What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-01 compared with 2023-08-02 · 105 added, 106 removed, 239 unchanged (47% of the section changed)

29 unchanged sentences

the ability and willingness of Crane Company to meet and/or perform their obligations under any contractual arrangements entered into among the parties in connection with the Separation and any of their obligations to indemnify, defend and hold the other party harmless from and against various claims, litigation and liabilities;

our ability to achieve some or all the benefits that we expect to achieve from the Separation;

our ability to achieve some or all the benefits that we expect from the Separation;

and other risks noted in reports that we file with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, and subsequent reports and other documents filed by us with the Securities and Exchange Commission, including any registration statement relating to our business separation.

2 unchanged sentences

Recent Transactions

On April 3, 2023, Crane Holdings, Co., was separated into two independent, publicly-traded companies in a transaction in which Crane Holdings, Co.

On April 3, 2023, Crane Holdings, Co.

was separated into two independent, publicly-traded companies in a transaction in which Crane Holdings, Co.

retained its Payment & Merchandising Technologies segment and spun-off its Aerospace & Electronics, Process Flow Technologies and Engineered Materials segments to Crane Holdings, Co.

stockholders.

Upon consummation of the Separation, each of our stockholders received one share of Crane Company common stock for every one share of our common stock held on March 23, 2023, the record date for the distribution.

Upon consummation of the Separation, each of its stockholders received one share of Crane Company common stock for every one share of its common stock held on March 23, 2023, the record date for the distribution.

BAUM Acquisition

On October 4, 2023, the Company completed the acquisition of Baum lined piping GmbH (“BAUM”) for approximately $91 million on a cash-free and debt-free basis.

BAUM is a German based company that designs, manufactures, and distributes lined piping products primarily focused on chemical and industrial end markets.

BAUM will be included in our Process Flow Technologies segment.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results from Continuing Operations – Three Month Periods Ended June 30,

Results from Continuing Operations – Three Months Ended September 30,

The following information should be read in conjunction with our condensed consolidated financial statements and related notes.

All comparisons below refer to the second quarter 2023 versus the second quarter 2022, unless otherwise specified.

Second Quarter Favorable/(Unfavorable) Change

All comparisons below refer to the third quarter 2023 versus the third quarter 2022, unless otherwise specified.

Third Quarter Favorable/(Unfavorable) Change

(dollars in millions) 2023 2022 $ %

4 unchanged sentences

as a percentage of sales 23.9 % 25.9 %

Operating profit 63.1 43.7 19.4 44.4 %

Loss on divestiture of asbestos-related assets and liabilities — 162.4 162.4 NM

Operating profit (loss) 76.3 (117.2) 193.5 NM

Operating margin 14.4 % (24.4) %

3 unchanged sentences

Gain on sale of business — 3.8 (3.8) NM

Miscellaneous (expense) income, net (1.3) 13.0 (14.3) (110.0) %

Total other expense (5.8) 241.5 (247.3) (102.4) %

Income from continuing operations before income taxes 57.3 285.2 (227.9) (79.9) %

Miscellaneous income (expense), net 1.3 4.5 (3.2) (71.1) %

Total other (expense) income, net (2.0) 6.7 (8.7) (129.9) %

Income (Loss) from continuing operations before income taxes 74.3 (110.5) 184.8 167.2 %

Provision for income taxes 19.1 10.4 (8.7) (83.7) %

Net income from continuing operations attributable to common shareholders $ 43.3 $ 206.6 $ (163.3) (79.0) %

Sales decreased by $20.7 million, or 3.9%, to $509.6 million in 2023.

Net income (loss) from continuing operations attributable to common shareholders $ 55.2 $ (120.9) $ 176.1 145.7 %

(1) Certain variances are labeled as not meaningful ("NM") throughout management's discussion and analysis.

Sales increased by $50.1 million, or 10.4%, to $530.1 million in 2023.

The year-over-year change in sales included:

• an increase in core sales of $44.7 million, or 9.3%, which was driven primarily by higher pricing;

• unfavorable foreign currency translation of $1.5 million, or 0.3%;

• a decrease in sales related to the May 2022 divestiture of Crane Supply of $44.0 million, or 8.3%.

Cost of sales decreased by $44.3 million, or 12.6%, to $308.5 million in 2023.

