, our second quarter tax rate was 31.3%, which compares to 30% in the second quarter of last year. We continue to expect our 2014 full year tax rate, excluding special items, to be roughly 31%, which includes the assumption that legislation will be enacted during 2014 that extends the U.S. Federal Research tax credit, retroactive to January 1 of this year. As a reminder, the increase in our forecasted tax rate reflects the January 2013 benefit from the reinstatement of the R&D tax credit, which was retroactive to 2012, coupled with increased earnings in the U.S. and Japan as a result of the acquisition of MEI.

Free cash flow increased $29 million from last year to $53 million in the quarter. Our second quarter is consistent with our previously disclosed 2014 free cash flow guidance of a range of $225 million to $250 million, which includes a $15 million increase in full year capital expenditures. We ended the quarter with $314 million in cash, up $44 million from year-end 2013. Total debt at the end of March was $903 million, compared to $875 million at December 31, 2013. As mentioned earlier, we are reaffirming our full year EPS guidance, excluding special items. However, we've reduced our full year GAAP EPS guidance by $0.10, reflecting 2 special items in the quarter: a loss on the divestiture and the settlement of previously disclosed lawsuits by certain homeowners in Roseland, related to environmental conditions at a former manufacturing facility. Reflecting continuing confidence in our long-term outlook, we have increased our dividend for the fifth consecutive year.

I'll now turn it back to you, Jason.

Jason D. Feldman

Thank you, Max and Rich. This marks the end of our prepared comments. Operator, we're now ready to take questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Matt Summerville of KeyBanc.

Matt J. Summerville - KeyBanc Capital Markets Inc., Research Division

A couple of questions. First, with respect to Fluid Handling, can you just give maybe a little more detail on the order cadence you're seeing there? And how we should think about organic growth beginning to turn positive. Is that a Q3 event, a Q4 event? And what sort of is a realistic back half growth rate?

Richard A. Maue

So in terms of the order rates, so the order backlog, we've seen sequential improvement through each of the first 6 months of this year, so -- but there's nothing that would suggest to us, given what we look at, specifically with respect to our detailed project tracking, where we had visibility into projects even before the bidding and quoting stage, that would indicate that we should see any of that activity not continue.

Max H. Mitchell

Matt, this is Max. I would just add, as we continue to look at the orders and the order rate, starting with the February investor conference, when we framed this up, I'm very pleased with -- I think it's playing out just as we had described. So after framing up 13 -- a 5% compound average growth rate since 2010, we saw a flat to declining markets and we grew 1%. And we called out clearly, continuing momentum through the year, where we were positioned in chemical. We looked at the markets at being similar year-over-year and that we would see that momentum to the back half of '14, specifically in chemical. And I can tell you, it's really playing out exactly as we had indicated in February. We're tracking the orders by plant, by project. We see the momentum with the ethylene installed base in the U.S. and on a global basis, with strength in China, due to automotive and the downstream within the same facilities from ethylene into polyethylene into HDPE and LDPE and other derivatives. We're tracking all of these projects, so we feel pretty confident about the continuing momentum and the continuing strengthening through the back half of the year into '15.

Matt J. Summerville - KeyBanc Capital Markets Inc., Research Division

And then just may be a follow-up. Like, two sort of questions on pricing. First, where are you in your Fluid and Engineered businesses in terms of pricing versus raws? And then Max, as you guys are out bidding on these projects, what sort of price sensitivity are you seeing in Fluid Handling relative to past cycles?

Max H. Mitchell

Matt, we're not seeing any anything different from a historical standpoint. It remains competitive, but we continue to do price for our value.

Matt J. Summerville - KeyBanc Capital Markets Inc., Research Division

And then where are you just relative to your input costs currently, Max?

Richard A. Maue

I'd say, overall, our input costs are consistent with what our expectations were when we set guidance. You see pressure here and there, but at this point, I wouldn't say there's anything material that would push us off any of our commodity cost assumptions, as we think about our full year guidance.

Operator

Our next question comes from Brian Konigsberg of Vertical Research Partners.

Brian Konigsberg - Vertical Research Partners, LLC

Actually, just coming back to the price cost question. I mean, are you pricing in line or ahead of your costs? Or are you falling behind? And does that ratio transition as these larger projects start to get traction? Could you be a little more specific on that?

Richard A. Maue

I think at this time, Brian, we don't see a dynamic that causes any concern from our point of view, with respect to where commodity costs or costs relative to our pricing. We feel pretty good about the discipline that we have across the business in this regard.

Brian Konigsberg - Vertical Research Partners, LLC

Okay. And can you just quantify may be a little bit more, how large you think the chemical cycle might be? And obviously, I think there is a number of -- there's several, I think, crackers that have gotten off the ground or so. There's talk of 3 or 4 more potentially happening this year, maybe 1 or 2 next year and I think some of the ENCs [ph] talked about for every cracker being built, 8 to 10 secondary and tertiary plants would get built as well. Maybe if you give us your view of how large the U.S. cycle could be and what your content within that market is?

Max H. Mitchell

Yes, Brian, I don't have the specifics to that degree on the call today. But as we indicated, as we painted the picture with Fluid Handling, we still feel, with the growth in the back half, that the 2% to 3% growth overall is still achievable. I think we can better frame that up in the future for you as well, but I don't have that specifically.

Brian Konigsberg - Vertical Research Partners, LLC

Okay. But it's safe to say that long-term growth rate, you're going to be fairly substantially above that probably over the next couple of years, as this cycle does start to get going? Is that a fair assumption?

Max H. Mitchell

That's consistent with what we've said, and we still see that.

Brian Konigsberg - Vertical Research Partners, LLC

Okay. And then just on Aerospace. Can you just talk a little bit more about aftermarket? So it's still fairly muted. You didn't get much benefit in 2013. I mean, it turned positive but certainly not to the levels that many of your peers had been reporting. Can you just talk a little bit more about what you're seeing in that market? Do you anticipate it does get more traction from here? Or does it stay at these kind of low single-digit levels?

Richard A. Maue

Yes. So to your point in 2013, the first half was a little bit more difficult. As we exited the year from Q2 to Q3 and Q3 to Q4, we saw some nice sequential increases. When we look at the first quarter, we were up quite a bit over the prior year first quarter, maybe more a bit on comps being favorable there. The second quarter, we were up slightly in overall aftermarket. And on the commercial spare side, up in the low-single-digit range. As I look at the spares activity in particular, in commercial spares, you have the dynamic with initial provisioning, so we saw some timing associated with that in the quarter, but replenishment continuing at a nice pace. So as we think about the second half of the year, we feel good about a momentum continuing, in particular, in the commercial spares space, such that we'll see that margin read through and help supplement the margin profile in the Aerospace segment.

Brian Konigsberg - Vertical Research Partners, LLC

Okay. If I could slip one last in, I apologize. Like, can you just talk a little bit more about the new opportunities in aero, on the original equipment side? It sounds like you think you could get some more penetration with the additional product. A little more granularity would be great.

Max H. Mitchell

I'm really excited by -- I'm not going to be able to speak specifically, Brian. I can just say that the entire aerospace team are really encouraged by some of the discussions that we had with major customers on some opportunities that have been identified, that we'll be chasing very hard. And hopefully, we can bring more clarity in the future, but there's a lot of activity.

Operator

Our next question comes from Matt McConnell of Citi Research.

Matthew W. McConnell - Citigroup Inc, Research Division

Can you just give us a little bit more of an update on MEI? I know you reiterated the synergy and the accretion targets, but now that you're about 2 quarters in, any surprises there, maybe positive and negative and maybe biggest challenges for the back half of the year?

