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Item 2. Management’s Discussion and Analysis

2022-08-03 compared with 2022-05-04 · 284 added, 107 removed, 158 unchanged (71% of the section changed)

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.

This Quarterly Report on Form 10-Q contains information about Crane Holdings, 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.

Reference herein to “Crane,” “the Company,” “we,” “us” and “our” refer to Crane Holdings, Co.

and its subsidiaries unless the context specifically states or implies otherwise.

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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;

being unable to successfully complete our pending separation as planned;

being unable to identify or complete acquisitions, or to successfully integrate the businesses we acquire, or complete dispositions;

adverse impacts from intangible asset impairment charges;

4 unchanged sentences

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;

4 unchanged sentences

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.

Holding Company Reorganization

On May 16, 2022, Crane Co., a Delaware corporation (“Crane Co.”), completed its previously announced reorganization merger pursuant to the Agreement and Plan of Merger, dated as of February 28, 2022 (the “Reorganization Agreement”), by and among Crane Co., Crane Holdings, Co., a Delaware corporation (“Crane Holdings”), and Crane Transaction Company, LLC, a Delaware limited liability company and, as of immediately prior to the consummation of such merger, a wholly-owned subsidiary of Crane Holdings (“Merger Sub”).

The Reorganization Agreement provided for the merger of Crane Co.

and 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”).

Following the Reorganization Merger, on May 16, 2022, Crane Co.

(which, as a result of the Reorganization Merger, became a wholly-owned subsidiary of Crane Holdings) converted from a Delaware corporation into a Delaware limited liability company named “Crane LLC” (such conversion, together with the Reorganization Merger, the “Reorganization”).

Following the Reorganization, substantially all of the assets of Crane LLC were distributed, assigned, transferred, conveyed and delivered to, and related liabilities of Crane LLC were assumed by, Crane Holdings.

On May 17, 2022, Crane LLC converted from a Delaware limited liability company to a Delaware corporation named “Crane Co.” Subsequently, on May 26, 2022, Crane Co.

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

Certificate of Amendment to its Certificate of Incorporation (the “Certificate of Amendment”) with the Secretary of State of the State of Delaware, which became effective upon filing, pursuant to which the Company officially changed its name from “Crane Co.” to “Redco Corporation.” The “Crane Co.” name has been reserved for future use by Crane Holdings.

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.

On March 30, 2022, the Company announced that its Board of Directors unanimously approved a plan to pursue a separation into two independent, publicly-traded companies (the “Separation”).

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

OUTLOOK - CONTINUING OPERATIONS

Our sales depend heavily on industries that are cyclical in nature or are subject to market conditions which may cause customer demand for our products to be volatile and unpredictable.

Demand in these industries is affected by fluctuations in domestic and international economic conditions, as well as currency fluctuations, commodity costs, and a variety of other factors.

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.

As we exited 2021 and through the first half of 2022, we have experienced supply chain disruptions impacting timely access to certain components and raw materials, as well as significant inflationary pressure across most businesses;

in response, we have initiated pricing actions throughout the first half to ensure we cover the higher costs and protect our margin profile.

For 2022, we expect a total year-over-year sales decline of approximately 1% to 2%, driven by a 4% unfavorable impact from the divestiture of Crane Supply and a 2.5% to 3% impact from unfavorable foreign exchange, partially offset by approximately 5% to 6% core growth.

On a year-to-date basis through June 30 2022, stronger pricing has been the primary contributor to our core growth across most businesses.

We continue to expect higher pricing on a full-year basis to approximately offset the impact of inflation.

We expect a slight improvement in operating profit driven primarily by the impact of core growth, net of inflation, productivity benefits, both partially offset by higher transaction and repositioning related costs, the impact of the Crane Supply divestiture, and unfavorable mix.

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.

In 2022, we expect Aerospace & Electronics core sales to increase in the high-single digit range as compared to 2021, driven by both higher volumes and 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.

We expect our defense business to decline given material availability challenges, and difficult 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, price and strong productivity, partially offset by unfavorable mix.

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.

In 2022, we expect Process Flow Technologies sales to decrease approximately 10% driven by an unfavorable 11.5% impact from the divestiture of Crane Supply and a low- to mid-single digit impact from unfavorable foreign exchange, partially offset by mid-single digit core growth.