The decrease is primarily related to the impact of the sale of Crane Supply of $32.3 million, or 9.1%, strong productivity gains of $9.7 million, or 2.8%, the impact of lower volumes of $9.5 million, or 2.7%, partially offset by an increase in material, labor and other manufacturing costs of $5.3 million, or 1.5% and unfavorable mix of $3.7 million, or 1.1%.

Selling, general and administrative expenses increased by $4.2 million, or 3.1%, to $138.0 million in 2023 reflecting a $13.9 million, or 10.4%, increase in administrative expenses primarily related to the Separation, partially offset by the impact of the sale of Crane Supply of $6.2 million, or 4.6%, and productivity gains and restructuring savings of $2.8 million, or 2.1%.

Operating profit increased by $19.4 million, or 44.4%, to $63.1 million in 2023.

The increase primarily reflected higher pricing net of inflation, and productivity, of $29.7 million, or 68.0%, partially offset by the impact of the sale of Crane Supply of $5.5 million, or 12.6% and unfavorable mix of $3.7 million, or 8.5%.

Other (expense) income decreased $247.3 million to $(5.8) million, reflecting the gain on the sale of the Crane Supply business of $228.7 million in 2022, not repeating in 2023.

Our effective tax rate attributable to continuing operations for the three months ended June 30, 2023 is lower than the prior year’s comparable periods primarily due to the prior year effect of a reversal of a deferred tax asset established that related to the sale of a subsidiary in a prior period, partially offset by earnings in jurisdictions with statutory tax rates higher than the United States in current period.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our effective tax rate attributable to continuing operations for the three months ended June 30, 2023 is higher than the statutory U.S.

federal tax rate of 21% primarily due to earnings in jurisdictions with statutory tax rates higher than the United States, expenses that are statutorily non-deductible for income tax purposes and U.S.

state taxes, partially offset by excess share-based compensation benefits, tax credit utilization, and the statutory U.S.

• favorable foreign currency translation of $5.4 million, or 1.1%.

Cost of sales increased by $16.2 million, or 5.2%, to $326.9 million in 2023.

The increase is primarily related to higher material, labor and other manufacturing costs of $13.8 million, or 4.4%, increased volumes of $5.3 million, or 1.7% and unfavorable mix of $4.4 million, or 1.4%, partially offset by strong productivity gains of $10.2 million, or 3.3%, and unfavorable foreign currency translation of $3.3 million, or 1.1%.

Selling, general and administrative expenses increased by $2.8 million, or 2.3%, to $126.9 million in 2023.

The increase primarily reflected a $4.9 million, or 3.9%, increase in selling and engineering costs, partially offset by productivity gains and restructuring savings of $2.1 million, or 1.7%.

Operating profit increased by $193.5 million to $76.3 million in 2023.

The increase is primarily related to the absence of the 2022 loss on divestiture of asbestos-related assets and liabilities of $162.4 million and higher pricing net of inflation, and productivity, of $28.0 million, or 23.9%.

Other (expense) income, net decreased by $8.7 million, or 129.9%, to ($2.0) million, primarily reflecting the prior year gain on the sale of Crane Supply.

For the three months ended September 30, 2023, our effective tax rate is impacted by earnings in jurisdictions with statutory rates higher than the U.S.

and expenses statutorily non-deductible for income tax purposes in the current period, this is partially offset by the statutory U.S.

deduction related to our non-U.S.

subsidiaries’ income.

Comprehensive Income

In the prior year’s three month period ended September 30, 2022, the Company reported a loss on the asbestos related transaction with no correlative income tax benefit, which resulted in the prior year’s negative effective tax rate.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Comprehensive Income (Loss)

Three Months Ended

September 30,

(in millions) 2023 2022

Net income before allocation to noncontrolling interests $ 45.6 $ 258.2

Components of other comprehensive income (loss), net of tax

Net income (loss) before allocation to noncontrolling interests $ 55.2 $ (59.3)

Components of other comprehensive (loss) income, net of tax

Currency translation adjustment (15.7) (77.7)

Changes in pension and postretirement plan assets and benefit obligation, net of tax 3.6 2.3

Other comprehensive income (loss), net of tax 3.3 (72.4)

Comprehensive income before allocation to noncontrolling interests 48.9 185.8

Other comprehensive loss, net of tax (12.1) (75.4)

Comprehensive income (loss) before allocation to noncontrolling interests 43.1 (134.7)

Noncontrolling interests in comprehensive income — (0.3)

Comprehensive income attributable to common shareholders $ 49.0 $ 185.9

For the three months ended June 30, 2023, comprehensive income before allocation to noncontrolling interests was $48.9 million compared to $185.8 million in the same period of 2022.

