Crane Co 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations This Quarterly Report on Form 10-Q contains information about Crane Company some of which includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements other than historical information or statements about our current condition. You can identify forward-looking statements by the use of terms such as “believes,” “contemplates,” “expects,” “may,” “could,” “should,” “would,” or “anticipates,” other similar phrases, or the negatives of these terms. Reference herein to “Crane,” “the Company,” “we,” “us” and “our” refer to Crane Company and its subsidiaries unless the context specifically states or implies otherwise. References to changes in “core sales” or “core growth” in this report include the change in sales excluding the impact of foreign currency translation and acquisitions and divestitures from closing up to the first anniversary, of such acquisitions or divestitures. Amounts in the following discussion are presented in millions, except employee, share and per share data, or unless otherwise stated. We have based the forward-looking statements relating to our operations on our current expectations, estimates and projections about us and the markets we serve. We caution you that these statements are not guarantees of future performance and involve risks and uncertainties. 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 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, or otherwise significantly reduce planned spending; • 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; • Adverse effects of changes in tax, environmental and other laws and regulations in the United States and other countries in which we operate. • Investment performance of our pension plan assets and fluctuations in interest rates, which may affect the amount and timing of future pension plan contributions. 29 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Recent Transactions and Events Marion Site Hurricane and Recovery In September 2024, our manufacturing site in Marion, North Carolina was directly affected by flooding from Hurricane Helene. Our insurance generally covers the repair or replacement of assets that suffered damage or loss and also provides business interruption coverage, including lost profits, and reimbursement for other expenses and costs that have been incurred relating to the damages and losses suffered. The extent of the damage to the facility is still being assessed but the loss, net of insurance recoveries is not expected to be material. The recovery related to business interruption will be recognized when realized and received. We are working with our insurance carrier to assess the damage and ascertain the amount of insurance recoveries due to us as a result of the damage and loss we incurred, as such the timing of insurance proceeds may lag behind actual losses incurred. For the three months ended September 30, 2024, we incurred losses of $3.7 million related to the write-off of damaged property, equipment and inventory and have recorded an insurance receivable of $3.2 million, which is net of the $0.5 million deductible. These costs and insurance recoveries are included in Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations. Acquisitions Effective May 1, 2024, the Company completed the acquisition of CryoWorks, Inc. (“CryoWorks”) for $60.7 million on a cash-free and debt-free basis. On April 29, 2024, we borrowed approximately $50 million under the Company’s existing Revolving Facility to fund the CryoWorks acquisition. During the third quarter of 2024, the Company received $1.6 million from the seller related to a final working capital adjustment. CryoWorks, a leading supplier of vacuum insulated pipe systems for hydrogen and cryogenic applications, has been integrated into the Process Flow Technologies segment. On January 2, 2024, the Company completed the acquisition of Vian Enterprises, Inc. (“Vian”) for $102.5 million on a cash-free and debt-free basis subject to potential additional payments of up to $7.5 million depending on the resolution of outstanding contingencies. On January 2, 2024, we borrowed $100 million under the Company’s existing Revolving Facility to fund the Vian acquisition. During the third quarter of 2024, the Company received $3.0 million from the seller related to a final working capital adjustment. Vian, a global designer and manufacturer of multi-stage lubrication pumps and lubrication system components technology for critical aerospace and defense applications with sole-sourced and proprietary content on the highest volume commercial and military aircraft platforms, has been integrated into the Aerospace & Electronics segment. Outlook 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 11%, driven by approximately 5% to 7% core growth, and approximately 5% sales contribution from the Baum, Vian and CryoWorks 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, and inclusive of a 5% contribution from the Vian Enterprises, Inc. acquisition. 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 modestly, 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, higher pricing and productivity benefits. Process Flow Technologies In 2024, we expect Process Flow Technologies sales to increase low double-digits driven by contribution from the Baum lined piping GmbH and CryoWorks acquisitions, along with a mid-single digit increase in core sales. We expect Process Valves and Related Products sales to increase in the low double-digit range compared to 2023, driven by mid- to high-single digit contribution from acquisitions, with mid-single digit cores sales growth driven primarily by sales to chemical and pharmaceutical end markets. We expect Commercial Valves sales to increase in the low- to mid-teens range as end markets in the U.K. begin to improve from the depressed levels, and we expect Pumps and Systems sales to increase 30 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS in the low-single digit range compared to 2023. We expect an improvement in segment operating profit and operating margin compared to 2023, driven primarily by productivity, higher pricing net of inflation, partially offset by unfavorable mix. Engineered Materials In 2024, we expect Engineered materials sales to decline in the mid-single digit range, and operating profit, and operating margin are expected to be lower compared to last year driven by the deleverage on lower volumes, partially offset by higher productivity. 31 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results from Continuing Operations – Three Months Ended September 30, The following information should be read in conjunction with our condensed consolidated financial statements and related notes. All comparisons below refer to the third quarter 2024 versus the third quarter 2023, unless otherwise specified. Third Quarter Favorable/(Unfavorable) Change (dollars in millions) 2024 2023 $ % (a) Net sales $ 597.2 $ 530.1 $ 67.1 12.7 % Cost of sales 359.2 326.9 (32.3) (9.9) % as a percentage of sales 60.1 % 61.7 % Selling, general and administrative 132.8 126.9 (5.9) (4.6) % as a percentage of sales 22.2 % 23.9 % Operating profit 105.2 76.3 28.9 37.9 % Operating margin 17.6 % 14.4 % Other income (expense): Interest income 1.5 1.5 — NM Interest expense (7.3) (4.8) (2.5) (52.1) % Miscellaneous income, net 0.7 1.3 (0.6) NM Total other expense, net (5.1) (2.0) (3.1) (155.0) % Income from continuing operations before income taxes 100.1 74.3 25.8 34.7 % Provision for income taxes 22.8 19.1 (3.7) (19.4) % Net income from continuing operations attributable to common shareholders $ 77.3 $ 55.2 $ 22.1 40.0 % (a) Variances designated as “NM” indicates such calculation is not meaningful. Sales increased by $67.1 million, or 12.7%, to $597.2 million in 2024. The period-over-period change in sales included: • an increase in core sales of $31.8 million, or 6.0%, which was driven primarily by higher pricing, offset by lower volumes; • an increase in sales related to the BAUM, Vian and CryoWorks acquisitions of $34.0 million, or 6.4%; and • favorable foreign currency translation of $1.3 million, or 0.3%. Cost of sales increased by $32.3 million, or 9.9%, to $359.2 million in 2024. The increase is primarily related to the impact from the BAUM, Vian and CryoWorks acquisitions of $26.4 million, or 8.1%, unfavorable mix of $13.1 million, or 4.0%, coupled with higher material, labor and other manufacturing costs $8.6 million, or 2.6%, partially offset by strong productivity gains $13.0 million, or 4.0%, and impact from lower volumes of $3.2 million, or 1.0%. Selling, general and administrative expenses increased by $5.9 million, or 4.6%, to $132.8 million in 2024, primarily driven by the impact from the BAUM, Vian and CryoWorks acquisitions. Operating profit increased by $28.9 million, or 37.9%, to $105.2 million in 2024. The increase is primarily due to higher pricing net of inflation of $24.7 million, or 32.4%, strong productivity gains of $14.1 million, or 18.5%, partially offset by unfavorable mix of $13.1 million, or 17.2%. Our effective tax rate for the three months ended September 30, 2024, is lower than the prior year’s comparable period primarily due to lower non-U.S. taxes and lower statutorily non-deductible costs, partially offset by the statutory U.S. deduction related to our non-U.S. subsidiaries’ income. Our effective tax rate for the three months ended September 30, 2024 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 the impact of 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. 32 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Comprehensive Income Three Months Ended September 30, (in millions) 2024 2023 Net income before allocation to noncontrolling interests $ 77.3 $ 55.2 Components of other comprehensive (loss) income, net of tax Currency translation adjustment 25.3 (15.7) Changes in pension and postretirement plan assets and benefit obligation, net of tax 3.0 3.6 Other comprehensive income (loss), net of tax 28.3 (12.1) Comprehensive income before allocation to noncontrolling interests 105.6 43.1 Less: Noncontrolling interests in comprehensive income 0.1 — Comprehensive income attributable to common shareholders $ 105.5 $ 43.1 For the three months ended September 30, 2024, comprehensive income before allocation to noncontrolling interests was $105.6 million compared to $43.1 million in the same period of 2023. The $62.5 million increase was primarily driven by higher net income before allocation to noncontrolling interests of $22.1 million, and $41.0 million year-over-year favorable impact of foreign currency translation, primarily related to the British pound and euro. 33 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Segment Results of Operations - Three Months Ended September 30, Aerospace & Electronics Third Quarter Favorable/(Unfavorable) Change (dollars in millions) 2024 2023 $ % Net sales by product line: Commercial Original Equipment $ 90.5 $ 75.8 $ 14.7 19.4 % Military Original Equipment 70.0 64.4 5.6 8.7 % Commercial Aftermarket Products 54.4 48.5 5.9 12.2 % Military Aftermarket Products 24.2 18.5 5.7 30.8 % Total net sales $ 239.1 $ 207.2 $ 31.9 15.4 % Cost of sales $ 144.8 $ 131.5 $ (13.3) (10.1) % as a percentage of sales 60.6 % 63.5 % Selling, general and administrative $ 39.4 $ 35.5 $ (3.9) (11.0) % as a percentage of sales 16.5 % 17.1 % Operating profit $ 54.9 $ 40.2 $ 14.7 36.6 % Operating margin 23.0 % 19.4 % Supplemental Data: Backlog (a) $ 833.3 $ 677.9 $ 155.4 22.9 % (a) Includes $59.1 million of backlog as of September 30, 2024, pertaining to the Vian acquisition. Sales increased $31.9 million, or 15.4%, to $239.1 million in 2024, primarily due to higher pricing and higher volumes of $20.8 million, or 10.0%, and the impact of the Vian acquisition of $11.0 million, or 5.3%. • Sales of Commercial Original Equipment increased $14.7 million, or 19.4%, to $90.5 million in 2024, reflecting strong demand from aircraft manufacturers and the impact of the Vian acquisition, partially offset by component availability constraints. • Sales of Military Original Equipment increased $5.6 million, or 8.7%, to $70.0 million in 2024, primarily reflecting strong demand from defense customers and the impact of the Vian acquisition. • Sales of Commercial Aftermarket Products increased $5.9 million, or 12.2%, to $54.4 million in 2024, reflecting continued strong demand from the airlines due to improving air traffic and inventory restocking. • Sales of Military Aftermarket Products increased $5.7 million, or 30.8%, to $24.2 million in 2024, reflecting stronger demand for military products, partly in response to heightened geopolitical tensions globally. Cost of sales increased by $13.3 million, or 10.1%, to $144.8 million in 2024, primarily reflecting the impact from the Vian acquisition of $9.8 million, or 7.5%, higher material, labor and other manufacturing costs of $3.6 million, or 2.7%, increased volumes of $2.1 million, or 1.6%, unfavorable mix of $3.0 million, or 2.3%, partially offset by strong productivity gains of $5.2 million, or 4.0%. Selling, general and administrative expense increased by $3.9 million , or 11.0% , to $39.4 million in 2024, primarily related to higher administrative costs of $3.3 million, or 9.3%. Operating profit increased by $14.7 million, or 36.6%, to $54.9 million in 2024. The increase primarily reflected the impact from higher pricing net of inflation and higher volumes of $11.4 million, or 28.4%, coupled with productivity gains net of unfavorable mix of $2.8 million, or 7.0%. 34 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Process Flow Technologies Third Quarter Favorable/(Unfavorable) Change (dollars in millions) 2024 2023 $ % Net sales by product line: Process Valves and Related Products $ 234.9 $ 197.3 $ 37.6 19.1 % Commercial Valves 36.8 31.2 5.6 17.9 % Pumps and Systems 37.5 38.2 (0.7) (1.8) % Total net sales $ 309.2 $ 266.7 $ 42.5 15.9 % Cost of sales $ 176.5 $ 152.2 $ (24.3) (16.0) % as a percentage of sales 57.1 % 57.1 % Selling, general and administrative $ 67.2 $ 63.3 $ (3.9) (6.2) % as a percentage of sales 21.7 % 23.7 % Operating profit $ 65.5 $ 51.2 $ 14.3 27.9 % Operating margin 21.2 % 19.2 % Supplemental Data: Backlog (a) $ 392.0 $ 352.9 $ 39.1 11.1 % (a) includes $19.2 million of backlog as of September 30, 2024 pertaining to the Baum and CryoWorks acquisitions. Sales increased by $42.5 million, or 15.9%, to $309.2 million in 2024, primarily driven by the impact of the BAUM and CryoWorks acquisitions of $23.0 million, or 8.6%, higher core sales of $18.3 million, or 6.9%, primarily driven by higher pricing, and to a lesser extent by favorable foreign currency translation of $1.1 million, or 0.4%. • Sales of Process Valves and Related Products increased by $37.6 million, or 19.1%, to $234.9 million in 2024, primarily driven by the impact of the BAUM and CryoWorks acquisitions and higher core sales. • Sales of Commercial Valves increased by $5.6 million, or 17.9%, to $36.8 million in 2024, reflecting an increase in core sales driven by higher volumes and pricing. Cost of sales increased by $24.3 million, or 16.0%, to $176.5 million, primarily related to the impact of the BAUM and CryoWorks acquisitions of $16.6 million, or 10.9%, unfavorable mix of $9.6 million, or 6.3%, higher material, labor and other manufacturing costs of $3.7 million, or 2.4%, partially offset by productivity gains of $6.9 million, or 4.5%. Selling, general and administrative expenses increased by $3.9 million, or 6.2%, to $67.2 million, primarily driven by the impact of the BAUM and CryoWorks acquisitions of $5.2 million, or 8.2%, partially offset by other net cost savings and productivity gains of $1.8 million, or 2.8%. Operating profit increas ed by $14.3 million, or 27.9%, to $65.5 million in 2024. The increase is primarily due to higher pricing net of inflation and higher volumes of $14.6 million, or 28.5%, productivity gains and other net cost savings of $7.9 million, or 15.4%, partially offset by unfavorable mix of $9.6 million, or 18.8%. 35 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Engineered Materials Third Quarter Favorable/(Unfavorable) Change (dollars in millions) 2024 2023 $ % Net sales by product line: FRP - Recreational Vehicles $ 15.7 $ 19.6 $ (3.9) (19.9) % FRP - Building Products 27.5 27.5 — — % FRP - Transportation 5.7 9.1 (3.4) (37.4) % Total net sales $ 48.9 $ 56.2 $ (7.3) (13.0) % Cost of sales $ 37.6 $ 43.3 $ 5.7 13.2 % as a percentage of sales 76.9 % 77.0 % Selling, general and administrative $ 5.1 $ 5.2 $ 0.1 1.9 % as a percentage of sales 10.4 % 9.3 % Operating profit $ 6.2 $ 7.7 $ (1.5) (19.5) % Operating margin 12.7 % 13.7 % Supplemental Data: Backlog $ 12.3 $ 14.6 $ (2.3) (15.8) % Sales decreased $7.3 million, or 13.0%, to $48.9 million in 2024, reflecting lower volumes partially offset by higher pricing. The decrease was primarily driven by lower sales in Recreational vehicle and Transportation end markets. Cost of sales decreased $5.7 million, or 13.2%, to $37.6 million in 2024, primarily related to lower volumes of $6.1 million or 14.1%, partially offset by higher material, labor and other manufacturing costs of $0.8 million, or 1.8%. Operating profit decreased by $1.5 million, or 19.5%, to $6.2 million in 2024, primarily reflecting the impact from lower volumes of $3.2 million, or 41.6%, and higher pricing net of inflation and productivity gains, partially offset by unfavorable mix of $1.8 million, or 23.4%. 36 Table of Contents 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 2024 versus the first nine months of 2023, unless otherwise specified. Year-to-Date Favorable/(Unfavorable) Change (dollars in millions) 2024 2023 $ % (a) Net sales $ 1,743.7 $ 1,553.5 $ 190.2 12.2 % Cost of sales 1,061.3 942.3 (119.0) (12.6) % as a percentage of sales 60.9 % 60.7 % Selling, general and administrative 391.2 394.3 3.1 0.8 % as a percentage of sales 22.4 % 25.4 % Operating profit 291.2 216.9 74.3 34.3 % Operating margin 16.7 % 14.0 % Other income (expense): Interest income 4.0 3.2 0.8 25.0 % Interest expense (21.9) (16.7) (5.2) (31.1) % Miscellaneous income (expense), net 0.5 (0.5) 1.0 NM Total other expense, net (17.4) (14.0) (3.4) (24.3) % Income from continuing operations before income taxes 273.8 202.9 70.9 34.9 % Provision for income taxes 60.1 48.5 (11.6) (23.9) % Net income from continuing operations attributable to common shareholders $ 213.7 $ 154.4 $ 59.3 38.4 % (a) Variances designated as “NM” indicates such calculation is not meaningful. Sales increased by $190.2 million, or 12.2%, to $1,743.7 million in 2024. The year-over-year change in sales included: • an increase in core sales of $99.8 million, or 6.4%, which was driven primarily by higher pricing, and to a lesser extent, higher volume; and • an increase in sales related to the BAUM, Vian and CryoWorks acquisitions of $88.6 million, or 5.7%. Cost of sales increased by $119.0 million, or 12.6%, to $1,061.3 million in 2024. The increase is primarily related to the impact from the BAUM, Vian and CryoWorks acquisitions of $74.1 million, or 7.9%, coupled with higher material, labor and other manufacturing costs of $61.3 million, or 6.5%, unfavorable mix of $16.0 million, or 1.7%, and higher volumes of $4.5 million, or 0.5%, partially offset by strong productivity gains of $37.7 million, or 4.0%. Selling, general and administrative expenses decreased by $3.1 million, or 0.8%, to $391.2 million in 2024, primarily driven by a decrease in administrative expenses of $15.5 million, or 3.9%, related to the absence of expenses related to the Separation, offset by higher selling costs of $12.4 million, or 3.1%. Operating profit increased by $74.3 million, or 34.3%, to $291.2 million in 2024. The increase is primarily due to strong productivity gains of $40.9 million, or 18.9%, the absence of expenses related to the Separation and net higher pricing to a lesser extent of $33.2 million, or 15.3%, coupled with higher volumes of $12.9 million, or 5.9%, and, partially offset by unfavorable mix of $16.0 million, or 7.4%. Our effective tax rate for the nine months ended September 30, 2024, is lower than the prior year’s comparable period primarily due to lower non-U.S. taxes and lower statutorily non-deductible costs, partially offset by the statutory U.S. deduction related to our non-U.S. subsidiaries’ income. Our effective tax rate for the nine months ended September 30, 2024 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 the impact of 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. 37 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Comprehensive Income Nine Months Ended September 30, (in millions) 2024 2023 Net income before allocation to noncontrolling interests $ 213.7 $ 206.5 Components of other comprehensive income (loss), net of tax Currency translation adjustment 9.6 (2.3) Changes in pension and postretirement plan assets and benefit obligation, net of tax 9.0 8.9 Other comprehensive income, net of tax 18.6 6.6 Comprehensive income before allocation to noncontrolling interests 232.3 213.1 Less: Noncontrolling interests in comprehensive income — (0.2) Comprehensive income attributable to common shareholders $ 232.3 $ 213.3 For the nine months ended September 30, 2024, comprehensive income before allocations to noncontrolling interests was $232.3 million compared to $213.1 million in the same period of 2023. The $19.2 million increase was primarily driven by a $11.9 million favorable impact of foreign currency translation, primarily related to the British pound and euro and higher net income before allocation to noncontrolling interests of $7.2 million. 38 Table of Contents 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) 2024 2023 $ % Net sales by product line: Commercial Original Equipment $ 264.6 $ 214.1 $ 50.5 23.6 % Military Original Equipment 208.3 189.1 19.2 10.2 % Commercial Aftermarket Products 157.4 127.2 30.2 23.7 % Military Aftermarket Products 65.6 46.1 19.5 42.3 % Total net sales $ 695.9 $ 576.5 $ 119.4 20.7 % Cost of sales $ 430.4 $ 359.1 $ (71.3) (19.9) % as a percentage of sales 61.8 % 62.3 % Selling, general and administrative $ 109.6 $ 101.3 $ (8.3) (8.2) % as a percentage of sales 15.7 % 17.6 % Operating profit $ 155.9 $ 116.1 $ 39.8 34.3 % Operating margin 22.4 % 20.1 % Sales increased $119.4 million, or 20.7%, to $695.9 million in 2024, primarily due to higher volumes and pricing of $88.6 million, or 15.4%, and the impact of the Vian acquisition of $30.7 million, or 5.3%. • Sales of Commercial Original Equipment increased $50.5 million, or 23.6%, to $264.6 million in 2024, reflecting strong demand from aircraft manufacturers and the impact of the Vian acquisition, partially offset by material availability constraints. • Sales of Military Original Equipment increased $19.2 million, or 10.2%, to $208.3 million in 2024, primarily reflecting strong demand from defense and space customers and the impact of the Vian acquisition. • Sales of Commercial Aftermarket Products increased $30.2 million, or 23.7%, to $157.4 million in 2024, reflecting continued strong demand from the airlines due to improving air traffic and inventory restocking. • Sales of Military Aftermarket Products increased $19.5 million, or 42.3%, to $65.6 million in 2024, reflecting stronger demand for military products, partly in response to heightened geopolitical tensions globally. Cost of sales increased by $71.3 million, or 19.9%, to $430.4 million in 2024, primarily reflecting higher material, labor and other manufacturing costs of $36.7 million, or 10.2%, the impact from the Vian acquisition of $29.0 million, or 8.1%, increased volumes of $21.9 million, or 6.1%, partially offset by productivity gains of $15.3 million, or 4.3%, and favorable mix of $1.3 million, or 0.4%. Selling, general and administrative expense increased by $8.3 million, or 8.2%, to $109.6 million in 2024, primarily related to higher administrative costs of $8.1 million, or 8.0%. Operating profit increased by $39.8 million, or 34.3%, to $155.9 million in 2024, t he increase primarily reflected the impact from higher volumes of $25.6 million, or 22.0%, coupled with productivity gains of $17.0 million, or 14.6%, partially offset by higher material, labor and other manufacturing costs net of higher pricing of $3.2 million, or 2.8%. 39 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Process Flow Technologies Year-to-Date Favorable/(Unfavorable) Change (dollars in millions) 2024 2023 $ % Net sales by product line: Process Valves and Related Products $ 675.6 $ 597.6 $ 78.0 13.1 % Commercial Valves 103.4 90.5 12.9 14.3 % Pumps and Systems 112.2 113.2 (1.0) (0.9) % Total net sales $ 891.2 $ 801.3 $ 89.9 11.2 % Cost of sales $ 511.4 $ 451.7 $ (59.7) (13.2) % as a percentage of sales 57.4 % 56.4 % Selling, general and administrative $ 197.9 $ 184.5 $ (13.4) (7.3) % as a percentage of sales 22.2 % 23.0 % Operating profit $ 181.9 $ 165.1 $ 16.8 10.2 % Operating margin 20.4 % 20.6 % Sales increased by $89.9 million, or 11.2%, to $891.2 million in 2024, primarily driven by the impact of the BAUM and CryoWorks acquisitions of $57.9 million, or 7.2%, higher core sales of $30.3 million, or 3.8%, primarily driven by higher pricing. • Sales of Process Valves and Related Products increased by $78.0 million, or 13.1%, to $675.6 million in 2024, primarily driven by the impact of the BAUM and CryoWorks acquisitions of $57.9 million, or 9.7%, and higher core sales of $20.8 million, or 3.5%, driven by higher pricing. • Sales of Commercial Valves increased by $12.9 million, or 14.3%, to $103.4 million in 2024, primarily driven by increase in core sales of $10.4 million, or 11.5%, and favorable foreign currency translation of $2.5 million, or 2.8%, as the British pound strengthened against the U.S. dollar. Cost of sales increased by $59.7 million, or 13.2%, to $511.4 million, primarily related to the impact of the BAUM and CryoWorks acquisitions of $45.1 million, or 10.0%, higher material, labor and other manufacturing costs of $21.0 million, or 4.6%, unfavorable mix of $16.9 million, or 3.7%, partially offset by productivity gains of $20.0 million, or 4.4%, and the impact of lower volumes of $3.8 million, or 0.8%. Selling, general and administrative expense increased by $13.4 million, or 7.3%, to $197.9 million, primarily driven by the impact of the BAUM and CryoWorks acquisitions of $12.6 million, or 6.8%. Operating profit increased by $16.8 million, or 10.2%, to $181.9 million in 2024. The increase is primarily due to productivity gains and other cost savings of $25.5 million, or 15.4 %, higher net pricing of $13.3 million, or 8.1%, partially offset by unfavorable mix of $16.9 million, or 10.2%, and the impact of lower volumes of $5.3 million, or 3.2%. 40 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Engineered Materials Year-to-Date Favorable/(Unfavorable) Change (dollars in millions) 2024 2023 $ % Net sales by product line: FRP - Recreational Vehicles $ 51.4 $ 57.1 $ (5.7) (10.0) % FRP - Building Products 85.7 91.1 (5.4) (5.9) % FRP - Transportation 19.5 27.5 (8.0) (29.1) % Total net sales $ 156.6 $ 175.7 $ (19.1) (10.9) % Cost of sales $ 119.2 $ 131.6 $ 12.4 9.4 % as a percentage of sales 76.1 % 74.9 % Selling, general and administrative $ 15.8 $ 15.2 $ (0.6) (3.9) % as a percentage of sales 10.1 % 8.7 % Operating profit $ 21.6 $ 28.9 $ (7.3) (25.3) % Operating margin 13.8 % 16.4 % Sales decreased $19.1 million, or 10.9%, to $156.6 million in 2024, reflecting lower volumes. The decrease was primarily driven by lower sales in all end markets. Cost of sales decreased by $12.4 million, or 9.4%, to $119.2 million, primarily related to lower volumes of $13.6 million, or 10.3%, partially offset by higher material, labor and other manufacturing costs, unfavorable mix, net of productivity gains of $1.2 million, or 0.9%. Operating profit decreased by $7.3 million, or 25.3%, to $21.6 million in 2024, primarily reflecting the impact of lower volumes of $7.5 million, or 26.0%, partially offset by higher net pricing, productivity gains, net of unfavorable mix of $0.3 million, or 1.0%. 41 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources Nine Months Ended September 30, (in millions) 2024 2023 Net cash (used for) provided by: Operating activities from continuing operations $ 63.8 $ 33.9 Investing activities from continuing operations (181.6) (29.1) Financing activities 44.5 (415.7) Discontinued operations — 30.5 Effect of exchange rates on cash and cash equivalents 1.9 (3.4) Decrease in cash and cash equivalents $ (71.4) $ (383.8) Our operating philosophy is to deploy cash provided from operating activities, when appropriate, to provide value to shareholders by reinvesting in existing businesses, by making acquisitions that will strengthen and complement our portfolio, by divesting businesses that are no longer strategic or aligned with our portfolio and where such divestitures can generate capacity for strategic investments and initiatives that further optimize our portfolio, and by paying dividends and/or repurchasing shares. 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 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 September 30, 2024, there was $247 million outstanding under the Term Facility and $85 million outstanding under the Revolving Facility. For more information regarding our borrowings under the Revolving Facility in connection with our acquisitions, see “Recent Transactions – “Acquisitions” above. Operating Activities Cash provided by operating activities from continuing operations was $63.8 million in the first nine months of 2024, as compared to $33.9 million during the same period last year. The increase in cash provided by operating activities from continuing operations was primarily driven by the $61.7 million increase in net income from continuing operations adjusted for the exclusion of non-cash items, partially offset by an increase in working capital investments of $26.1 million. Investing Activities 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 $181.6 million in the first nine months of 2024, as compared to $29.1 million in the comparable period of 2023. The increase in cash used for investing activities is primarily related to the acquisition of Vian for $99.5 million and the acquisition of CyroWorks for $59.1 million. Financing Activities 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 in connection with employee stock plans. During the first nine months of 2023, financing cash flows also includes activities associated with the distribution of Crane NXT, Co. in support of the Separation. Cash provided by financing activities was $44.5 million during the first nine months of 2024 compared to cash used for financing activities of $415.7 million in the comparable period of 2023. The increase in cash provided by financing activities was driven by: • $578.1 million related to the Distribution of Crane NXT, Co. in the prior year; • $11.9 million decrease in dividends paid, reflecting a lower dividend per share established on April 3, 2023 in connection with the Separation; • $7.5 million decrease in payments for debt issuance costs; offset by • $118.1 million decrease in net borrowings; and 42 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS • $19.2 million increase in payments for taxes related to net share settlements of equity awards, net of proceeds from stock options. 43 Table of Contents Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes in the information called for by this item since the disclosure in our Annual Report on Form 10-K for the year ended December 31, 2023.