UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Mark One:


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended ~~June 30, 2022~~March 31, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from to

Commission File Number: 1-1657

CRANE ~~HOLDINGS,~~NXT, CO.

(Exact name of registrant as specified in its charter)



Delaware						88-0706021
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


~~100 First Stamford Place~~950 Winter Street 4th Floor	~~Stamford~~Waltham	CTMA	~~06902~~02451
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: ~~203-363-7300~~610-430-2510

(Not Applicable)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $1.00	CRCXT	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non–accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

(check one):

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the issuer’s classes of common stock, as of ~~July 31, 2022~~April 30, 2023

Common stock, $1.00 Par Value – ~~56,098,326~~56,730,163 shares

Crane ~~Holdings,~~NXT, Co.

Table of Contents

Form 10-Q

Page

Part I - Financial Information

Item 1.

Financial Statements

Condensed Consolidated Statements of Operations

Page 34

Condensed Consolidated Statements of Comprehensive Income

Page 45

Condensed Consolidated Balance Sheets

Page 56

Condensed Consolidated Statements of Cash Flows

Page 78

Consolidated Statements of Changes in Equity

Page 10

Notes to Condensed Consolidated Financial Statements

Page 911

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Page 2928

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Page 4738

Item 4.

Controls and Procedures

Page 4738

Part II - Other Information

Page 4839

Page 4839

Unregistered Sales of Equity Securities and Use of Proceeds

Page 4839

Item 3.

Defaults Upon Senior Securities

Page 4839

Item 4.

Mine Safety Disclosures

Page 4839

Page 4839

Page 4940

Page 5041

EXPLANATORY NOTE

As used in this Quarterly Report on Form 10-Q, the terms "we," "us," "our," "Crane Holdings, Co." and the "Company" mean Crane NXT, Co. and our subsidiaries. Prior to April 3, 2023, Crane NXT, Co. was named “Crane Holdings, Co.” Accordingly, we refer to Crane NXT, Co. as “Crane Holdings, Co.” in certain disclosures that are as of dates or related to periods ended prior to April 3, 2023.

PART I: FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

CRANE HOLDINGS, CO. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


		Three Months Ended				Six Months Ended					Three Months Ended
		June 30,				June 30,					March 31,
(in millions, except per share data)	(in millions, except per share data)	2022		2021		2022		2021		(in millions, except per share data)	2023		2022
Net sales	Net sales	$	864.3	$	855.5	$	1,735.7	$	1,688.9	Net sales	$	842.9	$	871.5
Operating costs and expenses:	Operating costs and expenses:									Operating costs and expenses:
Cost of sales	Cost of sales	535.7		523.5		1,061.8		1,037.0		Cost of sales	481.3		526.2
Selling, general and administrative	Selling, general and administrative	204.2		187.6		402.5		374.2		Selling, general and administrative	209.4		198.3

Restructuring (gains) charges, net		—		(0.2)		—		(13.3)

Operating profit	Operating profit	124.4		144.6		271.4		291.0		Operating profit	152.2		147.0
Other income (expense):
Other (expense) income:										Other (expense) income:
Interest income	Interest income	0.6		0.4		0.9		0.9		Interest income	1.0		0.3
Interest expense	Interest expense	(11.4)		(11.4)		(22.5)		(25.0)		Interest expense	(17.0)		(11.1)
Gain on sale of business		228.7		—		228.7		—
Miscellaneous income, net		14.8		9.7		18.3		13.6
Total other income (expense)		232.7		(1.3)		225.4		(10.5)

Miscellaneous (expense) income, net										Miscellaneous (expense) income, net	(2.4)		3.5
Total other expense, net										Total other expense, net	(18.4)		(7.3)
Income before income taxes	Income before income taxes	357.1		143.3		496.8		280.5		Income before income taxes	133.8		139.7
Provision for income taxes	Provision for income taxes	98.9		5.0		133.6		33.8		Provision for income taxes	28.1		34.7

Net income attributable to common shareholders	Net income attributable to common shareholders	$	258.2	$	138.3	$	363.2	$	246.7	Net income attributable to common shareholders	$	105.7	$	105.0

Earnings per share:	Earnings per share:									Earnings per share:

Basic	Basic	$	4.60	$	2.36	$	6.41	$	4.22	Basic	$	1.87	$	1.84
Diluted	Diluted	$	4.54	$	2.33	$	6.32	$	4.17	Diluted	$	1.84	$	1.81

Average shares outstanding:	Average shares outstanding:									Average shares outstanding:
Basic	Basic	56.1		58.5		56.7		58.4		Basic	56.5		57.1
Diluted	Diluted	56.9		59.3		57.5		59.1		Diluted	57.3		57.9

Dividends per share	Dividends per share	$	0.47	$	0.43	$	0.94	$	0.86	Dividends per share	$	0.47	$	0.47

~~See Notes to Condensed Consolidated Financial Statements.~~

~~CRANE HOLDINGS, CO. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME~~

~~(UNAUDITED)~~

Three Months Ended Six Months Ended
June 30, June 30,
(in millions) 2022 2021 2022 2021
Net income before allocation to noncontrolling interests $ 258.2 $ 138.3 $ 363.2 $ 246.7
Components of other comprehensive income (loss), net of tax
Currency translation adjustment (75.9) 7.6 (97.5) (27.3)
Changes in pension and postretirement plan assets and benefit obligation, net of tax 3.5 5.2 6.8 10.1
Other comprehensive (loss) income, net of tax (72.4) 12.8 (90.7) (17.2)
Comprehensive income before allocation to noncontrolling interests 185.8 151.1 272.5 229.5
Less: Noncontrolling interests in comprehensive income (0.1) (0.1) — 0.7
Comprehensive income attributable to common shareholders $ 185.9 $ 151.2 $ 272.5 $ 228.8

See Notes to Condensed Consolidated Financial Statements.

CRANE HOLDINGS, CO. AND SUBSIDIARIES

CONDENSED CONSOLIDATED ~~BALANCE SHEETS~~STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(in millions) June 30,
2022 December 31,
2021
Assets
Current assets:
Cash and cash equivalents $ 650.6 $ 478.6
Accounts receivable, net of allowance for doubtful accounts of $10.0 as of June 30, 2022 and $10.4 as of December 31, 2021 490.4 483.0
Current insurance receivable - asbestos 13.7 13.7
Inventories, net:
Finished goods 103.6 147.3
Finished parts and subassemblies 73.6 59.5
Work in process 37.4 37.0
Raw materials 228.3 205.3
Inventories, net 442.9 449.1
Other current assets 130.8 118.7
Total current assets 1,728.4 1,543.1
Property, plant and equipment:
Cost 1,239.1 1,288.5
Less: accumulated depreciation 724.9 732.9
Property, plant and equipment, net 514.2 555.6
Long-term insurance receivable - asbestos 51.2 60.0
Long-term deferred tax assets 6.2 17.7
Other assets 239.6 259.3
Intangible assets, net 435.8 467.1
Goodwill 1,523.7 1,583.8
Total assets $ 4,499.1 $ 4,486.6


	Three Months Ended
	March 31,
(in millions)	2023		2022
Net income before allocation to noncontrolling interests	$	105.7	$	105.0
Components of other comprehensive income (loss), net of tax
Currency translation adjustment	12.7		(21.6)
Changes in pension and postretirement plan assets and benefit obligation, net of tax	2.7		3.3
Other comprehensive income (loss), net of tax	15.4		(18.3)
Comprehensive income before allocation to noncontrolling interests	121.1		86.7
Less: Noncontrolling interests in comprehensive income	(0.1)		0.1
Comprehensive income attributable to common shareholders	$	121.2	$	86.6

See Notes to Condensed Consolidated Financial Statements.

CRANE HOLDINGS, CO. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in millions, except per share and share data) June 30,
2022 December 31,
2021
Liabilities and equity
Current liabilities:
Short-term borrowings $ 119.4 $ —
Accounts payable 247.9 273.7
Current asbestos liability 62.3 62.3
Accrued liabilities 361.6 442.7
U.S. and foreign taxes on income 54.1 10.6
Total current liabilities 845.3 789.3
Long-term debt 842.9 842.4
Accrued pension and postretirement benefits 210.4 231.9
Long-term deferred tax liability 75.1 76.9
Long-term asbestos liability 517.5 549.8
Other liabilities 143.3 161.2
Total liabilities 2,634.5 2,651.5
Commitments and contingencies (Note 10) 0 0
Equity:
Preferred shares, par value $0.01; 5,000,000 shares authorized — —
Common shares, par value $1.00; 200,000,000 shares authorized, 72,426,139 shares issued 72.4 72.4
Capital surplus 369.3 363.9
Retained earnings 2,837.7 2,527.3
Accumulated other comprehensive loss (530.9) (440.2)
Treasury stock (886.7) (691.1)
Total shareholders’ equity 1,861.8 1,832.3
Noncontrolling interests 2.8 2.8
Total equity 1,864.6 1,835.1
Total liabilities and equity $ 4,499.1 $ 4,486.6
Share data:
Common shares issued 72,426,139 72,426,139
Less: Common shares held in treasury 16,333,384 14,590,274
Common shares outstanding 56,092,755 57,835,865


(in millions)	March 31, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	510.2	$	657.6
Accounts receivable, net of allowance for doubtful accounts of $16.9 as of March 31, 2023 and $14.1 as of December 31, 2022	499.5		474.7
Inventories, net:
Finished goods	106.0		83.3
Finished parts and subassemblies	74.5		70.7
Work in process	42.3		39.9
Raw materials	270.1		245.9
Inventories, net	492.9		439.8
Other current assets	193.2		179.8

Total current assets	1,695.8		1,751.9
Property, plant and equipment:
Cost	1,268.9		1,250.8
Less: accumulated depreciation	760.9		740.9
Property, plant and equipment, net	508.0		509.9
Long-term deferred tax assets	9.9		8.3
Other assets	184.9		176.0
Intangible assets, net	406.5		416.6
Goodwill	1,530.9		1,527.5

Total assets	$	4,336.0	$	4,390.2

See Notes to Condensed Consolidated Financial Statements.

CRANE HOLDINGS, CO. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


(in millions, except per share and share data)	March 31, 2023		December 31, 2022
Liabilities and equity
Current liabilities:
Short-term borrowings	$	308.5	$	699.3
Accounts payable	247.1		286.6
Accrued liabilities	395.9		464.2
U.S. and foreign taxes on income	23.0		38.1
Total current liabilities	974.5		1,488.2
Long-term debt	880.7		543.7
Accrued pension and postretirement benefits	153.9		153.2
Long-term deferred tax liability	161.1		162.4
Other liabilities	148.1		138.7

Total liabilities	2,318.3		2,486.2
Commitments and contingencies (Note 10)
Equity:
Preferred shares, par value $0.01; 5,000,000 shares authorized	—		—
Common shares, par value $1.00; 200,000,000 shares authorized, 72,440,983 shares issued	72.4		72.4
Capital surplus	376.8		373.8
Retained earnings	2,901.9		2,822.8
Accumulated other comprehensive loss	(487.8)		(503.3)
Treasury stock	(848.1)		(864.3)
Total shareholders’ equity	2,015.2		1,901.4
Noncontrolling interests	2.5		2.6
Total equity	2,017.7		1,904.0
Total liabilities and equity	$	4,336.0	$	4,390.2


Share data:
Common shares issued	72,440,983		72,426,389
Less: Common shares held in treasury	15,715,676		16,101,007
Common shares outstanding	56,725,307		56,325,382

See Notes to Condensed Consolidated Financial Statements.

CRANE HOLDINGS, CO. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


		Six Months Ended					Three Months Ended
		June 30,					March 31,
(in millions)	(in millions)	2022		2021		(in millions)	2023		2022
Operating activities:	Operating activities:					Operating activities:
Net income attributable to common shareholders	Net income attributable to common shareholders	$	363.2	$	246.7	Net income attributable to common shareholders	$	105.7	$	105.0
Gain on sale of business		(228.7)		—
Gain on sale of property		—		(18.5)

Depreciation and amortization	Depreciation and amortization	61.0		62.3		Depreciation and amortization	28.6		28.6
Stock-based compensation expense	Stock-based compensation expense	11.9		12.4		Stock-based compensation expense	6.3		5.9
Defined benefit plans and postretirement credit	Defined benefit plans and postretirement credit	(6.6)		(4.2)		Defined benefit plans and postretirement credit	5.3		(2.7)
Deferred income taxes	Deferred income taxes	19.9		(21.4)		Deferred income taxes	(0.1)		(0.9)
Cash used for operating working capital	Cash used for operating working capital	(149.0)		(29.1)		Cash used for operating working capital	(215.0)		(183.7)
Defined benefit plans and postretirement contributions	Defined benefit plans and postretirement contributions	(8.6)		(17.2)		Defined benefit plans and postretirement contributions	(1.8)		(2.8)
Environmental payments, net of reimbursements	Environmental payments, net of reimbursements	(5.0)		(3.6)		Environmental payments, net of reimbursements	(1.3)		(1.3)
Asbestos related payments, net of insurance recoveries	Asbestos related payments, net of insurance recoveries	(23.4)		(20.2)		Asbestos related payments, net of insurance recoveries	—		(7.5)

Other	Other	14.3		(0.5)		Other	1.5		3.9
Total provided by operating activities		49.0		206.7
Total used for operating activities						Total used for operating activities	(70.8)		(55.5)
Investing activities:	Investing activities:					Investing activities:

Proceeds from disposition of capital assets	Proceeds from disposition of capital assets	0.1		23.3		Proceeds from disposition of capital assets	0.1		—
Capital expenditures	Capital expenditures	(25.2)		(14.6)		Capital expenditures	(12.9)		(13.0)
Proceeds from sale of business		314.3		—
Purchase of marketable securities		—		(10.0)
Proceeds from sale of marketable securities		—		40.0
Total provided by investing activities		289.2		38.7

Total used for investing activities						Total used for investing activities	(12.8)		(13.0)
Financing activities:	Financing activities:					Financing activities:
Dividends paid	Dividends paid	(53.1)		(50.2)		Dividends paid	(26.6)		(26.7)
Reacquisition of shares on open market	Reacquisition of shares on open market	(203.7)		—		Reacquisition of shares on open market	—		(175.8)
Stock options exercised, net of shares reacquired	Stock options exercised, net of shares reacquired	1.8		5.2		Stock options exercised, net of shares reacquired	12.8		0.7
Debt issuance costs						Debt issuance costs	(4.0)		—

Repayments of commercial paper with maturities greater than 90 days		—		(27.1)
Net borrowings from issuance of commercial paper with maturities of 90 days or less	Net borrowings from issuance of commercial paper with maturities of 90 days or less	119.4		15.0		Net borrowings from issuance of commercial paper with maturities of 90 days or less	—		104.0

Proceeds from term loan						Proceeds from term loan	350.0		—
Repayment of term loan	Repayment of term loan	—		(348.1)		Repayment of term loan	(400.0)		—
Total used for financing activities	Total used for financing activities	(135.6)		(405.2)		Total used for financing activities	(67.8)		(97.8)

Effect of exchange rates on cash and cash equivalents	Effect of exchange rates on cash and cash equivalents	(30.6)		(4.5)		Effect of exchange rates on cash and cash equivalents	4.0		(5.1)
Increase (decrease) in cash and cash equivalents		172.0		(164.3)
Decrease in cash and cash equivalents						Decrease in cash and cash equivalents	(147.4)		(171.4)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	478.6		551.0		Cash and cash equivalents at beginning of period	657.6		478.6
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	650.6	$	386.7	Cash and cash equivalents at end of period	$	510.2	$	307.2

See Notes to Condensed Consolidated Financial Statements.

CRANE HOLDINGS, CO. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

Six Months Ended
June 30,
(in millions) 2022 2021
Detail of cash used for operating working capital:
Accounts receivable $ (65.1) $ (45.1)
Inventories (57.3) (29.8)
Other current assets (14.1) (22.3)
Accounts payable 13.5 49.7
Accrued liabilities (64.4) 3.3
U.S. and foreign taxes on income 38.4 15.1
Total $ (149.0) $ (29.1)
Supplemental disclosure of cash flow information:
Interest paid $ 21.0 $ 23.8
Income taxes paid $ 75.3 $ 37.0


	Three Months Ended
	March 31,
(in millions)	2023		2022
Detail of cash used for operating working capital:
Accounts receivable	$	(22.4)	$	(52.0)
Inventories	(50.3)		(35.2)
Other current assets	(16.5)		(5.9)
Accounts payable	(40.7)		(9.3)
Accrued liabilities	(69.9)		(100.1)
U.S. and foreign taxes on income	(15.2)		18.8
Total	$	(215.0)	$	(183.7)

Supplemental disclosure of cash flow information:
Interest paid	$	14.3	$	7.4
Income taxes paid	$	42.3	$	13.7

See Notes to Condensed Consolidated Financial Statements.

CRANE HOLDINGS, CO. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(UNAUDITED)


(in millions, except share data)	Common Shares Issued at Par Value	Capital Surplus		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total Share- holders’ Equity		Non-controlling Interest		Total Equity
BALANCE DECEMBER 31, 2022	72.4	$	373.8	$	2,822.8	$	(503.3)	$	(864.3)	$	1,901.4	$	2.6	$	1,904.0
Net income	—	—		105.7		—		—		105.7		—		105.7
Cash dividends ($0.47 per share)	—	—		(26.6)		—		—		(26.6)		—		(26.6)

Exercise of stock options, net of shares reacquired of 297,539 shares	—	—		—		—		19.8		19.8		—		19.8
Impact from settlement of share-based awards, net of shares acquired	—	(3.3)		—		—		(3.6)		(6.9)		—		(6.9)
Stock-based compensation expense	—	6.3		—		—		—		6.3		—		6.3
Changes in pension and postretirement plan assets and benefit obligation, net of tax	—	—		—		2.7		—		2.7		—		2.7
Currency translation adjustment	—	—		—		12.8		—		12.8		(0.1)		12.7
BALANCE MARCH 31, 2023	72.4	$	376.8	$	2,901.9	$	(487.8)	$	(848.1)	$	2,015.2	$	2.5	$	2,017.7



(in millions, except share data)	Common Shares Issued at Par Value	Capital Surplus		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total Share- holders’ Equity		Non-controlling Interest		Total Equity
BALANCE DECEMBER 31, 2021	72.4	$	363.9	$	2,527.3	$	(440.2)	$	(691.1)	$	1,832.3	$	2.8	$	1,835.1
Net income	—	—		105.0		—		—		105.0		—		105.0
Cash dividends ($0.47 per share)	—	—		(26.4)		—		—		(26.4)		—		(26.4)
Reacquisition on open market of 1,699,949 shares	—	—		—		—		(175.8)		(175.8)		—		(175.8)
Exercise of stock options, net of shares reacquired of 79,214 shares	—	—		—		—		6.1		6.1		—		6.1
Impact from settlement of share-based awards, net of shares acquired	—	(5.1)		—		—		(0.3)		(5.4)		—		(5.4)
Stock-based compensation expense	—	5.9		—		—		—		5.9		—		5.9
Changes in pension and postretirement plan assets and benefit obligation, net of tax	—	—		—		3.3		—		3.3		—		3.3
Currency translation adjustment	—	—		—		(21.7)		—		(21.7)		0.1		(21.6)
BALANCE MARCH 31, 2022	72.4	$	364.7	$	2,605.9	$	(458.6)	$	(861.1)	$	1,723.3	$	2.9	$	1,726.2

See Notes to Condensed Consolidated Financial Statements.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial reporting and the instructions to Form 10-Q and, therefore, reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. All such adjustments are of a normal recurring nature. These interim condensed consolidated financial statements should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

As used in these notes, the terms "we," "us," "our," and the "Company" mean Crane Holdings, Co., which was renamed “Crane NXT, Co.” on April 3, 2023.

Due to rounding, numbers presented throughout this report may not add up precisely to totals we provide, and percentages may not precisely reflect the absolute figures. Certain amounts in the prior periods’ condensed consolidated financial statements have been reclassified to conform to the current period presentation.

~~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. (which, as a result of the Reorganization Merger, became a wholly-owned subsidiary of Crane Holdings) converted from a Delaware corporation into a Delaware limited liability company named “Crane LLC” (such conversion, together with the Reorganization Merger, the “Reorganization”). Following the Reorganization, substantially all of the assets of Crane LLC were distributed, assigned, transferred, conveyed and delivered to, and related liabilities of Crane LLC were assumed by, Crane Holdings. On May 17, 2022, Crane LLC converted from a Delaware limited liability company to a Delaware corporation named “Crane Co.” Subsequently, on May 26, 2022, Crane Co. 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 Company officially changed its name from “Crane Co.” to “Redco Corporation”. The “Crane Co.” name has been reserved for future use by Crane Holdings.

~~Sale of business~~Separation

On April ~~8, 2022,~~3, 2023, the Company, ~~entered into an agreement to sell Crane Supply for CAD380 million on a cash-free and debt-free basis. The sale closed on May 31, 2022.~~

~~Pending Separation~~

~~On March 30, 2022, Crane Co. announced that its Board of Directors unanimously approved a plan to pursue a separation~~was separated into two independent, publicly-traded companies, in a transaction in which the Company retained its Payment & Merchandising Technologies segment and spun off its Aerospace & Electronics, Process Flow Technologies and Engineered Materials segments to the Company’s stockholders (the “Separation”). The Separation is expected to occur through a tax-free distribution and is expected to be completed within approximately 12 months, subject to the satisfaction of customary conditions and final approval by Crane Co.’s Board of Directors.

