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Item 7. Management’s Discussion and Analysis

2023-03-01 compared with 2022-02-28 · 272 added, 206 removed, 319 unchanged (60% of the section changed)

2 unchanged sentences

We are a diversified manufacturer of highly engineered industrial products.

Our operations are comprised of four segments:

Our operations are currently comprised of four segments:

Aerospace & Electronics, Process Flow Technologies, Payment & Merchandising Technologies, 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.

Our primary end markets include commercial and military aerospace, defense and space, chemical production, pharmaceutical production, water and wastewater, non-residential and municipal construction, energy, banknote design and production, payment automation solutions, along with a wide range of general industrial and certain consumer related end markets.

Our strategy is to grow earnings and cash flow by focusing on the manufacturing of highly engineered industrial products for specific markets where our scale is a relative advantage, and where we can compete based on our proprietary and differentiated technology, our deep vertical expertise, and our responsiveness to unique and diverse customer needs.

9 unchanged sentences

Recent Transactions

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”).

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

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 certain non-asbestos 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.

filed a 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 Crane Co.

officially changed its name from “Crane Co.” to “Redco Corporation”.

The “Crane Co.” name has been reserved for future use by Crane Holdings.

Divestiture of asbestos-related assets and liabilities

On August 12, 2022, Crane Holdings, Co., Crane Company, a wholly-owned subsidiary of Crane Holdings, Co., and Redco Corporation (“Redco”), then a wholly-owned subsidiary of Crane Company that held asbestos liabilities and related insurance assets, entered into a Stock Purchase Agreement (the “Redco Purchase Agreement”) with Spruce Lake Liability Management Holdco LLC (“Redco Buyer”), an unrelated third party and long-term liability management company specializing in the acquisition and management of legacy corporate liabilities whereby Crane Company transferred to Redco Buyer all of the issued and outstanding shares of Redco (the “Redco Sale”).

In connection with the Redco Sale, Crane Holdings, Co., on behalf of Crane Company, contributed approximately $550 million in cash to Redco, which was funded by a combination of short-term borrowings and cash on hand.

As a result of the Redco Sale, all asbestos obligations and liabilities, related insurance assets and associated deferred tax assets have been removed from Crane Holdings, Co.’s consolidated balance sheets effective August 12, 2022.

A loss on the divestiture of asbestos-related assets and liabilities of $162.4 million was recognized in the consolidated statements of operations for the year ended December 31, 2022.

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

Sale of Crane Supply

On April 8, 2022, the Company entered into an agreement to sell the Crane Supply business for CAD 380 million on a cash-free and debt-free basis.

Subsequent to net working capital and other closing adjustments, the sale closed on May 31, 2022 for CAD 402 million.

In August 2022, the Company received CAD 5 million related to a final working capital adjustment.

The Company recognized a total gain on sale of $232.5 million.

Pending Separation

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”), Crane Company and Crane NXT, Co.

Upon completion of the pending Separation, Crane Holdings, Co.

will be renamed “Crane NXT, Co.” and will continue to operate our Payment & Merchandising Technologies segment.

The new company distributed to our stockholders in the Separation, Crane Company, will hold our Aerospace & Electronics and Process Flow Technologies global growth platforms, as well as our Engineered Materials segment.

The Separation is expected to occur through a tax-free distribution of all of the outstanding shares of Crane Company common stock to holders of our common stock and is expected to be completed in April, 2023, subject to the satisfaction of customary conditions and final approval by Crane Holdings, Co.’s Board of Directors.

On February 7, 2023, the SEC declared effective the registration statement of Crane Company on Form 10.

Each of our stockholders will receive one share of Crane Company common stock for every one share of our common stock held on March 23, 2023, the record date for the distribution.

For additional information regarding the Separation, including risk factors, see the Information Statement of Crane Company, filed as Exhibit 99.1 to Amendment No.

1 to the registration statement on Form 10 filed by Crane Company with the SEC on January 23, 2023.

Termination of Agreement to Sell Engineered Materials

On May 16, 2021, we entered into an agreement to sell the Engineered Materials segment to Grupo Verzatec S.A.

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.

This section of this Form 10-K generally discusses 2021 and 2020 items and year-to-year comparisons between 2020 and 2019.

Segment discussions of 2019 items and year-to-year comparisons between 2020 and 2019 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020.

(“Verzatec”) for $360 million on a cash-free and debt-free basis.

In the second quarter of 2021, the assets and liabilities of the segment were classified as held for sale.

On May 26, 2022, Verzatec terminated the sale agreement and paid $7.5 million to the Company in termination fees, which is presented within Miscellaneous income, net on the Consolidated Statements of Operations.

As such, as of June 30, 2022 the Engineered Materials segment is no longer classified as assets held for sale and is presented herein as continuing operations for all periods presented.

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

Results from Continuing Operations

Results from Operations - For the Years ended December 31, 2022, 2021 and 2020

For the year ended December 31, 2022 vs 2021

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Payment & Merchandising Technologies 1,339.9 1,345.1 1,104.8 (5.2) (0.4) % 240.3 21.8 %

Engineered Materials 258.3 228.0 175.6 30.3 13.3 % 52.4 29.8 %

Total net sales $ 3,374.9 $ 3,408.0 $ 2,936.9 $ (33.1) (1.0) % $ 471.1 16.0 %

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Total sales growth $ (33.1) (1.0) % $ 471.1 16.0 %

Cost of sales $ 2,035.1 $ 2,120.3 $ 1,930.7 $ 85.2 4.0 % $ (189.6) (9.8) %

Selling, general and administrative $ 797.5 $ 775.4 $ 698.1 $ (22.1) (2.9) % $ (77.3) (11.1) %

Restructuring charges (gains), net $ 10.4 $ (16.9) $ 32.3 $ (27.3) (161.5) % $ 49.2 NM

Acquisition-related and integration charges — — $ 12.9 — — $ 12.9 NM

Loss on divestiture of asbestos-related assets and liabilities $ 162.4 — — $ (162.4) NM — —

Operating profit (loss):

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Payment & Merchandising Technologies 333.1 307.5 100.6 25.6 8.3 % 206.9 205.7 %

Engineered Materials 32.6 26.9 22.7 5.7 21.2 % 4.2 18.5 %

Corporate expense (284.7) (97.7) (58.8) (187.0) (191.4) % (38.9) (66.2) %

Corporate - Asbestos provision, net — — (229.0) — — 229.0 NM

Corporate - Environmental provision, net — — (18.9) — — 18.9 NM

Total operating profit $ 369.5 $ 529.2 $ 262.9 $ (159.7) (30.2) % $ 266.3 101.3 %

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Payment & Merchandising Technologies 24.9 % 22.9 % 9.1 %

Engineered Materials 12.6 % 11.8 % 12.9 %

Total operating margin 10.9 % 15.5 % 9.0 %

Acquisition-related and integration charges (a)

$ — $ 12.9 $ 5.2

Restructuring and related (gains) charges, net (a)

$ (9.6) $ 36.8 $ 29.1

Transaction related expenses (a)

$ 8.2 $ — $ —

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

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

Items Affecting Comparability of Reported Results

The comparability of our results from continuing operations for the years ended December 31, 2021, 2020 and 2019 is affected by the following significant items:

The comparability of our results for the years ended December 31, 2022, 2021 and 2020 is affected by the following significant items:

Divestiture of asbestos-related assets and liabilities

In 2022, we recognized a loss on the divestiture of asbestos-related assets and liabilities of $162.4 million.

Please refer to item 8 under Note 12, “Commitments and Contingencies” in the Notes to Consolidated Financial Statements for further discussion.

Sale of Crane Supply

In 2022, we recognized a gain on sale of $232.5 million related to the sale of Crane Supply, which is presented within Gain on sale of business on the Consolidated Statements of Operations.

Termination of Agreement to Sell Engineered Materials

Restructuring and Related (Gains) Charges, net

In 2022, we recorded net pre-tax restructuring and related charges of $14.9 million primarily related to modest cost reduction efforts across our businesses in response to continued macroeconomic uncertainty.

In 2021, we recorded total pre-tax restructuring and related gains of $9.6 million primarily related to a gain on the sale of real estate.

In 2020, we recorded total pre-tax restructuring and related charges of $37.4 million primarily in response to the adverse economic impact of COVID-19 and integration actions related to the Cummins-Allison acquisition.

In 2019, we recorded total pre-tax restructuring and related charges of $29.1 million;

$9.9 million was related to the repositioning actions initiated in December 2019 in our Process Flow Technologies segment, $5.9 million was related to the acquisition of Crane Currency, and $13.3 million was related to our 2017 repositioning actions.

We expect pre-tax savings subsequent to completing all actions for all programs to approximate $165 million.

Please refer to the individual segment discussion and analysis that follows, as well as Item 8 under Note 16, "Restructuring" in the Notes to Consolidated Financial Statements for further discussion.

Transaction Related Expenses

During 2021, we recorded pre-tax transaction related expenses of $8.2 million related to the divestiture of Engineered Materials and other professional fees.

In 2022, we recorded pre-tax transaction related expenses of $49.8 million most of which related to the planned separation, coupled with expenses associated with defending the asbestos liability and to a lesser extent, divestiture costs related to the intended sale of Engineered Materials and the completed sale of Crane Supply.

During 2021, we recorded pre-tax transaction related expenses of $8.2 million related to the previously proposed divestiture of Engineered Materials and other professional fees.

Acquisition-Related and Integration Charges

During 2020 and 2019, we recorded pre-tax acquisition-related and integration charges of $12.9 million and $5.2 million, respectively.

During 2020, we recorded pre-tax acquisition-related and integration charges of $12.9 million.

Please refer to Item 8 under Note 2, "Acquisitions" in the Notes to Consolidated Financial Statements for further discussion.

Asbestos Provision, net

In 2019, we recorded a pre-tax provision, net of insurance recoveries of $229.0 million associated with updating our estimated asbestos liability through the generally accepted end point in 2059.

Please refer to Item 8 under Note 13, "Commitments and Contingencies" in the Notes to Consolidated Financial Statements for further discussion.

Environmental Provision, net

In 2019, we recorded a pre-tax provision, net of reimbursements of $18.9 million to extend accrued costs through 2027 at the former manufacturing site in Goodyear, Arizona (the "Goodyear Site").

Please refer to Note 13, "Commitments and Contingencies" in the Notes to Consolidated Financial Statements for further discussion.

2022 compared with 2021

Sales decreased by $33.1 million, or 1.0%, to $3,374.9 million in 2022.

The year-over-year lower sales included:

• an increase in core sales of $219.6 million, or 6.4%;

• unfavorable foreign currency translation of $113.6 million, or 3.3%;

• a decrease in sales related to the sale of Crane Supply of $139.1 million, or 4.1%.

Cost of sales decreased by $85.2 million, or 4.0%, to $2,035.1 million in 2022.

The decrease is primarily related to the sale of Crane Supply of $102.4 million, or 4.8%, favorable foreign currency translation of $72.6 million, or 3.4%, the impact of lower volumes of $46.8 million, or 2.2%, and strong productivity of $59.5 million, or 2.8%, partially offset by an increase in material, labor and other manufacturing costs of $169.0 million, or 8.0%, and unfavorable mix of $34.6 million, or 1.6%.

Selling general and administrative expenses increased b y $22.1 million, or 2.9%, to $797.5 million in 2022.

The increase was driven primarily by increased costs of $72.8 million, or 9.4%, including transaction related expenses o f $41.6 million, or 5.4%, supporting the Crane Supply and asbestos divestiture as well as the planned Separation, partially offset by favorable foreign currency translation of $21.9 million, or 2.8%, the impact of the sale of Crane Supply of $16.5 million, or 2.1%, and strong productivity of $7.8 million, or 1%.

Operating profit decreased by $159.7 million, or 30.2%, to $369.5 million in 2022.

The decrease in operating profit is primarily related to the loss on divestiture of asbestos-related assets and liabilities of $162.4 million, coupled with the divested

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

operating profit of $20.2 million related to the sale of Crane Supply.

Operating segment performance was strong across the Company, with pricing actions and strong productivity more than offsetting higher material, labor and other manufacturing costs.

Operating profit in 2022 included net restructuring and related charges of $14.9 million and transaction related expenses of $49.8 million.

Operating profit in 2021 included net restructuring and related gains of $9.6 million and transaction related expenses of $8.2 million.

2021 compared with 2020

Sales increased by $471.1 million, or 16.0%, to $3,408.0 million in 2021.

The year-over-year higher sales included:

• an increase in core sales of $343.1 million, or 12.4%;

• an increase in core sales of $395.5 million, or 13.5%, largely driven by end markets that continued to recover from the 2020 impact of the COVID-19 pandemic;

• favorable foreign currency translation of $70.6 million, or 2.4%;

• an increase in sales related to acquisitions of $5.0 million, or 0.2%.

Cost of sales increased by $189.6 million, or 9.8%, to $2,120.3 million in 2021, primarily related to $175.2 million, or 9.1%, to support the higher sales volumes, and an increase in material, labor and other manufacturing costs of $94.2 million, or 4.9%.

Cost of Sales also increased $46.8 million, or 2.4%, related to unfavorable foreign currency translation.

These increases were offset by higher productivity of $68.9 million, or 3.6%, and favorable mix of $53.5 million, or 2.8%.

Selling, general and administrative expense increased $77.3 million, or 11.1%, to $775.4 million in 2021, primarily related to a proportionate increase to the higher sales in the period, including higher compensation costs of $57.6 million, or 8.3%, which was primarily related to higher incentive compensation, driven by above-budget performance.

The remaining increase primarily relates to unfavorable foreign currency translation of $12.9 million, or 1.8%.

Operating profit increased by $266.3 million, or 101.3%, to $529.2 million in 2021.

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Operating profit in 2020 included restructuring and related charges of $37.4 million and acquisition-related and integration charges of $12.9 million.

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

2020 compared with 2019

Sales decreased by $313.2 million, or 10.2%, to $2,761.3 million in 2020.

The year-over-year lower sales included:

• a decrease in core sales of $532.1 million, or 17.3%, partially offset by

• an increase in sales related to acquisitions of $211.7 million, or 6.9%;

• favorable foreign currency translation of $7.2 million, or 0.2%.

Operating profit increased by $57.1 million, or 31.2%, to $240.2 million in 2020.

The increase in operating profit reflected the absence of the $229.0 million asbestos provision, net and the $18.9 million environmental provision, net, together with lower corporate costs.

These increases were largely offset by lower operating profit in each of our segments.

Operating profit in 2020 included restructuring and related charges of $36.8 million and acquisition-related and integration charges of $12.9 million.

Operating profit in 2019 also included restructuring and related charges of $29.1 million and acquisition-related and integration charges of $5.2 million.

Comprehensive income

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Net income before allocation to noncontrolling interests $ 401.1 $ 435.4 $ 181.1

Other comprehensive income (loss), net of tax

Other comprehensive (loss) income, net of tax

Currency translation adjustment (93.3) (69.2) 70.4

Changes in pension and postretirement plan assets and benefit obligation, net of tax 30.0 96.0 (53.6)

Other comprehensive income (loss), net of tax 26.8 16.8 (36.2)

Other comprehensive (loss) income, net of tax (63.3) 26.8 16.8

Comprehensive income before allocation to noncontrolling interests 337.8 462.2 197.9

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For the year ended December 31, 2022, comprehensive income before allocation to noncontrolling interests was $337.8 million compared to $462.2 million in 2021.

The $264.3 million increase was primarily driven by $254.3 million of higher net income before allocation to noncontrolling interests and a $149.6 million increase primarily related to changes in pension discount rates, partially offset by a $139.6 million unfavorable impact of foreign currency translation adjustments, primarily related to the British pound and euro.

The $124.4 million decrease was primarily driven by $34.3 million of lower net income before allocation to noncontrolling interests, a $66.0 million decrease primarily related to changes in pension discount rates and a $24.1 million unfavorable impact of foreign currency translation adjustments, primarily related to the British pound and euro.

For the year ended December 31, 2021, comprehensive income before allocation to noncontrolling interests was $462.2 million compared to $197.9 million in 2020.

The $264.3 million increase was primarily driven by $254.3 million of higher net income before allocation to noncontrolling interests and a $149.6 million increase primarily related to changes in pension discount rates, coupled with improved asset performance, partially offset by a $139.6 million unfavorable impact of foreign currency translation adjustments, primarily related to the British pound, Canadian dollar and euro.

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

7 unchanged sentences

Total net sales $ 667.3 $ 638.3 $ 650.7

Operating profit $ 110.0 $ 100.7 $ 189.4

Restructuring and related charges, net (a)

Cost of sales $ 417.7 $ 399.6 $ 428.2

Selling, general and administrative (a)

$ 129.3 $ 128.7 $ 121.8

Operating profit $ 120.3 $ 110.0 $ 100.7

Assets $ 663.3 $ 604.7 $ 593.9

1 unchanged sentence

Operating margin 18.0 % 17.2 % 15.5 %

(a) Restructuring and related charges, net are included in operating profit and operating margin.

Aerospace & Electronics sales decreased $12.4 million, or 1.9%, to $638.3 million in 2021.

(a) Selling, general and administrative expense includes net restructuring charges of $1.5 million, $0.0 million and $6.5 million in 2022, 2021 and 2020, respectively.

2022 compared to 2021

Aerospace & Electronics sales increased $29.0 million, or 4.5%, to $667.3 million in 2022.

Price was the primary contribution to the growth for the year.

The commercial market and military market accounted for 57% and 43%, respectively, of total segment sales in 2022.

Sales to OEM and aftermarket customers in 2022 were 72% and 28% of total segment sales, respectively.

• Sales of Commercial Original Equipment increased by $21.1 million, or 9.2%, to $250.5 million in 2022, reflecting strong demand from aircraft manufacturers as the industry aircraft build rates continue to recover from the COVID-19 related slowdown, partially offset by material availability constraints.

• Sales of Military Original Equipment decreased by $8.5 million, or 3.5%, to $231.2 million in 2022, primarily reflecting lower shipments due to order timing and material availability constraints.

• Sales of Commercial Aftermarket increased by $24.8 million, or 23.7%, to $129.3 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, along with higher pricing.

• Sales of Military Aftermarket decreased by $8.4 million, or 13.0%, to $56.3 million in 2022, primarily reflecting timing of government orders for certain programs and material availability constraints.

Cost of sales increased $18.1 million, or 4.5%, to $417.7 million in 2022 compared to 2021, primarily reflecting $29.5 million, or 7.4%, of increased material, labor and other manufacturing costs supporting the higher sales, partially offset by $14.3 million, or 3.6%, of productivity gains.

Selling, general and administrative expense increased by $0.6 million, or 0.5%, to $129.3 million in 2022, as higher selling and engineering costs were offset by lower administrative costs.

Operating profit increased $10.3 million, or 9.4%, to $120.3 million in 2022 compared to 2021, primarily due to productivity gains of $16.0 million, or 14.5%, partially offset by increased material, labor and other costs of $2.4 million, or 2.2%, and unfavorable mix of $2.1 million, or 1.9%.

2021 compared to 2020

A&E sales decreased $12.4 million, or 1.9%, to $638.3 million in 2021 compared to 2020.

The commercial market and military market accounted for 52% and 48%, respectively, of total segment sales in 2021.

Sales to OEM and aftermarket customers in 2021 were 74% and 26% of total sales, respectively.

• Sales of Commercial Original Equipment increased by $3.0 million, or 1.3%, to $229.4 million in 2021.

• Sales of Military Original Equipment decreased by $19.0 million, or 7.3%, to $239.7 million in 2021, primarily reflecting challenging comparisons to particularly strong sales growth during the prior three years.

• Sales of Commercial Aftermarket increased by $11.5 million, or 12.4%, to $104.5 million in 2021, primarily reflecting higher demand driven by a rebound in commercial air traffic following the 2020 impact of COVID-19.

• Sales of Military Aftermarket decreased by $7.9 million, or 10.9%, to $64.7 million in 2021, primarily reflecting particularly strong sales in the prior year.

Aerospace & Electronics operating profit increased by $9.3 million, or 9.2%, to $110.0 million in 2021, primarily as a result of savings from 2020 repositioning actions of $19.0 million and productivity benefits of $16.5 million, largely offset by the impact of lower sales volumes of $21.3 million and $4.9 million of other items, net.

• Sales of Commercial Original Equipment increased by $3.0 million, or 1.3%, to $229.4 million in 2021 compared to 2020.

• Sales of Military Original Equipment decreased by $19.0 million, or 7.3%, to $239.7 million in 2021 compared to 2020, primarily reflecting challenging comparisons to particularly strong sales growth during the prior three years.

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

• Sales of Commercial Aftermarket increased by $11.5 million, or 12.4%, to $104.5 million in 2021 compared to 2020, primarily reflecting higher demand driven by a rebound in commercial air traffic following the 2020 impact of the COVID-19 pandemic.

• Sales of Military Aftermarket decreased by $7.9 million, or 10.9%, to $64.7 million in 2021 compared to 2020, primarily reflecting particularly strong sales in the prior year.

Cost of sales decreased $28.6 million, or 6.7%, to $399.6 million in 2021 compared to 2020, primarily related to increased productivity of $14.0 million, or 3.3%, and improved mix of $12.2 million, or 2.8%.

Selling, general and administrative expense increased $6.9 million, or 5.7%, to $128.7 million in 2021 compared to 2020, primarily related to higher compensation costs of $10.7 million, or 8.8%, offset by restructuring charges $6.5 million, or 5.3%, in 2020, which did not repeat in 2021.

Operating profit increased by $9.3 million, or 9.2%, to $110.0 million in 2021 compared to 2020, primarily as a result of savings from 2020 repositioning actions of $19.0 million, or 18.9%, and productivity benefits of $16.5 million, or 16.4%, largely offset by the impact of lower sales volumes of $21.3 million, or 21.2%.

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

Process Flow Technologies

5 unchanged sentences

Total net sales $ 1,109.4 $ 1,196.6 $ 1,005.8

Operating profit $ 182.5 $ 97.7 $ 131.7

Acquisition-related and integration charges (a)

$ — $ 6.3 $ 0.6

Restructuring and related (gains) charges, net (a)

Cost of sales $ 697.8 $ 791.5 $ 689.5

Selling, general and administrative (a)

$ 243.4 $ 222.6 $ 218.6

Operating profit $ 168.2 $ 182.5 $ 97.7

Assets $ 1,064.7 $ 1,240.4 $ 1,106.1

1 unchanged sentence

Operating margin 15.2 % 15.2 % 9.7 %

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

Process Flow Technologies sales increased by $190.8 million, or 19.0%, to $1,196.6 million in 2021, driven by higher core sales of $145.2 million, or 14.5%, favorable foreign currency translation of $40.6 million, or 4.0% and a benefit from the January 2020 acquisition of Instrumentation & Sampling (“I&S”) of $5.0 million, or 0.5%.

(a) Selling, general and administrative expense includes net restructuring charges of $2.3 million in 2022, net restructuring gain of $13.2 million in 2021 and net restructuring charges of $6.1 million in 2020.

2022 compared to 2021

Sales decreased by $87.2 million, or 7.3%, to $1,109.4 million in 2022, driven by lost sales associated with the divestiture of Crane Supply of $139.1 million, or 11.6%, and unfavorable foreign currency translation of $46.6 million, or 3.9%, partially offset by higher core sales of $98.3 million, or 8.2%.

Core sales growth was driven primarily by pricing, with modestly higher volumes.

• Sales of Process Valves and Related Products increased by $32.7 million, or 4.6%, to $749.8 million in 2022.

The increase reflected higher core sales of $63.6 million, or 8.9%, driven by higher pricing, offset by unfavorable foreign currency translation of $31.1 million, or 4.3%, as the euro weakened against the U.S.

Demand remained strong across Chemical, Pharmaceutical and General Industrial end markets.

• Sales of Commercial Valves decreased by $142.0 million, or 37.9%, to $232.2 million in 2022, primarily driven by lost sales associated with the divestiture of Crane Supply of $139.1 million, or 37.2%, and unfavorable foreign currency translation of $15.1 million, or 4.0%, as the British pound weakened against the U.S.

dollar, partially offset by an increase in core sales of $12.2 million, or 3.3%.

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

• Sales of Pumps and Systems increased by $22.1 million, or 21.0%, to $127.4 million in 2022, primarily driven by higher sales to municipal customers and non-residential construction end markets.

Cost of sales decreased by $93.7 million, or 11.8%, to $697.8 million, primarily related to $102.4 million of divested cost related to the sale of Crane Supply, or 12.9%, favorable foreign currency of $30.0 million, or 3.8%, and productivity gains of $17.1 million, or 2.2%, partially offset by a $45.3 million, or 5.7%, increase in material, labor and other manufacturing costs and unfavorable mix of $16.1 million, or 2.0%.

Selling, general and administrative expense increased by $20.8 million, or 9.3%, to $243.4 million primarily reflecting higher administrative and selling costs of $36.1 million, or 16.2%, and lower net restructuring gains of $15.5 million, or 7.0%, partially offset by favorable currency translation of $10.6 million, or 4.8%, and the divested cost related to the sale of Crane Supply of $16.5 million, or 7.4%.

Operating profit decreased by $14.3 million, or 7.8%, to $168.2 million in 2022.

The decrease is primarily due to divested operating profit of $20.2 million related to the sale of Crane Supply, or 11.1%, and lower net restructuring gains of $15.5 million, or 8.5%, partially offset by productivity gains of $20.1 million, or 11.0%.

2021 compared to 2020

Sales increased by $190.8 million, or 19.0%, to $1,196.6 million in 2021 compared to 2020, driven by higher core sales of $145.2 million, or 14.5%, favorable foreign currency translation of $40.6 million, or 4.0% and a benefit from the January 2020 acquisition of Instrumentation & Sampling (“I&S”) of $5.0 million, or 0.5%.

• Sales of Process Valves and Related Products increased by $85.5 million, or 13.5%, to $717.1 million in 2021 compared to 2020.

The increase reflected higher core sales of $66.2 million, or 10.5%, favorable foreign currency translation of $14.3 million, or 2.3%, primarily reflecting the strengthening of the euro against the U.S.

dollar, and a benefit from the acquisition of I&S of $5.0 million, or 0.8%.

The higher core sales primarily reflected broad based strengthening across chemical, pharmaceutical, and general industrial end markets that continue to recover from the 2020 impact of COVID-19.

• Sales of Commercial Valves increased by $87.9 million, or 30.7%, to $374.2 million in 2021 primarily driven by a core sales increase of $62.3 million, or 21.8%, and favorable foreign currency translation of $25.6 million, or 8.9%, as the Canadian dollar and British pound strengthened against the U.S.

dollar, and a

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

benefit from the acquisition of I&S of $5.0 million, or 0.8%.

The higher core sales primarily reflected broad based strengthening across chemical, pharmaceutical, and general industrial end markets that continue to recover from the 2020 impact of the COVID-19 pandemic.

• Sales of Commercial Valves increased by $87.9 million, or 30.7%, to $374.2 million in 2021 compared to 2020, primarily driven by a core sales increase of $62.3 million, or 21.8%, and favorable foreign currency translation of $25.6 million, or 8.9%, as the Canadian dollar and British pound strengthened against the U.S.

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

• Sales of Pumps and Systems increased by $17.4 million, or 19.8%, to $105.3 million in 2021, primarily reflecting higher demand from municipal and non-residential construction end markets.

Process Flow Technologies operating profit increased by $84.8 million, or 86.8%, to $182.5 million in 2021.

The increase primarily reflected the impact of higher sales volumes of $45.2 million, productivity benefits of $24.7 million, the absence of acquisition-related and integration charges of $6.3 million, lower restructuring costs of $16.4 million which included a gain on the sale of real estate related to prior repositioning actions, partially offset by $7.8 million of other items, net.