Richard A. Maue

I mean, to the point on -- we haven't -- as it relates to the actual integration itself, I think that we're pleased. We haven't been surprised in the way of the integration. So I would say overall, we feel good about where we stand. We feel good about the $0.20 of accretion. We feel good about the synergies that we're looking to achieve and then even as we look out to '15 and '16, targets that we see there growing to $17 million next year and then up to that $25 million in 2016. We have nice visibility into those projects and programs, that we feel we're executing very well against. So I would say we feel like things are on track.

Matthew W. McConnell - Citigroup Inc, Research Division

Okay, great. And the guidance for 2014, it seems a bit wide, now that you have 2 quarters in the bag. And maybe correct me if I'm wrong, but it seems like the high end might be tougher to reach. But you certainly have a path there since you reiterated the guidance. But what would it take to get to the high-end of your range now?

Richard A. Maue

Sure. So our range is 1% to 3%. If you look at where we are, on a year-to-date basis, in terms of what we need to achieve for the low end of the range, it's slightly north of whatever -- 1.5% or it's right around 1.5%. For that midpoint, we need to achieve 3%, 3 and -- a little over 3% perhaps, which from our perspective is, given the backlog position, the momentum that we're seeing in the businesses, we feel pretty good about. To achieve that high-end of the range, I would say that the markets where we need to see further acceleration or incremental would be in the Fluid Handling space, where we actually are seeing some momentum. So we feel confident about that midpoint, but we see that in terms of the top end, a possibility with respect to the Fluid Handling business.

Matthew W. McConnell - Citigroup Inc, Research Division

Okay. And then on Fluids specifically, the 3% decline this quarter. I know you called out the nuclear comps, but I think you also mentioned some project push out. What was that related to? And can you give a little more insight into what happened in the quarter?

Richard A. Maue

Sure. So just from a Fluid Handling perspective, on down 3.2%, if not for the unfavorable comps, it would have been closer to flat or in between 0% and 1%, in terms of the core sales decline. So really, not an insignificant impact, which is why we called it out. When I look at the remaining businesses, it's the natural project work that you have in the chemical and the ChemPharma energy business where sometimes, those projects do in fact push out. But in terms of additional specifics, I think, I'd rather...

Max H. Mitchell

No overall area of concern or just generic project timing, Matt.

Operator

[Operator Instructions] Our next question comes from Ajay Kejriwal of FBR Capital Markets.

Ajay Kejriwal - FBR Capital Markets & Co., Research Division

So on Fluid, I'm sorry if you touched on this earlier, I've been jumping between calls, but the backlog up nicely in the quarter. It's good to see that. Any color in the margins embedded in the backlog? I guess, you touched on pricing, and it sounds like you're pricing very similarly to what you've been doing in the past, so it sounds like things are okay, but any color on the profitability in the backlog?

Richard A. Maue

Sure. So we feel good about the profitability in the backlog. Our forecasts, as we look at them, read through with a strong backlog. So nothing in particular that would point to that would suggest any kind of margin weakness. So we feel good and that was, I would say, in line and consistent with the pricing discussion earlier.

Ajay Kejriwal - FBR Capital Markets & Co., Research Division

Good. And the timing of conversion of this backlog? I'd imagine there are long-tailed projects in there but broadly, is this something that you would convert in the next quarter or 2? Or is this more longer dated?

Richard A. Maue

No, I would say it's more in the next, I would call it, 6 to 12 months would be broadly, where we would position it. Probably closer to the 6 to 9 months, but it'll read through sooner than later. These are not for 18, 24 months from now.

Max H. Mitchell

Certainly, there's backlog that we'll ship in the quarter, average 6 months.

Ajay Kejriwal - FBR Capital Markets & Co., Research Division

Good. And then Max, on repositioning, I thought I heard you say more repositioning. So any more color on where those actions are or could be concentrated? And then perhaps, the size of the expense and the expected payback, please?

Max H. Mitchell

I'm sorry, Ajay, I don't recall mentioning more repositioning, but repositioning on track.

Richard A. Maue

So I think we're just following up on the guidance we gave at the beginning of the year in terms of the repositioning actions, specific to consolidating a site within Fluid Handling and one within Electronics and the Defense side and just that we are on track.

