What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-01 compared with 2023-11-01 · 120 added, 240 removed, 104 unchanged (78% of the section changed)

8 unchanged sentences

We caution you that these statements are not guarantees of future performance and involve risks and uncertainties.

In addition, we have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate.

There are a number of other factors, including risks and uncertainties related to the ongoing effects of the COVID-19 pandemic, that could cause actual results or outcomes to differ materially from those expressed or implied in the forward-looking statements.

Such factors also include, among others:

changes in global economic conditions (including inflationary pressures and higher interest rates) and geopolitical risks, including macroeconomic fluctuations that may harm our business, results of operations and stock price;

These statements should be considered in conjunction with the discussion in Part I, the information set forth under Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023.

We have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate.

Accordingly, our actual outcomes and results may differ materially from what we have expressed or forecast in the forward-looking statements.

Any differences could result from a variety of factors, including the following:

• The effect of changes in economic conditions in the markets in which we operate, including financial market conditions, end markets for our products, fluctuations in raw material prices, inflationary pressures, supply chain disruptions and access to key raw materials, higher interest rates and the financial condition of our customers and suppliers;

• Economic, social and political instability, currency fluctuation and other risks of doing business outside of the United States;

• The impact of commercial air traffic levels which are affected by a different array of factors including general economic conditions and global corporate travel spending, or terrorism;

• Competitive pressures, including the need for technology improvement, successful new product development and introduction and any inability to pass increased costs of raw materials to customers;

• Our ongoing need to attract and retain highly qualified personnel and key management;

• Our ability to successfully identify, value and integrate acquisitions and to realize synergies and opportunities for growth and innovation;

• Information systems and technology networks failures and breaches in data security, personally identifiable and other information, non-compliance with our contractual or other legal obligations regarding such information;

our ability to source components and raw materials from suppliers, including disruptions and delays in our supply chain;

demand for our products, which is variable and subject to factors beyond our control;

governmental regulations and failure to comply with those regulations;

fluctuations in the prices of our components and raw materials;

loss of personnel or being able to hire and retain additional personnel needed to sustain and grow our business as planned;

risks from environmental liabilities, costs, litigation and violations that could adversely affect our financial condition, results of operations, cash flows and reputation;

risks associated with conducting a substantial portion of our business outside the United States;

being unable to identify or complete acquisitions, or to successfully integrate the businesses we acquire, or complete dispositions;

adverse impacts from intangible asset impairment charges;

potential product liability or warranty claims;

being unable to successfully develop and introduce new products, which would limit our ability to grow and maintain our competitive position and adversely affect our financial condition, results of operations and cash flow;

significant competition in our markets;

additional tax expenses or exposures that could affect our financial condition, results of operations and cash flows;

inadequate or ineffective internal controls;

specific risks relating to our reportable segments, including Aerospace & Electronics, Process Flow Technologies, and Engineered Materials;

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 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.

We do not undertake any obligation to update or revise any forward-looking statements to reflect any future events or circumstances.

• Our ability to achieve some or all the benefits that we expect to achieve from our business separation;

• The ability of the U.S.

government to terminate our government contracts;

• The impact of governmental regulations and failure to comply with those regulations;

• A reduction in congressional appropriations that affect defense spending;

• The outcomes of legal proceedings, claims and contract disputes;

• Adverse effects as a result of further increases in environmental remediation activities, costs and related claims;

• Investment performance of our pension plan assets and fluctuations in interest rates, which may affect the amount and timing of future pension plan contributions;

• Adverse effects of changes in tax, environmental and other laws and regulations in the United States and other countries in which we operate.

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

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.

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 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.

CryoWorks Acquisition

Effective May 1, 2024, the Company completed the acquisition of CryoWorks, Inc.

(“CryoWorks”) for $61 million on a cash-free and debt-free basis, subject to a net working capital adjustment.

On April 29, 2024, we borrowed approximately $50 million under the Company’s existing Revolving Facility to fund the Cryoworks acquisition.

CryoWorks is a leading supplier of vacuum insulated pipe systems for hydrogen and cryogenic applications.

CryoWorks will be included in the Process Flow Technologies segment.