• Sales of Pumps and Systems increased by $17.4 million, or 19.8%, to $105.3 million in 2021 compared to 2020, primarily reflecting higher demand from municipal and non-residential construction end markets.

Cost of sales increased $102.0 million, or 14.8%, to $791.5 million in 2021 compared to 2020, primarily related to higher volumes of $62.7 million, or 9.1%, increased material, labor and other manufacturing costs of $29.4 million, or 4.3%, and unfavorable foreign currency translation of $27.5 million, or 4.0%, partially offset by increased productivity of $21.9 million, or 3.2%.

Selling, general and administrative expense increased $4.0 million, or 1.8%, to $222.6 million in 2021 compared to 2020, primarily related to higher compensation costs of $17.5 million, or 8.0%, partially offset by a restructuring gain in 2021 of $13.2 million.

Operating profit increased by $84.8 million, or 86.8%, to $182.5 million in 2021 compared to 2020.

The increase primarily reflected the impact of higher sales volumes of $45.2 million, or 46.3%, productivity benefits of $24.7 million, or 25.3%, lower restructuring costs of $16.4 million, or 16.8%, which included a gain on the sale of real estate related to prior repositioning actions, and the absence of acquisition-related and integration charges of $6.3 million, or 6.4%, partially offset by $7.8 million, or 8.0%, of other items, net.

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

5 unchanged sentences

Total net sales $ 1,339.9 $ 1,345.1 $ 1,104.8

Operating profit $ 307.5 $ 100.6 $ 177.3

Acquisition-related and integration charges (a)

$ — $ 6.5 $ 2.4

Restructuring and related (gains) charges, net (a)

Cost of sales $ 713.7 $ 746.2 $ 682.8

Selling, general and administrative (a)

$ 293.1 $ 291.4 $ 321.4

Operating profit $ 333.1 $ 307.5 $ 100.6

Assets $ 2,125.9 $ 2,096.5 $ 2,215.3

1 unchanged sentence

Operating margin 24.9 % 22.9 % 9.1 %

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

Payment & Merchandising Technologies sales increased $240.3 million, or 21.8%, to $1,345.1 million in 2021, reflecting higher core sales of $210.6 million, or 19.1%, and favorable foreign currency translation of $29.7 million, or 2.7%.

(a) Selling, general and administrative expense includes net restructuring charges of $6.2 million in 2022, net restructuring gains of $3.7 million in 2021, and net restructuring charges of $19.1 million in 2020.

2022 compared to 2021

Sales decreased $5.2 million, or 0.4%, to $1,339.9 million in 2022, driven by unfavorable foreign currency translation of $65.3 million, or 4.9%, offset by higher core sales of $60.1 million, or 4.5%.

The higher core sales were driven by higher pricing, partially offset by lower volumes.

• Sales of Payment Acceptance and Dispensing Products increased $68.6 million, or 8.5%, to $874.3 million in 2022.

The increase reflected higher core sales of $103.6 million, or 12.8%, partially offset by unfavorable foreign currency translation of $35.0 million, or 4.3%, primarily reflecting the weakening of the British pound and Japanese Yen against the U.S.

The core sales growth primarily reflected higher sales to Gaming customers and strong pricing across all end markets.

• Sales of Banknotes and Security Products decreased $73.8 million, or 13.7%, to $465.6 million in 2022.

The decrease reflected lower core sales of $43.6 million, or 8.1%, and unfavorable foreign currency translation of $30.2 million, or 5.6%, as the euro weakened against the U.S.

The core sales decline primarily reflected lower sales to international customers after a record-sales year in 2021.

Cost of sales decreased by $32.5 million, or 4.4%, to $713.7 million, primarily related to favorable foreign currency translation of $42.1 million, or 5.6%, the impact of lower volumes of $37.7 million, or 5.1%, and productivity gains of $26.4 million, or 3.5%, partially offset by an increase in material, labor and other manufacturing costs of $59.4 million, or 8.0%, and unfavorable mix of $14.4 million, or 1.9%.

Selling, general and administrative expense increased by $1.7 million, or 0.6%, to $293.1 million, primarily due to net restructuring charges of $6.2 million, or 2.1%, and higher selling costs of $6.0 million, or 2.1%, partially offset by favorable foreign currency translation of $11.3 million, or 3.9%.

Operating profit increased by $25.6 million, or 8.3%, to $333.1 million in 2022.

The increase primarily reflected higher pricing net of inflation, and productivity, of $92.9 million, or 30.2%, partially offset by lower volumes of $31.1 million, or 10.1%, unfavorable mix of $14.4 million, or 4.7%, unfavorable foreign currency translation of $11.8 million, or 3.8%, and higher restructuring charges of $9.9 million, or 3.2%.

2021 compared to 2020

Sales increased $240.3 million, or 21.8%, to $1,345.1 million in 2021 compared to 2020, reflecting higher core sales of $210.6 million, or 19.1%, and favorable foreign currency translation of $29.7 million, or 2.7%.

• Sales of Payment Acceptance and Dispensing Products increased $134.9 million, or 20.1%, to $805.7 million in 2021 compared to 2020.

The increase reflected higher core sales of $123.3 million, or 18.4%, and favorable foreign currency translation of $11.6 million, or 1.7%, primarily reflecting the strengthening of the British pound against the U.S.

The core sales increase primarily reflected higher sales to gaming, retail, vending and transportation customers as end markets continued to recover from the 2020 impact of COVID-19.

• Sales of Banknotes and Security Products increased $105.4 million, or 24.3%, to $539.4 million in 2021.

The core sales increase primarily reflected higher sales to gaming, retail, vending and transportation customers as end markets continued to recover from the 2020 impact of the COVID-19 pandemic.

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

• Sales of Banknotes and Security Products increased $105.4 million, or 24.3%, to $539.4 million in 2021 compared to 2020.

The increase reflected higher core sales of $87.3 million, or 20.1%, and favorable foreign currency translation of $18.1 million, or 4.2%, as the euro strengthened against the U.S.

The core sales increase reflected substantially higher sales of banknotes, globally.

Payment & Merchandising Technologies operating profit increased by $206.9 million, or 205.7%, to $307.5 million in 2021.

The increase primarily reflected the impact of higher sales volumes of $100.7 million and, to a lesser extent, favorable mix of $41.9 million, productivity benefits of $34.7 million, lower restructuring and related costs of $23.5 million and acquisition-related and integration charges of $6.5 million which did not repeat in the current year, partially offset by $0.4 million of other items, net.

Cost of sales increased $63.4 million, or 9.3%, to $746.2 million in 2021 compared to 2020, primarily reflecting a $91.3 million, or 13.4%, increase in costs proportionate to the higher sales volumes, increased material, labor and other manufacturing costs of $29.2 million, or 4.3%, and unfavorable foreign currency translation of $19.3 million, or 2.8%, partially offset by favorable mix of $41.9 million, or 6.1%, and increased productivity of $31.5 million, or 4.6%.

Selling, general and administrative expense decreased $30.0 million, or 9.3%, to $291.4 million in 2021 compared to 2020, primarily related to a $19.1 million restructuring charge in 2020 which did not repeat in 2021 and a $3.7 million restructuring gain in 2021.

Operating profit increased by $206.9 million, or 205.7%, to $307.5 million in 2021 compared to 2020.

The increase primarily reflected the impact of higher sales volumes of $100.7 million, or 100.1%, favorable mix of $41.9 million, or 41.7%, productivity benefits of $34.7 million, or 34.5%, lower restructuring and related costs of $23.5 million, or 23.4%, and acquisition-related and integration charges of $6.5 million, or 6.5%, which did not repeat in the current year, partially offset by $0.4 million, or 0.4% of other items, net.

Engineered Materials

(in millions, except %) For the year ended December 31, 2022 2021 2020

Net sales by product line:

FRP - Recreational Vehicles $ 111.9 $ 102.5 $ 68.9

FRP - Building Products 112.5 94.9 83.1

FRP - Transportation 33.9 30.6 23.6

Total net sales $ 258.3 $ 228.0 $ 175.6

Cost of sales $ 206.2 $ 181.3 $ 134.5

Selling, general and administrative (a)

$ 19.5 $ 19.8 $ 18.4

Operating profit $ 32.6 $ 26.9 $ 22.7

Assets $ 218.6 $ 220.5 $ 217.3

Backlog $ 16.2 $ 20.1 $ 12.8

Operating margin 12.6 % 11.8 % 12.9 %

(a) Selling, general and administrative expense includes net restructuring charges of $0.4 million, $0.0 million and $0.6 million in 2022, 2021 and 2020 respectively.

2022 compared to 2021

Sales increased by $30.3 million, or 13.3%, to $258.3 million in 2022 with higher pricing more than offsetting a decline in volume, primarily related to softening end market demand in the RV industry.

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

Cost of sales increased by $24.9 million, or 13.7%, to $206.2 million, primarily related to higher increase in material, labor and other manufacturing costs of $36.7 million, or 20.2%, offset by the impact of the lower volumes of $12.2 million, or 6.7%.

Selling, general and administrative expense decreased by $0.3 million, or 1.5%, to $19.5 million primarily reflecting lower selling costs.

Operating profit increased by $5.7 million, or 21.2%, to $32.6 million in 2022, primarily reflecting higher pricing net of inflation, and productivity gains, of $16.8 million, or 62.5%, partially offset by the impact of the lower volumes of $11.1 million, or 41.3%.

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

2021 compared to 2020

Engineered Materials sales increased $52.4 million, or 29.8%, to $228.0 million in 2021 compared to 2020, primarily due to higher core sales to RV manufacturers, and to a lesser extent, to building product and transportation customers.

Core sales increases included end markets recovering from the 2020 impact of the COVID-19 pandemic as well as higher pricing to offset higher raw material costs.

Cost of sales increased $46.8 million, or 34.8%, to $181.3 million in 2021 compared to 2020, primarily related to increased material, labor and other manufacturing costs of $32.4 million, or 24.1%, and $16.2 million, or 12.0%, of increased costs proportionate to the higher sales volumes.

Operating profit increased by $4.2 million, or 18.5%, to $26.9 million in 2021 compared to 2020.

The increase primarily reflected the impact of higher sales volumes of $9.5 million, or 41.9%, offset by increased material, labor and other costs of $7.4 million, or 32.6%.

(in millions) For the year ended December 31, 2022 2021 2020

Corporate expense $ (122.3) $ (97.7) $ (58.8)

Corporate — Asbestos provision, net — — (229.0)

Corporate — Environmental provision, net — — (18.9)

Loss on divestiture of asbestos-related assets and liabilities (162.4) — —

Total Corporate expense $ (284.7) $ (97.7) $ (58.8)

Acquisition-related and integration charges a

$ — $ 0.1 $ 2.2

(a) Acquisition-related and integration charges are included in Corporate expense

Total Corporate expense increased by $38.9 million, or 66.2%, in 2021 primarily related to higher compensation and benefit costs of $19.0 million and transaction related expenses of $8.2 million.

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

Total Corporate expense increased by $187.0 million, or 191.4%, in 2022, primarily related to the loss on divestiture of asbestos related assets and liabilities of $162.4 million, or 166.2%, and higher transaction related expenses of $33.9 million, or 34.7%, partially offset by slightly lower compensation and benefit costs.

Total Corporate expense increased by $38.9 million, or 66.2%, in 2021 compared to 2020 primarily related to higher compensation and benefit costs of $19.0 million, or 32.3%, and transaction related expenses of $8.2 million, or 13.9%.

INTEREST AND MISCELLANEOUS INCOME, NET

2 unchanged sentences

Interest expense $ (52.2) $ (46.9) $ (55.3)

Gain on sale of business $ 232.5 $ — $ —

Miscellaneous income, net $ 9.8 $ 19.1 $ 14.9

Interest expense decreased $8.4 million, or 15.2%, resulting from the absence of interest paid for the 364-day credit facility that was paid in April 2021 and lower amounts outstanding under the commercial paper facility beginning in the second quarter of 2021 .

2022 compared to 2021

Interest expense increased $5.3 million, or 11.3%, primarily due to interest paid for the 364-day credit facility that was entered into on August 11, 2022.

The $232.5 million gain on sale of business relates to the divestiture of Crane Supply.

Miscellaneous income, net, decreased $9.3 million, or 48.7%, primarily reflecting a loss on the settlement of a pension plan.

2021 compared to 2020

Interest expense decreased $8.4 million, or 15.2%, in 2021 compared to 2020 resulting from the repayment of the 364-day credit facility, entered into on April 16, 2020 (the “2020 364-Day Credit Agreement”) in April 2021 and lower amounts outstanding under the commercial paper facility beginning in the second quarter of 2021.

Miscellaneous income, net, increased $4.2 million, or 28.2%, primarily reflecting a gain on sale of a property.

7 unchanged sentences

Effective tax rate 28.8 % 13.4 % 19.3 %

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, and examinations initiated by tax authorities around the world.

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

deferred tax assets and liabilities, changes in tax laws, regulations and accounting principles, the continued availability of statutory tax credits and deductions, and examinations initiated by tax authorities around the world.

See "Application of Critical Accounting Policies" included later in this Item 7 for additional information about our provision for income taxes.

5 unchanged sentences

Net cash (used for) provided by:

Operating activities from continuing operations $ 466.7 $ 284.1 $ 370.4

Investing activities from continuing operations 1.9 (228.0) (216.6)

Financing activities from continuing operations (557.9) 55.1 (124.6)

Discontinued operations 29.6 24.3 19.0

Operating activities $ (151.6) $ 498.5 $ 309.5

Investing activities 264.0 (0.3) (229.1)

Financing activities 106.0 (557.9) 55.1

Effect of exchange rates on cash and cash equivalents (39.4) (12.7) 21.6

(Decrease) increase in cash and cash equivalents $ (72.4) $ 157.1 $ 50.5

Increase (decrease) in cash and cash equivalents $ 179.0 $ (72.4) $ 157.1

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.

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 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 August 2022, we entered a new $400 million senior unsecured 364-day Credit Agreement (the”364 Day Credit Agreement”).

The proceeds were used to partially fund the $550 million contribution related to the divestiture of asbestos-related assets and liabilities.

Please see Item 8 under Note 13, “Financing” to our Consolidated Financial Statements for additional details.

In July 2021, we entered a $650 million, 5-year Revolving Credit Agreement, which replaced the prior $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).

See Item 8 under Note 14, “Financing,” in the Notes to Consolidated Financial Statements for details regarding our financing arrangements.

On April 15, 2021, we repaid the amount outstanding under the 364-Day Credit Agreement which we entered into to enhance financial flexibility and maintain maximum liquidity in response to the uncertainty in the global markets resulting from the COVID-19 pandemic.

See Item 8 under Note 13, “Financing,” and Note 14, “Fair Value Measurements” in the Notes to our Consolidated Financial Statements for details regarding our financing arrangements.

On April 15, 2021, we repaid the amount outstanding under a prior credit agreement which was entered into to enhance financial flexibility and maintain maximum liquidity in response to the uncertainty in the global markets resulting from the COVID-19 pandemic.

Operating Activities

Cash provided by operating activities from continuing operations, a key source of our liquidity, was $466.7 million in 2021, compared to $284.1 million in 2020.

The increase in cash provided by operating activities from continuing operations was primarily driven by higher net income, partially offset by higher asbestos-related payments.

Cash used for operating activities, a key source of our liquidity, was $151.6 million in 2022, compared to cash provided by operating activities of $498.5 million in 2021.

The increase in cash used by operating activities was primarily driven by the $550.0 million payment related to the divestiture of asbestos-related assets, together with increased working capital investments supporting higher levels of demand across most businesses.

Cash provided by operating activities was $498.5 million in 2021, compared to $309.5 million in 2020.

The increase in cash provided by operating activities was primarily driven by higher net income, partially offset by higher asbestos-related payments.

Net asbestos-related payments in 2021 and 2020 were $44.9 million and $31.1 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 acquisitions, capital expenditures and cash provided by divestitures of businesses or assets.

Cash provided by investing activities from continuing operations was $1.9 million in 2021, compared to cash used for investing activities from continuing operations of $228.0 million in 2020.

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

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

Cash provided by investing activities was $264.0 million in 2022, compared to cash used for investing activities of $0.3 million in 2021.

The increase in cash provided by investing activities was primarily related to $318.1 million of proceeds related to the divestiture of Crane Supply.

Cash used for investing activities was $0.3 million in 2021, compared to cash used for investing activities of $229.1 million in 2020.

Cash used for investing activities in 2020 was driven by the acquisition of I&S for $169.2 million.

1 unchanged sentence

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

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, 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 $557.9 million in 2021, compared to cash provided by financing activities from continuing operations of $55.1 million in 2020.

The increase in cash used for financing activities from continuing operations was driven by the $348.1 million repayment of the outstanding amount under the 364-Day Credit Agreement in 2021, compared to proceeds of $343.9 million received from the same 364-Day Credit Agreement in 2020.

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

Cash provided by financing activities was $106.0 million in 2022, compared to cash used for financing activities of $557.9 million in 2021.

The increase in cash provided by financing activities was primarily driven by $399.4 million in net borrowings from the 2022 364-Day Credit Agreement, compared to a $348.1 million repayment of the outstanding amount under the 364-Day Credit Agreement in 2021.

This was partially offset by $107.4 million increase in share repurchases.

Cash used for financing activities was $557.9 million in 2021, compared to cash provided by financing activities of $55.1 million in 2020.

The increase in cash used for financing activities was driven by the $348.1 million repayment of the outstanding amount under the 2020 364-Day Credit Agreement in 2021, compared to proceeds of $343.9 million received from the 2020 364-Day Credit Agreement in 2020.

Financing Arrangements

Total debt was $842.4 million and $1,218.6 million as of December 31, 2021 and 2020, respectively.

Total net debt was $1,243.0 million and $842.4 million as of December 31, 2022 and 2021, respectively.

Our indebtedness as of December 31, 2022 was as follows:

• $399.6 million related to the 364-Day Credit Agreement due in 2023;

• $299.7 million of 4.45% notes due 2023;

3 unchanged sentences

(in millions)

Total long-term debt $ 842.4

Total shareholders’ equity 1,832.3

Short-term borrowings $ 699.3

Long-term debt $ 543.7

Total debt $ 1,243.0

Equity 1,904.0

Capitalization $ 3,147.0

4 unchanged sentences

We believe that these ratings afford us adequate access to the public and private debt markets.

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

Contractual Obligations

Under various agreements, we are obligated to make future cash payments in fixed amounts.

These include payments under our long-term debt agreements and rent payments required under operating lease agreements.

These include payments under our short-term and long-term debt agreements and rent payments required under operating lease agreements.

The following table summarizes our fixed cash obligations as of December 31, 2022:

12 unchanged sentences

(b) Pension benefits are funded by the respective pension trusts.

The postretirement benefit component of the obligation is approximately $2.4 per year for which there is no

The postretirement benefit component of the obligation is approximately $1.6 million per year for which there is no

trust and will be directly funded by us.

1 unchanged sentence

(c) As the timing of future cash outflows is uncertain, the following long-term liabilities (and related balances) are excluded from the above table:

Long-term asbestos liability

long-term environmental liability $17.6 and gross unrecognized tax benefits $28.2 and related gross interest and penalties $4.8.

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

Capital Structure

14 unchanged sentences

Net debt is comprised of components disclosed above which are presented on our Consolidated Balance Sheets.

Net capitalization, a non-GAAP measure, represents Net Debt plus Equity.

We report our financial results in accordance with U.S.

generally accepted accounting principles (U.S.

However, management believes that certain non-GAAP financial measures, which include the presentation of net debt, provide useful information about our ability to satisfy our debt obligation with currently available funds.

However, management believes that certain non-GAAP financial measures, which include the presentation of net debt and net capitalization, provide useful information about our ability to satisfy our debt obligation with currently available funds.

Management also uses these non-GAAP financial measures in making financial, operating, planning and compensation decisions and in evaluating our performance.

Non-GAAP financial measures, which may be inconsistent with similarly captioned measures presented by other companies, should be viewed in the context of the definitions of the elements of such measures we provide and in addition to, and not as a substitute for, our reported results prepared and presented in accordance with U.S.

In 2021, equity increased $304.0 million as a result of net income before allocation to noncontrolling interests of $435.4 million, changes in pension and post retirement plan assets and benefit obligations, net of tax of $96.0 million and the impact of equity-based awards and related settlement activities of $39.0 million.

These increases were partially offset by cash dividends of $100.9 million, currency translation adjustment of $69.2 million and share repurchases of $96.3 million.

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

OUTLOOK - CONTINUING OPERATIONS

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

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

For 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.

We expect an improvement in operating profit driven primarily by productivity benefits and operating leverage on higher volumes, partially offset by unfavorable mix.

Aerospace & Electronics

In 2022, we expect Aerospace & Electronics core sales to increase in the high-single digit range compared to 2021.

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 to be flat and 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 and operating margin to increase 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 approximately 1% driven by approximately 3% core growth, partially offset by a 2% impact from unfavorable foreign exchange.

We expect Process Valves and Related Products sales to increase in the low- to mid-single digit range 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 compared to 2021, driven by strong demand across municipal and non-residential U.S.

We expect an improvement in the segment’s operating profit and operating margin compared to 2021, driven by strong productivity and operating leverage on higher volumes.

Payment & Merchandising Technologies

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

At Crane Payment Innovations, we expect core sales growth in the low-double digit range, driven by broad-based strength across all vertical markets.

At Crane Currency, we expect core sales to decline in the high-single digit range compared to 2021 due to lower expected sales to international customers.

We expect the segment’s operating profit to be similar compared to 2021, with higher prices and strong productivity approximately offset by inflationary pressures and unfavorable sales mix.

In 2022, equity increased $68.9 million as a result of net income before allocation to noncontrolling interests of $401.1 million, changes in pension and postretirement plan assets and benefit obligations, net of tax of $30.0 million and the impact of equity-based awards and related settlement activities of $40.4 million.

These increases were partially offset by share repurchases of $203.7 million, cash dividends of $105.6 million and currency translation adjustment of $93.3 million.

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

APPLICATION OF CRITICAL ACCOUNTING POLICIES

APPLICATION OF CRITICAL ACCOUNTING ESTIMATES

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States.

Our significant accounting policies are more fully described in Item 8 under Note 1, “Nature of Operations and Significant Accounting Policies” in the Notes to Consolidated Financial Statements.

Certain accounting policies require us 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.

On an ongoing basis, we evaluate our estimates and assumptions, and the effects of revisions are reflected in the financial statements in the period in which they are determined to be necessary.

The accounting policies described below are those that most frequently require us to make estimates and judgments and, therefore, are critical to understanding our results of operations.

The accounting estimates described below are those that most frequently require us to make estimates and judgments and, therefore, are critical to understanding our results of operations.

We have discussed the development and selection of these accounting estimates and the related disclosures with the Audit Committee of our Board of Directors.

Our significant accounting policies are more fully described in Item 8 under Note 1, “Nature of Operations and Significant Accounting Policies” in the Notes to Consolidated Financial Statements.

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.

We primarily generate revenue through the manufacture and sale of engineered industrial products.

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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.

Total revenue recognized and cost estimates are updated monthly.

In 2022, the Company recognized approximately $120 million in revenue over time related to contracts in progress as of December 31, 2022.

These estimates are subject to uncertainties and require judgment.

Estimates of contract costs include labor hours and rates, and material costs.

These estimates consider historical performance, the complexity of the work to be performed, the estimated time to complete the project, and other economic factors such as inflation and market rates.

We update our estimates on a periodic basis and any revisions to such estimates are recorded in earnings in the period in which they are determined.

Provisions for estimated losses, if any, on uncompleted long-term contracts, are made in the period in which such losses are determined.

We do not believe that any discrete event or adjustment to an individual contract within the aggregate changes in contract estimates for 2022, 2021 or 2020 was material to the consolidated statements of income for such annual periods.

Income Taxes.

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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.

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

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.

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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.

Please refer to Item 8 under 3, “Discontinued Operations” in the Notes to Consolidated Financial Statements for further discussion.

As of December 31, 2022, we had six reporting units.

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.

Goodwill is 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 10.8%), reflecting the respective inherent business risk of each of the reporting units tested.

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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.

Furthermore, in order to evaluate the sensitivity of the fair value calculations on the goodwill impairment test, we applied a hypothetical, reasonably possible 10% decrease to the fair values of each reporting unit.

Furthermore, to evaluate the sensitivity of the fair value calculations on the goodwill impairment test, we applied a hypothetical, reasonably possible 10% decrease to the fair values of each reporting unit.

The effects of this hypothetical 10% decrease would still result in a fair value calculation exceeding our carrying value for each of our reporting units.

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We amortize the cost of definite-lived intangibles over their estimated useful lives.

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

We review all 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

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

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.

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.

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We believe there have been no events or circumstances which would more likely than not reduce the fair value of our indefinite-lived or definite-lived intangible assets below their carrying value.

Asbestos Liability and Related Insurance Coverage and Receivable.

We 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 covering 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.

These factors have both positive and negative effects on the dynamics of asbestos litigation in the tort system and the related best estimate of our asbestos liability, and these effects do not move in a linear fashion but rather change over multi-year periods.

Accordingly, we continue to monitor these trend factors over time and periodically assesses whether an alternative forecast period is appropriate.

With the assistance of our actuarial consultants, effective as of December 31, 2019, we updated our estimate of the asbestos liability, including the costs of settlement or indemnity payments and defense costs relating to currently pending claims and future claims projected to be filed against us through 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 (an aggregate asbestos liability of $712 million) as of December 31, 2019.

Estimation of our 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.

Management has made its 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

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

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.

The liability was $612 million and $670 million as of December 31, 2021 and 2020, respectively.

In conjunction with developing the aggregate liability estimate referenced above, we also developed an estimate of probable insurance recoveries for our asbestos liabilities.

In developing this estimate, we considered our coverage-in-place and other settlement agreements, as well as 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.

As of December 31, 2021 and 2020, we had an aggregate asbestos insurance receivable of $74 million and $87 million, respectively.

As of the last annual assessment, fair values have been substantially in excess of carrying values.

Environmental.

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The prior service cost (credit) is amortized over the average future working lifetime of plan participants whose prior service benefits were changed.

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

The net periodic pension benefit was $2.3 million, $6.8 million and $6.8 million in 2022, 2021 and 2020, respectively.

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pension plans.

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

The weighted average assumptions used to determine benefit obligations and net periodic benefit cost are as follows:

Pension Benefits

For the year ended December 31, 2021 2020 2019

Benefit Obligations

Discount rate 2.89 % 2.62 % 3.34 %

Rate of compensation increase N/A N/A N/A

Interest credit rate 1.47 % 0.93 % 2.83 %

Discount rate 1.58 % 1.07 % 1.70 %

Rate of compensation increase 3.08 % 3.10 % 2.89 %

Interest credit rate 0.33 % 0.29 % 0.22 %

Net Periodic Benefit Cost

Discount rate 2.62 % 3.34 % 4.36 %

Expected rate of return on plan assets 6.50 % 7.25 % 7.25 %

Rate of compensation increase N/A N/A N/A

Interest credit rate 0.93 % 2.83 % 2.40 %

Discount rate 1.07 % 1.70 % 2.42 %

Expected rate of return on plan assets 4.45 % 5.31 % 5.34 %

Rate of compensation increase 3.10 % 2.89 % 3.06 %

Interest credit rate 0.29 % 0.22 % 0.84 %

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 historic returns.

The discount rates we used 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 obligation.

Recent Accounting Pronouncements

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

What changed 10-K

Item 7. Management’s Discussion and Analysis