The $136.9 million decrease was primarily driven by the $76.6 million year-over-year favorable impact of foreign currency translation, due to the impact of the British pound and euro against the U.S.

dollar, offset by lower net income before allocation to noncontrolling interests of $212.6 million.

Comprehensive income (loss) attributable to common shareholders $ 43.1 $ (134.4)

For the three months ended September 30, 2023, comprehensive income before allocation to noncontrolling interests was $43.1 million compared to $134.7 million loss in the same period of 2022.

The $177.8 million increase was primarily driven by higher net income before allocation to noncontrolling interests of $114.5 million and a $62.0 million year-over-year favorable impact of foreign currency translation, reflecting a stronger euro against the U.S.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Segment Results of Operations - Three Month Periods Ended June 30,

Segment Results of Operations - Three Months Ended September 30,

Aerospace & Electronics

Second Quarter Favorable/(Unfavorable) Change

Third Quarter Favorable/(Unfavorable) Change

(dollars in millions) 2023 2022 $ %

13 unchanged sentences

Backlog $ 677.9 $ 591.6 $ 86.3 14.6 %

Sales increased $27.7 million, or 17.2%, to $189.2 million in 2023, primarily due to higher volumes and strong pricing.

Sales increased $40.0 million, or 23.9%, to $207.2 million in 2023, primarily due to higher volumes and pricing.

• Sales of Commercial Original Equipment increased $12.1 million, or 19.0%, to $75.8 million in 2023, reflecting strong demand from aircraft manufacturers as the industry aircraft build rates continue to recover from the COVID-19 related slowdown, partially offset by material availability constraints.

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• Sales of Military Aftermarket Products increased $6.9 million, or 59.5%, to $18.5 million in 2023, reflecting stronger demand from military customers.

Cost of sales increased by $15.4 million, or 15.2%, to $116.6 million in 2023, primarily reflecting higher material and other manufacturing costs of $10.0 million, or 9.9%, increased volumes of $6.9 million, or 6.9%, unfavorable mix of $1.6 million, or 1.6%, partially offset by productivity gains of $3.2 million, or 3.1%.

Selling, general and administrative expenses increased $2.2 million, or 6.9%, to $34.3 million, primarily related to higher engineering and administrative costs of $3.3 million, or 10.2%, partially offset by productivity and restructurings savings of $1.9 million, or 5.8%.

Cost of sales increased by $24.7 million, or 23.1%, to $131.5 million in 2023, primarily reflecting higher material and other manufacturing costs of $16.3 million, or 15.3%, increased volumes of $12.7 million, or 11.9%, partially offset by productivity gains and favorable mix of $4.5 million, or 4.2%.

Selling, general and administrative expenses increased $3.3 million, or 10.2%, to $35.5 million, primarily related to higher administrative and engineering costs of $5.0 million, or 15.5%, partially offset by productivity and restructurings savings of $1.8 million, or 5.6%.

Operating profit increased by $12.0 million, or 42.6%, to $40.2 million in 2023.

2 unchanged sentences

Process Flow Technologies

Second Quarter Favorable/(Unfavorable) Change

Third Quarter Favorable/(Unfavorable) Change

(dollars in millions) 2023 2022 $ %

12 unchanged sentences

Backlog $ 352.9 $ 353.7 $ (0.8) (0.2) %

Sales decreased by $32.8 million, or 11.1%, to $263.2 million in 2023, driven by a $44.0 million, or 14.9%, impact from the sale of Crane Supply and $1.6 million, or 0.5%, of unfavorable foreign currency translation, partially offset by core sales growth of $12.7 million, or 4.3%.

• Sales of Process Valves and Related Products increased by $10.7 million, or 5.7%, to $197.4 million in 2023, reflecting an increase in core sales, partially offset by unfavorable foreign currency translation as the Chinese Yuan and the Canadian Dollar weakened against the U.S.

Sales increased by $16.7 million, or 6.7%, to $266.7 million in 2023, driven by core sales growth of $12.0 million, or 4.8%, and $4.7 million, or 1.9%, of favorable foreign currency translation.

• Sales of Process Valves and Related Products increased by $11.1 million, or 6.0%, to $197.3 million in 2023, reflecting an increase in core sales and favorable foreign currency translation as the Euro strengthened against the U.S.

Sales growth was driven primarily by strength in Industrial end markets and higher pricing.

• Sales of Commercial Valves decreased by $48.4 million, or 62.7%, to $28.8 million in 2023, primarily driven by the impact of the divestiture of Crane Supply of $44.0 million, or 57.0%, and, to a lesser extent, modest weakening in the U.K.

non-residential construction markets.

• Sales of Pumps & Systems increased by $4.9 million, or 15.3%, to $37.0 million in 2023, reflecting an increase in core sales primarily driven by higher prices and volumes a cross all key end markets.

Cost of sales decreased by $41.8 million, or 21.9%, to $149.4 million, primarily related to the impact of the sale of Crane Supply of $32.3 million, or 16.9%, productivity gains of $5.8 million, or 3.0%, impact of lower volumes of $5.0 million, or 2.6%, partially offset by unfavorable mix of $3.3 million, or 1.7%.

Selling, general and administrative expense decreased by $1.0 million, or 1.6%, to $63.2 million, primarily related to the sale of Crane Supply of $6.2 million, or 9.7%, partially offset by higher administrative costs of $5.3 million, or 8.3%.

• Sales of Pumps & Systems increased by $4.8 million, or 14.4%, to $38.2 million in 2023, reflecting an increase in core sales primarily driven by higher prices and volumes a cross key end markets.

Cost of sales decreased by $0.8 million, or 0.5%, to $152.2 million, primarily related to productivity gains of $6.7 million, or 4.4%, impact of lower volumes of $3.8 million, or 2.5%, partially offset by unfavorable mix of $6.8 million, or 4.4% and unfavorable foreign currency translation of $3.1 million, or 2.0%.

Selling, general and administrative expense increased by $7.6 million, or 13.6%, to $63.3 million, primarily related to higher selling and administrative costs of $8.0 million, or 14.4%.

Operating profit increas ed by $9.9 million, or 24.0%, to $51.2 million in 2023.

The increase is primarily due to higher pricing net of inflation and productivity of $22.2 million, or 54.7%, partially offset by the impact of lower volumes and unfavorable mix of $6.5 million, or 16.0%, and the impact from the sale of Crane Supply of $5.5 million, or 13.5%.

The increase is primarily due to higher pricing net of inflation, and productivity of $17.7 million, or 42.9%, partially offset by the impact of unfavorable mix of $6.8 million, or 16.5%.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Engineered Materials

Second Quarter Favorable/(Unfavorable) Change

Third Quarter Favorable/(Unfavorable) Change

(dollars in millions) 2023 2022 $ %

12 unchanged sentences

Backlog $ 14.6 $ 18.5 $ (3.9) (21.1) %

Sales decreased $15.6 million, or 21.4%, to $57.2 million in 2023, reflecting lower volumes, partially offset by higher pricing.

Sales decreased $6.6 million, or 10.5%, to $56.2 million in 2023, primarily reflecting lower volumes of $5.8 million, or 9.2% .

The decrease was primarily driven by lower sales to recreational vehicle manufacturers.

Cost of sales decreased $7.9 million, or 15.4%, to $43.3 million in 2023, primarily related to lower volumes of $3.5 million, or 6.8%, and lower raw materials and other manufacturing costs of $2.9 million, or 5.7%.

Operating profit increased by $2.5 million, or 34.2%, to $9.8 million in 2023, reflecting the impact of higher pricing net of inflation and favorable mix, partially offset by lower volumes.

Operating profit increased by $1.0 million, or 14.9%, to $7.7 million in 2023, primarily reflecting lower raw material and other manufacturing costs, stronger productivity gains and favorable mix, partially offset by lower volumes.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results from Continuing Operations – Six Month Periods Ended June 30,

Results from Continuing Operations – Nine Months Ended September 30,

The following information should be read in conjunction with our condensed consolidated financial statements and related notes.

All comparisons below refer to the first six months of 2023 versus the first six months of 2022, unless otherwise specified.

All comparisons below refer to the first nine months of 2023 versus the first nine months of 2022, unless otherwise specified.

Year-to-Date Favorable/(Unfavorable) Change

6 unchanged sentences

as a percentage of sales 25.4 % 25.0 %

Operating profit 140.6 106.5 34.1 32.0 %

Loss on divestiture of asbestos-related assets and liabilities — 162.4 162.4 NM

Operating profit (loss) 216.9 (10.7) 227.6 NM

Operating margin 14.0 % (0.7) %

3 unchanged sentences

Gain on sale of business — 232.5 (232.5) NM

Miscellaneous income, net (1.9) 16.1 (18.0) (111.8) %

Total other (expense) income (12.0) 244.3 (256.3) (104.9) %

Miscellaneous (expense) income, net (0.5) 20.6 (21.1) (102.4) %

Total other (expense) income, net (14.0) 251.0 (265.0) (105.6) %

Income from continuing operations before income taxes 202.9 240.3 (37.4) (15.6) %

1 unchanged sentence

Net income from continuing operations attributable to common shareholders $ 154.4 $ 131.8 $ 22.6 17.1 %

Sales decreased by $45.7 million, or 4.3%, to $1,023.4 million in 2023.

(1) Certain variances are labeled as not meaningful ("NM") throughout management's discussion and analysis.

Sales increased by $4.4 million, or 0.3%, to $1,553.5 million in 2023.

The year-over-year change in sales included:

• an increase in core sales of $70.4 million, or 6.6%;

• an increase in core sales of $114.9 million, or 7.4%, which was driven primarily by higher pricing;

• unfavorable foreign currency translation of $4.8 million, or 0.3%;

3 unchanged sentences

Selling general and administrative expenses increased by $7.5 million, or 1.9%, to $394.3 million in 2023, r eflecting a $29.7 million, or 7.7%, increase in administrative expenses primarily related to the Separation, pa rtially offset by the impact of the sale of Crane Supply of $12.5 million, or 3.2%, and restructuring savings and productivity gains of $7.9 million, or 2.0%.

Operating profit increased by $34.1 million, or 32.0%, to $140.6 million in 2023.

The increase in operating profit is primarily related to higher pricing net of inflation $36.7 million, or 34.4%, productivity and restructuring savings of $24.5 million or 23.0% and impact of volumes of $3.6 million, or 3.3%, partially offset by the impact of the sale of Crane Supply of $15.2 million, or 14.3%, unfavorable mix of $13.4 million, or 12.6%, unfavorable foreign currency translation of $4.4 million, or 4.1%.

Other income (expense) decreased $256.3 million to $(12.0) million reflecting the gain on the sale of the Crane Supply business of $228.7 million in 2022, not repeating in 2023.

Our effective tax rate attributable to continuing operations for the six months ended June 30, 2023, is lower than the prior year’s comparable periods primarily due to prior year effect of a reversal of a deferred tax asset established that related to the sale of a subsidiary in a prior period and a greater benefit related to share-based compensation in current period.

This is partially offset by earnings in jurisdictions with statutory tax rates higher than the United States and expenses statutorily non-deductible for income tax purposes in current period.

Operating profit increased by $227.6 million to $216.9 million in 2023.

The increase is primarily related to the absence of the 2022 loss on divestiture of asbestos-related assets and liabilities of $162.4 million, higher pricing net of inflation of $53.1 million, productivity and restructuring savings of $37.8 million and the impact of volumes of $7.5 million, partially offset by unfavorable mix of $17.9 million and the impact of the sale of Crane Supply of $14.9 million.

Other (expense) income, net decreased by $265.0 million, or 105.6%, to ($14.0) million, primarily reflecting the gain on the sale of Crane Supply not repeating in 2023.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our effective tax rate attributable to continuing operations for the six months ended June 30, 2023 is higher than the statutory U.S.

state taxes, partially offset by excess share-based compensation benefits, tax credit utilization, and the statutory U.S.

deduction related to our non-U.S.

subsidiaries’ income.

Our effective tax rate attributable to continuing operations for the nine months ended September 30, 2023, is lower than the prior year’s comparable period primarily due to the prior year effect of a reversal of a deferred tax asset established that related to the planned sale of a subsidiary in a prior period and a prior year loss on the asbestos-related transaction and the lack of a related tax benefit.

This is partially offset by earnings in jurisdictions with statutory tax rates higher than the United States and expenses statutorily non-deductible for income tax purposes in current period.

Comprehensive Income

Six Months Ended

Nine Months Ended

September 30,

(in millions) 2023 2022

7 unchanged sentences

Comprehensive income attributable to common shareholders $ 213.3 $ 138.1

For the six months ended June 30, 2023, comprehensive income before allocations to noncontrolling interests was $170.0 million compared to $272.5 million in the same period of 2022.

The $102.5 million decrease was primarily driven by a $110.9 million favorable impact of foreign currency translation, due to the impact of the British pound and euro against the U.S.