Our sales depend heavily on industries that are cyclical in nature or are subject to market conditions, which may cause customer demand for our products to be volatile and unpredictable.

Demand in these industries is affected by fluctuations in domestic and international economic conditions, as well as currency fluctuations, commodity costs, and a variety of other factors.

For 2024, we expect a total year-over-year sales increase of approximately 10%, driven by approximately 4% to 6% core growth, and approximately 5% sales contribution from the Baum lined piping GmbH, Vian Enterprises, Inc.

and CryoWorks, Inc.

acquisitions.

We expect an improvement in operating profit driven primarily by lower transaction related expenses, productivity benefits, operating leverages on higher volumes, higher pricing net of inflation and contributions from acquisitions, partially offset by unfavorable mix.

Aerospace & Electronics

In 2024, we expect Aerospace & Electronics sales to increase in the mid-teens range compared to 2023, driven by approximately 12% core sales and a 4% to 5% contribution from the Vian Enterprises, Inc.

We expect a substantial improvement in our commercial OEM business driven by higher aircraft build rates, and we expect an improvement in our commercial aftermarket business given continued recovery in airline flight hours.

We expect our defense OEM sales to grow slightly, but the defense aftermarket businesses are expected to grow significantly given continued global geopolitical uncertainty which is driving increased demand to replace legacy product sales.

We expect segment operating profit and operating margin to increase compared to 2023 driven primarily by the impact of operating leverage on higher volumes, pricing and productivity benefits.

Process Flow Technologies

In 2024, we expect Process Flow Technologies sales to increase approximately 7% driven by contribution from the Baum lined piping GmbH and CryoWorks, Inc.

acquisitions, with core sales increasing approximately 1%.

We expect Process Valves and Related Products sales to increase in the mid to high single digit range compared to 2023, driven by mid- to high-single digit contribution from acquisitions, with core sales approximately flat.

We expect Commercial Valves sales to increase in the low- to mid-single digit range, and we expect Pumps and Systems sales to increase in the mid- to high-single digit range compared to 2023, driven by strong demand across municipal and non-residential U.S.

We expect an improvement in segment operating profit and operating margin compared to 2023, driven primarily by productivity and higher pricing net of inflation, partially offset by lower volumes and unfavorable mix.

Engineered Materials

In 2024, we expect Engineered materials sales to be flat compared to 2023, with a modest increase in sales to the Recreational Vehicle market, offset by a decline in sales to the Transportation market.

We expect operating profit and operating margin to be approximately flat compared to 2023.

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

Results from Continuing Operations – Three Months Ended September 30,

Results from Continuing Operations – Three Months Ended March 31,

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

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

Third Quarter Favorable/(Unfavorable) Change

All comparisons below refer to the first quarter 2024 versus the first quarter 2023, unless otherwise specified.

First Quarter Favorable/(Unfavorable) Change

(dollars in millions) 2024 2023 $ % (1)

4 unchanged sentences

as a percentage of sales 23.2 % 25.2 %

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 profit 89.4 77.5 11.9 15.4 %

Operating margin 15.8 % 15.1 %

2 unchanged sentences

Interest expense (7.2) (6.6) (0.6) (9.1) %

Gain on sale of business — 3.8 (3.8) NM

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 %

Miscellaneous expense, net (1.3) (0.5) (0.8) NM

Total other expense, net (7.3) (6.2) (1.1) (17.7) %

Income from continuing operations before income taxes 82.1 71.3 10.8 15.1 %

Provision for income taxes 17.3 15.4 (1.9) (12.3) %

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.

Net income from continuing operations attributable to common shareholders $ 64.8 $ 55.9 $ 8.9 15.9 %

(1) Variances designated as “NM” indicates such calculation is not meaningful.

Sales increased by $51.5 million, or 10.0%, to $565.3 million in 2024.

The year-over-year change in sales included:

The period-over-period change in sales included:

• an increase in sales related to the BAUM and Vian acquisitions of $25.8 million, or 5.0%;

• an increase in core sales of $24.1 million, or 4.7%, which was driven primarily by higher pricing;

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

• favorable foreign currency translation of $1.6 million.