Ajay Kejriwal - FBR Capital Markets & Co., Research Division

So -- and the benefits you would expect from what you're doing this year in '15 and '16?

Richard A. Maue

Correct. We see $5 million in total in aggregate in '15, growing to another $5 million in '16. So a run rate of $10 million beginning in '16.

Ajay Kejriwal - FBR Capital Markets & Co., Research Division

Got it. And the last quick one from me. On the Aero engineering, what's that as a percent of sales in the quarter? Can you give that please?

Richard A. Maue

It was consistent. It's consistent with where we were last quarter. So we're in that 9% range roughly.

Operator

And we have a follow-up question from Brian Konigsberg of Vertical Research Partners.

Brian Konigsberg - Vertical Research Partners, LLC

The intra-quarter or actually, I think maybe even the last couple of weeks, there's been some development on the asbestos front, with Garlock and then sealing in some documents. I know that you have been looking to get some clarity on some of the details related to the plaintiffs in the historical claims. Does that have any bearing on potential clawbacks for Crane or maybe some other implications? If you could touch on that, it will be great.

Max H. Mitchell

Brian, I know you're following this one closely, as we are, and tracking where Garlock in the Bankruptcy Court, we also would like to see that public release of information. So we're tracking that carefully. I think everything is the day-to-day here. It remains a very long battle. I do believe that this could -- this is an inflection point. It's important that the information be released. If we can get that, I think it will be enlightening. I think it will shed more light on the problem. And as those that are following, as it relates to the valuation of the asbestos liability, this is some of the key information that Judge Hodges uncovered in some of the abuses in this very sad situation, where people are clearly ill, but there are trusts that exist for that recovery. And people like Crane that never manufactured asbestos and only had it in gaskets. And Judge Hodges used the term gaskets are to asbestos exposure like a bucket of water in an ocean of insulation. And so we continue to track carefully here, the information that we believe is occurring as it relates to double dipping on these trusts, so that's important. And we'll be looking for the benefits going forward, but not necessarily the clawbacks as we move forward, but encouraging developments as they continue.

Brian Konigsberg - Vertical Research Partners, LLC

So potentially, you could re-evaluate the win-loss assumptions within your liability. Is that what would largely be the implication?

Max H. Mitchell

It could lead to that, eventually.

Brian Konigsberg - Vertical Research Partners, LLC

Okay. And just separately, on Fluid Handling again, just the margins. So another very strong quarter with margins. You are getting some pension benefit, but I'm just curious, when you look out from here, do you anticipate you could grind that materially higher from current levels? And I assume it's largely going to be on volume. Can you touch on that? And that would be great.

Richard A. Maue

I think our position here is that we're going to continue to always look to grow margins and the way we think about it again is, for these incremental sales that we'd look to see, we'd like 25% to read through for us. So that's -- we're not coming off that position, and we feel pretty good about it.

Operator

I'm not showing any further questions. I'd like to turn the call back to Max Mitchell for further remarks.

Max H. Mitchell

Thank you, operator. I have a few closing comments before we conclude the call. Second quarter earnings, in line with our expectations, and the year is developing as we anticipated. We were encouraged by our strong order intake during the quarter and the corresponding improvement in backlog. This positive momentum gives us confidence in our outlook for an improving second half of 2014. Beyond this year, we expect further improvement at Fluid Handling. We also expect secular tailwinds in several of our businesses, with improving cyclical outlooks in end markets such as aerospace and nonresidential construction. For the next few years, we will also see incremental benefits from our 2014 repositioning and from increasing synergies associated with the acquisition of MEI. We remain on track to deliver on our 2014 guidance and remain committed to our longer-term target of at least 10% EPS growth per year and our continued confidence is reflected in our dividend increase of 10%, the fifth consecutive year of a dividend increase. Thank you for your interest in Crane, and I look forward to speaking with you next quarter.

Operator

Ladies and gentlemen, thank you for participating on today's conference. This does conclude the program. You may all disconnect. Everyone, have a great day.

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