~~Discontinued Operations~~

On May 16, 2021, we entered into an agreement to sell the Engineered Materials segment to Grupo Verzatec S.A. de C.V. for $360 million on a cash-free and debt-free basis. In the second quarter of 2021, the assets and liabilities of the segment were classified as held for sale, and the segment’s results were presented as discontinued operations. This change was applied on a retrospective basis. On May 26, 2022, Verzatec terminated the sale agreement and paid $7.5 million to the Company in termination fees. As such, the results of the Engineered Materials segment are presented as continuing operations as of June 30, 2022.

Recent Accounting Pronouncements ~~- Adopted~~

~~Simplifying~~The Company considered the applicability and impact of all Accounting ~~for Income Taxes~~

~~In December 2019,~~Standards Updates issued by the Financial Accounting Standards Board (“FASB”) issued amended guidance to simplify the accounting for income taxes. The guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Certain amendments are(FASB) and determined them to be ~~applied prospectively, while other amendments~~either not applicable or are not expected to ~~be applied retrospectively to all periods presented. We~~ have ~~adopted this standard effective January 1, 2021. The adoption~~a material impact on the Company's Condensed Consolidated Statement of ~~this new standard did not impact our consolidated financial statements.~~Operations, Balance Sheets and Cash Flows.

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Note 2 - Segment Results

Our segments are reported on the same basis used internally for evaluating performance and for allocating resources. ~~We have 4~~As of March 31, 2023, we had four reportable segments: Aerospace & Electronics, Process Flow Technologies, Payment & Merchandising Technologies and Engineered Materials. Assets of the reportable segments exclude general corporate assets, which principally consist of cash, deferred tax assets, insurance receivables, certain property, plant and equipment, and certain other assets. Corporate consists of corporate office expenses including compensation and benefits for corporate employees, occupancy, depreciation, and other administrative costs.

A brief description of each of our segments as of March 31, 2023 are as follows:

Aerospace & Electronics

The Aerospace & Electronics segment supplies critical components and systems, including original equipment and aftermarket parts, primarily for the commercial aerospace, and the military aerospace, defense and space markets. Its brands have decades of proven experience, and in many cases invented the critical technologies in their respective markets. The business designs and delivers proven systems, reliable components, and flexible power solutions that excel in tough and mission-critical environments. Products ~~include a wide range of custom designed, highly engineered products used in landing systems, sensing~~ and ~~utility systems, fluid management, seat actuation, power~~services are organized into six integrated solutions: Sensing Components & Systems, Electrical Power Solutions, Fluid Management Solutions, Landing & Control Systems, and ~~microelectronic applications, and microwave systems.~~Microwave Solutions.

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, Commercial Valves, and Pumps and Systems. Process Valves and Related Products ~~manufactures~~include on/off ~~isolation~~ valves ~~instrumentation and controls,~~ and related products for critical and demanding applications ~~primarily~~ in the chemical, oil & gas, power, and ~~petrochemical,~~ general industrial ~~energy-related and pharmaceutical~~ end markets globally. Commercial Valves ~~is engaged primarily in~~includes the manufacturing of valves and related products for the non-residential construction, general industrial, and to a lesser extent, municipal ~~markets, and the distribution of pipe, valves and fittings (PVF) for the non-residential construction market.~~markets. Pumps and Systems ~~manufactures~~include pumps and related products primarily for water and wastewater applications in the industrial, municipal, commercial and military markets.

Payment & Merchandising Technologies

The Payment & Merchandising Technologies segment consists of Crane Payment Innovations (“CPI”) and Crane Currency. CPI provides ~~high technology~~electronic equipment and associated software leveraging extensive and proprietary core capabilities with various detection and sensing technologies for applications including verification and authentication of payment ~~acceptance and dispensing products to original equipment manufacturers, and for certain vertical markets, it~~transactions. CPI also provides ~~currency handling~~advanced automation solutions, and processing systems, ~~complete cash and cashless payment and merchandising solutions, equipment~~field service solutions, and ~~fully connected managed service~~remote diagnostics and productivity software solutions. Crane Currency ~~is a supplier of banknotes and highly engineered banknote~~provides advance security ~~features as well as a provider of security features for product authentication. A pioneer in advanced micro-optics~~solutions based on proprietary micro-optic technology ~~Crane Currency provides a wide range of engaging visual effects in features that increase the level of security and public trust in banknotes and~~ for the ~~product brand authentication market. Crane Currency offers uniquely designed banknotes, substrate (paper) and printing capabilities for over 50 central banks around the world.~~global banknote industry.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Engineered Materials

The Engineered Materials segment manufactures fiberglass-reinforced plastic ("FRP") panels and coils, primarily for use in the manufacturing of recreational vehicles ("RVs"), truck bodies and trailers (Transportation), with additional applications in commercial and industrial buildings ~~applications, with some additional applications including trailers and other transportation-related products.~~(Building Products). In the second quarter of 2022, Engineered Materials ~~sells~~segment was no longer classified as held for sale and as such, the ~~majority~~results of ~~its products directly to RV, trailer, and truck manufacturers, and it uses distributors and retailers to serve the commercial and industrial construction markets.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Engineered Materials segment are presented as continuing operations from second quarter of 2022. This change was applied on retroactive basis.

Financial information by reportable segment is set forth below.


		Three Months Ended				Six Months Ended					Three Months Ended
		June 30,				June 30,					March 31,
(in millions)	(in millions)	2022		2021		2022		2021		(in millions)	2023		2022
Net sales:	Net sales:									Net sales:
Aerospace & Electronics	Aerospace & Electronics	$	161.5	$	157.5	$	318.6��	$	311.5	Aerospace & Electronics	$	180.1	$	157.2
Process Flow Technologies	Process Flow Technologies	296.0		310.7		607.4		598.8		Process Flow Technologies	271.4		311.3
Payment & Merchandising Technologies	Payment & Merchandising Technologies	334.0		328.2		666.6		665.6		Payment & Merchandising Technologies	329.1		332.6
Engineered Materials	Engineered Materials	72.8		59.1		143.1		113.0		Engineered Materials	62.3		70.4
Total	Total	$	864.3	$	855.5	$	1,735.7	$	1,688.9	Total	$	842.9	$	871.5

Operating profit:	Operating profit:									Operating profit:
Aerospace & Electronics	Aerospace & Electronics	$	28.2	$	30.8	$	56.2	$	56.8	Aerospace & Electronics	$	37.7	$	28.1
Process Flow Technologies	Process Flow Technologies	40.6		46.5		89.6		96.6		Process Flow Technologies	63.3		49.0
Payment & Merchandising Technologies	Payment & Merchandising Technologies	80.7		77.9		164.9		163.7		Payment & Merchandising Technologies	79.4		84.2
Engineered Materials	Engineered Materials	7.3		7.7		20.2		14.1		Engineered Materials	11.4		13.4
Corporate	Corporate	(32.4)		(18.3)		(59.5)		(40.2)		Corporate	(39.6)		(27.7)
Total	Total	$	124.4	$	144.6	$	271.4	$	291.0	Total	$	152.2	$	147.0
Interest income	Interest income	0.6		0.4		0.9		0.9		Interest income	1.0		0.3
Interest expense	Interest expense	(11.4)		(11.4)		(22.5)		(25.0)		Interest expense	(17.0)		(11.1)
Gain on sale of business		228.7		—		228.7		—
Miscellaneous income, net		14.8		9.7		18.3		13.6

Miscellaneous (expense) income, net										Miscellaneous (expense) income, net	(2.4)		3.5
Income before income taxes	Income before income taxes	$	357.1	$	143.3	$	496.8	$	280.5	Income before income taxes	$	133.8	$	139.7


(in millions)	(in millions)	June 30, 2022		December 31, 2021		(in millions)	March 31, 2023		December 31, 2022
Assets:	Assets:					Assets:
Aerospace & Electronics	Aerospace & Electronics	$	633.9	$	604.7	Aerospace & Electronics	$	698.9	$	663.3
Process Flow Technologies	Process Flow Technologies	1,135.6		1,240.4		Process Flow Technologies	1,073.3		1,064.7
Payment & Merchandising Technologies	Payment & Merchandising Technologies	2,032.2		2,096.5		Payment & Merchandising Technologies	2,103.5		2,125.9
Engineered Materials	Engineered Materials	233.7		220.5		Engineered Materials	231.2		218.6
Corporate	Corporate	463.7		324.5		Corporate	229.1		317.7

Total	Total	$	4,499.1	$	4,486.6	Total	$	4,336.0	$	4,390.2


(in millions)	(in millions)	June 30, 2022		December 31, 2021		(in millions)	March 31, 2023		December 31, 2022
Goodwill:	Goodwill:					Goodwill:
Aerospace & Electronics	Aerospace & Electronics	$	202.3	$	202.5	Aerospace & Electronics	$	202.3	$	202.3
Process Flow Technologies	Process Flow Technologies	315.1		349.4		Process Flow Technologies	319.5		317.3
Payment & Merchandising Technologies	Payment & Merchandising Technologies	835.0		860.6		Payment & Merchandising Technologies	837.8		836.6
Engineered Materials	Engineered Materials	171.3		171.3		Engineered Materials	171.3		171.3
Total	Total	$	1,523.7	$	1,583.8	Total	$	1,530.9	$	1,527.5

1112

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 3 - Revenue

Disaggregation of Revenues

The following table presents net sales disaggregated by product line for each segment:


		Three Months Ended				Six Months Ended					Three Months Ended
		June 30,				June 30,					March 31,
(in millions)	(in millions)	2022		2021		2022		2021		(in millions)	2023		2022
Aerospace & Electronics	Aerospace & Electronics									Aerospace & Electronics
Commercial Original Equipment	Commercial Original Equipment	$	60.6	$	53.7	$	119.2	$	108.3	Commercial Original Equipment	$	68.4	$	58.7
Military and Other Original Equipment	Military and Other Original Equipment	57.1		62.8		114.4		125.6		Military and Other Original Equipment	61.9		57.4
Commercial Aftermarket Products	Commercial Aftermarket Products	29.0		25.3		57.7		44.8		Commercial Aftermarket Products	37.9		28.6
Military Aftermarket Products	Military Aftermarket Products	14.8		15.7		27.3		32.8		Military Aftermarket Products	11.9		12.5
Total Aerospace & Electronics	Total Aerospace & Electronics	$	161.5	$	157.5	$	318.6	$	311.5	Total Aerospace & Electronics	$	180.1	$	157.2

Process Flow Technologies	Process Flow Technologies									Process Flow Technologies
Process Valves and Related Products	Process Valves and Related Products	$	186.7	$	184.3	$	369.6	$	358.6	Process Valves and Related Products	$	202.9	$	182.9
Commercial Valves	Commercial Valves	77.2		98.2		175.4		187.7		Commercial Valves	30.6		98.2
Pumps and Systems	Pumps and Systems	32.1		28.2		62.4		52.5		Pumps and Systems	37.9		30.2
Total Process Flow Technologies	Total Process Flow Technologies	$	296.0	$	310.7	$	607.4	$	598.8	Total Process Flow Technologies	$	271.4	$	311.3

Payment & Merchandising Technologies	Payment & Merchandising Technologies									Payment & Merchandising Technologies
Payment Acceptance and Dispensing Products	Payment Acceptance and Dispensing Products	$	211.4	$	197.3	$	422.4	$	382.3	Payment Acceptance and Dispensing Products	$	223.8	$	211.0
Banknotes and Security Products	Banknotes and Security Products	122.6		130.9		244.2		283.3		Banknotes and Security Products	105.3		121.6
Total Payment & Merchandising Technologies	Total Payment & Merchandising Technologies	$	334.0	$	328.2	$	666.6	$	665.6	Total Payment & Merchandising Technologies	$	329.1	$	332.6

Engineered Materials	Engineered Materials									Engineered Materials
FRP - Recreational Vehicles	FRP - Recreational Vehicles	$	32.2	$	24.8	$	67.9	$	49.1	FRP - Recreational Vehicles	$	20.3	$	35.7
FRP - Building Products	FRP - Building Products	31.8		26.5		59.2		48.3		FRP - Building Products	32.3		27.4
FRP - Transportation	FRP - Transportation	8.8		7.8		16.0		15.6		FRP - Transportation	9.7		7.3
Total Engineered Materials	Total Engineered Materials	72.8		59.1		143.1		113.0		Total Engineered Materials	$	62.3	$	70.4
Net sales	Net sales	$	864.3	$	855.5	$	1,735.7	$	1,688.9	Net sales	$	842.9	$	871.5

Remaining Performance Obligations

The transaction price allocated to remaining performance obligations represents the transaction price of firm orders which have not yet been fulfilled, which we also refer to as total backlog. As of ~~June 30, 2022,~~March 31, 2023, total backlog was ~~$1,387.0~~$1,580.5 million. We expect to recognize approximately ~~69%~~84% of our remaining performance obligations as revenue in ~~2022,~~2023, an additional ~~29%~~14% in ~~2023~~2024 and the balance thereafter.

Contract Assets and Contract Liabilities

Contract assets represent unbilled amounts that typically arise from contracts for customized products or contracts for products sold directly to the U.S. government or indirectly to the U.S. government through subcontracts, where revenue recognized using the cost-to-cost method exceeds the amount billed to the customer. Contract assets are assessed for impairment and recorded at their net realizable value. Contract liabilities represent advance payments from customers. Revenue related to contract liabilities is recognized when control is transferred to the customer. We report contract assets, which are included within “Other current assets” in our Condensed Consolidated Balance Sheets, and contract liabilities, which are included within “Accrued liabilities” on our Condensed Consolidated Balance Sheets, on a contract-by-contract net basis at the end of each reporting period. Net contract assets and contract liabilities consisted of the following:


(in millions)	(in millions)	June 30, 2022		December 31, 2021		(in millions)	March 31, 2023		December 31, 2022
Contract assets	Contract assets	$	87.8	$	73.0	Contract assets	$	97.0	$	88.6
Contract liabilities	Contract liabilities	$	99.3	$	101.1	Contract liabilities	$	150.4	$	142.9

1213

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

We recognized revenue of ~~$30.3 million and $62.4~~$38.1 million during the ~~three-and six-month periods~~three-month period ended ~~June 30, 2022, respectively,~~March 31, 2023, related to contract liabilities as of December 31, ~~2021.~~2022.

Note 4 - Earnings Per Share

Our basic earnings per share calculations are based on the weighted average number of common shares outstanding during the period. Potentially dilutive securities include outstanding stock options, restricted share units, deferred stock units and performance-based restricted share units. The effect of potentially dilutive securities is reflected in diluted earnings per common share by application of the treasury method. Diluted earnings per share gives effect to all potentially dilutive common shares outstanding during the period.


		Three Months Ended				Six Months Ended					Three Months Ended
		June 30,				June 30,					March 31,
(in millions, except per share data)	(in millions, except per share data)	2022		2021		2022		2021		(in millions, except per share data)	2023		2022

Net income attributable to common shareholders	Net income attributable to common shareholders	$	258.2	$	138.3	$	363.2	$	246.7	Net income attributable to common shareholders	$	105.7	$	105.0

Average basic shares outstanding	Average basic shares outstanding	56.1		58.5		56.7		58.4		Average basic shares outstanding	56.5		57.1
Effect of dilutive share-based awards	Effect of dilutive share-based awards	0.8		0.8		0.8		0.7		Effect of dilutive share-based awards	0.8		0.8
Average diluted shares outstanding	Average diluted shares outstanding	56.9		59.3		57.5		59.1		Average diluted shares outstanding	57.3		57.9

Earnings per basic share	Earnings per basic share	$	4.60	$	2.36	$	6.41	$	4.22	Earnings per basic share	$	1.87	$	1.84

Earnings per diluted share	Earnings per diluted share	$	4.54	$	2.33	$	6.32	$	4.17	Earnings per diluted share	$	1.84	$	1.81

~~The computation~~Stock options, restricted share units, deferred stock units and performance-based restricted share units that were excluded from the calculation of diluted earnings per share ~~excludes the~~because their effect ~~of the potentially anti-dilutive securities which~~is anti‑dilutive was 0.4 million and ~~1.3~~0.3 million for the three months ended ~~June 30,~~March 31, 2023, and 2022, ~~and 2021, respectively and 0.3 million and 1.5 million for the six months ending June 30, 2022 and 2021,~~ respectively.

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~Note 5 - Changes in Equity and Accumulated Other Comprehensive Loss~~

~~A summary of changes in equity for the year-to-date interim periods ended June 30, 2022 and 2021 is provided below:~~

(in millions, except share data) Common
Shares
Issued at
Par Value Capital
Surplus Retained
Earnings Accumulated
Other
Comprehensive
Loss Treasury
Stock Total
Share- holders’
Equity Non-controlling
Interest Total
Equity
BALANCE DECEMBER 31, 2021 72.4 $ 363.9 $ 2,527.3 $ (440.2) $ (691.1) $ 1,832.3 $ 2.8 $ 1,835.1
Net income — — 105.0 — — 105.0 — 105.0
Cash dividends ($0.47 per share) — — (26.4) — — (26.4) — (26.4)
Reacquisition on open market of 1,699,949 shares — — — — (175.8) (175.8) — (175.8)
Exercise of stock options, net of shares reacquired of 79,214 shares — — — — 6.1 6.1 — 6.1
Impact from settlement of share-based awards, net of shares acquired — (5.1) — — (0.3) (5.4) — (5.4)
Stock-based compensation expense — 5.9 — — — 5.9 — 5.9
Changes in pension and postretirement plan assets and benefit obligation, net of tax — — — 3.3 — 3.3 — 3.3
Currency translation adjustment — — — (21.7) — (21.7) 0.1 (21.6)
BALANCE MARCH 31, 2022 72.4 $ 364.7 $ 2,605.9 $ (458.6) $ (861.1) $ 1,723.3 $ 2.9 $ 1,726.2
Net income — — 258.2 — — 258.2 — 258.2
Cash dividends ($0.47 per share) — — (26.4) — — (26.4) — (26.4)
Reacquisition on open market of 1,959,069 shares — — — — (27.9) (27.9) — (27.9)
Exercise of stock options, net of shares reacquired of 94,774 shares — — — — 1.1 1.1 — 1.1
Impact from settlement of share-based awards, net of shares acquired — (1.3) — — 1.2 (0.1) — (0.1)
Stock-based compensation expense — 5.9 — — — 5.9 — 5.9
Changes in pension and postretirement plan assets and benefit obligation, net of tax — — — 3.5 — 3.5 — 3.5
Currency translation adjustment — — — (75.8) — (75.8) (0.1) (75.9)
BALANCE June 30, 2022 72.4 $ 369.3 $ 2,837.7 $ (530.9) $ (886.7) $ 1,861.8 $ 2.8 $ 1,864.6

(in millions, except share data) Common
Shares
Issued at
Par Value Capital
Surplus Retained
Earnings Accumulated
Other
Comprehensive
Loss Treasury
Stock Total
Share- holders’
Equity Non-controlling
Interest Total
Equity
BALANCE DECEMBER 31, 2020 72.4 $ 330.7 $ 2,192.8 $ (466.4) $ (600.6) $ 1,528.9 $ 2.2 $ 1,531.1
Net income — — 108.4 — — 108.4 — 108.4
Cash dividends ($0.43 per share) — — (25.0) — — (25.0) — (25.0)
Impact from settlement of share-based awards, net of shares acquired — (2.3) — — 9.5 7.2 — 7.2
Stock-based compensation expense — 6.3 — — — 6.3 — 6.3
Changes in pension and postretirement plan assets and benefit obligation, net of tax — — — 4.9 — 4.9 — 4.9
Currency translation adjustment — — — (35.7) — (35.7) 0.8 (34.9)
BALANCE MARCH 31, 2021 72.4 $ 334.7 $ 2,276.2 $ (497.2) $ (591.1) $ 1,595.0 $ 3.0 $ 1,598.0
Net income — — 138.3 — — 138.3 — $ 138.3
Cash dividends ($0.43 per share) — — (25.2) — — (25.2) — (25.2)
Impact from settlement of share-based awards, net of shares acquired — 7.6 — — (9.5) (1.9) — (1.9)
Stock-based compensation expense — 6.1 — — — 6.1 — 6.1
Changes in pension and postretirement plan assets and benefit obligation, net of tax — — — 5.2 — 5.2 — 5.2
Currency translation adjustment — — — 7.7 — 7.7 (0.1) 7.6
BALANCE JUNE 30, 2021 72.4 $ 348.4 $ 2,389.3 $ (484.3) $ (600.6) $ 1,725.2 $ 2.9 $ 1,728.1

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 5 - Changes in Accumulated Other Comprehensive Loss

The table below provides the accumulated balances for each classification of accumulated other comprehensive income (loss), as reflected on our Condensed Consolidated Balance Sheets.


(in millions)	(in millions)		Defined Benefit Pension and Postretirement Items		Currency Translation Adjustment		Total a		(in millions)		Defined Benefit Pension and Postretirement Items		Currency Translation Adjustment		Total a
Balance as of December 31, 2021			$	(301.9)	$	(138.3)	$	(440.2)
Balance as of December 31, 2022									Balance as of December 31, 2022		$	(271.9)	$	(231.4)	$	(503.3)
		Other comprehensive income (loss) before reclassifications	—		(97.5)		(97.5)			Other comprehensive income (loss) before reclassifications	—		12.8		12.8
		Amounts reclassified from accumulated other comprehensive loss	6.8		—		6.8			Amounts reclassified from accumulated other comprehensive loss	2.7		—		2.7
Net period other comprehensive income (loss)	Net period other comprehensive income (loss)		6.8		(97.5)		(90.7)		Net period other comprehensive income (loss)		2.7		12.8		15.5
Balance as of June 30, 2022			$	(295.1)	$	(235.8)	$	(530.9)
Balance as of March 31, 2023									Balance as of March 31, 2023		$	(269.2)	$	(218.6)	$	(487.8)


a			Net of tax benefit of ~~$120.1~~$107.3 million and ~~$117.9~~$106.6 million as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

The table below illustrates the amounts reclassified out of each component of accumulated other comprehensive loss for the ~~three-~~three month ended March 31, 2023, and ~~six-month periods ended June 30, 2022, and 2021.~~2022. Amortization of pension and postretirement components has been recorded within “Miscellaneous (expense) income, net” on our Condensed Consolidated Statements of Operations.


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
(in millions)	(in millions)	2022		2021		2022		2021		(in millions)	2023		2022
Amortization of pension items:	Amortization of pension items:									Amortization of pension items:
Prior service costs		$	—	$	(0.1)	$	—	$	(0.1)

Net loss	Net loss	4.8		6.5		9.5		13.1		Net loss	3.8		4.8
Amortization of postretirement items:	Amortization of postretirement items:									Amortization of postretirement items:
Prior service costs	Prior service costs	(0.3)		(0.3)		(0.5)		(0.5)		Prior service costs	(0.2)		(0.3)

Net gain										Net gain	(0.2)		—
Total before tax	Total before tax	$	4.5	$	6.1	$	9.0	$	12.5	Total before tax	$	3.4	$	4.5
Tax impact	Tax impact	1.0		1.1		2.2		2.4		Tax impact	0.7		1.2
Total reclassifications for the period	Total reclassifications for the period	$	3.5	$	5.0	$	6.8	$	10.1	Total reclassifications for the period	$	2.7	$	3.3

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 6 - Defined Benefit and Postretirement Benefits

For all plans, the components of net periodic benefit for the three months ended ~~June 30,~~March 31, 2023, and 2022 ~~and 2021~~ are as follows:

Pension Postretirement
(in millions) 2022 2021 2022 2021
Service cost $ 1.3 $ 1.7 $ 0.1 $ 0.1
Interest cost 5.2 5.2 0.2 0.2
Expected return on plan assets (13.9) (15.7) — —
Recognized curtailment gain — — — —
Amortization of prior service cost — (0.1) (0.3) (0.3)
Amortization of net loss 4.8 6.5 — —
Net periodic benefit $ (2.6) $ (2.4) $ — $ —

~~For all plans, the components of net periodic benefit for the six months ended June 30, 2022, and 2021 are as follows:~~


		Pension				Postretirement					Pension				Postretirement
(in millions)	(in millions)	2022		2021		2022		2021		(in millions)	2023		2022		2023		2022
Service cost	Service cost	$	2.6	$	3.2	$	0.1	$	0.2	Service cost	$	1.3	$	1.3	$	—	$	0.1
Interest cost	Interest cost	10.4		10.4		0.4		0.3		Interest cost	9.5		5.2		0.2		0.2
Expected return on plan assets	Expected return on plan assets	(27.9)		(29.8)		—		—		Expected return on plan assets	(12.2)		(13.9)		—		—
Recognized curtailment gain		—		(0.7)		—		—

Amortization of prior service cost	Amortization of prior service cost	—		(0.1)		(0.5)		(0.5)		Amortization of prior service cost	—		—		(0.2)		(0.3)
Amortization of net loss		9.5		13.1		—		—
Net periodic benefit		$	(5.4)	$	(3.9)	$	—	$	—
Amortization of net (gain) loss										Amortization of net (gain) loss	3.8		4.8		(0.2)		—
Settlement loss										Settlement loss	1.8		—		—		—
Curtailment loss										Curtailment loss	1.1		—		—		—
Net periodic loss (benefit)										Net periodic loss (benefit)	$	5.3	$	(2.6)	$	(0.2)	$	—

The components of net periodic benefit, other than the service cost component, are included in “Miscellaneous (expense) income, net” in our Condensed Consolidated Statements of Operations. Service cost is recorded within “Cost of sales” and “Selling, general and administrative” in our Condensed Consolidated Statements of Operations.

We expect to contribute the following to our pension and postretirement plans:

(in millions) Pension Postretirement
Expected contributions in 2022 $ 20.1 $ 2.6
Amounts contributed during the six months ended June 30, 2022 $ 8.6 $ —


(in millions)	Pension		Postretirement
Expected contributions in 2023	$	20.0	$	2.3
Amounts contributed during the three months ended March 31, 2023	$	0.3	$	1.5

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 7 - Income Taxes

Effective Tax Rates

Our quarterly provision for income taxes is measured using an annual effective tax rate, adjusted for discrete items within the ~~period~~periods presented.

Our effective tax rates are as follows:

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Effective Tax Rate 27.7% 3.5% 26.9% 12.0%

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


	Three Months Ended March 31,
	2023	2022
Effective Tax Rate	21.0%	25.0%

Our effective tax rate for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 is lower than the prior year’s comparable period primarily due to the greater benefit related to share-based compensation partially offset by higher ~~than~~non-U.S. taxes.

Our effective tax rate attributable to continuing operations for the three months ended March 31, 2023 is equal to the statutory U.S. federal tax rate of 21% ~~primarily due to earnings in jurisdictions with statutory~~. The effective tax ~~rates higher than~~rate is the ~~United States., expenses~~result of permanent increases and decreases that ~~are statutorily non-deductible for income tax purposes~~net against each other and ~~U.S. state taxes, partially offset by excess share-based compensation benefits, tax credit utilization, and the statutory U.S. deduction related to our non-U.S. subsidiaries’ income.~~offset.

Unrecognized Tax Benefits

During the three months ended June 30, 2022, our gross unrecognized tax benefits, excluding interest and penalties, decreased by $0.3 million, primarily as a result of decreases due to expiration of statutes of limitations in the current year and tax positions taken in the current period, partially offset by increases in tax positions taken in the current year. During the six months ended June 30, 2022,March 31, 2023, our gross unrecognized tax benefits, excluding interest and penalties, increased by ~~$0.2~~$0.5 million, primarily ~~as a result of~~due to increases in tax positions taken in the current ~~year,~~periods, partially offset by reductions ~~from expirations~~as a result of ~~statutes of limitations and tax~~ positions taken during ~~the~~ prior period. During the three ~~and six~~ months ended ~~June 30, 2022,~~March 31, 2023, the total amount of unrecognized tax benefits that, if recognized, would ~~affect~~cause our effective tax rate ~~(decreased)/increased~~to increase by ~~$(0.3)~~$0.8 million ~~and $0.3 million respectively.~~. The difference between these amounts relates to (1) offsetting tax effects from other tax jurisdictions, and (2) interest expense, net of deferred taxes.

During the three ~~and six~~ months ended ~~June 30, 2022,~~March 31, 2023, we recognized ~~$(0.1)~~$0.5 million ~~and $0.2 million, respectively,~~ of interest ~~and penalty (income) /~~ expense related to unrecognized tax benefits in our Condensed Consolidated Statement of Operations. As of ~~June 30, 2022,~~March 31, 2023 and December 31, ~~2021,~~2022, the total amount of accrued interest and penalty expense related to unrecognized tax benefits recorded in our Condensed Consolidated Balance Sheets was ~~$5.1~~$5.3 million and ~~$4.9~~$4.8 million, respectively.

During the next twelve months, it is reasonably possible that our unrecognized tax benefits may decrease by ~~$6.1~~ $13.4 million due to expiration of statutes of limitations and settlements with tax authorities. However, if the ultimate resolution of income tax examinations results in amounts that differ from this estimate, we will record additional income tax expense or benefit in the period in which such matters are effectively settled.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 8 - Goodwill and Intangible Assets

Our business acquisitions have typically resulted in the recognition of goodwill and other intangible assets. We follow the provisions under ASC Topic 350, “Intangibles – Goodwill and Other” as it relates to the accounting for goodwill in our condensed consolidated financial statements. These provisions require that we, on at least an annual basis, evaluate the fair value of the reporting units to which goodwill is assigned and attributed and compare that fair value to the carrying value of the reporting unit to determine if an impairment has occurred. We perform our annual impairment testing during the fourth quarter. Impairment testing takes place more often than annually if events or circumstances indicate a change in status that would indicate a potential impairment. We believe that there have been no events or circumstances which would more likely than not reduce the fair value for our reporting units below its carrying value. A reporting unit is an operating segment unless discrete financial information is prepared and reviewed by segment management for businesses one level below that operating segment (a “component”), in which case the component would be the reporting unit. As of ~~June 30, 2022,~~March 31, 2023, we had 7six reporting units.

Intangibles with indefinite useful lives, consisting of trade names, are tested annually for impairment, or when events or changes in circumstances indicate the potential for impairment. If the carrying amount of an indefinite lived intangible asset exceeds its fair value, the intangible asset is written down to its fair value. Fair value is calculated using relief from royalty method. We amortize the cost of definite-lived intangibles over their estimated useful lives. We also 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.

Changes to goodwill are as follows:

(in millions) Aerospace & Electronics Process Flow Technologies Payment & Merchandising Technologies Engineered Materials Total
Balance as of December 31, 2021 $ 202.5 $ 349.4 $ 860.6 $ 171.3 $ 1,583.8
Currency translation (0.2) (12.0) (25.6) — (37.8)
Disposal on sale of business — (22.3) — — (22.3)
Balance at June 30, 2022 $ 202.3 $ 315.1 $ 835.0 $ 171.3 $ 1,523.7


(in millions)	Aerospace & Electronics		Process Flow Technologies		Payment & Merchandising Technologies		Engineered Materials		Total
Balance as of December 31, 2022	$	202.3	$	317.3	$	836.6	$	171.3	$	1,527.5


Currency translation	—		2.2		1.2		—		3.4

Balance as of March 31, 2023	$	202.3	$	319.5	$	837.8	$	171.3	$	1,530.9

As of ~~June 30, 2022,~~March 31, 2023, we had ~~$435.8~~$406.5 million of net intangible assets, of which ~~$69.5~~$67.4 million were intangibles with indefinite useful lives. As of December 31, ~~2021,~~2022, we had ~~$467.1~~$416.6 million of net intangible assets, of which ~~$70.6~~$67.3 million were intangibles with indefinite useful lives.

Changes to intangible assets are as follows:


(in millions)	(in millions)	Six Months Ended June 30, 2022		Year Ended December 31, 2021		(in millions)	Three Months Ended March 31, 2023		Year Ended December 31, 2022
Balance at beginning of period, net of accumulated amortization	Balance at beginning of period, net of accumulated amortization	$	467.1	$	520.3	Balance at beginning of period, net of accumulated amortization	$	416.6	$	467.1

Amortization expense	Amortization expense	(20.9)		(44.5)		Amortization expense	(10.4)		(41.7)
Currency translation and other	Currency translation and other	(10.4)		(8.7)		Currency translation and other	0.3		(8.8)
Balance at end of period, net of accumulated amortization	Balance at end of period, net of accumulated amortization	$	435.8	$	467.1	Balance at end of period, net of accumulated amortization	$	406.5	$	416.6

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A summary of intangible assets are as follows:


			June 30, 2022						December 31, 2021								March 31, 2023						December 31, 2022
(in millions)	(in millions)	Weighted Average Amortization Period of Finite Lived Assets (in years)	Gross Asset		Accumulated Amortization		Net		Gross Asset		Accumulated Amortization		Net		(in millions)	Weighted Average Amortization Period of Finite Lived Assets (in years)	Gross Asset		Accumulated Amortization		Net		Gross Asset		Accumulated Amortization		Net
Intellectual property rights	Intellectual property rights	15.1	$	134.4	$	58.6	$	75.8	$	136.8	$	59.2	$	77.6	Intellectual property rights	15.1	$	132.4	$	59.5	$	72.9	$	132.1	$	59.1	$	73.0
Customer relationships and backlog	Customer relationships and backlog	18.1	633.1		313.6		319.5		651.7		308.8		342.9		Customer relationships and backlog	18.4	636.2		338.3		297.9		635.5		329.8		305.7
Drawings	Drawings	40	11.1		10.7		0.4		11.1		10.6		0.5		Drawings	40.0	11.1		10.7		0.4		11.1		10.7		0.4
Other	Other	11.8	138.7		98.6		40.1		142.1		96.0		46.1		Other	11.7	141.8		106.5		35.3		141.3		103.8		37.5
Total	Total	18.6	$	917.3	$	481.5	$	435.8	$	941.7	$	474.6	$	467.1	Total	18.0	$	921.5	$	515.0	$	406.5	$	920.0	$	503.4	$	416.6

Future amortization expense associated with intangible assets is expected to be:


(in millions)	(in millions)			(in millions)
Remainder of 2022		$	20.9
2023		41.4
Remainder of 2023				Remainder of 2023	$	31.4
2024	2024	40.6		2024	41.1
2025	2025	35.3		2025	35.7
2026 and after		228.1
2026				2026	35.5
2027				2027	34.9
2028 and after				2028 and after	160.5

Note 9 - Accrued Liabilities

Accrued liabilities consist of:


(in millions)	(in millions)	June 30, 2022		December 31, 2021		(in millions)	March 31, 2023		December 31, 2022
Employee related expenses	Employee related expenses	$	111.7	$	181.9	Employee related expenses	$	86.3	$	156.6
Warranty	Warranty	8.5		8.6		Warranty	8.7		7.4
Current lease liabilities	Current lease liabilities	19.3		22.7		Current lease liabilities	16.2		19.0
Contract liabilities	Contract liabilities	99.3		101.1		Contract liabilities	150.4		142.9
Other	Other	122.8		128.4		Other	134.3		138.3
Total	Total	$	361.6	$	442.7	Total	$	395.9	$	464.2

We accrue warranty liabilities when it is probable that an asset has been impaired, or a liability has been incurred and the amount of the loss can be reasonably estimated. Warranty provision is included within “Cost of sales” in our Condensed Consolidated Statements of Operations.

~~The following table summarizes warranty activity recorded during the three and six months ended June 30, 2022, and 2021.~~

Three Months Ended June 30, Six Months Ended June 30,
(in millions) 2022 2021 2022 2021
Balance at beginning of period $ 8.7 $ 11.5 $ 8.6 $ 9.4
Expense 2.3 2.9 3.5 6.0
Payments / deductions (2.3) (2.4) (3.4) (3.4)
Currency translation (0.2) (0.2) (0.2) (0.2)
Balance at end of period $ 8.5 $ 11.8 $ 8.5 $ 11.8

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 10 - Commitments and Contingencies

~~Asbestos Liability~~

~~Information Regarding Claims and Costs in the Tort System~~

As of June 30, 2022, we were a defendant in cases filed in numerous state and federal courts alleging injury or death as a result of exposure to asbestos. Activity related to asbestos claims during the periods indicated was as follows:

Three Months Ended Six Months Ended Year Ended
June 30, June 30, December 31,
2022 2021 2022 2021 2021
Beginning claims 30,312 29,407 29,958 29,138 29,138
New claims 646 772 1,303 1,505 2,975
Settlements (347) (176) (548) (336) (980)
Dismissals (512) (215) (614) (519) (1,175)
Ending claims 30,099 29,788 30,099 29,788 29,958

Of the 30,099 pending claims as of June 30, 2022, approximately 18,000 claims were pending in New York of which approximately 16,000 are non-malignancy claims that were filed over 15 years ago and have been inactive under New York court orders.

We have tried several cases resulting in defense verdicts by the jury or directed verdicts for the defense by the court. We further have pursued appeals of certain adverse jury verdicts that have resulted in reversals in favor of the defense. We have also tried several other cases resulting in plaintiff verdicts which we paid or settled after unsuccessful appeals.

The gross settlement and defense costs incurred (before insurance recoveries and tax effects) by us for the six months ended June 30, 2022 and 2021 totaled $28.5 million and $21.3 million, respectively. In contrast to the recognition of settlement and defense costs, which reflect the current level of activity in the tort system, cash payments and receipts generally lag the tort system activity by several months or more and may show some fluctuation from period to period. Cash payments of settlement amounts are not made until all releases and other required documentation are received by us, and reimbursements of both settlement amounts and defense costs by insurers may be uneven due to insurer payment practices, transitions from one insurance layer to the next excess layer and the payment terms of certain reimbursement agreements. Our total pre-tax payments for settlement and defense costs, net of funds received from insurers, for the six months ended June 30, 2022 and 2021 totaled $23.5 million and $20.2 million, respectively. Detailed below are the comparable amounts for the periods indicated.

Three Months Ended Six Months Ended Year Ended
June 30, June 30, December 31,
(in millions) 2022 2021 2022 2021 2021
Settlement / indemnity costs incurred (1)
$ 12.6 $ 8.4 $ 23.1 $ 13.9 $ 40.6
Defense costs incurred (1)
2.8 3.8 5.4 7.4 14.6
Total costs incurred $ 15.4 $ 12.2 $ 28.5 $ 21.3 $ 55.2
Settlement / indemnity payments $ 17.6 $ 9.4 $ 27.3 $ 19.5 $ 42.6
Defense payments 2.9 4.2 5.0 7.4 15.4
Insurance receipts (4.6) (4.2) (8.8) (6.7) (13.1)
Pre-tax cash payments, net $ 15.9 $ 9.4 $ 23.5 $ 20.2 $ 44.9
~~(1)~~ ~~Before insurance recoveries and tax effects.~~

~~The amounts shown for settlement and defense costs incurred, and cash payments, are not necessarily indicative of future period amounts, which may be higher or lower than those reported.~~

Cumulatively through June 30, 2022, we have resolved (by settlement or dismissal) approximately 145,000 claims. The related settlement cost incurred by us and our insurance carriers is approximately $742 million, for an average settlement cost per resolved claim of approximately $5,100. The average settlement cost per claim resolved during the years ended December 31, 2021, 2020 and 2019 was $18,800, $13,900, and $15,800, respectively. Because claims are sometimes dismissed in large

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

groups, the average cost per resolved claim, as well as the number of open claims, can fluctuate significantly from period to period. In addition to large group dismissals, the nature of the disease and corresponding settlement amounts for each claim resolved will also drive changes from period to period in the average settlement cost per claim. Accordingly, the average cost per resolved claim is not considered in our periodic review of our estimated asbestos liability. For a discussion regarding the four most significant factors affecting the liability estimate, see “Effects on the Consolidated Financial Statements.”

~~Effects on the Consolidated Financial Statements~~

We have retained an independent actuarial firm to assist management in estimating our asbestos liability in the tort system. The actuarial consultants review information provided by us concerning claims filed, settled and dismissed, amounts paid in settlements and relevant claim information such as the nature of the asbestos-related disease asserted by the claimant, the jurisdiction where filed and the time lag from filing to disposition of the claim. The methodology used by the actuarial consultants to project future asbestos costs is based on our recent historical experience for claims filed, settled and dismissed during a base reference period. Our experience is then compared to estimates of the number of individuals likely to develop asbestos-related diseases determined based on widely used previously conducted epidemiological studies augmented with current data inputs. Those studies were undertaken in connection with national analyses of the population of workers believed to have been exposed to asbestos. Using that information, the actuarial consultants estimate the number of future claims that would be filed against us and estimates the aggregate settlement or indemnity costs that would be incurred to resolve both pending and future claims based upon the average settlement costs by disease during the reference period. This methodology has been accepted by numerous courts. After discussions with us, the actuarial consultants augment our liability estimate for the costs of defending asbestos claims in the tort system using a forecast from us which is based upon discussions with our defense counsel. Based on this information, the actuarial consultants compile an estimate of our asbestos liability for pending and future claims using a range of reference periods based on claim experience and claims expected to be filed through the indicated forecast period. The most significant factors affecting the liability estimate are (1) the number of new mesothelioma claims filed against us, (2) the average settlement costs for mesothelioma claims, (3) the percentage of mesothelioma claims dismissed against us and (4) the aggregate defense costs incurred by us. These factors are interdependent, and no one factor predominates in determining the liability estimate.

In our view, the forecast period used to provide the best estimate for asbestos claims and related liabilities and costs is a judgment based upon a number of trend factors, including the number and type of claims being filed each year; the jurisdictions where such claims are filed, and the effect of any legislation or judicial orders in such jurisdictions restricting the types of claims that can proceed to trial on the merits; and the likelihood of any comprehensive asbestos legislation at the federal level. In addition, the dynamics of asbestos litigation in the tort system have been significantly affected by the substantial number of companies that have filed for bankruptcy protection, thereby staying any asbestos claims against them until the conclusion of such proceedings, and the establishment of a number of post-bankruptcy trusts for asbestos claimants, which have been estimated to provide $36 billion for payments to current and future claimants. These trend factors have both positive and negative effects on the dynamics of asbestos litigation in the tort system and the related best estimate of our asbestos liability, and these effects do not move in a linear fashion but rather change over multi-year periods. Accordingly, management continues to monitor these trend factors over time and periodically assesses whether an alternative forecast period is appropriate.

