Form 8-K Crane Holdings, Co. For: Jul 25
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E-mailUNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 25, 2022
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification No.) | |||||||||
(Address of Principal Executive Offices) | (Zip Code) | ||||||||||
Registrant’s telephone number, including area code: 203 -363-7300
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||
| | ||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. ☐
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SECTION 2 – FINANCIAL INFORMATION
| Item 2.02 | Results of Operations and Financial Condition. | ||||
On July 25, 2022, Crane Co. (the “Company”) announced its results of operations for the quarter ended June 30, 2022. The related press release and quarterly financial data supplement is being furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The information furnished under Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1, is not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
SECTION 8 – OTHER EVENTS
| Item 8.01 | Other Events | ||||
Information Regarding Claims and Costs in the Tort System
As of June 30, 2022, we were a defendant in cases filed in numerous state and federal courts alleging injury or death as a result of exposure to asbestos. Activity related to asbestos claims during the periods indicated was as follows:
| Three Months Ended | Six Months Ended | Year Ended | |||||||||||||||||||||
| June 30, | June 30, | December 31, | |||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | 2021 | |||||||||||||||||||
| Beginning claims | 30,312 | 29,407 | 29,958 | 29,138 | 29,138 | ||||||||||||||||||
| New claims | 646 | 772 | 1,303 | 1,505 | 2,975 | ||||||||||||||||||
| Settlements | (347) | (176) | (548) | (336) | (980) | ||||||||||||||||||
| Dismissals | (512) | (215) | (614) | (519) | (1,175) | ||||||||||||||||||
| Ending claims | 30,099 | 29,788 | 30,099 | 29,788 | 29,958 | ||||||||||||||||||
Of the 30,099 pending claims as of June 30, 2022, approximately 18,000 claims were pending in New York of which approximately 16,000 are non-malignancy claims that were filed over 15 years ago and have been inactive under New York court orders.
We have tried several cases resulting in defense verdicts by the jury or directed verdicts for the defense by the court. We further have pursued appeals of certain adverse jury verdicts that have resulted in reversals in favor of the defense. We have also tried several other cases resulting in plaintiff verdicts which we paid or settled after unsuccessful appeals.
The gross settlement and defense costs incurred (before insurance recoveries and tax effects) by us for the six months ended June 30, 2022 and 2021 totaled $28.5 million and $21.3 million, respectively. In contrast to the recognition of settlement and defense costs, which reflect the current level of activity in the tort system, cash payments and receipts generally lag the tort system activity by several months or more, and may show some fluctuation from period to period. Cash payments of settlement amounts are not made until all releases and other required documentation are received by us, and reimbursements of both settlement amounts and defense costs by insurers may be uneven due to insurer payment practices, transitions from one insurance layer to the next excess layer and the payment terms of certain reimbursement agreements. Our total pre-tax payments for settlement and defense costs, net of funds received from insurers, for the six months ended June 30, 2022 and, 2021 totaled $23.5 million and $20.2 million, respectively. Detailed below are the comparable amounts for the periods indicated.
(1) Before insurance recoveries and tax effects.
| Three Months Ended | Six Months Ended | Year Ended | |||||||||||||||||||||
| June 30, | June 30, | December 31, | |||||||||||||||||||||
| (in millions) | 2022 | 2021 | 2022 | 2021 | 2021 | ||||||||||||||||||
Settlement / indemnity costs incurred (1) | $ | 12.6 | $ | 8.4 | $ | 23.1 | $ | 13.9 | $ | 40.6 | |||||||||||||
Defense costs incurred (1) | 2.8 | 3.8 | 5.4 | 7.4 | 14.6 | ||||||||||||||||||
| Total costs incurred | $ | 15.4 | $ | 12.2 | $ | 28.5 | $ | 21.3 | $ | 55.2 | |||||||||||||
| Settlement / indemnity payments | $ | 17.6 | $ | 9.4 | $ | 27.3 | $ | 19.5 | $ | 42.6 | |||||||||||||
| Defense payments | 2.9 | 4.2 | 5.0 | 7.4 | 15.4 | ||||||||||||||||||
| Insurance receipts | (4.6) | (4.2) | (8.8) | (6.7) | (13.1) | ||||||||||||||||||
| Pre-tax cash payments, net | $ | 15.9 | $ | 9.4 | $ | 23.5 | $ | 20.2 | $ | 44.9 | |||||||||||||
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The amounts shown for settlement and defense costs incurred, and cash payments, are not necessarily indicative of future period amounts, which may be higher or lower than those reported.
Cumulatively through June 30, 2022, we have resolved (by settlement or dismissal) approximately 145,000 claims. The related settlement cost incurred by us and our insurance carriers is approximately $742 million, for an average settlement cost per resolved claim of approximately $5,100. The average settlement cost per claim resolved during the years ended December 31, 2021, 2020 and 2019 was $18,800, $13,900, and $15,800, respectively. Because claims are sometimes dismissed in large groups, the average cost per resolved claim, as well as the number of open claims, can fluctuate significantly from period to period. In addition to large group dismissals, the nature of the disease and corresponding settlement amounts for each claim resolved will also drive changes from period to period in the average settlement cost per claim. Accordingly, the average cost per resolved claim is not considered in our periodic review of our estimated asbestos liability. For a discussion regarding the four most significant factors affecting the liability estimate, see “Effects on the Consolidated Financial Statements.”
Effects on the Consolidated Financial Statements
We have retained an independent actuarial firm to assist management in estimating our asbestos liability in the tort system. The actuarial consultants review information provided by us concerning claims filed, settled and dismissed, amounts paid in settlements and relevant claim information such as the nature of the asbestos-related disease asserted by the claimant, the jurisdiction where filed and the time lag from filing to disposition of the claim. The methodology used by the actuarial consultants to project future asbestos costs is based on our recent historical experience for claims filed, settled and dismissed during a base reference period. Our experience is then compared to estimates of the number of individuals likely to develop asbestos-related diseases determined based on widely used previously conducted epidemiological studies augmented with current data inputs. Those studies were undertaken in connection with national analyses of the population of workers believed to have been exposed to asbestos. Using that information, the actuarial consultants estimate the number of future claims that would be filed against us and estimates the aggregate settlement or indemnity costs that would be incurred to resolve both pending and future claims based upon the average settlement costs by disease during the reference period. This methodology has been accepted by numerous courts. After discussions with us, the actuarial consultants augment our liability estimate for the costs of defending asbestos claims in the tort system using a forecast from us which is based upon discussions with our defense counsel. Based on this information, the actuarial consultants compile an estimate of our asbestos liability for pending and future claims using a range of reference periods based on claim experience and claims expected to be filed through the indicated forecast period. The most significant factors affecting the liability estimate are (1) the number of new mesothelioma claims filed against us, (2) the average settlement costs for mesothelioma claims, (3) the percentage of mesothelioma claims dismissed against us and (4) the aggregate defense costs incurred by us. These factors are interdependent, and no one factor predominates in determining the liability estimate.
In our view, the forecast period used to provide the best estimate for asbestos claims and related liabilities and costs is a judgment based upon a number of trend factors, including the number and type of claims being filed each year; the jurisdictions where such claims are filed, and the effect of any legislation or judicial orders in such jurisdictions restricting the types of claims that can proceed to trial on the merits; and the likelihood of any comprehensive asbestos legislation at the federal level. In addition, the dynamics of asbestos litigation in the tort system have been significantly affected by the substantial number of companies that have filed for bankruptcy protection, thereby staying any asbestos claims against them until the conclusion of such proceedings, and the establishment of a number of post-bankruptcy trusts for asbestos claimants, which have been estimated to provide $36 billion for payments to current and future claimants. These trend factors have both positive and negative effects on the dynamics of asbestos litigation in the tort system and the related best estimate of our asbestos liability, and these effects do not move in a linear fashion but rather change over multi-year periods. Accordingly, management continues to monitor these trend factors over time and periodically assesses whether an alternative forecast period is appropriate.
Each quarter, the actuarial consultants compile an update based upon our experience in claims filed, settled and dismissed as well as average settlement costs by disease category (mesothelioma, lung cancer, other cancer, and non-malignant conditions including asbestosis). In addition to this claims experience, we also consider additional quantitative and qualitative factors such as the nature of the aging of pending claims, significant appellate rulings and legislative developments, and their respective effects on expected future settlement values. As part of this process, we also consider trends in the tort system such as those enumerated above. Management considers all these factors in conjunction with the liability estimate of the actuarial consultants and determines whether a change in the estimate is warranted.
Liability Estimate. In June 2016, the New York State Court of Appeals issued its opinion in Dummitt v. Crane Co., affirming a 2012 verdict for $4.9 million against us. In that opinion, the court ruled that in certain circumstances we are legally responsible for asbestos-containing materials made and sold by third parties that others attached post-sale to our equipment. This decision provided clarity regarding the nature of claims that may proceed to trial in New York and greater predictability regarding future claim activity. We also reflected the impact of the Dummitt decision on our expected settlement values.
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Accordingly, on December 31, 2016, we updated and extended our asbestos liability estimate through 2059, the generally accepted end point.
Following our experience in the tort system post the Dummitt decision, we entered into several, increasingly similar, group settlements with various plaintiff firms and we expect this new trend of these types of group settlements to continue. Accordingly, effective as of December 31, 2019, we updated our estimate of the asbestos liability, including revised costs of settlement or indemnity payments and defense costs relating to currently pending claims and future claims projected to be filed against us through the same expected end point of 2059. Our estimate of the asbestos liability for pending and future claims through 2059 is based on the projected future asbestos costs resulting from our experience using a range of reference periods for claims filed, settled and dismissed. Based on this estimate, we recorded an additional liability of $255 million as of December 31, 2019.
An aggregate liability of $712 million was recorded as of December 31, 2019 to cover the estimated cost of asbestos claims now pending or subsequently asserted through 2059, of which approximately 85% is attributable to settlement and defense costs for future claims projected to be filed through 2059. The liability is reduced when cash payments are made in respect of settled claims and defense costs. The liability was $580 million and $612 million as of June 30, 2022 and December 31, 2021, respectively. It is not possible to forecast when cash payments related to the asbestos liability will be fully expended; however, it is expected such cash payments will continue for a number of years past 2059, due to the significant proportion of future claims included in the estimated asbestos liability and the lag time between the date a claim is filed and when it is resolved. None of these estimated costs have been discounted to present value due to the inability to reliably forecast the timing of payments. The current portion of the total estimated liability at June 30, 2022 and December 31, 2021 is $62.3 million and represents our best estimate of total asbestos costs expected to be paid during the twelve-month period. Such amount is based upon the actuarial model together with our prior year payment experience for both settlement and defense costs.
We have made our best estimate of the costs through 2059. Through June 30, 2022, our actual experience during the updated reference period for mesothelioma claims filed and dismissed generally approximated the assumptions in our liability estimate. In addition to this claims experience, we considered additional quantitative and qualitative factors such as the nature of the aging of pending claims, significant appellate rulings and legislative developments, and their respective effects on expected future settlement values. Based on this evaluation, we determined that no change in the estimate was warranted for the period ended June 30, 2022.
Insurance Coverage and Receivables. Prior to 2005, a significant portion of our settlement and defense costs were paid by our primary insurers. With the exhaustion of that primary coverage, we began negotiations with our excess insurers to reimburse us for a portion of our settlement and/or defense costs as incurred. To date, we have entered into agreements providing for such reimbursements, known as “coverage-in-place,” with eleven of our excess insurer groups. Under such coverage-in-place agreements, an insurer’s policies remain in force and the insurer undertakes to provide coverage for our present and future asbestos claims on specified terms and conditions that address, among other things, the share of asbestos claims costs to be paid by the insurer, payment terms, claims handling procedures and the expiration of the insurer’s obligations. Similarly, under a variant of coverage-in-place, we have entered into an agreement with a group of insurers confirming the aggregate amount of available coverage under the subject policies and setting forth a schedule for future reimbursement payments to us based on aggregate indemnity and defense payments made. In addition, with ten of our excess insurer groups, we entered into agreements settling all asbestos and other coverage obligations for an agreed sum and received a total of $82.5 million in aggregate as a result of those settlements. Reimbursements from insurers for past and ongoing settlement and defense costs allocable to their policies have been made in accordance with these coverage-in-place and other agreements. All these agreements include provisions for mutual releases, indemnification of the insurer and, for coverage-in-place, claims handling procedures. With the agreements referenced above, we have concluded settlements with all but two of our solvent excess insurers with policies expected to respond to the aggregate costs included in the liability estimate. The first such insurer, which issued a single applicable policy, has been paying for many years the shares of defense and indemnity costs we have allocated to it, subject to a reservation of rights. The second insurer issued a single applicable policy in a layer of coverage that we do not anticipate reaching until many years from now, and, prior to the policy being reached, we anticipate opening a dialogue with that insurer about the execution of a suitable agreement. There are no pending legal proceedings between us and any insurer contesting our asbestos claims under our insurance policies.