We expect stronger pricing to offset inflationary pressures.

We expect Process Valves and Related Products sales to be approximately flat compared to 2021, with mid-single digit core sales growth approximately offset by a mid-single digit impact from unfavorable foreign exchange.

We expect Commercial Valves sales to decline substantially driven primarily by the impact of the Crane Supply divestiture, and to a lesser extent, the impact of 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.

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.

We expect a mid-single digit decline in the segment’s operating profit as compared to 2021, driven primarily by the impact of the Crane Supply divestiture, as well as transaction and repositioning costs, largely offset by core growth, inclusive of higher pricing, as well as strong productivity.

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.

In 2022, we expect Payment & Merchandising Technologies sales to increase in the low-single digit range as compared to 2021, driven by mid-single digit core sales growth, partially offset by a low- to mid-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.

At Crane Payment Innovations, we expect core sales growth in the mid-teens 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 to the low-double 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 modestly higher compared to 2021, with the impact of core growth inclusive of higher prices, together with strong productivity, to be approximately offset by inflationary pressures and unfavorable sales mix.

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

Results from Continuing Operations – Three Month Periods Ended March 31,

Engineered Materials

In 2022, we expect Engineered Materials sales to increase in the mid-single digit range as compared to 2021, driven by mid-single digit core growth which includes notable pricing gains to offset the impact of inflation.

We expect the core growth to be driven primarily by higher sales to recreational vehicle and building product customers.

We expect the segment’s operating profit to increase in the mid-teens range driven primarily by higher pricing.

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

Results from Operations – Three Month Periods Ended June 30,

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

All comparisons below refer to the first quarter 2022 versus the first quarter 2021, unless otherwise specified.

First Quarter Change

All comparisons below refer to the second quarter 2022 versus the second quarter 2021, unless otherwise specified.

Second Quarter Change

(dollars in millions) 2022 2021 $ %

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as a percentage of sales 23.6 % 21.9 %

Restructuring gain, net — (13.1) 13.1 NM

Operating profit 124.4 144.6 (20.2) (14.0) %

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Interest expense (11.4) (11.4) — — %

Gain on sale of business 228.7 — 228.7 NM

Miscellaneous income, net 14.8 9.7 5.1 52.6 %

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

1 Amounts included within Selling, general & administrative costs.

Total other income (expense) 232.7 (1.3) 234.0 NM

Income before income taxes 357.1 143.3 213.8 149.2 %

Provision for income taxes 98.9 5.0 93.9 NM

Net income attributable to common shareholders $ 258.2 $ 138.3 $ 119.9 86.7 %

Sales increased by $8.8 million, or 1.0%, to $864.3 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.

Net sales related to operations outside the United States were 33.3% and 36.6% of total net sales for the quarters ended June 30, 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;

• an increase in core sales of $60.3 million, or 7.1%, which was primarily comprised of higher pricing;

• unfavorable foreign currency translation of $29.7 million, or 3.5%;

• a decrease in sales of $21.8 million, or 2.5%, related to the sale of Crane Supply.

Cost of sales increased by $12.2 million, or 2.3% to $535.7 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%.

The increase is primarily related to an increase in material, labor and other manufacturing costs of $57.3 million, or 10.9%, partially offset by favorable foreign currency translation of $19.7 million, or 3.8%, productivity gains of $13.8 million, or 2.6%, and lower volumes of $12.4 million, or 2.4%.

Selling general and administrative expenses increased by $16.8 million or 9.0%, to $204.2 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%.

The increase was driven primarily by higher transaction related expenses of $16.4 million, or 8.8%, and an increase in selling costs of $4.2 million, or 2.3% , partially offset by favorable foreign currency translation of $6.0 million, or 3.2%.

Operating profit decreased by $20.2 million, or 14.0%, to $124.4 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.

The decrease in operating profit is related to higher transaction related expenses of $19.6 million, or 13.6%, and unfavorable mix of $16.1 million, or 11.1%, partially offset by productivity gains of $16.0 million, or 11.1%.

Other income increased $234.0 million to $232.7 million, related to the gain on the sale of the Crane Supply business of $228.7 million.

Our effective tax rate for the three months ended June 30, 2022, is higher than the prior year’s comparable periods primarily due to the reversal of a deferred tax asset established in the prior period that relates to the sale of a subsidiary, partially offset by earnings in jurisdictions with statutory tax rates lower than the United States.

Our effective tax rate for the three months ended June 30, 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 United States, expenses that are statutorily

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.

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.

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Comprehensive income attributable to common shareholders $ 185.9 $ 151.2

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.

For the three months ended June 30, 2022, comprehensive income before allocations to noncontrolling interests was $185.8 million compared to $151.1 million in the same period of 2021.

The $34.7 million increase was driven by higher net income before allocation to noncontrolling interests of $119.9 million, partially offset by an $83.5 million year-over-year unfavorable impact of foreign currency translation adjustments, primarily related to the British pound and Canadian dollar.

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

Segment Results of Operations - Three Month Periods Ended March 31,

Segment Results of Operations - Three Month Periods Ended June 30,

Aerospace & Electronics

First Quarter Change

Second Quarter Change

(dollars in millions) 2022 2021 $ %

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Sales increased $4.0 million, or 2.5%, to $161.5 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 Commercial Original Equipment increased $6.9 million, or 12.8%, to $60.6 million in 2022, reflecting strong demand from aircraft manufacturers as the industry aircraft build rates continue to recover from the COVID-19 related slowdown.

• Sales of Military Original Equipment decreased $5.7 million, or 9.1%, to $57.1 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.

• Sales of Commercial Aftermarket Products increased $3.7 million, or 14.6%, to $29.0 million in 2022, reflecting continued strong 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 $0.9 million, or 5.7%, to $14.8 million in 2022, primarily reflecting timing of government orders for certain programs.

Cost of sales increased by $4.6 million, or 4.8%, to $101.2 million in 2022, primarily reflecting $6.8 million, or 7.0%, of increased material, labor and other manufacturing costs, offset by $3.1 million, or 3.2%, of productivity gains.

Selling, general and administrative expense increased by $2.0 million, or 6.6%, to $32.1 million in 2022, primarily reflecting an increase of $1.5 million, or 5.0%, in engineering costs.

Operating profit decreased by $2.6 million, or 8.4%, to $28.2 million in 2022, primarily reflecting unfavorable mix of $1.8 million, or 5.8%.

Higher pricing offset higher material, labor, and other manufacturing costs.

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

Process Flow Technologies

First Quarter Change

Second Quarter Change

(dollars in millions) 2022 2021 $ %

8 unchanged sentences

as a percentage of sales 21.7 % 19.0 %

Restructuring charges (gains) $ — $ (12.6) $ 12.6 NM

Operating profit $ 40.6 $ 46.5 $ (5.9) (12.7) %

2 unchanged sentences

Backlog $ 348.6 $ 344.1 $ 4.5 1.3 %

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.

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.

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%.

Sales decreased by $14.7 million, or 4.7%, to $296.0 million in 2022, driven by a $21.8 million, or 7.0%, impact from the sale of Crane Supply and $12.4 million, or 4.0%, of unfavorable foreign currency translation, partially offset by core sales growth of $19.4 million, or 6.2%.

• Sales of Process Valves and Related Products increased by $2.4 million, or 1.3%, to $186.7 million in 2022, reflecting an increase in core sales of $9.8 million, or 5.3%, partially offset by unfavorable foreign currency translation of $7.5 million, or 4.1%, primarily due to the euro weakening against the U.S.

The higher core sales reflected continued solid demand across end markets together with higher pricing.

• Sales of Commercial Valves decreased by $21.0 million, or 21.4%, to $77.2 million in 2022, primarily driven by the impact of the divestiture of Crane Supply of $21.8 million, or 22.2%, and unfavorable foreign currency translation of $4.8 million, or 4.9%, as the British pound weakened against the U.S.

These decreases were partially offset by higher core sales of $5.6 million, or 5.7%, reflecting improvement in demand in Canadian non-residential construction markets and, to a lesser extent, the U.K.

non-residential construction markets, and higher pricing.

• Sales of Pumps & Systems increased by $3.9 million, or 13.8%, to $32.1 million in 2022, reflecting higher demand from municipal and non-residential construction end markets and higher pricing.

Cost of sales decreased by $14.1 million, or 6.9%, to $191.2 million, primarily related to the impact of the sale of Crane Supply of $16.2 million, or 8.0%, favorable foreign currency of $7.9 million, or 3.9%, and productivity benefits of $4.5 million, or 2.2%, partially offset by a $15.8 million, or 7.7%, increase in material, labor and other manufacturing costs.

Selling, general and administrative expense increased by $5.3 million, or 9.0%, to $64.2 million primarily reflecting an increase of $5.2 million, or 8.9%, in administrative costs consisting primarily of transaction related expenses, and $2.0 million, or 3.4%, in engineering and selling costs, partially offset by favorable foreign currency translation of $3.0 million, or 5.1%.

Operating profit decreas ed by $5.9 million, or 12.7%, to $40.6 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.

The decrease primarily reflected a $3.8 million, or 8.2%, impact from the sale of Crane Supply, and a $3.1 million, or 6.7%, impact from unfavorable mix.

Higher pricing offset the impact of higher material, labor, and other manufacturing costs.

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

Payment & Merchandising Technologies

First Quarter Change

Second Quarter Change

(dollars in millions) 2022 2021 $ %

7 unchanged sentences

as a percentage of sales 21.1 % 23.0 %

Restructuring gain, net $ — $ (0.5) $ 0.5 NM

Operating profit $ 80.7 $ 77.9 $ 2.8 3.6 %

2 unchanged sentences

Backlog $ 482.0 $ 374.7 $ 107.3 28.6 %

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 increased $5.8 million, or 1.8%, to $334.0 million in 2022, driven by higher core sales of $22.8 million, or 6.9%, partially offset by unfavorable foreign currency translation of $16.9 million, or 5.1%.

• Sales of Payment Acceptance and Dispensing Products increased $14.1 million, or 7.1%, to $211.4 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.

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

The increase reflected higher core sales of $22.5 million, or 11.4%, partially offset by unfavorable foreign currency translation of $8.4 million, or 4.3%, primarily due to the British pound and Japanese yen weakening against the U.S.

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

• Sales of Banknotes and Security Products decreased $8.3 million, or 6.3%, to $122.6 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.

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

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%.

The decrease primarily related to unfavorable foreign currency translation of $8.5 million, or 6.5%, as the euro weakened against the U.S.

Cost of sales increased by $7.9 million, or 4.5%, to $182.8 million primarily related to an increase in material, labor and other manufacturing costs of $23.2 million, or 13.3%, unfavorable mix of $10.8 million, or 6.2%, partially offset by favorable foreign currency translation of $11.6 million, or 6.6%, lower costs of $8.6 million, or 4.9 %, due to lower volumes, and higher productivity of $5.7 million, or 3.3%.

Selling, general and administrative expense decreased by $4.9 million, or 6.5%, to $70.5 million primarily reflecting favorable foreign currency translation, and productivity, of $3.8 million, or 5.0%.

Operating profit increased by $2.8 million, or 3.6%, to $80.7 million in 2022.

The increase primarily reflected higher pricing net of inflation, and productivity gains, of $21.6 million, or 27.7 %, partially offset by unfavorable mix of $10.8 million, or 13.9%, and lower volumes of $5.4 million, or 6.9%, and unfavorable foreign currency translation of $2.4 million, or 3.0%.

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

Engineered Materials

Second Quarter Change

(dollars in millions) 2022 2021 $ %

Net sales by product line:

FRP - Recreational Vehicles $ 32.2 $ 24.8 $ 7.4 29.8 %

FRP - Building Products 31.8 26.5 5.3 20.0 %

FRP - Transportation 8.8 7.8 1.0 12.8 %

Total net sales $ 72.8 $ 59.1 $ 13.7 23.2 %

Cost of sales $ 60.6 $ 46.7 $ 13.9 29.8 %

as a percentage of sales 83.2 % 79.0 %

Selling, general and administrative $ 4.9 $ 4.7 $ 0.2 4.3 %

as a percentage of sales 6.7 % 8.0 %

Operating profit $ 7.3 $ 7.7 $ (0.4) (5.2) %

Operating margin 10.0 % 13.0 %

Supplemental Data:

Backlog $ 22.0 $ 17.6 $ 4.4 25.0 %

Sales increased $13.7 million, or 23.2%, to $72.8 million in 2022.

The increase reflected higher sales to recreational vehicle manufacturers, building products customers and, to a lesser extent, transportation customers.

Cost of sales increased $13.9 million, or 29.8%, to $60.6 million in 2022, related primarily to higher raw material costs and, to a lesser extent, higher labor, and other manufacturing costs.

Operating profit decreased by $0.4 million, or 5.2%, to $7.3 million in 2022, primarily reflecting higher pricing net of inflation, and productivity gains, of $1.1 million or 14.3%, partially offset by unfavorable mix of $0.5 million, or 6.5%.

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

Results from Operations – Six Month Periods Ended June 30,

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

All comparisons below refer to the first six months of 2022 versus the first six months of 2021, unless otherwise specified.

Year-to-Date Change

(dollars in millions) 2022 2021 $ %

Net sales $ 1,735.7 $ 1,688.9 $ 46.8 2.8 %

Cost of sales 1,061.8 1,037.0 24.8 2.4 %

as a percentage of sales 61.2 % 61.4 %

Selling, general and administrative 1

402.5 360.9 41.6 11.5 %

as a percentage of sales 23.2 % 21.4 %

Operating profit 271.4 291.0 (19.6) (6.7) %

Operating margin 15.6 % 17.2 %

Other income (expense):

Interest income 0.9 0.9 — — %

Interest expense (22.5) (25.0) 2.5 10.0 %

Gain on sale of business 228.7 — 228.7 NM

Miscellaneous income, net 18.3 13.6 4.7 34.6 %

Total other income (expense) 225.4 (10.5) 235.9 NM

Income before income taxes 496.8 280.5 216.3 77.1 %

Provision for income taxes 133.6 33.8 99.8 295.3 %

Net income attributable to common shareholders $ 363.2 $ 246.7 $ 116.5 47.2 %

1 2021 includes restructuring gains of $13.3 million

Sales increased by $46.8 million, or 2.8%, to $1,735.7 million in 2022.

Net sales related to operations outside the United States were 34.8% and 37.2% of total net sales for the six months ended June 30, 2022 and 2021, respectively.

The year-over-year change in sales included:

• an increase in core sales of $112.2 million, or 6.6%;

• unfavorable foreign currency translation of $43.6 million, or 2.6%;

• a decrease in sales of $21.8 million, or 1.3%, related to the sale of Crane Supply.

Cost of sales increased by $24.8 million, or 2.4%, to $1,061.8 million in 2022.

The increase is primarily related to an increase in material, labor and other manufacturing costs of $91.3 million, or 8.8%, and unfavorable mix of $18.2 million, or 1.8%, partially offset by productivity gains of $29.0 million, or 2.8%, and favorable foreign currency translation of $28.5 million, or 2.7%, impact of the sale of Crane Supply of $16.2 million, or 1.6%, and lower volumes of $10.4 million, or 1.0%.

Selling general and administrative expenses increased by $41.6 million, or 11.5%, to $402.5 million in 2022.

The increase was driven primarily by higher transaction related and other expenses of $22.4 million, or 6.2%, increased engineering and selling costs of $18.9 million, or 5.2%, and the absence of restructuring gains in 2021 of $13.3 million which did not repeat in 2022, partially offset by favorable foreign currency translation of $8.6 million, or 2.4%, and productivity gains of $4.1 million, or 1.1%.

Operating profit decreased by $19.6 million, or 6.7%, to $271.4 million in 2022.

The decrease primarily reflected the impact of lower sales volumes, partially offset by favorable pricing net of inflation and strong productivity .

The decrease in operating profit reflected higher transaction costs of $25.6 million, or 8.9%, unfavorable mix of $18.2 million, or 6.3%, and the absence of a restructuring gain from 2021 of $13.3 million, or 4.6%, partially offset by productivity gains and restructuring savings of $36.7 million, or 12.6%.

Incremental pricing offset the impact of continued inflation.

Other income increased $235.9 million to $225.4 million reflecting the gain on the sale of the Crane Supply business of $228.7 million.

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

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

Our effective tax rates for the six months ended June 30, 2022, is higher than the prior year’s comparable periods primarily due to the reversal of a deferred tax asset established in the prior period that relates to the sale of a subsidiary, partially offset by earnings in jurisdictions with statutory tax rates lower than the United States.

Our effective tax rate for the six months ended June 30, 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 United States, 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

Six Months Ended

(in millions) 2022 2021

Net income before allocation to noncontrolling interests $ 363.2 $ 246.7

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

Currency translation adjustment (97.5) (27.3)

Changes in pension and postretirement plan assets and benefit obligation, net of tax 6.8 10.1

Other comprehensive loss, net of tax (90.7) (17.2)

Comprehensive income before allocation to noncontrolling interests 272.5 229.5

Noncontrolling interests in comprehensive income — 0.7

Comprehensive income attributable to common shareholders $ 272.5 $ 228.8

For the six months ended June 30, 2022, comprehensive income before allocations to noncontrolling interests was $272.5 million compared to $229.5 million in the same period of 2021.

The $43.0 million increase was primarily driven by higher net income before allocation to noncontrolling interests of $116.5 million, partially offset by a $70.2 million year over year unfavorable impact of foreign currency translation adjustments primarily related to the British pound and Canadian dollar.

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

Segment Results of Operations - Six Month Periods Ended June 30,

Aerospace & Electronics

Year-to-Date Change

(dollars in millions) 2022 2021 $ %

Net sales by product line:

Commercial Original Equipment $ 119.2 $ 108.3 $ 10.9 10.1 %

Military Original Equipment 114.4 125.6 (11.2) (8.9) %

Commercial Aftermarket Products 57.7 44.8 12.9 28.8 %

Military Aftermarket Products 27.3 32.8 (5.5) (16.8) %

Total net sales $ 318.6 $ 311.5 $ 7.1 2.3 %

Cost of sales $ 198.6 $ 195.9 $ 2.7 1.4 %

as a percentage of sales 62.3 % 62.9 %

Selling, general and administrative $ 63.8 $ 58.8 $ 5.0 8.5 %

as a percentage of sales 20.0 % 18.9 %

Operating profit $ 56.2 $ 56.8 $ (0.6) (1.1) %

Operating margin 17.6 % 18.2 %

Sales increased $7.1 million, or 2.3%, to $318.6 million in 2022.

• Sales of Commercial Original Equipment increased $10.9 million, or 10.1%, to $119.2 million in 2022, reflecting strong demand from aircraft manufacturers as the industry aircraft build rates continue to recover from the COVID-19 related slowdown.

• Sales of Military Original Equipment decreased $11.2 million, or 8.9%, to $114.4 million in 2022, primarily reflecting lower shipments due to order timing and material availability.

• Sales of Commercial Aftermarket Products increased $12.9 million, or 28.8%, to $57.7 million in 2022, reflecting strong 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 $5.5 million, or 16.8%, to $27.3 million in 2022, primarily reflecting timing of government orders for certain programs.

Cost of sales increased by $2.7 million, or 1.4%, to $198.6 million in 2022, primarily reflecting $14.4 million, or 7.4%, of increased material, labor and other manufacturing costs, partially offset by $6.6 million, or 3.4%, of productivity gains and favorable mix of $3.4 million, or 1.7%.

Selling, general and administrative expense increased by $5.0 million, or 8.5%, to $63.8 million in 2022, primarily reflecting continued increases in engineering investments and higher selling costs.

Operating profit decreased by $0.6 million, or 1.1%, to $56.2 million in 2022, primarily reflecting higher costs partially offset by higher pricing and productivity.

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

Process Flow Technologies

Year-to-Date Change

(dollars in millions) 2022 2021 $ %

Net sales by product line:

Process Valves and Related Products $ 369.6 $ 358.6 $ 11.0 3.1 %

Commercial Valves 175.4 187.7 (12.3) (6.6) %

Pumps and Systems 62.4 52.5 9.9 18.9 %

Total net sales $ 607.4 $ 598.8 $ 8.6 1.4 %

Cost of sales $ 388.1 $ 396.1 $ (8.0) (2.0) %

as a percentage of sales 63.9 % 66.1 %

Selling, general and administrative 1

$ 129.7 $ 106.1 $ 23.6 22.2 %

as a percentage of sales 21.4 % 17.7 %

Operating profit $ 89.6 $ 96.6 $ (7.0) (7.2) %

Operating margin 14.8 % 16.1 %

1 2021 includes net restructuring gains of $12.6 million

Sales increased by $8.6 million, or 1.4%, to $607.4 million in 2022, driven by higher core sales of $47.7 million, or 8.0%, partially offset by the impact of the sale of Crane Supply of $21.8 million, or 3.6%, and unfavorable foreign currency translation of $17.2 million, or 2.9%.

• Sales of Process Valves and Related Products increased by $11.0 million, or 3.1%, to $369.6 million in 2022.

The increase reflected higher core sales of $22.4 million, or 6.2%, offset by unfavorable foreign currency translation of $11.4 million, or 3.2%, primarily due to the Euro weakening against the U.S.

The higher core sales primarily reflected broad based demand across end markets that continue to recover from the impact of COVID-19 together with higher pricing.

• Sales of Commercial Valves decreased by $12.3 million, or 6.6%, to $175.4 million in 2022, primarily driven by the impact of the divestiture of Crane Supply of $21.8 million, or 11.6%, and unfavorable foreign currency translation of $5.7 million, or 3.0%, as the British pound and Canadian dollar weakened against the U.S.

dollar, partially offset by an increase in core sales of $15.2 million, or 8.1%.

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

• Sales of Pumps & Systems increased by $9.9 million, or 18.9%, to $62.4 million in 2022, primarily reflecting higher demand from municipal and non-residential construction end markets and higher pricing.

Cost of sales decreased by $8.0 million, or 2.0%, to $388.1 million, primarily related to the impact of the sale of Crane Supply of $16.2 million, or 4.1%, and favorable foreign currency of $10.8 million, or 2.7%, partially offset by a $19.5 million, or 5.0%, increase in material, labor and other manufacturing costs.

Selling, general and administrative expense increased by $23.6 million, or 22.2%, to $129.7 million primarily reflecting the absence of a prior year net restructuring gain of $12.6 million, or 11.9 %, higher engineering and selling costs of $6.9 million, or 6.5%, and higher transaction costs of $4.2 million, or 4.0%.

Operating profit decreased by $7.0 million, or 7.2%, to $89.6 million in 2022, primarily reflecting the impact of the divestiture of Crane Supply of $3.8 million, or 3.9%, and unfavorable mix of $4.9 million, or 5.1%.

Strong productivity substantially offset the unfavorable comparison related to the prior year restructuring gain.

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

Payment & Merchandising Technologies

Year-to-Date Change

(dollars in millions) 2022 2021 $ %

Net sales by product line:

Payment Acceptance and Dispensing Products $ 422.4 $ 382.3 $ 40.1 10.5 %

Banknotes and Security Products 244.2 283.3 (39.1) (13.8) %

Total net sales $ 666.6 $ 665.6 $ 1.0 0.2 %

Cost of sales $ 361.9 $ 355.2 $ 6.7 1.9 %

as a percentage of sales 54.3 % 53.4 %

Selling, general and administrative $ 139.8 $ 146.7 $ (6.9) (4.7) %

as a percentage of sales 21.0 % 22.0 %

Operating profit $ 164.9 $ 163.7 $ 1.2 0.7 %

Operating margin 24.7 % 24.6 %

Sales increased $1.0 million, or 0.2%, to $666.6 million in 2022, driven by higher core sales of $26.8 million, or 4.0%, offset by unfavorable foreign currency translation of $25.7 million, or 3.9%.

• Sales of Payment Acceptance and Dispensing Products increased $40.1 million, or 10.5%, to $422.4 million in 2022.

The increase reflected higher core sales of $51.7 million, or 13.4%, offset by unfavorable foreign currency translation of $11.6 million, or 3.0%, primarily reflecting the weakening of the British pound and Japanese Yen against the U.S.

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

• Sales of Banknotes and Security Products decreased $39.1 million, or 13.8%, to $244.2 million in 2022.

The decrease reflected lower core sales of $25.0 million, or 8.8%, and unfavorable foreign currency translation of $14.1 million, or 5.0%, as the euro weakened against the U.S.

The core sales decrease reflected lower sales to both international customers and the U.S.

Cost of sales increased by $6.7 million, or 1.9%, to $361.9 million primarily related to an increase in material, labor and other manufacturing costs of $36.4 million, or 10.2%, unfavorable mix of $14.9 million, or 4.2%, partially offset by favorable foreign currency translation of $17.5 million, or 4.9%, lower costs of $14.4 million, or 4.1 %, due to lower volumes, and productivity gains of $12.8 million, or 3.6%.

Selling, general and administrative expense decreased by $6.9 million, or 4.7%, to $139.8 million primarily reflecting lower administrative costs.

Operating profit increased by $1.2 million, or 0.7%, to $164.9 million in 2022.

The increase primarily reflected higher pricing net of inflation, and productivity, of $37.4 million, or 22.8%, partially offset by lower volumes of $16.6 million, or 10.1%, unfavorable mix of $14.9 million, or 9.1%, and unfavorable foreign currency translation of $4.2 million, or 2.6%.

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

Engineered Materials

Year-to-Date Change

(dollars in millions) 2022 2021 $ %

Net sales by product line:

FRP - Recreational Vehicles $ 67.9 $ 49.1 $ 18.8 38.3 %

FRP - Building Products 59.2 48.3 10.9 22.6 %

FRP - Transportation 16.0 15.6 0.4 2.6 %

Total net sales $ 143.1 $ 113.0 $ 30.1 26.6 %

Cost of sales $ 113.3 $ 89.7 $ 23.6 26.3 %

as a percentage of sales 79.2 % 79.4 %

Selling, general and administrative $ 9.6 $ 9.2 $ 0.4 4.3 %

as a percentage of sales 6.7 % 8.1 %

Operating profit $ 20.2 $ 14.1 $ 6.1 43.3 %

Operating margin 14.1 % 12.5 %

Sales increased by $30.1 million, or 26.6%, to $143.1 million in 2022.

The increase reflected higher sales to recreational vehicle manufacturers and building products customers.

Cost of sales increased by $23.6 million, or 26.3%, related primarily to higher raw material costs of $24.0 million, or 26.7%, and unfavorable mix of $1.8 million, or 2.0%, partially offset by productivity.

Operating profit increased by $6.1 million, or 43.3%, to $20.2 million in 2022, primarily reflecting higher pricing net of inflation, and productivity, of $9.3 million, or 65.9%, offset by the impact of unfavorable mix of $1.8 million, or 12.8%.

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

Liquidity and Capital Resources

Three Months Ended

Six Months Ended

(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

Operating activities $ 49.0 $ 206.7

Investing activities 289.2 38.7

Financing activities (135.6) (405.2)

Effect of exchange rates on cash and cash equivalents (30.6) (4.5)

(Decrease) increase in cash and cash equivalents $ (171.4) $ 27.4

Increase (decrease) in cash and cash equivalents $ 172.0 $ (164.3)

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.

At any given time, and from time to time, we may be evaluating one or more of these opportunities, although we cannot assure you if or when we will consummate any such transactions.

Our current cash balance, together with cash we expect to generate from future operations 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.

In July 2021, we entered 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 11 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”).

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 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.

Cash provided by operating activities was $49.0 million in the first six months of 2022, as compared to $206.7 million during the same period last year.

The decrease in cash provided by operating activities was primarily driven by increased working capital investments supporting higher levels of demand across most businesses, together with higher tax payments in the first half of 2022.

Net asbestos-related payments for the first six months of 2022 and 2021 were $23.4 million and $20.2 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.

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

Cash provided by investing activities was $289.2 million in the first six months of 2022, as compared to $38.7 million in the comparable period of 2021.

The increase in cash provided from investing activities was primarily related to proceeds from the sale of Crane Supply of $314.3 million.

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.

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.

Cash used for financing activities was $135.6 million during the first six months of 2022, compared to $405.2 million in the comparable period of 2021.

The decrease in cash used for financing activities was driven by the repayment of the term loan of $348.1 million in 2021 which did not repeat in 2022.

In 2022, we also had $203.7 million of share repurchases, partially offset by a $104.4 million increase in net borrowings from the issuance of commercial paper.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Recent Accounting Pronouncements

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What changed 10-Q

Item 2. Management’s Discussion and Analysis