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Mark One:

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

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

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

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

(check one):

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☐

Emerging growth company

☐

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

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

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

Common stock, $1.00 Par Value – 56,773,337 shares

PART I: FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

(UNAUDITED)

 

(UNAUDITED)

 

			Three Months Ended									Six Months Ended
			June 30,									June 30,
(in millions)			2023						2022			2023						2022
Net income before allocation to noncontrolling interests			$	45.6					$	258.2		$	151.3					$	363.2
Components of other comprehensive income (loss), net of tax
Currency translation adjustment			0.7						(75.9)			13.4						(97.5)
Changes in pension and postretirement plan assets and benefit obligation, net of tax			2.6						3.5			5.3						6.8
Other comprehensive income (loss), net of tax			3.3						(72.4)			18.7						(90.7)
Comprehensive income before allocation to noncontrolling interests			48.9						185.8			170.0						272.5
Less: Noncontrolling interests in comprehensive income			(0.1)						(0.1)			(0.2)						—
Comprehensive income attributable to common shareholders			$	49.0					$	185.9		$	170.2					$	272.5

(UNAUDITED) 

(UNAUDITED)

 

(UNAUDITED)

(UNAUDITED)

(UNAUDITED)

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, 2022.

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.

On March 30, 2022, Crane announced that its Board of Directors approved a plan to pursue a separation into two independent, publicly-traded companies in a transaction in which Crane NXT would retain its Payment & Merchandising Technologies segment and spin-off its Aerospace & Electronics, Process Flow Technologies and Engineered Materials segments to Crane NXT’s stockholders (the “Separation”).

On April 3, 2023, Crane Holdings, Co., completed the Separation into two independent, publicly-traded companies, Crane NXT, Co. and Crane Company 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.” The Distribution was effective at 5:00 p.m., Eastern Time, on April 3, 2023. As a result of the Distribution, Crane Company became an independent public company and our common stock is listed under the symbol "CR" on the New York Stock Exchange. Due to Crane Company’s larger operations, greater tangible assets, greater fair value and greater net sales, in each case, relative to Crane NXT, Co., among other factors, Crane Company was treated as the “accounting spinnor” and therefore was the “accounting successor” to Crane Holdings, Co. for accounting purposes, notwithstanding the legal form of the Separation. 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.

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

Transactions under the transition services agreement with Crane NXT, Co. did not have a material impact to the condensed consolidated balance sheets as of June 30, 2023, or the condensed consolidated statements of operations and comprehensive income for the three and six months ended June 30, 2023.

On April 3, 2023, prior to the consummation of the Separation, the Board of Directors of Crane Company declared and paid a one-time cash dividend in the amount of $275 million to Crane Holdings, Co., its sole stockholder at that time, as part of establishing the capital structure at Crane NXT.

As a result of the Separation, the Payment & Merchandising segment qualified as a discontinued operation and accordingly, the assets, liabilities and result of operations of this segment are reported as discontinued operations. See Note 2 for additional information.

The Company considered the applicability and impact of all Accounting Standards Updates issued by the Financial Accounting Standards Board (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.

As discussed above, on April 3, 2023, Crane Holdings, Co., completed the previously announced Separation into two independent, publicly-traded companies, Crane NXT, Co. and Crane Company. Due to Crane Company’s larger operations, greater tangible assets, greater fair value and greater net sales, in each case, relative to Crane NXT, Co., among other factors, Crane Company is treated as the “accounting spinnor” and therefore is the “accounting successor” to Crane Holdings, Co. for accounting purposes, notwithstanding the legal form of the Separation. Therefore, Crane Company has reflected 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.

Financial results from discontinued operations:

The major categories of assets and liabilities included in assets of discontinued operations and liabilities of discontinued operations are as follows:

Our segments are reported on the same basis used internally for evaluating performance and for allocating resources. As of June 30, 2023, 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:

The Aerospace & Electronics segment supplies critical components and systems, including original equipment and aftermarket parts, primarily for the commercial aerospace, and the military aerospace, defense and space markets. Its brands have decades of proven experience, and in many cases invented the critical technologies in their respective markets. The business designs and delivers proven systems, reliable components, and flexible power solutions that excel in tough and mission-critical environments. Products and services are organized into six integrated solutions: Sensing Components & Systems, Electrical Power Solutions, Fluid Management Solutions, Landing & Control Systems, and Microwave Solutions.

The Process Flow Technologies segment is a provider of highly engineered fluid handling equipment for mission critical applications that require high reliability. The segment is comprised of Process Valves and Related Products, Commercial Valves, and Pumps and Systems. Process Valves and Related Products include on/off valves and related products for critical and demanding applications in the chemical, oil & gas, power, and general industrial end markets globally. Commercial Valves includes the manufacturing of valves and related products for the non-residential construction, general industrial, and to a lesser extent, municipal markets. Pumps and Systems include pumps and related products primarily for water and wastewater applications in the industrial, municipal, commercial and military markets.

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).

Financial information by reportable segment is set forth below.

 

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

The transaction price allocated to remaining performance obligations represents the transaction price of firm orders which have not yet been fulfilled, which we also refer to as total backlog. As of June 30, 2023, total backlog was $1,042.5 million. We expect to recognize approximately 65% of our remaining performance obligations as revenue in 2023, an additional 29% in 2024 and the balance thereafter.

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

We recognized revenue of $8.2 million and $19.0 million during the three and six-month periods ended June 30, 2023, respectively, related to contract liabilities as of December 31, 2022.

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.

Stock options, restricted share units, deferred stock units and performance-based restricted share units that were excluded from the calculation of diluted earnings per share because their effect is anti‑dilutive was 0.4 million for both the three months ended June 30, 2023, and 2022 and 0.4 million and 0.3 million for the six months ended June 30, 2023, and 2022, respectively.

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

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

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

For all plans, the components of net periodic benefit for the six months ended June 30, 2023, and 2022 are as follows:

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

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

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:

Our effective tax rate attributable to continuing operations for the six months ended June 30, 2023 is lower than the prior year’s comparable periods primarily due to prior year effect of a reversal of a deferred tax asset established that related to the sale of a subsidiary in a prior period and a greater benefit related to share-based compensation in current period. This is partially offset by earnings in jurisdictions with statutory tax rates higher than the United States and expenses statutorily non-deductible for income tax purposes in current period.

Our effective tax rate attributable to continuing operations for the three and six months ended June 30, 2023 is higher than the statutory U.S. federal tax rate of 21% primarily due to earnings in jurisdictions with statutory tax rates higher than the United States, expenses that are statutorily non-deductible for income tax purposes and U.S. state taxes, partially offset by excess share-based compensation benefits, tax credit utilization, and the statutory U.S. deduction related to our non-U.S. subsidiaries’ income.

During both the three months and six months ended June 30, 2023, our gross unrecognized tax benefits, excluding interest and penalties, increased by $0.4 million, primarily due to increases in tax positions taken in the current and prior periods, partially offset by reductions from expiration of statutes of limitations.

During the three and six months ended June 30, 2023, the total amount of unrecognized tax benefits that, if recognized, would cause our effective tax rate to increase by $0.3 million and $0.4 million, respectively. The difference between these amounts relates to (1) offsetting tax effects from other tax jurisdictions, and (2) interest expense, net of deferred taxes.

During the three and six months ended June 30, 2023, we recognized $(0.1) million and $0.0 million, respectively, of interest expense related to unrecognized tax benefits in our Condensed Consolidated Statement of Operations. As of both June 30, 2023 and December 31, 2022, the total amount of accrued interest and penalty expense related to unrecognized tax benefits recorded in our Condensed Consolidated Balance Sheets was $2.0 million.

During the next twelve months, it is reasonably possible that our unrecognized tax benefits may decrease by $0.5 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.

As part of the Separation, to a limited extent, the Company has agreed to indemnify Crane NXT, for uncertain tax benefits, which are attributable to the Company’s business.

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

As of June 30, 2023, we had $69.3 million of net intangible assets, of which $22.0 million were intangibles with indefinite useful lives. As of December 31, 2022, we had $71.7 million of net intangible assets, of which $21.8 million were intangibles with indefinite useful lives.

Changes to intangible assets are as follows: