Crane Co 10-Q

ITEM 1: FINANCIAL STATEMENTS CRANE COMPANY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended Nine Months Ended September 30, September 30, (in millions, except per share data) 2023 2022 2023 2022 Net sales $ 530.1 $ 480.0 $ 1,553.5 $ 1,549.1 Operating costs and expenses: Cost of sales 326.9 310.7 942.3 1,010.6 Selling, general and administrative 126.9 124.1 394.3 386.8 Loss on divestiture of asbestos-related assets and liabilities — 162.4 — 162.4 Operating profit (loss) 76.3 ( 117.2 ) 216.9 ( 10.7 ) Other income (expense): Interest income 1.5 1.4 3.2 2.3 Interest expense ( 4.8 ) ( 3.0 ) ( 16.7 ) ( 4.4 ) Gain on sale of business — 3.8 — 232.5 Miscellaneous income (expense), net 1.3 4.5 ( 0.5 ) 20.6 Total other (expense) income, net ( 2.0 ) 6.7 ( 14.0 ) 251.0 Income (loss) from continuing operations before income taxes 74.3 ( 110.5 ) 202.9 240.3 Provision for income taxes 19.1 10.4 48.5 108.5 Net income (loss) from continuing operations attributable to common shareholders 55.2 ( 120.9 ) 154.4 131.8 Income from discontinued operations, net of tax (Note 2) — 61.6 52.1 172.1 Net income (loss) attributable to common shareholders $ 55.2 $ ( 59.3 ) $ 206.5 $ 303.9 Earnings (loss) per basic share: Earnings (loss) per basic share from continuing operations $ 0.97 $ ( 2.16 ) $ 2.72 $ 2.33 Earnings per basic share from discontinued operations — 1.10 0.92 3.05 Earnings (loss) per basic share $ 0.97 $ ( 1.06 ) $ 3.64 $ 5.38 Earnings (loss) per diluted share: Earnings (loss) per diluted share from continuing operations $ 0.96 $ ( 2.16 ) $ 2.69 $ 2.30 Earnings per diluted share from discontinued operations — 1.10 0.91 3.00 Earnings (loss) per diluted share $ 0.96 $ ( 1.06 ) $ 3.60 $ 5.30 Average shares outstanding: Basic 56.8 56.1 56.7 56.5 Diluted 57.5 56.1 57.4 57.3 Dividends per share $ 0.18 $ 0.47 $ 0.36 $ 1.41 See Notes to Condensed Consolidated Financial Statements. 3 CRANE COMPANY CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) Three Months Ended Nine Months Ended September 30, September 30, (in millions) 2023 2022 2023 2022 Net income (loss) before allocation to noncontrolling interests $ 55.2 $ ( 59.3 ) $ 206.5 $ 303.9 Components of other comprehensive income (loss), net of tax Currency translation adjustment ( 15.7 ) ( 77.7 ) ( 2.3 ) ( 175.2 ) Changes in pension and postretirement plan assets and benefit obligation, net of tax 3.6 2.3 8.9 9.1 Other comprehensive (loss) income, net of tax ( 12.1 ) ( 75.4 ) 6.6 ( 166.1 ) Comprehensive income (loss) before allocation to noncontrolling interests 43.1 ( 134.7 ) 213.1 137.8 Less: Noncontrolling interests in comprehensive income (loss) — ( 0.3 ) ( 0.2 ) ( 0.3 ) Comprehensive income (loss) attributable to common shareholders $ 43.1 $ ( 134.4 ) $ 213.3 $ 138.1 See Notes to Condensed Consolidated Financial Statements. 4 CRANE COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in millions) September 30, 2023 December 31, 2022 Assets Current assets: Cash and cash equivalents $ 273.8 $ 427.0 Accounts receivable, net of allowance for doubtful accounts of $ 10.0 as of September 30, 2023 and $ 8.0 as of December 31, 2022 323.5 269.7 Inventories, net: Finished goods 64.5 57.2 Finished parts and subassemblies 52.6 47.7 Work in process 41.3 27.2 Raw materials 192.5 162.1 Inventories, net 350.9 294.2 Other current assets 110.5 135.1 Current assets of discontinued operations — 625.9 Total current assets 1,058.7 1,751.9 Property, plant and equipment: Cost 751.4 729.2 Less: accumulated depreciation 498.0 480.9 Property, plant and equipment, net 253.4 248.3 Long-term deferred tax assets 4.1 3.1 Other assets 118.9 120.8 Intangible assets, net 67.4 71.7 Goodwill 689.4 690.9 Long-term assets of discontinued operations — 1,504.9 Total assets $ 2,191.9 $ 4,391.6 See Notes to Condensed Consolidated Financial Statements. 5 CRANE COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in millions, except per share and share data) September 30, 2023 December 31, 2022 Liabilities and equity Current liabilities: Short-term borrowings $ — $ 399.6 Accounts payable 150.5 179.2 Accrued liabilities 238.4 260.5 U.S. and foreign taxes on income 26.7 34.2 Current liabilities of discontinued operations — 614.7 Total current liabilities 415.6 1,488.2 Long-term debt, net 250.3 — Accrued pension and postretirement benefits 112.0 132.0 Long-term deferred tax liability 29.8 55.3 Other liabilities 97.7 85.2 Long-term liabilities of discontinued operations — 726.9 Total liabilities 905.4 2,487.6 Commitments and contingencies (Note 11) Equity: Common shares, par value $ 1.00 ; 66,475,672 and 200,000,000 shares authorized, respectively 56.8 72.4 Capital surplus 387.7 373.8 Retained earnings 921.6 2,822.8 Accumulated other comprehensive loss ( 82.0 ) ( 503.3 ) Treasury stock — ( 864.3 ) Total shareholders’ equity 1,284.1 1,901.4 Noncontrolling interests 2.4 2.6 Total equity 1,286.5 1,904.0 Total liabilities and equity $ 2,191.9 $ 4,391.6 Share data: Common shares issued 56,798,744 72,426,389 Less: Common shares held in treasury — 16,101,007 Common shares outstanding 56,798,744 56,325,382 See Notes to Condensed Consolidated Financial Statements. 6 CRANE COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Ended September 30, (in millions) 2023 2022 Operating activities: Net income from continuing operations attributable to common shareholders $ 154.4 $ 131.8 Non-cash loss on divestiture of asbestos-related assets and liabilities — 148.9 Gain on sale of business — ( 232.5 ) Depreciation and amortization, including deferred financing costs 29.0 30.2 Stock-based compensation expense 21.9 15.6 Defined benefit plans and postretirement cost (credit) 7.0 ( 8.8 ) Deferred income taxes 2.5 1.5 Cash used for operating working capital ( 165.4 ) ( 113.8 ) Defined benefit plans and postretirement contributions ( 16.1 ) ( 16.7 ) Environmental payments, net of reimbursements ( 3.0 ) ( 5.4 ) Asbestos related payments, net of insurance recoveries — ( 29.3 ) Divestiture of asbestos-related assets and liabilities — ( 550.0 ) Other 3.6 20.0 Total provided by (used for) operating activities from continuing operations 33.9 ( 608.5 ) Investing activities: Capital expenditures ( 29.7 ) ( 24.5 ) Proceeds from sale of business — 318.1 Other investing activities 0.6 — Total (used for) provided by investing activities from continuing operations ( 29.1 ) 293.6 Financing activities: Dividends paid ( 47.0 ) ( 79.5 ) Reacquisition of shares on open market — ( 203.7 ) Stock options exercised, net of shares reacquired 15.7 3.1 Debt issuance costs ( 7.5 ) — Proceeds from term facility 300.0 — Proceeds from term facility of discontinued operations 350.0 399.4 Repayment of term loans ( 448.8 ) — Distribution of Crane NXT, Co. ( 578.1 ) — Total (used for) provided by financing activities from continuing and discontinued operations ( 415.7 ) 119.3 Discontinued Operations: Total provided by operating activities 34.6 230.5 Total used for investing activities ( 4.1 ) ( 12.2 ) Increase in cash and cash equivalents from discontinued operations 30.5 218.3 Effect of exchange rates on cash and cash equivalents ( 3.4 ) ( 62.7 ) Decrease in cash and cash equivalents ( 383.8 ) ( 40.0 ) Cash and cash equivalents at beginning of period including discontinued operations (Note 2) 657.6 478.6 Cash and cash equivalents at end of period 273.8 438.6 Less: Cash and cash equivalents of discontinued operations — 196.3 Cash and cash equivalents of continuing operations at end of period $ 273.8 $ 242.3 See Notes to Condensed Consolidated Financial Statements. 7 CRANE COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Ended September 30, (in millions) 2023 2022 Detail of cash used for operating working capital from continuing operations: Accounts receivable $ ( 2.8 ) $ ( 61.9 ) Inventories ( 58.0 ) ( 55.6 ) Other current assets ( 28.7 ) ( 9.7 ) Accounts payable ( 27.3 ) 11.2 Accrued liabilities ( 14.2 ) ( 31.1 ) U.S. and foreign taxes on income ( 34.4 ) 33.3 Total $ ( 165.4 ) $ ( 113.8 ) Supplemental disclosure of cash flow information: Interest paid $ 22.2 $ 29.9 Income taxes paid $ 88.1 $ 118.1 See Notes to Condensed Consolidated Financial Statements. 8 CRANE COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED) (in millions, except share data) Common Shares Issued at Par Value Capital Surplus Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Total Share- holders’ Equity Non-controlling Interest Total Equity BALANCE DECEMBER 31, 2022 72.4 $ 373.8 $ 2,822.8 $ ( 503.3 ) $ ( 864.3 ) $ 1,901.4 $ 2.6 $ 1,904.0 Net income — — 105.7 — — 105.7 — 105.7 Cash dividends ($ 0.47 per share) — — ( 26.6 ) — — ( 26.6 ) — ( 26.6 ) Exercise of stock options, net of shares reacquired of 297,539 shares — — — — 19.8 19.8 — 19.8 Impact from settlement of share-based awards, net of shares acquired — ( 3.3 ) — — ( 3.6 ) ( 6.9 ) — ( 6.9 ) Stock-based compensation expense — 6.3 — — — 6.3 — 6.3 Changes in pension and postretirement plan assets and benefit obligation, net of tax — — — 2.7 — 2.7 — 2.7 Currency translation adjustment — — — 12.8 — 12.8 ( 0.1 ) 12.7 BALANCE MARCH 31, 2023 72.4 $ 376.8 $ 2,901.9 $ ( 487.8 ) $ ( 848.1 ) $ 2,015.2 $ 2.5 $ 2,017.7 Net income — — 45.6 — — 45.6 — 45.6 Cash dividends ($ 0.18 per share) — — ( 10.2 ) — — ( 10.2 ) — ( 10.2 ) Exercise of stock options — 1.0 — — — 1.0 — 1.0 Stock-based compensation expense — 2.5 — — — 2.5 — 2.5 Changes in pension and postretirement plan assets and benefit obligation, net of tax — — — 2.6 — 2.6 — 2.6 Currency translation adjustment — — — 0.8 — 0.8 ( 0.1 ) 0.7 Capital effect of spin-off ( 15.7 ) — ( 832.4 ) — 848.1 — — — Distribution of Crane NXT, Co. — — ( 1,236.8 ) 414.5 — ( 822.3 ) — ( 822.3 ) BALANCE JUNE 30, 2023 56.7 $ 380.3 $ 868.1 $ ( 69.9 ) $ — $ 1,235.2 $ 2.4 $ 1,237.6 Net income — — 55.2 — — 55.2 — 55.2 Cash dividends ($ 0.18 per share) — — ( 10.2 ) — — ( 10.2 ) — ( 10.2 ) Exercise of stock options 0.1 1.8 — — — 1.9 — 1.9 Impact from settlement of share-based awards — ( 0.1 ) — — — ( 0.1 ) — ( 0.1 ) Stock-based compensation expense — 5.7 — — — 5.7 — 5.7 Changes in pension and postretirement plan assets and benefit obligation, net of tax — — — 3.6 — 3.6 — 3.6 Currency translation adjustment — — — ( 15.7 ) — ( 15.7 ) — ( 15.7 ) Distribution of Crane NXT, Co. (Note 1) — — 8.5 — — 8.5 — 8.5 BALANCE SEPTEMBER 30, 2023 56.8 $ 387.7 $ 921.6 $ ( 82.0 ) $ — $ 1,284.1 $ 2.4 $ 1,286.5 9 (in millions, except share data) Common Shares Issued at Par Value Capital Surplus Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Total Share- holders’ Equity Non-controlling Interest Total Equity BALANCE DECEMBER 31, 2021 72.4 $ 363.9 $ 2,527.3 $ ( 440.2 ) $ ( 691.1 ) $ 1,832.3 $ 2.8 $ 1,835.1 Net income — — 105.0 — — 105.0 — 105.0 Cash dividends ($ 0.47 per share) — — ( 26.4 ) — — ( 26.4 ) — ( 26.4 ) Reacquisition on open market of 1,699,949 shares — — — — ( 175.8 ) ( 175.8 ) — ( 175.8 ) Exercise of stock options, net of shares reacquired of 79,214 shares — — — — 6.1 6.1 — 6.1 Impact from settlement of share-based awards, net of shares acquired — ( 5.1 ) — — ( 0.3 ) ( 5.4 ) — ( 5.4 ) Stock-based compensation expense — 5.9 — — — 5.9 — 5.9 Changes in pension and postretirement plan assets and benefit obligation, net of tax — — — 3.3 — 3.3 — 3.3 Currency translation adjustment — — — ( 21.7 ) — ( 21.7 ) 0.1 ( 21.6 ) BALANCE MARCH 31, 2022 72.4 $ 364.7 $ 2,605.9 $ ( 458.6 ) $ ( 861.1 ) $ 1,723.3 $ 2.9 $ 1,726.2 Net income — — 258.2 — — 258.2 — 258.2 Cash dividends ($ 0.47 per share) — — ( 26.4 ) — — ( 26.4 ) — ( 26.4 ) Reacquisition on open market of 1,959,069 shares — — — — ( 27.9 ) ( 27.9 ) — ( 27.9 ) Exercise of stock options, net of shares reacquired of 94,774 shares — — — — 1.1 1.1 — 1.1 Impact from settlement of share-based awards, net of shares acquired — ( 1.3 ) — — 1.2 ( 0.1 ) — ( 0.1 ) Stock-based compensation expense — 5.9 — — — 5.9 — 5.9 Changes in pension and postretirement plan assets and benefit obligation, net of tax — — — 3.5 — 3.5 — 3.5 Currency translation adjustment — — — ( 75.8 ) — ( 75.8 ) ( 0.1 ) ( 75.9 ) BALANCE JUNE 30, 2022 72.4 $ 369.3 $ 2,837.7 $ ( 530.9 ) $ ( 886.7 ) $ 1,861.8 $ 2.8 $ 1,864.6 Net loss — — ( 59.3 ) — — ( 59.3 ) — ( 59.3 ) Cash dividends ($ 0.47 per share) — — ( 26.4 ) — — ( 26.4 ) — ( 26.4 ) Exercise of stock options, net of shares reacquired of 81,642 shares — — — — 1.5 1.5 — 1.5 Impact from settlement of share-based awards, net of shares acquired — ( 7.0 ) — — 6.9 ( 0.1 ) — ( 0.1 ) Stock-based compensation expense — 5.9 — — — 5.9 — 5.9 Changes in pension and postretirement plan assets and benefit obligation, net of tax — — — 2.3 — 2.3 — 2.3 Currency translation adjustment — — — ( 77.4 ) — ( 77.4 ) ( 0.3 ) ( 77.7 ) BALANCE SEPTEMBER 30, 2022 72.4 $ 368.2 $ 2,752.0 $ ( 606.0 ) $ ( 878.3 ) $ 1,708.3 $ 2.5 $ 1,710.8 See Notes to Condensed Consolidated Financial Statements. 10 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial reporting and the instructions to Form 10-Q and, therefore, reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. All such adjustments are of a normal recurring nature. These interim condensed consolidated financial statements should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2022. Due to rounding, numbers presented throughout this report may not add up precisely to totals we provide, and percentages may not precisely reflect the absolute figures. Certain amounts in the prior periods’ condensed consolidated financial statements have been reclassified to conform to the current period presentation. Separation On March 30, 2022, Crane Holdings, Co. announced that its Board of Directors approved a plan to pursue a separation into two independent, publicly-traded companies in a transaction in which Crane Holdings, Co. would retain its Payment & Merchandising Technologies segment and spin-off its Aerospace & Electronics, Process Flow Technologies and Engineered Materials segments to its stockholders (the “Separation”). On April 3, 2023, Crane Holdings, Co. completed the Separation into two independent, publicly-traded companies, Crane NXT, Co. and Crane Company, through a pro-rata distribution (the "Distribution") of all of the outstanding common stock of Crane Company to the stockholders of Crane Holdings, Co., which on April 3, 2023 was renamed “Crane NXT, Co.” The Distribution was effective at 5:00 p.m., Eastern Time, on April 3, 2023. As a result of the Distribution, Crane Company became an independent public company. Our common stock is listed under the symbol "CR" on the New York Stock Exchange. Due to Crane Company’s larger operations, greater tangible assets, greater fair value and greater net sales, in each case, relative to Crane NXT, Co., among other factors, Crane Company was treated as the “accounting spinnor” and therefore was the “accounting successor” to Crane Holdings, Co. for accounting purposes, notwithstanding the legal form of the Separation. Therefore, following the Separation, the historical consolidated financial statements of Crane Company reflect the historical consolidated financial statements of Crane Holdings, Co. with the Payment & Merchandising Technologies segment and other distributed assets and liabilities classified as discontinued operations. In connection with the Separation on April 3, 2023, Crane Holdings, Co., which was renamed “Crane NXT, Co.,” and Crane Company entered into various agreements to effect the Separation and provide a framework for their relationship after the Separation, including a separation and distribution agreement, a transition services agreement, an employee matters agreement, a tax matters agreement and an intellectual property matters agreement. These agreements provide for the allocation between Crane NXT, Co. and Crane Company of assets, employees, liabilities and obligations (including property and employee benefits and tax-related assets and liabilities) attributable to periods prior to, at, and after the consummation of the Separation and govern certain relationships between Crane NXT, Co. and Crane Company after the Separation. Transactions under the transition services agreement with Crane NXT, Co. did not have a material impact to the condensed consolidated balance sheets as of September 30, 2023, or the condensed consolidated statements of operations and comprehensive income for the three and nine months ended September 30, 2023. On April 3, 2023, prior to the consummation of the Separation, the Board of Directors of Crane Company declared and paid a one-time cash dividend in the amount of $ 275 million to Crane Holdings, Co., its sole stockholder at that time, as part of establishing the capital structure at Crane NXT, Co. In connection with the Separation, we distributed net assets of $ 813.8 million through equity, including the cash dividend of $ 275 million and $ 303 million in cash balances. The net assets distributed includes an adjustment of $ 8.5 million recorded in the three months ended September 30, 2023, to correct the amount previously recognized at the time of the Distribution. As a result of the Separation, the Payment & Merchandising segment qualified as a discontinued operation and accordingly, the assets, liabilities and results of operations of this segment are reported as discontinued operations. See Note 2 for additional information. Recent Accounting Pronouncements The Company considered the applicability and impact of all Accounting Standards Updates issued by the Financial Accounting Standards Board (FASB) and determined them to be either not applicable or are not expected to have a material impact on the Company's Condensed Consolidated Statement of Operations, Balance Sheets and Cash Flows. 11 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 2 - Discontinued Operations As discussed in Note 1, Crane Company has reflected the historical consolidated financial statements of Crane Holdings, Co. with the Payment & Merchandising Technologies segment and other distributed assets and liabilities classified as discontinued operations. Financial results from discontinued operations: Three Months Ended Nine Months Ended September 30, September 30, (in millions) 2023 2022 2023 2022 Net sales $ — $ 335.1 $ 329.1 $ 1,001.7 Cost of sales — 174.9 174.4 536.8 Selling, general and administrative — 74.2 80.0 214.0 Operating profit — 86.0 74.7 250.9 Other expense, net — ( 10.5 ) ( 11.2 ) ( 29.4 ) Net income from discontinued operations before income taxes — 75.5 63.5 221.5 Provision for income taxes — 13.9 11.4 49.4 Income from discontinued operations, net of tax $ — $ 61.6 $ 52.1 $ 172.1 12 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The major categories of assets and liabilities included in assets of discontinued operations and liabilities of discontinued operations are as follows: (in millions) December 31, 2022 Assets: Cash and Cash Equivalents $ 230.6 Accounts receivable, net 205.0 Inventories, net 145.6 Other current assets 44.7 Current assets of discontinued operations 625.9 Property, plant and equipment, net 261.6 Long-term deferred tax asset 5.1 Other assets 56.7 Intangible assets, net 344.9 Goodwill 836.6 Long-term assets of discontinued operations 1,504.9 Assets of discontinued operations $ 2,130.8 Liabilities: Short term borrowings $ 299.7 Accounts payable 107.4 Accrued liabilities 203.7 U.S. and foreign taxes on income 3.9 Current liabilities of discontinued operations 614.7 Long-term debt 545.1 Accrued pension and postretirement benefits 21.1 Long-term deferred tax liability 107.1 Other liabilities 53.6 Long-term liabilities of discontinued operations 726.9 Liabilities of discontinued operations $ 1,341.6 13 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 3 - Segment Results Our segments are reported on the same basis used internally for evaluating performance and for allocating resources. As of September 30, 2023, we had three reportable segments: Aerospace & Electronics, Process Flow Technologies, and Engineered Materials. Assets of the reportable segments exclude general corporate assets, which principally consist of cash, deferred tax assets, certain property, plant and equipment, and certain other assets. Corporate consists of corporate office expenses including compensation and benefits for corporate employees, occupancy, depreciation, and other administrative costs. A brief description of each of our segments are as follows: Aerospace & Electronics The Aerospace & Electronics segment supplies critical components and systems, including original equipment and aftermarket parts, primarily for the commercial aerospace, and the military aerospace, defense and space markets. Its brands have decades of proven experience, and in many cases invented the critical technologies in their respective markets. The business designs and delivers systems, reliable components, and flexible power solutions that excel in tough and mission-critical environments. Products and services are organized into six integrated solutions: Sensing Components & Systems, Electrical Power Solutions, Fluid Management Solutions, Landing & Control Systems, and Microwave Solutions. Process Flow Technologies The Process Flow Technologies segment is a provider of highly engineered fluid handling equipment for critical applications that require high reliability. The segment is comprised of Process Valves and Related Products, Commercial Valves, and Pumps and Systems. Process Valves and Related Products include on/off valves and related products for critical and demanding applications in the chemical, oil & gas, power, and general industrial end markets globally. Commercial Valves includes the manufacturing of valves and related products for the non-residential construction, general industrial, and to a lesser extent, municipal markets. Pumps and Systems include pumps and related products primarily for water and wastewater applications in the industrial, municipal, commercial and military markets. Engineered Materials The Engineered Materials segment manufactures fiberglass-reinforced plastic ("FRP") panels and coils, primarily for use in the manufacturing of recreational vehicles, truck bodies and trailers (Transportation), with additional applications in commercial and industrial buildings (Building Products). 14 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Financial information by reportable segment is set forth below. Three Months Ended Nine Months Ended September 30, September 30, (in millions) 2023 2022 2023 2022 Net sales: Aerospace & Electronics $ 207.2 $ 167.2 $ 576.5 $ 485.8 Process Flow Technologies 266.7 250.0 801.3 857.4 Engineered Materials 56.2 62.8 175.7 205.9 Total $ 530.1 $ 480.0 $ 1,553.5 $ 1,549.1 Operating profit: Aerospace & Electronics $ 40.2 $ 28.2 $ 116.1 $ 84.4 Process Flow Technologies 51.2 41.3 165.1 130.9 Engineered Materials 7.7 6.7 28.9 26.9 Corporate ( 22.8 ) ( 193.4 ) ( 93.2 ) ( 252.9 ) Total $ 76.3 $ ( 117.2 ) $ 216.9 $ ( 10.7 ) Interest income 1.5 1.4 3.2 2.3 Interest expense ( 4.8 ) ( 3.0 ) ( 16.7 ) ( 4.4 ) Gain on sale of business — 3.8 — 232.5 Miscellaneous income (expense), net 1.3 4.5 ( 0.5 ) 20.6 Income (Loss) from continuing operations before income taxes $ 74.3 $ ( 110.5 ) $ 202.9 $ 240.3 (in millions) September 30, 2023 December 31, 2022 Assets: Aerospace & Electronics $ 747.2 $ 663.3 Process Flow Technologies 1,023.8 1,064.7 Engineered Materials 227.0 218.6 Corporate 193.9 314.2 Assets Discontinued Operations — 2,130.8 Total $ 2,191.9 $ 4,391.6 (in millions) September 30, 2023 December 31, 2022 Goodwill: Aerospace & Electronics $ 202.3 $ 202.3 Process Flow Technologies 315.8 317.3 Engineered Materials 171.3 171.3 Total $ 689.4 $ 690.9 15 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 4 - Revenue Disaggregation of Revenues The following table presents net sales disaggregated by product line for each segment: Three Months Ended Nine Months Ended September 30, September 30, (in millions) 2023 2022 2023 2022 Aerospace & Electronics Commercial Original Equipment $ 75.8 $ 63.7 $ 214.1 $ 182.9 Military and Other Original Equipment 64.4 57.1 189.1 171.5 Commercial Aftermarket Products 48.5 34.8 127.2 92.5 Military Aftermarket Products 18.5 11.6 46.1 38.9 Total Aerospace & Electronics $ 207.2 $ 167.2 $ 576.5 $ 485.8 Process Flow Technologies Process Valves and Related Products $ 197.3 $ 186.2 $ 597.6 $ 555.8 Commercial Valves 31.2 30.4 90.5 205.8 Pumps and Systems 38.2 33.4 113.2 95.8 Total Process Flow Technologies $ 266.7 $ 250.0 $ 801.3 $ 857.4 Engineered Materials FRP - Recreational Vehicles $ 19.6 $ 24.9 $ 57.1 $ 92.8 FRP - Building Products 27.5 29.0 91.1 88.2 FRP - Transportation 9.1 8.9 27.5 24.9 Total Engineered Materials $ 56.2 $ 62.8 $ 175.7 $ 205.9 Net sales $ 530.1 $ 480.0 $ 1,553.5 $ 1,549.1 Remaining Performance Obligations The transaction price allocated to remaining performance obligations represents the transaction price of firm orders which have not yet been fulfilled, which we also refer to as total backlog. As of September 30, 2023, total backlog was $ 1,045.4 million. We expect to recognize approximately 39 % of our remaining performance obligations as revenue in 2023, an additional 52 % in 2024 and the balance thereafter. Contract Assets and Contract Liabilities Contract assets represent unbilled amounts that typically arise from contracts for customized products or contracts for products sold directly to the U.S. government or indirectly to the U.S. government through subcontracts, where revenue recognized using the cost-to-cost method exceeds the amount billed to the customer. Contract assets are assessed for impairment and recorded at their net realizable value. Contract liabilities represent advance payments from customers. Revenue related to contract liabilities is recognized when control is transferred to the customer. We report contract assets, which are included within “Other current assets” in our Condensed Consolidated Balance Sheets, and contract liabilities, which are included within “Accrued liabilities” on our Condensed Consolidated Balance Sheets, on a contract-by-contract net basis at the end of each reporting period. Net contract assets and contract liabilities consisted of the following: (in millions) September 30, 2023 December 31, 2022 Contract assets $ 73.6 $ 56.8 Contract liabilities $ 51.8 $ 49.4 We recognized revenue of $ 7.6 million and $ 26.6 million during the three and nine-months ended September 30, 2023, respectively, related to contract liabilities as of December 31, 2022. 16 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 5 - Earnings Per Share Our basic earnings per share calculations are based on the weighted average number of common shares outstanding during the period. Potentially dilutive securities include outstanding stock options, restricted share units, deferred stock units and performance-based restricted share units. The effect of potentially dilutive securities is reflected in diluted earnings per common share by application of the treasury method. Diluted earnings per share gives effect to all potentially dilutive common shares outstanding during the period. Potentially dilutive common shares are excluded from the computations of diluted earnings per share if their effect would be anti-dilutive. For the three months ended September 30, 2022, the Company had a net loss attributable to common shareholders which causes all potentially dilutive securities to be anti-dilutive and are therefore not included in the calculation of earnings (loss) per share. Three Months Ended Nine Months Ended September 30, September 30, (in millions, except per share data) 2023 2022 2023 2022 Net income (loss) from continuing operations attributable to common shareholders $ 55.2 $ ( 120.9 ) $ 154.4 $ 131.8 Income from discontinued operations, net of tax (Note 2) — 61.6 52.1 172.1 Net income (loss) attributable to common shareholders $ 55.2 $ ( 59.3 ) $ 206.5 $ 303.9 Average basic shares outstanding 56.8 56.1 56.7 56.5 Effect of dilutive share-based awards 0.7 — 0.7 0.8 Average diluted shares outstanding 57.5 56.1 57.4 57.3 Earnings (loss) per basic share: Earnings (loss) per basic share from continuing operations $ 0.97 $ ( 2.16 ) $ 2.72 $ 2.33 Earnings per basic share from discontinued operations — 1.10 0.92 3.05 Earnings (loss) per basic share $ 0.97 $ ( 1.06 ) $ 3.64 $ 5.38 Earnings (loss) per diluted share: Earnings (loss) per diluted share from continuing operations $ 0.96 $ ( 2.16 ) $ 2.69 $ 2.30 Earnings per diluted share from discontinued operations — 1.10 0.91 3.00 Earnings (loss) per diluted share $ 0.96 $ ( 1.06 ) $ 3.60 $ 5.30 Stock options, restricted share units, deferred stock units and performance-based restricted share units that were excluded from the calculation of diluted earnings per share because their effect is anti‑dilutive was 0.5 million and 1.2 million for the three months ended September 30, 2023, and 2022, respectively, and 0.4 million for the nine months ended September 30, 2023, and 2022, respectively. 17 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 6 - Changes in Accumulated Other Comprehensive Loss The table below provides the accumulated balances for each classification of accumulated other comprehensive income (loss), as reflected on our Condensed Consolidated Balance Sheets. (in millions) Defined Benefit Pension and Postretirement Items Currency Translation Adjustment Total a Balance as of December 31, 2022 $ ( 271.9 ) $ ( 231.4 ) $ ( 503.3 ) Other comprehensive income before reclassifications — ( 2.1 ) ( 2.1 ) Amounts reclassified from accumulated other comprehensive loss 8.9 — 8.9 Net period other comprehensive income 8.9 ( 2.1 ) 6.8 Distribution of Crane NXT, Co. ( 8.9 ) 423.4 414.5 Balance as of September 30, 2023 $ ( 271.9 ) $ 189.9 $ ( 82.0 ) a Net of tax benefit of $ 109.3 million and $ 106.6 million as of September 30, 2023 and December 31, 2022, respectively. The table below illustrates the amounts reclassified out of each component of accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2023 and 2022. Amortization of pension and postretirement components has been recorded within “Miscellaneous income (expense), net” on our Condensed Consolidated Statements of Operations. Three Months Ended September 30, Nine Months Ended September 30, (in millions) 2023 2022 2023 2022 Amortization of pension items: Prior service costs (benefit) $ 0.5 $ — $ 0.5 $ ( 0.1 ) Net loss $ 3.9 $ 3.3 $ 11.5 $ 12.9 Amortization of postretirement items: Prior service costs (benefit) 0.2 ( 0.3 ) ( 0.3 ) ( 0.8 ) Net loss (benefit) 0.2 — ( 0.2 ) — Total before tax $ 4.8 $ 3.0 $ 11.5 $ 12.0 Tax impact 1.2 0.8 2.6 2.9 Total reclassifications for the period $ 3.6 $ 2.2 $ 8.9 $ 9.1 18 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 7 - Defined Benefit and Postretirement Benefits For all plans, the components of net periodic benefit for the three months ended September 30, 2023, and 2022 are as follows: Pension Postretirement (in millions) 2023 2022 2023 2022 Service cost $ ( 0.2 ) $ 1.7 $ — $ — Interest cost 7.8 6.9 ( 0.2 ) 0.2 Expected return on plan assets ( 9.8 ) ( 15.7 ) — — Amortization of prior service cost (benefit) 0.5 — 0.2 ( 0.3 ) Amortization of net loss 3.9 3.3 0.2 — Net periodic loss (benefit) $ 2.2 $ ( 3.8 ) $ 0.2 $ ( 0.1 ) For all plans, the components of net periodic benefit for the nine months ended September 30, 2023, and 2022 are as follows: Pension Postretirement (in millions) 2023 a 2022 2023 b 2022 Service cost $ 2.4 $ 4.3 $ — $ 0.1 Interest cost 26.7 17.4 0.3 0.5 Expected return on plan assets ( 34.2 ) ( 43.6 ) — — Amortization of prior service cost (benefit) 0.5 ( 0.1 ) ( 0.3 ) ( 0.8 ) Amortization of net loss (benefit) 11.5 12.9 ( 0.2 ) — Curtailment and Settlement loss from discontinued operations 1.9 — — — Net periodic loss (benefit) $ 8.8 $ ( 9.1 ) $ ( 0.2 ) $ ( 0.2 ) a Includes $ 1.9 million of pension net periodic loss related to discontinued operations for nine months ended September 30, 2023. b Includes $ 0.2 million of net periodic benefit related to discontinued operations for the nine months ended September 30, 2023. The components of net periodic benefit, other than the service cost component, are included in “Miscellaneous income (expense), net” in our Condensed Consolidated Statements of Operations. Service cost is recorded within “Cost of sales” and “Selling, general and administrative” in our Condensed Consolidated Statements of Operations. We expect to contribute the following to our pension and postretirement plans: (in millions) Pension Postretirement Expected contributions in 2023 $ 18.1 $ 0.5 Amounts contributed during the nine months ended September 30, 2023 $ 16.1 $ — 19 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 8 - Income Taxes Effective Tax Rates Our quarterly provision for income taxes is measured using an annual effective tax rate, adjusted for discrete items within the periods presented. Our effective tax rates are as follows: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Effective Tax Rate 25.7 % ( 9.4 )% 23.9 % 45.2 % 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. 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. 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. Our effective tax rate attributable to continuing operations for the three and nine months ended September 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. deduction related to our non-U.S. subsidiaries’ income. Unrecognized Tax Benefits During the three months and nine months ended September 30, 2023, our gross unrecognized tax benefits, excluding interest and penalties, increased by $ 0.7 million and $ 1.1 million, respectively, primarily due to increases in tax positions taken in the current and prior periods, and in the nine months ended September 30, 2023 these items were partially offset by reductions from expiration of statutes of limitations. During the three and nine months ended September 30, 2023, the total amount of unrecognized tax benefits that, if recognized, would cause our effective tax rate to increase by $ 0.8 million and $ 1.2 million, respectively. The difference between these amounts relates to (1) offsetting tax effects from other tax jurisdictions, and (2) interest expense, net of deferred taxes. During the three and nine months ended September 30, 2023, we recognized $ 0.1 million and $ 0.2 million, respectively, of interest expense related to unrecognized tax benefits in our Condensed Consolidated Statement of Operations. As of September 30, 2023 and December 31, 2022, the total amount of accrued interest and penalty expense related to unrecognized tax benefits recorded in our Condensed Consolidated Balance Sheets was $ 2.0 million and $ 2.0 million, respectively. During the next twelve months, it is reasonably possible that our unrecognized tax benefits may decrease by $ 0.5 million due to expiration of statutes of limitations and settlements with tax authorities. However, if the ultimate resolution of income tax examinations results in amounts that differ from this estimate, we will record additional income tax expense or benefit in the period in which such matters are effectively settled. As part of the Separation, to a limited extent, the Company has agreed to indemnify Crane NXT, Co. for uncertain tax benefits, which are attributable to the Company’s business. As of September 30, 2023, the total liability was $ 8.5 million and was included in other liabilities on our condensed consolidated balance sheets. 20 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 9 - Goodwill and Intangible Assets Our business acquisitions have typically resulted in the recognition of goodwill and other intangible assets. We follow the provisions under ASC Topic 350, “Intangibles – Goodwill and Other” as it relates to the accounting for goodwill in our condensed consolidated financial statements. These provisions require that we, on at least an annual basis, evaluate the fair value of the reporting units to which goodwill is assigned and attributed and compare that fair value to the carrying value of the reporting unit to determine if an impairment has occurred. We perform our annual impairment testing during the fourth quarter. Impairment testing takes place more often than annually if events or circumstances indicate a change in status that would indicate a potential impairment. We believe that there have been no events or circumstances which would more likely than not reduce the fair value for our reporting units below its carrying value. A reporting unit is an operating segment unless discrete financial information is prepared and reviewed by segment management for businesses one level below that operating segment (a “component”), in which case the component would be the reporting unit. As of September 30, 2023, we had four reporting units. Intangibles with indefinite useful lives, consisting of trade names, are tested annually for impairment, or when events or changes in circumstances indicate the potential for impairment. If the carrying amount of an indefinite lived intangible asset exceeds its fair value, the intangible asset is written down to its fair value. Fair value is calculated using relief from royalty method. We amortize the cost of definite-lived intangibles over their estimated useful lives. We also review all of our definite-lived intangible assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Changes to goodwill are as follows: (in millions) Aerospace & Electronics Process Flow Technologies Engineered Materials Total Balance as of December 31, 2022 $ 202.3 $ 317.3 $ 171.3 $ 690.9 Currency translation — ( 1.5 ) — ( 1.5 ) Balance as of September 30, 2023 $ 202.3 $ 315.8 $ 171.3 $ 689.4 As of September 30, 2023, we had $ 67.4 million of net intangible assets, of which $ 21.6 million were intangibles with indefinite useful lives. As of December 31, 2022, we had $ 71.7 million of net intangible assets, of which $ 21.8 million were intangibles with indefinite useful lives. Changes to intangible assets are as follows: (in millions) Nine Months Ended September 30, 2023 Year Ended December 31, 2022 Balance at beginning of period, net of accumulated amortization $ 71.7 $ 78.5 Amortization expense ( 4.2 ) ( 5.7 ) Currency translation and other ( 0.1 ) ( 1.1 ) Balance at end of period, net of accumulated amortization $ 67.4 $ 71.7 21 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS A summary of intangible assets are as follows: September 30, 2023 December 31, 2022 (in millions) Weighted Average Amortization Period of Definite Lived Assets (in years) Gross Asset Accumulated Amortization Net Gross Asset Accumulated Amortization Net Intellectual property rights 19.0 $ 69.9 $ 45.4 $ 24.5 $ 70.0 $ 45.1 $ 24.9 Customer relationships and backlog 14.2 132.5 91.4 41.1 132.6 87.8 44.8 Drawings 40.0 11.1 10.8 0.3 11.1 10.7 0.4 Other 21.0 42.6 41.1 1.5 42.4 40.8 1.6 Total 17.5 $ 256.1 $ 188.7 $ 67.4 $ 256.1 $ 184.4 $ 71.7 Future amortization expense associated with intangible assets is expected to be: (in millions) Remainder of 2023 $ 1.3 2024 5.2 2025 5.2 2026 5.2 2027 5.2 2028 and after 23.7 Note 10 - Accrued Liabilities Accrued liabilities consist of: (in millions) September 30, 2023 December 31, 2022 Employee related expenses $ 90.2 $ 100.8 Warranty 2.6 3.0 Current lease liabilities 10.5 11.6 Contract liabilities 51.8 49.4 Other 83.3 95.7 Total $ 238.4 $ 260.5 22 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 11 - Commitments and Contingencies Environmental Matters For environmental matters, we record a liability for estimated remediation costs when it is probable that we will be responsible for such costs and they can be reasonably estimated. Generally, third party specialists assist in the estimation of remediation costs. The environmental remediation liability as of September 30, 2023 is substantially related to the former manufacturing site in Goodyear, Arizona (the “Goodyear Site”) discussed below. On June 21, 2021, we completed the sale of substantially all of the property associated with what we have historically called the Goodyear Site for $ 8.7 million, retaining only a small parcel on which our remediation and treatment systems are located. We will continue to be responsible for all remediation costs associated with the Goodyear Site. On August 12, 2022, Crane Holdings, Co., Crane Company, a then wholly-owned subsidiary of Crane Holdings, Co., and Redco Corporation (f/k/a Crane Co., (“Redco”) a then wholly-owned subsidiary of Crane Company that held liabilities including asbestos liabilities and related insurance assets, entered into a Stock Purchase Agreement (the “Redco Purchase Agreement”) with Spruce Lake Liability Management Holdco LLC (“Redco Buyer”), an unrelated third party long-term liability management company specializing in the acquisition and management of legacy corporate liabilities, whereby Crane Company transferred to Redco Buyer all of the issued and outstanding shares of Redco (the “Redco Sale”). Pursuant to the terms of the Redco Purchase Agreement, Crane Company and Redco Buyer will each indemnify the other for breaches of representations and warranties, breaches of covenants and obligations and certain liabilities, subject to the terms of the Redco Purchase Agreement. Such covenants and obligations include obligations of Crane Company to indemnify Redco and its affiliates for all other historical liabilities of Redco, which include certain potential environmental liabilities. Crane Holdings, Co. guaranteed the full payment and performance of Crane Company’s indemnification obligations under the Redco Purchase Agreement. On April 3, 2023, Crane Holdings, Co. completed the Separation, pursuant to which, among other things, all outstanding shares of Crane Company were distributed to Crane Holdings, Co.’s stockholders. Upon completion of the Separation, pursuant to the terms of the Redco Purchase Agreement, Crane Holdings, Co. was released from its guarantee of Crane Company’s indemnification obligations under the Redco Purchase Agreement. Prior to the effective date of the Redco Sale, the U.S. Department of Justice agreed that Crane Holdings, Co. and, following completion of the Separation, Crane Company will be primarily liable for the Goodyear Site. The New Jersey Department of Environmental Protection agreed to transfer the liability of the Roseland Site to Crane Holdings, Co., and to further transfer this environmental liability to Crane Company upon effectiveness of the Separation. The potential liability for the Crab Orchard Site referenced below remains a direct obligation of Redco. As noted above, however, Crane Company has agreed to indemnify Redco and Redco Buyer against the Goodyear, Roseland, and Crab Orchard environmental liabilities. Thus, references below in this Note 11 to “we”, and “us” refer to Crane Company in its capacity as the primarily responsible party for the Goodyear and Roseland Sites, and as indemnitor to the Redco Buyer on the Crab Orchard Site. Goodyear Site The Goodyear Site was operated by Unidynamics/Phoenix, Inc. (“UPI”), which became an indirect subsidiary in 1985 when Crane Co. (n/k/a Redco) acquired UPI’s parent company, UniDynamics Corporation. UPI was an indirect subsidiary of Crane Holdings, Co. pre-Separation and became an indirect subsidiary of Crane Company following completion of the Separation. UPI manufactured explosive and pyrotechnic compounds, including components for critical military programs, for the U.S. Government at the Goodyear Site from 1962 to 1993, under contracts with the U.S. Department of Defense and other government agencies and certain of their prime contractors. In 1990, the U.S. Environmental Protection Agency (“EPA”) issued administrative orders requiring UPI to design and conduct certain remedial actions, which UPI has done. Groundwater extraction and treatment systems have been in operation at the Goodyear Site since 1994. On July 26, 2006, we entered a consent decree with the EPA with respect to the Goodyear Site providing for, among other things, a work plan for further investigation and remediation activities (inclusive of a supplemental remediation investigation and feasibility study). During the third quarter of 2014, the EPA issued a Record of Decision (“ROD”) amendment permitting, among other things, additional source area remediation resulting in us recording a charge of $ 49.0 million, extending the accrued costs through 2022. Following the 2014 ROD amendment, we continued our remediation activities and explored an alternative strategy to accelerate remediation of the site. During the fourth quarter of 2019, we received conceptual agreement from the EPA on our alternative remediation strategy which is expected to further reduce the contaminant plume. Accordingly, in 2019, we recorded a pre-tax charge of $ 18.9 million, net of reimbursements, to extend our forecast period through 2027 and reflect our revised workplan. The total estimated gross liability was $ 21.7 million and $ 24.8 million as of September 30, 2023 and December 31, 2022, respectively, and as described below, a portion is reimbursable by the U.S. Government. The current portion of the total estimated liability was $ 7.8 million and $ 7.7 million as of September 30, 2023 and December 31, 2022, respectively, and represents our best estimate, in consultation with our technical advisors, of total remediation costs expected to be paid during the next twelve-month period. It is not possible at this point to reasonably estimate the amount of any obligation in excess of our current accruals through the 2027 forecast period because of the aforementioned uncertainties, in particular, the continued significant changes in the Goodyear Site conditions and additional expectations of remediation activities experienced in recent years. 23 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS On July 31, 2006, we entered into a consent decree with the U.S. Department of Justice on behalf of the Department of Defense and the Department of Energy pursuant to which, among other things, the U.S. Government reimburses us for 21 % of qualifying costs of investigation and remediation activities at the Goodyear Site. As of September 30, 2023 and December 31, 2022, we recorded a receivable of $ 3.8 million and $ 4.8 million, respectively, for the expected reimbursements from the U.S. Government in respect of the aggregate liability as at that date. The receivable is reduced as reimbursements and other payments from the U.S. Government are received. Other Environmental Matters Roseland, NJ Site The Roseland Site was operated by Resistoflex Corporation (“Resistoflex”), which became an indirect subsidiary in 1985 when Crane Co. (n/k/a Redco) acquired Resistoflex’s parent company, UniDynamics Corporation. Resistoflex manufactured specialty lined pipe and fittings at the site from the 1950s until it was closed in the mid-1980s. We undertook an extensive soil remediation effort at the Roseland Site following our closure and had been monitoring the Site’s condition in the years that followed. In response to changes in remediation standards, in 2014 we began to conduct further site characterization and delineation studies at the Site. We are in the late stages of our remediation activities at the Site, which include a comprehensive delineation of contaminants of concern in soil, groundwater, surface water, sediment, and indoor air in certain buildings, all in accordance with the New Jersey Department of Environmental Protection guidelines and directives. Marion, IL Site Crane Co. (n/k/a Redco) has been identified as a potentially responsible party (“PRP”) with respect to environmental contamination at the Crab Orchard National Wildlife Refuge Superfund Site (the “Crab Orchard Site”). The Crab Orchard Site is located near Marion, Illinois, and consists of approximately 55,000 acres. Beginning in 1941, the United States used the Crab Orchard Site for the production of ordnance and other related products for use in World War II. In 1947, about half of the Crab Orchard Site was leased to a variety of industrial tenants whose activities (which continue to this day) included manufacturing ordnance and explosives. Unidynamics Corporation formerly leased portions of the Crab Orchard Site and conducted manufacturing operations at the Crab Orchard Site from 1952 until 1964. General Dynamics Ordnance and Tactical Systems, Inc. (“GD-OTS”) is in the process of conducting a remedial investigation and feasibility study (“RI-FS”) for portions of the Crab Orchard Site (the “AUS-OU”), which include areas where we maintained operations, pursuant to an Administrative Order on Consent (the “AOC”). A remedial investigation report was approved in February 2015, and work on the feasibility study is underway. It is unclear when the final feasibility study will be completed, or when a final Record of Decision (“ROD”) may be issued. As noted above, we have agreed to indemnify Redco against the Crab Orchard environmental liabilities, and accordingly we act as Redco’s agent with respect to such liabilities. GD-OTS asked Crane Co. (n/k/a Redco) to participate in a voluntary, multi-party mediation exercise with respect to response costs that GD-OTS has incurred or will incur with respect to the AUS-OU, and Crane Co. (n/k/a Redco), the U.S. Government, and other PRPs entered into a non-binding mediation agreement in 2015 (we have since stepped into Redco’s position as a participant in the mediation). The first phase of the mediation, involving certain former munitions or ordnance storage areas, began in November 2017, but did not result in a multi-party settlement agreement. Subsequently, Redco entered discussions directly with GD-OTS and reached an agreement, as of July 13, 2021, to contribute toward GD-OTS’s past RI-FS costs associated with the first-phase areas for an immaterial amount. We, as indemnitor, have also agreed to pay a modest percentage of future RI-FS costs and the United States’ claimed past response costs relative to the first-phase areas, a sum that has proven to be and we expect to continue to be, in the aggregate, an immaterial amount. We understand that GD-OTS has also reached agreements with the U.S. Government and other participating PRPs related to the first-phase areas of concern. Negotiations between GD-OTS, the U.S. Government and remaining participants are underway with respect to resolution of the U.S. Government’s liability for, and contribution claims with respect to, RI/FS costs associated with the remaining areas of the site, including those portions of the Crab Orchard Site where Redco’s predecessor conducted manufacturing and research activities. The participants have reached agreement in principle on a framework for resolving the U.S. Government’s share of RI/FS costs, subject to consummation of a mutually-agreeable consent decree. Further, we have reached a preliminary agreement in principle with GD-OTS on our contribution to the United States’ claimed past response costs, for an immaterial amount, also conditioned on consummation of the consent decree, and further conditioned on a separate agreement to memorialize the parties’ agreement with respect to the United States’ response costs. At present, we cannot predict whether or when these negotiations will result in definitive agreements. Negotiations remain ongoing between us and GD-OTS 24 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS regarding a potential resolution of GD-OTS’ claim for costs that it has incurred in performing its obligations under the AOC. We at present cannot predict when any determination of the ultimate allocable share of GD-OTS response costs for which we may be liable is likely to be completed. None of these discussions address responsibility for the performance of, or payment of costs incurred in connection with, any remedial design or remedial action that may be required pursuant to the ROD (when it is ultimately issued). It is not possible at this time to reasonably estimate the total amount of any obligation for remediation of the Crab Orchard Site as a whole because the allocation among PRPs, selection of remediation alternatives, and concurrence of regulatory authorities have not yet advanced to the stage where a reasonable estimate can be made. Insurers with contractual coverage obligations for this site have been notified of this potential liability and have been providing coverage, subject to reservations of rights. Asbestos Liability As a result of the Redco Sale, the Company contributed approximately $ 550 million in cash, and all asbestos obligations and liabilities, related insurance assets and associated deferred tax assets of Redco were removed from the Company’s condensed consolidated balance sheets effective August 12, 2022 and the Company no longer has any obligation with respect to pending and future asbestos claims. The gross settlement and defense costs incurred for the periods presented was as follows: Three Months Ended Nine Months Ended September 30, September 30, (in millions) 2022 2022 Settlement / indemnity costs incurred $ 6.3 $ 29.4 Defense costs incurred 1.0 6.4 Total costs incurred $ 7.3 $ 35.8 The total pre-tax payments for settlement and defense costs, net of funds received from insurers, for the periods presented was as follows: Three Months Ended Nine Months Ended September 30, September 30, (in millions) 2022 2022 Settlement / indemnity payments $ 6.6 $ 33.8 Defense payments 1.1 6.1 Insurance receipts ( 1.8 ) ( 10.6 ) Pre-tax cash payments, net $ 5.9 $ 29.3 Other Proceedings We regularly review the status of lawsuits, claims and proceedings that have been or may be asserted against us relating to the conduct of our business, including those pertaining to product liability, patent infringement, commercial, employment, employee benefits, environmental and stockholder matters. We record a provision for a liability for such matters when it is considered probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions, if any, are reviewed quarterly and adjusted as additional information becomes available. If either or both of the criteria are not met, we assess whether there is at least a reasonable possibility that a loss, or additional losses, may have been incurred. If there is a reasonable possibility that a loss or additional loss may have been incurred for such matters, we disclose the estimate of the amount of loss or range of loss, disclose that the amount is immaterial, or disclose that an estimate of loss cannot be made, as applicable. We believe that as of September 30, 2023, there was no reasonable possibility that a material loss, or any additional material losses, may have been incurred for such matters, and that adequate provision has been made in our financial statements for the potential impact of all such matters. 25 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 12 - Financing Our debt consisted of the following: (in millions) September 30, 2023 December 31, 2022 364 -Day Credit Agreement a $ — $ 399.6 Total short-term borrowings $ — $ 399.6 Term Facility a $ 250.3 $ — Total long-term debt $ 250.3 $ — (a) Debt issuance costs totaled $ 0.9 million and $ 0.4 million as of September 30, 2023 and December 31, 2022, respectively, and have been netted against the aggregate principal amounts of the related debt in the components of the debt table above. Credit Facilities – On March 17, 2023, the Company entered into a senior secured credit agreement (the “Credit Agreement”), which provided for (i) a $ 500 million, 5 -year revolving credit facility (the “Revolving Facility”) and (ii) a $ 300 million, 3 -year term loan facility (the “Term Facility”), funding under each of which became available in connection with the Separation. On April 3, 2023, the Company borrowed the full amount of the Term Facility. The Company made principal prepayments of $ 48.8 million on the Term Facility during the nine months ended September 30, 2023. As of September 30, 2023, there were no outstanding borrowings under the Revolving Facility. On October 2, 2023, the Company borrowed $ 100 million under the revolving credit facility and on October 3, 2023, the Company exercised a portion of the accordion feature under its existing revolving credit facility to increase the available borrowing capacity from $ 500 million, to $ 800 million. The corresponding amendment established incremental revolving commitments in an aggregate amount of $ 300 million and refreshed the incremental capacity under the Company’s existing credit agreement. The Revolving Facility allows us to borrow, repay and re-borrow funds from time to time prior to the maturity of the Revolving Facility without any penalty or premium, subject to customary borrowing conditions for facilities of this type and the reimbursement of breakage costs. Borrowings under the Term Facility are prepayable without premium or penalty, subject to customary reimbursement of breakage costs. Interest on loans advanced under the Credit Agreement accrues, at our option, at a rate per annum equal to (1) adjusted term SOFR plus a credit spread adjustment of 0.10 % for the applicable interest period plus a margin ranging from 1.50 % to 2.25 % or (2) a base rate plus a margin ranging from 0.50 % to 1.25 %, in each case, with such margin determined based on the lower of the ratings of our senior, unsecured long-term debt (the “Ratings”) and our total net leverage ratio. We are required to pay a fee on undrawn commitments under the Revolving Facility at a rate per annum that ranges from 0.20 % to 0.35 %, based on the lower of the Ratings and our total net leverage ratio. The Credit Agreement contains customary affirmative and negative covenants for credit facilities of this type, including limitations on our and our subsidiaries with respect to indebtedness, liens, mergers, consolidations, liquidations and dissolutions, sales of all or substantially all assets, transactions with affiliates, hedging arrangements and amendments to our organizational documents or to certain subordinated debt agreements. As of the last day of each fiscal quarter, our total net leverage ratio cannot exceed 3.50 to 1.00 (provided that, at our election, such maximum ratio may be increased to 4.00 to 1.00 for specified periods following our consummation of certain material acquisitions) and our minimum interest coverage ratio must be at least 3.00 to 1.00. The Credit Agreement also includes customary events of default, including failure to pay principal, interest or fees when due, failure to comply with covenants, any representation or warranty made by us or any of our material subsidiaries being false in any material respect, default under certain other material indebtedness, certain insolvency or receivership events affecting us and our material subsidiaries, certain ERISA events, material judgments and a change in control, in each case, subject to cure periods and thresholds where customary. The Company was in compliance with all such covenants as of September 30, 2023. 364 -Day Credit Agreement - On August 11, 2022, the Company entered into a senior unsecured 364 -day credit facility (the “ 364 -Day Credit Agreement”) under which it borrowed term loans denominated in U.S. dollars (the “Term Loans”) in an aggregate principal amount of $ 400 million. Interest on the Term Loans accrued at a rate per annum equal to, at the Company’s option, (a) a base rate (determined in a customary manner), plus a margin of 0.25 % or 0.50 % that was determined based upon the ratings by S&P and Moody’s of the Company’s senior unsecured long-term debt (the “Index Debt Rating”) or (b) an adjusted Term SOFR (determined in a customary manner) for an interest period to be selected by the Company, plus a margin of 1.25 % or 1.50 % that was determined based upon the Index Debt Rating. During the first quarter of 2023, the Company repaid the remaining principal of $ 400 million under the 364 -Day Credit Agreement. 26 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 13 - Fair Value Measurements Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are to be considered from the perspective of a market participant that holds the asset or owes the liability. The standards also establish a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standards describe three levels of inputs that may be used to measure fair value: Level 1 : Quoted prices in active markets for identical or similar assets and liabilities. Level 2 : Quoted prices for identical or similar assets and liabilities in markets that are not active or observable inputs other than quoted prices in active markets for identical or similar assets and liabilities. Level 2 assets and liabilities include over-the-counter derivatives, principally forward foreign exchange contracts, whose value is determined using pricing models with inputs that are generally based on published foreign exchange rates and exchange traded prices, adjusted for other specific inputs that are primarily observable in the market or can be derived principally from or corroborated by observable market data. Level 3 : Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Valuation Technique The carrying value of our financial assets and liabilities, including cash and cash equivalents, accounts receivable and accounts payable approximate fair value, without being discounted, due to the short periods during which these amounts are outstanding. We are exposed to certain risks related to our ongoing business operations, including market risks related to fluctuation in currency exchange. We use foreign exchange contracts to manage the risk of certain cross-currency business relationships to minimize the impact of currency exchange fluctuations on our earnings and cash flows. We do not hold or issue derivative financial instruments for trading or speculative purposes. Foreign exchange contracts not designated as hedging instruments had a notional value of $ 10.8 million and $ 4.1 million as of September 30, 2023 and December 31, 2022, respectively. Our derivative assets and liabilities include foreign exchange contract derivatives that are measured at fair value using internal models based on observable market inputs such as forward rates and interest rates. Based on these inputs, the derivatives are classified within Level 2 of the valuation hierarchy. Such derivative receivable amounts are recorded within “Other current assets” on our Condensed Consolidated Balance Sheets and was $ 0.1 million as of December 31, 2022. The Company had no such derivative receivable as of September 30, 2023. Such derivative liability amounts are recorded within “Accrued liabilities” on our Condensed Consolidated Balance Sheets and was $ 0.2 million as of September 30, 2023. The Company had no such derivative liability as of December 31, 2022. 27 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 14 - Restructuring Overview 2022 Repositioning - In the fourth quarter of 2022, in response to economic uncertainty, we initiated modest workforce reductions of approximately 160 employees, or about 2 % of our global workforce. We expect to complete the program in the first quarter of 2024. 2019 Repositioning - In the fourth quarter of 2019, we initiated actions to consolidate two manufacturing operations in Europe within our Process Flow Technologies segment. In 2020, we recorded additional severance costs related to the final negotiation with the works council/union at both locations. These actions, taken together, included workforce reductions of approximately 180 employees, or about 2 % of our global workforce. We expect to complete the program in the fourth quarter of 2023. The Company recorded a restructuring gain of $ 0.3 million during the nine months ended September 30, 2023. The following table summarizes the cumulative restructuring costs, net incurred through September 30, 2023. As of September 30, 2023, we do not expect to incur additional facility consolidation costs to complete these actions. Cumulative Restructuring Costs, Net (in millions) Severance Other Total Aerospace & Electronics $ 1.5 $ — $ 1.5 Process Flow Technologies 6.3 — 6.3 Engineered Materials 0.1 — 0.1 2022 Repositioning $ 7.9 $ — $ 7.9 Process Flow Technologies $ 14.9 $ ( 2.8 ) $ 12.1 2019 Repositioning $ 14.9 $ ( 2.8 ) $ 12.1 Restructuring Liability The following table summarizes the accrual balances related to each restructuring program: (in millions) 2022 Repositioning 2019 Repositioning Total Severance: Balance as of December 31, 2022 (a) $ 8.2 $ 2.4 $ 10.6 Utilization ( 3.4 ) ( 1.5 ) $ ( 4.9 ) Balance as of September 30, 2023 (a) $ 4.8 $ 0.9 $ 5.7 (a) Included within Accrued Liabilities in the Condensed Consolidated Balance Sheets. 28 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 15- Subsequent Events On October 2, 2023, the Company borrowed $ 100 million under its existing revolving credit facility to complete the $ 91 million, cash-free, and debt-free, acquisition of Baum lined piping GmbH (“BAUM”), which closed on October 4, 2023. BAUM is 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. On October 3, 2023, the Company exercised a portion of the accordion feature under its existing revolving credit facility to increase available borrowing capacity from $ 500 million to $ 800 million to support potential additional acquisitions. 29 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS