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 sales 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. 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. 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, 2025. 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 the impact of U.S. tariff policy and retaliatory tariffs on our business, 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, geopolitical uncertainties including the ongoing conflict in the Middle East, currency fluctuation and other risks of doing business outside of the United States; • Our ability to successfully identify, value and integrate acquisitions and to realize synergies and opportunities for growth and innovation; • The impact of commercial air traffic levels which are affected by a different array of factors including geopolitical instability, general economic conditions and global corporate travel spending, or terrorism; • Competitive pressures, including the need for technology improvement, successful new product development and introduction, impact from pricing strategies and/or any inability to pass increased costs of raw materials, including tariffs, to customers; • A reduction in congressional appropriations that affect defense spending; • The ability of the U.S. government to terminate our government contracts; • 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; • The impact of governmental regulations and failure to comply with those regulations; • Our ongoing need to attract and retain highly qualified personnel and key management; • Adverse effects of changes in tax, environmental and other laws and regulations in the United States and other countries in which we operate; • The outcomes of legal proceedings, claims and contract disputes; • Investment performance of our pension plan assets and fluctuations in interest rates, which may affect the amount and timing of future pension plan contributions; and 29 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS • Adverse effects as a result of further increases in environmental remediation activities, costs and related claims. 30 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Recent Transactions and Events Acquisition of Druck, Panametrics and Reuter-Stokes On January 1, 2026, the Company completed the acquisition of Druck, Panametrics and Reuter-Stokes. Collectively, they are leading providers of sensor-based technologies for aerospace, nuclear and process industries. The Druck brand is integrated into the Aerospace & Advanced Technologies segment. Panametrics and Reuter-Stokes brands are integrated into the Process Flow Technologies segment. Other Acquisition On January 1, 2026, the Company completed the acquisition of a leading provider of inline process control optical measurement solutions for biopharma, pharmaceutical and other demanding markets. The acquired company has been integrated into our Process Flow Technologies segment. Other On February 20, 2026, the U.S. Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act ("IEEPA") were not authorized by the statute. The Company is the importer of record for certain raw materials and products that were previously subject to such tariffs under IEEPA. Because the process, timing, and amount of any tariff recovery are uncertain, we have not recorded any benefit from a potential refund at this time. 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, geopolitical instability including the ongoing conflict in the Middle East, as well as currency fluctuations, commodity costs, tariff impacts, and a variety of other factors. For 2026, we expect total sales growth in the low-to-mid 20%s, driven by the Druck, Panametrics, Reuter-Stokes, and Optek acquisitions, as well as mid-single digit core sales growth and a slight foreign exchange benefit. We expect an improvement in operating profit driven primarily by productivity benefits and operating leverage on higher volumes, lower transaction related expenses, higher pricing net of inflation and contributions from the Druck, Panametrics, Reuter-Stokes, and Optek acquisitions. Aerospace & Advanced Technologies In 2026, we expect Aerospace & Advanced Electronics sales to increase in the low to mid 20% range driven by high-single digit core sales growth, a low-to-mid-teen percentage contribution from the Druck acquisition and a slight benefit from favorable foreign exchange. We expect an improvement in our commercial OEM business driven by higher aircraft build rates, and increased demand for our military OEM and aftermarket business driven by continued global geopolitical uncertainty. We expect growth in our military aftermarket business to be approximately offset by softer commercial aftermarket sales reflecting elevated fuel prices and the conflict in the Middle East. We expect segment operating profit to increase compared to 2025 due to higher volumes, positive net price and the contribution from the Druck acquisition. However, we expect operating margin to decline modestly compared to 2025 driven by the dilutive impact of the Druck acquisition. Process Flow Technologies In 2026, we expect Process Flow Technologies sales to increase in the low-to-mid 20%s driven by flat-to-low single digit core sales growth, a low-20% contribution from the Panametrics, Reuter-Stokes, and Optek acquisitions, as well as a 1.5% benefit from foreign exchange. We expect core sales to be driven by demand in the pharmaceutical, water and waste-water and cryogenic markets offset by ongoing sluggishness in the chemical markets. We expect segment operating profit to increase compared to 2025 due primarily to the contribution from the Panametrics, Reuter-Stokes, and Optek acquisitions. However, we expect operating margin to decline modestly compared to 2025 driven primarily by the dilutive impact of the Panametrics, Reuter-Stokes, and Optek acquisitions. 31 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results from Continuing Operations – Three Months Ended March 31, 2026 and 2025 The following information should be read in conjunction with our condensed consolidated financial statements and related notes. All comparisons below refer to the first quarter 2026 versus the first quarter 2025, unless otherwise specified. First Quarter Favorable/(Unfavorable) Change (dollars in millions) 2026 2025 $ % Net sales $ 696.4 $ 557.6 $ 138.8 24.9 % Cost of sales 415.1 320.0 (95.1) (29.7) % as a percentage of sales 59.6 % 57.4 % Engineering, selling and administrative 181.2 136.5 (44.7) (32.7) % as a percentage of sales 26.0 % 24.5 % Operating profit 100.1 101.1 (1.0) (1.0) % Operating margin 14.4 % 18.1 % Other income (expense): Interest income 1.6 3.2 (1.6) (50.0) % Interest expense (16.8) (4.5) (12.3) (273.3) % Miscellaneous income (expense), net 0.2 (1.0) 1.2 120.0 % Total other expense, net (15.0) (2.3) (12.7) (552.2) % Income from continuing operations before income taxes 85.1 98.8 (13.7) (13.9) % Provision for income taxes 18.0 20.5 2.5 12.2 % Net income from continuing operations attributable to common shareholders $ 67.1 $ 78.3 $ (11.2) (14.3) % Sales increased by $138.8 million, or 24.9%, to $696.4 million in 2026. The period-over-period change in sales included: • an increase in sales related to the Druck, Panametrics, Reuter-Stokes and Optek acquisitions of $102.2 million, or 18.3%; • an increase in core sales of $21.4 million, or 3.8%, which was driven by higher pricing; and • favorable foreign currency translation of $15.2 million, or 2.7%. Cost of sales increased by $95.1 million, or 29.7%, to $415.1 million in 2026. The increase primarily reflects the impact of the Druck, Panametrics, Reuter-Stokes and Optek acquisitions of $73.4 million, or 22.9%, higher material, labor and other manufacturing costs of $23.1 million, or 7.2%, unfavorable mix of $10.5 million, or 3.3%, unfavorable foreign currency translation of $9.0 million, or 2.8%, partially offset by strong productivity gains of $14.0 million, or 4.4%, lower volumes of $4.5 million, or 1.4%, and cost savings of $2.4 million, or 0.8%. Engineering, selling and administrative expenses increased by $44.7 million, or 32.7%, to $181.2 million in 2026, primarily driven by the acquisitions of Druck, Panametrics, and Reuter-Stokes, including the transaction related costs associated with them. Operating profit decreased by $1.0 million, or 1.0%, to $100.1 million in 2026. The decrease primarily reflected unfavorable mix of $10.5 million, or 10.4%, lower volumes of $4.1 million, or 4.1%, net investments in core businesses of $3.5 million, or 3.5%, partially offset by strong productivity gains of $15.4 million, or 15.2%, and favorable foreign currency translation of $1.7 million, or 1.7%. Our effective tax rate for the three months ended March 31, 2026 is higher than the prior year’s comparable period, primarily due to an increase in non-U.S. taxes and statutorily non-deductible costs. Our effective tax rate for the three months ended March 31, 2026 is approximately equal to the statutory U.S. federal tax rate of 21%, and any overall net differences are 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 March 31, (in millions) 2026 2025 Net income before allocation to noncontrolling interests $ 67.1 $ 107.1 Components of other comprehensive income (loss), net of tax Currency translation adjustment (18.6) 18.3 Changes in pension and postretirement plan assets and benefit obligation, net of tax 2.4 2.7 Other comprehensive (loss) income, net of tax (16.2) 21.0 Comprehensive income before allocation to noncontrolling interests 50.9 128.1 Less: Noncontrolling interests in comprehensive income — — Comprehensive income attributable to common shareholders $ 50.9 $ 128.1 For the three months ended March 31, 2026, comprehensive income before allocation to noncontrolling interests was $50.9 million compared to $128.1 million in the same period of 2025. The $77.2 million decrease was primarily driven by lower net income before allocation to noncontrolling interests of $40.0 million and $36.9 million year-over-year unfavorable impact of foreign currency translation, primarily related to the euro and British pound. 