Each quarter, the actuarial consultants compile an update based upon our experience in claims filed, settled and dismissed as well as average settlement costs by disease category (mesothelioma, lung cancer, other cancer, and non-malignant conditions including asbestosis). In addition to this claims experience, we also consider additional quantitative and qualitative factors such as the nature of the aging of pending claims, significant appellate rulings and legislative developments, and their respective effects on expected future settlement values. As part of this process, we also consider trends in the tort system such as those enumerated above. Management considers all these factors in conjunction with the liability estimate of the actuarial consultants and determines whether a change in the estimate is warranted.

~~Liability Estimate.~~ ~~In June 2016, the New York State Court of Appeals issued its opinion in~~ ~~Dummitt v. Crane Co~~., affirming a 2012 verdict for $4.9 million against us. In that opinion, the court ruled that in certain circumstances we are legally responsible for asbestos-containing materials made and sold by third parties that others attached post-sale to our equipment. This decision provided clarity regarding the nature of claims that may proceed to trial in New York and greater predictability regarding future claim activity. We also reflected the impact of the ~~Dummitt~~ ~~decision on our expected settlement values. Accordingly, on December 31, 2016, we updated and extended our asbestos liability estimate through 2059, the generally accepted end point.~~

~~Following our experience in the tort system post the~~ ~~Dummitt~~ ~~decision, we entered into several, increasingly similar, group settlements with various plaintiff firms and we expect this new trend of these types of group settlements to continue.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Accordingly, effective as of December 31, 2019, we updated our estimate of the asbestos liability, including revised costs of settlement or indemnity payments and defense costs relating to currently pending claims and future claims projected to be filed against us through the same expected end point of 2059. Our estimate of the asbestos liability for pending and future claims through 2059 is based on the projected future asbestos costs resulting from our experience using a range of reference periods for claims filed, settled and dismissed. Based on this estimate, we recorded an additional liability of $255 million as of December 31, 2019.

An aggregate liability of $712 million was recorded as of December 31, 2019 to cover the estimated cost of asbestos claims now pending or subsequently asserted through 2059, of which approximately 85% is attributable to settlement and defense costs for future claims projected to be filed through 2059. The liability is reduced when cash payments are made in respect of settled claims and defense costs. The liability was $580 million and $612 million as of June 30, 2022 and December 31, 2021, respectively. It is not possible to forecast when cash payments related to the asbestos liability will be fully expended; however, it is expected such cash payments will continue for a number of years past 2059, due to the significant proportion of future claims included in the estimated asbestos liability and the lag time between the date a claim is filed and when it is resolved. None of these estimated costs have been discounted to present value due to the inability to reliably forecast the timing of payments. The current portion of the total estimated liability at June 30, 2022 and December 31, 2021 is $62.3 million and represents our best estimate of total asbestos costs expected to be paid during the twelve-month period. Such amount is based upon the actuarial model together with our prior year payment experience for both settlement and defense costs.

We have made our best estimate of the costs through 2059. Through June 30, 2022, our actual experience during the updated reference period for mesothelioma claims filed and dismissed generally approximated the assumptions in our liability estimate. In addition to this claims experience, we considered additional quantitative and qualitative factors such as the nature of the aging of pending claims, significant appellate rulings and legislative developments, and their respective effects on expected future settlement values. Based on this evaluation, we determined that no change in the estimate was warranted for the period ended June 30, 2022.

~~Insurance Coverage and Receivables.~~ Prior to 2005, a significant portion of our settlement and defense costs were paid by our primary insurers. With the exhaustion of that primary coverage, we began negotiations with our excess insurers to reimburse us for a portion of our settlement and/or defense costs as incurred. To date, we have entered into agreements providing for such reimbursements, known as “coverage-in-place,” with eleven of our excess insurer groups. Under such coverage-in-place agreements, an insurer’s policies remain in force and the insurer undertakes to provide coverage for our present and future asbestos claims on specified terms and conditions that address, among other things, the share of asbestos claims costs to be paid by the insurer, payment terms, claims handling procedures and the expiration of the insurer’s obligations. Similarly, under a variant of coverage-in-place, we have entered into an agreement with a group of insurers confirming the aggregate amount of available coverage under the subject policies and setting forth a schedule for future reimbursement payments to us based on aggregate indemnity and defense payments made. In addition, with ten of our excess insurer groups, we entered into agreements settling all asbestos and other coverage obligations for an agreed sum and received a total of $82.5 million in aggregate as a result of those settlements. Reimbursements from insurers for past and ongoing settlement and defense costs allocable to their policies have been made in accordance with these coverage-in-place and other agreements. All these agreements include provisions for mutual releases, indemnification of the insurer and, for coverage-in-place, claims handling procedures. With the agreements referenced above, we have concluded settlements with all but two of our solvent excess insurers with policies expected to respond to the aggregate costs included in the liability estimate. The first such insurer, which issued a single applicable policy, has been paying for many years the shares of defense and indemnity costs we have allocated to it, subject to a reservation of rights. The second insurer issued a single applicable policy in a layer of coverage that we do not anticipate reaching until many years from now, and, prior to the policy being reached, we anticipate opening a dialogue with that insurer about the execution of a suitable agreement. There are no pending legal proceedings between us and any insurer contesting our asbestos claims under our insurance policies.

In conjunction with developing the aggregate updated liability estimate referenced above, we also developed an updated estimate of probable insurance recoveries for our asbestos liabilities. In developing this estimate, we considered our coverage-in-place and other settlement agreements described above, as well as several additional factors. These additional factors include the financial viability of the insurance companies, the method by which losses will be allocated to the various insurance policies and the years covered by those policies, how settlement and defense costs will be covered by the insurance policies and interpretation of the effect on coverage of various policy terms and limits. In addition, the timing and amount of reimbursements will vary because our insurance coverage for asbestos claims involves multiple insurers, with different policy terms and certain gaps in coverage. In addition to consulting with legal counsel on these insurance matters, we retained insurance consultants to assist management in the estimation of probable insurance recoveries based upon the aggregate liability estimate described above and assuming the continued viability of all solvent insurance carriers. Based upon the analysis of policy terms and other factors noted above by our legal counsel, and incorporating risk mitigation judgments by us

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

where policy terms or other factors were not certain, our insurance consultants compiled a model indicating how our historical insurance policies would respond to varying levels of asbestos settlement and defense costs and the allocation of such costs between such insurers and us. Using the estimated liability as of December 31, 2019 (for claims filed or expected to be filed through 2059), the insurance consultant’s model forecasted that approximately 14% of the liability would be reimbursed by our insurers. While there are overall limits on the aggregate amount of insurance available to us with respect to asbestos claims, certain limits were not reached by the total estimated liability currently recorded by us, and such overall limits did not influence our determination of the asset amount to record. We allocate to ourselves the amount of the asbestos liability (for claims filed or expected to be filed through 2059) that is in excess of available insurance coverage allocated to such years. An asset of $98 million was recorded as of December 31, 2019 representing the probable insurance reimbursement for claims expected through 2059. The asset is reduced as reimbursements and other payments from insurers are received. The asset was $65 million and $74 million as of June 30, 2022 and December 31, 2021, respectively.

We review the estimated reimbursement rate with our insurance consultants on a periodic basis in order to confirm overall consistency with our established reserves. The reviews encompass consideration of the performance of the insurers under coverage-in-place agreements and the effect of any additional lump-sum payments under other insurer agreements. Actual insurance reimbursements vary from period to period, and will decline over time, for the reasons cited above.

~~Uncertainties.~~ Estimation of our ultimate exposure for asbestos-related claims is subject to significant uncertainties, as there are multiple variables that can affect the timing, severity and quantity of claims and the manner of their resolution. We caution that our estimated liability is based on assumptions with respect to future claims, settlement and defense costs based on past experience that may not prove reliable as predictors; the assumptions are interdependent and no single factor predominates in determining the liability estimate. A significant upward or downward trend in the number of claims filed, depending on the nature of the alleged injury, the jurisdiction where filed and the quality of the product identification, or a significant upward or downward trend in the costs of defending claims, could change the estimated liability, as would substantial adverse verdicts at trial that withstand appeal. A legislative solution, structured settlement transaction, or significant change in relevant case law could also change the estimated liability.

The same factors that affect developing estimates of probable settlement and defense costs for asbestos-related liabilities also affect estimates of the probable insurance reimbursements, as do a number of additional factors. These additional factors include the financial viability of the insurance companies, the method by which losses will be allocated to the various insurance policies and the years covered by those policies, how settlement and defense costs will be covered by the insurance policies and interpretation of the effect on coverage of various policy terms and limits and their interrelationships. In addition, due to the uncertainties inherent in litigation matters, no assurances can be given regarding the outcome of any litigation, if necessary, to enforce our rights under our insurance policies or settlement agreements.

Many uncertainties exist surrounding asbestos litigation, and we will continue to evaluate our estimated asbestos-related liability and corresponding estimated insurance reimbursement as well as the underlying assumptions and process used to derive these amounts. These uncertainties may result in our incurring future charges or increases to income to adjust the carrying value of recorded liabilities and assets, particularly if the number of claims and settlement and defense costs change significantly, or if there are significant developments in the trend of case law or court procedures, or if legislation or another alternative solution is implemented. Although the resolution of these claims will likely take many years, the effect on the results of operations, financial position, and cash flow in any given period from a revision to these estimates could be material.

~~Other Contingencies~~

Environmental Matters

For environmental matters, we record a liability for estimated remediation costs when it is probable that we will be responsible for such costs and they can be reasonably estimated. Generally, third party specialists assist in the estimation of remediation costs. The environmental remediation liability as of ~~June 30, 2022~~March 31, 2023 is substantially related to the former manufacturing site in Goodyear, Arizona (the “Goodyear Site”) discussed below. On June 21, 2021, we completed the sale of substantially all of the property associated with what we have historically called the Goodyear Site for $8.7 million, retaining only a small parcel on which our remediation and treatment systems are located. We will continue to be responsible for all remediation costs associated with the Goodyear Site.

On August 12, 2022, Crane Holdings, Co., Crane Company, a then wholly-owned subsidiary of Crane Holdings, Co., and Redco Corporation (f/k/a Crane Co., (“Redco”) a then wholly-owned subsidiary of Crane Company that held liabilities including asbestos liabilities and related insurance assets, entered into the a Stock Purchase Agreement (the “Redco Purchase Agreement”) with Spruce Lake Liability Management Holdco LLC (“Redco Buyer”), an unrelated third party 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”). Pursuant to the terms of the Redco Purchase Agreement, Crane Company and Redco Buyer will each indemnify the other for breaches of representations and warranties, breaches of covenants and obligations and certain liabilities, subject to the terms of the Redco Purchase Agreement. Such covenants and obligations include obligations of Crane Company to indemnify Redco and its affiliates for all other historical liabilities of Redco, which include certain potential environmental liabilities. Crane Holdings, Co. guaranteed the full payment and performance of Crane Company’s indemnification obligations under the Redco Purchase Agreement. On April 3, 2023, Crane Holdings, Co. completed the Separation, pursuant to which, among other things, all outstanding shares of Crane Company were distributed to Crane Holdings, Co.’s stockholders. Upon completion of the Separation, pursuant to the terms of the Redco Purchase Agreement, Crane Holdings, Co was released from its guarantee of Crane Company’s indemnification obligations under the Redco Purchase Agreement. Prior to the effective date of the Redco Sale, the U.S. Department of Justice agreed that Crane Holdings, Co. and, following completion of the Separation, Crane Company will be primarily liable for the Goodyear Site. The New Jersey Department of Environmental Protection agreed to transfer the liability of the Roseland Site to Crane Holdings, Co., and to further transfer this environmental liability to Crane Company upon effectiveness of the Separation. The potential liability for the Crab Orchard Site referenced below remains a direct obligation of Redco. As noted above, however, Crane Company, and Crane Holdings, Co. (as guarantor until the completion of the Separation), agreed to indemnify Redco Buyer against the Goodyear, Roseland, and Crab Orchard environmental liabilities.Thus, references below to “we”, and “us” refer to Crane Company in its capacity as the primarily responsible party for the Goodyear and Roseland Sites, and as indemnitor to the Redco Buyer on the Crab Orchard Site.

Goodyear Site

The Goodyear Site was operated by Unidynamics/Phoenix, Inc. (“UPI”), which became an indirect subsidiary in 1985 when weCrane Co. (n/k/a Redco) acquired UPI’s parent company, UniDynamics Corporation. UPI was an indirect subsidiary of Crane Holdings, Co. pre-Separation and became an indirect subsidiary of Crane Company following completion of the Separation. UPI manufactured explosive and pyrotechnic compounds, including components for critical military programs, for the U.S. ~~government~~Government at the Goodyear Site from 1962 to 1993, under

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

contracts with the U.S. Department of Defense and other government agencies and certain of their prime contractors. In 1990, the U.S. Environmental Protection Agency (“EPA”) issued administrative orders requiring UPI to design and ~~carry out~~conduct certain remedial actions, which UPI has done. Groundwater extraction and treatment systems have been in operation at the Goodyear Site since 1994. On July 26, 2006, we entered a consent decree with the EPA with respect to the Goodyear Site providing for, among other things, a work plan for further investigation and remediation activities (inclusive of a supplemental remediation investigation and feasibility study). During the third quarter of 2014, the EPA issued a Record of Decision (“ROD”) amendment permitting, among other things, additional source area remediation resulting in us recording a charge of $49.0 million, extending the accrued costs through 2022. Following the 2014 ROD amendment, we continued our remediation activities and explored an alternative strategy to accelerate remediation of the site. During the fourth quarter of 2019, we received conceptual agreement from the EPA on our alternative remediation strategy which is expected to further reduce the contaminant plume. Accordingly, in 2019, we recorded a pre-tax charge of $18.9 million, net of reimbursements, to extend our forecast period through 2027 and reflect our revised workplan. The total estimated gross liability was ~~$27.1~~$23.7 million and ~~$32.3~~$24.8 million as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively and as described below, a portion is reimbursable by the U.S. Government. The current portion of the total estimated liability was $7.8 million and ~~$7.1~~$7.7 million as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively, and represents our best estimate, in consultation with our technical advisors, of total remediation costs expected to be paid during the next twelve-month period. It is not possible at this point to reasonably estimate the amount of any obligation in excess of our current accruals through the 2027 forecast period because of the aforementioned uncertainties, in particular,

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

the continued significant changes in the Goodyear Site conditions and additional expectations of remediation activities experienced in recent years.

On July 31, 2006, we entered into a consent decree with the U.S. Department of Justice on behalf of the Department of Defense and the Department of Energy pursuant to which, among other things, the U.S. Government reimburses us for 21% of qualifying costs of investigation and remediation activities at the Goodyear Site. As of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, we recorded a receivable of ~~$6.6~~$4.7 million and ~~$7.3~~$4.8 million, respectively, for the expected reimbursements from the U.S. Government in respect of the aggregate liability as at that date. The receivable is reduced as reimbursements and other payments from the U.S. Government are received.

Other Environmental Matters

~~Marion, IL Site~~

We have been identified as a potentially responsible party (“PRP”) with respect to environmental contamination at the Crab Orchard National Wildlife Refuge Superfund Site (the “Crab Orchard Site”). The Crab Orchard Site is located near Marion, Illinois, and consists of approximately 55,000 acres. Beginning in 1941, the United States used the Crab Orchard Site for the production of ordnance and other related products for use in World War II. In 1947, about half of the Crab Orchard Site was leased to a variety of industrial tenants whose activities (which continue to this day) included manufacturing ordnance and explosives. A predecessor of us formerly leased portions of the Crab Orchard Site and conducted manufacturing operations at the Crab Orchard Site from 1952 until 1964. General Dynamics Ordnance and Tactical Systems, Inc. (“GD-OTS”) is in the process of conducting a remedial investigation and feasibility study for a portion of the Crab Orchard Site (the “AUS-OU”), which includes an area where we maintained operations, pursuant to an Administrative Order on Consent. A remedial investigation report was approved in February 2015, and work on the feasibility study is underway. It is unclear when the final feasibility study will be completed, or when a final Record of Decision may be issued.

GD-OTS has asked us to participate in a voluntary, multi-party mediation exercise with respect to response costs it has incurred or will incur with respect to the AUS-OU. We and other PRPs executed a non-binding mediation agreement on March 16, 2015, and the U.S. government executed the mediation agreement on August 6, 2015. The first phase of the mediation, involving certain former munitions or ordnance storage areas, began in November 2017, but did not result in a multi-party settlement agreement. Subsequently, we entered discussions directly with GD-OTS and reached an agreement, as of July 13, 2021, to contribute toward GD-OTS’s past RI-FS costs associated with the first-phase areas for an immaterial amount. We have also agreed to pay a modest percentage of future RI-FS costs and the United States’ claimed past response costs relative to the first-phase areas, a sum that we expect in the aggregate to be immaterial. We understand that GD-OTS has also reached agreements-in-principle with the U.S. Government and the other participating PRPs related to the first-phase areas of concern. Negotiations between GD-OTS and the U.S. Government are underway with respect to resolution of the remaining areas of the site, including those portions of the Crab Orchard Site where our predecessor conducted manufacturing and research activities. We at present cannot predict whether these further negotiations will result in an agreement, or when any determination of the ultimate allocable shares of the various PRPs, including the U.S. Government, is likely to be completed. It is not possible at this time to reasonably estimate the total amount of any obligation for remediation of the Crab Orchard Site as a whole because the allocation among PRPs, selection of remediation alternatives, and concurrence of regulatory authorities have not yet advanced to the stage where a reasonable estimate can be made. We

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~notified our insurers of this potential liability and have obtained defense and indemnity coverage, subject to reservations of rights, under certain of our insurance policies.~~

Roseland, NJ Site

The Roseland Site was operated by Resistoflex Corporation (“Resistoflex”), which became an indirect subsidiary ~~of ours~~ in 1985 when weCrane Co. (n/k/a Redco) acquired Resistoflex’s parent company, UniDynamics Corporation. Resistoflex manufactured specialty lined pipe and fittings at the site from the 1950s until it was closed in the mid-1980s. We undertook an extensive soil remediation effort at the Roseland Site following our closure and had been monitoring the Site’s condition in the years that followed. In response to changes in remediation standards, in 2014 we began to conduct further site characterization and delineation studies at the Site. We are in the late stages of our remediation activities at the Site, which include a comprehensive delineation of contaminants of concern in soil, groundwater, surface water, sediment, and indoor air ~~testing,~~in certain buildings, all in accordance with the New Jersey Department of Environmental Protection guidelines and directives.

Marion, IL Site

Crane Co. (n/k/a Redco) has been identified as a potentially responsible party (“PRP”) with respect to environmental contamination at the Crab Orchard National Wildlife Refuge Superfund Site (the “Crab Orchard Site”). The Crab Orchard Site is located near Marion, Illinois, and consists of approximately 55,000 acres. Beginning in 1941, the United States used the Crab Orchard Site for the production of ordnance and other related products for use in World War II. In 1947, about half of the Crab Orchard Site was leased to a variety of industrial tenants whose activities (which continue to this day) included manufacturing ordnance and explosives. Unidynamics Corporation formerly leased portions of the Crab Orchard Site and conducted manufacturing operations at the Crab Orchard Site from 1952 until 1964. General Dynamics Ordnance and Tactical Systems, Inc. (“GD-OTS”) is in the process of conducting a remedial investigation and feasibility study (“RI-FS”) for a portion of the Crab Orchard Site (the “AUS-OU”), which includes an area where we maintained operations, pursuant to an Administrative Order on Consent (the “AOC”). A remedial investigation report was approved in February 2015, and work on the feasibility study is underway. It is unclear when the final feasibility study will be completed, or when a final Record of Decision (“ROD”) may be issued.As noted above, we have agreed to indemnify Redco Buyer against the Crab Orchard environmental liabilities, and accordingly we act as Redco’s agent with respect to such liabilities.

GD-OTS asked Crane Co. (n/k/a Redco) to participate in a voluntary, multi-party mediation exercise with respect to response costs that GD-OTS has incurred or will incur with respect to the AUS-OU, and Crane Co. (n/k/a Redco), the U.S. Government, and other PRPs entered into a non-binding mediation agreement in 2015. We have stepped into Redco’s position as a participant in the mediation.The first phase of the mediation, involving certain former munitions or ordnance storage areas, began in November 2017, but did not result in a multi-party settlement agreement. Subsequently, Redco entered discussions directly with GD-OTS and reached an agreement, as of July 13, 2021, to contribute toward GD-OTS’s past RI-FS costs associated with the first-phase areas for an immaterial amount. We, as indemnitor, have also agreed to pay a modest percentage of future RI-FS costs and the United States’ claimed past response costs relative to the first-phase areas, a sum that has proven to be and we expect to continue to be, in the aggregate, an immaterial amount. We understand that GD-OTS has also reached agreements with the U.S. Government and the other participating PRPs related to the first-phase areas of concern.

Negotiations between GD-OTS, the U.S. Government and remaining participants are underway with respect to resolution of the U.S. Government’s liability for, and contribution claims with respect to, RI/FS costs associated with the remaining areas of the site, including those portions of the Crab Orchard Site where Redco’s predecessor conducted manufacturing and research activities.The participants have reached agreement in principle on a framework for resolving the U.S. Government’s share of RI/FS costs, subject to consummation of a mutually-agreeable consent decree, but we at present cannot predict whetheror whenthese negotiations will result in a definitive agreement. Further, negotiations are ongoing between us and GD-OTS

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

regarding a potential resolution of GD-OTS’ claim for costs that it has incurred in performing its obligations under the AOC. We at present cannot predict when any determination of the ultimate allocable shares of GD-OTS and U.S. Government response costs for which we may be liable is likely to be completed. None of these discussions address responsibility for the performance of, or payment of costs incurred in connection with, any remedial design or remedial action that may be required pursuant to the ROD (when it is ultimately issued). It is not possible at this time to reasonably estimate the total amount of any obligation for remediation of the Crab Orchard Site as a whole because the allocation among PRPs, selection of remediation alternatives, and concurrence of regulatory authorities have not yet advanced to the stage where a reasonable estimate can be made. Insurers with contractual coverage obligations for this site have been notified of this potential liability and have been providing coverage, subject to reservations of rights.

Asbestos Liability

As a result of the Redco Sale, all asbestos obligations and liabilities, related insurance assets and associated deferred tax assets of Redco were removed from the Company’s condensed consolidated balance sheets effective August 12, 2022 and the Company no longer has any obligation with respect to pending and future asbestos claims.

The gross settlement and defense costs incurred for the periods presented was as follows:


	Three Months Ended
	March 31,
(in millions)	2023		2022
Settlement / indemnity costs incurred	$	—	$	10.5
Defense costs incurred	—		2.5
Total costs incurred	$	—	$	13.0

The total pre-tax payments for settlement and defense costs, net of funds received from insurers, for the periods presented was as follows:


	Three Months Ended
	March 31,
(in millions)	2023		2022
Settlement / indemnity payments	$	—	$	9.6
Defense payments	—		2.1
Insurance receipts	—		(4.2)
Pre-tax cash payments, net	$	—	$	7.5

Other Proceedings

We regularly review the status of lawsuits, claims and proceedings that have been or may be asserted against us relating to the conduct of our business, including those pertaining to product liability, patent infringement, commercial, employment, employee benefits, environmental and stockholder matters. We record a provision for a liability for such matters when it is considered probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions, if any, are reviewed quarterly and adjusted as additional information becomes available. If either or both of the criteria are not met, we assess whether there is at least a reasonable possibility that a loss, or additional losses, may have been incurred. If there is a reasonable possibility that a loss or additional loss may have been incurred for such matters, we disclose the estimate of the amount of loss or range of loss, disclose that the amount is immaterial, or disclose that an estimate of loss cannot be made, as applicable. We believe that as of ~~June 30, 2022,~~March 31, 2023, there was no reasonable possibility that a material loss, or any additional material losses, may have been incurred for such matters, and that adequate provision has been made in our financial statements for the potential impact of all such matters.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 11 - Financing

Our debt consisted of the following:

(in millions) June 30,
2022 December 31,
2021
Commercial paper $ 119.4 $ —
Total short-term borrowings $ 119.4 $ —
4.45% notes due December 2023 $ 299.6 $ 299.4
6.55% notes due November 2036 198.5 198.5
4.20% notes due March 2048 346.4 346.3
Other deferred financing costs associated with credit facilities (1.6) (1.8)
Total long-term debt $ 842.9 $ 842.4
Debt discounts and debt issuance costs totaled $5.5 million and $5.7 million as of each of June 30, 2022 and December 31, 2021, respectively, and have been netted against the aggregate principal amounts of the related debt in the components of the debt table above.


(in millions)	March 31, 2023		December 31, 2022
4.45% notes due December 2023 a	$	299.8	$	299.7
Term Facility	8.7		—
364-Day Credit Agreement	—		399.6
Total short-term borrowings	$	308.5	$	699.3

Term Facility a	$	339.3	$	—
6.55% notes due November 2036 a	198.6		198.6
4.20% notes due March 2048 a	346.5		346.5
Other deferred financing costs associated with credit facilities	(3.7)		(1.4)
Total long-term debt	$	880.7	$	543.7


(a) Debt discounts and debt issuance costs totaled $7.1 million and $5.6 million as of March 31, 2023 and December 31, 2022, respectively, and have been netted against the aggregate principal amounts of the related debt in the components of the debt table above.

Credit Facilities – On March 17, 2023, the Company entered into a new senior secured credit agreement (the “Credit Agreement”), which provides for (i) a $500 million, 5-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, the Company borrowed the full amount of the Term Facility.

The Revolving Facility allows us to borrow, repay and re-borrow funds from time to time prior to the maturity of the Revolving Facility without any penalty or premium, subject to customary borrowing conditions for facilities of this type and the reimbursement of breakage costs. Borrowings under the Term Facility are prepayable without premium or penalty, subject to customary reimbursement of breakage costs. Interest on loans advanced under the Credit Agreement accrues, at our option, at a rate per annum equal to (1) adjusted term SOFR plus a credit spread adjustment of 0.10% for the applicable interest period plus a margin ranging from 1.50% to 2.25% or (2) a base rate plus a margin ranging from 0.50% to 1.25%, in each case, with such margin determined based on the lower of the ratings of our senior, unsecured long-term debt (the “Ratings”) and our total net leverage ratio. We are required to pay a fee on undrawn commitments under the Revolving Facility at a rate per annum that ranges from 0.20% to 0.35%, based on the lower of the Ratings and our total net leverage ratio. The Credit Agreement contains customary affirmative and negative covenants for credit facilities of this type, including limitations on our and our subsidiaries with respect to indebtedness, liens, mergers, consolidations, liquidations and dissolutions, sales of all or substantially all assets, transactions with affiliates, hedging arrangements and amendments to our organizational documents or to certain subordinated debt agreements. As of the last day of each fiscal quarter, our total net leverage ratio cannot exceed 3.50 to 1.00 (provided that, at our election, such maximum ratio may be increased to 4.00 to 1.00 for specified periods following our consummation of certain material acquisitions) and our minimum interest coverage ratio must be at least 3.00 to 1.00. The Credit Agreement also includes customary events of default, including failure to pay principal, interest or fees when due, failure to comply with covenants, any representation or warranty made by us or any of our material subsidiaries being false in any material respect, default under certain other material indebtedness, certain insolvency or receivership events affecting us and our material subsidiaries, certain ERISA events, material judgments and a change in control, in each case, subject to cure periods and thresholds where customary.

The $650 million revolving credit facility and commercial paper program disclosed below were replaced by commitments under the new $500 million, 5-year Revolving Credit Agreement, with funding available upon Separation, subject to customary conditions precedent for facilities of this type. The commercial paper program will no longer be available upon Separation.

364-Day Credit Agreement- On August 11, 2022, the Company entered into a senior unsecured 364-day credit facility (the “364-Day Credit Agreement”) under which it borrowed term loans denominated in U.S. dollars (the “Term Loans”) in an aggregate principal amount of $400 million. Interest on the Term Loans accrued at a rate per annum equal to, at the Company’s option, (a) a base rate (determined in a customary manner), plus a margin of 0.25% or 0.50% that was determined based upon the ratings by S&P and Moody’s of the Company’s senior unsecured long-term debt (the “Index Debt Rating”) or (b) an adjusted Term SOFR (determined in a customary manner) for an interest period to be selected by the Company, plus a margin of 1.25% or 1.50% that was determined based upon the Index Debt Rating. During the first quarter of 2023, the Company repaid the remaining principal of $400 million under the 364-Day Credit Agreement.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Commercial paper program - On July 28, 2021, we increased the size of the commercial paper program (“CP Program”) to permit the issuance of short-term, unsecured commercial paper notes in an aggregate principal amount not to exceed $650 million at any time outstanding. Prior to this increase, the CP Program permitted us to issue commercial paper notes in an aggregate principal amount not to exceed $550 million at any time outstanding. The ~~other terms and conditions of the CP program remain the same. Amounts available under the CP Program may be borrowed, repaid and re-borrowed from time to time. The~~ notes ~~will have maturities of up to 397 days from date of issue. The notes rank~~ranked at least pari passu with all of our other unsecured and unsubordinated indebtedness. As of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, there ~~was $119.4 million and $0.0 million, respectively, of~~were no outstanding borrowings under the commercial paper program.

Revolving Credit Facility - On July 28, 2021, we entered into a $650 million, 5-year Revolving Credit Agreement (the “2021 Facility”). The 2021 Facility allowed us to borrow, repay, or to the extent permitted by the agreement, prepay and re-borrow funds at any time prior to the stated maturity date. Interest on loans made under the 2021 Facility accrued, at our option, at a rate per annum equal to (1) a base rate, plus a margin ranging from 0.00% to 0.50% depending upon the ratings by S&P and Moody’s of our senior unsecured long-term debt (the "Index Debt Rating"), or (2) an adjusted LIBO rate or the applicable replacement rate (determined based on “hardwired” LIBOR transition provisions consistent with those published by the Alternative References Rates Committee) for an interest period to be selected by us, plus a margin ranging from 0.805% to 1.50% depending upon the Index Debt Rating. The 2021 Facility contained customary affirmative and negative covenants for credit facilities of this type, including limitations on us and our subsidiaries with respect to indebtedness, liens, mergers, consolidations, liquidations and dissolutions, sales of all or substantially all assets, transactions with affiliates and hedging arrangements. We also were required to maintain a debt to capitalization ratio not to exceed 0.65 to 1.00 at all times. The 2021 Facility also provided for customary events of default, including failure to pay principal, interest or fees when due, failure to comply with covenants, any representation or warranty made by us or any of our material subsidiaries being false in any material respect, default under certain other material indebtedness, certain insolvency or receivership events affecting us and our material subsidiaries, certain ERISA events, material judgments and a change in control of us. As of March 31, 2023 and December 31, 2022, there were no outstanding borrowings under the 2021 Facility.

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Note 12 - Fair Value Measurements

Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are to be considered from the perspective of a market participant that holds the asset or owes the liability. The standards also establish a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The standards describe three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices in active markets for identical or similar assets and liabilities.

Level 2: Quoted prices for identical or similar assets and liabilities in markets that are not active or observable inputs other than quoted prices in active markets for identical or similar assets and liabilities. Level 2 assets and liabilities include over-the-counter derivatives, principally forward foreign exchange contracts, whose value is determined using pricing models with inputs that are generally based on published foreign exchange rates and exchange traded prices, adjusted for other specific inputs that are primarily observable in the market or can be derived principally from or corroborated by observable market data.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Valuation Technique

The carrying value of our financial assets and liabilities, including cash and cash equivalents, accounts receivable and accounts payable approximate fair value, without being discounted, due to the short periods during which these amounts are outstanding.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

We are exposed to certain risks related to our ongoing business operations, including market risks related to fluctuation in currency exchange. We use foreign exchange contracts to manage the risk of certain cross-currency business relationships to minimize the impact of currency exchange fluctuations on our earnings and cash flows. We do not hold or issue derivative financial instruments for trading or speculative purposes. Foreign exchange contracts not designated as hedging instruments had a notional value of ~~$87.5~~$4.9 million and ~~$3.0~~$89.7 million as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. Our derivative assets and liabilities include foreign exchange contract derivatives that are measured at fair value using internal models based on observable market inputs such as forward rates and interest rates. Based on these inputs, the derivatives are classified within Level 2 of the valuation hierarchy. Such derivative receivable amounts are recorded within “Other current assets” on our Condensed Consolidated Balance Sheets and were ~~$7.9~~$0.1 million and ~~$0.0~~$5.9 million as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. Such derivative liability amounts are recorded within “Accrued liabilities” on our Condensed Consolidated Balance Sheets and there were ~~$0.0 million and less than $0.1 million~~no derivative liabilities as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

Available-for-sale securities consist of rabbi trust investments that hold marketable securities for the benefit of participants in our Supplemental Executive Retirement Plan. These investments are measured at fair value using quoted market prices in an active market and are therefore classified within Level 1 of the valuation hierarchy. The fair value of available-for-sale securities was ~~$0.5~~$0.4 million and ~~$1.6~~$0.4 million as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. These investments are included in “Other assets” on our Condensed Consolidated Balance Sheets.

Long-term debt rates currently available to us for debt with similar terms and remaining maturities are used to estimate the fair value for debt issues that are not quoted on an exchange. The estimated fair value of total debt, measured using Level 2 inputs, was ~~$825.5~~$779.0 million and ~~$984.9~~$753.1 million as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

2625

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 13 - Restructuring

Overview

~~2020~~2022 Repositioning - - In the ~~second~~fourth quarter of ~~2020, we initiated actions~~2022, in response to ~~the adverse~~ economic ~~impact of COVID-19 and integration actions related to the Cummins-Allison acquisition. These actions include~~uncertainty, we initiated modest workforce reductions of approximately ~~1,200~~300 employees, or about ~~11%~~3% of our global ~~workforce, and the exiting of two leased office facilities and one leased warehouse facility.~~workforce. We ~~have completed this program and do not~~ expect to ~~incur additional restructuring charges.~~complete the program in the first quarter of 2024.

2019 Repositioning - In the fourth quarter of 2019, we initiated actions to consolidate two manufacturing operations in Europe within our Process Flow Technologies segment. In 2020, we recorded additional severance costs related to the final negotiation with the works council/union at both locations. These actions, taken together, included workforce reductions of approximately 180 employees, or less than 1% of our global workforce. We expect to complete the program in the fourth quarter of 2023. ~~There were no charges recorded in the three month periods ended June 30, 2022 or 2021 related to these actions.~~

~~2017 Repositioning -~~ In the fourth quarter of 2017, we initiated broad-based repositioning actions designed to improve profitability. These actions included headcount reductions of approximately 300 employees, or about 3% of our global workforce, and select facility consolidations in North America and Europe. In 2020, we adjusted the estimate downward to reflect the impact of employees that chose to voluntarily terminate prior to receiving severance at the conclusion of the actions in North America. In 2021, we recorded a gain on sale of real estate related to these actions. We expect to complete the program in the first quarter of 2023. We recorded $0.0 and $(0.2) in the three month periods ended June 30, 2022 and 2021 related to these actions.

~~Restructuring (gains) charges, net~~

~~We recorded restructuring (gains) charges, net which are reflected in the Condensed Consolidated Statements of Operations, as follows:~~
Three Months Ended June 30, Six Months Ended June 30,
(in millions) 2022 2021 2022 2021
Process Flow Technologies $ — $ — — (12.6)
Payment & Merchandising Technologies — (0.2) — (0.7)
Total restructuring (gains) charges, net $ — $ (0.2) $ — $ (13.3)

~~The following table summarizes our restructuring gains, net by program, cost type and segment for the six months ended June 30, 2022 and 2021:~~

Six Months Ended June 30,2022 Six Months Ended June 30,2021
(in millions) Severance Other Total Severance Other Total
Payment & Merchandising Technologies $ — $ — $ — $ (0.5) $ — $ (0.5)
2020 Repositioning $ — $ — $ — $ (0.5) $ — $ (0.5)
Process Flow Technologies $ — $ — $ — $ 0.1 $ — $ 0.1
2019 Repositioning $ — $ — $ — $ 0.1 $ — $ 0.1
Process Flow Technologies 1
$ — $ — $ — $ — $ (12.7) $ (12.7)
Payment & Merchandising Technologies — — — (0.2) — (0.2)
2017 Repositioning $ — $ — $ — $ (0.2) $ (12.7) $ (12.9)
Total $ — $ — $ — $ (0.6) $ (12.7) $ (13.3)

1 ~~Reflects a pre-tax gain related to the sale of real estate in 2021~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

The following table summarizes the cumulative restructuring costs, net incurred through ~~June 30, 2022. We~~March 31, 2023. As of March 31, 2023, we do not expect to incur additional facility consolidation costs to complete these ~~actions as of June 30, 2022.~~actions.


		Cumulative Restructuring Costs, Net							Cumulative Restructuring Costs, Net
(in millions)	(in millions)	Severance		Other		Total		(in millions)	Severance		Other		Total
Aerospace & Electronics		$	6.5	$	—	$	6.5
Process Flow Technologies		3.7		—		3.7
Payment & Merchandising Technologies		15.8		1.8		17.6
2020 Repositioning		$	26.0	$	1.8	$	27.8

Process Flow Technologies		$	16.1	$	—	$	16.1
2019 Repositioning		$	16.1	$	—	$	16.1

Aerospace & Electronics	Aerospace & Electronics	$	1.3	$	(1.4)	$	(0.1)	Aerospace & Electronics	$	1.5	$	—	$	1.5
Process Flow Technologies	Process Flow Technologies	13.1		(12.7)		0.4		Process Flow Technologies	6.3		—		6.3
Payment & Merchandising Technologies	Payment & Merchandising Technologies	11.5		0.7		12.2		Payment & Merchandising Technologies	5.7		0.5		6.2
2017 Repositioning		$	25.9	$	(13.4)	$	12.5
Engineered Materials								Engineered Materials	0.4		—		0.4
2022 Repositioning								2022 Repositioning	$	13.9	$	0.5	$	14.4

Process Flow Technologies								Process Flow Technologies	$	14.9	$	(2.8)	$	12.1
2019 Repositioning								2019 Repositioning	$	14.9	$	(2.8)	$	12.1

Restructuring Liability

The following table summarizes the accrual balances related to each restructuring program:


(in millions)	(in millions)	2019 Repositioning		2017 Repositioning		Total		(in millions)	2022 Repositioning		2019 Repositioning		Total
Severance:	Severance:							Severance:
Balance at December 31, 2021 (a)		$	11.5	$	0.7	$	12.2
Balance as of December 31, 2022 (a)								Balance as of December 31, 2022 (a)	$	14.2	$	2.4	$	16.6

Utilization	Utilization	(6.1)		(0.6)		(6.7)		Utilization	(4.1)		(1.0)		(5.1)
Balance at June 30, 2022 (a)		$	5.4	$	0.1	$	5.5
Balance as of March 31, 2023 (a)								Balance as of March 31, 2023 (a)	$	10.1	$	1.4	$	11.5



(a)			Included within Accrued Liabilities in the Condensed Consolidated Balance ~~Sheets~~Sheets.

2826

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 14- Subsequent Event

Dividend from Crane Company

Prior to the consummation of the Separation, the Board of Directors of Crane Company declared a one-time cash dividend in the amount of $275 million to Crane Holdings, Co., its sole stockholder at that time, and paid such dividend on April 3, 2023, prior to the consummation of the Separation.

The Separation and Distribution

On April 3, 2023, the Separation was completed. In connection with the Separation, Crane Holdings, Co., which was renamed “Crane NXT, Co.,” and Crane Company entered into various agreements to effect the Separation and provide a framework for their relationship after the Separation, including a separation and distribution agreement, a transition services agreement, an employee matters agreement, a tax matters agreement and an intellectual property matters agreement. These agreements provide for the allocation between Crane NXT, Co. and Crane Company of assets, employees, liabilities and obligations (including property and employee benefits and tax-related assets and liabilities) attributable to periods prior to, at, and after the consummation of the Separation and govern certain relationships between Crane NXT, Co. and Crane Company after the Separation.

4.45% Senior Notes due 2023

On April 4, 2023, the Company redeemed all of its outstanding 4.45% senior notes due 2023, of which $300 million aggregate principal amount was outstanding upon redemption.

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

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q contains information about Crane Holdings, Co. (which was renamed to Crane NXT, Co. effective as of immediately following the consummation of the Separation on April 3, 2023), some of which includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements other than historical information or statements about our current condition. You can identify forward-looking statements by the use of terms such as “believes,” “contemplates,” “expects,” “may,” “could,” “should,” “would,” or “anticipates,” other similar phrases, or the negatives of these terms.

~~Reference~~References herein to ~~“Crane,” “the Company,”~~ “we,” ~~“us”~~“us,” “our,” “Crane Holdings, Co.” and ~~“our”~~the “Company” refer to Crane ~~Holdings,~~NXT, Co. and ~~its subsidiaries unless the context specifically states~~our subsidiaries. Prior to April 3, 2023, Crane NXT, Co. was named “Crane Holdings, Co.” Accordingly, we refer to Crane NXT, Co.as “Crane Holdings, Co.” in certain disclosures that are as of dates or ~~implies otherwise.~~related to periods ended prior to April 3, 2023. References to “core business” or “core sales” in this report include sales from acquired businesses starting from and after the first anniversary of the acquisition but exclude currency effects. Amounts in the following discussion are presented in millions, except employee, share and per share data, or unless otherwise stated.

We have based the forward-looking statements relating to our operations on our current expectations, estimates and projections about us and the markets we serve. We caution you that these statements are not guarantees of future performance and involve risks and uncertainties. In addition, we have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. There are a number of other factors, including risks and uncertainties related to the ongoing effects of the COVID-19 pandemic, that could cause actual results or outcomes to differ materially from those expressed or implied in the forward-looking statements. Such factors also include, among others: changes in global economic conditions (including inflationary pressures) and geopolitical risks, including macroeconomic fluctuations that may harm our business, results of ~~operation~~operations and stock price; the effects of the ongoing coronavirus pandemic on our business and the global and U.S. economies generally; information systems and technology networks failures and breaches in data security, personally identifiable and other information, non-compliance with our contractual or other legal obligations regarding such information; ~~potential exposure from numerous lawsuits for asbestos-related personal injury;~~ our ability to source components and raw materials from suppliers, including disruptions and delays in our supply chain; demand for our products, which is variable and subject to factors beyond our control; governmental regulations and failure to comply with those regulations; fluctuations in the prices of our components and raw materials; loss of personnel or being able to hire and retain additional personnel needed to sustain and grow our business as planned; risks from environmental liabilities, costs, litigation and violations that could adversely affect our financial condition, results of operations, cash flows and reputation; risks associated with conducting a substantial portion of our business outside the United States; being unable to ~~successfully complete our pending separation as planned; being unable to~~ identify or complete acquisitions, or to successfully integrate the businesses we acquire, or complete dispositions; adverse impacts from intangible asset impairment charges; potential product liability or warranty claims; being unable to successfully develop and introduce new products, which would limit our ability to grow and maintain our competitive position and adversely affect our financial condition, results of operations and cash flow; significant competition in our markets; additional tax expenses or exposures that could affect our financial condition, results of operations and cash flows; inadequate or ineffective internal controls; specific risks relating to our reportable segments, including Aerospace & Electronics, Process Flow Technologies, Payment & Merchandising Technologies and Engineered ~~Materials;~~Materials (as a result of the Separation, Crane Holdings, Co. retained its Payment & Merchandising Technologies segment and spun-off its Aerospace & Electronics, Process Flow Technologies and Engineered Materials segments to Crane Holdings, Co.’s stockholders); the ability and willingness of ~~the parties~~Crane NXT, Co. and Crane Company to meet and/or perform their obligations under any contractual arrangements ~~that are~~ entered into among the parties in connection with ~~our previously announced proposed business separation~~the Separation and any of their obligations to indemnify, defend and hold the other party harmless from and against various claims, litigation and liabilities; our ability to achieve some or all the benefits that we expect to achieve from ~~our proposed business separation;~~the Separation; and other risks noted in reports that we file with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021,~~2022, and subsequent reports and other documents filed by us ~~or Crane Holdings, Co.~~ with the Securities and Exchange Commission, including any registration statement relating to our ~~proposed~~ business separation. We do not undertake any obligation to update or revise any forward-looking statements to reflect any future events or circumstances.

~~Holding Company Reorganization~~

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

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

~~Pending Separation~~

On March 30, 2022, the Company announced that its Board of Directors unanimously approved a plan to pursue a separation into two independent, publicly-traded companies (the “Separation”). The Separation is expected to occur through a tax-free distribution and is expected to be completed within approximately 12 months, subject to the satisfaction of customary conditions and final approval by the Company’s Board of Directors.

3028

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

~~OUTLOOK~~Recent Transactions

~~Overall~~Separation

~~Our sales depend heavily on industries that are cyclical~~On April 3, 2023, Crane Holdings, Co., was separated into two independent, publicly-traded companies in ~~nature or are subject to market conditions~~a transaction in which may cause customer demand for our products to be volatile and unpredictable. Demand in these industries is affected by fluctuations in domestic and international economic conditions, as well as currency fluctuations, commodity costs, and a variety of other factors. As we exited 2021 and through the first half of 2022, we have experienced supply chain disruptions impacting timely access to certain components and raw materials, as well as significant inflationary pressure across most businesses; in response, we have initiated pricing actions throughout the first half to ensure we cover the higher costs and protect our margin profile.

~~For 2022, we expect a total year-over-year sales decline of approximately 1% to 2%, driven by a 4% unfavorable impact from the divestiture of~~ Crane Supply and a 2.5% to 3% impact from unfavorable foreign exchange, partially offset by approximately 5% to 6% core growth. On a year-to-date basis through June 30 2022, stronger pricing has been the primary contributor to our core growth across most businesses. We continue to expect higher pricing on a full-year basis to approximately offset the impact of inflation. We expect a slight improvement in operating profit driven primarily by the impact of core growth, net of inflation, productivity benefits, both partially offset by higher transaction and repositioning related costs, the impact of the Crane Supply divestiture, and unfavorable mix.

~~Aerospace & Electronics~~

In 2022, we expect Aerospace & Electronics core sales to increase in the high-single digit range as compared to 2021, driven by both higher volumes and price. We expect a substantial improvement in our commercial OEM business driven by higher aircraft build rates, and we expect a substantial improvement in our commercial aftermarket business given continued recovery in airline flight hours following two years of depressed demand due to the impacts of COVID-19. We expect our defense business to decline given material availability challenges, and difficult comparisons to recent years where these markets exhibited very strong growth.We expect segment operating profit to increase in the low double-digit range as compared to 2021 driven primarily by the impact of operating leverage on higher volumes, price and strong productivity, partially offset by unfavorable mix.

~~Process Flow Technologies~~

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

We expect Process Valves and Related Products sales to be approximately flat compared to 2021, with mid-single digit core sales growth approximately offset by a mid-single digit impact from unfavorable foreign exchange. We expect Commercial Valves sales to decline substantially driven primarily by the impact of the Crane Supply divestiture, and to a lesser extent, the impact of unfavorable foreign exchange. We expect Pumps and Systems sales to increase in the high-single digit range as compared to 2021, driven by strong demand across municipal and non-residential U.S. end markets.

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

~~Payment & Merchandising Technologies~~

~~In 2022, we expect~~Holdings, Co. retained its Payment & Merchandising Technologies ~~sales~~segment and spun-off its Aerospace & Electronics, Process Flow Technologies and Engineered Materials segments to ~~increase in~~Crane Holdings, Co. stockholders. Upon consummation of the low-single digit range as compared to 2021, driven by mid-single digit core sales growth, partially offset by a low- to mid-single digit impact from unfavorable foreign exchange. Higher pricing is expected to offset higher inflation and sustain margins.Separation, each of our stockholders received 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.

At Crane Payment Innovations, we expect core sales growth in the mid-teens range, driven by broad-based strength across all vertical markets, together with higher pricing. At Crane Currency, we expect core sales to decline in the high-single digit to the low-double digit range as compared to 2021 due to lower expected sales to international customers, reflecting challenging comparisons to a record year of project activity and growth in 2021.

We expect the segment’s operating profit to be modestly higher compared to 2021, with the impact of core growth inclusive of higher prices, together with strong productivity, to be approximately offset by inflationary pressures and unfavorable sales mix.

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

~~Engineered Materials~~

In 2022, we expect Engineered Materials sales to increase in the mid-single digit range as compared to 2021, driven by mid-single digit core growth which includes notable pricing gains to offset the impact of inflation. We expect the core growth to be driven primarily by higher sales to recreational vehicle and building product customers.

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

3229

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

Results from Operations – Three Month Periods Ended ~~June 30,~~March 31,

The following information should be read in conjunction with our condensed consolidated financial statements and related notes. All comparisons below refer to the ~~second~~first quarter ~~2022~~2023 versus the ~~second~~first quarter ~~2021,~~2022, unless otherwise specified.


		Second Quarter						Change					First Quarter						Favorable/(Unfavorable) Change
(dollars in millions)	(dollars in millions)	2022			2021			$		%		(dollars in millions)	2023			2022			$		%
Net sales	Net sales	$	864.3		$	855.5		$	8.8	1.0	%	Net sales	$	842.9		$	871.5		$	(28.6)	(3.3)	%

Cost of sales	Cost of sales	535.7			523.5			12.2		2.3	%	Cost of sales	481.3			526.2			44.9		8.5	%
as a percentage of sales	as a percentage of sales	62.0		%	61.2		%					as a percentage of sales	57.1		%	60.4		%
Selling, general and administrative	Selling, general and administrative	204.2			187.4			16.8		9.0	%	Selling, general and administrative	209.4			198.3			(11.1)		(5.6)	%
as a percentage of sales	as a percentage of sales	23.6		%	21.9		%					as a percentage of sales	24.8		%	22.8		%

Operating profit	Operating profit	124.4			144.6			(20.2)		(14.0)	%	Operating profit	152.2			147.0			5.2		3.5	%
Operating margin	Operating margin	14.4		%	16.9		%					Operating margin	18.1		%	16.9		%

Other income (expense):	Other income (expense):											Other income (expense):
Interest income	Interest income	0.6			0.4			0.2		50.0	%	Interest income	1.0			0.3			0.7		233.3	%
Interest expense	Interest expense	(11.4)			(11.4)			—		—	%	Interest expense	(17.0)			(11.1)			(5.9)		(53.2)	%
Gain on sale of business		228.7			—			228.7		NM
Miscellaneous income, net		14.8			9.7			5.1		52.6	%
Total other income (expense)		232.7			(1.3)			234.0		NM

Miscellaneous (expense) income, net												Miscellaneous (expense) income, net	(2.4)			3.5			(5.9)		(168.6)	%
Total other expense												Total other expense	(18.4)			(7.3)			(11.1)		152.1	%
Income before income taxes	Income before income taxes	357.1			143.3			213.8		149.2	%	Income before income taxes	133.8			139.7			(5.9)		(4.2)	%
Provision for income taxes	Provision for income taxes	98.9			5.0			93.9		NM		Provision for income taxes	28.1			34.7			6.6		19.0	%

Net income attributable to common shareholders	Net income attributable to common shareholders	$	258.2		$	138.3		$	119.9	86.7	%	Net income attributable to common shareholders	$	105.7		$	105.0		$	0.7	0.7	%

Sales ~~increased~~decreased by ~~$8.8~~$28.6 million, or ~~1.0%~~3.3%, to ~~$864.3~~$842.9 million in ~~2022. Net sales related to operations outside the United States were 33.3% and 36.6% of total net sales for the quarters ended June 30, 2022, and 2021, respectively.~~2023. The year-over-year change in sales included:

•an increase in core sales of ~~$60.3~~$54.2 million, or ~~7.1%~~6.2%, which was driven primarily ~~comprised of~~by higher pricing;

•unfavorable foreign currency translation of ~~$29.7~~$21.0 million, or ~~3.5%~~2.4%; and

•a decrease in sales related to the May 2022 divestiture of ~~$21.8~~Crane Supply of $61.7 million, or ~~2.5%~~7.1%.

Cost of sales decreased by $44.9 million, or 8.5%, to $481.3 million in 2023. The decrease is primarily related to the impact of the sale of Crane ~~Supply.~~

~~Cost~~Supply of ~~sales increased by $12.2~~$46.0 million, or ~~2.3% to $535.7~~8.7%, strong productivity gains of $17.2 million, ~~in 2022. The increase is primarily related to~~or 3.3%, favorable foreign currency translation of $12.0 million, or 2.3%, the impact of lower volumes of $9.6 million, or 1.8%, partially offset by unfavorable mix of $23.9 million, or 4.5%, and an increase in material, labor and other manufacturing costs of ~~$57.3~~$17.6 million, or ~~10.9%, partially offset by favorable foreign currency translation of $19.7 million, or 3.8%, productivity gains of $13.8 million, or 2.6%, and lower volumes of $12.4 million, or 2.4%~~3.3%.

Selling, general and administrative expenses increased by ~~$16.8~~$11.1 million, or ~~9.0%~~5.6%, to ~~$204.2~~$209.4 million in ~~2022. The~~2023 primarily related to a $19.9 million, or 10.0%, increase ~~was driven primarily by higher~~in administrative expenses, including transaction related expenses of ~~$16.4~~$11.7 million, or ~~8.8%,~~ ~~and an increase in selling costs of $4.2 million,~~ ~~or 2.3%~~5.9%, partially offset by the impact of the sale of Crane Supply of $6.0 million, or 3.0%, and favorable foreign currency translation of ~~$6.0~~$4.0 million, or ~~3.2%~~2.0%.

Operating profit ~~decreased~~increased by ~~$20.2~~$5.2 million, or ~~14.0%~~3.5%, to ~~$124.4~~$152.2 million in ~~2022.~~2023. The ~~decrease in operating profit is related to~~increase primarily reflected higher ~~transaction related expenses~~pricing net of ~~$19.6~~inflation, and productivity, of $43.9 million, or ~~13.6%, and unfavorable mix of $16.1 million, or 11.1%~~29.9%, partially offset by ~~productivity gains~~unfavorable mix of ~~$16.0~~$23.9 million, or ~~11.1%.~~

~~Other income increased $234.0 million to $232.7 million, related to~~16.3%, the ~~gain on~~impact of the sale of ~~the~~ Crane Supply ~~business~~ of ~~$228.7 million.~~$9.7 million, or 6.6%, and unfavorable foreign currency translation of $5.1 million, or 3.5%.

Our effective tax rate for the three months ended ~~June 30, 2022,~~March 31, 2023 is ~~higher~~lower than the prior year’s comparable ~~periods~~period primarily due to ~~the reversal of~~ a ~~deferred tax asset established in the prior period that relates~~greater benefit related to ~~the sale of a subsidiary, partially offset by earnings in jurisdictions with statutory tax rates lower than the United States.~~share-based compensation.

Our effective tax rate for the three months ended ~~June 30, 2022,~~March 31, 2023 is ~~higher than~~equal to the statutory U.S. federal tax rate of 21% ~~primarily due to earnings in jurisdictions with statutory~~. The effective tax ~~rates higher than~~rate is the ~~United States, expenses~~result of permanent increases and decreases that ~~are statutorily~~net against each other and offset.

3330

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

non-deductible for income tax purposes and U.S. state taxes, partially offset by excess share-based compensation benefits, tax credit utilization, and the statutory U.S. deduction related to our non-U.S. subsidiaries’ income.

Comprehensive Income


		Three Months Ended					Three Months Ended
		June 30,					March 31,
(in millions)	(in millions)	2022		2021		(in millions)	2023		2022
Net income before allocation to noncontrolling interests	Net income before allocation to noncontrolling interests	$	258.2	$	138.3	Net income before allocation to noncontrolling interests	$	105.7	$	105.0
Components of other comprehensive income, net of tax
Components of other comprehensive income (loss), net of tax						Components of other comprehensive income (loss), net of tax
Currency translation adjustment	Currency translation adjustment	(75.9)		7.6		Currency translation adjustment	12.7		(21.6)
Changes in pension and postretirement plan assets and benefit obligation, net of tax	Changes in pension and postretirement plan assets and benefit obligation, net of tax	3.5		5.2		Changes in pension and postretirement plan assets and benefit obligation, net of tax	2.7		3.3
Other comprehensive income, net of tax		(72.4)		12.8
Other comprehensive income (loss), net of tax						Other comprehensive income (loss), net of tax	15.4		(18.3)
Comprehensive income before allocation to noncontrolling interests	Comprehensive income before allocation to noncontrolling interests	185.8		151.1		Comprehensive income before allocation to noncontrolling interests	121.1		86.7
Less: Noncontrolling interests in comprehensive income	Less: Noncontrolling interests in comprehensive income	(0.1)		(0.1)		Less: Noncontrolling interests in comprehensive income	(0.1)		0.1
Comprehensive income attributable to common shareholders	Comprehensive income attributable to common shareholders	$	185.9	$	151.2	Comprehensive income attributable to common shareholders	$	121.2	$	86.6

For the three months ended ~~June 30, 2022,~~March 31, 2023, comprehensive income before ~~allocations~~allocation to noncontrolling interests was ~~$185.8~~$121.1 million compared to ~~$151.1~~$86.7 million in the same period of ~~2021.~~2022. The ~~$34.7~~$34.4 million increase was primarily driven by ~~higher net income before allocation to noncontrolling interests of $119.9 million, partially offset by an $83.5~~a $34.3 million year-over-year ~~unfavorable~~favorable impact of foreign currency translation, ~~adjustments,~~ primarily related to the British pound and ~~Canadian dollar.~~euro.

3431

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

Segment Results of Operations - Three Month Periods Ended ~~June 30,~~March 31,

Aerospace & Electronics


		Second Quarter						Change					First Quarter						Favorable/(Unfavorable) Change
(dollars in millions)	(dollars in millions)	2022			2021			$		%		(dollars in millions)	2023			2022			$		%
Net sales by product line:	Net sales by product line:											Net sales by product line:
Commercial Original Equipment	Commercial Original Equipment	$	60.6		$	53.7		$	6.9	12.8	%	Commercial Original Equipment	$	68.4		$	58.7		$	9.7	16.5	%
Military Original Equipment	Military Original Equipment	57.1			62.8			(5.7)		(9.1)	%	Military Original Equipment	61.9			57.4			4.5		7.8	%
Commercial Aftermarket Products	Commercial Aftermarket Products	29.0			25.3			3.7		14.6	%	Commercial Aftermarket Products	37.9			28.6			9.3		32.5	%
Military Aftermarket Products	Military Aftermarket Products	14.8			15.7			(0.9)		(5.7)	%	Military Aftermarket Products	11.9			12.5			(0.6)		(4.8)	%
Total net sales	Total net sales	$	161.5		$	157.5		$	4.0	2.5	%	Total net sales	$	180.1		$	157.2		$	22.9	14.6	%
Cost of sales	Cost of sales	$	101.2		$	96.6		$	4.6	4.8	%	Cost of sales	$	111.0		$	97.4		$	(13.6)	(14.0)	%
as a percentage of sales	as a percentage of sales	62.7		%	61.3		%					as a percentage of sales	61.6		%	62.0		%
Selling, general and administrative	Selling, general and administrative	$	32.1		$	30.1		$	2.0	6.6	%	Selling, general and administrative	$	31.4		$	31.7		$	0.3	0.9	%
as a percentage of sales	as a percentage of sales	19.9		%	19.1		%					as a percentage of sales	17.4		%	20.2		%
Operating profit	Operating profit	$	28.2		$	30.8		$	(2.6)	(8.4)	%	Operating profit	$	37.7		$	28.1		$	9.6	34.2	%

Operating margin	Operating margin	17.5		%	19.6		%					Operating margin	20.9		%	17.9		%

Supplemental Data:	Supplemental Data:											Supplemental Data:
Backlog	Backlog	$	534.4		$	472.9		$	61.5	13.0	%	Backlog	$	644.8		$	508.4		$	136.4	26.8	%

Sales increased ~~$4.0~~$22.9 million, or ~~2.5%~~14.6%, to ~~$161.5~~$180.1 million in ~~2022.~~2023, primarily due to higher volumes and strong pricing.

•Sales of Commercial Original Equipment increased ~~$6.9~~$9.7 million, or ~~12.8%~~16.5%, to ~~$60.6~~$68.4 million in ~~2022,~~2023, reflecting strong demand from aircraft manufacturers as the industry aircraft build rates continue to recover from the COVID-19 related ~~slowdown.~~slowdown, partially offset by material availability constraints.

•Sales of Military Original Equipment ~~decreased $5.7~~increased $4.5 million, or ~~9.1%~~7.8%, to ~~$57.1~~$61.9 million in ~~2022,~~2023, primarily reflecting ~~lower shipments due to order timing~~strong demand from defense and ~~material availability.~~space customers.

•Sales of Commercial Aftermarket Products increased ~~$3.7~~$9.3 million, or ~~14.6%~~32.5%, to ~~$29.0~~$37.9 million in ~~2022,~~2023, reflecting continued strong demand from the airlines due to improving air ~~traffic as the industry continues to recover from the COVID-19 related slowdown, together with higher pricing.~~traffic.

•Sales of Military Aftermarket Products decreased ~~$0.9~~$0.6 million, or ~~5.7%~~4.8%, to ~~$14.8~~$11.9 million in ~~2022,~~2023, primarily reflecting timing of government orders for certain programs.

Cost of sales increased by ~~$4.6~~$13.6 million, or ~~4.8%~~14.0%, to ~~$101.2~~$111.0 million in ~~2022,~~2023, primarily reflecting ~~$6.8~~an unfavorable mix of $9.7 million, or ~~7.0%~~10.0%, increased volumes of ~~increased material, labor and other manufacturing costs,~~$5.7 million, or 5.9%, partially offset by $3.1 million, or 3.2%, of productivity gains.

~~Selling, general and administrative expense~~Operating profit increased by ~~$2.0~~$9.6 million, or ~~6.6%~~34.2%, to ~~$32.1~~$37.7 million in ~~2022,~~2023. The increase primarily ~~reflecting an increase~~reflected higher pricing net of ~~$1.5~~inflation and productivity of $12.0 million, or ~~5.0%~~42.7%, ~~in engineering costs.~~

~~Operating profit decreased by $2.6~~coupled with the impact from higher volumes of $6.2 million, or ~~8.4%~~22%, ~~to $28.2 million in 2022, primarily reflecting~~partially offset by an unfavorable mix of ~~$1.8~~$9.7 million, or ~~5.8%~~34.5%. ~~Higher pricing offset higher material, labor, and other manufacturing costs.~~

3532

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

Process Flow Technologies


		Second Quarter						Change					First Quarter						Favorable/(Unfavorable) Change
(dollars in millions)	(dollars in millions)	2022			2021			$		%		(dollars in millions)	2023			2022			$		%
Net sales by product line:	Net sales by product line:											Net sales by product line:
Process Valves and Related Products	Process Valves and Related Products	$	186.7		$	184.3		$	2.4	1.3	%	Process Valves and Related Products	$	202.9		$	182.9		$	20.0	10.9	%
Commercial Valves	Commercial Valves	77.2			98.2			(21.0)		(21.4)	%	Commercial Valves	30.6			98.2			(67.6)		(68.8)	%
Pumps and Systems	Pumps and Systems	32.1			28.2			3.9		13.8	%	Pumps and Systems	37.9			30.2			7.7		25.5	%
Total net sales	Total net sales	$	296.0		$	310.7		$	(14.7)	(4.7)	%	Total net sales	$	271.4		$	311.3		$	(39.9)	(12.8)	%

Cost of sales	Cost of sales	$	191.2		$	205.3		$	(14.1)	(6.9)	%	Cost of sales	$	150.1		$	196.8		$	46.7	23.7	%
as a percentage of sales	as a percentage of sales	64.6		%	66.1		%					as a percentage of sales	55.3		%	63.2		%
Selling, general and administrative	Selling, general and administrative	$	64.2		$	58.9		$	5.3	9.0	%	Selling, general and administrative	$	58.0		$	65.5		$	7.5	11.5	%
as a percentage of sales	as a percentage of sales	21.7		%	19.0		%					as a percentage of sales	21.4		%	21.0		%
Operating profit	Operating profit	$	40.6		$	46.5		$	(5.9)	(12.7)	%	Operating profit	$	63.3		$	49.0		$	14.3	29.2	%
Operating margin	Operating margin	13.7		%	15.0		%					Operating margin	23.3		%	15.7		%

Supplemental Data:	Supplemental Data:											Supplemental Data:

Backlog	Backlog	$	348.6		$	344.1		$	4.5	1.3	%	Backlog	$	363.0		$	372.4		$	(9.4)	(2.5)	%

Sales decreased by ~~$14.7~~$39.9 million, or ~~4.7%~~12.8%, to ~~$296.0~~$271.4 million in ~~2022,~~2023, driven by a ~~$21.8~~$61.7 million, or ~~7.0%~~19.8%, impact from the sale of Crane Supply and ~~$12.4~~$8.3 million, or ~~4.0%~~2.7%, of unfavorable foreign currency translation, partially offset by core sales growth of ~~$19.4~~$30.2 million, or ~~6.2%~~9.7%. Core sales growth was driven by higher pricing and volumes.

•Sales of Process Valves and Related Products increased by ~~$2.4~~$20.0 million, or ~~1.3%~~10.9%, to ~~$186.7~~$202.9 million in ~~2022,~~2023, reflecting an increase in core sales, ~~of $9.8 million, or 5.3%,~~ partially offset by unfavorable foreign currency translation ~~of $7.5 million, or 4.1%, primarily due to~~as the euro ~~weakening~~weakened against the U.S. dollar. ~~The higher core sales reflected continued solid demand across end markets together with higher pricing.~~Sales growth was driven primarily by strength in the Chemical vertical.

•Sales of Commercial Valves decreased by ~~$21.0~~$67.6 million, or ~~21.4%~~68.8%, to ~~$77.2~~$30.6 million in ~~2022,~~2023, primarily driven by the impact of the divestiture of Crane Supply of ~~$21.8~~$61.7 million, or ~~22.2%~~62.8%, and, to a lesser extent, unfavorable foreign currency translation ~~of $4.8 million, or 4.9%,~~ as the British pound weakened against the U.S. dollar. These decreases were partially offset by higher core sales of $5.6 million, or 5.7%, reflecting improvement in demand in Canadian non-residential construction markets and, to a lesser extent, the U.K. non-residential construction markets, and higher pricing.

•Sales of Pumps & Systems increased by ~~$3.9~~$7.7 million, or ~~13.8%~~25.5%, to ~~$32.1~~$37.9 million in ~~2022,~~2023, reflecting an increase in core sales primarily driven by higher ~~demand from municipal and non-residential construction~~volumes across all key end ~~markets and higher pricing.~~markets.

Cost of sales decreased by ~~$14.1~~$46.7 million, or ~~6.9%~~23.7%, to ~~$191.2~~$150.1 million, primarily related to the impact of the sale of Crane Supply of ~~$16.2~~$46.0 million, or ~~8.0%~~23.4%, productivity gains of $4.9 million, or 2.5%, and favorable foreign currency translation of ~~$7.9~~$4.6 million, or ~~3.9%, and productivity benefits of $4.5 million, or 2.2%~~2.3%, partially offset by ~~a $15.8 million, or 7.7%, increase in~~increased material, labor and other manufacturing ~~costs.~~costs and of $5.4 million, or 2.7%, and the impact of the higher volumes of $4.0 million, or 2.0%.

Selling, general and administrative expense ~~increased~~decreased by ~~$5.3~~$7.5 million, or ~~9.0%~~11.5%, to ~~$64.2~~$58.0 million primarily ~~reflecting an increase~~related to the impact of ~~$5.2~~the sale of Crane Supply of $6.0 million, or ~~8.9%~~9.2%, ~~in administrative costs consisting primarily of transaction related expenses,~~ and ~~$2.0 million, or 3.4%, in engineering and selling costs, partially offset by~~ favorable foreign currency translation of ~~$3.0~~$1.8 million, or ~~5.1%~~2.7%.

Operating profit ~~decreas~~increased by ~~$5.9~~$14.3 million, or 29.2%, to $63.3 million in 2023. The increase is primarily due to higher pricing net of inflation and productivity of $18.6 million, or 38%, the impact of higher volumes of $6.2 million, or 12.7%, ~~to $40.6 million in 2022.~~ ~~The decrease primarily reflected a $3.8 million, or 8.2%,~~partially offset by the impact from the sale of Crane Supply ~~and a $3.1~~of $9.7 million, or ~~6.7%, impact from unfavorable mix. Higher pricing offset the impact of higher material, labor, and other manufacturing costs.~~19.8%.

3633

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

Payment & Merchandising Technologies


		Second Quarter						Change					First Quarter						Favorable/(Unfavorable) Change
(dollars in millions)	(dollars in millions)	2022			2021			$		%		(dollars in millions)	2023			2022			$		%
Net sales by product line:	Net sales by product line:											Net sales by product line:
Payment Acceptance and Dispensing Products	Payment Acceptance and Dispensing Products	$	211.4		$	197.3		$	14.1	7.1	%	Payment Acceptance and Dispensing Products	$	223.8		$	211.0		$	12.8	6.1	%
Banknotes and Security Products	Banknotes and Security Products	122.6			130.9			(8.3)		(6.3)	%	Banknotes and Security Products	105.3			121.6			(16.3)		(13.4)	%
Total net sales	Total net sales	$	334.0		$	328.2		$	5.8	1.8	%	Total net sales	$	329.1		$	332.6		$	(3.5)	(1.1)	%
Cost of sales	Cost of sales	$	182.8		$	174.9		$	7.9	4.5	%	Cost of sales	$	174.4		$	179.1		$	4.7	2.6	%
as a percentage of sales	as a percentage of sales	54.7		%	53.3		%					as a percentage of sales	53.0		%	53.8		%
Selling, general and administrative	Selling, general and administrative	$	70.5		$	75.4		$	(4.9)	(6.5)	%	Selling, general and administrative	$	75.3		$	69.3		$	(6.0)	(8.7)	%
as a percentage of sales	as a percentage of sales	21.1		%	23.0		%					as a percentage of sales	22.9		%	20.8		%
Operating profit	Operating profit	$	80.7		$	77.9		$	2.8	3.6	%	Operating profit	$	79.4		$	84.2		$	(4.8)	(5.7)	%
Operating margin	Operating margin	24.2		%	23.7		%					Operating margin	24.1		%	25.3		%

Supplemental Data:	Supplemental Data:											Supplemental Data:

Backlog	Backlog	$	482.0		$	374.7		$	107.3	28.6	%	Backlog	$	556.0		$	429.0		$	127.0	29.6	%

Sales ~~increased $5.8~~decreased $3.5 million, or ~~1.8%~~1.1%, to ~~$334.0~~$329.1 million in ~~2022,~~2023, driven ~~by higher core sales of $22.8 million, or 6.9%, partially offset~~ by unfavorable foreign currency translation of ~~$16.9~~$12.4 million, or ~~5.1%~~3.7%, partially offset by higher core sales of $8.9 million, or 2.7%. The higher core sales reflected higher pricing, largely offset by lower volumes.

•Sales of Payment Acceptance and Dispensing Products increased ~~$14.1~~$12.8 million, or ~~7.1%~~6.1%, to ~~$211.4~~$223.8 million in ~~2022.~~2023. The increase reflected higher core sales of ~~$22.5~~$21.7 million, or ~~11.4%~~10.3%, partially offset by unfavorable foreign currency translation of ~~$8.4~~$8.9 million, or ~~4.3%~~4.2%, primarily due to the British pound and Japanese yen weakening against the U.S. dollar. The core sales increase primarily reflected higher ~~sales to gaming and vending customers together with higher pricing.~~component sales.

•Sales of Banknotes and Security Products decreased ~~$8.3~~$16.3 million, or ~~6.3%~~13.4%, to ~~$122.6~~$105.3 million in ~~2022.~~2023. The decrease primarily related to lower core sales of $12.8 million, or 10.5%, and unfavorable foreign currency translation of ~~$8.5~~$3.5 million, or ~~6.5%~~2.9%, as the euro weakened against the U.S. dollar. The core sales decrease primarily reflected lower sales to the U.S. Government.

Cost of sales ~~increased~~decreased by ~~$7.9~~$4.7 million, or ~~4.5%~~2.6%, to ~~$182.8~~$174.4 million, primarily ~~related to~~reflecting lower volumes of $9.0 million, or 5.0%, strong productivity of $8.5 million, or 4.7%, and favorable foreign currency translation of $7.4 million, or 4.1%, partially offset by an ~~increase~~unfavorable mix $14.2 million, or 7.9%, and increased in material, labor and other manufacturing costs of ~~$23.2~~$6.0 million, or 13.3%, unfavorable mix of $10.8 million, or 6.2%, partially offset by favorable foreign currency translation of $11.6 million, or 6.6%, lower costs of $8.6 million, or 4.9 %, due to lower volumes, and higher productivity of $5.7 million, or 3.3%3.4%.

Selling, general and administrative expense increased by $6.0 million, or 8.7%, to $75.3 million, primarily due to higher selling and administrative expenses of $9.1 million, or 13.1%, partially offset by favorable currency translation of $2.1 million, or 3.0%.

Operating profit decreased by ~~$4.9~~$4.8 million, or ~~6.5%~~5.7%, to ~~$70.5~~$79.4 million in 2023. The decrease primarily ~~reflecting favorable~~reflected an unfavorable mix of $14.2 million, or 16.9%, lower volumes of $12.0 million, or 14.3%, and unfavorable foreign currency translation ~~and productivity,~~ of ~~$3.8~~$2.9 million, or ~~5.0%.~~

~~Operating profit increased~~3.4%, partially offset by ~~$2.8 million, or 3.6%, to $80.7 million in 2022. The increase primarily reflected~~ higher pricing net of inflation and productivity gains of ~~$21.6~~$24.7 million, or ~~27.7 %, partially offset by unfavorable mix of $10.8 million, or 13.9%, and lower volumes of $5.4 million, or 6.9%, and unfavorable foreign currency translation of $2.4 million, or 3.0%~~29.3%.

3734

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

Engineered Materials


		Second Quarter						Change					First Quarter						Favorable/(Unfavorable) Change
(dollars in millions)	(dollars in millions)	2022			2021			$		%		(dollars in millions)	2023			2022			$		%
Net sales by product line:	Net sales by product line:											Net sales by product line:
FRP - Recreational Vehicles	FRP - Recreational Vehicles	$	32.2		$	24.8		$	7.4	29.8	%	FRP - Recreational Vehicles	$	20.3		$	35.7		$	(15.4)	(43.1)	%
FRP - Building Products	FRP - Building Products	31.8			26.5			5.3		20.0	%	FRP - Building Products	32.3			27.4			4.9		17.9	%
FRP - Transportation	FRP - Transportation	8.8			7.8			1.0		12.8	%	FRP - Transportation	9.7			7.3			2.4		32.9	%
Total net sales	Total net sales	$	72.8		$	59.1		$	13.7	23.2	%	Total net sales	$	62.3		$	70.4		$	(8.1)	(11.5)	%
Cost of sales	Cost of sales	$	60.6		$	46.7		$	13.9	29.8	%	Cost of sales	$	45.8		$	52.4		$	6.6	12.6	%
as a percentage of sales	as a percentage of sales	83.2		%	79.0		%					as a percentage of sales	73.5		%	74.4		%
Selling, general and administrative	Selling, general and administrative	$	4.9		$	4.7		$	0.2	4.3	%	Selling, general and administrative	$	5.1		$	4.6		$	(0.5)	(10.9)	%
as a percentage of sales	as a percentage of sales	6.7		%	8.0		%					as a percentage of sales	8.2		%	6.5		%
Operating profit	Operating profit	$	7.3		$	7.7		$	(0.4)	(5.2)	%	Operating profit	$	11.4		$	13.4		$	(2.0)	(14.9)	%
Operating margin	Operating margin	10.0		%	13.0		%					Operating margin	18.3		%	19.0		%

Supplemental Data:	Supplemental Data:											Supplemental Data:

Backlog	Backlog	$	22.0		$	17.6		$	4.4	25.0	%	Backlog	$	16.8		$	30.4		$	(13.6)	(44.7)	%

Sales ~~increased $13.7~~decreased $8.1 million, or ~~23.2%~~11.5%, to ~~$72.8~~$62.3 million in ~~2022.~~2023, reflecting lower volumes, partially offset by higher pricing. The ~~increase reflected higher~~decrease was driven by lower sales to recreational vehicle manufacturers, offset by higher sales to building products customers and ~~to a lesser extent,~~ transportation customers.

Cost of sales ~~increased $13.9~~decreased $6.6 million, or ~~29.8%~~12.6%, to ~~$60.6~~$45.8 million in ~~2022,~~2023, primarily related ~~primarily~~ to ~~higher raw material costs and, to a lesser extent, higher labor, and other manufacturing costs.~~

~~Operating profit decreased by $0.4~~lower volumes of $10.3 million, or ~~5.2%, to $7.3 million in 2022, primarily reflecting higher pricing net of inflation, and productivity gains, of $1.1 million or 14.3%~~19.7%, partially offset by ~~unfavorable mix of $0.5 million, or 6.5%.~~

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

~~Results from Operations – Six Month Periods Ended June 30,~~

The following information should be read in conjunction with our condensed consolidated financial statements and related notes. All comparisons below refer to the first six months of 2022 versus the first six months of 2021, unless otherwise specified.

Year-to-Date Change
(dollars in millions) 2022 2021 $ %
Net sales $ 1,735.7 $ 1,688.9 $ 46.8 2.8 %
Cost of sales 1,061.8 1,037.0 24.8 2.4 %
as a percentage of sales 61.2 % 61.4 %
Selling, general and administrative1
402.5 360.9 41.6 11.5 %
as a percentage of sales 23.2 % 21.4 %
Operating profit 271.4 291.0 (19.6) (6.7) %
Operating margin 15.6 % 17.2 %
Other income (expense):
Interest income 0.9 0.9 — — %
Interest expense (22.5) (25.0) 2.5 10.0 %
Gain on sale of business 228.7 — 228.7 NM
Miscellaneous income, net 18.3 13.6 4.7 34.6 %
Total other income (expense) 225.4 (10.5) 235.9 NM
Income before income taxes 496.8 280.5 216.3 77.1 %
Provision for income taxes 133.6 33.8 99.8 295.3 %
Net income attributable to common shareholders $ 363.2 $ 246.7 $ 116.5 47.2 %
1 2021 includes restructuring gains of $13.3 million

Sales increased by $46.8 million, or 2.8%, to $1,735.7 million in 2022. Net sales related to operations outside the United States were 34.8% and 37.2% of total net sales for the six months ended June 30, 2022 and 2021, respectively. The year-over-year change in sales included:

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

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

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

~~Cost of sales increased by $24.8 million, or 2.4%, to $1,061.8 million in 2022. The increase is primarily related to an increase in material,~~higher raw materials, labor, and other manufacturing costs of ~~$91.3~~$5.0 million, or 8.8%, and unfavorable mix of $18.2 million, or 1.8%, partially offset by productivity gains of $29.0 million, or 2.8%, and favorable foreign currency translation of $28.5 million, or 2.7%, impact of the sale of Crane Supply of $16.2 million, or 1.6%, and lower volumes of $10.4 million, or 1.0%.

Selling general and administrative expenses increased by $41.6 million, or 11.5%, to $402.5 million in 2022. The increase was driven primarily by higher transaction related and other expenses of $22.4 million, or 6.2%, increased engineering and selling costs of $18.9 million, or 5.2%, and the absence of restructuring gains in 2021 of $13.3 million which did not repeat in 2022, partially offset by favorable foreign currency translation of $8.6 million, or 2.4%, and productivity gains of $4.1 million, or 1.1%9.5%.

Operating profit decreased by ~~$19.6~~$2.0 million, or ~~6.7%~~14.9%, to ~~$271.4~~$11.4 million in 2022. The decrease in operating profit reflected higher transaction costs of $25.6 million, or 8.9%, unfavorable mix of $18.2 million, or 6.3%, and the absence of a restructuring gain from 2021 of $13.3 million, or 4.6%, partially offset by productivity gains and restructuring savings of $36.7 million, or 12.6%. Incremental pricing offset2023, reflecting the impact ~~of continued inflation.~~

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

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

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

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

Our effective tax rate for the six months ended June 30, 2022, is higher than the statutory U.S. federal tax rate of 21% primarily due to earnings in jurisdictions with statutory tax rates higher than the United States, expenses that are statutorily non-deductible for income tax purposes and U.S. state taxes, partially offset by excess share-based compensation benefits, tax credit utilization, and the statutory U.S. deduction related to our non-U.S. subsidiaries’ income.

~~Comprehensive Income~~

Six Months Ended
June 30,
(in millions) 2022 2021
Net income before allocation to noncontrolling interests $ 363.2 $ 246.7
Components of other comprehensive income (loss), net of tax
Currency translation adjustment (97.5) (27.3)
Changes in pension and postretirement plan assets and benefit obligation, net of tax 6.8 10.1
Other comprehensive loss, net of tax (90.7) (17.2)
Comprehensive income before allocation to noncontrolling interests 272.5 229.5
Less: Noncontrolling interests in comprehensive income — 0.7
Comprehensive income attributable to common shareholders $ 272.5 $ 228.8

For the six months ended June 30, 2022, comprehensive income before allocations to noncontrolling interests was $272.5 million compared to $229.5 million in the same period of 2021. The $43.0 million increase was primarily driven by higher net income before allocation to noncontrolling interests of $116.5 million, partially offset by a $70.2 million year over year unfavorable impact of foreign currency translation adjustments primarily related to the British pound and Canadian dollar.

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

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

~~Aerospace & Electronics~~

Year-to-Date Change
(dollars in millions) 2022 2021 $ %
Net sales by product line:
Commercial Original Equipment $ 119.2 $ 108.3 $ 10.9 10.1 %
Military Original Equipment 114.4 125.6 (11.2) (8.9) %
Commercial Aftermarket Products 57.7 44.8 12.9 28.8 %
Military Aftermarket Products 27.3 32.8 (5.5) (16.8) %
Total net sales $ 318.6 $ 311.5 $ 7.1 2.3 %
Cost of sales $ 198.6 $ 195.9 $ 2.7 1.4 %
as a percentage of sales 62.3 % 62.9 %
Selling, general and administrative $ 63.8 $ 58.8 $ 5.0 8.5 %
as a percentage of sales 20.0 % 18.9 %
Operating profit $ 56.2 $ 56.8 $ (0.6) (1.1) %
Operating margin 17.6 % 18.2 %

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

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

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

•Sales of Commercial Aftermarket Products increased $12.9 million, or 28.8%, to $57.7 million in 2022, reflecting strong demand from the airlines due to improving air traffic as the industry continues to recover from the COVID-19 related slowdown together with higher pricing.

•~~Sales of Military Aftermarket Products decreased $5.5 million, or 16.8%, to $27.3 million in 2022, primarily reflecting timing of government orders for certain programs.~~

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

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

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

net of inflation.

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

~~Process Flow Technologies~~

Year-to-Date Change
(dollars in millions) 2022 2021 $ %
Net sales by product line:
Process Valves and Related Products $ 369.6 $ 358.6 $ 11.0 3.1 %
Commercial Valves 175.4 187.7 (12.3) (6.6) %
Pumps and Systems 62.4 52.5 9.9 18.9 %
Total net sales $ 607.4 $ 598.8 $ 8.6 1.4 %
Cost of sales $ 388.1 $ 396.1 $ (8.0) (2.0) %
as a percentage of sales 63.9 % 66.1 %
Selling, general and administrative1
$ 129.7 $ 106.1 $ 23.6 22.2 %
as a percentage of sales 21.4 % 17.7 %
Operating profit $ 89.6 $ 96.6 $ (7.0) (7.2) %
Operating margin 14.8 % 16.1 %
12021 includes net restructuring gains of $12.6 million

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

•Sales of Process Valves and Related Products increased by $11.0 million, or 3.1%, to $369.6 million in 2022. The increase reflected higher core sales of $22.4 million, or 6.2%, offset by unfavorable foreign currency translation of $11.4 million, or 3.2%, primarily due to the Euro weakening against the U.S. dollar. The higher core sales primarily reflected broad based demand across end markets that continue to recover from the impact of COVID-19 together with higher pricing.

•Sales of Commercial Valves decreased by $12.3 million, or 6.6%, to $175.4 million in 2022, primarily driven by the impact of the divestiture of Crane Supply of $21.8 million, or 11.6%, and unfavorable foreign currency translation of $5.7 million, or 3.0%, as the British pound and Canadian dollar weakened against the U.S. dollar, partially offset by an increase in core sales of $15.2 million, or 8.1%. The higher core sales primarily reflected higher demand in Canadian and, to a lesser extent, U.K., non-residential construction markets and higher pricing.

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

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

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

Operating profit decreased by $7.0 million, or 7.2%, to $89.6 million in 2022, primarily reflecting the impact of the divestiture of Crane Supply of $3.8 million, or 3.9%, and unfavorable mix of $4.9 million, or 5.1%. Strong productivity substantially offset the unfavorable comparison related to the prior year restructuring gain.

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

~~Payment & Merchandising Technologies~~

Year-to-Date Change
(dollars in millions) 2022 2021 $ %
Net sales by product line:
Payment Acceptance and Dispensing Products $ 422.4 $ 382.3 $ 40.1 10.5 %
Banknotes and Security Products 244.2 283.3 (39.1) (13.8) %
Total net sales $ 666.6 $ 665.6 $ 1.0 0.2 %
Cost of sales $ 361.9 $ 355.2 $ 6.7 1.9 %
as a percentage of sales 54.3 % 53.4 %
Selling, general and administrative $ 139.8 $ 146.7 $ (6.9) (4.7) %
as a percentage of sales 21.0 % 22.0 %
Operating profit $ 164.9 $ 163.7 $ 1.2 0.7 %
Operating margin 24.7 % 24.6 %

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

•Sales of Payment Acceptance and Dispensing Products increased $40.1 million, or 10.5%, to $422.4 million in 2022. The increase reflected higher core sales of $51.7 million, or 13.4%, offset by unfavorable foreign currency translation of $11.6 million, or 3.0%, primarily reflecting the weakening of the British pound and Japanese Yen against the U.S. dollar. The core sales increase primarily reflected higher sales to gaming and vending customers, including higher pricing.

•Sales of Banknotes and Security Products decreased $39.1 million, or 13.8%, to $244.2 million in 2022. The decrease reflected lower core sales of $25.0 million, or 8.8%, and unfavorable foreign currency translation of $14.1 million, or 5.0%, as the euro weakened against the U.S. dollar. The core sales decrease reflected lower sales to both international customers and the U.S. Government.

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

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

Operating profit increased by $1.2 million, or 0.7%, to $164.9 million in 2022. The increase primarily reflected higher pricing net of inflation, and productivity, of $37.4 million, or 22.8%, partially offset by lower volumes of $16.6 million, or 10.1%, unfavorable mix of $14.9 million, or 9.1%, and unfavorable foreign currency translation of $4.2 million, or 2.6%.

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

~~Engineered Materials~~

Year-to-Date Change
(dollars in millions) 2022 2021 $ %
Net sales by product line:
FRP - Recreational Vehicles $ 67.9 $ 49.1 $ 18.8 38.3 %
FRP - Building Products 59.2 48.3 10.9 22.6 %
FRP - Transportation 16.0 15.6 0.4 2.6 %
Total net sales $ 143.1 $ 113.0 $ 30.1 26.6 %
Cost of sales $ 113.3 $ 89.7 $ 23.6 26.3 %
as a percentage of sales 79.2 % 79.4 %
Selling, general and administrative $ 9.6 $ 9.2 $ 0.4 4.3 %
as a percentage of sales 6.7 % 8.1 %
Operating profit $ 20.2 $ 14.1 $ 6.1 43.3 %
Operating margin 14.1 % 12.5 %

~~Sales increased by $30.1 million, or 26.6%, to $143.1 million in 2022. The increase reflected higher sales to recreational vehicle manufacturers and building products customers.~~

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

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

4435

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

Liquidity and Capital Resources


		Six Months Ended					Three Months Ended
		June 30,					March 31,
(in millions)	(in millions)	2022		2021		(in millions)	2023		2022
Net cash provided by (used for):
Net cash (used for) provided by:						Net cash (used for) provided by:
Operating activities	Operating activities	$	49.0	$	206.7	Operating activities	$	(70.8)	$	(55.5)
Investing activities	Investing activities	289.2		38.7		Investing activities	(12.8)		(13.0)
Financing activities	Financing activities	(135.6)		(405.2)		Financing activities	(67.8)		(97.8)

Effect of exchange rates on cash and cash equivalents	Effect of exchange rates on cash and cash equivalents	(30.6)		(4.5)		Effect of exchange rates on cash and cash equivalents	4.0		(5.1)
Increase (decrease) in cash and cash equivalents		$	172.0	$	(164.3)
Decrease in cash and cash equivalents						Decrease in cash and cash equivalents	$	(147.4)	$	(171.4)

Our operating philosophy is to deploy cash provided from operating activities, when appropriate, to provide value to shareholders by reinvesting in existing businesses, by making acquisitions that will strengthen and complement our portfolio, by divesting businesses that are no longer strategic or aligned with our portfolio and where such divestitures can generate capacity for strategic investments and initiatives that further optimize our portfolio, and by paying dividends and/or repurchasing shares. At any given time, and from time to time, we may be evaluating one or more of these opportunities, although we cannot assure you if or when we will consummate any such transactions.

Our current cash balance, together with cash we expect to generate from future operations along with our ~~commercial paper program or~~ borrowings available under our revolving credit facility is expected to be sufficient to finance our short- and long-term capital requirements, as well as to fund ~~payments associated with our asbestos and environmental liabilities and~~ expected pension contributions. ~~In addition, we believe our investment grade credit ratings afford us adequate access to public and private debt markets.~~

In July 2021, we entered a $650 million, 5-year Revolving Credit Agreement, which replaced the existing $550 million revolving credit facility. The $650 million revolving credit facility and the CP Program were replaced by commitments under a new $500 million, 5-year Revolving Credit Agreement that was entered into on March 17, 2023, with funding available upon consummation of the Separation, subject to customary conditions precedent for facilities of this type. As of the Separation, the CP Program is no longer available.

We also ~~increased~~entered into a $350 million, 3-year term loan facility. Funding under each facility became available in connection with the ~~size~~Separation, upon the satisfaction of ~~our Commercial Paper Program (“CP Program”)~~customary conditions of facilities of this type. On March 31, 2023, Crane Holdings, Co. borrowed the full amount of the Term Facility.

In August 2022, we entered into a $400 million senior unsecured 364-day Credit Agreement. The proceeds were used to ~~permit~~partially fund the ~~issuance of short-term, unsecured commercial paper notes in an aggregate principal amount outstanding not to exceed $650 million at any time (up from~~ $550 million ~~previously). Please see~~contribution related to the Redco Sale. See Note 10 and Note 11 to our Condensed Consolidated Financial Statements for additional details.

In April 2020, to enhance financial flexibility and maintain maximum liquidity in response to the uncertainty in the global markets resulting from the COVID-19 pandemic, we entered a senior unsecured 364-day credit facility (the “364-Day Credit Agreement”). On ~~April 15, 2021,~~March 31, 2023, we repaid the amount outstanding under the 364-Day Credit Agreement.

On April 3, 2023, prior to the consummation of the Separation, Crane Company paid a dividend to Crane Holdings, Co. in the amount of $275 million.

On April 4, 2023, we redeemed all of our outstanding 4.45% senior notes due 2023, of which $300 million aggregate principal amount was outstanding upon redemption.

Operating Activities

Cash ~~provided by~~used for operating activities was ~~$49.0~~$70.8 million in the first ~~six~~three months of ~~2022,~~2023, as compared to ~~$206.7~~$55.5 million during the same period last year. The ~~decrease~~increase in cash ~~provided by~~used for operating activities was primarily driven by increased working capital investments supporting higher levels of demand across most ~~businesses, together with higher tax payments in the first half of 2022.~~Net asbestos-related payments for the first six months of 2022 and 2021 were $23.4 million and $20.2 million, respectively. In 2022, we expect to make payments related to asbestos settlement and defense costs, net of related insurance recoveries, of approximately $45 million.businesses.

Investing Activities

Cash flows relating to investing activities consist primarily of cash used for ~~acquisitions and~~ capital expenditures and cash provided by divestitures of ~~businesses or~~ assets. Cash ~~provided by~~used for investing activities was ~~$289.2~~$12.8 million in the first ~~six~~three months of ~~2022,~~2023, as compared to ~~$38.7 million~~$13.0 in the comparable period of ~~2021. The increase in cash provided from investing activities was primarily related to proceeds from the sale of Crane Supply of $314.3 million.~~2022. 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.~~

Financing Activities

Financing cash flows consist primarily of dividend payments to shareholders, share repurchases and repayments of indebtedness, proceeds from the issuance of long-term debt and commercial paper and proceeds from the issuance of common stock. Cash used for financing activities was ~~$135.6~~$67.8 million during the first ~~six~~three months of ~~2022,~~2023 compared to ~~$405.2~~$97.8 million in the comparable period of ~~2021.~~2022. The ~~decrease~~decreased in cash used for financing activities was primarily driven by the ~~repayment~~absence of ~~the term loan of $348.1~~$175.8 million in ~~2021 which did not repeat in 2022. In 2022, we also had $203.7 million of~~cash used for share repurchases ~~partially offset by a $104.4 million increase~~ in ~~net borrowings from~~ the ~~issuance of commercial paper.~~

prior year.

4536

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Recent Accounting Pronouncements

Information regarding new accounting pronouncements is included in Note 1 to our Condensed Consolidated Financial Statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in the information called for by this item since the disclosure in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Item 4. Controls and Procedures

Disclosure Controls and Procedures. The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this quarterly report. The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that are filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that the information is accumulated and communicated to the Company’s Chief Executive Officer and Chief Financial Officer to allow timely decisions regarding required disclosure. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that these controls are effective as of the end of the period covered by this quarterly report.

Changes in Internal Control over Financial Reporting. During the fiscal quarter ended ~~June 30, 2022,~~March 31, 2023, there have been no changes in the Company’s internal control over financial reporting, identified in connection with our evaluation thereof, that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

4738

Part II: Other Information

Item 1. Legal Proceedings

Discussion of legal matters is incorporated by reference from Part 1, Item 1, Note 10, “Commitments and Contingencies”, of this Quarterly Report on Form 10-Q, and should be considered an integral part of Part II, Item 1, “Legal Proceedings.”

Item 1A. Risk Factors

Information regarding risk factors appears in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021.~~2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) Not applicable

(b) Not applicable

~~On October 25, 2021, the Company announced that its Board of Directors authorized the Company to purchase up to $300 million of its common stock through a~~We did not make any open-market share repurchase program (the “Program”) that calls for shares to be purchased in the open market from time-to-time at prevailing prices in accordance with federal securities laws. All remaining availability under the Program as of March 31, 2022 was repurchased in April 2022 prior to the Program expiring on April 22, 2022.

~~The following table only includes the open market~~ repurchases of our common stock ~~in each month~~ during the ~~three months~~quarter ended ~~June 30, 2022:~~
Total number
of shares
purchased (a)
Average
price paid per
share (b)
Total number of
shares purchased
as part of publicly
announced plans
or programs Maximum
dollar value of
shares that may yet
be purchased under
the plans or
programs (in millions)
April 1-30 149,487 $ 105.51 2,902,117 $ —
May 1-31 — $ — — $ —
June 1-30 — $ — — $ —
Total April 1 — June 30, 2022 149,487 $ 105.51

~~(a)~~ ~~Shares repurchased are based on the trade date~~

~~(b)~~ ~~Excludes any fees, commissions or other expenses associated with share repurchases~~

March 31, 2023. We routinely receive shares of our common stock as payment for stock option exercises and the withholding taxes due on stock option exercises and the vesting of restricted share units from stock-based compensation program participants.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

Not applicable

4839

Item 6. Exhibits


Exhibit 2.1						Separation and Distribution Agreement, ~~and Plan~~dated as of ~~Merger, dated February 28, 2022,~~April 3, 2023, by and ~~among~~between Crane NXT, Co.~~, Crane Holdings, Co.,~~ and Crane ~~Transaction~~ Company LLC (included as Appendix A to the proxy statement/prospectus included in Amendment No. 2 to Crane Holdings, Co.’s Registration Statement on Form S-4 (Registration No. 333-263119) filed on April 14, 2022) (incorporated by reference to Exhibit 2.1 to Crane ~~Holdings,~~NXT, Co.'s’s Current Report on Form ~~8-K12G3~~8-K filed on ~~May 16, 2022)~~April 3, 2023).
Exhibit 3.1						Amended and Restated Certificate of Incorporation of Crane ~~Holdings,~~NXT, Co. (incorporated by reference to Exhibit 3.1 to Crane Holdings, Co.'s Current Report on Form 8-K12G3 filed on May 16, 2022).
Exhibit 3.2						Certificate of Amendment to the Amended and Restated ~~By-laws~~Certificate of Incorporation of Crane ~~Holdings,~~NXT, Co. (incorporated by reference to Exhibit 3.2 to Crane ~~Holdings,~~NXT, Co.'s’s Current Report on Form ~~8-K12G3~~8-K filed on ~~May 16, 2022)~~April 3, 2023).
Exhibit ~~4.1~~3.3						~~First Supplemental Indenture to the Indenture dated December 13, 2013,~~Amended and Restated By-laws of Crane NXT, Co., dated as of ~~May 16, 2022, between Crane Holdings, Co. and U.S. Bank Trust Company, National Association~~April 3, 2023 (incorporated by reference to Exhibit ~~4.2~~3.3 to Crane ~~Holdings,~~NXT, Co.'s’s Current Report on Form ~~8-K12G3~~8-K filed on ~~May 16, 2022)~~April 3, 2023).
Exhibit ~~4.2~~10.1*						~~First Supplemental Indenture to the Indenture dated April 1, 1991, dated as of May 16, 2022,~~Offer Letter between Crane ~~Holdings,~~NXT, Co. and ~~U.S. Bank Trust Company, National Association (incorporated by reference to Exhibit 4.5 to Crane Holdings, Co.'s Current Report on Form 8-K12G3 filed on May 16, 2022).~~Christina Cristiano.
Exhibit ~~4.3~~10.2*						~~First Supplemental Indenture to the Indenture dated February 5, 2018, dated as of May 16, 2022,~~Offer Letter between Crane ~~Holdings,~~NXT, Co. and ~~U.S. Bank Trust Company, National Association (incorporated by reference to Exhibit 4.8 to Crane Holdings, Co.'s Current Report on Form 8-K12G3 filed on May 16, 2022).~~Paul Igoe.
Exhibit ~~10.1~~10.3*						~~Amendment No. 1,~~Offer Letter between Crane NXT, Co. and Jennifer Kartono.
Exhibit 10.4*						Offer Letter between Crane NXT, Co. and Bianca Shardelow.
Exhibit 10.5*						Crane NXT, Co. Benefit Equalization Plan.
Exhibit 10.6*						Crane NXT, Co. Annual Incentive Plan.
Exhibit 10.7						Credit Agreement, dated as of ~~May 16, 2022,~~March 17, 2023, by and among Crane ~~Holdings,~~NXT, Co., ~~Crane Co., CR Holdings C.V., each Lender~~as borrower, the lenders and issuing banks party thereto, ~~and~~ JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, and the other agents and arrangers party thereto.
Exhibit 10.8						Transition Services Agreement, dated as of April 3, 2023, by and between Crane NXT, Co. and Crane Company (incorporated by reference to Exhibit 10.1 to Crane ~~Holdings,~~NXT, Co.'s’s Current Report on Form 8-K filed on ~~May 16, 2022)~~April 3, 2023).
Exhibit ~~10.2~~10.9						~~Form~~Tax Matters Agreement, dated as of ~~Commercial Paper Dealer Agreement~~April 3, 2023, by and between Crane ~~Holdings,~~NXT, Co. and ~~the respective commercial paper dealer party thereto~~Crane Company (incorporated by reference to Exhibit 10.2 to Crane ~~Holdings,~~NXT, Co.'s’s Current Report on Form ~~8-K12G3~~8-K filed on ~~May 16, 2022)~~April 3, 2023).
Exhibit 10.10						Employee Matters Agreement, dated as of April 3, 2023, by and between Crane NXT, Co. and Crane Company (incorporated by reference to Exhibit 10.3 to Crane NXT, Co.’s Current Report on Form 8-K filed on April 3, 2023).
Exhibit 10.11						Intellectual Property Matters Agreement, dated as of April 3, 2023, by and between Crane NXT, Co. and Crane Company (incorporated by reference to Exhibit 10.4 to Crane NXT, Co.’s Current Report on Form 8-K filed on April 3, 2023).
Exhibit 10.12						Collateral Agreement, dated as of March 31, 2023, by and among Crane NXT, Co., the subsidiary grantors party thereto and JPMorgan Chase, N.A., as administrative agent (incorporated by reference to Exhibit 10.5 to Crane NXT, Co.’s Current Report on Form 8-K filed on April 3, 2023).
Exhibit 31.1*						Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a)
Exhibit 31.2*						Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a)
Exhibit 32.1**						Certification of Chief Executive Officer pursuant to Rule 13a-14(b) or 15d-14(b)
Exhibit 32.2**						Certification of Chief Financial Officer pursuant to Rule 13a-14(b) or 15d-14(b)
101.INS						XBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.
101.SCH						Inline XBRL Taxonomy Extension Schema (filed herewith)
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase (filed herewith)
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase (filed herewith)
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase (filed herewith)
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase (filed herewith)
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed with this report

** Furnished with this report

4940

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		CRANE ~~HOLDINGS,~~NXT, CO.
		REGISTRANT

Date
~~August 3, 2022~~May 10, 2023	By	/s/ ~~Max H. Mitchell~~Aaron Saak
		~~Max H. Mitchell~~Aaron Saak
		President and Chief Executive Officer

Date	By	/s/ ~~Richard A. Maue~~Christina Cristiano
~~August 3, 2022~~May 10, 2023		~~Richard A. Maue~~Christina Cristiano
		Senior Vice President and Chief Financial Officer

5041


	Three Months Ended		Six Months Ended		Year Ended
	June 30,		June 30,		December 31,
	2022	2021	2022	2021	2021
Beginning claims	30,312	29,407	29,958	29,138	29,138
New claims	646	772	1,303	1,505	2,975
Settlements	(347)	(176)	(548)	(336)	(980)
Dismissals	(512)	(215)	(614)	(519)	(1,175)

Ending claims	30,099	29,788	30,099	29,788	29,958


	Six Months Ended June 30,2022						Six Months Ended June 30,2021
(in millions)	Severance		Other		Total		Severance		Other		Total


Payment & Merchandising Technologies	$	—	$	—	$	—	$	(0.5)	$	—	$	(0.5)
2020 Repositioning	$	—	$	—	$	—	$	(0.5)	$	—	$	(0.5)

Process Flow Technologies	$	—	$	—	$	—	$	0.1	$	—	$	0.1
2019 Repositioning	$	—	$	—	$	—	$	0.1	$	—	$	0.1


Process Flow Technologies 1	$	—	$	—	$	—	$	—	$	(12.7)	$	(12.7)
Payment & Merchandising Technologies	—		—		—		(0.2)		—		(0.2)
2017 Repositioning	$	—	$	—	$	—	$	(0.2)	$	(12.7)	$	(12.9)

Total	$	—	$	—	$	—	$	(0.6)	$	(12.7)	$	(13.3)


	Year-to-Date						Change
(dollars in millions)	2022			2021			$		%
Net sales	$	1,735.7		$	1,688.9		$	46.8	2.8	%

Cost of sales	1,061.8			1,037.0			24.8		2.4	%
as a percentage of sales	61.2		%	61.4		%
Selling, general and administrative1	402.5			360.9			41.6		11.5	%
as a percentage of sales	23.2		%	21.4		%
Operating profit	271.4			291.0			(19.6)		(6.7)	%


Operating margin	15.6		%	17.2		%
Other income (expense):
Interest income	0.9			0.9			—		—	%
Interest expense	(22.5)			(25.0)			2.5		10.0	%
Gain on sale of business	228.7			—			228.7		NM
Miscellaneous income, net	18.3			13.6			4.7		34.6	%
Total other income (expense)	225.4			(10.5)			235.9		NM
Income before income taxes	496.8			280.5			216.3		77.1	%
Provision for income taxes	133.6			33.8			99.8		295.3	%


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


1 2021 includes restructuring gains of $13.3 million


	Total number of shares purchased (a)	Average price paid per share (b)		Total number of shares purchased as part of publicly announced plans or programs	Maximum dollar value of shares that may yet be purchased under the plans or programs (in millions)
April 1-30	149,487	$	105.51	2,902,117	$	—
May 1-31	—	$	—	—	$	—
June 1-30	—	$	—	—	$	—
Total April 1 — June 30, 2022	149,487	$	105.51