What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-04 compared with 2021-05-05 · 227 added, 102 removed, 125 unchanged (72% of the section changed)

19 unchanged sentences

our ability to value and successfully integrate acquisitions and to realize synergies and opportunities for growth and innovation, and to attract and retain highly qualified personnel and key management;

the risks that any regulatory approval that may be required for the Engineered Materials divestiture is delayed or is not obtained, that the Engineered Materials divestiture does not close or that the related transaction agreement is terminated, or that the benefits expected from the Engineered Materials divestiture will not be realized or will not be realized within the expected time period;

a reduction in congressional appropriations that affect defense spending and our ability to predict the timing and award of substantial contracts in our banknote business;

5 unchanged sentences

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

OUTLOOK - CONTINUING OPERATIONS

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 2021, we expect a total year-over-year sales increase of approximately 8%, driven by mid-single digit core growth following the substantial core sales decline in 2020 attributable to the COVID-19 pandemic, an approximate 2.5% benefit from favorable foreign exchange, and a slight acquisition benefit.

We expect an improvement in operating profit of more than 70%, driven by a combination of operating leverage on higher volumes, restructuring and acquisition related charges recorded in 2020 that will not repeat in 2021, productivity and carry-over savings associated with COVID-19 related repositioning actions.

Fluid Handling

In 2021, we expect Fluid Handling sales to increase in the high-single digit range compared to 2020, driven by core sales growth in the mid-single digit range following the substantial core sales decline in 2020 attributable to the COVID-19 pandemic;

For 2021, we expect a total year-over-year sales increase of approximately 12%, driven by high-single digit core growth following the substantial core sales decline in 2020 attributable to the COVID-19 pandemic, an approximate 3.5% benefit from favorable foreign exchange, and a slight acquisition benefit.

We expect an improvement in operating profit of approximately two times greater than 2020, driven by a combination of operating leverage on higher volumes, restructuring and acquisition related charges recorded last year that will not repeat in 2021 and carry-over savings associated with COVID-19 related repositioning actions.

Aerospace & Electronics

In 2021, we expect Aerospace & Electronics core sales to decline in the low- to mid-single digit range compared to 2020 as the COVID-19 pandemic had a major impact on business and leisure air travel beginning in the early part of the second quarter of last year which has only recently began to recover.

Accordingly, we expect a decline in our commercial OEM business driven by lower aircraft build rates, and we expect a decline in our commercial aftermarket business given lower airline flight hours.

We expect a decline in our defense OEM and aftermarket businesses given very challenging comparisons to 2020 where these markets exhibited very strong growth.

We expect the segment’s operating profit to increase slightly compared to 2020 driven primarily by the carry-over savings associated with COVID-19 related repositioning actions and the absence of restructuring related costs, partially offset by the impact of the lower sales volume.

Process Flow Technologies

In 2021, we expect Process Flow Technologies sales to increase in the mid-teens range compared to 2020, driven by core sales growth in the high-single digit range following the substantial core sales decline in 2020 attributable to the COVID-19 pandemic;

favorable foreign exchange of approximately 5%;

and a small benefit from the I&S acquisition.

We expect Process Valves and Related Products sales to increase in the high-single digit range compared to 2020, driven by mid-single digit core sales growth, an approximate 3% benefit from favorable foreign exchange, and a small benefit from the I&S acquisition.

We expect Commercial Valves sales to increase in the low double-digit range compared to 2020 driven by favorable foreign exchange in the mid- to high-single digit range, and low- to mid-single digit core sales growth.

We expect Pumps and Systems sales to increase in the mid- to high-single digit range compared to 2020, driven by growth in the U.S.

municipal markets and military.

We expect an improvement in the segment’s operating profit and operating margin compared to 2020, driven by the impact of higher sales volume, lower restructuring and acquisition related charges, and carry-over savings primarily associated with COVID-19 related repositioning actions.

We expect Process Valves and Related Products sales to increase in the low-teens digit range compared to 2020, driven by high-single digit core sales growth, an approximate 3% benefit from favorable foreign exchange, and a small benefit from the I&S acquisition.

We expect Commercial Valves sales to increase more than 20% compared to 2020 driven by favorable foreign exchange and core sales growth, both in the low double digit range.

We expect Pumps and Systems sales to increase in the low-teens range compared to 2020, driven by growth in the U.S.

municipal, non-residential construction and military end markets.

We expect an improvement in the segment’s operating profit and operating margin compared to 2020, driven by the impact of the higher sales, lower restructuring and acquisition related charges, and carry-over savings primarily associated with COVID-19 related repositioning actions.

Payment & Merchandising Technologies

In 2021, we expect Payment & Merchandising Technologies sales to increase in the low-double digit range compared to 2020, driven primarily by high-single digit core sales growth, and an approximate 3% benefit from favorable foreign exchange.

At Crane Payment Innovations, we expect core sales growth in the high-single digit range, driven by broad-based strength across vertical markets following the substantial core sales decline in 2020 attributable to the COVID-19 pandemic.

At Crane Currency, we expect core sales to increase in the high-single digit range compared to 2020 primarily driven by higher sales to the U.S.

We expect the segment’s operating profit to increase substantially compared to 2020, driven by the impact from the higher sales volume, favorable product mix, productivity, carry-over savings primarily associated with COVID-19 related repositioning actions, and the absence of restructuring and acquisition-related costs.

Aerospace & Electronics

In 2021, we expect Aerospace & Electronics core sales to decline in the mid-single digit range compared to 2020 as the COVID-19 pandemic continues to depress business and leisure air travel.

Accordingly, we expect a decline in our commercial OEM business driven by lower aircraft build rates, and we expect a decline in our commercial aftermarket business given continued lower airline flight hours.

We expect a decline in our defense OEM and aftermarket businesses given very challenging comparisons to 2020 where these markets exhibited very strong growth.

We expect the segment’s operating profit to decrease compared to 2020 driven primarily by the impact of the lower sales volume, partially offset by carry-over savings associated with COVID-19 related repositioning actions, and the absence of restructuring related costs.

Engineered Materials

In 2021, we expect Engineered Materials sales to increase approximately 20% compared to 2020 driven primarily by substantially stronger recreational vehicle industry build rates in response to increasing consumer preference for RV lifestyle and RV vacations, higher trailer industry build rates, and a recovery in certain building products end markets.

Segment operating profit and operating margin are expected to increase compared to 2020 driven primarily by the impact of the higher sales volume.

In 2021, we expect Payment & Merchandising Technologies sales to increase in the mid- to high-teens range compared to 2020, driven primarily by mid-teens core sales growth, and an approximate 4% benefit from favorable foreign exchange.

At Crane Payment Innovations, we expect core sales growth in the low double digit range, driven by broad-based strength across most vertical end markets following the substantial core sales decline in 2020 attributable to the COVID-19 pandemic.

At Crane Currency, we expect core sales to increase more than 20% compared to 2020 primarily driven by higher sales to the U.S.

Government, and to a lesser extent, by higher sales to international customers.

We expect the segment’s operating profit and operating margin to increase substantially compared to 2020, driven by the impact from the higher sales volume, favorable product mix, productivity, carry-over savings primarily associated with COVID-19 related repositioning actions, and the absence of restructuring and acquisition-related costs.

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

Results from Operations – Three Month Periods Ended March 31

Results from Continuing Operations – Three Month Periods Ended June 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 quarter 2021 versus the first quarter 2020, unless otherwise specified.

First Quarter Change

All comparisons below refer to the second quarter 2021 versus the second quarter 2020, unless otherwise specified.

Second Quarter Change

(dollars in millions) 2021 2020 $ %

1 unchanged sentence

Operating profit 136.9 28.7 108.2 377.0 %

Acquisition-related and integration charges * — 5.2 (5.2) NM

Restructuring and related (gain) charges, net * (11.7) 0.1 (11.8) NM

Acquisition-related and integration charges 1

— 2.3 (2.3) NM

Restructuring and related charges, net 1

2.2 24.5 (22.3) (91.0) %

Operating margin 17.2 % 4.5 %

4 unchanged sentences

Total other expense (1.3) (11.7) 10.4 88.9 %

Income before income taxes 137.1 80.3 56.8 70.7 %

Income from continuing operations before income taxes 135.6 17.0 118.6 697.6 %

Provision for income taxes 24.9 3.6 21.3 591.7 %

Net income attributable to common shareholders $ 108.4 $ 62.8 $ 45.6 72.6 %

* Acquisition-related and integration charges and restructuring and related (gain) charges, net are included in operating profit and operating margin.

Net income from continuing operations attributable to common shareholders $ 110.7 $ 13.4 $ 97.3 726.1 %

1 Acquisition-related and integration charges and restructuring and related (gains) charges, net are included in operating profit and operating margin.

Sales increased by $152.1 million, or 23.6%, to $796.4 million in 2021.

Net sales related to operations outside the United States were 37.8% and 35.9% of total net sales for the quarters ended March 31, 2021 and 2020, respectively.

Net sales related to operations outside the United States were 38.8% and 36.8% of total net sales for the quarters ended June 30, 2021 and 2020, respectively.

The year-over-year change in sales included:

• favorable foreign currency translation of $25.2 million, or 3.2%.

• an increase in core sales of $120.4 million, or 18.7%;

• an increase in sales related to a benefit from the January 2020 I&S acquisition of $5.0 million, or 0.6%

• favorable foreign currency translation of $31.7 million, or 4.9%.

Operating profit increased by $108.2 million, or 377.0%, to $136.9 million in 2021.

The increase in operating profit reflected higher operating profit in our Payment & Merchandising Technologies and Fluid Handling segments, partially offset by lower operating profit in our Aerospace & Electronics and Engineered Materials segments, and higher corporate costs.

Operating profit in the first quarter of 2021 included a net restructuring and related gain of $11.7 million primarily related to prior repositioning actions.

Operating profit in the first quarter of 2020 included acquisition-related and integration costs of $5.2 million related to the I&S and Cummins-Allison acquisitions.

Other expense increased $1.0 million, or 12.0%, primarily reflecting higher interest expense resulting from the 364-day credit facility entered into in April 2020.

The increase in operating profit reflected higher operating profit in our Payment & Merchandising Technologies, Process Flow Technologies and Aerospace & Electronics segments, partially offset by higher corporate costs.

Operating profit in the second quarter of 2021 included restructuring and related charges of $2.2 million and disposition costs of $0.8 million.

Operating profit in the second quarter of 2020 included restructuring and related charges of $24.5 million, primarily relating to workforce reductions initiated in response to COVID-19 and integration actions related to the Cummins-Allison acquisition.

We also recorded acquisition-related and integration charges of $2.3 million related to the Cummins-Allison and I&S acquisitions in the second quarter of 2020.

Other expense decreased $10.4 million, or 88.9%, primarily reflecting a gain on sale of property and lower interest expense resulting from the absence of interest paid for the 364-day credit facility that was paid in April 2021.

Our effective tax rate is affected by a number of items, both recurring and discrete, including the amount of income we earn in different jurisdictions and their respective statutory tax rates, acquisitions and dispositions, changes in the valuation of our deferred tax assets and liabilities, changes in tax laws, regulations and accounting principles, the continued availability of statutory tax credits and deductions, the continued reinvestment of our overseas earnings, and examinations initiated by tax authorities around the world.

Our tax rate for the three months ended March 31, 2021 is lower than the prior year’s comparable period primarily due to higher tax credit utilization, partially offset by a lower statutory U.S.

deduction related to our non-U.S.

subsidiaries’ income.

Our tax rate for the three months ended March 31, 2021 is approximately equal to the statutory U.S.

federal tax rate of 21%.

Our effective tax rate attributable to continuing operations for the three months ended June 30, 2021 is lower than the prior year’s comparable period primarily due to higher tax credit utilization, partially offset by the reversal of tax accruals in the prior year related to an audit settlement.

Our effective tax rates attributable to continuing operations for the three months ended June 30, 2021 is lower than the statutory U.S.

federal tax rate of 21% primarily due to excess share-based compensation benefits, partially offset by state taxes .

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

3 unchanged sentences

Net income before allocation to noncontrolling interests $ 138.3 $ 14.8

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

Components of other comprehensive income, net of tax

Currency translation adjustment 7.6 17.2

Changes in pension and postretirement plan assets and benefit obligation, net of tax 5.2 3.6

Other comprehensive income (loss), net of tax (30.0) (41.6)

Other comprehensive income, net of tax 12.8 20.8

Comprehensive income before allocation to noncontrolling interests 151.1 35.6

1 unchanged sentence

Comprehensive income attributable to common shareholders $ 151.2 $ 35.4

For the three months ended March 31, 2021, comprehensive income before allocations to noncontrolling interests was $78.4 million compared to $21.2 million in the same period of 2020.

The $57.2 million increase was driven by higher net income before allocation to noncontrolling interests of $45.6 million and a $10.3 million year over year favorable impact of foreign currency translation adjustments, primarily related to the euro and Japanese yen.

For the three months ended June 30, 2021, comprehensive income before allocations to noncontrolling interests was $151.1 million compared to $35.6 million in the same period of 2020.

The $115.5 million increase was driven by higher net income before allocation to noncontrolling interests of $123.5 million, partially offset by a $9.6 million year over year unfavorable impact of foreign currency translation adjustments, primarily related to the euro and Japanese yen.

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

Segment Results of Operations - Three Month Periods Ended March 31

Fluid Handling

First Quarter Change

Segment Results of Operations - Three Month Periods Ended June 30

Aerospace & Electronics

Second Quarter Change

(dollars in millions) 2021 2020 $ %

Net sales by product line:

Commercial Original Equipment $ 53.7 $ 51.9 $ 1.8 3.5 %

Military Original Equipment 62.8 65.5 (2.7) (4.1) %

Commercial Aftermarket Products 25.3 20.3 5.0 24.6 %

Military Aftermarket Products 15.7 19.7 (4.0) (20.3) %

Total net sales $ 157.5 $ 157.4 $ 0.1 0.1 %

Operating profit $ 30.8 $ 19.5 $ 11.3 57.9 %

Restructuring and related charges 1

$ — $ 4.7 $ (4.7) NM

Backlog $ 472.9 $ 505.7 $ (32.8) (6.5) %

Operating margin 19.6 % 12.4 %

1 Restructuring and related charges are included in operating profit and operating margin.

Aerospace & Electronics sales increased $0.1 million, or 0.1%, to $157.5 million in 2021.

• Sales of Commercial Original Equipment increased $1.8 million, or 3.5%, to $53.7 million in 2021 , reflecting higher shipments as the industry begins to recover from the COVID-19 related slowdown.

• Sales of Military Original Equipment decreased $2.7 million, or 4.1%, to $62.8 million in 2021, primarily reflecting challenging comparisons to particularly strong sales in the same period last year.

• Sales of Commercial Aftermarket Products increased $5.0 million, or 24.6%, to $25.3 million in 2021, reflecting demand from improving air traffic as the airline industry begins to recover from the COVID-19 related slowdown.

• Sales of Military Aftermarket Products decreased $4.0 million, or 20.3%, to $15.7 million in 2021, primarily reflecting challenging comparisons to particularly strong sales in the same period last year.

Aerospace & Electronics operating profit increased by $11.3 million, or 57.9%, to $30.8 million in 2021, primarily as a result of restructuring savings from 2020 repositioning actions and the non-recurrence of repositioning charges.

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

Process Flow Technologies

Second Quarter Change

(dollars in millions) 2021 2020 $ %

Net sales by product line:

Process Valves and Related Products $ 184.3 $ 160.8 $ 23.5 14.6 %

3 unchanged sentences

Operating profit $ 46.5 $ 20.2 $ 26.3 130.2 %

Acquisition-related and integration charges * $ — $ 2.0 $ (2.0) NM

Restructuring and related (gain) charges, net * $ (11.2) $ 1.3 $ (12.5) NM

Acquisition-related and integration charges 1

$ — $ 1.3 $ (1.3) NM

Restructuring and related charges, net 1

$ 2.4 $ 5.2 $ (2.8) (53.8) %

Backlog $ 344.1 $ 298.6 $ 45.5 15.2 %

Operating margin 15.0 % 8.4 %

* Acquisition-related and integration charges and restructuring and related (gain) charges, net are included in operating profit and operating margin.

Fluid Handling sales increased by $31.3 million, or 12.2%, to $288.0 million in 2021, driven by higher core sales of $14.6 million, or 5.7%, favorable foreign currency translation of $11.7 million, or 4.6%, and a benefit from the January 2020 acquisition of I&S of $5.0 million, or 1.9%.

1 Acquisition-related and integration charges and restructuring and related charges, net are included in operating profit and operating margin.

Process Flow Technologies sales increased by $71.4 million, or 29.8%, to $310.7 million in 2021, driven by higher core sales of $52.7 million, or 22.0%, and favorable foreign currency translation of $18.7 million, or 7.8%.

• Sales of Process Valves and Related Products increased by $23.5 million, or 14.6%, to $184.3 million in 2021.

The increase reflected favorable foreign currency translation of $6.3 million, or 4.0%, primarily due to the euro strengthening against the U.S.

dollar, higher core sales of $6.0 million, or 3.8%, and a benefit from the acquisition of I&S of $5.0 million, or 3.2%.

The higher core sales primarily reflected the timing of services provided to support nuclear outages compared to the prior year.

The increase reflected higher core sales of $16.4 million, or 10.2%, and favorable foreign currency translation of $7.1 million, or 4.4%, primarily due to the euro strength ening against the U.S.

The higher core sales primarily reflected the timing of services provided to support nuclear outages compared to the prior year, and improving demand across Chemical and General Industrial end markets.

• Sales of Commercial Valves increased by $39.9 million, or 68.4%, to $98.2 million in 2021, primarily driven by a core sales increase of $28.6 million, or 49.0%, and favorable foreign currency translation of $11.3 million, or 19.4%, as the Canadian dollar and British pound strengthened against the U.S.

The higher core sales primarily reflected higher demand in Canadian non-residential construction markets.

• Sales of Pumps & Systems increased by $0.7 million, or 3.0%, to $24.3 million in 2021.

Fluid Handling operating profit increased by $21.9 million, or 78.2%, to $49.9 million in 2021.

The increase primarily reflected a gain on the sale of real estate related to prior repositioning actions, productivity benefits, restructuring savings from 2020 repositioning actions and the impact of higher sales volumes.

The higher core sales reflected broad-based improvement in demand across Canadian, U.K.

and Middle East non-residential construction markets.

• Sales of Pumps & Systems increased by $8.0 million, or 39.6%, to $28.2 million in 2021, reflecting broad-based improvement in demand across municipal, non-residential construction, and military end markets.

Process Flow Technologies operating profit increas ed by $26.3 million, or 130.2%, to $46.5 million in 2021.

The increase primarily reflected the impact of higher sales volumes.

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

Payment & Merchandising Technologies

First Quarter Change

Second Quarter Change

(dollars in millions) 2021 2020 $ %

4 unchanged sentences

Total net sales $ 328.2 $ 247.6 $ 80.6 32.6 %

Operating profit $ 85.9 $ 26.4 $ 59.5 225.4 %

Acquisition-related and integration charges * $ — $ 3.1 $ (3.1) NM

Restructuring and related gain, net * $ (0.5) $ (1.2) $ 0.7 NM

Operating profit $ 77.9 $ 2.0 $ 75.9 NM

Acquisition-related and integration charges 2

$ — $ 1.0 $ (1.0) NM

Restructuring and related (gains) charges, net 2

$ (0.2) $ 14.6 $ (14.8) NM

Backlog $ 374.7 $ 285.5 $ 89.2 31.2 %

2 unchanged sentences

The prior period has been reclassified to conform to the current period presentation.

* Acquisition-related and integration charges and restructuring and related gain, net are included in operating profit and operating margin.

2 Acquisition-related and integration charges and restructuring and related (gains) charges, net are included in operating profit and operating margin.

Payment & Merchandising Technologies sales increased $80.6 million, or 32.6%, to $328.2 million in 2021, driven by higher core sales of $67.9 million, or 27.5%, and favorable foreign currency translation of $12.7 million, or 5.1%.

• Sales of Payment Acceptance and Dispensing Products decreased $18.2 million, or 9.0%, to $185.0 million in 2021.

The decrease reflected lower core sales of $22.1 million, or 10.9%, partially offset by favorable foreign currency translation of $3.9 million, or 1.9%, as the British pound strengthened against the U.S.

The core sales decrease primarily reflected lower sales to vending customers driven by COVID-19 related demand impacts.

• Sales of Payment Acceptance and Dispensing Products in creased $56.4 million, or 40.0%, to $197.3 million in 2021.

The increase reflected higher core sales of $50.9 million, or 36.1%, and favorable foreign currency translation of $5.5 million, or 3.9%, primarily due to the British pound strengthening against the U.S.

The core sales increase primarily reflected higher sales to Gaming, Retail and Vending customers.

• Sales of Banknotes and Security Products increased $24.2 million, or 22.7%, to $130.9 million in 2021.

The increase reflected higher core sales of $17.0 million, or 16.0% , and favorable foreign currency translation of $7.2 million, or 6.7%, as the euro strengthened against the U.S.

The core sales increase reflected substantially higher sales to both the U.S.

Government and international customers.

Payment & Merchandising Technologies operating profit increased by $59.5 million, or 225.4%, to $85.9 million in 2021.

The increase primarily reflected favorable mix, productivity benefits, restructuring savings from 2020 repositioning actions and the impact of higher sales volumes.

The core sales increase primarily reflected higher sales to the U.S.

Government, and to a lesser extent, higher sales to international customers.

Payment & Merchandising Technologies operating profit increased by $75.9 million to $77.9 million in 2021.

The increase primarily reflected the impact of higher sales volumes, and to a lesser extent, favorable mix, the non-recurrence of repositioning charges and restructuring savings from 2020 repositioning actions.

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

Results from Continuing Operations – Six Month Periods Ended June 30

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

All comparisons below refer to the first six months of 2021 versus the first six months of 2020, unless otherwise specified.

Year-to-Date Change

(dollars in millions) 2021 2020 $ %

Net sales $ 1,575.9 $ 1,391.1 $ 184.8 13.3 %

Operating profit 276.9 110.4 166.5 150.8 %

Acquisition-related and integration charges 1

— 7.5 (7.5) NM

Restructuring and related (gains) charges, net 1

(9.5) 24.6 (34.1) (138.6) %

Operating margin 17.6 % 7.9 %

Other income (expense):

Interest income 0.9 0.7 0.2 28.6 %

Interest expense (25.0) (26.9) 1.9 7.1 %

Miscellaneous income, net 13.6 6.2 7.4 119.4 %

Total other expense (10.5) (20.0) 9.5 47.5 %

Income from continuing operations before income taxes 266.4 90.4 176.0 194.7 %

Provision for income taxes 52.3 19.3 33.0 171.0 %

Net income from continuing operations attributable to common shareholders $ 214.1 $ 71.1 $ 143.0 201.1 %

1 Acquisition-related and integration charges and restructuring and related (gains) charges, net are included in operating profit and operating margin.

Sales increased by $184.8 million, or 13.3%, to $1,575.9 million in 2021.

Net sales related to operations outside the United States were 39.4% and 36.3% of total net sales for the six months ended June 30, 2021 and 2020, respectively.

