What changed in this filing

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Item 1. Business

2024-02-22 compared with 2023-03-01 · 61 added, 125 removed, 54 unchanged (78% of the section changed)

We are a diversified manufacturer of highly engineered industrial products.

Our operations are currently comprised of four segments:

Aerospace & Electronics (“A&E”), Process Flow Technologies (“PFT”), Payment & Merchandising Technologies (“P&MT”), and Engineered Materials (“EM”).

Our primary end markets include aerospace, defense and space, process industries, non-residential and municipal construction, payment automation solutions, banknote design and production, along with a wide range of general industrial and certain consumer related end markets.

We have been committed to the highest standards of business conduct since inception in 1855 when our founder, R.T.

Crane, resolved “to conduct my business in the strictest honesty and fairness;

to avoid all deception and trickery;

to deal fairly with both customers and competitors;

to be liberal and just toward employees;

and to put my whole mind upon the business.”

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.

We continuously evaluate our portfolio, pursue acquisitions that complement our existing businesses and selectively divest businesses where appropriate.

We strive to foster a performance-based culture focused on productivity and continuous improvement, to attract and retain a committed management team whose interests are directly aligned with those of our shareholders, and to maintain a focused, efficient corporate structure.

We operate a comprehensive set of business processes, philosophies and operational excellence tools to drive continuous improvement throughout our businesses (collectively, the Crane Business System).

Beginning with a core value of integrity, we incorporate “Voice of the Customer” teachings (specific processes designed to capture our customers’ requirements) and a broad range of tools into a disciplined strategy deployment process to continuously improve safety, quality, delivery, cost and growth.

An embedded intellectual capital development process helps ensure that we attract, develop, promote and retain talent to drive continuity and repeatable results.

Crane NXT is a premier industrial technology company that provides proprietary and trusted technology solutions to secure, detect, and authenticate what matters most to its customers.

The company is a pioneer in advanced, proprietary micro-optics technology for securing physical products, and its sophisticated electronic equipment and associated software leverages proprietary core capabilities with detection and sensing technologies.

We are comprised of two reporting segments:

Crane Payment Innovations (“CPI”) and Crane Currency.

We are committed to delivering shareholder value by focusing on our proprietary and differentiated technology and investing in core businesses to capitalize on opportunities to enhance organic growth.

We maintain a strong balance sheet with financial flexibility, allowing us the ability to expand the business through strategic acquisitions into higher-growth adjacencies.

We continuously evaluate our portfolio, pursue acquisitions that complement our existing businesses and are accretive to our growth profile, and selectively divest businesses where appropriate.

We foster a performance-based culture with clearly defined values and utilize our well-established Crane Business System (CBS) to drive operational excellence and profitable growth.

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.

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.

(“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.

On April 3, 2023, Holdings was separated (the “Separation”) into two independent, publicly-traded companies, Crane NXT, Co.

and Crane Company (“SpinCo”) through a pro-rata distribution (the “Distribution”) of all the issued and outstanding common stock of SpinCo to the stockholders of Holdings.

As part of the Separation, the Aerospace & Electronics, Process Flow Technologies and Engineered Materials businesses of Holdings were spun off to SpinCo.

Also, as part of the Separation, Holdings retained the Payment and Merchandising Technologies business and was renamed “Crane NXT, Co.” on April 3, 2023.

Following the consummation of the Separation, our common stock is listed under the symbol “CXT” on the New York Stock Exchange.

Due to SpinCo’s larger operations, greater tangible assets, greater fair value and greater net sales, in each case, relative to ours, among other factors, SpinCo was considered to be the “accounting spinnor” and therefore is the “accounting successor” to Holdings for accounting purposes, notwithstanding the legal form of the Separation.

Therefore, following the Separation, our historical financial statements are comprised solely of combined carve-out financial statements representing only our operations, assets, liabilities and equity on a stand-alone basis derived from the consolidated financial statements and accounting records of Holdings.

Credit Facilities

We are party to a senior secured credit agreement (the “Credit Agreement”) entered into on March 17, 2023, which provides for (i) a $500 million, five-year revolving credit facility (the “Revolving Facility”) and (ii) a $350 million, 3-year term loan facility (the “Term Facility”), funding under each of which became available in connection with the Separation, upon the satisfaction of customary conditions of facilities of this type.

On March 31, 2023, we borrowed the full amount of the Term Facility and $245.0 million was repaid as of December 31, 2023.

Separation Agreements

On April 3, 2023, we entered into definitive agreements with SpinCo in connection with the Separation.

The agreements set forth the terms and conditions of the Separation and provide a framework for Crane NXT’s relationship with SpinCo following the Separation, including the allocation between Crane NXT and SpinCo of Crane NXT’s and SpinCo’s assets, liabilities and obligations attributable to periods prior to, at and after the Separation.

These agreements include the Separation and Distribution Agreement, which contains certain key provisions related to the Separation, as well as a Transition Services Agreement, a Tax Matters Agreement, an Employee Matters Agreement and an Intellectual Property Matters Agreement (each, as described below).

Separation and Distribution Agreement

The Separation and Distribution Agreement sets forth, among other things, the agreements between us and SpinCo regarding the principal transactions necessary to effect the Separation.

It also sets forth other agreements that govern certain aspects of our ongoing relationship with SpinCo after the completion of the Separation.

Transition Services Agreement

The Transition Services Agreement provides for the transition of Holdings into two independent, publicly-traded companies following the consummation of the Separation, and provides each party time to replace certain assets and employees that

have been allocated to the other party.

Under the Transition Services Agreement, we agreed with SpinCo to provide transition service support to the other for various periods of time of up to 18 months in the areas of finance, tax, human resources, legal and information technology.

Such services are provided on customary commercial terms, and each such service can be terminated prior to the expected termination date of such service if it is no longer required.

The Transition Services Agreement was negotiated in the context of a parent-subsidiary relationship and in the context of the Separation.

Transactions under this agreement did not have a material impact to our financial statements and services were substantially completed as of December 31, 2023.

Tax Matters Agreement

The Tax Matters Agreement, among other things, governs our and SpinCo’s respective rights, responsibilities and obligations after the Separation with respect to tax liabilities and benefits (including any taxes imposed that are attributable to the failure of the Distribution and certain related transactions to qualify as a transaction that is tax-free for U.S.

federal income tax purposes), tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and other matters regarding taxes.

Although enforceable as between the parties, the Tax Matters Agreement will not be binding on the Internal Revenue Service or other tax authorities.

Employee Matters Agreement

The Employee Matters Agreement, among other things, governs Crane NXT’s, SpinCo’s and their respective subsidiaries’ rights, responsibilities and obligations after the Separation with respect to the following matters:

(i) employees and former employees (and their respective dependents and beneficiaries) who are or were employed with Crane NXT, SpinCo or their respective subsidiaries, (ii) the allocation of assets and liabilities generally relating to employees, employment or service-related matters and employee benefit plans, (iii) employee compensation plans and director compensation plans, including equity plans, and (iv) other human resources, employment and employee benefits matters.

Intellectual Property Matters Agreement

The Intellectual Property Matters Agreement, among other things, governs the continued ownership and use by Crane NXT and SpinCo of their respective trademarks and trade names that include or are comprised of the term “Crane” in their respective businesses.

Reportable Segments

For additional information on recent business developments and other information about us and our business, please refer to the information set forth under the captions, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in Part II, Item 7 of this report, as well as in Part II, Item 8 under Note 3, “Segment Information,” in the Notes to Consolidated Financial Statements for sales, operating profit and assets employed by each segment.

Aerospace & Electronics

The Aerospace & Electronics segment supplies critical components and systems, including original equipment and aftermarket parts, primarily for the commercial aerospace, and the military aerospace, defense and space markets.

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

Sales to original equipment manufacturers ("OEMs") and aftermarket customers were 72% and 28%, respectively, in 2022.

We provide mission critical systems that require high reliability and high accuracy, such as pressure sensors for aircraft engine control, aircraft braking systems for fighter jets, power conversion solutions for spacecraft and lubrication systems for the harshest and most hazardous environmental conditions.

Crane has differentiated proprietary technology and know-how supporting many of the fundamental technologies that are supporting solutions where we are often sole source in the areas where we compete, with a track record for performance, reliability and continued innovation.

A&E’s integrated capabilities include the following:

• Power Solutions:

Provides enabling technology to accelerate electrification of air, land, space and sea vehicles and systems.

• Sensing Systems:

Provides components and systems for condition and position sensing, and pressure and flow measurement, with high-accuracy, reliability and engineering to excel in rugged aerospace environments.

• Fluid & Thermal Management:

Designs and manufactures positive displacement pumps, centrifugal pumps and true mass flowmeters for aerospace and defense applications.

• Landing Systems:

Provides hydraulic and electric brake control systems with antiskid and autobrake functionality, as well as electronic and hydraulic subsystems for landing gear control.

• Microwave Solutions:

Designs and manufactures high-performance RF and IF components and millimeter-wave systems and subsystems for defense, space and commercial end-use customers.

A&E has a solid long term growth profile driven by positions on market leading platforms, recent new program wins and continued investment in technology readiness.

The segment is also positioned to benefit from underlying market growth driven by increasing new commercial aircraft deliveries, air passenger travel growth, defense investment, ongoing maintenance, repair and overhaul organizations (“MRO”) requirements and emerging applications in the space market, as well as a strong trend driving greater electrification for aerospace and defense applications.

Our unique position to drive sustained growth is driven by differentiated technology investment focused on high-growth market segments, including Low Earth Orbit satellite constellations, next-generation aircraft engines, advanced ground and sea-based radar systems, as well as high-power and bi-directional power conversion for numerous emerging commercial and military applications, including more-electric and hybrid-electric ground vehicles and hybrid-electric and pure electric-propulsion aircraft.

Facilities are located in the United States, Taiwan, and France.

Process Flow Technologies

The Process Flow Technologies segment is a provider of highly engineered fluid handling equipment for mission critical applications that require high reliability.

The segment is comprised of Process Valves and Related Products, Pumps and Systems and Commercial Valves.

• Process Valves and Related Products:

Manufactures a wide range of on/off isolation valves, including check valves, sleeved plug valves, lined valves, process ball valves, high performance butterfly valves, bellows sealed globe valves, aseptic and industrial diaphragm valves and multi / quarter-turn valves actuation.

Other related products include lined pipe, fittings and hoses, air operated diaphragm and peristaltic pumps, instrumentation and sampling systems, valve positioning and control systems, valve diagnostic and calibration systems.

Across the portfolio, the primary focus is on chemical, pharmaceutical and general industrial end markets.

Manufacturing facilities, along with sales and service centers, are located across North America, Europe, the Middle East, Asia and Australia.

• Pumps and Systems:

Manufactures pumps products for water and wastewater applications, primarily in the United States municipal and industrial markets.

• Commercial Valves:

Manufactures valves and related products for the non-residential construction, gas utility and municipal markets.

The primary geographies served by the manufacturing operations are the United Kingdom, the Middle East and continental Europe.

Our portfolio strategically targets the higher growth and less cyclical chemical, general industrial, water and wastewater and pharmaceutical industries.

We expect these industries to be outsized growth segments of the market, driven by investment in sustainability and clean energy, aging infrastructure, tightening wastewater regulations and an aging population with a growing demand for healthcare.

Crane has a strong track record of innovation and being a pioneer in the industry, “writing the book” on the flow of fluids with Technical Paper 410, which is still used as a definitive authority on the topic for engineers, professionals and other practitioners.

By focusing on accelerating the rate of innovation through R&D investment, we have driven incremental market capture and significantly improved new product sales vitality to support long term profitable growth.

Payment & Merchandising Technologies

The Payment & Merchandising Technologies segment consists of Crane Payment Innovations (“CPI”) and Crane Currency.

CPI provides electronic equipment and associated software leveraging extensive and proprietary core capabilities with various detection and sensing technologies for applications including payment verification and authentication.

CPI also provides automation solutions, field service solutions, and remote diagnostics and productivity enhancing software solutions.

Key R&D and manufacturing facilities are located in the United States, the United Kingdom, Mexico, Japan, Switzerland, and Germany, with additional sales offices across the world.

Crane Currency is a pioneer in advanced, proprietary micro-optics technology

for securing physical products.

It provides a broad portfolio of engaging visual effects in features that aid in verification, thereby increasing the level of security and public trust in the authenticity of products including banknotes, consumer goods, and industrial products.

Additionally, Crane Currency has provided banknote substrate to the U.S.

Government since 1879, and today, customers for its advanced technology include more than 50 central banks around the world, and a growing number of consumer and industrial companies.

For additional information on recent business developments and other information about us and our business, please refer to the information set forth under the captions, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in Part II, Item 7 of this report, as well as in Part II, Item 8 under Note 3, “Segment Information,” in the Notes to Consolidated and Combined Financial Statements for sales, operating profit and assets employed by each segment.

Crane NXT, Co.

operates through two reportable segments.

Crane Payment Innovations

CPI also provides advanced automation solutions, and processing systems, field service solutions, and remote diagnostics and productivity software solutions.

Key research and development and manufacturing facilities are located in the United States, the United Kingdom, Mexico, Japan, and Germany, with additional sales offices across the world.

Crane Currency

Crane Currency provides advanced security solutions based on proprietary technology for securing physical products, including banknotes, consumer goods and industrial products.

Facilities are located in the United States, Sweden and Malta.

Engineered Materials

The Engineered Materials segment manufactures fiberglass-reinforced plastic ("FRP") panels and coils, primarily for use in the manufacturing of recreational vehicles ("RVs"), and in commercial and industrial buildings applications, with some additional applications including trailers and other transportation-related products.

Engineered Materials sells the majority of its products directly to RV, trailer, and truck manufacturers, and it uses distributors and retailers to serve the commercial and industrial construction markets.

Manufacturing facilities are located in the United States.

Other Matters Relating to Our Business as a Whole

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Our primary basis of competition is providing high quality products, with technological differentiation, at competitive prices, with superior customer service and timely delivery.

Our products are sold into primary end markets which include aerospace, defense and space, process industries, non-residential and municipal construction, payment automation solutions, banknote design and production, along with a wide range of general industrial and certain consumer related end markets.

We are a leader in a number of distinct areas including materials and surface technology applied for anti-counterfeiting applications, differentiated capabilities in the design and manufacturing of detection systems, and image recognition software

built on advance algorithms to authenticate products.

Our products are sold into primary end markets which include payment automation solutions, banknote design and production, along with a wide range of consumer related and financial services end markets.

As such, our revenues depend on numerous unpredictable factors, including changes in market demand, general economic conditions, customer capital spending, timing and amount of contract awards and credit availability.

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Raw Materials

Our manufacturing operations employ a wide variety of raw materials, including steel, copper, cast iron, electronic components, aluminum, plastics, cotton, flax and various petroleum-based products.

Our manufacturing operations employ a wide variety of raw materials, including steel, copper, electronic components, aluminum, plastics, cotton, flax and various petroleum-based products.

We purchase raw materials from a large number of independent sources around the world.

Although market forces have at times , including in 2022, caused increases in the costs of key raw materials, there have been no raw materials shortages that have had a material adverse impact on our business.

Although market forces have at times, includin g in 2023, caused increases in the costs of key raw materials, there have been no raw materials shortages that have had a material adverse impact on our business.

We believe that we will generally be able to obtain adequate supplies of major raw material requirements or reasonable substitutes at acceptable costs.

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Government Contracts

We have agreements relating to the sale of products to government entities, primarily involving products in our Aerospace & Electronics and Payment & Merchandising Technologies segments and, to a lesser extent, our Process Flow Technologies segment.

We have agreements relating to the sale of products to government entities, primarily involving products in our Currency segments.

As a result, we are subject to various statutes and regulations that apply to companies doing business with the government.

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Accordingly, continued compliance with these existing laws has not had a material impact on our capital expenditures or earnings.

However, we occasionally engage in environmental remediation activities as required by federal and state laws.

In addition, we may be exposed to other environmental costs including participation in the characterization and remediation of federal Superfund sites, or analogous state sites.

When it is reasonably probable we will pay remediation costs at a site, and those costs can be reasonably estimated, we accrue a liability for such future costs with a related charge against our earnings.

For further discussion of environmental related risks, please refer to Item 1A.

“Risk Factors.” For further discussion of our environmental matters, please refer to Part II, Item 8 under Note 12, “Commitments and Contingencies,” in the Notes to Consolidated Financial Statements.

Human Capital Resources

To remain a leading manufacturer of highly engineered industrial products, it is important that we continue to attract, develop, and retain exceptional talent across our global enterprise.

To remain a premier industrial technology company, it is important that we continue to attract, develop, and retain exceptional talent across our global enterprise.

The Company has a diverse global workforce located in 29 countries, spanning six continents.

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In the United States, we employed approximately 2,000 people across 56 locations.

At December 31, 2022, approximately 4% of our U.S.

employees were represented by a union under a collective bargaining agreement.

Employees based in some foreign countries may, from time to time, be represented by works councils or unions or subject to collective bargaining agreements.

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The manufacture and production of our products requires the use of a variety of tools, equipment, materials, and supplies.

At Crane, we are strongly committed to the health and safety of our associates and strive to continuously adhere to global regulatory safety requirements and to reduce the incidence and severity of job-related injuries.

At Crane NXT, we are strongly committed to the health and safety of our associates and strive to continuously adhere to global regulatory safety requirements and to reduce the incidence and severity of job-related injuries.

We utilize strict compliance protocols, training programs, effective risk management practices, and sound science in our operations to minimize risk to our associates.

Beginning in 2020, in response to the COVID-19 pandemic, we implemented flexible remote work options and health and safety protocols and procedures across all of our global offices, manufacturing and distribution facilities to ensure the safety and well-being of our associates.

These protocols included proper hygiene, social distancing, mask use and temperature screenings and other health and safety standards as required by federal, state and local government agencies, taking into consideration guidelines of the Centers for Disease Control and Prevention in the U.S., and other similar public health authorities in our international locations.

Today, we continue to deploy various work options and protocols in response to the significantly reduced health risks compared to the initial and early period of the pandemic.

For a discussion of risks related to employee relations, please refer to Item 1A.

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We also make our filings available free of charge through our Internet website, as soon as reasonably practicable after filing such material electronically with, or furnishing such material, to the SEC.

Also posted on our website are our Corporate Governance Guidelines, Standards for Director Independence, Crane Holdings, Co.

Also posted on our website are our Corporate Governance Guidelines, Standards for Director Independence, Crane NXT, Co.

Code of Ethics and the charters and a brief description of each of the Audit Committee, the Management Organization and Compensation Committee and the Nominating and Governance Committee.

These items are available in the “Investors – Corporate Governance” section of our website at www.craneco.com.

These items are available in the “Investors – Corporate Governance” section of our website at www.cranenxt.com.

The content of our website is not part of this report.

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 1. Business