33 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Segment Results of Operations - Three Months Ended March 31, 2026 and 2025 Aerospace & Advanced Technologies First Quarter Favorable/(Unfavorable) Change (dollars in millions) 2026 2025 $ % Net sales by product line: Commercial Original Equipment $ 126.6 $ 94.0 $ 32.6 34.7 % Military Original Equipment 84.6 71.8 12.8 17.8 % Commercial Aftermarket Products 53.0 60.4 (7.4) (12.3) % Military Aftermarket Products 29.1 22.7 6.4 28.2 % Other $ 25.0 $ — $ 25.0 NM Total net sales $ 318.3 $ 248.9 $ 69.4 27.9 % Cost of sales $ 196.2 $ 147.8 $ (48.4) (32.7) % as a percentage of sales 61.6 % 59.4 % Engineering, selling and administrative $ 50.6 $ 36.5 $ (14.1) (38.6) % as a percentage of sales 15.9 % 14.7 % Operating profit $ 71.5 $ 64.6 $ 6.9 10.7 % Operating margin 22.5 % 26.0 % Supplemental Data: Backlog (b) $ 1,188.6 $ 960.1 $ 228.5 23.8 % (a) A variance designated as “NM” indicates such calculation is not meaningful. (b) Includes $93.4 million of backlog as of March 31, 2026 pertaining to the Druck acquisition. Sales increased $69.4 million, or 27.9%, to $318.3 million in 2026, primarily driven from the impact of the Druck acquisition of $42.9 million, or 17.2%, higher core sales of $23.4 million, or 9.4%, and favorable foreign currency translation of $3.1 million, or 1.2%. • Sales of Commercial Original Equipment increased $32.6 million, or 34.7%, to $126.6 million in 2026, reflecting the impact of the Druck acquisition and strong demand from aircraft manufacturers. • Sales of Military Original Equipment increased $12.8 million, or 17.8%, to $84.6 million in 2026, reflecting strong demand from defense and space customers and the impact of the Druck acquisition. • Sales of Commercial Aftermarket Products decreased $7.4 million, or 12.3%, to $53.0 million in 2026, due to lower initial provisioning and commercial spares replenishment. • Sales of Military Aftermarket Products increased $6.4 million, or 28.2%, to $29.1 million in 2026, reflecting stronger demand for military products, partly in response to heightened geopolitical tensions globally. • Other sales increased $25.0 million, reflecting the impact of the Druck acquisition. Cost of sales increased by $48.4 million, or 32.7%, to $196.2 million in 2026, primarily reflecting the impact of the Druck acquisition of $28.8 million, or 19.5%, increased material, labor and other manufacturing costs of $11.3 million, or 7.6%, unfavorable mix of $11.0 million, or 7.4%, and higher volumes of $2.6 million, or 1.8%, partially offset by strong productivity gains of $5.9 million, or 4.0%. Engineering, selling and administrative expenses increased by $14.1 million, or 38.6%, to $50.6 million in 2026, primarily driven by the acquisition of Druck. Operating profit increased by $6.9 million, or 10.7%, to $71.5 million in 2026, primarily reflecting productivity gains, higher volumes and strong net price, inclusive of tariffs, and cost savings of $16.4 million, or 25.4%, favorable contribution from the acquisition of Druck of $0.9 million, or 1.4%, offset by unfavorable mix of $11.0 million, or 17.0%. 34 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Process Flow Technologies First Quarter Favorable/(Unfavorable) Change (dollars in millions) 2026 2025 $ % Net sales by product line: Process Valves and Related Products $ 295.2 $ 233.5 $ 61.7 26.4 % Commercial Valves 41.0 37.4 3.6 9.6 % Pumps and Systems 41.9 37.8 4.1 10.8 % Total net sales $ 378.1 $ 308.7 $ 69.4 22.5 % Cost of sales $ 218.9 $ 172.2 $ (46.7) (27.1) % as a percentage of sales 57.9 % 55.8 % Engineering, selling and administrative $ 95.0 $ 73.7 $ (21.3) (28.9) % as a percentage of sales 25.1 % 23.9 % Operating profit $ 64.2 $ 62.8 $ 1.4 2.2 % Operating margin 17.0 % 20.3 % Supplemental Data: Backlog (a) $ 606.2 $ 389.9 $ 216.3 55.5 % (a) Includes $222.2 million of backlog as of March 31, 2026 pertaining to the Panametrics, Reuter-Stokes, and Optek acquisitions. Sales increased by $69.4 million, or 22.5%, to $378.1 million in 2026, primarily driven by the impact of Panametrics, Reuter-Stokes and Optek acquisitions of $59.3 million, or 19.2%, favorable foreign currency translation of $12.1 million, or 3.9% and to a lesser extent offset by lower core sales of $2.0 million, or 0.6%. • Sales of Process Valves and Related Products increased by $61.7 million, or 26.4%, to $295.2 million in 2026, primarily driven by the impact of the Panametrics, Reuter-Stokes and Optek acquisitions of $59.3 million, or 25.4%, favorable foreign currency translation of $9.1 million, or 3.9%, and to a lesser extent offset by lower core sales of $6.7 million, or 2.9%, driven by lower volumes. • Sales of Commercial Valves increased by $3.6 million, or 9.6%, to $41.0 million in 2026, primarily driven by the impact of favorable foreign currency translation. • Sales of Pumps and Systems increased by $4.1 million, or 10.8%, to $41.9 million in 2026, reflecting an increase in core sales driven by higher pricing and volumes. Cost of sales increased by $46.7 million, or 27.1%, to $218.9 million, primarily driven by the impact of the Panametrics, Reuter-Stokes and Optek acquisitions of $44.6 million, or 25.9%, higher material, labor and other manufacturing costs, inclusive of tariffs, of $11.7 million, or 6.8%, unfavorable foreign currency translation of $7.3 million, or 4.2%, partially offset by strong productivity gains of $8.1 million, or 4.7%, lower volumes of $7.1 million, or 4.1%, and to a lesser extent cost savings and net favorable mix of $1.8 million, or 1.0%. Engineering, selling and administrative expenses increased by $21.3 million, or 28.9%, to $95.0 million, primarily driven by the acquisitions of Panametrics, Reuter-Stokes and Optek. Operating profit increas ed by $1.4 million, or 2.2%, to $64.2 million in 2026. T he increase is primarily due to strong net price, inclusive of tariffs, favorable foreign exchange, productivity gains and cost savings of $16.1 million, or 25.6%, partially offset by the net impact of acquisitions driven primarily by amortization of acquisition-related intangibles and transaction related expenses, lower volumes, and mix impacts of $14.7 million, or 23.4%. 35 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources Three Months Ended March 31, (in millions) 2026 2025 Net cash provided by (used for): Operating activities from continuing operations $ (29.5) $ (46.2) Investing activities from continuing operations (1,366.0) (14.4) Financing activities 24.4 (23.6) Discontinued operations (a) — 207.7 Effect of exchange rates on cash and cash equivalents (3.3) 4.9 (Decrease) Increase in cash and cash equivalents $ (1,374.4) $ 128.4 (a) For the three months ended March 31, 2025, the cash provided by discontinued operations is from the sale of the Engineered Materials business. See Note 3, “Discontinued Operations” to the Condensed Consolidated Financial Statements for additional information. Our operating philosophy is to deploy cash provided from operating activities, when appropriate, to provide value to stockholders 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. In September 2025, we entered into a $900 million senior unsecured delayed draw term loan facility (the “Term Facility”), which matures on September 30, 2030, and a $900 million senior unsecured revolving facility (the “Revolving Facility”), which also matures on September 30, 2030. In December 2025, the Company borrowed $900 million under the Term Facility and an additional $250 million under the Revolving Facility. The borrowings under the Term Facility and Revolving Facility were used, along with cash on-hand, to fund the Company’s January 2026 acquisitions of Druck, Panametrics Reuter-Stokes, and Optek. In February 2026, the Company borrowed $50 million under the Revolving Facility for general corporate and working capital purposes. Operating Activities Cash used for operating activities from continuing operations was $29.5 million in the first three months of 2026, as compared to $46.2 million during the same period last year. The decrease in cash used for operating activities from continuing operations was primarily driven by improved working capital of $13.2 million and the $2.8 million increase in net income from continuing operations adjusted for the exclusion of non-cash items. Investing Activities Cash flows relating to investing activities from continuing operations consist primarily of cash used for acquisitions of businesses and capital expenditures. Cash used for investing activities from continuing operations was $1,366.0 million in the first three months of 2026, as compared to $14.4 million in the comparable period of 2025. The increase in cash used for investing activities was primarily related to the aggregate cash paid of $1,355.4 million for the acquisitions of Druck, Panametrics, Reuter-Stokes and Optek, partially offset by a $3.5 million decrease in capital expenditures. Capital expenditures are made primarily for increasing capacity, replacing equipment, supporting new product development, and improving information systems. Financing Activities Financing cash flows consist primarily of dividend payments to stockholders, repayments of indebtedness, proceeds from our Credit Facilities and proceeds from the issuance of common stock in connection with employee stock plans. Cash provided by financing activities was $24.4 million during the first three months of 2026 compared to cash used by financing activities of $23.6 million in the comparable period of 2025. The increase in cash provided by financing activities was primarily attributable to $50.0 million of borrowings under the Company’s Revolving Facility in the first quarter of 2026. 36 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, 2025.