Crane NXT, Co. 10-K

Item 8. Financial Statements and Supplementary Data MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING The accompanying consolidated financial statements of Crane Co. and subsidiaries have been prepared by management in conformity with accounting principles generally accepted in the United States of America and, in the judgment of management, present fairly and consistently the Company’s financial position and results of operations and cash flows. These statements by necessity include amounts that are based on management’s best estimates and judgments and give due consideration to materiality. Management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control system was designed to provide reasonable assurance to the Company’s management and board of directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021. In making its assessment, management has utilized the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in its Internal Control—Integrated Framework, released in 2013. Based on our assessment we believe that, as of December 31, 2021, the Company’s internal control over financial reporting is effective based on those criteria. Deloitte & Touche LLP, the independent registered public accounting firm that also audited the Company’s consolidated financial statements included in this Annual Report on Form 10-K, audited the internal control over financial reporting as of December 31, 2021, and issued their related attestation report which is included herein. /s/ Max H. Mitchell Max H. Mitchell President and Chief Executive Officer (Principal Executive Officer) /s/ Richard A. Maue Richard A. Maue Senior Vice President and Chief Financial Officer (Principal Financial Officer) The Section 302 certifications of the Company’s Chief Executive Officer and its Principal Financial Officer have been filed as Exhibit 31 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021. 36 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and the Board of Directors of Crane Co. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Crane Co. & subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income, cash flows, and changes in equity, for each of the three years in the period ended December 31, 2021 and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Asbestos Liability — Refer to Note 13, Commitments and Contingencies, to the financial statements Critical Audit Matter Description The Company is a defendant in cases filed in numerous state and federal courts alleging injury or death of exposure to asbestos. The Company records an estimated liability related to the resolution cost of pending and future claims projected to be filed against the Company for which management believes are probable of occurring and reasonably estimable. The model utilized by the Company to estimate its asbestos liability has several factors that involve the application of significant judgement and estimates with a significant measurement of uncertainty. The most significant factors affecting the asbestos liability are (1) the number of new mesothelioma claims filed against the Company, (2) the average settlement costs for mesothelioma claims, (3) the percentage of mesothelioma claims dismissed against the Company and (4) the aggregate defense costs incurred by the Company. These factors are interdependent, and no one factor predominates in determining the liability estimate. Changes in these estimates and assumptions could have a significant impact on the asbestos liability. The current and non-current liability as of December 31, 2021 was $62.3 million and $549.8 million, respectively. 37 Given the subjectivity of estimating the asbestos liability, future claims, and underlying assumptions utilized by management, auditing management’s judgments regarding the significant factors listed above involved especially subjective auditor judgment, including the need to involve our actuarial specialists. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures performed on the recorded asbestos liability included the following, among others: • We tested the design and effectiveness of controls over the asbestos liability, including those over the projection of settlement value of current and future claims. • We obtained the System and Organization Control Report (SOC) 1 reports for the outside service providers to evaluate the processes and controls relevant to the Company’s asbestos claims administration. • With the assistance of our internal actuarial specialists, we: • Evaluated the reasonableness of the underlying methodology for estimating the liability. • Tested the completeness and accuracy of underlying source data that served as the basis for the actuarial analysis and estimates, including historical claims, to test that the inputs to the actuarial estimate were reasonable. • Compared management’s prior-year assumptions of expected development and ultimate loss to actual incurred during the current year to identify potential bias in the determination of the liability. • We assessed the reasonableness of the forecast period used by the Company to estimate the liability. • Developed a range of independent estimates based on loss information and historical and industry claim development factors and compared our estimates to the Company’s estimates. • We considered the impact of changes in the regulatory and litigation environments on management’s assumptions by performing corroborating inquires with the Company’s internal and external legal counsel. • We evaluated management’s ability to accurately estimate the future liability by comparing actual results to management’s historical estimates. /s/ Deloitte & Touche LLP Stamford, Connecticut February 28, 2022 We have served as the Company's auditor since 1979. 38 CONSOLIDATED STATEMENTS OF OPERATIONS For the year ended December 31, (in millions, except per share data) 2021 2020 2019 Net sales $ 3,180.0 $ 2,761.3 $ 3,074.5 Operating costs and expenses: Cost of sales 1,939.0 1,796.2 1,942.2 Selling, general and administrative 755.6 680.3 678.6 Restructuring (gains) charges, net ( 16.9 ) 31.7 17.5 Acquisition-related and integration charges — 12.9 5.2 Asbestos provision, net — — 229.0 Environmental provision, net — — 18.9 Operating profit 502.3 240.2 183.1 Other income (expense): Interest income 1.4 2.0 2.7 Interest expense ( 46.9 ) ( 55.3 ) ( 46.8 ) Miscellaneous income, net 20.5 14.9 4.9 Total other expense ( 25.1 ) ( 38.4 ) ( 39.2 ) Income from continuing operations before income taxes 477.2 201.8 143.9 Provision for income taxes 82.9 38.6 31.3 Net income from continuing operations before allocation to noncontrolling interests 394.3 163.2 112.6 Less: Noncontrolling interest in subsidiaries’ earnings — 0.1 0.3 Net income from continuing operations attributable to common shareholders 394.3 163.1 112.3 Income from discontinued operations, net of tax (Note 3) 41.1 17.9 21.0 Net income attributable to common shareholders $ 435.4 $ 181.0 $ 133.3 Earnings per basic share: Earnings per basic share from continuing operations $ 6.76 $ 2.79 $ 1.88 Earnings per basic share from discontinued operations 0.70 0.31 0.35 Earnings per basic share $ 7.46 $ 3.10 $ 2.23 Earnings per diluted share: Earnings per diluted share from continuing operations $ 6.66 $ 2.77 $ 1.85 Earnings per diluted share from discontinued operations 0.70 0.31 0.35 Earnings per diluted share $ 7.36 $ 3.08 $ 2.20 Average shares outstanding: Basic 58.4 58.3 59.8 Diluted 59.2 58.8 60.6 See Notes to Consolidated Financial Statements 39 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the year ended December 31, (in millions) 2021 2020 2019 Net income before allocation to noncontrolling interests $ 435.4 $ 181.1 $ 133.6 Components of other comprehensive income (loss), net of tax Currency translation adjustment ( 69.2 ) 70.4 11.5 Changes in pension and postretirement plan assets and benefit obligation, net of tax 96.0 ( 53.6 ) ( 47.7 ) Other comprehensive income (loss), net of tax 26.8 16.8 ( 36.2 ) Comprehensive income before allocation to noncontrolling interests 462.2 197.9 97.4 Less: Noncontrolling interests in comprehensive income (loss) 0.6 ( 0.5 ) ( 0.1 ) Comprehensive income attributable to common shareholders $ 461.6 $ 198.4 $ 97.5 See Notes to Consolidated Financial Statements 40 CONSOLIDATED BALANCE SHEETS Balance as of December 31, (in millions, except shares and per share data) 2021 2020 Assets Current assets: Cash and cash equivalents $ 478.6 $ 551.0 Current insurance receivable - asbestos 13.7 14.4 Accounts receivable, net 472.4 423.9 Inventories, net 440.9 429.7 Other current assets 118.1 137.3 Current assets held for sale 220.5 17.4 Total current assets 1,744.2 1,573.7 Property, plant and equipment, net 527.3 573.7 Insurance receivable - asbestos 60.0 72.5 Long-term deferred tax assets 17.7 41.0 Intangible assets, net 465.9 519.1 Goodwill 1,412.5 1,437.7 Other assets 259.0 197.4 Long-term assets held for sale — 199.9 Total assets $ 4,486.6 $ 4,615.0 Liabilities and equity Current liabilities: Short-term borrowings $ — $ 375.7 Accounts payable 246.7 198.9 Current asbestos liability 62.3 66.5 Accrued liabilities 430.7 388.0 U.S. and foreign taxes on income 10.6 0.1 Current liabilities held for sale 44.9 27.4 Total current liabilities 795.2 1,056.6 Long-term debt 842.4 842.9 Accrued pension and postretirement benefits 231.9 329.7 Long-term deferred tax liability 71.1 53.6 Long-term asbestos liability 549.8 603.6 Other liabilities 161.1 171.3 Long-term liabilities held for sale — 26.2 Commitments and contingencies (Note 13) Equity: Preferred shares, par value 0.01 ; 5,000,000 shares authorized — — Common shares, par value $ 1.00 ; 200,000,000 shares authorized; 72,426,139 shares issued; 57,835,865 and 58,127,948 shares outstanding in 2021 and 2020, respectively 72.4 72.4 Capital surplus 363.9 330.7 Retained earnings 2,527.3 2,192.8 Accumulated other comprehensive loss ( 440.2 ) ( 466.4 ) Treasury stock; 14,590,274 and 14,298,191 treasury shares in 2021 and 2020, respectively ( 691.1 ) ( 600.6 ) Total shareholders’ equity 1,832.3 1,528.9 Noncontrolling interest 2.8 2.2 Total equity 1,835.1 1,531.1 Total liabilities and equity $ 4,486.6 $ 4,615.0 See Notes to Consolidated Financial Statements 41 CONSOLIDATED STATEMENTS OF CASH FLOWS For the year ended December 31, (in millions) 2021 2020 2019 Operating activities from continuing operations: Net income from continuing operations attributable to common shareholders $ 394.3 $ 163.1 $ 112.3 Asbestos provision, net — — 229.0 Environmental provision, net — — 18.9 Loss on deconsolidation of joint venture — — 1.2 Realized gain on marketable securities — — ( 1.1 ) Gain on sale of property ( 18.5 ) — — Depreciation and amortization 119.5 123.8 107.9 Stock-based compensation expense 24.5 21.8 21.8 Defined benefit plans and postretirement credit ( 8.0 ) ( 7.1 ) ( 0.7 ) Deferred income taxes 10.8 16.0 ( 28.3 ) Cash provided by (used for) operating working capital 29.7 37.8 ( 33.2 ) Defined benefit plans and postretirement contributions ( 29.4 ) ( 28.4 ) ( 8.7 ) Environmental payments, net of reimbursements ( 5.8 ) ( 4.2 ) ( 8.2 ) Asbestos related payments, net of insurance recoveries ( 44.9 ) ( 31.1 ) ( 41.5 ) Other ( 5.5 ) ( 7.6 ) 1.0 Total provided by operating activities from continuing operations $ 466.7 $ 284.1 $ 370.4 Investing activities from continuing operations: Payment for acquisition - net of cash acquired — ( 169.5 ) ( 156.2 ) Proceeds from disposition of capital assets 23.6 4.4 3.1 Capital expenditures ( 51.7 ) ( 32.9 ) ( 64.4 ) Purchase of marketable securities ( 10.0 ) ( 90.0 ) ( 8.8 ) Proceeds from sale of marketable securities 40.0 60.0 9.9 Impact of deconsolidation of joint venture — — ( 0.2 ) Total provided by (used for) investing activities from continuing operations $ 1.9 $ ( 228.0 ) $ ( 216.6 ) Financing activities from continuing operations: Dividends paid ( 100.6 ) ( 100.4 ) ( 93.2 ) Reacquisition of shares on open market ( 96.3 ) ( 70.0 ) ( 79.9 ) Stock options exercised, net of shares reacquired 14.2 5.1 2.9 Debt issuance costs — ( 1.3 ) — Repayment of long-term debt — — ( 99.4 ) Repayment of short-term debt — — ( 7.4 ) Proceeds from issuance of long-term debt — — 3.0 Proceeds from issuance of commercial paper with maturities greater than 90 days — 251.3 25.0 Repayments of commercial paper with maturities greater than 90 days ( 27.1 ) ( 296.7 ) — Net (repayments) proceeds from issuance of commercial paper with maturities of 90 days or less — ( 76.8 ) 124.4 Proceeds from revolving credit facility — 77.2 — Repayments of revolving credit facility — ( 77.2 ) — Proceeds from term loan — 343.9 — Repayment of term loan ( 348.1 ) — — Total (used for) provided by financing activities from continuing operations $ ( 557.9 ) $ 55.1 $ ( 124.6 ) Discontinued operations: Total provided by operating activities 31.8 25.4 23.4 Total used for investing activities ( 2.2 ) ( 1.1 ) ( 4.4 ) Increase in cash and cash equivalents from discontinued operations $ 29.6 $ 24.3 $ 19.0 42 For the year ended December 31, (in millions) 2021 2020 2019 Effect of exchange rates on cash and cash equivalents $ ( 12.7 ) $ 21.6 $ 2.3 (Decrease) increase in cash and cash equivalents ( 72.4 ) 157.1 50.5 Cash and cash equivalents at beginning of period 551.0 393.9 343.4 Cash and cash equivalents at end of period $ 478.6 $ 551.0 $ 393.9 Detail of cash provided by (used for) operating working capital from continuing operations: Accounts receivable $ ( 57.0 ) $ 139.2 $ 1.9 Inventories ( 18.5 ) 35.2 ( 8.8 ) Other current assets ( 18.0 ) ( 5.8 ) ( 1.2 ) Accounts payable 51.8 ( 103.1 ) ( 13.6 ) Accrued liabilities 51.1 3.5 ( 35.9 ) U.S. and foreign taxes on income 20.3 ( 31.2 ) 24.4 Total $ 29.7 $ 37.8 $ ( 33.2 ) Supplemental disclosure of cash flow information: Interest paid $ 44.4 $ 53.8 $ 47.4 Income taxes paid $ 56.3 $ 43.8 $ 35.1 See Notes to Consolidated Financial Statements 43 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (in millions, except share data) Common Shares Issued at Par Value Capital Surplus Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Total Shareholders’ Equity Noncontrolling Interest Total Equity BALANCE DECEMBER 31, 2018 72.4 $ 303.5 $ 2,072.1 $ ( 447.6 ) $ ( 476.2 ) $ 1,524.2 $ 2.9 $ 1,527.1 Net income — — 133.3 — — 133.3 0.3 133.6 Cash dividends ($ 1.56 per share) — — ( 93.2 ) — — ( 93.2 ) — ( 93.2 ) Reacquisition on open market of 987,630 shares — — — — ( 79.9 ) ( 79.9 ) — ( 79.9 ) Exercise of stock options, net of shares reacquired of 218,540 — — — — 11.5 11.5 — 11.5 Stock-based compensation — 22.3 — — — 22.3 — 22.3 Impact from settlement of share-based awards, net of shares acquired — ( 10.2 ) — — 1.8 ( 8.4 ) — ( 8.4 ) Deconsolidation of a joint venture — — — — — — ( 0.5 ) ( 0.5 ) Changes in pension and postretirement plan assets and benefit obligation, net of tax — — — ( 47.7 ) — ( 47.7 ) — ( 47.7 ) Currency translation adjustment — — — 11.6 — 11.6 ( 0.1 ) 11.5 BALANCE DECEMBER 31, 2019 72.4 $ 315.6 $ 2,112.2 $ ( 483.7 ) $ ( 542.8 ) $ 1,473.7 $ 2.6 $ 1,476.3 Net income — — 181.0 — — 181.0 0.1 181.1 Cash dividends ($ 1.72 per share) — — ( 100.4 ) — — ( 100.4 ) — ( 100.4 ) Reacquisition on open market of 1,221,233 shares — — — — ( 70.0 ) ( 70.0 ) — ( 70.0 ) Exercise of stock options, net of shares reacquired of 183,320 — — — — 8.9 8.9 — 8.9 Stock-based compensation — 22.3 — — — 22.3 — 22.3 Impact from settlement of share-based awards, net of shares acquired — ( 7.2 ) — — 3.3 ( 3.9 ) — ( 3.9 ) Changes in pension and postretirement plan assets and benefit obligation, net of tax — — — ( 53.6 ) — ( 53.6 ) — ( 53.6 ) Currency translation adjustment — — — 70.9 — 70.9 ( 0.5 ) 70.4 BALANCE DECEMBER 31, 2020 72.4 $ 330.7 $ 2,192.8 $ ( 466.4 ) $ ( 600.6 ) $ 1,528.9 $ 2.2 $ 1,531.1 Net income — — 435.4 — — 435.4 — 435.4 Cash dividends ($ 1.72 per share) — — ( 100.9 ) — — ( 100.9 ) — ( 100.9 ) Reacquisition on open market of 943,048 shares — — — — ( 96.3 ) ( 96.3 ) — ( 96.3 ) Exercise of stock options, net of shares reacquired of 553,655 shares — — — — 16.5 16.5 — 16.5 Stock-based compensation — 24.9 — — — 24.9 — 24.9 Impact from settlement of share-based awards, net of shares acquired — 8.3 — — ( 10.7 ) ( 2.4 ) — ( 2.4 ) Changes in pension and postretirement plan assets and benefit obligation, net of tax — — — 96.0 — 96.0 — 96.0 Currency translation adjustment — — — ( 69.8 ) — ( 69.8 ) 0.6 ( 69.2 ) BALANCE DECEMBER 31, 2021 72.4 $ 363.9 $ 2,527.3 $ ( 440.2 ) $ ( 691.1 ) $ 1,832.3 $ 2.8 $ 1,835.1 See Notes to Consolidated Financial Statements 44 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 – Nature of Operations and Significant Accounting Policies Nature of Operations We are a diversified manufacturer of highly engineered industrial products comprised of four reporting segments: Process Flow Technologies, Payment & Merchandising Technologies, Aerospace & Electronics and Engineered Materials. Our primary end markets include process industries (chemical production, oil & gas, power, and general industrial), non-residential and municipal construction, payment automation solutions, banknote design and production, aerospace, defense and space, along with a wide range of general industrial and certain consumer related end markets. See Note 4, “Segment Information” for the relative size of these segments in relation to the total company (both net sales and total assets). Discontinued Operations. On May 16, 2021, we entered into an agreement to sell the Engineered Materials segment to Grupo Verzatec S.A. de C.V. for $ 360 million on a cash-free and debt-free basis. The sale is subject to customary closing conditions and regulatory approvals. We determined that the Engineered Materials segment met the criteria of being reported as a discontinued operation as of June 30, 2021. As a result, the related assets, liabilities and operating results of Engineered Materials are presented as discontinued operations and, as such, have been excluded from both continuing operations and segment results for all periods presented. Throughout this Annual Report on Form 10-K, unless otherwise indicated, amounts and activity are presented on a continuing operations basis. See Item 8 under Note 3, “Discontinued Operations,” in the Notes to Consolidated Financial Statements for additional details. Process Flow Technologies. In the second quarter of 2021, we changed the name of our 'Fluid Handling' segment to 'Process Flow Technologies'. This new name better conveys the key strengths and core competencies of the segment; providing proprietary and highly engineered process flow technology solutions to its customers. 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. Significant Accounting Policies Accounting Principles. Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The consolidated financial statements include the accounts of Crane Co. and our subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation. As used in these notes, the terms "we," "us," "our," "Crane" and the "Company" mean Crane Co. and our subsidiaries unless the context specifically states or implies otherwise. Basis of presentation. Certain amounts in the prior years’ consolidated financial statements have been reclassified to conform to the current year presentation. Use of Estimates. Our accounting principles require management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results may differ from those estimated. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the financial statements in the period in which they are determined to be necessary. Estimates are used when accounting for such items as asset valuations, allowance for doubtful accounts, depreciation and amortization, impairment assessments, reserve for excess and obsolete inventory, reserve for warranty provision, restructuring provisions, employee benefits, taxes, asbestos liability and related insurance receivable, environmental liability and contingencies. Currency Translation. Assets and liabilities of subsidiaries that prepare financial statements in currencies other than the U.S. dollar are translated at the rate of exchange in effect on the balance sheet date; results of operations are translated at the monthly average rates of exchange prevailing during the year. The related translation adjustments are included in accumulated other comprehensive income (loss) in a separate component of equity. Revenue Recognition. In accordance with Accounting Standards Codification (“ASC”) Topic 606 “Revenue from Contracts with Customers,” we recognize revenue when control of the promised goods or services in a contract transfers to the customer, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. We account for a contract when both parties have approved and committed to the terms, each party’s rights and payment obligations under the contract are identifiable, the contract has commercial substance, and it is probable that we will collect substantially all of the consideration. When shipping and handling activities are performed after the customer obtains control of product, we elect to account for shipping and handling as activities to fulfill the promise to transfer the product. In determining the transaction price of a contract, we exercise judgment to determine the total transaction price when it includes estimates of variable consideration, 45 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS such as rebates and milestone payments. We generally estimate variable consideration using the expected value method and consider all available information (historical, current, and forecasted) in estimating these amounts. Variable consideration is only included in the transaction price to the extent that it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. We elect to exclude from the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by us from a customer. We primarily generate revenue through the manufacture and sale of engineered industrial products. Each product within a contract generally represents a separate performance obligation, as we do not provide a significant service of integrating or installing the products, the products do not customize each other, and the products can function independently of each other. Control of products generally transfers to the customer at a point in time, as the customer does not control the products as they are manufactured. We exercise judgment and consider the timing of right to payment, transfer of risk and rewards, transfer of title, transfer of physical possession, and customer acceptance when determining when control transfers to the customer. As a result, revenue from the sale of products is generally recognized at a point in time - either upon shipment or delivery - based on the specific shipping terms in the contract. When products are customized or products are sold directly to the U.S. government or indirectly to the U.S. government through subcontracts, revenue is recognized over time because control is transferred continuously to customers, as the contract progresses. We exercise judgment to determine whether the products have an alternative use to us. When an alternative use does not exist for these products and we are entitled to payment for performance completed to date which includes a reasonable profit margin, revenue is recognized over time. When a contract with the U.S. government or subcontract for the U.S. government contains clauses indicating that the U.S. government owns any work-in-progress as the contracted product is being built, revenue is recognized over time. The measure of progress applied by us is the cost-to-cost method as this provides the most faithful depiction of the pattern of transfer of control. Under this method, we measure progress by comparing costs incurred to date to the total estimated costs to provide the performance obligation. This method effectively reflects our progress toward completion, as this methodology includes any work-in-process amounts as part of the measure of progress. Costs incurred represent work performed, which corresponds with, and thereby depicts, the transfer of control to the customer. Total revenue recognized and cost estimates are updated on a monthly basis. When there are multiple performance obligations in a single contract, the total transaction price is allocated to each performance obligation based on their relative standalone selling prices. We maximize the use of observable data inputs and consider all information (including market conditions, segment-specific factors, and information about the customer or class of customer) that is reasonably available. The standalone selling price for our products and services is generally determined using an observable list price, which differs by class of customer. Revenue recognized from performance obligations satisfied in previous periods (for example, due to changes in the transaction price or estimates), was not material in any period. Payment for products is due within a limited time period after shipment or delivery, and we do not offer extended payment terms. Payment is typically due within 30-90 calendar days of the respective invoice dates. Customers generally do not make large upfront payments. Any advanced payments received do not provide us with a significant benefit of financing, as the payments are meant to secure materials used to fulfill the contract, as opposed to providing us with a significant financing benefit. When an unconditional right to consideration exists, we record these amounts as receivables. When amounts are dependent on factors other than the passage of time in order for payment from a customer to become due, we record a contract asset. Contract assets represent unbilled amounts that typically arise from contracts for customized products or contracts for products sold directly to the U.S. government or indirectly to the U.S. government through subcontracts, where revenue recognized using the cost-to-cost method exceeds the amount billed to the customer. Contract assets are assessed for impairment and recorded at their net realizable value. Contract liabilities represent advance payments from customers. Revenue related to contract liabilities is recognized when control is transferred to the customer. We pay sales commissions related to certain contracts, which qualify as incremental costs of obtaining a contract. However, the sales commissions generally relate to contracts for products or services satisfied at a point in time or over a period of time less than one year. As a result, we apply the practical expedient that allows an entity to recognize incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that would have been recognized is one year or less. See Note 5, “Revenue” for further details. Cost of Goods Sold. Cost of goods sold includes the costs of inventory sold and the related purchase and distribution costs. In addition to material, labor and direct overhead and inventoried cost, cost of goods sold include allocations of other expenses that are part of the production process, such as inbound freight charges, purchasing and receiving costs, inspection costs, 46 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS warehousing costs, amortization of production related intangible assets and depreciation expense. We also include costs directly associated with products sold, such as warranty provisions. Selling, General and Administrative Expenses. Selling, general and administrative expenses are charged to income as incurred. Such expenses include the costs of promoting and selling products and include such items as compensation, advertising, sales commissions and travel. Also included are costs related to compensation for other operating activities such as executive office administrative and engineering functions, as well as general operating expenses such as office supplies, non-income taxes, insurance and office equipment rentals. Income Taxes. We account for income taxes in accordance with ASC Topic 740 “Income Taxes” (“ASC 740”) which requires an asset and liability approach for the financial accounting and reporting of income taxes. Under this method, deferred income taxes are recognized for the expected future tax consequences of differences between the tax bases of assets and liabilities and their reported amounts in the financial statements. These balances are measured using the enacted tax rates expected to apply in the year(s) in which these temporary differences are expected to reverse. The effect of a change in tax rates on deferred income taxes is recognized in income in the period when the change is enacted. Based on consideration of all available evidence regarding their utilization, we record net deferred tax assets to the extent that it is more likely than not that they will be realized. Where, based on the weight of all available evidence, it is more likely than not that some amount of a deferred tax asset will not be realized, we establish a valuation allowance for the amount that, in management's judgment, is sufficient to reduce the deferred tax asset to an amount that is more likely than not to be realized. The evidence we consider in reaching such conclusions includes, but is not limited to, (1) future reversals of existing taxable temporary differences, (2) future taxable income exclusive of reversing taxable temporary differences, (3) taxable income in prior carryback year(s) if carryback is permitted under the tax law, (4) cumulative losses in recent years, (5) a history of tax losses or credit carryforwards expiring unused, (6) a carryback or carryforward period that is so brief it limits realization of tax benefits, and (7) a strong earnings history exclusive of the loss that created the carryforward and support showing that the loss is an aberration rather than a continuing condition. We account for unrecognized tax benefits in accordance with ASC 740, which prescribes a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. The minimum threshold is defined as a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation, based solely on the technical merits of the position. The tax benefit recognized is the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. We recognize interest and penalties related to unrecognized tax benefits within the income tax expense line of our Consolidated Statement of Operations, while accrued interest and penalties are included within the related tax liability line of our Consolidated Balance Sheets. 47 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Earnings Per Share. Our basic earnings per share calculations are based on the weighted average number of common shares outstanding during the year. Potentially dilutive securities include outstanding stock options, restricted share units, deferred stock units and performance-based restricted share units. The dilutive effect of potentially dilutive securities is reflected in diluted earnings per common share by application of the treasury method. Diluted earnings per share gives effect to all potential dilutive common shares outstanding during the year. (in millions, except per share data) For the year ended December 31, 2021 2020 2019 Net income from continuing operations attributable to common shareholders $ 394.3 $ 163.1 $ 112.3 Income from discontinued operations, net of tax (Note 3) 41.1 17.9 21.0 Net income attributable to common shareholders $ 435.4 $ 181.0 $ 133.3 Average basic shares outstanding 58.4 58.3 59.8 Effect of dilutive share-based awards 0.8 0.5 0.8 Average diluted shares outstanding 59.2 58.8 60.6 Earnings per basic share: Earnings per basic share from continuing operations $ 6.76 $ 2.79 $ 1.88 Earnings per basic share from discontinued operations 0.70 0.31 0.35 Earnings per basic share $ 7.46 $ 3.10 $ 2.23 Earnings per diluted share: Earnings per diluted share from continuing operations $ 6.66 $ 2.77 $ 1.85 Earnings per diluted share from discontinued operations 0.70 0.31 0.35 Earnings per diluted share $ 7.36 $ 3.08 $ 2.20 The computation of diluted earnings per share excludes the effect of the potential exercise of stock options when the average market price of the common stock is lower than the exercise price of the related stock options. During 2021, 2020 and 2019, the number of stock options excluded from the computation was 1.2 million, 2.1 million and 1.2 million, respectively. Cash and Cash Equivalents. Cash and cash equivalents include highly liquid investments with original maturities of three months or less that are readily convertible to cash and are not subject to significant risk from fluctuations in interest rates. As a result, the carrying amount of cash and cash equivalents approximates fair value. Accounts Receivable, Net. Accounts receivable are carried at net realizable value. The allowance for doubtful accounts was $ 10.4 million and $ 10.9 million as of December 31, 2021 and 2020, respectively. The allowance for doubtful accounts activity was not material to our financial results for the years ended December 31, 2021 and 2020. Concentrations of credit risk with respect to accounts receivable are limited due to the large number of customers and relatively small account balances within the majority of our customer base and their dispersion across different businesses. We periodically evaluate the financial strength of our customers and believe that our credit risk exposure is limited. Inventories, net. Inventories consist of the following: (in millions) December 31, 2021 2020 Finished goods $ 143.8 $ 125.4 Finished parts and subassemblies 59.5 54.5 Work in process 36.9 45.1 Raw materials 200.7 204.7 Total inventories, net $ 440.9 $ 429.7 Inventories, net include the costs of material, labor and overhead and are stated at the lower of cost or net realizable value. Domestic inventories are stated at either the lower of cost or net realizable value using the last-in, first-out (“LIFO”) method or the lower of cost or net realizable value using the first-in, first-out (“FIFO”) method. Inventories held in foreign locations are primarily stated at the lower of cost or market using the FIFO method. The LIFO method is not being used at our foreign locations as such a method is not allowable for tax purposes. Changes in the levels of LIFO inventories have increased (reduced) cost of sales by $ 2.1 million, $ 2.3 million and $( 1.9 ) million for the years ended December 31, 2021, 2020 and 2019, respectively. The portion of inventories costed using the LIFO method was 28.5 % and 29.3 % of consolidated inventories as of December 31, 2021 48 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS and 2020, respectively. If inventories that were valued using the LIFO method had been valued under the FIFO method, they would have been higher by $ 28.2 million and $ 26.2 million as of December 31, 2021 and 2020, respectively. The reserve for excess and obsolete inventory was $ 98.5 million and $ 95.7 million as of December 31, 2021 and 2020, respectively. Valuation of Long-Lived Assets. We review our long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Examples of events or changes in circumstances could include, but are not limited to, a prolonged economic downturn, current period operating or cash flow losses combined with a history of losses or a forecast of continuing losses associated with the use of an asset or asset group, or a current expectation that an asset or asset group will be sold or disposed of before the end of its previously estimated useful life. Recoverability is based upon projections of anticipated future undiscounted cash flows associated with the use and eventual disposal of the long-lived asset (or asset group), as well as specific appraisal in certain instances. Reviews occur at the lowest level for which identifiable cash flows are largely independent of cash flows associated with other long-lived assets or asset groups. If the future undiscounted cash flows are less than the carrying value, then the long-lived asset is considered impaired and a loss is recognized based on the amount by which the carrying amount exceeds the estimated fair value. Judgments which impact these assessments relate to the expected useful lives of long-lived assets and our ability to realize any undiscounted cash flows in excess of the carrying amounts of such assets, and are affected primarily by changes in the expected use of the assets, changes in technology or development of alternative assets, changes in economic conditions, changes in operating performance and changes in expected future cash flows. Since judgment is involved in determining the recoverable amount of long-lived assets, there is risk that the carrying value of our long-lived assets may require adjustment in future periods. Property, Plant and Equipment, net. Property, plant and equipment, net consists of the following: (in millions) December 31, 2021 2020 Land $ 77.5 $ 85.6 Buildings and improvements 252.3 263.0 Machinery and equipment 850.1 843.3 Gross property, plant and equipment 1,179.9 1,191.9 Less: accumulated depreciation 652.6 618.2 Property, plant and equipment, net $ 527.3 $ 573.7 Property, plant and equipment is stated at cost and depreciation is calculated by the straight-line method over the estimated useful lives of the respective assets, which range from 10 to 25 years for buildings and improvements and three to 10 years for machinery and equipment. Depreciation expense was $ 73.6 million, $ 73.7 million and $ 68.1 million for the years ended December 31, 2021, 2020 and 2019, respectively. Goodwill and Other Intangible Assets. Our business acquisitions have typically resulted in the recognition of goodwill and other intangible assets. We follow the provisions under ASC Topic 350, “Intangibles – Goodwill and Other” (“ASC 350”) as it relates to the accounting for goodwill in the Consolidated Financial Statements. These provisions require that we, on at least an annual basis, evaluate the fair value of the reporting units to which goodwill is assigned and attributed and compare that fair value to the carrying value of the reporting unit to determine if an impairment has occurred. We perform our annual impairment testing during the fourth quarter. Impairment testing takes place more often than annually if events or circumstances indicate a change in status that would indicate a potential impairment. We believe that there have been no other events or circumstances which would more likely than not reduce the fair value of our reporting units below its carrying value. A reporting unit is an operating segment unless discrete financial information is prepared and reviewed by segment management for businesses one level below that operating segment (a “component”), in which case the component would be the reporting unit. As of December 31, 2021, we had seven reporting units. In the second quarter of 2021, the assets and liabilities of our Engineered Materials segment (which is a separate reportable segment and reporting unit) were classified as held for sale. See Note 3, “Discontinued Operations” for additional details. When performing our annual impairment assessment, we compare the fair value of each of our reporting units to our respective carrying value. Goodwill is considered to be potentially impaired when the net book value of the reporting unit exceeds its estimated fair value. Fair values are established primarily by discounting estimated future cash flows at an estimated cost of capital which varies for each reporting unit and which, as of our most recent annual impairment assessment, ranged between 9.5 % and 11.5 % (a weighted average of 10.7 %), reflecting the respective inherent business risk of each of the reporting units tested. This methodology for valuing our reporting units (commonly referred to as the Income Method) has not changed since the adoption of the provisions under ASC 350. The determination of discounted cash flows is based on the businesses’ strategic plans and long-range planning forecasts, which change from year to year. The revenue growth rates included in the forecasts represent best estimates based on current and forecasted market conditions. Profit margin assumptions are projected by each reporting unit based on the current cost structure and anticipated net cost increases/reductions. There are inherent 49 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS uncertainties related to these assumptions, including changes in market conditions, and management judgment is necessary in applying them to the analysis of goodwill impairment. In addition to the foregoing, for each reporting unit, market multiples are used to corroborate discounted cash flow results where fair value is estimated based on earnings multiples determined by available public information of comparable businesses. While we believe we have made reasonable estimates and assumptions to calculate the fair value of our reporting units, it is possible a material change could occur. If actual results are not consistent with management’s estimates and assumptions, goodwill and other intangible assets may then be determined to be overstated and a charge would need to be taken against net earnings. No impairment charges have been required during 2021, 2020 or 2019. Changes to goodwill are as follows: (in millions) Aerospace & Electronics Process Flow Technologies Payment & Merchandising Technologies Total Balance as of December 31, 2019 $ 202.4 $ 240.9 $ 857.8 $ 1,301.1 Additions — 106.1 — 106.1 Adjustments to purchase price allocations — — 5.6 5.6 Currency translation 0.1 13.0 11.8 24.9 Balance as of December 31, 2020 $ 202.5 $ 360.0 $ 875.2 $ 1,437.7 Adjustments to purchase price allocations — ( 0.1 ) — ( 0.1 ) Currency translation — ( 10.5 ) ( 14.6 ) ( 25.1 ) Balance as of December 31, 2021 $ 202.5 $ 349.4 $ 860.6 $ 1,412.5 For the year ended December 31, 2020, additions to goodwill within the Process Flow Technologies segment were $ 106.1 million. These additions represent the preliminary purchase price allocation for the acquisition of CIRCOR International, Inc.’s Instrumentation & Sampling Business (“I&S”). For the year ended December 31, 2020, adjustments to goodwill within the Payment & Merchandising Technologies segment were $ 5.6 million. These adjustments represent the finalization of the purchase price allocation for the acquisition of Cummins-Allison Corp. ("Cummins-Allison"). For the year ended December 31, 2021, adjustments within the Process Flow Technologies segment of $ 0.1 million represent the finalization of the purchase price allocation for the acquisition of I&S. See a discussion in Note 2, “Acquisitions” for further details. Intangibles with indefinite useful lives are tested annually for impairment, or when events or changes in circumstances indicate the potential for impairment. If the carrying amount of an indefinite lived intangible asset exceeds its fair value, the intangible asset is written down to its fair value. Fair value is calculated using relief from royalty method. We amortize the cost of definite-lived intangibles over their estimated useful lives. 50 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In addition to annual testing for impairment of indefinite-lived intangible assets, we review all of our definite-lived intangible assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Examples of events or changes in circumstances could include, but are not limited to, a prolonged economic downturn, current period operating or cash flow losses combined with a history of losses or a forecast of continuing losses associated with the use of an asset or asset group, or a current expectation that an asset or asset group will be sold or disposed of before the end of its previously estimated useful life. Recoverability is based upon projections of anticipated future undiscounted cash flows associated with the use and eventual disposal of the definite-lived intangible asset (or asset group), as well as specific appraisal in certain instances. Reviews occur at the lowest level for which identifiable cash flows are largely independent of cash flows associated with other long-lived assets or asset groups and include estimated future revenues, gross profit margins, operating profit margins and capital expenditures which are based on the businesses’ strategic plans and long-range planning forecasts, which change from year to year. The revenue growth rates included in the forecasts represent our best estimates based on current and forecasted market conditions, and the profit margin assumptions are based on the current cost structure and anticipated net cost increases or reductions. There are inherent uncertainties related to these assumptions, including changes in market conditions, and management’s judgment in applying them to the analysis. If the future undiscounted cash flows are less than the carrying value, then the definite-lived intangible asset is considered impaired and a charge would be taken against net earnings based on the amount by which the carrying amount exceeds the estimated fair value. Judgments that we make which impact these assessments relate to the expected useful lives of definite-lived assets and its ability to realize any undiscounted cash flows in excess of the carrying amounts of such assets, and are affected primarily by changes in the expected use of the assets, changes in technology or development of alternative assets, changes in economic conditions, changes in operating performance and changes in expected future cash flows. Since judgment is involved in determining the recoverable amount of definite-lived intangible assets, there is risk that the carrying value of our definite-lived intangible assets may require adjustment in future periods. Historical results to date have generally approximated expected cash flows for the identifiable cash flow generating level. As of December 31, 2021, we had $ 465.9 million of net intangible assets, of which $ 70.6 million were intangibles with indefinite useful lives, consisting of trade names. As of December 31, 2020, we had $ 519.1 million of net intangible assets, of which $ 70.9 million were intangibles with indefinite useful lives, consisting of trade names. Changes to intangible assets are as follows: (in millions) December 31, 2021 2020 2019 Balance at beginning of period, net of accumulated amortization $ 519.1 $ 503.7 $ 478.3 Additions — 52.5 66.0 Amortization expense ( 44.5 ) ( 48.3 ) ( 37.8 ) Currency translation and other ( 8.7 ) 11.2 ( 2.8 ) Balance at end of period, net of accumulated amortization $ 465.9 $ 519.1 $ 503.7 For the year ended December 31, 2020, additions to intangible assets represent the preliminary purchase price allocation related to the January 2020 acquisition of I&S. See discussion in Note 2, “Acquisitions” for further details. 51 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A summary of intangible assets follows: (in millions) Weighted Average Amortization Period of Finite Lived Assets (in years) December 31, 2021 December 31, 2020 Gross Asset Accumulated Amortization Net Gross Asset Accumulated Amortization Net Intellectual property rights 15.2 $ 131.9 $ 54.3 $ 77.6 $ 133.2 $ 53.4 $ 79.8 Customer relationships and backlog 18.3 611.8 270.1 341.8 623.7 241.9 381.8 Drawings 40.0 11.1 10.6 0.5 11.1 10.5 0.6 Other 11.8 137.4 91.3 46.0 140.2 83.3 56.9 Total 17.8 $ 892.2 $ 426.3 $ 465.9 $ 908.2 $ 389.1 $ 519.1 Future amortization expense associated with intangibles is expected to be: Year (in millions) 2022 $ 42.9 2023 $ 42.4 2024 $ 41.5 2025 $ 36.0 2026 and after $ 232.5 Accumulated Other Comprehensive Loss The tables below provide the accumulated balances for each classification of accumulated other comprehensive loss, as reflected on the Consolidated Balance Sheets. (in millions) Defined Benefit Pension and Other Postretirement Items Currency Translation Adjustment Total (a) Balance as of December 31, 2018 $ ( 296.6 ) $ ( 151.0 ) $ ( 447.6 ) Other comprehensive (loss) income before reclassifications ( 58.4 ) 11.6 ( 46.8 ) Amounts reclassified from accumulated other comprehensive loss 10.7 — 10.7 Net period other comprehensive (loss) income ( 47.7 ) 11.6 ( 36.1 ) Balance as of December 31, 2019 ( 344.3 ) ( 139.4 ) ( 483.7 ) Other comprehensive (loss) income before reclassifications ( 67.4 ) 70.9 3.5 Amounts reclassified from accumulated other comprehensive loss 13.8 — 13.8 Net period other comprehensive (loss) income ( 53.6 ) 70.9 17.3 Balance as of December 31, 2020 ( 397.9 ) ( 68.5 ) ( 466.4 ) Other comprehensive income (loss) before reclassifications 78.0 ( 69.8 ) 8.2 Amounts reclassified from accumulated other comprehensive loss 18.0 — 18.0 Net period other comprehensive income (loss) 96.0 ( 69.8 ) 26.2 Balance as of December 31, 2021 $ ( 301.9 ) $ ( 138.3 ) $ ( 440.2 ) (a) Net of tax benefit of $ 117.9 million, $ 148.2 million and $ 135.4 million for 2021, 2020, and 2019, respectively. 52 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The table below illustrates the amounts reclassified out of each component of accumulated other comprehensive loss for the years ended December 31, 2021, 2020 and 2019. Amortization of pension and postretirement components have been recorded within “Miscellaneous income, net” on the Consolidated Statements of Operations. (in millions) Amount Reclassified from Accumulated Other Comprehensive Loss December 31, 2021 2020 2019 Amortization of pension items: Prior service costs $ ( 0.1 ) $ ( 0.3 ) $ ( 0.3 ) Net loss 23.4 19.1 15.3 Amortization of postretirement items: Prior service costs ( 1.1 ) ( 1.1 ) ( 1.1 ) Net gain — — ( 0.3 ) Total before tax $ 22.2 $ 17.7 $ 13.6 Tax impact 4.2 3.9 2.9 Total reclassifications for the period $ 18.0 $ 13.8 $ 10.7 53 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Recent Accounting Pronouncements - Adopted Simplifying the Accounting for Income Taxes In December 2019, the Financial Accounting Standards Board (“FASB”) issued amended guidance to simplify the accounting for income taxes. The guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Certain amendments are to be applied prospectively, while other amendments are to be applied retrospectively to all periods presented. We have adopted this standard effective January 1, 2021. The adoption of this new standard did not impact our consolidated financial statements. Disclosure Requirements for Defined Benefit Plans In August 2018, the FASB issued amended guidance to add, remove, and clarify disclosure requirements related to defined benefit pension and other postretirement plans. The amended guidance removes the requirements to disclose: amounts in accumulated other comprehensive income (loss) expected to be recognized as components of net periodic benefit cost over the next fiscal year; the amount and timing of plan assets expected to be returned to the entity; and the effects of a one-percentage point change in assumed health care cost trend r ates. The amended guidance requires disclosure of an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. This guidance is effective for fiscal years ending after December 15, 2020. Effective December 31, 2020, we adopted the amended guidance and applied the disclosure requirements on a retrospective basis to all periods presented. This amended guidance did not have a material effect on our disclosures. Measurement of Credit Losses on Financial Instruments In June 2016, the FASB issued amended guidance that changes the impairment model for most financial assets and certain other instruments. For trade receivables, contract assets and other receivables, held-to-maturity debt securities, loans and other instruments, entities are required to use a current expected credit loss (“CECL”) model that will immediately recognize an estimate of credit losses that are expected to occur over the life of the financial instruments that are in the scope of this update, including trade receivables. For available-for-sale debt securities with unrealized losses, entities will measure credit losses in a manner similar to current practice, except that the losses will be recognized as an allowance. The CECL model is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect collectability. On January 1, 2020, we adopted the new CECL standard and developed an expected impairment model based on our historical loss experience. We believe that our previous methodology to calculate credit losses is generally consistent with the new expected credit loss model and did not result in a material adjustment upon adoption. The allowance for doubtful accounts was $ 10.4 million and $ 10.9 million as of December 31, 2021 and 2020, respectively. Note 2 – Acquisitions Acquisitions are accounted for in accordance with ASC Topic 805, “Business Combinations” (“ASC 805”). Accordingly, we make an initial allocation of the purchase price at the date of acquisition based upon our understanding of the fair value of the acquired assets and assumed liabilities. We obtain this information during due diligence and through other sources. In the months after closing, as we obtain additional information about these assets and liabilities, including through tangible and intangible asset appraisals, we are able to refine estimates of fair value and more accurately allocate the purchase price. Only items identified as of the acquisition date are considered for subsequent adjustment to the purchase price allocation. We will make appropriate adjustments to the purchase price allocation prior to completion of the measurement period, as required. In order to allocate the consideration transferred for our acquisitions, the fair values of all identifiable assets and liabilities must be established. For accounting and financial reporting purposes, fair value is defined under ASC Topic 820, “Fair Value Measurement and Disclosure” as the price that would be received upon sale of an asset or the amount paid to transfer a liability in an orderly transaction between market participants at the measurement date. Market participants are assumed to be buyers and sellers in the principal (most advantageous) market for the asset or liability. Additionally, fair value measurements for an asset assume the highest and best use of that asset by market participants. Use of different estimates and judgments could yield different results. 54 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Instrumentation & Sampling Business Acquisition On January 31, 2020, we completed the acquisition of I&S for $ 172.3 million on a cash-free and debt-free basis, subject to a later adjustment reflecting I&S' net working capital, cash, the assumption of certain debt-like items, and I&S' transaction expenses. We funded the acquisition through short-term borrowings consisting of $ 100 million of commercial paper and $ 67 million from our revolving credit facility, and cash on hand. In August 2020, we received $ 3.1 million related to the final working capital adjustment which resulted in net cash paid of $ 169.2 million. I&S designs, engineers and manufactures a broad range of critical fluid control instrumentation and sampling solutions used in severe service environments which complements our existing portfolio of chemical, refining, petrochemical and upstream oil and gas applications. I&S has been integrated into the Process Flow Technologies segment. The amount allocated to goodwill reflects the expected sales synergies, manufacturing efficiency and procurement savings. Goodwill from this acquisition is not deductible for tax purposes. Allocation of Consideration Transferred to Net Assets Acquired The following amounts represent the determination of the fair value of identifiable assets acquired and liabilities assumed from our acquisition of I&S. The fair value of certain assets and liabilities has been completed as required by ASC 805. Net assets acquired (in millions) Total current assets $ 21.0 Property, plant and equipment 11.0 Other assets 6.0 Intangible assets 52.5 Goodwill 106.0 Total assets acquired $ 196.5 Total current liabilities $ 8.1 Other liabilities 19.2 Total assumed liabilities $ 27.3 Net assets acquired $ 169.2 The amounts allocated to acquired intangible assets, and their associated weighted-average useful lives which were determined based on the period in which the assets are expected to contribute directly or indirectly to our future cash flows, consist of the following: Intangible Assets (dollars in millions) Intangible Fair Value Weighted Average Life Trademarks/trade names $ 2.6 13 Customer relationships 49.0 14 Backlog 0.9 1 Total acquired intangible assets $ 52.5 The fair values of the trademark and trade name intangible assets were determined by using an income approach, specifically the relief-from-royalty approach, which is a commonly accepted valuation approach. This approach is based on the assumption that in lieu of ownership, a firm would be willing to pay a royalty in order to exploit the related benefits of this asset. Therefore, a portion of I&S’ earnings, equal to the after-tax royalty that would have been paid for the use of the asset, can be attributed to our ownership. The trade names are being amortized on a straight-line basis (which approximates the economic pattern of benefits) over the estimated economic life of 13 years. The fair values of the customer relationships and backlog intangible assets were determined by using an income approach which is a commonly accepted valuation approach. Under this approach, the net earnings attributable to the asset or liability being measured are isolated using the discounted projected net cash flows. These projected cash flows are isolated from the projected cash flows of the combined asset group over the remaining economic life of the intangible asset or liability being measured. Both the amount and the duration of the cash flows are considered from a market participant perspective. Our estimates of market participant net cash flows considered historical and projected pricing, operational performance including market participant synergies, aftermarket retention, product life cycles, material and labor pricing, and other relevant 55 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS customer, contractual and market factors. Where appropriate, the net cash flows were adjusted to reflect the potential attrition of existing customers in the future, as existing customers are expected to decline over time. The attrition-adjusted future cash flows are then discounted to present value using an appropriate discount rate. The customer relationship asset is being amortized on a straight-line basis (which approximates the economic pattern of benefits) over the estimated economic life of 14 years. Supplemental Pro Forma Data I&S’ results of operations have been included in our financial statements for the period subsequent to the completion of the acquisition on January 31, 2020. Consolidated pro forma revenue and net income attributable to common shareholders has not been presented since the impact is not material to our financial results for either prior period. Cummins-Allison Acquisition On December 31, 2019 we completed the acquisition of Cummins-Allison. The base purchase price of the acquisition was $ 160 million on a cash-free, debt-free basis, subject to a later adjustment reflecting Cummins-Allison’s net working capital, cash, and Cummins-Allison’s transaction expenses. The amount paid, net of cash acquired, was $ 156.2 million. We issued $ 150 million of commercial paper and used cash on hand to fund the acquisition. In November 2020, we paid $ 0.2 million related to the final working capital adjustment which resulted in net cash paid of $ 156.4 million. Cummins-Allison is a leading provider of high speed, cash and coin counting and sorting machines and retail cash office solutions which are primarily used in back-office applications. Cummins-Allison has been integrated into our Payment & Merchandising Technologies segment. Cummins-Allison also has a nationwide service network to support these hardware sales. The amount allocated to goodwill reflects the expected synergies related to material costs, supply chain manufacturing productivity and research and development. Goodwill from this acquisition is not deductible for tax purposes. Allocation of Consideration Transferred to Net Assets Acquired The following amounts represent the determination of the fair value of identifiable assets acquired and liabilities assumed from our acquisition of Cummins-Allison. The fair value of certain assets and liabilities has been completed as required by ASC 805. Net assets acquired (in millions) Total current assets $ 91.6 Property, plant and equipment 26.3 Other assets 9.1 Intangible assets 66.0 Goodwill 60.3 Total assets acquired $ 253.3 Total current liabilities $ 71.6 Other liabilities 25.3 Total assumed liabilities $ 96.9 Net assets acquired $ 156.4 The amounts allocated to acquired intangible assets, and their associated weighted-average useful lives which were determined based on the period in which the assets are expected to contribute directly or indirectly to our future cash flows, consist of the following: Intangible Assets (dollars in millions) Intangible Fair Value Weighted Average Life Trademarks/trade names $ 3.0 7 Customer relationships 54.5 18 Product technology 8.5 10 Total acquired intangible assets $ 66.0 The fair values of the trademark and trade name intangible assets were determined by using an “income approach,” specifically the relief-from-royalty approach, which is a commonly accepted valuation approach. This approach is based on the assumption that in lieu of ownership, a firm would be willing to pay a royalty in order to exploit the related benefits of this 56 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS asset. Therefore, a portion of Cummins-Allison’s earnings, equal to the after-tax royalty that would have been paid for the use of the asset, can be attributed to the firm’s ownership. The trade name Cummins Allison is being amortized on a straight-line basis (which approximates the economic pattern of benefits) over the estimated economic life of seven years . The fair values of the customer relationships intangible assets were determined by using an “income approach” which is a commonly accepted valuation approach. Under this approach, the net earnings attributable to the asset or liability being measured are isolated using the discounted projected net cash flows. These projected cash flows are isolated from the projected cash flows of the combined asset group over the remaining economic life of the intangible asset or liability being measured. Both the amount and the duration of the cash flows are considered from a market participant perspective. Our estimates of market participant net cash flows considered historical and projected pricing, operational performance including market participant synergies, aftermarket retention, product life cycles, material and labor pricing, and other relevant customer, contractual and market factors. Where appropriate, the net cash flows were adjusted to reflect the potential attrition of existing customers in the future, as existing customers are a “wasting” asset and are expected to decline over time. The attrition-adjusted future cash flows are then discounted to present value using an appropriate discount rate. The customer relationship is being amortized on a straight-line basis (which approximates the economic pattern of benefits) over the estimated economic life of 18 years. The fair values of the product technology intangible assets were also determined by the relief-from-royalty approach. Similarly, this approach is based on the assumption that in lieu of ownership, a firm would be willing to pay a royalty in order to exploit the related benefits of the technology. Therefore, a portion of Cummins-Allison’s earnings, equal to the after-tax royalty that would have been paid for the use of the technology, can be attributed to the firm’s ownership of the technology. The technology assets are being amortized on a straight-line basis (which approximates the economic pattern of benefits) over the estimated economic life of 10 years. Supplemental Pro Forma Data The following unaudited pro forma combined information assumes that the acquisition was completed on January 1, 2019. The unaudited pro forma consolidated net sales for 2019 would have been $ 3,266.6 million. The unaudited pro forma consolidated net sales are provided for illustrative purposes only and are not indicative of our actual consolidated results of operations or consolidated financial position. Consolidated pro forma net income attributable to common shareholders has not been presented since the impact is not material to our financial results in any of the periods. Acquisition-Related Costs Acquisition-related costs are being expensed as incurred. For the years ended December 31, 2020 and 2019, we recorded $ 12.9 million and $ 5.2 million, respectively, of integration and transaction costs. Acquisition-related costs are recorded within “Acquisition-related and integration charges” in our Consolidated Statements of Operations. 57 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 3 - Discontinued Operations A business is classified as held for sale when management having the authority to approve the action commits to a plan to sell the business, the sale is probable to occur during the next 12 months at a price that is reasonable in relation to its current fair value and certain other criteria are met. A business classified as held for sale is recorded at the lower of its carrying amount or estimated fair value less cost to sell. When the carrying amount of the business exceeds its estimated fair value less cost to sell, a loss is recognized and updated each reporting period as appropriate. Executing on our strategy to focus our growth investments on our three remaining segments, on May 16, 2021, we entered into an agreement to sell our Engineered Materials segment to Grupo Verzatec S.A. de C.V. for $ 360 million on a cash-free and debt-free basis. The sale is subject to customary closing conditions and regulatory approvals. In the second quarter of 2021, the assets and liabilities of the segment were classified as held for sale, and the segment’s results are presented as discontinued operations. This change was applied on a retrospective basis. The following represents financial results from discontinued operations: For the year ended December 31, (in millions) 2021 2020 2019 Net sales $ 228.0 $ 175.6 $ 208.6 Cost of sales 181.3 134.5 161.9 Selling, general and administrative 19.8 17.8 19.4 Restructuring charges — 0.6 — Operating profit $ 26.9 $ 22.7 $ 27.3 Miscellaneous expense, net ( 1.3 ) — ( 0.5 ) Income from discontinued operations $ 25.6 $ 22.7 $ 26.8 Income tax (benefit) provision (a) ( 15.5 ) 4.8 5.8 Income from discontinued operations, net of tax $ 41.1 $ 17.9 $ 21.0 (a) The period ended December 31, 2021 includes $ 20.6 million of deferred tax benefit associated with the pending disposition of the Engineered Materials segment. 58 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following represents m ajor classes of assets and liabilities to be disposed of in the transaction: (in millions) December 31, 2021 December 31, 2020 Assets: Accounts receivable, net $ 10.6 $ 8.8 Inventories, net 8.2 8.5 Other current assets 0.6 0.1 Current assets held for sale (a) 19.4 17.4 Property, plant and equipment, net 28.3 26.8 Other assets 0.3 0.6 Intangible assets, net 1.2 1.2 Goodwill 171.3 171.3 Long-term assets held for sale (a) 201.1 199.9 Assets held for sale $ 220.5 $ 217.3 Liabilities: Accounts payable $ 27.0 $ 19.5 Accrued liabilities 12.0 7.9 Current liabilities held for sale (a) 39.0 27.4 Long-term deferred tax liability 5.8 26.1 Other liabilities 0.1 0.1 Long-term liabilities held for sale (a) 5.9 26.2 Liabilities held for sale $ 44.9 $ 53.6 (a) We reasonably expect to close on this transaction within one year from the date of our entry into the agreement, and therefore have presented the assets and liabilities as current as of December 31, 2021. 59 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 4 – Segment Information In accordance with ASC Topic 280, “Segment Reporting,” for purposes of segment performance measurement, we do not allocate to the business segments items that are of a non-operating nature, including charges which occur from time to time related to our asbestos liability and our legacy environmental liabilities, as such items are not related to current business activities; or corporate organizational and functional expenses of a governance nature. “Corporate expenses-before asbestos and environmental charges” consist of corporate office expenses including, compensation, benefits, occupancy, depreciation, and other administrative costs. Assets of the business segments exclude general corporate assets, which principally consist of cash and cash equivalents, deferred tax assets, insurance receivables, certain property, plant and equipment, and certain other assets. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. We account for intersegment sales and transfers as if the sales or transfers were to third parties at current market prices. Our segments are reported on the same basis used internally for evaluating performance and for allocating resources. We have four reporting segments: Process Flow Technologies, Payment & Merchandising Technologies, Aerospace & Electronics and Engineered Materials. A brief description of each of our segments is as follows: Aerospace & Electronics The Aerospace & Electronics segment supplies critical components and systems, including original equipment and aftermarket parts, primarily for the commercial aerospace and military aerospace and defense markets. Its brands have decades of proven experience, and in many cases invented the critical technologies in their respective markets. The business designs and delivers proven systems, reliable components, and flexible power solutions that excel in tough and mission-critical environments. Products and services are organized into six integrated solutions: Sensing Components & Systems, Electrical Power Solutions, Fluid Management Solutions, Landing & Control Systems, and Microwave Solutions. Process Flow Technologies The Process Flow Technologies segment is a provider of highly engineered Process Flow Technologies equipment for critical performance applications that require high reliability. The segment is comprised of Process Valves and Related Products, Commercial Valves, and Pumps and Systems. Process Valves and Related Products include on/off valves and related products for critical and demanding applications in the chemical, oil & gas, power, and general industrial end markets globally. Commercial Valves includes the manufacturing and distribution of valves and related products for the non-residential construction, general industrial, and to a lesser extent, municipal markets. Pumps and Systems include pumps and related products primarily for water and wastewater applications in the industrial, municipal, commercial and military markets. Payment & Merchandising Technologies The Payment & Merchandising Technologies segment consists of Crane Payment Innovations (“CPI”) and Crane Currency. CPI provides high technology payment acceptance and dispensing products to original equipment manufacturers, and for certain vertical markets, it also provides currency handling and processing systems, complete cash and cashless payment and merchandising solutions, equipment service solutions, and fully connected managed service solutions. Crane Currency is a supplier of banknotes and highly engineered banknote security features. Engineered Materials The Engineered Materials segment manufactures fiberglass-reinforced plastic ("FRP") panels and coils, primarily for use in the manufacturing of recreational vehicles ("RVs"), truck bodies and trailers (Transportation), with additional applications in commercial and industrial buildings (Building Products). In the second quarter of 2021, the assets and liabilities of the Engineered Materials segment were reclassified as held for sale and results are presented as discontinued operations and, therefore, not included in the tables below. This change was applied on a retrospective basis. See Note 3, “Discontinued Operations” for further details. 60 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Financial information by reportable segment is set forth below: (in millions) December 31, 2021 2020 2019 Net Sales: Aerospace & Electronics $ 638.3 $ 650.7 $ 798.8 Process Flow Technologies 1,196.6 1,005.8 1,117.4 Payment & Merchandising Technologies 1,345.1 1,104.8 1,158.3 TOTAL NET SALES $ 3,180.0 $ 2,761.3 $ 3,074.5 Operating profit: Aerospace & Electronics $ 110.0 $ 100.7 $ 189.4 Process Flow Technologies 182.5 97.7 131.7 Payment & Merchandising Technologies 307.5 100.6 177.3 Corporate expense — before asbestos and environmental provisions ( 97.7 ) ( 58.8 ) ( 67.4 ) Corporate expense — asbestos provision, net — — ( 229.0 ) Corporate expense — environmental provision, net — — ( 18.9 ) TOTAL OPERATING PROFIT $ 502.3 $ 240.2 $ 183.1 Capital expenditures: Aerospace & Electronics $ 14.1 $ 9.8 $ 20.0 Process Flow Technologies 18.8 13.7 23.4 Payment & Merchandising Technologies 18.6 9.3 20.6 Corporate 0.2 0.1 0.4 TOTAL CAPITAL EXPENDITURES $ 51.7 $ 32.9 $ 64.4 Depreciation and amortization: Aerospace & Electronics $ 14.7 $ 14.2 $ 13.5 Process Flow Technologies 22.0 21.6 14.2 Payment & Merchandising Technologies 81.3 85.9 77.1 Corporate 1.5 2.1 3.1 TOTAL DEPRECIATION AND AMORTIZATION $ 119.5 $ 123.8 $ 107.9 For the year ended December 31, 2021, operating profit included a restructuring gain of $ 16.9 million. For the year ended December 31, 2020, operating profit included acquisition-related and integration charges of $ 12.9 million and net restructuring charges of $ 31.7 million. For the year ended December 31, 2019, operating profit included a net asbestos provision of $ 229.0 million, a net environmental provision of $ 18.9 million, acquisition-related and integration charges of $ 5.2 million and net restructuring charges of $ 17.5 million. See Note 2, “Acquisitions” for discussion on the acquisition-related costs. See Note 16, “Restructuring Charges” for discussion of the restructuring charges. See Note 13, “Commitments and Contingencies” for discussion of the asbestos provision and environmental provision. 61 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Net sales by geographic region: (in millions) December 31, 2021 2020 2019 Net sales (a) United States $ 1,645.4 $ 1,423.2 $ 1,557.0 Canada 286.9 217.1 243.1 United Kingdom 140.9 122.8 168.6 Continental Europe 406.0 362.7 465.4 Other international 700.8 635.5 640.4 TOTAL NET SALES $ 3,180.0 $ 2,761.3 $ 3,074.5 (a) Net sales by geographic region are based on the destination of the sale. Balance sheet items by reportable segment is set forth below: (in millions) December 31, 2021 2020 Goodwill: Aerospace & Electronics $ 202.5 $ 202.5 Process Flow Technologies 349.4 360.0 Payment & Merchandising Technologies 860.6 875.2 TOTAL GOODWILL $ 1,412.5 $ 1,437.7 Assets: Aerospace & Electronics $ 604.7 $ 593.9 Process Flow Technologies 1,240.4 1,106.1 Payment & Merchandising Technologies 2,096.5 2,215.3 Corporate 324.5 482.4 Assets held for sale 220.5 217.3 TOTAL ASSETS $ 4,486.6 $ 4,615.0 Long-lived assets by geographic region: (in millions) December 31, 2021 2020 Long-lived assets (a) United States $ 295.8 $ 311.9 Canada 18.2 15.8 Europe 231.3 266.6 Other international 62.8 60.7 Corporate 15.6 22.4 TOTAL LONG-LIVED ASSETS $ 623.7 $ 677.4 (a) Long-lived assets, net by geographic region are based on the location of the business unit. 62 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 5 - Revenue Disaggregation of Revenues The following table presents net sales disaggregated by product line for each segment: (in millions) December 31, 2021 2020 2019 Aerospace & Electronics Commercial Original Equipment $ 229.4 $ 226.4 $ 357.2 Military Original Equipment 239.7 258.7 217.2 Commercial Aftermarket Products 104.5 93.0 161.4 Military Aftermarket Products 64.7 72.6 63.0 Total Aerospace & Electronics $ 638.3 $ 650.7 $ 798.8 Process Flow Technologies Process Valves and Related Products $ 717.1 $ 631.6 $ 685.1 Commercial Valves 374.2 286.3 332.1 Pumps and Systems 105.3 87.9 100.2 Total Process Flow Technologies $ 1,196.6 $ 1,005.8 $ 1,117.4 Payment & Merchandising Technologies Payment Acceptance and Dispensing Products $ 805.7 $ 670.8 $ 805.5 Banknotes and Security Products 539.4 434.0 352.8 Total Payment & Merchandising Technologies $ 1,345.1 $ 1,104.8 $ 1,158.3 Total Net Sales $ 3,180.0 $ 2,761.3 $ 3,074.5 Remaining Performance Obligations The transaction price allocated to remaining performance obligations represents the transaction price of firm orders which have not yet been fulfilled, which we also refer to as total backlog. As of December 31, 2021, backlog was $ 1,255.7 million. We expect to recognize approximately 94 % of our remaining performance obligations as revenue in 2022, an additional 5 % by 2023 and the balance thereafter. Contract Assets and Contract Liabilities Contract assets represent unbilled amounts that typically arise from contracts for customized products or contracts for products sold directly to the U.S. government or indirectly to the U.S. government through subcontracts, where revenue recognized using the cost-to-cost method exceeds the amount billed to the customer. Contract assets are assessed for impairment and recorded at their net realizable value. Contract liabilities represent advance payments from customers. Revenue related to contract liabilities is recognized when control is transferred to the customer. We report contract assets, which are included within “Other current assets” in our Consolidated Balance Sheets, and contract liabilities, which are included within “Accrued liabilities” on our Consolidated Balance Sheets, on a contract-by-contract net basis at the end of each reporting period. Net contract assets and contract liabilities consisted of the following: (in millions) December 31, 2021 2020 Contract assets $ 73.0 $ 66.7 Contract liabilities $ 101.1 $ 103.0 During 2021 we recognized revenue of $ 92.8 million related to contract liabilities as of December 31, 2020. 63 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 6 – Research and Development Research and development costs are expensed when incurred. (in millions) December 31, 2021 2020 2019 Research and Development Costs $ 81.4 $ 74.1 $ 74.0 Note 7 – Pension and Postretirement Benefits Pension Plan In the United States, we sponsor a defined benefit pension plan that covers approximately 16 % of all U.S. employees. Effective January 1, 2013, pension eligible non-union employees no longer earn future benefits in the domestic defined benefit pension plan. The benefits are based on years of service and compensation on a final average pay basis, except for certain hourly employees where benefits are fixed per year of service. Charges to expense are based upon costs computed by an independent actuary. Contributions are intended to provide for future benefits earned to date. Additionally, a number of our non-U.S. subsidiaries sponsor defined benefit pension plans that cover approximately 9 % of all non-U.S. employees. The benefits are typically based upon years of service and compensation. Most of these plans are funded by company contributions to pension funds, which are held for the sole benefit of plan participants and beneficiaries. Postretirement Plans Postretirement health care and life insurance benefits are provided for certain employees hired before January 1, 1990, who meet minimum age and service requirements. As a result of the acquisition of Crane Currency, we also have postretirement medical and Medicare supplement that cover substantially all former full-time U.S. employees of Crane Currency. A summary of the projected benefit obligations, fair value of plan assets and funded status is as follows: Pension Benefits Postretirement Benefits (in millions) December 31, 2021 2020 2021 2020 Change in benefit obligation: Benefit obligation at beginning of year $ 1,259.8 $ 1,168.7 $ 30.0 $ 29.0 Service cost 6.0 6.4 0.3 0.3 Interest cost 18.4 26.1 0.6 0.9 Plan participants’ contributions 0.4 0.5 — — Amendments ( 0.7 ) ( 0.2 ) — — Actuarial (gain) loss ( 64.8 ) 94.8 ( 0.2 ) 2.0 Settlements ( 6.1 ) ( 9.3 ) — — Curtailments 0.5 ( 3.5 ) — — Benefits paid ( 49.5 ) ( 46.8 ) ( 2.6 ) ( 2.2 ) Foreign currency exchange and other ( 10.9 ) 23.6 — — Administrative expenses paid ( 1.0 ) ( 0.5 ) — — Benefit obligation at end of year $ 1,152.1 $ 1,259.8 $ 28.1 $ 30.0 Change in plan assets: Fair value of plan assets at beginning of year $ 1,024.1 $ 965.8 $ — $ — Actual return on plan assets 96.2 70.3 — — Employer contributions 26.7 26.1 2.6 2.2 Plan participants’ contributions 0.4 0.5 — — Settlements ( 6.1 ) ( 9.3 ) — — Benefits paid ( 49.5 ) ( 46.8 ) ( 2.6 ) ( 2.2 ) Foreign currency exchange and other ( 8.8 ) 18.5 — — Administrative expenses paid ( 1.6 ) ( 1.0 ) — — Fair value of plan assets at end of year $ 1,081.4 $ 1,024.1 $ — $ — Funded status $ ( 70.7 ) $ ( 235.7 ) $ ( 28.1 ) $ ( 30.0 ) 64 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In the U.S., 2021 actuarial gains in the projected benefit obligation were primarily the result of an increase in the discount rate. Other sources of gains or losses such as plan experience, updated census data and minor adjustments to actuarial assumptions generated combined losses of less than 1 % of expected year end obligations. In the Non-U.S. countries, 2021 actuarial gains in the projected benefit obligation were primarily the result of increases in discount rates. Other sources of gains or losses such as plan experience, updated census data, changes to forecast inflation, mortality table updates and minor adjustments to other actuarial assumptions generated combined gains of 2 % of expected year end obligations. In the U.S., 2020 actuarial losses in the projected benefit obligation were primarily the result of a decrease in the discount rate. Other sources of gains or losses such as plan experience, updated census data and minor adjustments to actuarial assumptions generated combined losses of less than 1 % of expected year end obligations. In the Non-U.S. countries, 2020 actuarial losses in the projected benefit obligation were primarily the result of decreases in discount rates. Other sources of gains or losses such as plan experience, updated census data, changes to forecast inflation and minor adjustments to actuarial assumptions generated combined gains of 5 % of expected year end obligations. Amounts recognized on our Consolidated Balance Sheets consist of: Pension Benefits Postretirement Benefits (in millions) December 31, 2021 2020 2021 2020 Other assets $ 132.1 $ 62.6 $ — $ — Current liabilities ( 1.5 ) ( 1.5 ) ( 2.5 ) ( 2.6 ) Accrued pension and postretirement benefits ( 201.3 ) ( 296.8 ) ( 25.6 ) ( 27.4 ) Funded status $ ( 70.7 ) $ ( 235.7 ) $ ( 28.1 ) $ ( 30.0 ) Amounts recognized in accumulated other comprehensive loss consist of: Pension Benefits Postretirement Benefits (in millions) December 31, 2021 2020 2021 2020 Net actuarial loss (gain) $ 400.0 $ 532.3 $ ( 1.1 ) $ ( 0.9 ) Prior service credit ( 1.6 ) ( 2.8 ) ( 3.1 ) ( 4.1 ) Total recognized in accumulated other comprehensive loss $ 398.4 $ 529.5 $ ( 4.2 ) $ ( 5.0 ) The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the U.S. and Non-U.S. plans, are as follows: Pension Obligations/Assets U.S. Non-U.S. Total (in millions) December 31, 2021 2020 2021 2020 2021 2020 Projected benefit obligation $ 669.7 $ 699.1 $ 482.4 $ 560.7 $ 1,152.1 $ 1,259.8 Accumulated benefit obligation 669.7 699.1 473.6 548.9 1,143.3 1,248.0 Fair value of plan assets 522.2 482.8 559.2 541.3 1,081.4 1,024.1 Information for pension plans with an accumulated benefit obligation in excess of plan assets is as follows: (in millions) December 31, 2021 2020 Projected benefit obligation $ 771.6 $ 1,060.4 Accumulated benefit obligation $ 720.1 $ 1,049.5 Fair value of plan assets $ 525.2 $ 762.5 65 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Components of net periodic (benefit) cost are as follows: Pension Benefits Postretirement Benefits (in millions) For the year ended December 31, 2021 2020 2019 2021 2020 2019 Net Periodic (Benefit) Cost: Service cost $ 6.0 $ 6.4 $ 5.4 $ 0.3 $ 0.3 $ 0.3 Interest cost 18.4 26.1 32.7 0.6 0.9 1.1 Expected return on plan assets ( 54.6 ) ( 57.5 ) ( 53.7 ) — — — Amortization of prior service cost ( 0.1 ) ( 0.3 ) ( 0.3 ) ( 1.1 ) ( 1.1 ) ( 1.1 ) Amortization of net loss (gain) 23.4 19.1 15.3 — — ( 0.3 ) Recognized curtailment (gain) loss ( 1.3 ) ( 2.3 ) — — — — Settlement loss 1.4 1.7 — — — — Net periodic (benefit) cost $ ( 6.8 ) $ ( 6.8 ) $ ( 0.6 ) $ ( 0.2 ) $ 0.1 $ — The weighted average assumptions used to determine benefit obligations are as follows: Pension Benefits Postretirement Benefits For the year ended December 31, 2021 2020 2019 2021 2020 2019 U.S. Plans: Discount rate 2.89 % 2.62 % 3.34 % 2.70 % 2.30 % 3.20 % Rate of compensation increase N/A N/A N/A N/A N/A N/A Interest credit rate 1.47 % 0.93 % 2.83 % N/A N/A N/A Non-U.S. Plans: Discount rate 1.58 % 1.07 % 1.70 % N/A N/A N/A Rate of compensation increase 3.08 % 3.10 % 2.89 % N/A N/A N/A Interest credit rate 0.33 % 0.29 % 0.22 % N/A N/A N/A The weighted-average assumptions used to determine net periodic benefit cost are as follows: Pension Benefits Postretirement Benefits For the year ended December 31, 2021 2020 2019 2021 2020 2019 U.S. Plans: Discount rate 2.62 % 3.34 % 4.36 % 2.30 % 3.20 % 4.10 % Expected rate of return on plan assets 6.50 % 7.25 % 7.25 % N/A N/A N/A Rate of compensation increase N/A N/A N/A N/A N/A N/A Interest credit rate 0.93 % 2.83 % 2.40 % N/A N/A N/A Non-U.S. Plans: Discount rate 1.07 % 1.70 % 2.42 % N/A N/A N/A Expected rate of return on plan assets 4.45 % 5.31 % 5.34 % N/A N/A N/A Rate of compensation increase 3.10 % 2.89 % 3.06 % N/A N/A N/A Interest credit rate 0.29 % 0.22 % 0.84 % N/A N/A N/A The long-term expected rate of return on plan assets assumptions were determined with input from independent investment consultants and plan actuaries, utilizing asset pricing models and considering historical returns. The discount rates used by us for valuing pension liabilities are based on a review of high-quality corporate bond yields with maturities approximating the remaining life of the projected benefit obligations. In the U.S. plan, the 6.50 % expected rate of return on assets assumption for 2021 reflected a long-term target comprised of an asset allocation range of 25 %- 75 % equity securities, 15 %- 35 % fixed income securities, 10 %- 35 % alternative assets and 0 %- 10 % cash and cash equivalents. As of December 31, 2021, the actual asset allocation for the U.S. plan was 64.4 % equity securities, 22.3 % fixed income securities, 12.6 % alternative assets and 0.7 % cash and cash equivalents. For the non-U.S. plans, the 4.45 % expected rate of return on assets assumption for 2021 reflected a weighted average of the long-term asset allocation targets for our various non-U.S. plans. As of December 31, 2021, the actual weighted average asset 66 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS allocation for the non-U.S. plans was 24.9 % equity securities, 39.8 % fixed income securities, 30.5 % alternative assets/other and 4.8 % cash and cash equivalents. The assumed health care cost trend rates are as follows: December 31, 2021 2020 Health care cost trend rate assumed for next year 7.25 % 6.50 % Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) 4.50 % 4.50 % Year that the rate reaches the ultimate trend rate 2033 2029 Assumed health care cost trend rates have a significant effect on the amounts reported for our health care plans. Plan Assets Our pension plan target allocations and weighted-average asset allocations by asset category are as follows: Target Allocation Actual Allocation Asset Category December 31, 2021 2020 Equity securities 15 %- 75 % 44 % 44 % Fixed income securities 15 %- 75 % 31 % 26 % Alternative assets/Other 0 %- 45 % 22 % 27 % Cash and money market 0 %- 10 % 3 % 3 % Independent investment consultants are retained to assist in executing the plans’ investment strategies. A number of factors are evaluated in determining if an investment strategy will be implemented in our pension trusts. These factors include, but are not limited to, investment style, investment risk, investment manager performance and costs. We periodically review investment managers and their performance in relation to our plans’ investment objectives. The primary investment objective of our various pension trusts is to maximize the value of plan assets, focusing on capital preservation, current income and long-term growth of capital and income. The plans’ assets are typically invested in a broad range of equity securities, fixed income securities, alternative assets and cash instruments. Equity securities include investments in large, mid, and small-capitalization companies located in both developed countries and emerging markets around the world. Fixed income securities include government bonds of various countries, corporate bonds that are primarily investment-grade, and mortgage-backed securities. Alternative assets include investments in real estate and hedge funds employing a wide variety of strategies. Equity securities include Crane Co. common stock, which represents 4 % of plan assets as of December 31, 2021 and 2020. 67 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The fair value of our pension plan assets as of December 31, 2021, by asset category, are as follows: (in millions) Active Markets for Identical Assets Level 1 Other Observable Inputs Level 2 Unobservable Inputs Level 3 Net Asset Value ("NAV") Practical Expedient (a) Total Fair Value Cash Equivalents and Money Markets $ 30.5 $ — $ — $ — $ 30.5 Common Stocks Actively Managed U.S. Equities 112.8 — — — 112.8 Commingled and Mutual Funds U.S. Equity Funds 129.1 — — — 129.1 Non-U.S. Equity Funds 93.7 — — 139.3 233.0 U.S. Fixed Income, Government and Corporate 116.2 — — — 116.2 Registered Investment Company 34.0 — — — 34.0 Collective Trust — — 21.7 19.0 40.7 Non-U.S. Fixed Income, Government and Corporate — — — 222.6 222.6 International Balanced Funds — — — 2.1 2.1 Property Funds 29.0 — — — 29.0 Alternative Investments Insurance / Annuity Contract(s) — 14.7 — — 14.7 Hedge Funds and LDI — — — 64.0 64.0 International Property Funds — — — 52.7 52.7 Total Fair Value $ 545.3 $ 14.7 $ 21.7 $ 499.7 $ 1,081.4 (a) Investments are measured at fair value using the net asset value per share practical expedient, and therefore, are not classified in the fair value hierarchy. In 2021, the pension plan's asset classified as Level 3 constitutes an insurance contract valued annually on an actuarial basis. 68 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The fair value of our pension plan assets as of December 31, 2020, by asset category, are as follows: (in millions) Active Markets for Identical Assets Level 1 Other Observable Inputs Level 2 Unobservable Inputs Level 3 Net Asset Value ("NAV") Practical Expedient (a) Total Fair Value Cash Equivalents and Money Markets $ 30.1 $ — $ — $ — $ 30.1 Common Stocks Actively Managed U.S. Equities 103.2 — — — 103.2 Fixed Income Bonds and Notes — 0.1 — — 0.1 Commingled and Mutual Funds U.S. Equity Funds 117.3 — — — 117.3 Non-U.S. Equity Funds 53.2 — — 178.0 231.2 U.S. Fixed Income, Government and Corporate 76.6 — — — 76.6 Registered Investment Company 18.3 — — — 18.3 Collective Trust — — 22.8 19.2 42.0 Non-U.S. Fixed Income, Government and Corporate — — — 186.5 186.5 International Balanced Funds — — — 1.9 1.9 Alternative Investments Insurance / Annuity Contract(s) — 14.2 — — 14.2 Hedge Funds and LDI — — — 153.8 153.8 International Property Funds — — — 48.9 48.9 Total Fair Value $ 398.7 $ 14.3 $ 22.8 $ 588.3 $ 1,024.1 In 2020, the pension plan's asset classified as Level 3 constitutes an insurance contract valued annually on an actuarial basis The following table sets forth a summary of pension plan assets valued using NAV or its equivalent as of December 31, 2021 and December 31, 2020: Redemption Frequency Unfunded Commitment Other Redemption Restrictions Redemption Notice Period Non-U.S. Equity Funds (a) Immediate None None None Non-U.S. Fixed Income, Government and Corporate (b) Immediate None None None International Balanced Funds (c) Immediate None None None Collective Trust Fund (d) Immediate None None None International Property Funds (e) Immediate None None None Hedge Funds and LDI (f) Immediate None None None (a) These funds invest in corporate equity securities outside the United States. (b) These funds invest in corporate and government fixed income securities outside the United States. (c) These funds invest in a blend of equities, fixed income, cash and property outside the United States. (d) These funds are managed in a collective trust under Australia's Superannuation plan structure. (e) These funds invest in real property outside the United States. (f) These funds invest in strategies that seek to add diversification to a portfolio with uncorrelated risk profiles or are designed to track the duration of all or part of the underlying liability. Cash Flows We expect, based on current actuarial calculations, to contribute cash of approximately $ 18.9 million to our defined benefit pension plans during 2022. Cash contributions in subsequent years will depend on a number of factors including the investment performance of plan assets. 69 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Estimated Future Benefit Payments The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid: Estimated future payments (in millions) Pension Benefits Postretirement Benefits 2022 $ 53.6 $ 2.6 2023 53.2 2.6 2024 54.2 2.4 2025 56.4 2.3 2026 56.0 2.1 2027 to 2031 284.9 8.8 Total payments $ 558.3 $ 20.8 Supplemental Executive Retirement Plan We also have a non-qualified Supplemental Executive Retirement Plan (“SERP”). The SERP, which is not funded, is intended to provide retirement benefits for certain executive officers who were formerly employees of Crane Currency. Benefit amounts are based upon years of service and compensation of the participating employees. There were no pre-tax settlement gains recorded in 2021 or 2020. We recorded a pre-tax settlement gain of $ 0.1 million in 2019. Accrued SERP benefits were $ 3.7 million and $ 3.9 million as of December 31, 2021 and 2020, respectively. Employer contributions made to the SERP were $ 0.2 million, $ 0.2 million and $ 2.2 million in 2021, 2020 and 2019, respectively. Defined Contribution Plans We sponsor savings and investment plans that are available to our eligible employees including employees of our subsidiaries. We made contributions to the plans of $ 12.0 million, $ 11.8 million and $ 11.0 million in 2021, 2020 and 2019, respectively. In addition to participant deferral contributions and company matching contributions on those deferrals, we provide a 3 % non-matching contribution to eligible participants. We made non-matching contributions to these plans of $ 14.6 million, $ 14.5 million and $ 13.4 million in 2021, 2020 and 2019, respectively. 70 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 8 – Stock-Based Compensation Plans At December 31, 2021, we had stock-based compensation awards outstanding under the following shareholder-approved plans: the 2013 Stock Incentive Plan (the "2013 Plan"), 2018 Stock Incentive Plan (the "2018 Plan") and 2018 Amended and Restated Stock Incentive Plan (the “2018 Amended & Restated Plan”), applicable to employees and non-employee directors. The 2013 Plan was approved by the Board of Directors and stockholders at the annual meeting in 2013. The 2013 Plan originally authorized the issuance of up to 9,500,000 shares of stock pursuant to awards under the plan. In 2018, in view of the limited number of shares remaining available under the 2013 Plan, the Board of Directors and stockholders approved the adoption of the 2018 Plan which authorized the issuance of up to 6,500,000 shares of Crane Co. stock. In 2021, the Board of Directors and stockholders approved the adoption of the 2018 Amended and Restated Stock Incentive Plan which authorized the issuance of up to 4,710,000 shares of Crane Co. stock. No further awards will be made under the 2013 Plan or 2018 Plan. The stock incentive plans are used to provide long-term incentive compensation through stock options, restricted share units, performance-based restricted share units and deferred stock units. Stock Options Options are granted under the Stock Incentive Plan to officers and other key employees and directors at an exercise price equal to the closing price on the date of grant. Unless otherwise determined by the Compensation Committee which administers the plan, options become exercisable at a rate of 25 % after the first year, 50 % after the second year, 75 % after the third year and 100 % after the fourth year from the date of grant. Options granted to officers and employees from 2004 to 2013 expire six years after the date of grant. All options granted to directors and options granted to officers and employees after 2014 expire 10 years after the date of grant. We determine the fair value of each grant using the Black-Scholes option pricing model. The weighted-average assumptions for grants made during the years ended December 31, 2021, 2020 and 2019 are as follows: 2021 2020 2019 Dividend yield 3.06 % 3.05 % 2.20 % Volatility 36.28 % 27.15 % 25.17 % Risk-free interest rate 0.50 % 1.23 % 2.64 % Expected lives in years 5.2 5.2 4.2 Expected dividend yield is based on our dividend rate. Expected stock volatility was determined based upon the historical volatility for the four-year period preceding the date of grant. The risk-free interest rate was based on the yield curve in effect at the time the options were granted, using U.S. constant maturities over the expected life of the option. The expected lives of the awards represent the period of time that options granted are expected to be outstanding. Activity in our stock option plans for the year ended December 31, 2021 were as follows: Option Activity Number of Shares (in 000’s) Weighted Average Exercise Price Weighted Average Remaining Life (Years) Options outstanding as of January 1, 2021 2,876 $ 68.88 Granted 155 78.59 Exercised ( 935 ) 57.12 Canceled ( 25 ) 76.84 Options outstanding as of December 31, 2021 2,071 $ 74.82 6.33 Options exercisable as of December 31, 2021 1,161 $ 72.57 5.12 Included in our share-based compensation was expense recognized for our stock option awards of $ 6.0 million, $ 6.4 million and $ 5.7 million in 2021, 2020 and 2019, respectively. The weighted-average fair value of options granted during 2021, 2020 and 2019 was $ 20.82 , $ 15.18 and $ 15.79 , respectively. The total fair value of shares vested during 2021, 2020 and 2019 was $ 6.3 million, $ 6.2 million and $ 6.3 million, respectively. The total intrinsic value of options exercised during 2021, 2020 and 2019 was $ 36.4 million, $ 4.1 million and $ 6.8 million, respectively. The aggregate intrinsic value of exercisable options was $ 33.9 million, $ 29.5 million and $ 39.4 million as of December 31, 2021, 2020 and 2019, respectively. 71 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The total cash received from these option exercises during 2021, 2020 and 2019 was $ 26.4 million, $ 8.9 million and $ 11.4 million, respectively. The tax benefit realized for the tax deductions from these option exercises was $ 5.5 million, $ 0.5 million and $ 0.8 million as of December 31, 2021, 2020 and 2019, respectively. As of December 31, 2021, there was $ 8.5 million of total future compensation cost related to unvested share-based awards to be recognized over a weighted-average period of 1.67 years. Restricted Share Units and Performance-Based Restricted Share Units Restricted share units vest at a rate of 25 % after the first year, 50 % after the second year, 75 % after the third year and 100 % after the fourth year from the date of grant and are subject to forfeiture restrictions which lapse over time. The vesting of performance-based restricted share units is determined in three years based on relative total shareholder return for Crane Co. compared to the S&P Midcap 400 Capital Goods Group, with payout potential ranging from 0 % to 200 % but capped at 100 % if our three year total shareholder return is negative. Included in our share-based compensation was expense recognized for our restricted share unit and performance-based restricted share unit awards of $ 18.3 million, $ 15.1 million and $ 15.6 million in 2021, 2020 and 2019, respectively. The tax (detriment) benefit for the vesting of the restricted share units was $( 0.1 ) million, $( 0.1 ) million and $ 2.8 million as of December 31, 2021, 2020 and 2019, respectively. As of December 31, 2021, there was $ 27.1 million of total future compensation cost related to restricted share unit and performance-based restricted share unit awards, to be recognized over a weighted-average period of 1.98 years. Changes in our restricted share units for the year ended December 31, 2021 were as follows: Restricted Share Unit Activity Restricted Share Units (in 000’s) Weighted Average Grant-Date Fair Value Restricted share units as of January 1, 2021 485 $ 83.17 Restricted share units granted 225 80.38 Restricted share units vested ( 144 ) 77.34 Restricted share units forfeited ( 23 ) 81.13 Performance-based restricted share units granted 72 82.27 Performance-based restricted share units vested ( 67 ) 88.66 Restricted share units as of December 31, 2021 548 $ 82.84 Note 9 - Leases Arrangements that explicitly or implicitly relate to property, plant and equipment are assessed at inception to determine if the arrangement is or contains a lease. Generally, we enter into operating leases as the lessee and recognize right-of-use assets and lease liabilities based on the present value of future lease payments over the lease term. We lease certain vehicles, equipment, manufacturing facilities, and non-manufacturing facilities. We have leases with both lease components and non-lease components, such as common area maintenance, utilities, or other repairs and maintenance. For all asset classes, we applied the practical expedient to account for each separate lease component and its associated non-lease component(s) as a single lease component. We identify variable lease payments, such as maintenance payments based on actual activities performed or costs incurred, at lease commencement by assessing the nature of the payment provisions, including whether the payments are subject to a minimum. Certain leases include options to renew for an additional term or company-controlled options to terminate. We generally determine it is not reasonably certain to assume the exercise of renewal options because there is no economic incentive to renew. As termination options often include penalties, we generally determine it is reasonably certain that termination options will not be exercised because there is an economic incentive not to terminate. Therefore, these options generally do not impact the lease term or the determination or classification of the right-of-use asset and lease liability. In the third quarter of 2017, we entered into a seven-year lease for a used airplane which includes a maximum residual value guarantee of $ 11.1 million if the fair value of the airplane is less than $ 14.4 million at the end of the lease term. We do not 72 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS believe it is probable that any amount will be owed under this guarantee. Therefore, no amount related to the residual value guarantee is included in the lease payments used to measure the right-of-use asset and lease liability. We have not entered into any other leases where a residual value guarantee is provided to the lessor. Rental expense was $ 37.4 million, $ 39.5 million and $ 34.0 million for 2021, 2020 and 2019, respectively. We do not enter into arrangements where restrictions or covenants are imposed by the lessor that, for example, relate to incurring additional financial obligations. Furthermore, we also have not entered into any significant sublease arrangements. We use our collateralized incremental borrowing rate based on the information available at commencement date to determine the present value of future payments and the appropriate lease classification. The rate implicit in the lease is generally unknown, as we generally operate in the capacity of the lessee. Our Consolidated Balance Sheet includes the following related to leases: (in millions) December 31, Classification 2021 2020 Assets Operating right-of-use assets Other assets $ 96.5 $ 103.7 Liabilities Current lease liabilities Accrued liabilities $ 22.5 $ 23.0 Long-term lease liabilities Other liabilities 79.3 86.4 Total lease liabilities $ 101.8 $ 109.4 The components of lease cost were as follows: (in millions) December 31, 2021 2020 2019 Operating lease cost $ 31.2 $ 32.4 $ 27.9 Variable lease cost $ 6.2 $ 7.1 $ 6.1 The weighted average remaining lease terms and discount rates for our operating leases were as follows: December 31, 2021 2020 Weighted-average remaining lease term - operating leases 9.4 9.8 Weighted-average discount rate - operating leases 3.6 % 3.8 % Supplemental cash flow information related to our operating leases was as follows for periods ended December 31, 2021 and 2020: (in millions) December 31, 2021 2020 2019 Cash paid for amounts included in measurement of operating lease liabilities - operating cash flows $ 26.8 $ 26.5 $ 24.3 Right-of-use assets obtained in exchange for new operating lease liabilities $ 17.0 $ 10.0 $ 21.0 Future minimum operating lease payments are as follows: (in millions) December 31, 2021 2022 $ 25.5 2023 22.7 2024 17.5 2025 13.8 2026 9.4 Thereafter 48.2 Total future minimum operating lease payments $ 137.1 Imputed interest 35.3 Present value of lease liabilities reported $ 101.8 73 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 10 – Income Taxes Provision for Income Taxes Our income before taxes is as follows: (in millions) For year ended December 31, 2021 2020 2019 U.S. operations $ 316.5 $ 102.2 $ 37.2 Non-U.S. operations 160.7 99.6 106.7 Total $ 477.2 $ 201.8 $ 143.9 Our provision (benefit) for income taxes consists of: (in millions) For the year ended December 31, 2021 2020 2019 Current: U.S. federal tax $ 34.5 $ 8.6 $ 28.5 U.S. state and local tax 3.4 1.6 2.1 Non-U.S. tax 34.2 12.4 29.0 Total current 72.1 22.6 59.6 Deferred: U.S. federal tax 12.2 14.9 ( 28.8 ) U.S. state and local tax ( 2.0 ) ( 0.6 ) 2.2 Non-U.S. tax 0.6 1.7 ( 1.7 ) Total deferred 10.8 16.0 ( 28.3 ) Total provision for income taxes * $ 82.9 $ 38.6 $ 31.3 * Included in the above amounts are excess tax benefits from share-based compensation of $ 5.4 millions $ 0.4 millions and $ 3.6 millions in 2021, 2020 and 2019, respectively, which were reflected as reductions in our provision for income taxes in 2021, 2020 and 2019. A reconciliation of the statutory U.S. federal tax rate to our effective tax rate is as follows: For the year ended December 31, 2021 2020 2019 Statutory U.S. federal tax rate 21.0 % 21.0 % 21.0 % Increase (reduction) from: Income taxed at non-U.S. rates 0.2 % ( 3.4 ) % 3.1 % Non-U.S. income inclusion, net of tax credits ( 1.6 ) % 2.5 % 4.0 % State and local taxes, net of federal benefit 0.2 % 0.3 % 2.3 % U.S. research and development tax credit ( 0.6 ) % ( 2.5 ) % ( 2.0 ) % U.S. deduction for foreign - derived intangible income ( 1.0 ) % ( 0.4 ) % ( 5.7 ) % Other ( 0.8 ) % 1.6 % ( 1.0 ) % Effective tax rate 17.4 % 19.1 % 21.7 % As of December 31, 2021, we have made the following determinations with regard to our non-U.S. earnings: (in millions) Permanently reinvested Not permanently reinvested Amount of earnings $ 333.2 $ 1,294 Associated tax NA * $ 14.3 * Determination of U.S. income taxes and non-U.S. withholding taxes due upon repatriation of this $ 333.2 million of earnings is not practicable because the amount of such taxes depends upon circumstances existing in numerous taxing jurisdictions at the time the remittance occurs. 74 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Tax Related to Comprehensive Income During 2021, 2020 and 2019, tax (benefit) provision of $ 29.9 million, $( 13.5 ) million and $( 12.6 ) million, respectively, related to changes in pension and post-retirement plan assets and benefit obligations, were recorded to accumulated other comprehensive loss. Deferred Taxes and Valuation Allowances The components of deferred tax assets and liabilities included in our Consolidated Balance Sheets are as follows: (in millions) December 31, 2021 2020 Deferred tax assets: Asbestos-related liabilities $ 138.9 $ 150.3 Tax loss and credit carryforwards 111.2 124.5 Pension and post-retirement benefits 24.1 66.0 Inventories 28.7 29.5 Other 34.9 40.2 Total $ 337.8 $ 410.5 Less: valuation allowance 141.5 153.4 Total deferred tax assets, net of valuation allowance $ 196.3 $ 257.1 Deferred tax liabilities: Basis difference in fixed assets $ ( 42.9 ) $ ( 55.6 ) Basis difference in intangible assets ( 185.9 ) ( 191.4 ) Other ( 20.9 ) ( 22.7 ) Total deferred tax liabilities $ ( 249.7 ) $ ( 269.7 ) Net deferred tax asset (liability) $ ( 53.4 ) $ ( 12.6 ) Balance sheet classification: Long-term deferred tax assets 17.7 41.0 Long-term deferred tax liability ( 71.1 ) ( 53.6 ) Net deferred tax asset (liability) $ ( 53.4 ) $ ( 12.6 ) As of December 31, 2021, we had U.S. federal, U.S. state and non-U.S. tax loss and credit carryforwards that will expire, if unused, as follows: (in millions) Year of expiration U.S. Federal Tax Credits U.S. Federal Tax Losses U.S. State Tax Credits U.S. State Tax Losses Non- U.S. Tax Losses Total 2022-2026 $ — $ — $ 2.7 $ 114.3 $ 5.3 After 2026 3.8 0.7 1.7 764.2 5.8 Indefinite — — 22.0 9.5 184.8 Total tax carryforwards $ 3.8 $ 0.7 $ 26.4 $ 888.0 $ 195.9 Deferred tax asset on tax carryforwards $ 3.8 $ 0.2 $ 21.1 $ 43.9 $ 42.2 $ 111.2 Valuation allowance on tax carryforwards ( 3.8 ) ( 0.2 ) ( 20.3 ) ( 42.2 ) ( 39.9 ) ( 106.4 ) Net deferred tax asset on tax carryforwards $ — $ — $ 0.8 $ 1.7 $ 2.3 $ 4.8 As of December 31, 2021 and 2020, we determined that it was more likely than not that $ 106.4 million and $ 118.3 million, respectively, of our deferred tax assets related to tax loss and credit carryforwards will not be realized. As a result, we recorded a valuation allowance against these deferred tax assets. We also determined that it is more likely than not that a portion of the benefit related to U.S. state and non-U.S. deferred tax assets other than tax loss and credit carryforwards will not be realized. Accordingly, as of December 31, 2021 and 2020, a valuation allowance of $ 35.1 million and $ 35.1 million, respectively, was established against these U.S. state and non-U.S. deferred tax assets. Our total valuation allowance as of December 31, 2021 and 2020 was $ 141.5 million and $ 153.4 million, respectively. 75 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Unrecognized Tax Benefits A reconciliation of the beginning and ending amount of our gross unrecognized tax benefits, excluding interest and penalties, is as follows: (in millions) 2021 2020 2019 Balance of liability as of January 1, $ 34.0 $ 39.8 $ 42.0 Increase as a result of tax positions taken during a prior year 0.7 5.4 1.1 Decrease as a result of tax positions taken during a prior year ( 0.3 ) ( 0.4 ) ( 0.5 ) Increase as a result of tax positions taken during the current year 2.6 1.8 3.2 Decrease as a result of settlements with taxing authorities ( 0.8 ) ( 2.5 ) — Reduction as a result of a lapse of the statute of limitations ( 4.6 ) ( 10.1 ) ( 6.0 ) Balance of liability as of December 31, $ 31.6 $ 34.0 $ 39.8 As of December 31, 2021, 2020 and 2019, the amount of our unrecognized tax benefits that, if recognized, would affect our effective tax rate were $ 33.5 million, $ 32.6 million and $ 43.8 million, respectively. The difference between these amounts and those reflected in the table above relates to (1) offsetting tax effects from other tax jurisdictions, and (2) interest expense, net of deferred taxes and (3) unrecognized tax benefits whose reversals would be recorded to goodwill. We recognize interest and penalties related to unrecognized tax benefits as a component of our income tax expense. During the years ended December 31, 2021, 2020 and 2019, we recognized interest and penalty (income)/ expense of $( 2.6 ) million, $( 0.5 ) million and $ 0.8 million, respectively, in our Consolidated Statements of Operations. As of December 31, 2021 and 2020, we had accrued $ 4.9 million and $ 7.5 million, respectively, of interest and penalties related to unrecognized tax benefits on our Consolidated Balance Sheets. During the next twelve months, it is reasonably possible that our unrecognized tax benefits could change by $ 6.6 million due to settlements of income tax examinations, the expiration of statutes of limitations or other resolution of uncertainties. However, if the ultimate resolution of income tax examinations results in amounts that differ from this estimate, we will record additional income tax expense or benefit in the period in which such matters are effectively settled. Income Tax Examinations Our income tax returns are subject to examination by the U.S. federal, U.S. state and local, and non-U.S. tax authorities. With few exceptions, the years for which we filed returns that are open to examination are as follows: Jurisdiction Year U.S. federal 2018 - 2020 U.S. state and local 2015 - 2020 Non-U.S. 2015 - 2020 Currently, we and our subsidiaries are under examination in various jurisdictions, including Germany (2016 through 2019), Canada (2013 through 2015) and Luxembourg (2017 through 2018). Note 11 – Accrued Liabilities Accrued liabilities consist of: (in millions) December 31, 2021 2020 Employee related expenses $ 175.1 $ 120.5 Warranty 7.3 8.1 Current lease liabilities 22.5 23.0 Contract liabilities 101.1 103.0 Other 124.7 133.4 Total $ 430.7 $ 388.0 We accrue warranty liabilities when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Warranty provision is included in "Cost of sales" in our Consolidated Statements of Operations. 76 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A summary of the warranty liabilities is as follows: (in millions) December 31, 2021 2020 2019 Balance at beginning of period $ 8.1 $ 9.8 $ 17.2 Expense 7.6 8.0 8.5 Changes due to acquisitions/divestitures — 0.3 — Payments / deductions ( 8.4 ) ( 10.1 ) ( 15.8 ) Currency translation — 0.1 ( 0.1 ) Balance at end of period $ 7.3 $ 8.1 $ 9.8 Note 12 – Other Liabilities (in millions) December 31, 2021 2020 Environmental $ 25.8 $ 29.4 Long-term lease liabilities 79.3 86.4 Other 56.0 55.5 Total $ 161.1 $ 171.3 Note 13 - Commitments and Contingencies Asbestos Liability Information Regarding Claims and Costs in the Tort System As of December 31, 2021, we were a defendant in cases filed in numerous state and federal courts alleging injury or death as a result of exposure to asbestos. Activity related to asbestos claims during the periods indicated was as follows: For the year ended December 31, 2021 2020 2019 Beginning claims 29,138 29,056 29,089 New claims 2,975 2,620 2,848 Settlements ( 980 ) ( 885 ) ( 983 ) Dismissals ( 1,175 ) ( 1,653 ) ( 1,898 ) Ending claims 29,958 29,138 29,056 Of the 29,958 pending claims as of December 31, 2021, approximately 18,000 claims were pending in New York of which approximately 16,000 are non-malignancy claims that were filed over 15 years ago and have been inactive under New York court orders. We have tried several cases resulting in defense verdicts by the jury or directed verdicts for the defense by the court. We further have pursued appeals of certain adverse jury verdicts that have resulted in reversals in favor of the defense. We have also tried several other cases resulting in plaintiff verdicts which we paid or settled after unsuccessful appeals. The gross settlement and defense costs incurred (before insurance recoveries and tax effects) by us for the years ended December 31, 2021, 2020 and 2019 totaled $ 55.2 million, $ 50.9 million and $ 66.2 million, respectively. In contrast to the recognition of settlement and defense costs, which reflect the current level of activity in the tort system, cash payments and receipts generally lag the tort system activity by several months or more, and may show some fluctuation from period to period. Cash payments of settlement amounts are not made until all releases and other required documentation are received by us, and reimbursements of both settlement amounts and defense costs by insurers may be uneven due to insurer payment practices, transitions from one insurance layer to the next excess layer and the payment terms of certain reimbursement agreements. Our total pre-tax payments for settlement and defense costs, net of funds received from insurers, for the years ended December 31, 2021, 2020 and 2019 totaled $ 44.9 million, $ 31.1 million and $ 41.5 million, respectively. Detailed below are the comparable amounts for the periods indicated. 77 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in millions) For the year ended December 31, 2021 2020 2019 Settlement / indemnity costs incurred (a) $ 40.6 $ 35.3 $ 45.5 Defense costs incurred (a) 14.6 15.6 20.7 Total costs incurred $ 55.2 $ 50.9 $ 66.2 Settlement / indemnity payments $ 42.6 $ 24.7 $ 38.9 Defense payments 15.4 16.7 21.4 Insurance receipts ( 13.1 ) ( 10.3 ) ( 18.8 ) Pre-tax cash payments, net $ 44.9 $ 31.1 $ 41.5 (a) Before insurance recoveries and tax effects. The amounts shown for settlement and defense costs incurred, and cash payments, are not necessarily indicative of future period amounts, which may be higher or lower than those reported. Cumulatively through December 31, 2021, we have resolved (by settlement or dismissal) approximately 143,000 claims. The related settlement cost incurred by us and our insurance carriers is approximately $ 720 million, for an average settlement cost per resolved claim of approximately $ 5,000 . The average settlement cost per claim resolved during the years ended December 31, 2021, 2020 and 2019 was $ 18,800 , $ 13,900 , and $ 15,800 , respectively. Because claims are sometimes dismissed in large groups, the average cost per resolved claim, as well as the number of open claims, can fluctuate significantly from period to period. In addition to large group dismissals, the nature of the disease and corresponding settlement amounts for each claim resolved will also drive changes from period to period in the average settlement cost per claim. Accordingly, the average cost per resolved claim is not considered in our periodic review of our estimated asbestos liability. For a discussion regarding the four most significant factors affecting the liability estimate, see “Effects on the Consolidated Financial Statements.” Effects on the Consolidated Financial Statements We have retained an independent actuarial firm to assist management in estimating our asbestos liability in the tort system. The actuarial consultants review information provided by us concerning claims filed, settled and dismissed, amounts paid in settlements and relevant claim information such as the nature of the asbestos-related disease asserted by the claimant, the jurisdiction where filed and the time lag from filing to disposition of the claim. The methodology used by the actuarial consultants to project future asbestos costs is based on our recent historical experience for claims filed, settled and dismissed during a base reference period. Our experience is then compared to estimates of the number of individuals likely to develop asbestos-related diseases determined based on widely used previously conducted epidemiological studies augmented with current data inputs. Those studies were undertaken in connection with national analyses of the population of workers believed to have been exposed to asbestos. Using that information, the actuarial consultants estimate the number of future claims that would be filed against us and estimates the aggregate settlement or indemnity costs that would be incurred to resolve both pending and future claims based upon the average settlement costs by disease during the reference period. This methodology has been accepted by numerous courts. After discussions with us, the actuarial consultants augment our liability estimate for the costs of defending asbestos claims in the tort system using a forecast from us which is based upon discussions with our defense counsel. Based on this information, the actuarial consultants compile an estimate of our asbestos liability for pending and future claims using a range of reference periods based on claim experience and claims expected to be filed through the indicated forecast period. The most significant factors affecting the liability estimate are (1) the number of new mesothelioma claims filed against us, (2) the average settlement costs for mesothelioma claims, (3) the percentage of mesothelioma claims dismissed against us and (4) the aggregate defense costs incurred by us. These factors are interdependent, and no one factor predominates in determining the liability estimate. In our view, the forecast period used to provide the best estimate for asbestos claims and related liabilities and costs is a judgment based upon a number of trend factors, including the number and type of claims being filed each year; the jurisdictions where such claims are filed, and the effect of any legislation or judicial orders in such jurisdictions restricting the types of claims that can proceed to trial on the merits; and the likelihood of any comprehensive asbestos legislation at the federal level. In addition, the dynamics of asbestos litigation in the tort system have been significantly affected by the substantial number of companies that have filed for bankruptcy protection, thereby staying any asbestos claims against them until the conclusion of such proceedings, and the establishment of a number of post-bankruptcy trusts for asbestos claimants, which have been estimated to provide $ 36 billion for payments to current and future claimants. These trend factors have both positive and negative effects on the dynamics of asbestos litigation in the tort system and the related best estimate of 78 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS our asbestos liability, and these effects do not move in a linear fashion but rather change over multi-year periods. Accordingly, management continues to monitor these trend factors over time and periodically assesses whether an alternative forecast period is appropriate. Each quarter, the actuarial consultants compile an update based upon our experience in claims filed, settled and dismissed as well as average settlement costs by disease category (mesothelioma, lung cancer, other cancer, and non-malignant conditions including asbestosis). In addition to this claims experience, we also consider additional quantitative and qualitative factors such as the nature of the aging of pending claims, significant appellate rulings and legislative developments, and their respective effects on expected future settlement values. As part of this process, we also consider trends in the tort system such as those enumerated above. Management considers all these factors in conjunction with the liability estimate of the actuarial consultants and determines whether a change in the estimate is warranted. Liability Estimate. In June 2016, the New York State Court of Appeals issued its opinion in Dummitt v. Crane Co ., affirming a 2012 verdict for $ 4.9 million against us. In that opinion, the court ruled that in certain circumstances we are legally responsible for asbestos-containing materials made and sold by third parties that others attached post-sale to our equipment. This decision provided clarity regarding the nature of claims that may proceed to trial in New York and greater predictability regarding future claim activity. We also reflected the impact of the Dummitt decision on our expected settlement values. Accordingly, on December 31, 2016, we updated and extended our asbestos liability estimate through 2059, the generally accepted end point. Following our experience in the tort system post the Dummitt decision, we entered into several, increasingly similar, group settlements with various plaintiff firms and we expect this new trend of these types of group settlements to continue. Accordingly, effective as of December 31, 2019, we updated our estimate of the asbestos liability, including revised costs of settlement or indemnity payments and defense costs relating to currently pending claims and future claims projected to be filed against us through the same expected end point of 2059. Our estimate of the asbestos liability for pending and future claims through 2059 is based on the projected future asbestos costs resulting from our experience using a range of reference periods for claims filed, settled and dismissed. Based on this estimate, we recorded an additional liability of $ 255 million as of December 31, 2019. An aggregate liability of $ 712 million was recorded as of December 31, 2019 to cover the estimated cost of asbestos claims now pending or subsequently asserted through 2059, of which approximately 85 % is attributable to settlement and defense costs for future claims projected to be filed through 2059. The liability is reduced when cash payments are made in respect of settled claims and defense costs. The liability was $ 612 million and $ 670 million as of December 31, 2021 and 2020, respectively. It is not possible to forecast when cash payments related to the asbestos liability will be fully expended; however, it is expected such cash payments will continue for a number of years past 2059, due to the significant proportion of future claims included in the estimated asbestos liability and the lag time between the date a claim is filed and when it is resolved. None of these estimated costs have been discounted to present value due to the inability to reliably forecast the timing of payments. The current portion of the total estimated liability at December 31, 2021 and 2020 is $ 62.3 million and $ 66.5 million, respectively and represents our best estimate of total asbestos costs expected to be paid during the twelve-month period. Such amount is based upon the actuarial model together with our prior year payment experience for both settlement and defense costs. We have made our best estimate of the costs through 2059. Through December 31, 2021, our actual experience during the updated reference period for mesothelioma claims filed and dismissed generally approximated the assumptions in our liability estimate. In addition to this claims experience, we considered additional quantitative and qualitative factors such as the nature of the aging of pending claims, significant appellate rulings and legislative developments, and their respective effects on expected future settlement values. Based on this evaluation, we determined that no change in the estimate was warranted for the period ended December 31, 2021. Insurance Coverage and Receivables. Prior to 2005, a significant portion of our settlement and defense costs were paid by our primary insurers. With the exhaustion of that primary coverage, we began negotiations with our excess insurers to reimburse us for a portion of our settlement and/or defense costs as incurred. To date, we have entered into agreements providing for such reimbursements, known as “coverage-in-place,” with eleven of our excess insurer groups. Under such coverage-in-place agreements, an insurer’s policies remain in force and the insurer undertakes to provide coverage for our present and future asbestos claims on specified terms and conditions that address, among other things, the share of asbestos claims costs to be paid by the insurer, payment terms, claims handling procedures and the expiration of the insurer’s obligations. Similarly, under a variant of coverage-in-place, we have entered into an agreement with a group of insurers confirming the aggregate amount of available coverage under the subject policies and setting forth a schedule for future reimbursement payments to us based on aggregate indemnity and defense payments made. In addition, with ten of our excess insurer groups, we entered into agreements settling all asbestos and other coverage obligations for an agreed sum and received a total of $ 82.5 million in 79 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS aggregate as a result of those settlements. Reimbursements from insurers for past and ongoing settlement and defense costs allocable to their policies have been made in accordance with these coverage-in-place and other agreements. All these agreements include provisions for mutual releases, indemnification of the insurer and, for coverage-in-place, claims handling procedures. With the agreements referenced above, we have concluded settlements with all but two of our solvent excess insurers with policies expected to respond to the aggregate costs included in the liability estimate. The first such insurer, which issued a single applicable policy, has been paying for many years the shares of defense and indemnity costs we have allocated to it, subject to a reservation of rights. The second insurer issued a single applicable policy in a layer of coverage that we do not anticipate reaching until many years from now, and, prior to the policy being reached, we anticipate opening a dialogue with that insurer about the execution of a suitable agreement. There are no pending legal proceedings between us and any insurer contesting our asbestos claims under our insurance policies. In conjunction with developing the aggregate updated liability estimate referenced above, we also developed an updated estimate of probable insurance recoveries for our asbestos liabilities. In developing this estimate, we considered our coverage-in-place and other settlement agreements described above, as well as several additional factors. These additional factors include the financial viability of the insurance companies, the method by which losses will be allocated to the various insurance policies and the years covered by those policies, how settlement and defense costs will be covered by the insurance policies and interpretation of the effect on coverage of various policy terms and limits. In addition, the timing and amount of reimbursements will vary because our insurance coverage for asbestos claims involves multiple insurers, with different policy terms and certain gaps in coverage. In addition to consulting with legal counsel on these insurance matters, we retained insurance consultants to assist management in the estimation of probable insurance recoveries based upon the aggregate liability estimate described above and assuming the continued viability of all solvent insurance carriers. Based upon the analysis of policy terms and other factors noted above by our legal counsel, and incorporating risk mitigation judgments by us where policy terms or other factors were not certain, our insurance consultants compiled a model indicating how our historical insurance policies would respond to varying levels of asbestos settlement and defense costs and the allocation of such costs between such insurers and us. Using the estimated liability as of December 31, 2019 (for claims filed or expected to be filed through 2059), the insurance consultant’s model forecasted that approximately 14 % of the liability would be reimbursed by our insurers. While there are overall limits on the aggregate amount of insurance available to us with respect to asbestos claims, certain limits were not reached by the total estimated liability currently recorded by us, and such overall limits did not influence our determination of the asset amount to record. We allocate to ourselves the amount of the asbestos liability (for claims filed or expected to be filed through 2059) that is in excess of available insurance coverage allocated to such years. An asset of $ 98 million was recorded as of December 31, 2019 representing the probable insurance reimbursement for claims expected through 2059. The asset is reduced as reimbursements and other payments from insurers are received. The asset was $ 74 million and $ 87 million as of December 31, 2021 and 2020, respectively. We review the estimated reimbursement rate with our insurance consultants on a periodic basis in order to confirm overall consistency with our established reserves. The reviews encompass consideration of the performance of the insurers under coverage-in-place agreements and the effect of any additional lump-sum payments under other insurer agreements. Actual insurance reimbursements vary from period to period, and will decline over time, for the reasons cited above. Uncertainties. Estimation of our ultimate exposure for asbestos-related claims is subject to significant uncertainties, as there are multiple variables that can affect the timing, severity and quantity of claims and the manner of their resolution. We caution that our estimated liability is based on assumptions with respect to future claims, settlement and defense costs based on past experience that may not prove reliable as predictors; the assumptions are interdependent and no single factor predominates in determining the liability estimate. A significant upward or downward trend in the number of claims filed, depending on the nature of the alleged injury, the jurisdiction where filed and the quality of the product identification, or a significant upward or downward trend in the costs of defending claims, could change the estimated liability, as would substantial adverse verdicts at trial that withstand appeal. A legislative solution, structured settlement transaction, or significant change in relevant case law could also change the estimated liability. The same factors that affect developing estimates of probable settlement and defense costs for asbestos-related liabilities also affect estimates of the probable insurance reimbursements, as do a number of additional factors. These additional factors include the financial viability of the insurance companies, the method by which losses will be allocated to the various insurance policies and the years covered by those policies, how settlement and defense costs will be covered by the insurance policies and interpretation of the effect on coverage of various policy terms and limits and their interrelationships. In addition, due to the uncertainties inherent in litigation matters, no assurances can be given regarding the outcome of any litigation, if necessary, to enforce our rights under our insurance policies or settlement agreements. Many uncertainties exist surrounding asbestos litigation, and we will continue to evaluate our estimated asbestos-related liability and corresponding estimated insurance reimbursement as well as the underlying assumptions and process used to 80 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS derive these amounts. These uncertainties may result in our incurring future charges or increases to income to adjust the carrying value of recorded liabilities and assets, particularly if the number of claims and settlement and defense costs change significantly, or if there are significant developments in the trend of case law or court procedures, or if legislation or another alternative solution is implemented. Although the resolution of these claims will likely take many years, the effect on the results of operations, financial position and cash flow in any given period from a revision to these estimates could be material. Other Contingencies Environmental Matters For environmental matters, we record a liability for estimated remediation costs when it is probable that we will be responsible for such costs and they can be reasonably estimated. Generally, third party specialists assist in the estimation of remediation costs. The environmental remediation liability as of December 31, 2021 is substantially related to the former manufacturing site in Goodyear, Arizona (the “Goodyear Site”) discussed below. On June 21, 2021, we completed the sale of substantially all of the property associated with what we have historically called the Goodyear Site for $ 8.7 million, retaining only a small parcel on which our remediation and treatment systems are located. We will continue to be responsible for all remediation costs associated with the Goodyear Site. Goodyear Site The Goodyear Site was operated by Unidynamics/Phoenix, Inc. (“UPI”), which became an indirect subsidiary in 1985 when we acquired UPI’s parent company, UniDynamics Corporation. UPI manufactured explosive and pyrotechnic compounds, including components for critical military programs, for the U.S. government at the Goodyear Site from 1962 to 1993, under contracts with the Department of Defense and other government agencies and certain of their prime contractors. In 1990, the U.S. Environmental Protection Agency (“EPA”) issued administrative orders requiring UPI to design and carry out certain remedial actions, which UPI has done. Groundwater extraction and treatment systems have been in operation at the Goodyear Site since 1994. On July 26, 2006, we entered into a consent decree with the EPA with respect to the Goodyear Site providing for, among other things, a work plan for further investigation and remediation activities (inclusive of a supplemental remediation investigation and feasibility study). During the third quarter of 2014, the EPA issued a Record of Decision (“ROD”) amendment permitting, among other things, additional source area remediation resulting in us recording a charge of $ 49.0 million, extending the accrued costs through 2022. Following the 2014 ROD amendment, we continued our remediation activities and explored an alternative strategy to accelerate remediation of the site. During the fourth quarter of 2019, we received conceptual agreement from the EPA on our alternative remediation strategy which is expected to further reduce the contaminant plume. Accordingly, in 2019, we recorded a pre-tax charge of $ 18.9 million, net of reimbursements, to extend our forecast period through 2027 and reflect our revised workplan. The total estimated gross liability was $ 32.3 million and $ 39.8 million as of December 31, 2021 and 2020, respectively and as described below, a portion is reimbursable by the U.S. Government. The current portion of the total estimated liability was $ 7.1 million and $ 10.9 million as of December 31, 2021 and 2020, respectively, and represents our best estimate, in consultation with our technical advisors, of total remediation costs expected to be paid during the twelve-month period. It is not possible at this point to reasonably estimate the amount of any obligation in excess of our current accruals through the 2027 forecast period because of the aforementioned uncertainties, in particular, the continued significant changes in the Goodyear Site conditions and additional expectations of remediation activities experienced in recent years. On July 31, 2006, we entered into a consent decree with the U.S. Department of Justice on behalf of the Department of Defense and the Department of Energy pursuant to which, among other things, the U.S. Government reimburses us for 21 % of qualifying costs of investigation and remediation activities at the Goodyear Site. As of December 31, 2021 and 2020, we recorded a receivable of $ 7.3 million and $ 7.8 million, respectively, for the expected reimbursements from the U.S. Government in respect of the aggregate liability as at that date. The receivable is reduced as reimbursements and other payments from the U.S. Government are received. 81 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Other Environmental Matters Marion, IL Site We have been identified as a potentially responsible party (“PRP”) with respect to environmental contamination at the Crab Orchard National Wildlife Refuge Superfund Site (the “Crab Orchard Site”). The Crab Orchard Site is located near Marion, Illinois, and consists of approximately 55,000 acres. Beginning in 1941, the United States used the Crab Orchard Site for the production of ordnance and other related products for use in World War II. In 1947, about half of the Crab Orchard Site was leased to a variety of industrial tenants whose activities (which continue to this day) included manufacturing ordnance and explosives. A predecessor of us formerly leased portions of the Crab Orchard Site and conducted manufacturing operations at the Crab Orchard Site from 1952 until 1964. General Dynamics Ordnance and Tactical Systems, Inc. (“GD-OTS”) is in the process of conducting a remedial investigation and feasibility study for a portion of the Crab Orchard Site (the “AUS-OU”), which includes an area where we maintained operations, pursuant to an Administrative Order on Consent. A remedial investigation report was approved in February 2015, and work on the feasibility study is underway. It is unclear when the final feasibility study will be completed, or when a final Record of Decision may be issued. GD-OTS has asked us to participate in a voluntary, multi-party mediation exercise with respect to response costs it has incurred or will incur with respect to the AUS-OU. We and other PRPs executed a non-binding mediation agreement on March 16, 2015, and the U.S. government executed the mediation agreement on August 6, 2015. The first phase of the mediation, involving certain former munitions or ordnance storage areas, began in November 2017, but did not result in a multi-party settlement agreement. Subsequently, we entered into discussions directly with GD-OTS and reached an agreement, as of July 13, 2021, to contribute toward GD-OTS’s past RI-FS costs associated with the first-phase areas for a non-material amount. We have also agreed to pay a modest percentage of future RI-FS costs and the United States’ claimed past response costs relative to the first-phase areas, a sum that we expect in the aggregate to be immaterial. We understand that GD-OTS has also reached agreements-in-principle with the U.S. Government and the other participating PRPs related to the first-phase areas of concern. Negotiations between GD-OTS and the U.S. Government are underway with respect to resolution of the remaining areas of the site, including those portions of the Crab Orchard Site where our predecessor conducted manufacturing and research activities. We at present cannot predict whether these further negotiations will result in an agreement, or when any determination of the ultimate allocable shares of the various PRPs, including the U.S. Government, is likely to be completed. It is not possible at this time to reasonably estimate the total amount of any obligation for remediation of the Crab Orchard Site as a whole because the allocation among PRPs, selection of remediation alternatives, and concurrence of regulatory authorities have not yet advanced to the stage where a reasonable estimate can be made. We notified our insurers of this potential liability and have obtained defense and indemnity coverage, subject to reservations of rights, under certain of our insurance policies. Roseland, NJ Site The Roseland Site was operated by Resistoflex Corporation (“Resistoflex”), which became an indirect subsidiary of ours in 1985 when we acquired Resistoflex’s parent company, UniDynamics Corporation. Resistoflex manufactured specialty lined pipe and fittings at the site from the 1950s until it was closed in the mid-1980s. We undertook an extensive soil remediation effort at the Roseland Site following our closure and had been monitoring the Site’s condition in the years that followed. In response to changes in remediation standards, in 2014 we began to conduct further site characterization and delineation studies at the Site. We are in the late stages of our remediation activities at the Site, which include a comprehensive delineation of contaminants of concern in soil, groundwater, surface water, sediment, and indoor air testing, all in accordance with the New Jersey Department of Environmental Protection guidelines and directives. Other Proceedings We regularly review the status of lawsuits, claims and proceedings that have been or may be asserted against us relating to the conduct of our business, including those pertaining to product liability, patent infringement, commercial, employment, employee benefits, environmental and stockholder matters. We record a provision for a liability for such matters when it is considered probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions, if any, are reviewed quarterly and adjusted as additional information becomes available. If either or both of the criteria are not met, we assess whether there is at least a reasonable possibility that a loss, or additional losses, may have been incurred. If there is a reasonable possibility that a loss or additional loss may have been incurred for such matters, we disclose the estimate of the amount of loss or range of loss, disclose that the amount is immaterial, or disclose that an estimate of loss cannot be made, as applicable. We believe that as of December 31, 2021 2020 and 2019, there was no reasonable possibility that a material loss, or any additional material losses, may have been incurred for such matters, and that adequate provision has been made in our financial statements for the potential impact of all such matters. 82 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 14 – Financing Our debt as of December 31, 2021 and 2020 consisted of the following: (in millions) December 31, 2021 2020 Commercial paper $ — $ 27.2 364 -Day Credit Agreement — 348.5 Total short-term borrowings $ — $ 375.7 4.45 % notes due December 2023 $ 299.4 $ 299.1 6.55 % notes due November 2036 198.5 198.4 4.20 % notes due March 2048 346.3 346.2 Other deferred financing costs associated with credit facilities ( 1.8 ) ( 0.8 ) Total long-term debt $ 842.4 $ 842.9 Debt discounts and debt issuance costs totaled $ 5.7 million and $ 6.6 million as of December 31, 2021 and 2020, respectively, and have been netted against the aggregate principal amounts of the related debt in the components of the debt table above. Commercial paper program - On July 28, 2021, we increased the size of the commercial paper program (“CP Program”) to permit the issuance of short-term, unsecured commercial paper notes in an aggregate principal amount not to exceed $ 650 million at any time outstanding. We may issue short-term, unsecured commercial paper notes pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended. Prior to this increase, the CP Program permitted us to issue commercial paper notes in an aggregate principal amount not to exceed $ 550 million at any time outstanding. The other terms and conditions of the CP Program remain the same. Amounts available under the CP Program may be borrowed, repaid and re-borrowed from time to time. The notes will have maturities of up to 397 days from date of issue. The notes rank at least pari passu with all of our other unsecured and unsubordinated indebtedness. As of December 31, 2021 and 2020, there was $ 0.0 million and $ 27.2 million of outstanding borrowings, respectively. We issued $ 100 million in January 2020 and $ 150 million in December 2019 of commercial paper to fund the acquisitions of I&S and Cummins-Allison, respectively. See discussion in Note 2, “Acquisitions” for further details. 364-Day Credit Agreement - On April 16, 2020, we entered into a new senior unsecured 364 -day credit facility (the “ 364 -Day Credit Agreement”). We borrowed term loans denominated in dollars (the “Dollar Term Loans”) in an aggregate principal amount equal to $ 300 million, and term loans denominated in euros (the “Euro Term Loans”) in an aggregate principal amount equal to € 40 million under the 364 -Day Credit Agreement. Interest on the Dollar Term Loans accrues at a rate per annum equal to (a) a base rate (determined in a customary manner), plus a margin dependent upon ratings of our senior unsecured long-term debt (the “Index Debt Rating”) or (2) an adjusted LIBO rate (determined in a customary manner) for an interest period to be selected by us, plus a margin dependent upon the Index Debt Rating. Interest on the Euro Term Loans accrues at an adjusted LIBO rate (determined in a customary manner) for an interest period to be selected by us, plus a margin. The 364 - Day Credit Agreement contains customary affirmative and negative covenants and customary events of default and acceleration for credit facilities of this type. As of December 31, 2020, there was $ 348.5 million outstanding under 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. 4.45% notes due December 2023 - In December 2013, we issued 10 year notes having an aggregate principal amount of $ 300 million. The notes are unsecured, senior obligations that mature on December 15, 2023 and bear interest at 4.45 % per annum, payable semi-annually on June 15 and December 15 of each year. The notes have no sinking fund requirement, but may be redeemed, in whole or part, at our option. These notes do not contain any material debt covenants or cross default provisions. If there is a change in control of the Company, and if as a consequence, the notes are rated below investment grade by both Moody’s Investors Service and Standard & Poor’s, then holders of the notes may require us to repurchase them, in whole or in part, for 101 % of the principal amount plus accrued and unpaid interest. Debt issuance costs are deferred and included in long-term debt and are amortized as a component of interest expense over the term of the notes. Including debt issuance cost amortization, these notes have an effective annualized interest rate of 4.56 %. The notes were issued under an indenture dated as of December 13, 2013. The indentures contain certain restrictions, including a limitation that restricts our ability and the ability of certain of our subsidiaries to create or incur secured indebtedness, enter into certain sale and leaseback transactions, and consolidate, merge or transfer all or substantially all of our assets and the assets of our subsidiaries. 6.55% notes due November 2036 - In November 2006, we issued 30 year notes having an aggregate principal amount of $ 200 million. The notes are unsecured, senior obligations of us that mature on November 15, 2036 and bear interest at 6.55 % per 83 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS annum, payable semi-annually on May 15 and November 15 of each year. The notes have no sinking fund requirement, but may be redeemed, in whole or in part, at the option of us. These notes do not contain any material debt covenants or cross default provisions. If there is a change in control of the Company, and if as a consequence, the notes are rated below investment grade by both Moody’s Investors Service and Standard & Poor’s, then holders of the notes may require us to repurchase them, in whole or in part, for 101 % of the principal amount plus accrued and unpaid interest. Debt issuance costs are deferred and included in long-term debt and are amortized as a component of interest expense over the term of the notes. Including debt issuance cost amortization, these notes have an effective annualized interest rate of 6.67 %. The notes were issued under an indenture dated as of April 1, 1991. The indentures contain certain restrictions, including a limitation that restricts our ability and the ability of certain of our subsidiaries to create or incur secured indebtedness, enter into certain sale and leaseback transactions, and consolidate, merge or transfer all or substantially all of our assets and the assets of our subsidiaries. 4.20% notes due March 2048 - On February 5, 2018, we completed a public offering of $ 350 million aggregate principal amount of 4.20 % Senior Notes due 2048 (the "2048 Notes"). The 2048 Notes bear interest at a rate of 4.20 % per annum and mature on March 15, 2048. Interest on the 2048 Notes is payable on March 15 and September 15 of each year, commencing on September 15, 2018. These notes do not contain any material debt covenants or cross default provisions. If there is a change in control of the Company, and if as a consequence, the notes are rated below investment grade by both Moody’s Investors Service and Standard & Poor’s, then holders of the notes may require us to repurchase them, in whole or in part, for 101 % of the principal amount plus accrued and unpaid interest. Debt issuance costs are deferred and included in long-term debt and are amortized as a component of interest expense over the term of the notes. Including debt issuance cost amortization, these notes have an effective annualized interest rate of 4.29 %. The notes were issued under an indenture dated as of February 5, 2018. The indentures contain certain restrictions, including a limitation that restricts our ability and the ability of certain of our subsidiaries to create or incur secured indebtedness, enter into certain sale and leaseback transactions, and consolidate, merge or transfer all or substantially all of our assets and the assets of our subsidiaries. Other - As of December 31, 2021, we had open standby letters of credit of $ 49.5 million issued pursuant to a $ 162.7 million uncommitted Letter of Credit Reimbursement Agreement, and certain other credit lines. As of December 31, 2020, we had open standby letters of credit of $ 57.9 million issued pursuant to a $ 183.4 million uncommitted Letter of Credit Reimbursement Agreement, and certain other credit lines. Revolving Credit Facility - On July 28, 2021, we entered into a $ 650 million, 5 -year Revolving Credit Agreement (the “2021 Facility”), which replaced the $ 550 million revolving credit facility that we had entered into in December 2017. The 2021 Facility allows us to borrow, repay, or to the extent permitted by the agreement, prepay and re-borrow funds at any time prior to the stated maturity date. Interest on loans made under the 2021 Facility accrues, at our option, at a rate per annum equal to (1) a base rate, plus a margin ranging from 0.00 % to 0.50 % depending upon the ratings by S&P and Moody’s of our senior unsecured long-term debt (the "Index Debt Rating"), or (2) an adjusted LIBO rate or the applicable replacement rate (determined based on “hardwired” LIBOR transition provisions consistent with those published by the Alternative References Rates Committee) for an interest period to be selected by us, plus a margin ranging from 0.805 % to 1.50 % depending upon the Index Debt Rating. The 2021 Facility contains customary affirmative and negative covenants for credit facilities of this type, including limitations on us and our subsidiaries with respect to indebtedness, liens, mergers, consolidations, liquidations and dissolutions, sales of all or substantially all assets, transactions with affiliates and hedging arrangements. We must also maintain a debt to capitalization ratio not to exceed 0.65 to 1.00 at all times. The 2021 Facility also provides for customary events of default, including failure to pay principal, interest or fees when due, failure to comply with covenants, any representation or warranty made by us or any of our material subsidiaries being false in any material respect, default under certain other material indebtedness, certain insolvency or receivership events affecting us and our material subsidiaries, certain ERISA events, material judgments and a change in control of us. The undrawn portion of this revolving credit agreement is also available to serve as a backstop facility for the issuance of commercial paper. As of December 31, 2021 and 2020, there were no outstanding borrowings. As of December 31, 2021, our total debt to total capitalization ratio was 31.5 %, computed as follows: (in millions) Total long-term debt $ 842.4 Total shareholders’ equity 1,832.3 Capitalization $ 2,674.7 Total indebtedness to capitalization 31.5 % 84 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 15 - Fair Value Measurements Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are to be considered from the perspective of a market participant that holds the asset or owes the liability. The standards also establish a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standards describe three levels of inputs that may be used to measure fair value: Level 1 : Quoted prices in active markets for identical or similar assets and liabilities. Level 2 : Quoted prices for identical or similar assets and liabilities in markets that are not active or observable inputs other than quoted prices in active markets for identical or similar assets and liabilities. Level 2 assets and liabilities include over-the-counter derivatives, principally forward foreign exchange contracts, whose value is determined using pricing models with inputs that are generally based on published foreign exchange rates and exchange traded prices, adjusted for other specific inputs that are primarily observable in the market or can be derived principally from or corroborated by observable market data. Level 3 : Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Valuation Technique The carrying value of our financial assets and liabilities, including cash and cash equivalents, accounts receivable, commercial paper and accounts payable approximate fair value, without being discounted, due to the short periods during which these amounts are outstanding. We are exposed to certain risks related to our ongoing business operations, including market risks related to fluctuation in currency exchange. We use foreign exchange contracts to manage the risk of certain cross-currency business relationships to minimize the impact of currency exchange fluctuations on our earnings and cash flows. We do not hold or issue derivative financial instruments for trading or speculative purposes. Foreign exchange contracts not designated as hedging instruments had a notional value of $ 3.0 million and $ 34.2 million as of December 31, 2021 and 2020, respectively. Our derivative assets and liabilities include foreign exchange contract derivatives that are measured at fair value using internal models based on observable market inputs such as forward rates and interest rates. Based on these inputs, the derivatives are classified within Level 2 of the valuation hierarchy. Such derivative receivable amounts are recorded within “Other current assets” on our Consolidated Balance Sheets and were $ 0.0 million and less than $ 0.1 million as of the years ended December 31, 2020 and 2019, respectively. Such derivative liability amounts are recorded within “Accrued liabilities” on our Consolidated Balance Sheets and were less than $ 0.1 million and $ 0.1 million for the years ended December 31, 2021 and 2020, respectively. Available-for-sale securities consist of marketable debt securities and rabbi trusts investments. Marketable debt securities consist of commercial paper which are measured at fair value using prices for comparable securities in active markets, and are therefore classified within Level 2 of the valuation hierarchy. The fair value of the commercial paper was $ 30.0 million as of December 31, 2020. These investments are included in “Other current assets” on our Consolidated Balance Sheets. We also have two rabbi trusts that hold marketable securities for the benefit of participants in the SERP. These investments are measured at fair value using quoted market prices in an active market, and are therefore classified within Level 1 of the valuation hierarchy. The fair value of available-for-sale securities was $ 1.6 million and $ 1.5 million as of December 31, 2021 and 2020, respectively. These investments are included in “Other assets” on our Consolidated Balance Sheets. Long-term debt rates currently available to us for debt with similar terms and remaining maturities are used to estimate the fair value for debt issues that are not quoted on an exchange. The estimated fair value of long-term debt is measured using Level 2 inputs and was $ 984.9 million and $ 954.8 million as of December 31, 2021 and 2020, respectively. 85 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 16 – Restructuring Overview 2020 Repositioning - In the second quarter of 2020, we initiated actions in response to the adverse economic impact of COVID-19 and integration actions related to the Cummins-Allison acquisition. These actions include workforce reductions of approximately 1,200 employees, or about 11 % of our global workforce, and the exiting of two leased office facilities and one leased warehouse facility. We do not expect to incur additional restructuring charges. 2019 Repositioning - In the fourth quarter of 2019, we initiated actions to consolidate two manufacturing operations in Europe within our Process Flow Technologies segment. In 2020, we recorded additional severance costs related to the final negotiation with the works council/union at both locations. These actions, taken together, included workforce reductions of approximately 180 employees, or less than 1 % of our global workforce. We expect to complete the program in the fourth quarter of 2023. 2017 Repositioning - In the fourth quarter of 2017, we initiated broad-based repositioning actions designed to improve profitability. These actions included headcount reductions of approximately 300 employees, or about 3 % of our global workforce, and select facility consolidations in North America and Europe. In 2020, we adjusted the estimate downward to reflect the impact of employees that chose to voluntarily terminate prior to receiving severance at the conclusion of the actions in North America. In 2021, we recorded a gain on sale of real estate related to these actions. We expect to complete the program in the first quarter of 2022. Acquisition-Related Restructuring - In the third quarter of 2018, we initiated actions within our Payment & Merchandising Technologies segment related to the closure of Crane Currency’s printing operations in Sweden, which were transitioned to a new print facility in Malta. These actions included workforce reductions of approximately 170 employees, or less than 2 % of our global workforce. We do not expect to incur additional restructuring charges. Other Restructuring - In the second quarter of 2020, we recorded other restructuring costs within our Payment & Merchandising Technologies segment. We do not expect to incur additional restructuring charges. Restructuring (Gains) Charges, Net We recorded restructuring (gains) charges which are reflected in the Consolidated Statements of Operations, as follows: (in millions) For the year ended December 31, 2021 2020 2019 Aerospace & Electronics $ — $ 6.5 $ ( 0.4 ) Process Flow Technologies ( 13.2 ) 6.1 10.5 Payment & Merchandising Technologies ( 3.7 ) 19.1 7.4 Total restructuring (gains) charges, net $ ( 16.9 ) $ 31.7 $ 17.5 86 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes our restructuring (gains) charges by program, cost type and segment for the years ended December 31, 2021, 2020 and 2019: December 31, 2021 December 31, 2020 December 31, 2019 (in millions) Severance Other Total Severance Other Total Severance Other Total Aerospace & Electronics $ — $ — $ — $ 6.5 $ — $ 6.5 $ — $ — $ — Process Flow Technologies ( 0.1 ) (a) — ( 0.1 ) 3.8 — 3.8 — — — Payment & Merchandising Technologies ( 0.8 ) (a) ( 2.8 ) ( 3.6 ) 16.6 4.6 (b) 21.2 — — — 2020 Repositioning ( 0.9 ) (a) ( 2.8 ) ( 3.7 ) 26.9 4.6 31.5 — — — Process Flow Technologies 0.1 — 0.1 6.1 (a) — 6.1 9.9 — 9.9 2019 Repositioning 0.1 — 0.1 6.1 — 6.1 9.9 — 9.9 Aerospace & Electronics — — — — — — — ( 0.4 ) ( 0.4 ) Process Flow Technologies ( 0.4 ) (a) ( 12.7 ) (c) ( 13.1 ) ( 3.8 ) (a) — ( 3.8 ) 0.6 — 0.6 Payment & Merchandising Technologies ( 0.2 ) (a) — ( 0.2 ) ( 0.9 ) (a) ( 1.5 ) (d) ( 2.4 ) 0.3 1.8 2.1 2017 Repositioning ( 0.6 ) (a) ( 12.7 ) (c) ( 13.3 ) ( 4.7 ) (a) ( 1.5 ) (d) ( 6.2 ) 0.9 1.4 2.3 Payment & Merchandising Technologies — — — — — — 1.7 3.6 5.3 Acquisition-Related Restructuring — — — — — — 1.7 3.6 5.3 Payment & Merchandising Technologies — — — 0.3 — 0.3 — — — Other Restructuring — — — 0.3 — 0.3 — — — Total $ ( 1.4 ) $ ( 15.5 ) $ ( 16.9 ) $ 28.6 $ 3.1 $ 31.7 $ 12.5 $ 5.0 $ 17.5 (a) Reflects changes in estimates for increases and decreases in costs related to our restructuring programs. (b) Primarily reflects non-cash charges related to the impairment of ROU assets and leasehold improvements associated with the exit of the three leased facilities in 2020. (c) Reflects a pre-tax gain related to the sale of real estate in 2021 (d) Reflects a pre-tax gain related to the sale of a facility in 2020. 87 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes the cumulative restructuring costs incurred through December 31, 2021. We do not expect to incur additional facility consolidation costs to complete these actions as of December 31, 2021: Cumulative Restructuring Costs (in millions) Severance Other Total Aerospace & Electronics $ 6.5 $ — $ 6.5 Process Flow Technologies 3.7 — 3.7 Payment & Merchandising Technologies 15.8 1.8 17.6 2020 Repositioning 26.0 1.8 27.8 Process Flow Technologies 16.1 — 16.1 2019 Repositioning 16.1 — 16.1 Aerospace & Electronics 1.3 ( 1.4 ) ( 0.1 ) Process Flow Technologies 13.1 ( 12.7 ) 0.4 Payment & Merchandising Technologies 11.5 0.7 12.2 2017 Repositioning $ 25.9 $ ( 13.4 ) $ 12.5 Restructuring Liability The following table summarizes the accrual balances related to these restructuring charges by program: (in millions) 2020 Repositioning 2019 Repositioning 2017 Repositioning Other Restructuring Total Severance: Balance at December 31, 2019 $ — $ 9.9 $ 12.5 $ — $ 22.4 Expense (a) 26.9 — — 0.3 27.2 Adjustments (b) — 6.1 ( 4.7 ) — 1.4 Utilization ( 22.7 ) — ( 3.1 ) ( 0.3 ) ( 26.1 ) Balance at December 31, 2020 (c) $ 4.2 $ 16.0 $ 4.7 $ — $ 24.9 Expense (a) — 0.1 — — 0.1 Adjustments (b) ( 0.9 ) — ( 0.5 ) — ( 1.4 ) Utilization ( 3.3 ) ( 4.6 ) ( 3.5 ) — ( 11.4 ) Balance at December 31, 2021 (c) $ — $ 11.5 $ 0.7 $ — $ 12.2 (a) Included within “Restructuring (gains) charges, net” in the Consolidated Statements of Operations (b) Included within “Restructuring (gains) charges, net” in the Consolidated Statements of Operations and reflects changes in estimates for increases and decreases in costs related to our restructuring programs (c) Included within Accrued Liabilities in the Consolidated Balance Sheets 88 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 17 – Quarterly Results (Unaudited) (in millions, except per share data) For year ended December 31, First Quarter Second Quarter Third Quarter Fourth Quarter Full Year 2021 Net sales $ 779.6 $ 796.4 $ 833.5 $ 770.5 $ 3,180.0 Cost of sales 470.5 476.8 509.1 482.5 1,939.0 Gross profit 309.0 319.6 324.4 288.0 1,241.0 Operating profit 140.1 136.9 138.2 87.1 502.3 Net income from continuing operations attributable to common shareholders 103.4 110.7 111.4 68.8 394.3 Income from discontinued operations, net of tax 5.0 27.6 5.2 3.3 41.1 Net income attributable to common shareholders 108.4 138.3 116.6 72.1 435.4 Earnings per basic share: Earnings per basic share from continuing operations $ 1.78 $ 1.89 $ 1.90 $ 1.19 $ 6.76 Earnings per basic share from discontinued operations 0.08 0.47 0.09 0.06 0.70 Earnings per basic share $ 1.86 $ 2.36 $ 1.99 $ 1.25 $ 7.46 Earnings per diluted share: Earnings per diluted share from continuing operations $ 1.76 $ 1.87 $ 1.87 $ 1.16 $ 6.66 Earnings per diluted share from discontinued operations 0.08 0.46 0.09 0.06 0.70 Earnings per diluted share $ 1.84 $ 2.33 $ 1.96 $ 1.22 $ 7.36 2020 Net sales $ 746.9 $ 644.3 $ 686.5 $ 683.6 $ 2,761.3 Cost of sales 471.9 424.8 443.3 456.2 1,796.2 Gross profit 275.0 219.5 243.2 227.4 965.1 Operating profit 81.7 28.7 75.9 53.9 240.2 Net income from continuing operations attributable to common shareholders 57.7 13.4 49.4 42.6 163.1 Income from discontinued operations, net of tax 5.0 1.4 7.2 4.3 17.9 Net income attributable to common shareholders 62.7 14.8 56.6 46.9 181.0 Earnings per basic share: Earnings per basic share from continuing operations $ 0.98 $ 0.23 $ 0.85 $ 0.73 $ 2.79 Earnings per basic share from discontinued operations 0.09 0.03 0.12 0.07 0.31 Earnings per basic share $ 1.07 $ 0.26 $ 0.97 $ 0.80 $ 3.10 Earnings per diluted share: Earnings per diluted share from continuing operations $ 0.96 $ 0.23 $ 0.84 $ 0.73 $ 2.77 Earnings per diluted share from discontinued operations 0.09 0.02 0.13 0.07 0.31 Earnings per diluted share $ 1.05 $ 0.25 $ 0.97 $ 0.80 $ 3.08 89 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None