For the nine months ended September 30, 2023, comprehensive income before allocations to noncontrolling interests was $213.1 million compared to $137.8 million in the same period of 2022.

The $75.3 million increase was primarily driven by a $172.9 million favorable impact of foreign currency translation, due to the impact of the euro against the U.S.

dollar, offset by lower net income before allocation to noncontrolling interests of $97.4 million.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Segment Results of Operations - Six Month Periods Ended June 30,

Segment Results of Operations - Nine Months Ended September 30,

Aerospace & Electronics

13 unchanged sentences

Operating margin 20.1 % 17.4 %

Sales increased $50.7 million, or 15.9%, to $369.3 million in 2023, with strong pricing and higher volumes .

Sales increased $90.7 million, or 18.7%, to $576.5 million in 2023, primarily due to higher volumes and strong pricing.

• Sales of Commercial Original Equipment increased $31.2 million, or 17.1%, to $214.1 million in 2023, reflecting strong demand from aircraft manufacturers as the industry aircraft build rates continue to recover from the COVID-19 related slowdown, partially offset by material availability constraints.

1 unchanged sentence

• Sales of Commercial Aftermarket Products increased $34.7 million, or 37.5%, to $127.2 million in 2023, reflecting continued strong demand from the airlines due to improving air traffic and inventory restocking.

• Sales of Military Aftermarket Products increased $0.4 million, or 1.5%, to $27.7 million in 2023.

Cost of sales increased by $29.0 million, or 14.6%, to $227.6 million in 2023, primarily reflecting increased volumes of $12.7 million, or 6.4%, increased material, labor and other manufacturing costs of $11.3 million, or 5.7%, unfavorable mix of $11.3 million, or 5.7%, partially offset by $6.3 million, or 3.2%, of productivity gains.

Selling, general and administrative expense increased by $2.0 million, or 3.1%, to $65.8 million in 2023, primarily reflecting higher engineering, selling and administrative costs, partially offset by productivity and restructuring savings.

Operating profit increased by $19.7 million, or 35.1%, to $75.9 million in 2023, primarily reflecting higher pricing net of inflation, productivity gains and restructuring savings of $18.8 million, or 33.4%, coupled with impact from higher volumes of $12.4 million, or 22.0%, partially offset by an unfavorable mix of $11.3 million, or 20.0%.

• Sales of Military Aftermarket Products increased $7.2 million, or 18.5%, to $46.1 million in 2023, reflecting stronger demand from military customers.

Cost of sales increased by $53.7 million, or 17.6%, to $359.1 million in 2023, primarily reflecting increased material, labor and other manufacturing costs of $27.6 million, or 9.0%, increased volumes of $25.4 million, or 8.3%, unfavorable mix of $9.4 million, or 3.1%, partially offset by $9.0 million, or 2.9%, of productivity gains.

Selling, general and administrative expense increased by $5.3 million, or 5.5%, to $101.3 million in 2023, primarily reflecting higher engineering, selling and administrative costs of $10.6 million, or 11.0%, partially offset by productivity and restructuring savings of $5.3 million, or 5.5%.

Operating profit increased by $31.7 million, or 37.6%, to $116.1 million in 2023, primarily reflecting the impact from higher volumes of $21.6 million, or 25.6%, coupled with higher pricing net of inflation, productivity gains and restructuring savings of $19.4 million, or 23.0%, partially offset by an unfavorable mix of $9.4 million, or 11.1%.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

14 unchanged sentences

Operating margin 20.6 % 15.3 %

Sales decreased by $72.8 million, or 12.0%, to $534.6 million in 2023, driven by the impact of the sale of Crane Supply of $105.8 million, or 17.4%, and unfavorable foreign currency translation of $10.0 million, or 1.6%, partially offset by higher core sales of $43.0 million, or 7.1%.

Core sales growth was driven primarily by pricing, with modestly higher volumes.

Sales decreased by $56.1 million, or 6.5%, to $801.3 million in 2023, driven by the impact of the sale of Crane Supply of $105.8 million, or 12.3%, and favorable foreign currency translation of $5.2 million, or 0.6%, partially offset by higher core sales of $54.9 million, or 6.4%.

Core sales growth was driven primarily by pricing, with modestly lower volumes.

• Sales of Process Valves and Related Products increased by $41.8 million, or 7.5%, to $597.6 million in 2023.

The increase reflected higher core sales of $36.7 million, or 9.9%, driven by higher pricing, partially offset by unfavorable foreign currency translation of $6.1 million, or 1.7%, as the Chinese Yuan, euro and Canadian dollar weakened against the U.S.

The increase reflected higher core sales of $45.0 million, or 8.1%, driven by higher pricing, partially offset by unfavorable foreign currency translation of $3.2 million, or 0.6%, as the Chinese Yuan and Canadian dollar weakened against the U.S.

Sales growth was driven primarily by strength in the Chemical and Industrial verticals.

• Sales of Commercial Valves decreased by $115.3 million, or 56.0%, to $90.5 million in 2023, primarily driven by the impact of the divestiture of Crane Supply of $105.8 million, or 51.4%, lower core sales of $8.0 million, or 3.9%, and to a lesser extent, unfavorable foreign currency translation as the British pound weakened against the U.S.

• Sales of Pumps & Systems increased by $12.5 million, or 20.0%, to $74.9 million in 2023, reflecting an increase in core sales primarily driven by higher volumes across all key end markets and higher pricing.

Cost of sales decreased by $88.6 million, or 22.8%, to $299.5 million, primarily related to the impact of the sale of Crane Supply of $78.3 million, or 20.2% and productivity gains of $10.7 million, or 2.8%.

Selling, general and administrative expense decreased by $8.5 million, or 6.6%, to $121.2 million, primarily related to the sale of Crane Supply of $12.2 million, or 9.4%, partially offset by higher administrative costs of $6.2 million, or 4.8%.

• Sales of Pumps & Systems increased by $17.4 million, or 18.2%, to $113.2 million in 2023, reflecting an increase in core sales primarily driven by higher pricing and higher volumes across all key end markets.

Cost of sales decreased by $89.4 million, or 16.5%, to $451.7 million, primarily related to the impact of the sale of Crane Supply of $78.3 million, or 14.5%, and productivity gains of $17.3 million, or 3.2% offset by unfavorable mix of 11.0 million, or 2.0%.

Selling, general and administrative expense increased by $0.9 million, or 0.5%, to $184.5 million, primarily related to higher administrative costs net of savings offset by the sale of Crane Supply.

Operating profit increased by $34.2 million, or 26.1%, to $165.1 million in 2023.

The increase is primarily due to higher pricing net of inflation and productivity $40.8 million, or 45.6%, partially offset by the impact from the sale of Crane Supply of $15.2 million, or 17.0%.

The increase is primarily due to higher pricing net of inflation and productivity of $57.1 million, or 43.6%, partially offset by the impact from the sale of Crane Supply of $14.9 million, or 11.4%, and unfavorable mix of $11.0 million, or 8.4%.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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Operating margin 16.4 % 13.1 %

Sales decreased $23.6 million, or 16.5%, to $119.5 million in 2023, reflecting lower volumes, partially offset by higher pricing.

Sales decreased $30.2 million, or 14.7%, to $175.7 million in 2023, reflecting lower core sales of $30.2 million, or 14.7%, primarily due to lower volumes, offset by higher pricing.

The decrease was primarily driven by lower sales to recreational vehicle manufacturers.

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Liquidity and Capital Resources

Six Months Ended

Nine Months Ended

September 30,

(in millions) 2023 2022

Net cash (used for) provided by:

Net cash provided by (used for):

Operating activities from continuing operations $ 33.9 $ (608.5)

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Effect of exchange rates on cash and cash equivalents (3.4) (62.7)

(Decrease) increase in cash and cash equivalents $ (438.7) $ 172.0

Decrease in cash and cash equivalents $ (383.8) $ (40.0)

Our operating philosophy is to deploy cash provided from operating activities, when appropriate, to provide value to shareholders by reinvesting in existing businesses, by making acquisitions that will strengthen and complement our portfolio, by divesting businesses that are no longer strategic or aligned with our portfolio and where such divestitures can generate capacity for strategic investments and initiatives that further optimize our portfolio, and by paying dividends and/or repurchasing shares.

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Our current cash balance, together with cash we expect to generate from future operations along with our borrowings available under our revolving credit facility is expected to be sufficient to finance our short- and long-term capital requirements, as well as to fund expected pension contributions.

In March 2023, we entered into a new senior secured credit agreement, which provides for a $500 million, 5-year revolving credit facility and a $300 million, 3-year term loan facility.

Funding under each facility became available in connection with the Separation.

We have a senior secured credit agreement, which provides for a $500 million, 5-year revolving credit facility through March 2028 and a $300 million, 3-year term loan facility, through March 2026.

At September 30, 2023, there was $251 million outstanding under the term loan facility.

In October 2023, we exercised a portion of the accordion feature under the revolving credit facility to increase the available borrowing capacity from $500 million to $800 million.

In October 2023, we borrowed $100 million under the revolving credit facility and used approximately $91 million of the proceeds to acquire Baum lined piping GmbH.

See Note 15 for further detail.

Operating Activities

Cash used for operating activities from continuing operations was $53.0 million in the first six months of 2023, as compared to $30.7 million during the same period last year.

The increase in cash used for operating activities from continuing operations was primarily driven by increased working capital investments of $87.1 million, partially offset by the $42.4 million increase in net income adjusted for the exclusion of non-cash items and a $23.4 million decrease in asbestos related payments.

Cash provided by operating activities from continuing operations was $30.7 million in the first six months of 2022.

The cash provided by operating activities from continuing operations was primarily driven by increased working capital investments supporting higher levels of demand across most businesses, together with higher tax payments in the first half of 2022.

Net asbestos-related payments for the first six months of 2022 were $23.4 million.

Cash provided by operating activities from continuing operations was $33.9 million in the first nine months of 2023, as compared to cash used for operating activities of $608.5 million during the same period last year.

The increase in cash provided by operating activities from continuing operations was primarily driven by the absence of a $550.0 million payment made last year in connection with the divestiture of the Company’s asbestos-related assets and liabilities and, to a lesser extent, the $128.3 million increase in net income adjusted for the exclusion of non-cash items;

both partially offset by increased working capital investments of $51.6 million.

Investing Activities

Cash flows relating to investing activities from continuing operations consist primarily of cash used for capital expenditures and cash provided by divestitures of businesses or assets.

Cash used for investing activities from continuing operations was $20.8 million in the first six months of 2023, as compared to cash provided by investing activities from continuing operations of $296.8 million in the comparable period of 2022.

The increase in cash used for investing activities is primarily related to the absence of the $314.3 million provided by the sale of Crane Supply in the prior year.

Cash used for investing activities from continuing operations was $29.1 million in the first nine months of 2023, as compared to cash provided by investing activities from continuing operations of $293.6 million in the comparable period of 2022.

The increase in cash used for investing activities is primarily related to the absence of $318.1 million in proceeds from the sale of Crane Supply in the prior year.

Capital expenditures are made primarily for increasing capacity, replacing equipment, supporting new product development, and improving information systems.

Cash provided by investing activities from continuing operations was $296.8 million in the first six months of 2022.

The cash provided from investing activities from continuing operations was primarily related to proceeds from the sale of Crane Supply of $314.3 million.

Financing Activities

Financing cash flows consist primarily of dividend payments to shareholders, share repurchases and repayments of indebtedness, proceeds from the issuance of long-term debt, commercial paper, proceeds from the issuance of common stock.

During the first six months of 2023, financing cash flows also includes activities associated with the distribution of Crane NXT Co.

Financing cash flows consist primarily of dividend payments to shareholders, share repurchases and repayments of indebtedness, proceeds from the issuance of long-term debt and proceeds from the issuance of common stock.

During the first nine months of 2023, financing cash flows also includes activities associated with the distribution of Crane NXT, Co.

in support of the Separation.

Cash used for financing activities was $395.6 million during the first six months of 2023 compared to $135.6 million in the comparable period of 2022.

Cash used for financing activities was $415.7 million during the first nine months of 2023 compared to cash provided by financing activities of $119.3 million in the comparable period of 2022.

Cash used for financing activities was driven by:

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

• $578.1 million of distribution cash outflows, which was comprised of the $275 million dividend to Crane NXT, Co.

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• $48.8 million in prepayments on the 3-year term loan facility.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The above uses were primarily funded by $650 million in proceeds from the term loan facilities, comprised of a $350 million term loan issued by Crane NXT, Co.

(discontinued operations) and the $300 million term loan issued by Crane Company.

Cash used for financing activities was $135.6 million during the first six months of 2022.

The cash used for financing activities was driven by the repayment of the term loan of $348.1 million in 2021 which did not repeat in 2022.

In 2022, we also had $203.7 million of share repurchases, partially offset by a $119.4 million increase in net borrowings from the issuance of commercial paper.

Recent Accounting Pronouncements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis