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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
March 31, 2024
OR
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:
1-41570
CRANE COMPANY
(Exact name of registrant as specified in its charter)
Delaware 88-2846451
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 First Stamford Place Stamford CT 06902
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
203
-
363-7300
(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 New York Stock Exchange
CR
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
every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T ((s)232.405 of this chapter) during the preceding 12 months (or
for such shorter period that the registrant was required to submit 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 April 30, 2024
Common stock, $1.00 Par Value -
57,157,884
shares
1
-------------------------------------------------------------------------------
Crane Company
Table of Contents
Form 10-Q
Page
Part I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Page
Statements of Operations 3
Condensed Consolidated Statements Page
of Comprehensive Income 4
Condensed Consolidated Page
Balance Sheets 5
Condensed Consolidated Page
Statements of Cash Flows 7
Condensed Consolidated Statements of Changes in Equity Page
9
Notes to Condensed Consolidated Page
Financial Statements 10
Item 2. Management's Discussion Page
and Analysis of 27
Financial Condition and
Results of Operations
Item 3. Quantitative and Page
Qualitative 35
Disclosures About
Market Risk
Item 4. Controls and Procedures Page
35
Part II - Other Information
Item 1. Legal Proceedings Page
36
Item 1A. Risk Factors Page
36
Item 2. Unregistered Page
Sales of Equity 36
Securities and
Use of Proceeds
Item 3. Defaults Upon Senior Securities Page
36
Item 4. Mine Safety Disclosures Page
36
Item 5. Other Information Page
36
Item 6. Exhibits Page
37
Signatures Page
38
2
-------------------------------------------------------------------------------
Table of Contents
P
ART
I: F
INANCIAL
I
NFORMATION
ITEM 1: FINANCIAL STATEMENTS
CRANE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
March 31,
(in millions, except per share data) 2024 2023
Net sales $ 565.3 $ 513.8
Operating costs and expenses:
Cost of sales 344.8 306.9
Selling, general and administrative 131.1 129.4
Operating profit 89.4 77.5
Other (expense) income:
Interest income 1.2 0.9
Interest expense ( (
7.2 6.6
) )
Miscellaneous expense, net ( (
1.3 0.5
) )
Total other expense, net ( (
7.3 6.2
) )
Income from continuing operations before income taxes 82.1 71.3
Provision for income taxes 17.3 15.4
Net income from continuing operations attributable to common shareholders 64.8 55.9
Income from discontinued operations, net of tax (Note 3) - 49.8
Net income attributable to common shareholders $ 64.8 $ 105.7
Earnings per basic share:
Earnings per basic share from continuing operations $ 1.14 $ 0.99
Earnings per basic share from discontinued operations - 0.88
Earnings per basic share $ 1.14 $ 1.87
Earnings per diluted share:
Earnings per diluted share from continuing operations $ 1.12 $ 0.98
Earnings per diluted share from discontinued operations - 0.86
Earnings per diluted share $ 1.12 $ 1.84
Average shares outstanding:
Basic 57.0 56.5
Diluted 58.1 57.3
Dividends per share $ 0.205 $ 0.47
See Notes to Condensed Consolidated Financial Statements.
3
-------------------------------------------------------------------------------
Table of Contents
CRANE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
Three Months Ended
March 31,
(in millions) 2024 2023
Net income before allocation to noncontrolling interests $ 64.8 $ 105.7
Components of other comprehensive (loss) income, net of tax
Currency translation adjustment ( 12.7
12.4
)
Changes in pension and postretirement plan assets and benefit obligation, net of tax 3.0 2.7
Other comprehensive income, net of tax ( 15.4
9.4
)
Comprehensive income before allocation to noncontrolling interests 55.4 121.1
Less: Noncontrolling interests in comprehensive income ( (
0.1 0.1
) )
Comprehensive income attributable to common shareholders $ 55.5 $ 121.2
See Notes to Condensed Consolidated Financial Statements.
4
-------------------------------------------------------------------------------
Table of Contents
CRANE COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in millions) March 31, December 31,
2024 2023
Assets
Current assets:
Cash and cash equivalents $ 219.4 $ 329.6
Accounts receivable, net of allowance for doubtful accounts of $ 356.3 306.4
8.4
as of March 31, 2024 and
December 31, 2023.
Inventories, net:
Finished goods 69.2 67.0
Finished parts and subassemblies 48.2 49.9
Work in process 54.0 40.6
Raw materials 212.4 195.6
Inventories, net 383.8 353.1
Other current assets 112.7 101.7
Total current assets 1,072.2 1,090.8
Property, plant and equipment:
Cost 772.6 776.3
Less: accumulated depreciation 498.3 505.8
Property, plant and equipment, net 274.3 270.5
Long-term deferred tax assets 2.5 2.7
Other assets 140.2 134.0
Intangible assets, net 137.6 87.9
Goodwill 791.6 747.7
Total assets $ 2,418.4 $ 2,333.6
See Notes to Condensed Consolidated Financial Statements.
5
-------------------------------------------------------------------------------
Table of Contents
CRANE COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in millions, except per share and share data) March 31, December 31,
2024 2023
Liabilities and equity
Current liabilities:
Short-term borrowings $ 110.0 $ -
Accounts payable 156.0 179.1
Accrued liabilities 214.4 273.7
U.S. and foreign taxes on income 12.4 14.3
Total current liabilities 492.8 467.1
Long-term debt, net 246.8 248.5
Accrued pension and postretirement benefits 110.7 115.0
Long-term deferred tax liability 48.6 37.1
Other liabilities 112.5 105.6
Total liabilities 1,011.4 973.3
Commitments and contingencies (Note 12)
Equity:
Common shares, par value $ 57.1 56.9
1.00
;
66,475,307
shares authorized;
57,111,810
and
56,919,443
shares issued and outstanding, respectively
Capital surplus 401.0 398.2
Retained earnings 1,013.8 960.7
Accumulated other comprehensive loss ( (
67.3 58.0
) )
Total shareholders' equity 1,404.6 1,357.8
Noncontrolling interests 2.4 2.5
Total equity 1,407.0 1,360.3
Total liabilities and equity $ 2,418.4 $ 2,333.6
See Notes to Condensed Consolidated Financial Statements.
6
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CRANE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
(in millions) 2024 2023
Operating activities:
Net income from continuing operations attributable to common shareholders $ 64.8 $ 55.9
Depreciation and amortization 12.9 9.2
Stock-based compensation expense 6.6 5.6
Defined benefit plans and postretirement cost 0.9 2.9
Deferred income taxes 0.1 1.6
Cash used for operating working capital ( (
162.4 184.6
) )
Defined benefit plans and postretirement contributions ( (
0.6 0.3
) )
Environmental payments, net of reimbursements ( (
1.4 1.3
) )
Other ( 5.6
0.8
)
Total used for operating activities from continuing operations ( (
79.9 105.4
) )
Investing activities:
Payment for acquisition - net of cash acquired ( -
105.6
)
Capital expenditures ( (
9.1 8.9
) )
Other investing activities 0.2 0.2
Total used for investing activities from continuing operations ( (
114.5 8.7
) )
Financing activities:
Dividends paid ( (
11.7 26.6
) )
Net (payments) proceeds related to employee stock plans ( 12.9
8.5
)
Debt issuance costs - (
4.1
)
Proceeds from long-term debt 140.0 -
Proceeds from term facility of discontinued operations - 350.0
Repayments of long-term debt ( (
31.9 400.0
) )
Total provided by (used for) financing activities from continuing and discontinued operations 87.9 (
67.8
)
Discontinued Operations:
Total provided by operating activities - 34.6
Total used for investing activities - (
4.1
)
Increase in cash and cash equivalents from discontinued operations - 30.5
Effect of exchange rates on cash and cash equivalents ( 4.0
3.7
)
Decrease in cash and cash equivalents ( (
110.2 147.4
) )
Cash and cash equivalents at beginning of period 329.6 657.6
(a)
Cash and cash equivalents at end of period 219.4 510.2
Less: Cash and cash equivalents of discontinued operations - 218.0
Cash and cash equivalents of continuing operations at end of period $ 219.4 $ 292.2
(a)
2023 Includes cash and cash equivalents of discontinued operations.
See Notes to Condensed Consolidated Financial Statements.
7
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CRANE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
(in millions) 2024 2023
Detail of cash used for operating working capital from continuing operations:
Accounts receivable $ ( $ (
46.3 43.4
) )
Inventories ( (
19.0 38.2
) )
Other current assets ( (
11.9 12.1
) )
Accounts payable ( (
23.5 27.8
) )
Accrued liabilities ( (
58.9 42.3
) )
U.S. and foreign taxes on income ( (
2.8 20.8
) )
Total $ ( $ (
162.4 184.6
) )
Supplemental disclosure of cash flow information:
Interest paid $ 5.8 $ 7.0
Income taxes paid $ 20.0 $ 33.6
See Notes to Condensed Consolidated Financial Statements.
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CRANE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)
(in millions, Common Capital Retained Accumulated Total Non-controlling Total
except share Shares Surplus Earnings Other Share- holders' Interest Equity
data) Issued at Comprehensive Equity
Par Value Loss
BALANCE 56.9 $ 398.2 $ 960.7 $ ( $ 1,357.8 $ 2.5 $ 1,360.3
DECEMBER 58.0
31, 2023 )
Net income - - 64.8 - 64.8 - 64.8
Cash - - ( - ( - (
dividends ($ 11.7 11.7 11.7
0.205 ) ) )
per share)
Exercise of 0.1 2.4 - - 2.5 - 2.5
stock options
Impact from settlement 0.1 ( - - ( - (
of share-based 11.1 11.0 11.0
awards, net of ) ) )
shares acquired
Impact from - 6.1 - - 6.1 - 6.1
settlement of
liability PRSUs
(Note 1)
Stock-based - 5.4 - - 5.4 - 5.4
compensation
expense
Changes in pension and - - - 3.0 3.0 - 3.0
postretirement plan
assets and benefit
obligation, net of tax
Currency - - - ( ( ( (
translation 12.3 12.3 0.1 12.4
adjustment ) ) ) )
BALANCE 57.1 $ 401.0 $ 1,013.8 $ ( $ 1,404.6 $ 2.4 $ 1,407.0
MARCH 67.3
31, 2024 )
(in millions, Common Capital Retained Accumulated Treasury Total Non-controlling Total
except share Shares Surplus Earnings Other Stock Share- Interest Equity
data) Issued at Comprehensive holders'
Par Value Loss Equity
BALANCE 72.4 $ 373.8 $ 2,822.8 $ ( $ ( $ 1,901.4 $ 2.6 $ 1,904.0
DECEMBER 503.3 864.3
31, 2022 ) )
Net income - - 105.7 - - 105.7 - 105.7
Cash - - ( - - ( - (
dividends ($ 26.6 26.6 26.6
0.47 ) ) )
per share)
Exercise of - - - - 19.8 19.8 - 19.8
stock options,
net of shares
reacquired of
297,539
shares
Impact from settlement - ( - - ( ( - (
of share-based 3.3 3.6 6.9 6.9
awards, net of ) ) ) )
shares acquired
Stock-based - 6.3 - - - 6.3 - 6.3
compensation
expense
Changes in pension and - - - 2.7 - 2.7 - 2.7
postretirement plan
assets and benefit
obligation, net of tax
Currency - - - 12.8 - 12.8 ( 12.7
translation 0.1
adjustment )
BALANCE 72.4 $ 376.8 $ 2,901.9 $ ( $ ( $ 2,015.2 $ 2.5 $ 2,017.7
MARCH 487.8 848.1
31, 2023 ) )
See Notes to Condensed Consolidated Financial Statements.
9
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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, 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.
Separation
On April 3, 2023, Crane Holdings, Co. completed a separation into two
independent, publicly-traded companies, Crane NXT, Co. and Crane Company (the
"Separation"), through a pro-rata distribution (the "Distribution") of all of
the outstanding common stock of Crane Company to the stockholders of Crane
Holdings, Co., which on April 3, 2023 was renamed "Crane NXT, Co." Therefore,
following the Separation, the historical consolidated financial statements of
Crane Company reflect the historical consolidated financial statements of
Crane Holdings, Co. with the Payment & Merchandising Technologies segment and
other distributed assets and liabilities classified as discontinued
operations. See Note 3 for additional information.
In connection with the Separation 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.
The Company had a receivable of $
0.1
million and $
2.2
million related to the transition services agreement and tax matters agreement
as of March 31, 2024 and December 31, 2023 respectively. Additionally, as part
of the Separation, to a limited extent, the Company has agreed to indemnify
Crane NXT, Co. for uncertain tax benefits, which are attributable to the
Company's business. Such total liability amounts are included in other
liabilities on our Consolidated Balance Sheets and were $
7.0
million as of March 31, 2024 and December 31, 2023.
Liability Performance-Based Restricted Share Units
As a result of the Separation, certain executives hold performance-based
restricted share units ("PRSUs") that have undergone an equity-to-liability
modification and are denominated in Crane NXT, Co. stock. As of March 31, 2024
and December 31, 2023, the liability balance was $
5.1
million and $
10.0
million, respectively.
Recent Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board ("FASB") issued
Accounting Standard Updates ("ASU") No. 2023-07,
Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures
. The amendments improve reportable segment disclosure requirements, primarily
through enhanced disclosures about significant segment expenses. In addition,
the amendments enhance interim disclosure requirements, clarify circumstances
in which an entity can disclose multiple segment measures of profit or loss,
provide new segment disclosure requirements for entities with a single
reportable segment, and contain other disclosure requirements. The amendments
in this ASU are effective for fiscal years beginning after December 15, 2023,
and interim periods within fiscal years beginning after December 15, 2024.
Early adoption is permitted. The amended guidance is required to be applied on
a retrospective basis to all periods presented. We are currently evaluating
this guidance to determine the impact on our disclosures.
In December 2023, FASB issued ASU No. 2023-09,
Income Taxes (Topic 740): Improvements to Income Tax Disclosures
. The amendments in this ASU require that public business entities disclose
specific categories in the rate reconciliation and provide additional
information for reconciling items that meet a quantitative threshold (if the
effect of those reconciling items is equal to or greater than 5 percent of the
amount computed by multiplying pretax income by the applicable statutory
income tax rate). The amendments in this ASU are effective for fiscal years
beginning after December 15, 2024. Early adoption is permitted. The amendments
in this Update should be applied on a prospective basis. We are currently
evaluating this guidance to determine the impact on our disclosures.
10
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company considered the applicability and impact of all ASUs issued by the
FASB and determined them to be either not applicable or are not expected to
have a material impact on the Company's Condensed Consolidated Statement of
Operations, Balance Sheets and Cash Flows.
Note 2 -
Acquisitions
Vian Acquisition
On January 2, 2024, the Company completed the acquisition of Vian Enterprises,
Inc. ("Vian") for $
102.5
million on a cash-free and debt-free basis, subject to a net working capital
adjustment and potential additional payments of up to $
7.5
million depending on the resolution of outstanding contingencies.
Vian is a global designer and manufacturer of multi-stage lubrication pumps
and lubrication system components technology for critical aerospace and
defense applications with sole-sourced and proprietary content on the
commercial and military aircraft platforms. Vian has been integrated into the
Aerospace & Electronics segment.
Allocation of Consideration Transferred to Net Assets Acquired
The following amounts represent the preliminary determination of the fair
value of identifiable assets acquired and liabilities assumed from our
acquisition of Vian. The final determination of the fair value of certain
assets and liabilities will be completed within the one-year measurement
period as required by ASC 805. We have not yet completed our evaluation and
determination of certain assets acquired and liabilities assumed. Any
potential adjustments made could be material in relation to the preliminary
values presented below:
Net assets acquired
(
in millions
)
Total current assets $ 21.0
Property, plant and equipment 6.8
Other assets 7.4
Intangible assets 54.4
Goodwill 48.5
Total assets acquired $ 138.1
Total current liabilities $ 6.2
Other liabilities 29.4
Total assumed liabilities $ 35.6
Net assets acquired $ 102.5
The amounts allocated to acquired intangible assets, and their associated
weighted-average useful lives which were determined based on the period in
which the assets are expected to contribute directly or indirectly to our
future cash flows, consist of the following:
Intangible Assets ( Intangible Fair Value Weighted Average Life (in years)
dollars in millions
)
Trademarks/trade names $ 2.0 17.0
Customer relationships 44.0 29.0
Manufacturing know-how 3.2 4.0
Backlog 5.2 1.0
Total acquired intangible assets $ 54.4
The fair values of the trade name and manufacturing know-how intangible assets
were determined by using an income approach, specifically the relief-from-royalt
y approach, which is a commonly accepted valuation approach. This approach is
based on the assumption that in lieu of ownership, a firm would be willing to
pay a royalty in order to exploit the related benefits of this asset.
Therefore, a portion of Vian's earnings, equal to the after-tax royalty that
would have been paid for the use of the asset, can be attributed to our
ownership. The trade name and manufacturing know-how are being amortized on a
straight-line basis (which approximates the economic pattern of benefits) over
the estimated economic life of
17
years and
4
years, respectively.
The fair values of the customer relationships and backlog intangible assets
were determined by using an income approach which is a commonly accepted
valuation approach. Under this approach, the net earnings attributable to the
asset or liability
11
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
being measured are isolated using the discounted projected net cash flows.
These projected cash flows are isolated from the projected cash flows of the
combined asset group over the remaining economic life of the intangible asset
or liability being measured. Both the amount and the duration of the cash
flows are considered from a market participant perspective. Our estimates of
market participant net cash flows considered historical and projected pricing,
operational performance including market participant synergies, aftermarket
retention, product life cycles, material and labor pricing, and other relevant
customer, contractual and market factors. Where appropriate, the net cash
flows were adjusted to reflect the potential attrition of existing customers
in the future, as existing customers are expected to decline over time. The
attrition-adjusted future cash flows are then discounted to present value
using an appropriate discount rate. The customer relationship and backlog
intangible assets are being amortized on a straight-line basis (which
approximates the economic pattern of benefits) over the estimated economic
life of
29
years and
1
year, respectively. The useful life of the customer relationship intangible
asset of
29
years is primarily driven by large customer relationships tied to
long-duration aircraft platforms.
Supplemental Pro Forma Data
Vian's results of operations have been included in our financial statements
for the period subsequent to the completion of the acquisition on January 2,
2024. Consolidated pro forma revenue and net income attributable to common
shareholders have not been presented since the impact is not material to our
financial results for the period.
BAUM Acquisition
On October 4, 2023, the Company completed the acquisition of Baum lined piping
GmbH ("BAUM") for $
93.5
million on a cash-free and debt-free basis. During the first quarter of 2024,
the Company paid $
3.1
million to the seller related to a final working capital adjustment.
Note 3 -
Discontinued Operations
As discussed in Note 1, Crane Company has reflected the historical
consolidated financial statements of Crane Holdings, Co. with the Payment &
Merchandising Technologies segment classified as discontinued operations.
Financial results from discontinued operations:
Three Months Ended
March 31,
(in millions) 2024 2023
Net sales $ - $ 329.1
Cost of sales - 174.4
Selling, general and administrative - 80.0
Operating profit - 74.7
Other expense, net - (
12.2
)
Net income from discontinued operations before income taxes - 62.5
Provision for income taxes - 12.7
Income from discontinued operations, net of tax $ - $ 49.8
12
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 4 -
Segment Results
Our segments are reported on the same basis used internally for evaluating
performance and for allocating resources. As of March 31, 2024, we had
three
reportable segments: Aerospace & Electronics, Process Flow Technologies, and
Engineered Materials. Assets of the reportable segments exclude general
corporate assets, which principally consist of cash, deferred tax assets,
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 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 systems, reliable components, and flexible power solutions that excel
in tough and mission-critical environments. Products and services are
organized into integrated solutions: Sensing Components & Systems, Electrical
Power Solutions, Fluid Management Solutions, Landing & Control Systems, and
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,
Pumps and Systems and Commercial Valves. Process Valves and Related Products
include on/off valves and related products for critical and demanding
applications primary focused on chemical, pharmaceutical and general
industrial end markets. Commercial Valves includes the manufacturing of valves
and related products for the non-residential construction, gas utility and
municipal markets. Pumps and Systems include pumps and related products
primarily for water and wastewater applications in the industrial, municipal
and commercial markets.
Engineered Materials
The Engineered Materials segment manufactures fiberglass-reinforced plastic
("FRP") panels and coils, primarily for use in the manufacturing of
recreational vehicles, truck bodies and trailers (Transportation), with
additional applications in commercial and industrial buildings (Building
Products).
13
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Financial information by reportable segment is set forth below.
Three Months Ended
March 31,
(in millions) 2024 2023
Net sales:
Aerospace & Electronics $ 225.9 $ 180.1
Process Flow Technologies 284.3 271.4
Engineered Materials 55.1 62.3
Total $ 565.3 $ 513.8
Operating profit:
Aerospace & Electronics $ 48.3 $ 37.7
Process Flow Technologies 56.9 63.3
Engineered Materials 8.1 11.4
Corporate ( (
23.9 34.9
) )
Total $ 89.4 $ 77.5
Interest income 1.2 0.9
Interest expense ( (
7.2 6.6
) )
Miscellaneous expense, net ( (
1.3 0.5
) )
Income from continuing operations before income taxes $ 82.1 $ 71.3
(in millions) March 31, 2024 December 31, 2023
Assets:
Aerospace & Electronics $ 917.2 $ 744.6
Process Flow Technologies 1,162.4 1,164.5
Engineered Materials 226.9 191.8
Corporate 111.9 232.7
Total $ 2,418.4 $ 2,333.6
(in millions) March 31, 2024 December 31, 2023
Goodwill:
Aerospace & Electronics $ 250.8 $ 202.4
Process Flow Technologies 369.5 374.0
Engineered Materials 171.3 171.3
Total $ 791.6 $ 747.7
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 5 -
Revenue
Disaggregation of Revenues
The following table presents net sales disaggregated by product line for each
segment:
Three Months Ended
March 31,
(in millions) 2024 2023
Aerospace & Electronics
Commercial Original Equipment $ 85.5 $ 68.4
Military and Other Original Equipment 71.4 61.9
Commercial Aftermarket Products 50.7 37.9
Military Aftermarket Products 18.3 11.9
Total Aerospace & Electronics $ 225.9 $ 180.1
Process Flow Technologies
Process Valves and Related Products $ 214.0 $ 202.9
Commercial Valves 32.9 30.6
Pumps and Systems 37.4 37.9
Total Process Flow Technologies $ 284.3 $ 271.4
Engineered Materials
FRP - Recreational Vehicles $ 19.1 $ 20.3
FRP - Building Products 28.8 32.3
FRP - Transportation 7.2 9.7
Total Engineered Materials $ 55.1 $ 62.3
Net sales $ 565.3 $ 513.8
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 March 31, 2024,
total backlog was $
1,197.9
million. We expect to recognize approximately
76
% of our remaining performance obligations as revenue in 2024, an additional
20
% in 2025 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-cont
ract net basis at the end of each reporting period.
Net contract assets and contract liabilities consisted of the following:
(in millions) March 31, 2024 December 31, 2023
Contract assets $ 73.4 $ 63.5
Contract liabilities $ 52.1 $ 56.2
We recognized revenue of $
13.7
million during the three months ended March 31, 2024, related to contract
liabilities as of December 31, 2023.
15
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 6 -
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
March 31,
(in millions, except per share data) 2024 2023
Net income from continuing operations attributable to common shareholders $ 64.8 $ 55.9
Income from discontinued operations, net of tax (Note 3) - 49.8
Net income attributable to common shareholders $ 64.8 $ 105.7
Average basic shares outstanding 57.0 56.5
Effect of dilutive share-based awards 1.1 0.8
Average diluted shares outstanding 58.1 57.3
Earnings per basic share:
Earnings per basic share from continuing operations $ 1.14 $ 0.99
Earnings per basic share from discontinued operations - 0.88
Earnings per basic share $ 1.14 $ 1.87
Earnings per diluted share:
Earnings per diluted share from continuing operations $ 1.12 $ 0.98
Earnings per diluted share from discontinued operations - 0.86
Earnings per diluted share $ 1.12 $ 1.84
Stock options, restricted share units, deferred stock units and performance-base
d restricted share units that were excluded from the calculation of diluted
earnings per share because their effect is antidilutive was
0.2
million and
0.4
million for the three months ended March 31, 2024, and 2023, respectively.
16
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 7 -
Changes in Accumulated Other Comprehensive Loss
The table below provides the accumulated balances for each classification of
accumulated other comprehensive loss, as reflected on our Condensed
Consolidated Balance Sheets.
(in millions) Defined Benefit Pension Currency Translation Adjustment Total
and Postretirement Items (a)
Balance as of $ ( $ 212.8 $ (
December 31, 2023 270.8 58.0
) )
Other comprehensive income - ( (
before reclassifications 12.3 12.3
) )
Amounts reclassified from accumulated 3.0 - 3.0
other comprehensive loss
Net period other 3.0 ( (
comprehensive income 12.3 9.3
) )
Balance as of $ ( $ 200.5 $ (
March 31, 2024 267.8 67.3
) )
(a)
Net of tax benefit of $
102.2
million and $
103.0
million as of March 31, 2024 and December 31, 2023, respectively.
The table below illustrates the amounts reclassified out of each component of
accumulated other comprehensive loss for the three months ended March 31, 2024
and 2023. Amortization of pension and postretirement components has been
recorded within "Miscellaneous expense, net" on our Condensed Consolidated
Statements of Operations.
Three Months Ended March 31,
(in millions) 2024 2023
Amortization of pension items:
Prior service costs $ 0.2 $ -
Net loss 3.8 3.8
Amortization of postretirement items:
Prior service benefit - (
(a) 0.2
)
Net gain ( (
(b) 0.1 0.2
) )
Total before tax $ 3.9 $ 3.4
Tax impact 0.9 0.7
Total reclassifications for the period $ 3.0 $ 2.7
(a)
Includes benefit from discontinued operations of $
0.2
million in 2023.
(b)
Includes net activity from discontinued operations of $
0.2
million in 2023.
17
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 8 -
Defined Benefit and Postretirement Benefits
For all plans, the components of net periodic benefit for the three months
ended March 31, 2024, and 2023 are as follows:
Pension Postretirement
(in millions) 2024 2023 2024 2023
Service cost $ 0.9 $ 0.9 $ - $ -
Interest cost 8.6 8.9 - -
Expected return on plan assets ( ( - -
12.5 11.4
) )
Amortization of prior service cost 0.2 0.2 - -
Amortization of net loss (gain) 3.8 3.8 ( -
0.1
)
Curtailment and Settlement loss from discontinued operations - 2.9 - -
Net periodic loss (benefit) $ 1.0 $ 5.3 $ ( $ -
0.1
)
The components of net periodic benefit, other than the service cost component,
are included in "Miscellaneous expense, 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 2024 $ 17.9 $ 0.4
Amounts contributed during the three months ended March 31, 2024 $ 0.5 $ 0.1
18
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 9 -
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 periods presented.
Our effective tax rates are as follows:
Three Months Ended March 31,
2024 2023
Effective Tax Rate 21.0 21.6
% %
Our effective tax rate for the three months ended March 31, 2024, is slightly
lower than the prior year's comparable period primarily due to lower non-U.S.
taxes and lower statutorily non-deductible costs.
Our effective tax rate for the three months ended March 31, 2024, is equal to
the statutory U.S. federal tax rate of 21%. The effective tax rate is the
result of permanent increases and decreases that net against each other and
offset. These increases and decreases include 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.
Unrecognized Tax Benefits
During the three months ended March 31, 2024, our gross unrecognized tax
benefits, excluding interest and penalties, increased by $
0.5
million, primarily due to increases in tax positions taken in the current and
prior periods. During the three months ended March 31, 2024, the total amount
of unrecognized tax benefits that, if recognized, would cause our effective
tax rate to increase by $
0.7
million. 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 months ended March 31, 2024, we recognized $
0.2
million of interest and penalty expense related to unrecognized tax benefits
in our Condensed Consolidated Statement of Operations. As of March 31, 2024
and December 31, 2023, the total amount of accrued interest and penalty
expense related to unrecognized tax benefits recorded in our Condensed
Consolidated Balance Sheets was $
2.4
million and $
2.2
million, respectively.
During the next twelve months, it is reasonably possible that our unrecognized
tax benefits may decrease by
$
0.3
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.
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 10 -
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
March 31, 2024, we had
four
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 Engineered Materials Total
Balance as of December 31, 2023 $ 202.4 $ 374.0 $ 171.3 $ 747.7
Acquisition 48.5 - - 48.5
(a)
Currency translation ( ( - (
0.1 4.5 4.6
) ) )
Balance as of March 31, 2024 $ 250.8 $ 369.5 $ 171.3 $ 791.6
(a)
For the period ended March 31, 2024, adjustments within the Aerospace &
Electronics segment of $
48.5
million relate to the acquisition of Vian. See Note 2 for further information.
As of March 31, 2024, we had $
137.6
million of net intangible assets, of which $
21.9
million were intangibles with indefinite useful lives. As of December 31,
2023, we had $
87.9
million of net intangible assets, of which $
22.1
million were intangibles with indefinite useful lives.
Changes to intangible assets are as follows:
(in millions) Three Months Ended Year Ended December 31, 2023
March 31, 2024
Balance at beginning of period, net of accumulated amortization $ 87.9 $ 71.7
Additions 54.4 21.1
(a)
Amortization expense ( (
3.9 6.3
) )
Currency translation and other ( 1.4
0.8
)
Balance at end of period, net of accumulated amortization $ 137.6 $ 87.9
(a)
For the period ended March 31, 2024, additions of $
54.4
million relate to the acquisition of Vian. See Note 2 for further information.
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
A summary of intangible assets are as follows:
March 31, 2024 December 31, 2023
( Weighted Average Gross Accumulated Net Gross Accumulated Net
dollars in Amortization Asset Amortization Asset Amortization
millions Period of Definite
) Lived Assets
(in years)
Intellectual 17.2 $ 77.5 $ 45.7 $ 31.8 $ 72.6 $ 45.4 $ 27.2
property
rights
Customer 21.9 201.8 97.7 104.1 152.9 93.9 59.0
relationships
and backlog
Drawings 40.0 11.1 10.8 0.3 11.1 10.8 0.3
Other 25.8 42.6 41.2 1.4 42.7 41.3 1.4
Total 22.3 $ 333.0 $ 195.4 $ 137.6 $ 279.3 $ 191.4 $ 87.9
Future amortization expense associated with intangible assets is expected to be:
(in millions)
Remainder of 2024 $ 11.4
2025 9.3
2026 9.3
2027 8.5
2028 7.3
2029 and after 69.9
Note 11 -
Accrued Liabilities
Accrued liabilities consist of:
(in millions) March 31, December 31,
2024 2023
Employee related expenses $ 66.0 $ 115.3
Current lease liabilities 11.9 10.8
Contract liabilities 52.1 56.2
Other 84.4 91.4
Total $ 214.4 $ 273.7
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 12 -
Commitments and 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
March 31, 2024 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 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 has agreed to indemnify Redco
and Redco Buyer against the Goodyear, Roseland, and Crab Orchard environmental
liabilities. Thus, references below in this Note 12 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 Crane 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 at the Goodyear Site from 1962 to
1993, under 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 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 remediation of the PGA North Site comprises
two main remedial components: a plume management and remediation system (in
accordance with the requirements of the 2006 Consent Decree) and source area
remediation (to comply with the requirements of the 2014 ROD Amendment). The
2019 conceptual agreement and modified remedial approach focused on enhanced
extraction of contaminated groundwater and targeted reinjection of treated
groundwater and was designed to accelerate remedial progress at the site. The
modified remedial approach required certain capital investments and
infrastructure upgrades across the broader plume area, with the final
components of this approach commissioned in 2022. In addition, the modified
source area treatment remedy was commissioned in late 2023. As part of our
approved remedial plans, the Company is required to conduct periodic
groundwater monitoring to demonstrate the effectiveness of these system
enhancements and provide the EPA with a report evaluating remedial
performance, restoration time frames and potential inefficiencies (which may
warrant further system upgrade or modifications). The year 2027 was
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
selected as a milestone to enable the collection of 3 to 4 years of
post-commissioning data, analysis of data and submission of a performance
monitoring report to the EPA with recommendations. This report will document
the project restoration time frames for groundwater and outline the future
operational scheme, including the key milestones for transitioning from active
groundwater treatment to monitoring only. This report will be submitted to the
EPA for approval and in combination with regulatory discussions and
consultations, will provide clarity on future remedial requirements at the
site and associated costs. The total estimated gross liability was $
19.4
million and $
20.7
million as of March 31, 2024 and December 31, 2023, 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 as of March 31, 2024 and December 31, 2023, 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, 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 March 31, 2024 and December 31, 2023, we recorded a
receivable of $
3.8
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
Roseland, NJ Site
The Roseland Site was operated by Resistoflex Corporation ("Resistoflex"),
which became an indirect subsidiary in 1985 when Crane 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 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 portions of the Crab Orchard
Site, which include areas where Unidynamics 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 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 in performing its obligations under the AOC, 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 since 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-
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OTS has also reached agreements with the U.S. Government and 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. Further, we have reached a preliminary
agreement in principle with GD-OTS on our contribution to the United States'
claimed past response costs, for an immaterial amount, also conditioned on
consummation of the consent decree, and further conditioned on a separate
agreement to memorialize the parties' agreement with respect to the United
States' response costs. At present, we cannot predict whether
or when
these negotiations will result in definitive agreements. Negotiations remain
ongoing between us and GD-OTS regarding a potential resolution of GD-OTS'
claim for costs that it has incurred and expects to incur in performing its
obligations under the AOC. We at present cannot predict when any determination
of the ultimate allocable share of GD-OTS 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.
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, including government
contracting violations, 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 March 31, 2024, 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.
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 13 -
Financing
Our debt consisted of the following:
(in millions) March 31, December 31,
2024 2023
Revolving facility $ 110.0 $ -
Total short-term borrowings $ 110.0 $ -
Term Facility $ 246.8 $ 248.5
(a)
Total long-term debt $ 246.8 $ 248.5
(a)
Debt issuance costs totaled $
0.7
million and $
0.8
million as of March 31, 2024 and December 31, 2023, 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 senior secured credit agreement
(the "Credit Agreement"), which provided for (i) a $
500
million,
5
-year revolving credit facility (the "Revolving Facility") and (ii) a $
300
million,
3
-year term loan facility (the "Term Facility"), funding under each of which
became available in connection with the Separation. On April 3, 2023, the
Company borrowed the full amount of the Term Facility.
On October 3, 2023, the Company exercised a portion of the accordion feature
under its existing revolving credit facility to increase the available
borrowing capacity from $
500
million, to $
800
million. The corresponding amendment established incremental revolving
commitments in an aggregate amount of $
300
million and refreshed the incremental capacity under the Company's existing
credit agreement.
The
Company made principal prepayments of $
1.9
million on the Term Facility during the three months ended March 31, 2024. The
Company had net borrowings of $
110.0
million under the Revolving Facility during the first quarter of 2024,
primarily to fund the Vian acquisition and for general corporate and working
capital purposes.
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 Company was in compliance with all such
covenants as of
March 31, 2024.
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. During the first quarter of 2023, the Company repaid the remaining
principal of $
400
million under the
364
-Day Credit Agreement.
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 14 -
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.
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 $
19.0
million and $
11.3
million as of March 31, 2024 and December 31, 2023, 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 was $
0.1
million as of March 31, 2024 and December 31, 2023, respectively. Such
derivative liability amounts are recorded within "Accrued liabilities" on our
Condensed Consolidated Balance Sheets and were $
0.2
million and $
0.1
million as of March 31, 2024 and December 31, 2023, respectively.
Note 15 -
Restructuring
Overview
In the fourth quarter of 2022, in response to economic uncertainty, we
initiated modest workforce reductions of approximately
160
employees, or about
2
% of our global workforce. We expect to complete the program in the fourth
quarter of 2024.
Our restructuring liability was $
2.4
million and $
4.7
million, as of March 31, 2024 and December 31, 2023, respectively.
Note 16 -
Subsequent Events
Effective May 1, 2024, the Company completed the acquisition of
CryoWorks, Inc.
("
CryoWorks
") for $
61
million on a cash-free and debt-free basis, subject to a net working capital
adjustment.
On April 29, 2024, we borrowed approximately $
50
million under the Company's existing Revolving Facility to fund the CryoWorks
acquisition. Cr
yoWorks is a
leading supplier of vacuum insulated pipe systems for hydrogen and cryogenic
applications
. CryoWorks will be included in the Process Flow Technologies segment.
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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 Company
some of which includes "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
are statements other than historical information or statements about our
current condition. You can identify forward-looking statements by the use of
terms such as "believes," "contemplates," "expects," "may," "could," "should,"
"would," or "anticipates," other similar phrases, or the negatives of these
terms.
Reference herein to "Crane," "the Company," "we," "us" and "our" refer to
Crane Company and its subsidiaries unless the context specifically states or
implies otherwise. References to "core business" or "core sales" in this
report include sales from acquired businesses starting from and after the
first anniversary of the acquisition but exclude currency effects. Amounts in
the following discussion are presented in millions, except employee, share and
per share data, or unless otherwise stated.
We have based the forward-looking statements relating to our operations on our
current expectations, estimates and projections about us and the markets we
serve. We caution you that these statements are not guarantees of future
performance and involve risks and uncertainties. These statements should be
considered in conjunction with the discussion in Part I, the information set
forth under Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the
year ended December 31, 2023. We have based many of these forward-looking
statements on assumptions about future events that may prove to be inaccurate.
Accordingly, our actual outcomes and results may differ materially from what
we have expressed or forecast in the forward-looking statements. Any
differences could result from a variety of factors, including the following:
.
The effect of changes in economic conditions in the markets in which we
operate, including financial market conditions, end markets for our products,
fluctuations in raw material prices, inflationary pressures, supply chain
disruptions and access to key raw materials, higher interest rates and the
financial condition of our customers and suppliers;
.
Economic, social and political instability, currency fluctuation and other
risks of doing business outside of the United States;
.
The impact of commercial air traffic levels which are affected by a different
array of factors including general economic conditions and global corporate
travel spending, or terrorism;
.
Competitive pressures, including the need for technology improvement,
successful new product development and introduction and any inability to pass
increased costs of raw materials to customers;
.
Our ongoing need to attract and retain highly qualified personnel and key
management;
.
Our ability to successfully identify, value and integrate acquisitions and to
realize synergies and opportunities for growth and innovation;
.
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;
.
Our ability to achieve some or all the benefits that we expect to achieve from
our business separation;
.
The ability of the U.S. government to terminate our government contracts;
.
The impact of governmental regulations and failure to comply with those
regulations;
.
A reduction in congressional appropriations that affect defense spending;
.
The outcomes of legal proceedings, claims and contract disputes;
.
Adverse effects as a result of further increases in environmental remediation
activities, costs and related claims;
.
Investment performance of our pension plan assets and fluctuations in interest
rates, which may affect the amount and timing of future pension plan
contributions; and
.
Adverse effects of changes in tax, environmental and other laws and
regulations in the United States and other countries in which we operate.
27
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Recent Transactions
CryoWorks Acquisition
Effective May 1, 2024, the Company completed the acquisition of CryoWorks,
Inc. ("CryoWorks") for $61 million on a cash-free and debt-free basis, subject
to a net working capital adjustment. On April 29, 2024, we borrowed
approximately $50 million under the Company's existing Revolving Facility to
fund the Cryoworks acquisition. CryoWorks is a leading supplier of vacuum
insulated pipe systems for hydrogen and cryogenic applications. CryoWorks will
be included in the Process Flow Technologies segment.
Outlook
Our sales depend heavily on industries that are cyclical in nature or are
subject to market conditions, which may cause customer demand for our products
to be volatile and unpredictable. Demand in these industries is affected by
fluctuations in domestic and international economic conditions, as well as
currency fluctuations, commodity costs, and a variety of other factors.
For 2024, we expect a total year-over-year sales increase of approximately
10%, driven by approximately 4% to 6% core growth, and approximately 5% sales
contribution from the Baum lined piping GmbH, Vian Enterprises, Inc. and
CryoWorks, Inc. acquisitions. We expect an improvement in operating profit
driven primarily by lower transaction related expenses, productivity benefits,
operating leverages on higher volumes, higher pricing net of inflation and
contributions from acquisitions, partially offset by unfavorable mix.
Aerospace & Electronics
In 2024, we expect Aerospace & Electronics sales to increase in the mid-teens
range compared to 2023, driven by approximately 12% core sales and a 4% to 5%
contribution from the Vian Enterprises, Inc. acquisition. We expect a
substantial improvement in our commercial OEM business driven by higher
aircraft build rates, and we expect an improvement in our commercial
aftermarket business given continued recovery in airline flight hours. We
expect our defense OEM sales to grow slightly, but the defense aftermarket
businesses are expected to grow significantly given continued global
geopolitical uncertainty which is driving increased demand to replace legacy
product sales. We expect segment operating profit and operating margin to
increase compared to 2023 driven primarily by the impact of operating leverage
on higher volumes, pricing and productivity benefits.
Process Flow Technologies
In 2024, we expect Process Flow Technologies sales to increase approximately
7% driven by contribution from the Baum lined piping GmbH and CryoWorks, Inc.
acquisitions, with core sales increasing approximately 1%.
We expect Process Valves and Related Products sales to increase in the mid to
high single digit range compared to 2023, driven by mid- to high-single digit
contribution from acquisitions, with core sales approximately flat. We expect
Commercial Valves sales to increase in the low- to mid-single digit range, and
we expect Pumps and Systems sales to increase in the mid- to high-single digit
range compared to 2023, driven by strong demand across municipal and
non-residential U.S. end markets. We expect an improvement in segment
operating profit and operating margin compared to 2023, driven primarily by
productivity and higher pricing net of inflation, partially offset by lower
volumes and unfavorable mix.
Engineered Materials
In 2024, we expect Engineered materials sales to be flat compared to 2023,
with a modest increase in sales to the Recreational Vehicle market, offset by
a decline in sales to the Transportation market.
We expect operating profit and operating margin to be approximately flat
compared to 2023.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results from Continuing Operations - Three Months Ended March 31,
The following information should be read in conjunction with our condensed
consolidated financial statements and related notes. All comparisons below
refer to the first quarter 2024 versus the first quarter 2023, unless
otherwise specified.
First Quarter Favorable/(Unfavorable) Change
(dollars in millions) 2024 2023 $ %
(1)
Net sales $ 565.3 $ 513.8 $ 51.5 10.0 %
Cost of sales 344.8 306.9 (37.9) (12.3) %
as a percentage of sales 61.0 % 59.7 %
Selling, general 131.1 129.4 (1.7) (1.3) %
and administrative
as a percentage of sales 23.2 % 25.2 %
Operating profit 89.4 77.5 11.9 15.4 %
Operating margin 15.8 % 15.1 %
Other income (expense):
Interest income 1.2 0.9 0.3 33.3 %
Interest expense (7.2) (6.6) (0.6) (9.1) %
Miscellaneous expense, net (1.3) (0.5) (0.8) NM
Total other (7.3) (6.2) (1.1) (17.7) %
expense, net
Income from continuing 82.1 71.3 10.8 15.1 %
operations before income taxes
Provision for 17.3 15.4 (1.9) (12.3) %
income taxes
Net income from continuing operations $ 64.8 $ 55.9 $ 8.9 15.9 %
attributable to common shareholders
(1)
Variances designated as "NM" indicates such calculation is not meaningful.
Sales increased by
$51.5 million, or 10.0%, to $565.3 million in 2024. The period-over-period
change in sales included:
.
an increase in sales related to the BAUM and Vian acquisitions of $25.8
million, or 5.0%;
.
an increase in core sales of $24.1 million, or 4.7%, which was driven
primarily by higher pricing; and
.
favorable foreign currency translation of $1.6 million.
Cost of sales increased by $37.9 million, or 12.3%, to $344.8 million in 2024.
The increase is primarily related to higher material, labor and other
manufacturing costs of $30.8 million, or 10.0%, driven by the higher sales,
coupled with the impact from the BAUM and Vian acquisitions of $21.9 million,
or 7.1%, partially offset by strong productivity gains and favorable mix of
$16.7 million, or 5.4%.
Selling, general and administrative expenses increased by $1.7 million, or
1.3%, to $131.1 million in 2024, which was primarily driven by the impact from
the BAUM and Vian acquisitions.
Operating profit increased by $11.9 million, or 15.4%, to $89.4 million in
2024. The increase is primarily due to strong productivity gains of $13.2
million, or 17.0%, coupled with favorable mix and higher volumes of $8.4
million, or 10.8%, partially offset by higher material, labor and other
manufacturing costs net of higher pricing of $10.4 million, or 13.4%.
Our effective tax rate for the three months ended March 31, 2024, is slightly
lower than the prior year's comparable period primarily due to lower non-U.S.
taxes and lower statutorily non-deductible transaction costs.
Our effective tax rate for the three months ended March 31, 2024, is equal to
the statutory U.S. federal tax rate of 21%. The effective tax rate is the
result of permanent increases and decreases that net against each other and
offset. These increases and decreases include 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.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Comprehensive Income
Three Months Ended
March 31,
(in millions) 2024 2023
Net income before allocation to noncontrolling interests $ 64.8 $ 105.7
Components of other comprehensive (loss) income, net of tax
Currency translation adjustment (12.4) 12.7
Changes in pension and postretirement plan assets and benefit obligation, net of tax 3.0 2.7
Other comprehensive (loss) income, net of tax (9.4) 15.4
Comprehensive income before allocation to noncontrolling interests 55.4 121.1
Less: Noncontrolling interests in comprehensive income (0.1) (0.1)
Comprehensive income attributable to common shareholders $ 55.5 $ 121.2
For the three months ended March 31, 2024, comprehensive income before
allocation to noncontrolling interests was $55.4 million compared to $121.1
million in the same period of 2023. The $65.7 million decrease was primarily
driven by lower net income before allocation to noncontrolling interests of
$40.9 million, reflecting absence of income from discontinued operations in
2024 compared to 2023, and a $25.1 million year-over-year unfavorable impact
of foreign currency translation, primarily related to the British pound and
euro.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Segment Results of Operations - Three Months Ended March 31,
Aerospace & Electronics
First Quarter Favorable/(Unfavorable) Change
(dollars in millions) 2024 2023 $ %
Net sales by product line:
Commercial Original Equipment $ 85.5 $ 68.4 $ 17.1 25.0 %
Military Original Equipment 71.4 61.9 9.5 15.3 %
Commercial Aftermarket Products 50.7 37.9 12.8 33.8 %
Military Aftermarket Products 18.3 11.9 6.4 53.8 %
Total net sales $ 225.9 $ 180.1 $ 45.8 25.4 %
Cost of sales $ 141.7 $ 111.0 $ (30.7) (27.7) %
as a percentage of sales 62.7 % 61.6 %
Selling, general and administrative $ 35.9 $ 31.4 $ (4.5) (14.3) %
as a percentage of sales 15.9 % 17.4 %
Operating profit $ 48.3 $ 37.7 $ 10.6 28.1 %
Operating margin 21.4 % 20.9 %
Supplemental Data:
Backlog $ 791.8 $ 644.8 $ 147.0 22.8 %
(a)
(a) Includes $53.5 million of backlog as of March 31, 2024, pertaining to the
Vian acquisition.
Sales increased $45.8 million, or 25.4%, to $225.9 million in 2024, primarily
due to higher volumes and pricing of $36.7 million, or 20.4%, and the impact
of the Vian acquisition of $9.0 million, or 5.0%.
.
Sales of Commercial Original Equipment increased $17.1 million, or 25.0%, to
$85.5 million in 2024, reflecting strong demand from aircraft manufacturers as
the industry aircraft build rates continue to recover from the COVID-19
related slowdown, partially offset by component availability constraints.
.
Sales of Military Original Equipment increased $9.5 million, or 15.3%, to
$71.4 million in 2024, primarily reflecting strong demand from defense
customers.
.
Sales of Commercial Aftermarket Products increased $12.8 million, or 33.8%, to
$50.7 million in 2024, reflecting continued strong demand from the airlines
due to improving air traffic and inventory restocking.
.
Sales of Military Aftermarket Products increased $6.4 million, or 53.8%, to
$18.3 million in 2024, reflecting stronger demand for military products in
response to heightened geopolitical tensions, globally.
Cost of sales increased by $30.7 million, or 27.7%, to $141.7 million in 2024,
primarily reflecting higher material and other manufacturing costs of $19.3
million, or 17.4%, increased volumes of $12.4 million, or 11.2%, the impact
from the Vian acquisition of $9.4 million, or 8.5%, partially offset by
productivity gains of $5.3 million, or 4.8%, and favorable mix of $5.1
million, or 4.6%.
Selling, general and administrative expenses increased $4.5 million, or 14.3%,
to $35.9 million, primarily related to higher administrative costs of $4.0
million, or 12.7%.
Operating profit increased by $10.6 million, or 28.1%, to $48.3 million in
2024. The increase primarily reflected the impact from higher volumes of $14.0
million, or 37.1%, coupled with productivity gains and favorable mix of $10.9
million, or 28.9%, partially offset by higher material, labor and other
manufacturing costs net of higher pricing of $12.9 million, or 34.2%.
31
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Process Flow Technologies
First Quarter Favorable/(Unfavorable) Change
(dollars in millions) 2024 2023 $ %
Net sales by product line:
Process Valves and Related Products $ 214.0 $ 202.9 $ 11.1 5.5 %
Commercial Valves 32.9 30.6 2.3 7.5 %
Pumps and Systems 37.4 37.9 (0.5) (1.3) %
Total net sales $ 284.3 $ 271.4 $ 12.9 4.8 %
Cost of sales $ 161.7 $ 150.1 $ (11.6) (7.7) %
as a percentage of sales 56.9 % 55.3 %
Selling, general and administrative $ 65.7 $ 58.0 $ (7.7) (13.3) %
as a percentage of sales 23.1 % 21.4 %
Operating profit $ 56.9 $ 63.3 $ (6.4) (10.1) %
Operating margin 20.0 % 23.3 %
Supplemental Data:
Backlog $ 393.3 $ 363.0 $ 30.3 8.3 %
(a)
(a) Includes $8.3 million of backlog as of March 31, 2024, pertaining to the
Baum acquisition.
Sales increased by $12.9 million, or 4.8%, to $284.3 million in 2024,
primarily driven by the impact of the BAUM acquisition of $16.8 million, or
6.2% and favorable foreign currency translation of $1.5 million, or 0.6%,
partially offset by lower core sales of $5.4 million, or 2.0%. Lower core
sales were driven by lower volumes.
.
Sales of Process Valves and Related Products increased by $11.1 million, or
5.5%, to $214.0 million in 2024, primarily driven by the impact of the BAUM
acquisition, partially offset by lower core sales.
.
Sales of Commercial Valves increased by $2.3 million, or 7.5%, to $32.9
million in 2024, reflecting an impact from favorable foreign currency
translation and a modest increase in core sales.
Cost of sales increased by $11.6 million, or 7.7%, to $161.7 million,
primarily related to the impact of the BAUM acquisition of $12.6 million,
or 8.4%, higher
material, labor and other manufacturing costs of $10.9 million, or 7.3%, and
unfavorable
foreign currency translation of $1.0 million, or 1%,
partially offset by
the impact of lower volumes of $7.6 million, or 5.1%, and net productivity
gains of $5.1 million, or 3.4%.
Selling, general and administrative expenses increased by $7.7 million, or
13.3%, to $65.7 million, primarily related to higher selling and administrative
costs of $7.5 million, or 12.9%, partially driven by the impact of the BAUM
acquisition.
Operating profit decreas
ed by $6.4 million, or 10.1%, to $56.9 million in 2024.
The decrease is primarily due to lower volumes, higher
selling, administrative and manufacturing costs
, and unfavorable mix of $15.3 million, or 24.2%, partially offset by
productivity gains of $6.8 million, or 10.7%, the net impact from the Baum
acquisition of $1.2 million, or 1.9% and other savings of $0.8 million, or
1.2%.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Engineered Materials
First Quarter Favorable/(Unfavorable) Change
(dollars in millions) 2024 2023 $ %
Net sales by product line:
FRP - Recreational Vehicles $ 19.1 $ 20.3 $ (1.2) (5.9) %
FRP - Building Products 28.8 32.3 (3.5) (10.8) %
FRP - Transportation 7.2 9.7 (2.5) (25.8) %
Total net sales $ 55.1 $ 62.3 $ (7.2) (11.6) %
Cost of sales $ 41.4 $ 45.8 $ 4.4 9.6 %
as a percentage of sales 75.1 % 73.5 %
Selling, general and administrative $ 5.6 $ 5.1 $ (0.5) (9.8) %
as a percentage of sales 10.2 % 8.2 %
Operating profit $ 8.1 $ 11.4 $ (3.3) (28.9) %
Operating margin 14.7 % 18.3 %
Supplemental Data:
Backlog $ 12.8 $ 16.8 $ (4.0) (23.8) %
Sales decreased $7.2 million, or 11.6%, to $55.1 million in 2024, primarily
reflecting lower volumes of $6.0 million, or 9.6%. The decrease was primarily
driven by lower sales in Building Products and Transportation end markets.
Cost of sales decreased $4.4 million, or 9.6%, to $41.4 million in 2024,
primarily related to lower volumes of $3.8 million, or 8.3%.
Operating profit decreased by $3.3 million, or 28.9%, to $8.1 million in 2024,
primarily reflecting the impact from lower volumes.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Liquidity and Capital Resources
Three Months Ended
March 31,
(in millions) 2024 2023
Net cash (used for) provided by:
Operating activities from continuing operations $ (79.9) $ (105.4)
Investing activities from continuing operations (114.5) (8.7)
Financing activities 87.9 (67.8)
Discontinued operations - 30.5
Effect of exchange rates on cash and cash equivalents (3.7) 4.0
Decrease in cash and cash equivalents $ (110.2) $ (147.4)
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 and borrowing capacity 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 expected pension contributions.
We have available borrowing capacity of $800 million under a 5-year revolving
credit facility ("Revolving Facility") through March 2028 and a $300 million,
3-year term loan facility ("Term Facility") through March 2026. At March 31,
2024, there was $247 million outstanding under the Term Facility and $110
million outstanding under the Revolving Facility. For more information
regarding our borrowings under the Revolving Facility in connection with our
acquisition of CryoWorks, see "Recent Transactions - CryoWorks Acquisition"
above.
Operating Activities
Cash used for operating activities from continuing operations was $79.9
million in the first three months of 2024, as compared to $105.4 million
during the same period last year. The decrease in cash used for operating
activities from continuing operations was primarily driven by the $10.1
million increase in net income adjusted for the exclusion of non-cash items
and a decrease in working capital investments of $22.2 million, primarily due
to lower income tax payments and lower payments for inventory.
Investing Activities
Cash flows relating to investing activities from continuing operations consist
primarily of cash used for capital expenditures and acquisitions of
businesses. Cash used for investing activities from continuing operations was
$114.5 million in the first three months of 2024, as compared to $8.7 million
in the comparable period of 2023. The increase in cash used for investing
activities is primarily related to the acquisition of Vian for $102.5 million
and the $3.1 million final working capital adjustment related to the BAUM
acquisition.
Financing Activities
Financing cash flows consist primarily of dividend payments to shareholders,
repayments of indebtedness, proceeds from our Credit Facilities and proceeds
from the issuance of common stock. During the first three months of 2023,
financing cash flows also includes activities associated with the distribution
of Crane NXT, Co. in support of the Separation.
Cash provided by financing activities was $87.9 million during the first three
months of 2024 compared to cash used for financing activities of $67.8 million
in the comparable period of 2023. The increase in cash provided by financing
activities was primarily driven by;
.
$158.1 million increase in net borrowings;
.
$14.9 million decrease in dividends paid; partially offset by
.
$21.4 million increase in payments for taxes related to net share settlements
of equity awards, net of proceeds from stock options.
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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, 2023.
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 March 31, 2024, there were 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.
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Part II: Other Information
Item 1.
Legal Proceedings
Discussion of legal matters is incorporated by reference from Part 1, Item 1,
Note 12, "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, 2023.
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
(a) Not applicable
(b) Not applicable
(c) Share Repurchases
We did not make any open-market share repurchases of our common stock during
the quarter ended March 31, 2024. 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
None.
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Item 6.
Exhibits
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
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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 COMPANY
REGISTRANT
Date
May 1, 2024 By /s/ Max H. Mitchell
Max H. Mitchell
Chairman, President and Chief Executive Officer
Date By /s/ Richard A. Maue
May 1, 2024 Richard A. Maue
Executive Vice President and Chief Financial Officer
38
Exhibit 31.1
CERTIFICATION
I, Max H. Mitchell, certify that:
(1)
I have reviewed this Quarterly Report on Form 10-Q of Crane Company;
(2)
Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
(3)
Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
(4)
The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent fiscal
quarter that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
(5)
The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
By /s/ Max H. Mitchell
Max H. Mitchell
Chairman, President and Chief Executive Officer
May 1, 2024
Exhibit 31.2
CERTIFICATION
I, Richard A. Maue, certify that:
(1)
I have reviewed this Quarterly Report on Form 10-Q of Crane Company;
(2)
Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
(3)
Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
(4)
The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent fiscal
quarter that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
(5)
The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
By /s/ Richard A. Maue
Richard A. Maue
Principal Financial Officer
May 1, 2024
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Crane Company (the "Registrant") on
Form 10-Q for the quarter ended March 31, 2024 as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, Max H. Mitchell,
Chairman, President and Chief Executive Officer of the Registrant, pursuant to
18 U.S.C. section 1350, as adopted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002, hereby certify to the best of my knowledge that:
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Registrant.
This Certification accompanies this Quarterly Report on Form 10-Q and shall
not be treated as having been filed as part of this Quarterly Report on Form
10-Q.
By /s/ Max H. Mitchell
Max H. Mitchell
Chairman, President and Chief Executive Officer
May 1, 2024
Exhibit 32.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Crane Company (the "Registrant") on
Form 10-Q for the quarter ended March 31, 2024 as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, Richard A. Maue,
Principal Financial Officer of the Registrant, pursuant to 18 U.S.C. section
1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002,
hereby certify to the best of my knowledge that:
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Registrant.
This Certification accompanies this Quarterly Report on Form 10-Q and shall
not be treated as having been filed as part of this Quarterly Report on Form
10-Q.
By /s/Richard A. Maue
Richard A. Maue
Principal Financial Officer
May 1, 2024
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