The year-over-year change in sales included:

• an increase in core sales of $123.0 million, or 8.8%;

• favorable foreign currency translation of $56.8 million, or 4.1%;

• an increase in sales related to a benefit from the January 2020 I&S acquisition of $5.0 million, or 0.4%.

Operating profit increased by $166.5 million, or 150.8%, to $276.9 million in 2021.

The increase in operating profit reflected higher operating profit in our Payment & Merchandising Technologies and Process Flow Technologies segments, partially offset by Aerospace & Electronics segment and higher corporate costs.

Operating profit in the first six months of 2021 included net restructuring and related gains of $9.5 million and disposition costs of $0.8 million.

Operating profit in the first six months of 2020 included restructuring and related charges of $24.6 million and acquisition-related and integration charges of $7.5 million.

Other expense decreased $9.5 million, or 47.5%, primarily reflecting a gain on sale of a property, a curtailment gain related to our pension plan and lower interest expense resulting from the absence of interest paid for the 364-day credit facility that was paid in April 2021.

Our effective tax rate attributable to continuing operations for the six months ended June 30, 2021 is lower than the prior year’s comparable period primarily due to higher tax credit utilization, partially offset by the reversal of tax accruals in the prior year related to an audit settlement.

Our effective tax rate attributable to continuing operations for the six months ended June 30, 2021 is lower than the statutory U.S.

federal tax rate of 21% primarily due to excess share-based compensation benefits, partially offset by state taxes .

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

Comprehensive Income

Six Months Ended

(in millions) 2021 2020

Net income before allocation to noncontrolling interests $ 246.7 $ 77.6

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

Currency translation adjustment (27.3) (28.0)

Changes in pension and postretirement plan assets and benefit obligation, net of tax 10.1 7.1

Other comprehensive loss, net of tax (17.2) (20.9)

Comprehensive income before allocation to noncontrolling interests 229.5 56.7

Noncontrolling interests in comprehensive income 0.7 (0.1)

Comprehensive income attributable to common shareholders $ 228.8 $ 56.8

For the six months ended June 30, 2021, comprehensive income before allocations to noncontrolling interests was $229.5 million compared to $56.7 million in the same period of 2020.

The $172.8 million increase was primarily driven by higher net income before allocation to noncontrolling interests of $169.1 million.

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

Segment Results of Operations - Six Month Periods Ended June 30

Aerospace & Electronics

First Quarter Change

Year-to-Date Change

(dollars in millions) 2021 2020 $ %

6 unchanged sentences

Operating profit $ 56.8 $ 63.3 $ (6.5) (10.3) %

Backlog $ 481.6 $ 547.5 $ (65.9) (12.0) %

Restructuring and related charges 1

$ — $ 4.7 $ (4.7) NM

Operating margin 18.2 % 18.1 %

1 Restructuring and related charges are included in operating profit and operating margin.

Aerospace & Electronics sales decreased $38.8 million, or 11.1%, to $311.5 million in 2021.

• Sales of Commercial Original Equipment decreased $25.9 million, or 32.1%, to $54.7 million in 2021, primarily reflecting lower aircraft build rates as a result of COVID-19.

• Sales of Military Original Equipment increased $2.4 million, or 4.0%, to $62.8 million in 2021, reflecting broad-based military demand strength across solutions.

• Sales of Commercial Original Equipment decreased $24.2 million, or 18.3%, to $108.3 million in 202 1, reflecting lower aircraft build rates as a result of COVID-19.

• Sales of Military Original Equipment decreased $0.3 million, or 0.2%, to $125.6 million in 2021.

• Sales of Commercial Aftermarket Products decreased $9.4 million, or 17.3%, to $44.8 million in 2021, reflecting lower sales of commercial spares as airlines reduced flight schedules in response to COVID-19.

• Sales of Military Aftermarket Products decreased $0.9 million, or 5.0%, to $17.1 million in 2021.

Aerospace & Electronics operating profit decreased by $17.8 million, or 40.6%, to $26.0 million in 2021, primarily as a result of the impact of lower sales volumes, partially offset by restructuring savings from 2020 repositioning actions.

Engineered Materials

First Quarter Change

• Sales of Military Aftermarket Products decreased $4.9 million, or 13.0%, to $32.8 million in 2021, primarily reflecting challenging comparisons to particularly strong sales in the same period last year.

Aerospace & Electronics operating profit decreased by $6.5 million, or 10.3%, to $56.8 million in 2021, primarily as a result of lower sales volumes, partially offset by savings from 2020 repositioning actions.

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

Process Flow Technologies

Year-to-Date Change

(dollars in millions) 2021 2020 $ %

Net sales by product line:

FRP- Recreational Vehicles $ 24.3 $ 18.8 $ 5.5 29.3 %

FRP- Building Products 21.8 24.9 (3.1) (12.4) %

FRP- Transportation 7.8 7.2 0.6 8.3 %

Process Valves and Related Products $ 358.6 $ 317.9 $ 40.7 12.8 %

Commercial Valves 187.7 134.1 53.6 40.0 %

Pumps and Systems 52.5 43.9 8.6 19.6 %

Total net sales $ 598.8 $ 495.9 $ 102.9 20.8 %

Operating profit $ 96.6 $ 48.2 $ 48.4 100.4 %

Backlog $ 17.0 $ 10.8 $ 6.2 57.4 %

Acquisition-related and integration charges 1

$ — $ 3.2 $ (3.2) NM

Restructuring and related (gains) charges 1

$ (8.8) $ 6.6 $ (15.4) NM

Operating margin 16.1 % 9.7 %

Engineered Materials sales increased by $3.0 million, or 5.9%, to $53.9 million in 2021.

The increase reflected higher sales to recreational vehicle manufacturers, partially offset by lower sales to building products customers.

Engineered Materials operating profit decreased by $0.5 million, or 7.2%, to $6.4 million in 2021, primarily reflecting higher material costs, partially offset by the impact of higher sales volumes.

1 Acquisition-related and integration charges and restructuring and related (gains) charges are included in operating profit and operating margin.

Process Flow Technologies sales increased by $102.9 million, or 20.8%, to $598.8 million in 2021, driven by higher core sales of $67.4 million, or 13.6%, favorable foreign currency translation of $30.5 million, or 6.2%, and a benefit from the January 2020 acquisition of I&S of $5.0 million, or 1.0%.

• Sales of Process Valves and Related Products increased by $40.7 million, or 12.8%, to $358.6 million in 2021.

The increase reflected higher core sales of $22.3 million, or 7.0%, favorable foreign currency translation of $13.4 million, or 4.2%, primarily due to the euro strengthening against the U.S.

dollar, and a benefit from the acquisition of I&S of $5.0 million, or 1.6%.

The higher core sales primarily reflected the timing of services provided to support nuclear outages compared to the prior year.

• Sales of Commer cial Valves increased by $53.6 million, or 40.0%, to $187.7 million in 2021, primarily driven by a core sales increase of $36.9 million , or 27.5%, and favorable foreign currency translation of $16.7 million, or 12.5%, as the Canadian dollar and British pound strengthened against the U.S.

The higher core sales primarily reflected higher demand in Canadian, and, to a lesser extent, U.K., non-residential construction markets.

• Sales of Pumps & Systems increased by $8.6 million, or 19.6%, to $52.5 million in 2021, primarily reflecting higher demand from municipal and non-residential construction end markets.

Process Flow Technologies operating profit increased by $48.4 million , or 100.4%, to $96.6 million in 2021.

The increase primarily reflected the impact of higher sales volumes, a gain on the sale of real estate related to prior repositioning actions, productivity benefits, and savings from 2020 repositioning actions.

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

Payment & Merchandising Technologies

Year-to-Date Change

(dollars in millions) 2021 2020 $ %

Net sales by product line:

Payment Acceptance and Dispensing Products 1

$ 382.3 $ 344.1 $ 38.2 11.1 %

Banknotes and Security Products 283.3 200.8 82.5 41.1 %

Total net sales $ 665.6 $ 544.9 $ 120.7 22.2 %

Operating profit $ 163.7 $ 28.4 $ 135.3 NM

Acquisition-related and integration charges 2

$ — $ 4.1 $ (4.1) NM

Restructuring and related (gains) charges, net 2

$ (0.7) $ 13.3 $ (14.0) NM

Operating margin 24.6 % 5.2 %

1 As a result of the third quarter 2020 internal merger of the CMS business into the vending vertical of the CPI business, Payment Acceptance and Dispensing Products now includes Merchandising Equipment.

The prior period has been reclassified to conform to the current period presentation.

2 Acquisition-related and integration charges and restructuring and related (gains) charges, net are included in operating profit and operating margin.

Payment & Merchandising Technologies sales increased $120.7 million, or 22.2%, to $665.6 million in 2021, driven by higher core sales of $94.7 million, or 17.4%, and favorable foreign currency translation of $26.0 million, or 4.8%.

• Sales of Payment Acceptance and Dispensing Produc ts increased $38.2 million, or 11.1%, to $382.3 million in 2021.

The increase reflected higher core sales of $28.8 million, or 8.4%, and favorable foreign currency translation of $9.4 million, or 2.7%, primarily reflecting the strengthening of the British pound against the U.S.

The core sales increase primarily reflected higher sales to gaming and retail customers.

• Sales of Banknotes and Security Products increased $82.5 million, or 41.1%, to $283.3 million in 2021.

The increase reflected higher core sales of $65.9 million, or 32.8%, and favorable foreign currency translation of $16.6 million, or 8.3%, as the euro strengthened against the U.S.

The core sales increase reflected substantially higher sales to the U.S.

Government, and to a lesser extent, to international customers.

Payment & Merchandising Technologies operating profit increased by $135.3 million to $163.7 million in 2021.

The increase primarily reflected the impact of higher sales volumes, favorable mix and restructuring savings from 2020 repositioning actions.

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

Liquidity and Capital Resources

Three Months Ended

Six Months Ended

(in millions) 2021 2020

Net cash provided by (used for):

Operating activities $ 50.2 $ (35.5)

Investing activities 29.6 (177.4)

Financing activities (44.9) 134.3

Net cash (used for) provided by:

Operating activities from continuing operations $ 197.5 $ 75.6

Investing activities from continuing operations 39.5 (182.9)

Financing activities from continuing operations (405.2) 314.9

Discontinued operations 8.4 0.8

Effect of foreign currency exchange rate changes on cash and cash equivalents (4.5) (10.2)

Increase (decrease) in cash and cash equivalents $ 27.4 $ (91.1)

(Decrease) increase in cash and cash equivalents $ (164.3) $ 198.2

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

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In addition, we believe our investment grade credit ratings afford us adequate access to public and private debt markets.

In July 2021, we entered into a $650 million, 5-year Revolving Credit Agreement, which replaced the existing $550 million revolving credit facility.

We also increased the size of our Commercial Paper Program (“CP Program”) to permit the issuance of short-term, unsecured commercial paper notes in an aggregate principal amount outstanding not to exceed $650 million at any time (up from $550 million, previously).

Please see Note 16 for additional details.

In April 2020, to enhance financial flexibility and maintain maximum liquidity in response to the uncertainty in the global markets resulting from the COVID-19 pandemic, we entered into a senior unsecured 364-day credit facility (the “364-Day Credit Agreement”).

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Operating Activities

Cash provided by operating activities was $50.2 million in the first three months of 2021, compared to cash used for operating activities of $35.5 million during the same period last year.

The increase in cash provided by operating activities was primarily driven by higher net income and lower working capital levels, partially offset by higher pension contributions.

Net asbestos-related payments in the first three months of 2021 and 2020 were $10.8 million and $11.7 million, respectively.

Cash provided by operating activities from continuing operations was $197.5 million in the first six months of 2021, compared to $75.6 million during the same period last year.

The increase in cash provided by operating activities from continuing operations was primarily driven by higher net income and lower working capital levels, partially offset by higher pension contributions.

Net asbestos-related payments in the first six months of 2021 and 2020 were $20.2 million and $19.2 million, respectively.

In 2021, we expect to make payments related to asbestos settlement and defense costs, net of related insurance recoveries, of approximately $45 million.

Investing Activities

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

Cash provided by investing activities was $29.6 million in the first three months of 2021, compared to cash used for investing activities of $177.4 million in the comparable period of 2020.

The increase in cash provided by investing activities was driven by the absence of cash paid for the acquisition of I&S of $172.0 million, net cash proceeds from the sale of marketable securities of $20 million and proceeds from the sale of real estate related to prior repositioning actions.

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

Cash provided by investing activities from continuing operations was $39.5 million in the first six months of 2021, compared to cash used for investing activities from continuing operations of $182.9 million in the comparable period of 2020.

The increase in cash provided by investing activities from continuing operations was driven by the absence of cash paid for the acquisition of I&S of $172.3 million, net cash proceeds from the sale of marketable securities of $30.0 million and proceeds from the sale of real estate.

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

We expect capital expenditures of approximately $70.0 million in 2021.

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

Financing Activities

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

Cash used for financing activities was $44.9 million during the first three months of 2021, compared to cash provided by financing activities of $134.3 million in the comparable period of 2020.

The increase in cash used for financing activities was driven by $27.1 million of repayments of commercial paper in the first quarter of 2021 compared to $184.5 million of net proceeds received from the issuance of commercial paper in the first quarter of 2020.

This was partially offset by the absence of $70.0 million of cash used for the repurchase of shares in the first quarter of 2020.

Cash used for financing activities from continuing operations was $405.2 million during the first six months of 2021, compared to cash provided by financing activities from continuing operations of $314.9 million in the comparable period of 2020.

The increase in cash used for financing activities from continuing operations was driven by the $348.1 million repayment of the 364-Day Credit Agreement in the first six months of 2021 compared to the proceeds from the 364-Day Credit Agreement of $343.9 million in the first six months of 2020.

In addition there was $12.1 million of net repayments of commercial paper in the first six months of 2021 compared to $92.0 million of net proceeds received from the issuance of commercial paper in the first six months of 2020.

This was partially offset by the absence of $70.0 million of cash used for the repurchase of shares in the first six months of 2020.

Recent Accounting Pronouncements

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis