Crane NXT, Co. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations This Quarterly Report on Form 10-Q contains information about Crane Co., some of which includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements other than historical information or statements about our current condition. You can identify forward-looking statements by the use of terms such as “believes,” “contemplates,” “expects,” “may,” “could,” “should,” “would,” or “anticipates,” other similar phrases, or the negatives of these terms. Reference herein to “Crane,” “the Company,” “we,” “us” and “our” refer to Crane Co. and its subsidiaries unless the context specifically states or implies otherwise. References to “core business” or “core sales” in this report include sales from acquired businesses starting from and after the first anniversary of the acquisition, but exclude currency effects. Amounts in the following discussion are presented in millions, except employee, share and per share data, or unless otherwise stated. We have based the forward-looking statements relating to our operations on our current expectations, estimates and projections about us and the markets we serve. We caution you that these statements are not guarantees of future performance and involve risks and uncertainties. In addition, we have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. There are a number of other factors, including risks and uncertainties related to the ongoing COVID-19 pandemic, that could cause actual results or outcomes to differ materially from those expressed or implied in the forward-looking statements. Such factors also include, among others: changes in global economic conditions (including inflationary pressures) and geopolitical risks, including macroeconomic fluctuations that may harm our business, results of operation and stock price; the effects of the ongoing coronavirus pandemic on our business and the global and U.S. economies generally; information systems and technology networks failures and breaches in data security, personally identifiable and other information, non-compliance with our contractual or other legal obligations regarding such information; potential exposure from numerous lawsuits for asbestos-related personal injury; our ability to source components and raw materials from suppliers, including disruptions and delays in our supply chain; demand for our products, which is variable and subject to factors beyond our control; governmental regulations and failure to comply with those regulations; fluctuations in the prices of our components and raw materials; loss of personnel or being able to hire and retain additional personnel needed to sustain and grow our business as planned; risks from environmental liabilities, costs, litigation and violations that could adversely affect our financial condition, results of operations, cash flows and reputation; risks associated with conducting a substantial portion of our business outside the United States; being unable to identify or complete acquisitions, or to successfully integrate the businesses we acquire, or complete dispositions, including the disposition of our Engineered Materials segment; adverse impacts from intangible asset impairment charges; potential product liability or warranty claims; being unable to successfully develop and introduce new products, which would limit our ability to grow and maintain our competitive position and adversely affect our financial condition, results of operations and cash flow; significant competition in our markets; additional tax expenses or exposures that could affect our financial condition, results of operations and cash flows; inadequate or ineffective internal controls; risks related to our holding company proposal to be voted on by our stockholders at our 2022 annual stockholder meeting, which are further described in the section entitled “Risk Factors Related to the Holding Company Proposal” in the registration statement on Form S-4 (File No. 333-263119) filed by our wholly-owned subsidiary, Crane Holdings, Co.; specific risks relating to our reportable segments, including Aerospace & Electronics, Process Flow Technologies, Payment & Merchandising Technologies and Engineered Materials; the ability and willingness of the parties to meet and/or perform their obligations under any contractual arrangements that are entered into among the parties in connection with our previously announced proposed business separation and any of their obligations to indemnify, defend and hold the other party harmless from and against various claims, litigation and liabilities; our ability to achieve some or all the benefits that we expect to achieve from our proposed business separation; and other risks noted in reports that we file with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, and subsequent reports and other documents filed by us or Crane Holdings, Co. with the Securities and Exchange Commission, including any registration statement relating to our proposed business separation. We do not undertake any obligation to update or revise any forward-looking statements to reflect any future events or circumstances. Pending Holding Company Reorganization On February 28, 2022, Crane Co., a Delaware corporation (“Crane Co.”), Crane Holdings, Co., a Delaware corporation and wholly-owned subsidiary of Crane Co. (“Crane Holdings”), and Crane Transaction Company, LLC, a Delaware limited liability company and wholly-owned subsidiary of Crane Holdings (“Merger Sub”), entered into an Agreement and Plan of Merger, pursuant to which Crane Co. will merge with Merger Sub, with Crane Co. surviving the merger as a wholly-owned subsidiary of Crane Holdings (the “Reorganization Merger”). The Reorganization Merger is subject to specific conditions, including approval by Crane Co.’s stockholders at its 2022 Annual Meeting of Stockholders. Following the Reorganization Merger, Crane Holdings intends for Crane Co. (which will, as of that time, be a wholly-owned subsidiary of Crane Holdings) to convert from a Delaware corporation to a Delaware limited liability company (such conversion, together with the Reorganization Merger, the “Reorganization”). 31 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Pending Separation On March 30, 2022, Crane Co. announced that its Board of Directors unanimously approved a plan to pursue a separation into two independent, publicly-traded companies (the “Separation”). The Separation is expected to occur through a tax-free distribution and is expected to be completed within approximately 12 months, subject to the satisfaction of customary conditions and final approval by Crane Co.’s Board of Directors. 32 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OUTLOOK - CONTINUING OPERATIONS Overall Our sales depend heavily on industries that are cyclical in nature or are subject to market conditions which may cause customer demand for our products to be volatile and unpredictable. Demand in these industries is affected by fluctuations in domestic and international economic conditions, as well as currency fluctuations, commodity costs, and a variety of other factors. As we exited 2021 and through the first quarter of 2022, we have experienced significant inflationary pressure across most businesses and have initiated pricing actions to ensure we cover the higher costs and protect our margin profile. For 2022, we expect a total year-over-year sales increase of approximately 3% to 4%, driven by approximately 5% core growth, partially offset by a 1% to 2% impact from unfavorable foreign exchange. On a year-to-date basis through March, substantially all of our core growth has been driven by price to offset the impact of inflation. We expect higher pricing on a full-year basis to approximately offset the impact of inflation. We expect a 1% to 2% improvement in operating profit driven primarily by productivity benefits and operating leverage on higher volumes, partially offset by higher transaction related costs, primarily related to the Separation and unfavorable mix. This Outlook does not include any potential impacts from the pending Crane Supply divestiture which is expected to close in the second quarter of 2022. If such transaction closes in 2022, it would result in a decrease in sales and operating profit relative to the Outlook described here in both the Overall and Process Flow Technologies sections. Aerospace & Electronics In 2022, we expect Aerospace & Electronics core sales to increase in the high-single digit range as compared to 2021, primarily driven by higher volumes and, to a lesser extent, price. We expect a substantial improvement in our commercial OEM business driven by higher aircraft build rates, and we expect a substantial improvement in our commercial aftermarket business given continued recovery in airline flight hours following two years of depressed demand due to the impacts of COVID-19. We expect our defense OEM business to be flat and our defense aftermarket businesses to be slightly lower given challenging comparisons to recent years where these markets exhibited very strong growth. We expect segment operating profit to increase in the low double-digit range as compared to 2021 driven primarily by the impact of operating leverage on higher volumes. Process Flow Technologies In 2022, we expect Process Flow Technologies sales to increase slightly driven by low- to mid-single digit core growth, partially offset by a low single-digit impact from unfavorable foreign exchange. As a result of inflationary pressures, we expect additional price to supplement volume growth during the year. We expect Process Valves and Related Products sales to increase in the low- to mid-single digit range as compared to 2021, driven by mid-single digit core sales growth, partially offset by a low-single digit impact from unfavorable foreign exchange. We expect Commercial Valves sales to decline in the mid-single digit range with a low-single digit decline in core sales and a low-single digit impact from unfavorable foreign exchange. We expect Pumps and Systems sales to increase in the high-single digit range as compared to 2021, driven by strong demand across municipal and non-residential U.S. end markets. We expect an improvement in the segment’s operating profit as compared to 2021 in the low-single digit range, driven by strong productivity and operating leverage on higher volumes as well as higher pricing to cover inflationary pressures. Payment & Merchandising Technologies In 2022, we expect Payment & Merchandising Technologies sales to increase in the low- to mid-single digit range as compared to 2021, driven by mid-single digit core sales growth, partially offset by a low-single digit impact from unfavorable foreign exchange. Higher pricing is expected to offset higher inflation and sustain margins. At Crane Payment Innovations, we expect core sales growth in the low-double digit range, driven by broad-based strength across all vertical markets, together with higher pricing. At Crane Currency, we expect core sales to decline in the high-single digit range as compared to 2021 due to lower expected sales to international customers, reflecting challenging comparisons to a record year of project activity and growth in 2021. We expect the segment’s operating profit to be similar as compared to 2021, with higher prices and strong productivity to be approximately offset by inflationary pressures and unfavorable sales mix. 33 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results from Continuing Operations – Three Month Periods Ended March 31, The following information should be read in conjunction with our condensed consolidated financial statements and related notes. All comparisons below refer to the first quarter 2022 versus the first quarter 2021, unless otherwise specified. First Quarter Change (dollars in millions) 2022 2021 $ % Net sales $ 801.1 $ 779.6 $ 21.5 2.8 % Cost of sales 473.8 470.5 3.3 0.7 % as a percentage of sales 59.1 % 60.4 % Selling, general and administrative 193.7 182.2 11.5 6.3 % as a percentage of sales 24.2 % 23.4 % Restructuring gain, net — (13.1) 13.1 NM Operating profit 133.6 140.0 (6.4) (4.6) % Operating margin 16.7 % 18.0 % Other income (expense): Interest income 0.3 0.4 (0.1) (25.0) % Interest expense (11.1) (13.6) 2.5 18.4 % Miscellaneous income, net 3.5 3.9 (0.4) (10.3) % Total other expense (7.3) (9.3) 2.0 21.5 % Income from continuing operations before income taxes 126.3 130.7 (4.4) (3.4) % Provision for income taxes 31.6 27.3 4.3 15.8 % Net income from continuing operations attributable to common shareholders $ 94.7 $ 103.4 $ (8.7) (8.4) % Supplemental Data: Transaction related expenses 1 6.1 — 6.1 NM 1 Amounts included within Selling, general & administrative costs. Sales increased by $21.5 million, or 2.8%, to $801.1 million in 2022. Net sales by destination related to operations outside the United States were 47.7% and 48.6% of total net sales for the quarters ended March 31, 2022 and 2021, respectively. The year-over-year change in sales included: • an increase in core sales of $35.5 million, or 4.6%, which in aggregate which was primarily comprised of higher pricing; and • unfavorable foreign currency translation of $14.0 million, or 1.8%. Cost of sales increased by $3.3 million, or 0.7% to $473.8 million in 2022. The increase is primarily related to an increase in material, labor and other manufacturing costs of $24.6 million, or 5.2%, partially offset by productivity gains of $14.8 million, or 3.1%, and favorable foreign currency translation of $8.7 million, or 1.8%. Selling general and administrative expenses increased by $11.5 million, or 6.3%, to $193.7 million in 2022. The increase was driven primarily by an increase in selling costs of $7.8 million, or 4.3%, transaction related expenses of $6.1 million, or 3.3%, primarily related to the Separation, partially offset by favorable foreign currency translation of $2.6 million, or 1.4%. Operating profit decreased by $6.4 million, or 4.6%, to $133.6 million in 2022. The decrease in operating profit is related to transaction related expenses of $6.1 million, and net restructuring gain of $13.1 million related to prior repositioning actions which did not repeat in 2022, offset by $12.9 million of operational improvement across the segments. Other expense decreased $2.0 million, or 21.5%, to $7.3 million, primarily reflecting lower interest expense following the repayment of the 364-day credit facility in April 2021. 34 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Our effective tax rate attributable to continuing operations for the three months ended March 31, 2022 is higher than the prior year’s comparable period primarily due to higher non-U.S. taxes, partially offset by a greater benefit related to share-based compensation. Our effective tax rate attributable to continuing operations for the three months ended March 31, 2022 is higher than the statutory U.S. federal tax rate of 21% primarily due to earnings in jurisdictions with statutory tax rates higher than the U.S., expenses that are statutorily non-deductible for income tax purposes and U.S. state taxes, partially offset by excess share-based compensation benefits, tax credit utilization, and the statutory U.S. deduction related to our non-U.S. subsidiaries’ income. Comprehensive Income Three Months Ended March 31, (in millions) 2022 2021 Net income before allocation to noncontrolling interests $ 105.0 $ 108.4 Components of other comprehensive income, net of tax Currency translation adjustment (21.6) (34.9) Changes in pension and postretirement plan assets and benefit obligation, net of tax 3.3 4.9 Other comprehensive income, net of tax (18.3) (30.0) Comprehensive income before allocation to noncontrolling interests 86.7 78.4 Less: Noncontrolling interests in comprehensive income 0.1 0.8 Comprehensive income attributable to common shareholders $ 86.6 $ 77.6 For the three months ended March 31, 2022, comprehensive income before allocations to noncontrolling interests was $86.7 million compared to $78.4 million in the same period of 2021. The $8.3 million increase was driven by a $13.3 million year-over-year favorable impact of foreign currency translation adjustments, primarily related to the British pound and Japanese yen, partially offset by lower net income before allocation to noncontrolling interests of $3.4 million. 35 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Segment Results of Operations - Three Month Periods Ended March 31, Aerospace & Electronics First Quarter Change (dollars in millions) 2022 2021 $ % Net sales by product line: Commercial Original Equipment $ 58.7 $ 54.7 $ 4.0 7.3 % Military Original Equipment 57.4 62.8 (5.4) (8.6) % Commercial Aftermarket Products 28.6 19.5 9.1 46.7 % Military Aftermarket Products 12.5 17.1 (4.6) (26.9) % Total net sales $ 157.2 $ 154.1 $ 3.1 2.0 % Cost of sales $ 97.4 $ 99.4 $ (2.0) (2.0) % as a percentage of sales 62.0 % 64.5 % Selling, general and administrative $ 31.7 $ 28.7 $ 3.0 10.5 % as a percentage of sales 20.2 % 18.6 % Operating profit $ 28.1 $ 26.0 $ 2.1 8.1 % Operating margin 17.9 % 16.9 % Supplemental Data: Backlog $ 508.4 $ 481.6 $ 26.8 5.6 % Sales increased $3.1 million, or 2.0%, to $157.2 million in 2022. • Sales of Commercial Original Equipment increased $4.0 million, or 7.3%, to $58.7 million in 2022, reflecting higher shipments to aircraft manufacturers as the industry continues to recover from the COVID-19 related slowdown. • Sales of Military Original Equipment decreased $5.4 million, or 8.6%, to $57.4 million in 2022, primarily reflecting lower shipments due to order timing and material availability. • Sales of Commercial Aftermarket Products increased $9.1 million, or 46.7%, to $28.6 million in 2022, reflecting higher demand from the airlines due to improving air traffic as the industry continues to recover from the COVID-19 related slowdown together with higher pricing. • Sales of Military Aftermarket Products decreased $4.6 million, or 26.9%, to $12.5 million in 2022, primarily reflecting lower spares sales. Cost of sales decreased by $2.0 million, or 2.0%, to $97.4 million in 2022, primarily reflecting $5.2 million, or 5.2%, of favorable mix, $3.5 million, or 3.5%, of productivity benefits, partially offset by a $7.6 million, or 7.7%, increase in material, labor and other manufacturing costs. Selling, general and administrative expense increased by $3.0 million, or 10.5%, to $31.7 million in 2022, primarily reflecting an increase of $2.0 million, or 7.0%, in engineering costs and $1.0 million, or 3.5%, in selling costs. Operating profit increased by $2.1 million, or 8.1%, to $28.1 million in 2022, primarily reflecting favorable mix of $5.2 million and productivity benefits of $3.9 million, partially offset by higher manufacturing and engineering costs of $6.0 million. 36 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Process Flow Technologies First Quarter Change (dollars in millions) 2022 2021 $ % Net sales by product line: Process Valves and Related Products $ 182.9 $ 174.5 $ 8.4 4.8 % Commercial Valves 98.2 89.2 9.0 10.1 % Pumps and Systems 30.2 24.3 5.9 24.3 % Total net sales $ 311.3 $ 288.0 $ 23.3 8.1 % Cost of sales $ 196.8 $ 190.7 $ 6.1 3.2 % as a percentage of sales 63.2 % 66.2 % Selling, general and administrative $ 65.5 $ 60.0 $ 5.5 9.2 % as a percentage of sales 21.0 % 20.8 % Restructuring charges (gains) $ — $ (12.6) $ 12.6 NM Operating profit $ 49.0 $ 49.9 $ (0.9) (1.8) % Operating margin 15.7 % 17.4 % Supplemental Data: Backlog $ 372.4 $ 325.4 $ 47.0 14.4 % Sales increased by $23.3 million, or 8.1%, to $311.3 million in 2022, driven by higher core sales of $28.1 million, or 9.8%, partially offset by unfavorable foreign currency translation of $4.8 million, or 1.7%. • Sales of Process Valves and Related Products increased by $8.4 million, or 4.8%, to $182.9 million in 2022. The increase reflected higher core sales of $12.3 million, or 7.0%, partially offset by unfavorable foreign currency translation of $3.9 million, or 2.2%, primarily due to the euro weakening against the U.S. dollar. The higher core sales reflected broad-based strength across process end markets. • Sales of Commercial Valves increased by $9.0 million, or 10.1%, to $98.2 million in 2022, primarily driven by a core sales increase of $9.9 million, or 11.1%, partially offset by unfavorable foreign currency translation of $0.9 million, or 1.0%, as the British pound weakened against the U.S. dollar. The higher core sales primarily reflected improvement in demand in Canadian non-residential construction markets. • Sales of Pumps & Systems increased by $5.9 million, or 24.3%, to $30.2 million in 2022, reflecting broad-based improvement in demand across municipal, non-residential construction, and military end markets. Cost of sales increased by $6.1 million, or 3.2%, to $196.8 million, primarily related to increased volume of $9.2 million, or 4.8%, and an increase in material, labor and other manufacturing costs of $3.7 million, or 1.9%, partially offset by productivity benefits of $4.3 million, or 2.2%, and favorable foreign currency translation of $2.8 million, or 1.5%. Selling, general and administrative expense increased by $5.5 million, or 9.2%, to $65.5 million primarily reflecting an increase of $4.1 million, or 6.8%, in selling costs and $2.6 million, or 4.3%, in administrative costs, partially offset by favorable foreign currency translation of $1.2 million, or 2.1%. Operating profit decreas ed by $0.9 million, or 1.8%, to $49.0 million in 2022. The decrease reflected the impact of higher net restructuring costs of $12.6 million primarily related to the impact of a net restructuring gain on a sale of real estate recorded in the prior year, partially offset by productivity benefits of $5.0 million, leverage on higher sales volumes of $4.8 million and restructuring savings of $1.9 million. 37 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Payment & Merchandising Technologies First Quarter Change (dollars in millions) 2022 2021 $ % Net sales by product line: Payment Acceptance and Dispensing Products $ 211.0 $ 185.0 $ 26.0 14.1 % Banknotes and Security Products 121.6 152.5 (30.9) (20.3) % Total net sales $ 332.6 $ 337.5 $ (4.9) (1.5) % Cost of sales $ 179.1 $ 180.4 $ (1.3) (0.7) % as a percentage of sales 53.8 % 53.5 % Selling, general and administrative $ 69.3 $ 71.7 $ (2.4) (3.3) % as a percentage of sales 20.8 % 21.2 % Restructuring gain, net $ — $ (0.5) $ 0.5 NM Operating profit $ 84.2 $ 85.9 $ (1.7) (2.0) % Operating margin 25.3 % 25.4 % Supplemental Data: Backlog $ 429.0 $ 337.0 $ 92.0 27.3 % Sales decreased $4.9 million, or 1.5%, to $332.6 million in 2022, driven by unfavorable foreign currency translation of $8.9 million, or 2.6%, partially offset by higher core sales of $4.0 million, or 1.2%. • Sales of Payment Acceptance and Dispensing Products increased $26.0 million, or 14.1%, to $211.0 million in 2022. The increase reflected higher core sales of $29.2 million, or 15.8%, partially offset by unfavorable foreign currency translation of $3.3 million, or 1.8%, primarily due to the Japanese yen and British pound weakening against the U.S. dollar. The core sales increase primarily reflected higher sales to gaming and retail customers and higher pricing. • Sales of Banknotes and Security Products decreased $30.9 million, or 20.3%, to $121.6 million in 2022. The decrease reflected lower core sales of $25.3 million, or 16.6%, and unfavorable foreign currency translation of $5.6 million, or 3.7%, as the euro weakened against the U.S. dollar. The core sales decrease primarily reflected lower sales to international customers, and to a lesser extent, lower sales to the U.S. Government. Cost of sales decreased by $1.3 million, or 0.7%, to $179.1 million primarily related to productivity benefits of $7.0 million, or 3.9%, favorable foreign currency translation of $5.8 million, or 3.2%, and lower volume of $5.8 million, or 3.2%, partially offset by an increase in material, labor and other manufacturing costs of $13.3 million, or 7.3%, and unfavorable mix of $4.1 million, or 2.3%. Selling, general and administrative expense decreased by $2.4 million, or 3.3%, to $69.3 million primarily reflecting favorable foreign currency translation of $1.3 million, or 1.8%. Operating profit decreased by $1.7 million, or 2.0%, to $84.2 million in 2022. The decrease primarily reflected the impact of lower sales volumes, partially offset by favorable pricing net of inflation and strong productivity . 38 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources Three Months Ended March 31, (in millions) 2022 2021 Net cash provided by (used for): Operating activities from continuing operations $ (49.3) $ 47.6 Investing activities from continuing operations (12.5) 29.8 Financing activities from continuing operations (97.8) (44.8) Discontinued operations (6.7) 2.3 Effect of exchange rates on cash and cash equivalents (5.1) (7.5) (Decrease) increase in cash and cash equivalents $ (171.4) $ 27.4 Our operating philosophy is to deploy cash provided from operating activities, when appropriate, to provide value to shareholders by reinvesting in existing businesses, by making acquisitions that will strengthen and complement our portfolio, by divesting businesses that are no longer strategic or aligned with our portfolio and where such divestitures can generate capacity for strategic investments and initiatives that further optimize our portfolio, and by paying dividends and/or repurchasing shares. At any given time, and from time to time, we may be evaluating one or more of these opportunities, although we cannot assure you if or when we will consummate any such transaction. Our current cash balance, together with cash we expect to generate from future operations along with our commercial paper program or borrowings available under our revolving credit facility is expected to be sufficient to finance our short- and long-term capital requirements, as well as to fund payments associated with our asbestos and environmental liabilities and expected pension contributions. In addition, we believe our investment grade credit ratings afford us adequate access to public and private debt markets. In July 2021, we entered into a $650 million, 5-year Revolving Credit Agreement, which replaced the existing $550 million revolving credit facility. We also increased the size of our Commercial Paper Program (“CP Program”) to permit the issuance of short-term, unsecured commercial paper notes in an aggregate principal amount outstanding not to exceed $650 million at any time (up from $550 million, previously). Please see Note 12 for additional details. In April 2020, to enhance financial flexibility and maintain maximum liquidity in response to the uncertainty in the global markets resulting from the COVID-19 pandemic, we entered into a senior unsecured 364-day credit facility (the “364-Day Credit Agreement”). On April 15, 2021, we repaid the amount outstanding under the 364-Day Credit Agreement. Operating Activities Cash used for operating activities from continuing operations was $49.3 million in the first three months of 2022, compared to provided by $47.6 million during the same period last year. The increase in cash used for operating activities from continuing operations was primarily driven by higher working capital levels reflecting higher inventory and higher bonus payments related to strong 2021 performance, partially offset by lower pension contributions. Net asbestos-related payments in the first three months of 2022 and 2021 were $7.5 million and $10.8 million, respectively. In 2022, we expect to make payments related to asbestos settlement and defense costs, net of related insurance recoveries, of approximately $45 million. Investing Activities Cash flows relating to investing activities from continuing operations consist primarily of cash used for capital expenditures. Cash used for investing activities from continuing operations was $12.5 million in the first three months of 2022, compared to cash provided by investing activities from continuing operations of $29.8 million in the comparable period of 2021. The increase in cash used was primarily related to $20 million of net proceeds from the sale of marketable securities and $14.5 million of proceeds from the disposition of capital assets during the first three months of 2021, both of which did not repeat in the first quarter of 2022. These were partially offset by a $7.8 million increase in capital expenditures. Capital expenditures are made primarily for increasing capacity, replacing equipment, supporting new product development and improving information systems. We expect capital expenditures of approximately $60 million in 2022. 39 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Financing Activities Financing cash flows consist primarily of dividend payments to shareholders, share repurchases and repayments of indebtedness, proceeds from the issuance of long-term debt and commercial paper and proceeds from the issuance of common stock. Cash used for financing activities from continuing operations was $97.8 million during the first three months of 2022, compared to $44.8 million in the comparable period of 2021. The increase in cash used for financing activities from continuing operations was driven by $175.8 million of share repurchases, partially offset by $104.0 million of net borrowings from the issuance of commercial paper. Recent Accounting Pronouncements Information regarding new accounting pronouncements is included in Note 1 to our Condensed Consolidated Financial Statements. 40 Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes in the information called for by this item since the disclosure in our Annual Report on Form 10-K for the year ended December 31, 2021.