What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-02 compared with 2021-08-04 · 93 added, 98 removed, 254 unchanged (43% of the section changed)

15 unchanged sentences

fluctuations in raw material prices;

inflationary pressures;

supply chain disruptions;

the effects of any government imposed vaccine mandates on the workforce;

the financial condition of our customers and suppliers;

13 unchanged sentences

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 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.

For 2021, we expect a total year-over-year sales increase of approximately 14%, driven by low-double 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 operating profit to nearly double compared to 2020, driven by a combination of operating leverage on higher volumes, strong productivity, favorable mix, and restructuring and acquisition related charges recorded last year that will not repeat in 2021, and carry-over savings related to 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.

In 2021, we expect Aerospace & Electronics core sales to decline slightly 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 slight decline in our commercial business driven by lower aircraft build rates and lower airline flight hours.

We expect a slight decline in our defense 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 related to COVID-19 related repositioning actions and the absence of restructuring related costs and strong productivity, 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;

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

favorable foreign exchange of approximately 4%;

1 unchanged sentence

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.

We expect Commercial Valves sales to increase nearly 30% compared to 2020 driven by close to 20% core sales growth, and high-single digit favorable foreign exchange.

The higher core sales relates to increased spending in non-residential end markets primarily in Canada and the U.K.

We expect Pumps and Systems sales to increase nearly 20% 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.

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

Payment & Merchandising Technologies

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.

In 2021, we expect Payment & Merchandising Technologies sales to increase approximately 20% compared to 2020, driven primarily by high-teens core sales growth, and an approximate 3% benefit from favorable foreign exchange.

At Crane Payment Innovations, we expect core sales growth in the mid-teen 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.

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 mix, strong productivity, carry-over savings 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 Continuing Operations – Three Month Periods Ended June 30

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

Second Quarter Change

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

Third Quarter Change

(dollars in millions) 2021 2020 $ %

16 unchanged sentences

Sales increased by $147.0 million, or 21.4%, to $833.5 million in 2021.

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.

Net sales related to operations outside the United States were 40.4% and 38.6% of total net sales for the quarters ended September 30, 2021 and 2020, respectively.

The year-over-year change in sales included:

2 unchanged sentences

Operating profit increased by $62.3 million, or 82.1%, to $138.2 million in 2021.

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.

The increase in operating profit reflected higher operating profit in all segments, partially offset by higher corporate costs.

Operating profit in the third quarter of 2021 included restructuring and related charges of $0.8 million.

Operating profit in the third quarter of 2020 included acquisition-related and integration costs of $2.7 million related to the I&S and Cummins-Allison acquisitions and restructuring and related charges of $1.4 million.

Other expense decreased $2.2 million, or 23.4% to $7.2 million, primarily reflecting lower interest expense following the repayment of the 364-day credit facility 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 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 .

Our effective tax rate attributable to continuing operations for the three months ended September 30, 2021 is lower than the prior year’s comparable period primarily due to higher foreign tax credits utilized, partially offset by a lower amount of U.S.

federal research credits generated.

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

federal tax rate of 21% primarily due to tax credit utilization, partially offset by state taxes net of federal benefit, statutory inclusions, and nondeductible expenses.

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

1 unchanged sentence

Three Months Ended

September 30,

(in millions) 2021 2020

7 unchanged sentences

Comprehensive income attributable to common shareholders $ 97.1 $ 100.9

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.

For the three months ended September 30, 2021, comprehensive income before allocations to noncontrolling interests was $97.0 million compared to $101.0 million in the same period of 2020.

The $4.0 million decrease was driven by a $65.8 million year over year unfavorable impact of foreign currency translation adjustments, primarily related to the euro, partially offset by higher net income before allocation to noncontrolling interests of $60.0 million.

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

Segment Results of Operations - Three Month Periods Ended June 30

Segment Results of Operations - Three Month Periods Ended September 30

Aerospace & Electronics

Second Quarter Change

Third Quarter Change

(dollars in millions) 2021 2020 $ %

6 unchanged sentences

Operating profit $ 32.5 $ 24.5 $ 8.0 32.7 %

Restructuring and related charges 1

$ — $ 4.7 $ (4.7) NM

Backlog $ 478.5 $ 498.1 $ (19.6) (3.9) %

Operating margin 19.3 % 15.6 %

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

Aerospace & Electronics sales increased $11.6 million, or 7.4%, to $168.6 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 Commercial Original Equipment increased $14.7 million, or 30.9%, to $62.2 million in 2021, reflecting higher shipments to aircraft manufacturers as the industry begins to recover from the COVID-19 related slowdown, and stronger demand for modular power products.

• Sales of Military Original Equipment decreased $12.5 million, or 17.6%, to $58.4 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.

• Sales of Commercial Aftermarket Products increased $10.0 million, or 49.5%, to $30.2 million in 2021, reflecting higher demand from the airlines due to improving air traffic as the industry continues to recover from the COVID-19 related slowdown.

• Sales of Military Aftermarket Products decreased $0.6 million, or 3.3%, to $17.8 million in 2021, primarily reflecting lower sales for Modernization & Upgrade programs.

Aerospace & Electronics operating profit increased by $8.0 million, or 32.7%, to $32.5 million in 2021, primarily as a result of the impact of higher sales volumes, productivity benefits, and benefits form 2020 cost actions.

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

Process Flow Technologies

Second Quarter Change

Third Quarter Change

(dollars in millions) 2021 2020 $ %

14 unchanged sentences

• Sales of Process Valves and Related Products increased by $22.7 million, or 14.7%, to $176.6 million in 2021.

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.

The increase reflected higher core sales of $20.5 million, or 13.3%, and favorable foreign currency translation of $2.2 million, or 1.4%, primarily due to the British pound and euro strengthening against the U.S.

The higher core sales primarily reflected improving demand across chemical and general industrial end markets.

• Sales of Commercial Valves increased by $19.7 million, or 25.9%, to $95.8 million in 2021, primarily driven by a core sales increase of $14.1 million, or 18.5%, and favorable foreign currency translation of $5.6 million, or 7.4%, as the Canadian dollar and British pound strengthened against the U.S.

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

and Middle East non-residential construction markets.

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

• Sales of Pumps & Systems increased by $4.4 million, or 19.7%, to $26.7 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 $18.4 million, or 71.0%, to $44.3 million in 2021.

The increase primarily reflected the impact of higher sales volumes.

The increase primarily reflected the impact of higher sales volumes and productivity benefits.

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

Payment & Merchandising Technologies

Second Quarter Change

Third Quarter Change

(dollars in millions) 2021 2020 $ %

1 unchanged sentence

Payment Acceptance and Dispensing Products $ 206.0 $ 161.6 $ 44.4 27.5 %

$ 197.3 $ 140.9 $ 56.4 40.0 %

Banknotes and Security Products 159.8 115.6 44.2 38.2 %

Total net sales $ 365.8 $ 277.2 $ 88.6 32.0 %

Operating profit $ 77.9 $ 2.0 $ 75.9 NM

Operating profit $ 83.7 $ 40.5 $ 43.2 106.7 %

Acquisition-related and integration charges 1

4 unchanged sentences

Operating margin 22.9 % 14.6 %

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.

1 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 $88.6 million, or 32.0%, to $365.8 million in 2021, driven by higher core sales of $83.8 million, or 30.3%, and favorable foreign currency translation of $4.8 million, or 1.7%.

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

• Sales of Payment Acceptance and Dispensing Products increased $44.4 million, or 27.5%, to $206.0 million in 2021.

The increase reflected higher core sales of $41.9 million, or 26.0%, and favorable foreign currency translation of $2.5 million, or 1.5%, 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.

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

• Sales of Banknotes and Security Products increased $44.2 million, or 38.2%, to $159.8 million in 2021.

The increase reflected higher core sales of $41.9 million, or 36.2%, and favorable foreign currency translation of $2.3 million, or 2.0%, as the euro strengthened against the U.S.

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.

The core sales increase primarily reflected higher sales to international customers, and to a lesser extent, higher sales to the U.S.

Payment & Merchandising Technologies operating profit increased by $43.2 million, or 106.7%, to $83.7 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

Results from Continuing Operations – Six Month Periods Ended June 30

Results from Continuing Operations – Nine Month Periods 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 six months of 2021 versus the first six months of 2020, unless otherwise specified.

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

Year-to-Date Change

5 unchanged sentences

Restructuring and related (gains) charges, net 1

(9.5) 24.6 (34.1) (138.6) %

(8.6) 25.9 (34.5) NM

Operating margin 17.2 % 9.0 %

9 unchanged sentences

Sales increased by $331.9 million, or 16.0%, to $2,409.5 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.

Net sales related to operations outside the United States were 39.8% and 38.3% of total net sales for the nine months ended September 30, 2021 and 2020, respectively.

The year-over-year change in sales included:

3 unchanged sentences

Operating profit increased by $228.8 million, or 122.8%, to $415.1 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.

Operating profit in the first nine months of 2021 included net restructuring and related gains of $8.6 million and disposition costs of $1.3 million.

Operating profit in the first nine months of 2020 included restructuring and related charges of $25.9 million and acquisition-related and integration charges of $10.3 million.

Other expense decreased $11.7 million, or 39.8%, to $17.7 million 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 .

Our effective tax rate attributable to continuing operations for the nine months ended September 30, 2021 is lower than the prior year’s comparable period primarily due to higher foreign tax credits utilized, partially offset by a lower reversal of tax accruals.

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

federal tax rate of 21% primarily due to tax credit utilization, partially offset by state taxes net of federal benefit, statutory inclusions, and nondeductible expenses.

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

Comprehensive Income

Six Months Ended

Nine Months Ended

September 30,

(in millions) 2021 2020

7 unchanged sentences

Comprehensive income attributable to common shareholders $ 325.9 $ 157.8

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.

For the nine months ended September 30, 2021, comprehensive income before allocations to noncontrolling interests was $326.5 million compared to $157.8 million in the same period of 2020.

The $168.7 million increase was primarily driven by higher net income before allocation to noncontrolling interests of $229.1 million, partially offset by a $65.3 million year over year unfavorable impact of foreign currency translation adjustments primarily related to the euro.

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

Segment Results of Operations - Six Month Periods Ended June 30

Segment Results of Operations - Nine Month Periods Ended September 30

Aerospace & Electronics

13 unchanged sentences

Aerospace & Electronics sales decreased $27.1 million, or 5.3%, to $480.2 million in 2021.

• 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 Commercial Original Equipment decreased $9.5 million, or 5.3%, to $170.5 million in 2021, primarily reflecting lower aircraft build rates as a result of COVID-19.

• Sales of Military Original Equipment decreased $12.8 million, or 6.5%, to $184.0 million in 2021, primarily reflecting challenging comparisons to particularly strong sales in the same period last year

• Sales of Commercial Aftermarket Products increased $0.7 million, or 0.9%, to $75.1 million in 2021.

• Sales of Military Aftermarket Products decreased $5.5 million, or 9.8%, to $50.6 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.

Aerospace & Electronics operating profit increased by $1.5 million, or 1.7%, to $89.3 million in 2021, primarily as a result of savings from 2020 repositioning actions, productivity benefits and favorable product mix largely offset by the impact of lower sales volumes.

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

18 unchanged sentences

dollar, and a benefit from the acquisition of I&S of $5.0 million, or 1.1%.

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 broad based strengthening across end markets that continue to recover from the 2020 impact of COVID-19.

• Sales of Commercial Valves increased by $73.0 million, or 34.7%, to $283.3 million in 2021, primarily driven by a core sales increase of $50.9 million, or 24.2%, and favorable foreign currency translation of $22.1 million, or 10.5%, 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.

1 unchanged sentence

Process Flow Technologies operating profit increased by $66.8 million, or 90.1%, to $140.9 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.

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

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

4 unchanged sentences

Payment Acceptance and Dispensing Products $ 588.3 $ 505.7 $ 82.6 16.3 %

$ 382.3 $ 344.1 $ 38.2 11.1 %

Banknotes and Security Products 443.1 316.4 126.7 40.0 %

Total net sales $ 1,031.4 $ 822.1 $ 209.3 25.5 %

Operating profit $ 163.7 $ 28.4 $ 135.3 NM

Operating profit $ 247.4 $ 68.9 $ 178.5 259.1 %

Acquisition-related and integration charges 1

3 unchanged sentences

Operating margin 24.0 % 8.4 %

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

1 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 $209.3 million, or 25.5%, to $1,031.4 million in 2021, driven by higher core sales of $178.5 million, or 21.8%, and favorable foreign currency translation of $30.8 million, or 3.7%.

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

• Sales of Payment Acceptance and Dispensing Products increased $82.6 million, or 16.3%, to $588.3 million in 2021.

The increase reflected higher core sales of $70.7 million, or 13.9%, and favorable foreign currency translation of $11.9 million, or 2.4%, 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.

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

• Sales of Banknotes and Security Products increased $126.7 million, or 40.0%, to $443.1 million in 2021.

The increase reflected higher core sales of $107.8 million, or 34.0%, and favorable foreign currency translation of $18.9 million, or 6.0%, 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.

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

Payment & Merchandising Technologies operating profit increased by $178.5 million, or 259.1%, to $247.4 million in 2021.

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

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

Liquidity and Capital Resources

Six Months Ended

Nine Months Ended

September 30,

(in millions) 2021 2020

Net cash (used for) provided by:

Net cash provided by (used for):

Operating activities from continuing operations $ 311.7 $ 197.0

2 unchanged sentences

Discontinued operations 13.9 10.5

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

Effect of exchange rates on cash and cash equivalents (13.0) 1.2

(Decrease) increase in cash and cash equivalents $ (100.2) $ 150.7

7 unchanged sentences

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”).

On April 15, 2021, we repaid the amount outstanding under the 364-Day Credit Agreement with cash on hand and the issuance of commercial paper.

On April 15, 2021, we repaid the amount outstanding under the 364-Day Credit Agreement.

Operating Activities

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.

Cash provided by operating activities from continuing operations was $311.7 million in the first nine months of 2021, compared to $197.0 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, partially offset by higher working capital levels and pension contributions.

Net asbestos-related payments in the first nine months of 2021 and 2020 were $29.6 million and $23.7 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.

1 unchanged sentence

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.

Cash provided by investing activities from continuing operations was $28.0 million in the first nine months of 2021, compared to cash used for investing activities from continuing operations of $245.3 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 $169.2 million.

In addition, there was $30 million of net proceeds from the sale of marketable securities in the first nine months of 2021 compared to $60 million of cash used for the purchase of marketable securities in the first nine months of 2020.

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

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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 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.

Cash used for financing activities from continuing operations was $440.8 million during the first nine months of 2021, compared to cash provided by financing activities from continuing operations of $187.3 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 outstanding amount under the 364-Day Credit Agreement in the first nine months of 2021, compared to proceeds of $343.9 million received from the same 364-Day Credit Agreement in the first nine 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 nine months of 2020.

Recent Accounting Pronouncements

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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