Cost of sales increased by $37.9 million, or 12.3%, to $344.8 million in 2024.

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.

The increase is primarily related to higher material, labor and other manufacturing costs of $30.8 million, or 10.0%, driven by the higher sales, coupled with the impact from the BAUM and Vian acquisitions of $21.9 million, or 7.1%, partially offset by strong productivity gains and favorable mix of $16.7 million, or 5.4%.

Selling, general and administrative expenses increased by $1.7 million, or 1.3%, to $131.1 million in 2024, which was primarily driven by the impact from the BAUM and Vian acquisitions.

Operating profit increased by $11.9 million, or 15.4%, to $89.4 million in 2024.

The increase is primarily due to strong productivity gains of $13.2 million, or 17.0%, coupled with favorable mix and higher volumes of $8.4 million, or 10.8%, partially offset by higher material, labor and other manufacturing costs net of higher pricing of $10.4 million, or 13.4%.

Our effective tax rate for the three months ended March 31, 2024, is slightly lower than the prior year’s comparable period primarily due to lower non-U.S.

taxes and lower statutorily non-deductible transaction costs.

Our effective tax rate for the three months ended March 31, 2024, is equal to the statutory U.S.

federal tax rate of 21%.

The effective tax rate is the result of permanent increases and decreases that net against each other and offset.

These increases and decreases include 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.

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)

Comprehensive Income

Three Months Ended

September 30,

(in millions) 2024 2023

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

Net income before allocation to noncontrolling interests $ 64.8 $ 105.7

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

1 unchanged sentence

Changes in pension and postretirement plan assets and benefit obligation, net of tax 3.0 2.7

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

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

Other comprehensive (loss) income, net of tax (9.4) 15.4

Comprehensive income before allocation to noncontrolling interests 55.4 121.1

Noncontrolling interests in comprehensive income (0.1) (0.1)

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.

Comprehensive income attributable to common shareholders $ 55.5 $ 121.2

For the three months ended March 31, 2024, comprehensive income before allocation to noncontrolling interests was $55.4 million compared to $121.1 million in the same period of 2023.

The $65.7 million decrease was primarily driven by lower net income before allocation to noncontrolling interests of $40.9 million, reflecting absence of income from discontinued operations in 2024 compared to 2023, and a $25.1 million year-over-year unfavorable impact of foreign currency translation, primarily related to the British pound and euro.

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

Segment Results of Operations - Three Months Ended September 30,

Segment Results of Operations - Three Months Ended March 31,

Aerospace & Electronics

Third Quarter Favorable/(Unfavorable) Change

First Quarter Favorable/(Unfavorable) Change

(dollars in millions) 2024 2023 $ %

12 unchanged sentences

Supplemental Data:

Backlog $ 677.9 $ 591.6 $ 86.3 14.6 %

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.

• Sales of Military Original Equipment increased $7.3 million, or 12.8%, to $64.4 million in 2023, primarily reflecting strong demand from defense and space customers.

$ 791.8 $ 644.8 $ 147.0 22.8 %

(a) Includes $53.5 million of backlog as of March 31, 2024, pertaining to the Vian acquisition.

Sales increased $45.8 million, or 25.4%, to $225.9 million in 2024, primarily due to higher volumes and pricing of $36.7 million, or 20.4%, and the impact of the Vian acquisition of $9.0 million, or 5.0%.

• Sales of Commercial Original Equipment increased $17.1 million, or 25.0%, to $85.5 million in 2024, reflecting strong demand from aircraft manufacturers as the industry aircraft build rates continue to recover from the COVID-19 related slowdown, partially offset by component availability constraints.

• Sales of Military Original Equipment increased $9.5 million, or 15.3%, to $71.4 million in 2024, primarily reflecting strong demand from defense customers.

• Sales of Commercial Aftermarket Products increased $12.8 million, or 33.8%, to $50.7 million in 2024, reflecting continued strong demand from the airlines due to improving air traffic and inventory restocking.

• 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 $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%.

• Sales of Military Aftermarket Products increased $6.4 million, or 53.8%, to $18.3 million in 2024, reflecting stronger demand for military products in response to heightened geopolitical tensions, globally.

Cost of sales increased by $30.7 million, or 27.7%, to $141.7 million in 2024, primarily reflecting higher material and other manufacturing costs of $19.3 million, or 17.4%, increased volumes of $12.4 million, or 11.2%, the impact from the Vian acquisition of $9.4 million, or 8.5%, partially offset by productivity gains of $5.3 million, or 4.8%, and favorable mix of $5.1 million, or 4.6%.

Selling, general and administrative expenses increased $4.5 million, or 14.3%, to $35.9 million, primarily related to higher administrative costs of $4.0 million, or 12.7%.

Operating profit increased by $10.6 million, or 28.1%, to $48.3 million in 2024.

The increase primarily reflected higher volumes and productivity of $12.5 million, or 44.3%.

The increase primarily reflected the impact from higher volumes of $14.0 million, or 37.1%, coupled with productivity gains and favorable mix of $10.9 million, or 28.9%, partially offset by higher material, labor and other manufacturing costs net of higher pricing of $12.9 million, or 34.2%.

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

Process Flow Technologies

Third Quarter Favorable/(Unfavorable) Change

First Quarter Favorable/(Unfavorable) Change

(dollars in millions) 2024 2023 $ %

11 unchanged sentences

Supplemental Data:

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

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 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 $17.7 million, or 42.9%, partially offset by the impact of unfavorable mix of $6.8 million, or 16.5%.

$ 393.3 $ 363.0 $ 30.3 8.3 %

(a) Includes $8.3 million of backlog as of March 31, 2024, pertaining to the Baum acquisition.

Sales increased by $12.9 million, or 4.8%, to $284.3 million in 2024, primarily driven by the impact of the BAUM acquisition of $16.8 million, or 6.2% and favorable foreign currency translation of $1.5 million, or 0.6%, partially offset by lower core sales of $5.4 million, or 2.0%.

Lower core sales were driven by lower volumes.

• Sales of Process Valves and Related Products increased by $11.1 million, or 5.5%, to $214.0 million in 2024, primarily driven by the impact of the BAUM acquisition, partially offset by lower core sales.

• Sales of Commercial Valves increased by $2.3 million, or 7.5%, to $32.9 million in 2024, reflecting an impact from favorable foreign currency translation and a modest increase in core sales.

Cost of sales increased by $11.6 million, or 7.7%, to $161.7 million, primarily related to the impact of the BAUM acquisition of $12.6 million, or 8.4%, higher material, labor and other manufacturing costs of $10.9 million, or 7.3%, and unfavorable foreign currency translation of $1.0 million, or 1%, partially offset by the impact of lower volumes of $7.6 million, or 5.1%, and net productivity gains of $5.1 million, or 3.4%.

Selling, general and administrative expenses increased by $7.7 million, or 13.3%, to $65.7 million, primarily related to higher selling and administrative costs of $7.5 million, or 12.9%, partially driven by the impact of the BAUM acquisition.

Operating profit decreas ed by $6.4 million, or 10.1%, to $56.9 million in 2024.

The decrease is primarily due to lower volumes, higher selling, administrative and manufacturing costs , and unfavorable mix of $15.3 million, or 24.2%, partially offset by productivity gains of $6.8 million, or 10.7%, the net impact from the Baum acquisition of $1.2 million, or 1.9% and other savings of $0.8 million, or 1.2%.

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

Engineered Materials

Third Quarter Favorable/(Unfavorable) Change

First Quarter Favorable/(Unfavorable) Change

(dollars in millions) 2024 2023 $ %

13 unchanged sentences

Sales decreased $7.2 million, or 11.6%, to $55.1 million in 2024, primarily reflecting lower volumes of $6.0 million, or 9.6%.

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 $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 – 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 nine months of 2023 versus the first nine months of 2022, unless otherwise specified.

Year-to-Date Favorable/(Unfavorable) Change

(dollars in millions) 2023 2022 $ %

Net sales $ 1,553.5 $ 1,549.1 $ 4.4 0.3 %

Cost of sales 942.3 1,010.6 68.3 6.8 %

as a percentage of sales 60.7 % 65.2 %

Selling, general and administrative

394.3 386.8 (7.5) (1.9) %

as a percentage of sales 25.4 % 25.0 %

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) %

Other income (expense):

Interest income 3.2 2.3 0.9 39.1 %

Interest expense (16.7) (4.4) (12.3) (279.5) %

Gain on sale of business — 232.5 (232.5) NM

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) %

Provision for income taxes 48.5 108.5 60.0 55.3 %

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

(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 $114.9 million, or 7.4%, which was driven primarily by higher pricing;

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

• a decrease in sales related to the May 2022 divestiture of Crane Supply of $105.8 million, or 6.8%.

Cost of sales decreased by $68.3 million, or 6.8%, to $942.3 million in 2023.

The decrease is primarily related to the sale of Crane Supply of $78.3 million, or 7.7%, strong productivity of $28.6 million, or 2.8%, lower volumes of $4.7 million, or 0.5%, favorable foreign currency translation of $2.3 million, or 0.2%, partially offset by an increase in material, labor and other manufacturing costs of $30.7 million, or 3.0%, and unfavorable mix of $17.9 million, or 1.8%.

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 $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 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

Nine Months Ended

September 30,

(in millions) 2023 2022

Net income before allocation to noncontrolling interests $ 206.5 $ 303.9

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

Currency translation adjustment (2.3) (175.2)

Changes in pension and postretirement plan assets and benefit obligation, net of tax 8.9 9.1

Other comprehensive income (loss), net of tax 6.6 (166.1)

Comprehensive income before allocation to noncontrolling interests 213.1 137.8

Noncontrolling interests in comprehensive income (0.2) (0.3)

Comprehensive income attributable to common shareholders $ 213.3 $ 138.1

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 - Nine Months Ended September 30,

Aerospace & Electronics

Year-to-Date Favorable/(Unfavorable) Change

(dollars in millions) 2023 2022 $ %

Net sales by product line:

Commercial Original Equipment $ 214.1 $ 182.9 $ 31.2 17.1 %

Military Original Equipment 189.1 171.5 17.6 10.3 %

Commercial Aftermarket Products 127.2 92.5 34.7 37.5 %

Military Aftermarket Products 46.1 38.9 7.2 18.5 %

Total net sales $ 576.5 $ 485.8 $ 90.7 18.7 %

Cost of sales $ 359.1 $ 305.4 $ (53.7) (17.6) %

as a percentage of sales 62.3 % 62.9 %

Selling, general and administrative $ 101.3 $ 96.0 $ (5.3) (5.5) %

as a percentage of sales 17.6 % 19.8 %

Operating profit $ 116.1 $ 84.4 $ 31.7 37.6 %

Operating margin 20.1 % 17.4 %

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.

• Sales of Military Original Equipment increased $17.6 million, or 10.3%, to $189.1 million in 2023, primarily reflecting strong demand from defense and space customers.

• 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 $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

Process Flow Technologies

Year-to-Date Favorable/(Unfavorable) Change

(dollars in millions) 2023 2022 $ %

Net sales by product line:

Process Valves and Related Products $ 597.6 $ 555.8 $ 41.8 7.5 %

Commercial Valves 90.5 205.8 (115.3) (56.0) %

Pumps and Systems 113.2 95.8 17.4 18.2 %

Total net sales $ 801.3 $ 857.4 $ (56.1) (6.5) %

Cost of sales $ 451.7 $ 541.1 $ 89.4 16.5 %

as a percentage of sales 56.4 % 63.1 %

Selling, general and administrative

$ 184.5 $ 185.4 $ 0.9 0.5 %

as a percentage of sales 23.0 % 21.6 %

Operating profit $ 165.1 $ 130.9 $ 34.2 26.1 %

Operating margin 20.6 % 15.3 %

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 $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 $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 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

Engineered Materials

Year-to-Date Favorable/(Unfavorable) Change

(dollars in millions) 2023 2022 $ %

Net sales by product line:

FRP - Recreational Vehicles $ 57.1 $ 92.8 $ (35.7) (38.5) %

FRP - Building Products 91.1 88.2 2.9 3.3 %

FRP - Transportation 27.5 24.9 2.6 10.4 %

Total net sales $ 175.7 $ 205.9 $ (30.2) (14.7) %

Cost of sales $ 131.6 $ 164.5 $ 32.9 20.0 %

as a percentage of sales 74.9 % 79.9 %

Selling, general and administrative $ 15.2 $ 14.5 $ (0.7) (4.8) %

as a percentage of sales 8.7 % 7.0 %

Operating profit $ 28.9 $ 26.9 $ 2.0 7.4 %

Operating margin 16.4 % 13.1 %

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.

Cost of sales decreased by $32.9 million, or 20.0%, to $131.6 million, primarily related to lower volumes of $25.2 million, or 15.3%, and productivity gains and favorable mix of $4.9 million, or 3.0%.

Operating profit increased by $2.0 million, or 7.4%, to $28.9 million in 2023, primarily reflecting higher pricing net of inflation, productivity gains and favorable mix, offset by lower volumes.

The decrease was primarily driven by lower sales in Building Products and Transportation end markets.

Cost of sales decreased $4.4 million, or 9.6%, to $41.4 million in 2024, primarily related to lower volumes of $3.8 million, or 8.3%.

Operating profit decreased by $3.3 million, or 28.9%, to $8.1 million in 2024, primarily reflecting the impact from lower volumes.

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

Liquidity and Capital Resources

Nine Months Ended

September 30,

Three Months Ended

(in millions) 2024 2023

Net cash provided by (used for):

Net cash (used for) provided by:

Operating activities from continuing operations $ (79.9) $ (105.4)

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At any given time, and from time to time, we may be evaluating one or more of these opportunities, although we cannot assure you if or when we will consummate any such transactions.

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.

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.

Our current cash balance, together with cash we expect to generate from future operations and borrowing capacity 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.

We have available borrowing capacity of $800 million under a 5-year revolving credit facility (“Revolving Facility”) through March 2028 and a $300 million, 3-year term loan facility (“Term Facility”) through March 2026.

At March 31, 2024, there was $247 million outstanding under the Term Facility and $110 million outstanding under the Revolving Facility.

For more information regarding our borrowings under the Revolving Facility in connection with our acquisition of CryoWorks, see “Recent Transactions – CryoWorks Acquisition” above.

Operating Activities

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.

Cash used for operating activities from continuing operations was $79.9 million in the first three months of 2024, as compared to $105.4 million during the same period last year.

The decrease in cash used for operating activities from continuing operations was primarily driven by the $10.1 million increase in net income adjusted for the exclusion of non-cash items and a decrease in working capital investments of $22.2 million, primarily due to lower income tax payments and lower payments for inventory.

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 $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 flows relating to investing activities from continuing operations consist primarily of cash used for capital expenditures and acquisitions of businesses.

Cash used for investing activities from continuing operations was $114.5 million in the first three months of 2024, as compared to $8.7 million in the comparable period of 2023.

The increase in cash used for investing activities is primarily related to the acquisition of Vian for $102.5 million and the $3.1 million final working capital adjustment related to the BAUM acquisition.

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 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.

Financing cash flows consist primarily of dividend payments to shareholders, repayments of indebtedness, proceeds from our Credit Facilities and proceeds from the issuance of common stock.

During the first three 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 $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:

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

and $303.1 million in cash balances at the Crane NXT businesses at time of Separation;

• $400.0 million repayment of the 364-Day Credit Agreement;

• $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.

Recent Accounting Pronouncements

Information regarding new accounting pronouncements is included in Note 1 to our Condensed Consolidated Financial Statements.

Cash provided by financing activities was $87.9 million during the first three months of 2024 compared to cash used for financing activities of $67.8 million in the comparable period of 2023.

The increase in cash provided by financing activities was primarily driven by;

• $158.1 million increase in net borrowings;

• $14.9 million decrease in dividends paid;

partially offset by

• $21.4 million increase in payments for taxes related to net share settlements of equity awards, net of proceeds from stock options.

Quantitative and Qualitative Disclosures About Market Risk

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What changed 10-Q

Item 2. Management’s Discussion and Analysis