In conjunction with developing the aggregate updated liability estimate referenced above, we also developed an updated estimate of probable insurance recoveries for our asbestos liabilities. In developing this estimate, we considered our coverage-in-place and other settlement agreements described above, as well as several additional factors. These additional factors include the financial viability of the insurance companies, the method by which losses will be allocated to the various insurance policies and the years covered by those policies, how settlement and defense costs will be covered by the insurance policies and interpretation of the effect on coverage of various policy terms and limits. In addition, the timing and amount of reimbursements will vary because our insurance coverage for asbestos claims involves multiple insurers, with different policy terms and certain gaps in coverage. In addition to consulting with legal counsel on these insurance matters, we retained
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insurance consultants to assist management in the estimation of probable insurance recoveries based upon the aggregate liability estimate described above and assuming the continued viability of all solvent insurance carriers. Based upon the analysis of policy terms and other factors noted above by our legal counsel, and incorporating risk mitigation judgments by us where policy terms or other factors were not certain, our insurance consultants compiled a model indicating how our historical insurance policies would respond to varying levels of asbestos settlement and defense costs and the allocation of such costs between such insurers and us. Using the estimated liability as of December 31, 2019 (for claims filed or expected to be filed through 2059), the insurance consultant’s model forecasted that approximately 14% of the liability would be reimbursed by our insurers. While there are overall limits on the aggregate amount of insurance available to us with respect to asbestos claims, certain limits were not reached by the total estimated liability currently recorded by us, and such overall limits did not influence our determination of the asset amount to record. We allocate to ourselves the amount of the asbestos liability (for claims filed or expected to be filed through 2059) that is in excess of available insurance coverage allocated to such years. An asset of $98 million was recorded as of December 31, 2019 representing the probable insurance reimbursement for claims expected through 2059. The asset is reduced as reimbursements and other payments from insurers are received. The asset was $65 million and $74 million as of June 30, 2022 and December 31, 2021, respectively.
We review the estimated reimbursement rate with our insurance consultants on a periodic basis in order to confirm overall consistency with our established reserves. The reviews encompass consideration of the performance of the insurers under coverage-in-place agreements and the effect of any additional lump-sum payments under other insurer agreements. Actual insurance reimbursements vary from period to period, and will decline over time, for the reasons cited above.
Uncertainties. Estimation of our ultimate exposure for asbestos-related claims is subject to significant uncertainties, as there are multiple variables that can affect the timing, severity and quantity of claims and the manner of their resolution. We caution that our estimated liability is based on assumptions with respect to future claims, settlement and defense costs based on past experience that may not prove reliable as predictors; the assumptions are interdependent and no single factor predominates in determining the liability estimate. A significant upward or downward trend in the number of claims filed, depending on the nature of the alleged injury, the jurisdiction where filed and the quality of the product identification, or a significant upward or downward trend in the costs of defending claims, could change the estimated liability, as would substantial adverse verdicts at trial that withstand appeal. A legislative solution, structured settlement transaction, or significant change in relevant case law could also change the estimated liability.
The same factors that affect developing estimates of probable settlement and defense costs for asbestos-related liabilities also affect estimates of the probable insurance reimbursements, as do a number of additional factors. These additional factors include the financial viability of the insurance companies, the method by which losses will be allocated to the various insurance policies and the years covered by those policies, how settlement and defense costs will be covered by the insurance policies and interpretation of the effect on coverage of various policy terms and limits and their interrelationships. In addition, due to the uncertainties inherent in litigation matters, no assurances can be given regarding the outcome of any litigation, if necessary, to enforce our rights under our insurance policies or settlement agreements.
Many uncertainties exist surrounding asbestos litigation, and we will continue to evaluate our estimated asbestos-related liability and corresponding estimated insurance reimbursement as well as the underlying assumptions and process used to derive these amounts. These uncertainties may result in our incurring future charges or increases to income to adjust the carrying value of recorded liabilities and assets, particularly if the number of claims and settlement and defense costs change significantly, or if there are significant developments in the trend of case law or court procedures, or if legislation or another alternative solution is implemented. Although the resolution of these claims will likely take many years, the effect on the results of operations, financial position and cash flow in any given period from a revision to these estimates could be material.
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SECTION 9 – FINANCIAL STATEMENTS AND EXHIBITS
| Item 9.01 | Financial Statements and Exhibits. | ||||
| (a) | None | |||||||
| (b) | None | |||||||
| (c) | None | |||||||
| (d) | Exhibits | |||||||
| 99.1 | ||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |||||||
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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 hereunto duly authorized.
| CRANE CO. | |||||||||||||||||
| July 25, 2022 | |||||||||||||||||
| By: | /s/ Richard A. Maue | ||||||||||||||||
| Richard A. Maue | |||||||||||||||||
| Senior Vice President and | |||||||||||||||||
| Chief Financial Officer | |||||||||||||||||
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| Document and Entity Information | As of | ||||||||||
| 7/25/2022 | |||||||||||
| Entity Central Index Key | |||||||||||
| Amendment Flag | |||||||||||
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Exhibit 99.1
| Contact: | ||
| Jason D. Feldman | ||
| Vice President, Investor Relations | ||
| 203-363-7329 | ||
| www.craneco.com | ||
Crane Holdings, Co. Reports Second Quarter 2022 Results
Second Quarter 2022 Highlights
•GAAP earnings per diluted share (EPS) of $4.93, inclusive of a $3.58 per share after-tax gain on the sale of Crane Supply, compared to $2.33 in the second quarter of 2021.
•Excluding Special Items, EPS of $1.90 compared to $1.93 in the second quarter of 2021.
•Core year-over-year sales growth of 7% and core year-over-year order growth of 14%.
•Raising GAAP EPS guidance to $9.80-$10.20, from $6.80-$7.20, primarily to reflect the gain on the sale of Crane Supply.
•Reaffirming EPS guidance, excluding Special Items, of $7.45-$7.85 provided on May 26, 2022.
STAMFORD, CONNECTICUT - July 25, 2022 - Crane Holdings, Co. (NYSE: CR), a diversified manufacturer of highly engineered industrial products, reported second quarter 2022 financial results and reaffirmed its full-year 2022 outlook excluding Special Items.
Max Mitchell, Crane Holdings, Co. President and Chief Executive Officer stated: “Our momentum continues with another quarter of strong results reflecting differentiated execution despite a challenging operational environment as well as solid underlying trends in our primary end markets. Our overall performance in the first half, with adjusted operating margins of 17.3%, core sales growth of 7%, and core order growth of 14%, all support our outlook, and we are well on-track to achieve our full-year guidance."
Mr. Mitchell concluded: "In addition to delivering consistently strong operational performance, our businesses and portfolio are positioned to support accelerating growth. Across all businesses, our commercial excellence, innovation, and investment in technology roadmaps support our ability to drive outperformance compared to our peers throughout the cycle. We are also making continued progress towards our early 2023 separation which will permit each post-separation company to optimize investment and capital allocation, further accelerate growth, and unlock shareholder value.”
Second Quarter 2022 Results
Second quarter 2022 GAAP earnings per diluted share (EPS) of $4.93 included an after-tax gain of $204 million, or $3.58 per share, on the May 2022 sale of Crane Supply and compared to $2.33 in the second quarter of 2021. Excluding Special Items, second quarter 2022 EPS was $1.90, compared to $1.93 in the second quarter of 2021. (Please see the attached Non-GAAP Financial Measures tables for a detailed reconciliation of reported results to adjusted measures.)
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Second quarter 2022 sales were $864 million, an increase of $9 million, or 1%, compared to the second quarter of 2021. The sales increase was comprised of a $60 million, or 7%, increase in core sales, partially offset by a $30 million, or 4%, impact from unfavorable foreign exchange, and a $22 million, or 3%, divestiture impact.
Second quarter 2022 operating profit was $124 million, compared to $145 million in the second quarter of 2021. Operating profit margin was 14.4%, compared to 16.9% last year, with the decline driven primarily by higher transaction costs in 2022, unfavorable mix and lower volumes, partially offset by strong pricing and productivity; higher pricing more than offset inflation. Excluding Special Items, second quarter 2022 operating profit was $145 million, compared to $148 million last year. Excluding Special Items, operating profit margin was 16.8%, compared to 17.3% last year, due to unfavorable mix and lower volume, largely offset by strong productivity and pricing. (Please see the attached Non-GAAP Financial Measures tables for a detailed reconciliation of reported results to adjusted measures.)
Summary of Second Quarter 2022 Results
| Second Quarter | Change | |||||||||||||||||||||||||
| (dollars in millions) | 2022 | 2021 | $ | % | ||||||||||||||||||||||
| Net sales | $ | 864 | $ | 856 | $ | 9 | 1% | |||||||||||||||||||
| Core sales | 60 | 7% | ||||||||||||||||||||||||
| Foreign exchange | (30) | (4)% | ||||||||||||||||||||||||
| Divestiture impact | (22) | (3)% | ||||||||||||||||||||||||
| Operating profit | $ | 124 | $ | 145 | $ | (20) | (14)% | |||||||||||||||||||
| Operating profit, before special Items (adjusted)* | $ | 145 | $ | 148 | $ | (2) | (2)% | |||||||||||||||||||
| Operating profit margin | 14.4 | % | 16.9 | % | (250bps) | |||||||||||||||||||||
| Operating profit margin, before special items (adjusted)* | 16.8 | % | 17.3 | % | (50bps) | |||||||||||||||||||||
*Please see the attached Non-GAAP Financial Measures tables
2022 Outlook and Guidance
We are adjusting our full year 2022 GAAP EPS guidance to $9.80-$10.20, from $6.80-$7.20, primarily to reflect the second quarter $3.58 after-tax gain on the sale of Crane Supply. Excluding Special Items, full year 2022 EPS guidance remains $7.45-$7.85. We expect 2022 Free Cash Flow (cash provided by operating activities less capital spending) of $350-$390 million, excluding cash flow items related to 2022 portfolio actions. (Please see the attached non-GAAP Financial Measures tables.)
Rich Maue, Crane Holdings, Co. Senior Vice President and Chief Financial Officer, added: "We continue to see robust demand across our end markets, and supply chain challenges and inflationary pressures remain consistent with the outlook we provided in January of this year. Given our strong performance in the first half of the year, including pricing actions to fully offset the impact of inflation, we are confident in our ability to achieve our full-year guidance."
"We have exciting opportunities and developments across each of our businesses. At Aerospace & Electronics, we expect the segment to return to pre-COVID sales and margin levels within the next two years as commercial air traffic and OE build rates continue to recover. We are also making further progress positioning this business for the future with our participation on numerous prototypes and demonstrator programs utilizing our next-generation power conversion, sensing, and thermal management technologies. Process Flow Technologies is on-track to achieve record
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adjusted margins this year - with further upside in the years ahead - and its traction with new product development and commercialization has never been stronger, with tangible share gains as evidence of success. And at Payment & Merchandising Technologies, both Crane Payment Innovations and Crane Currency continue to perform extremely well and gain share in their core markets, while they both pursue breakthrough opportunities, in areas such as product authentication, that could drive a step-function increase in sales and profitability. Overall, we are extremely excited about the opportunities across our portfolio, and post-separation, Crane Company and Crane NXT are both positioned to further accelerate growth."
Second Quarter 2022 Segment Results
All comparisons detailed in this section refer to operating results for the second quarter 2022 versus the second quarter 2021.
Aerospace & Electronics
| Second Quarter | Change | |||||||||||||||||||||||||
| (dollars in millions) | 2022 | 2021 | $ | % | ||||||||||||||||||||||
| Net sales | $ | 162 | $ | 158 | $ | 4 | 3% | |||||||||||||||||||
| Operating profit | $ | 28 | $ | 31 | $ | (3) | (8)% | |||||||||||||||||||
| Operating profit margin | 17.5 | % | 19.6 | % | (210bps) | |||||||||||||||||||||
Sales of $162 million increased $4 million, or 3%, compared to the prior year. Operating profit margin of 17.5% compared to 19.6% last year, primarily reflecting unfavorable mix and higher engineering costs, partially offset by strong productivity and pricing. Aerospace & Electronics' order backlog was $534 million at June 30, 2022, compared to $460 million at December 31, 2021, and compared to $473 million at June 30, 2021.
Process Flow Technologies
| Second Quarter | Change | |||||||||||||||||||||||||
| (dollars in millions) | 2022 | 2021 | $ | % | ||||||||||||||||||||||
| Net sales | $ | 296 | $ | 311 | $ | (15) | (5)% | |||||||||||||||||||
| Core sales | 19 | 6% | ||||||||||||||||||||||||
| Foreign exchange | (12) | (4)% | ||||||||||||||||||||||||
| Divestiture impact | (22) | (7)% | ||||||||||||||||||||||||
| Operating profit | $ | 41 | $ | 47 | $ | (6) | (13)% | |||||||||||||||||||
| Operating profit, before special Items (adjusted)* | $ | 46 | $ | 49 | $ | (3) | (6)% | |||||||||||||||||||
| Operating profit margin | 13.7 | % | 15.0 | % | (130bps) | |||||||||||||||||||||
| Operating profit margin, before special items (adjusted)* | 15.6 | % | 15.7 | % | (10bps) | |||||||||||||||||||||
*Please see the attached Non-GAAP Financial Measures tables
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Sales of $296 million decreased $15 million, or 5%, driven by a $22 million, or 7%, impact from the divestiture of Crane Supply and a $12 million, or 4%, impact from unfavorable foreign exchange, partially offset by $19 million, or 6%, of core growth. Operating profit margin decreased to 13.7%, compared to 15.0% last year, primarily reflecting transaction related expenses, unfavorable mix, and lower volumes, partially offset by strong productivity and pricing. Excluding Special Items, operating margin of 15.6% compared to 15.7% last year. Process Flow Technologies order backlog was $349 million at June 30, 2022, compared to $358 million at December 31, 2021, and compared to $344 million at June 30, 2021.
Payment & Merchandising Technologies
| Second Quarter | Change | |||||||||||||||||||||||||
| (dollars in millions) | 2022 | 2021 | $ | % | ||||||||||||||||||||||
| Net sales | $ | 334 | $ | 328 | $ | 6 | 2 | % | ||||||||||||||||||
| Core sales | 23 | 7 | % | |||||||||||||||||||||||
| Foreign exchange | (17) | (5) | % | |||||||||||||||||||||||
| Operating profit | $ | 81 | $ | 78 | $ | 3 | 4 | % | ||||||||||||||||||
| Operating profit, before special Items (adjusted)* | $ | 81 | $ | 78 | $ | 3 | 4 | % | ||||||||||||||||||
| Operating profit margin | 24.2 | % | 23.7 | % | 50bps | |||||||||||||||||||||
| Operating profit margin, before special items (adjusted)* | 24.2 | % | 23.7 | % | 50bps | |||||||||||||||||||||
*Please see the attached Non-GAAP Financial Measures tables
Sales of $334 million increased $6 million, or 2%, driven by a $23 million, or 7%, increase in core sales, partially offset by a $17 million, or 5%, impact from unfavorable foreign exchange. Operating profit margin increased to 24.2%, from 23.7% primarily reflecting strong pricing and productivity, partially offset by unfavorable mix. During the quarter, stronger pricing offset the impact of higher inflation.
Engineered Materials
| Second Quarter | Change | |||||||||||||||||||||||||
| (dollars in millions) | 2022 | 2021 | $ | % | ||||||||||||||||||||||
| Net sales | $ | 73 | $ | 59 | $ | 14 | 23 | % | ||||||||||||||||||
| Operating profit | $ | 7 | $ | 8 | $ | — | (5) | % | ||||||||||||||||||
| Operating profit, before special Items (adjusted)* | $ | 11 | $ | 8 | $ | 3 | 40 | % | ||||||||||||||||||
| Operating profit margin | 10.0 | % | 13.0 | % | (300bps) | |||||||||||||||||||||
| Operating profit margin, before special items (adjusted)* | 14.8 | % | 13.0 | % | 180bps | |||||||||||||||||||||
*Please see the attached Non-GAAP Financial Measures tables
Sales of $73 million increased $14 million, or 23%, compared to the prior year. Operating profit margin declined to 10.0%, from 13.0%. Excluding Special Items, operating profit margin increased to 14.8%, from 13.0%.
4
Additional Information
The results of the Engineered Materials segment are presented as continuing operations as of June 30, 2022.
Additional information with respect to the Company’s asbestos liability and related accounting provisions and cash requirements is set forth in the Current Report on Form 8-K filed with a copy of this press release.
Conference Call
Crane Holdings, Co. has scheduled a conference call to discuss the second quarter financial results on Tuesday, July 26, 2022 at 10:00 A.M. (Eastern). All interested parties may listen to a live webcast of the call at http://www.craneco.com. An archived webcast will also be available to replay this conference call directly from the Company’s website under Investors, Events & Presentations. Slides that accompany the conference call will be available on the Company’s website.
About Crane Holdings, Co.
Crane Holdings, Co. is a diversified manufacturer of highly engineered industrial products. Founded in 1855, Crane provides products and solutions to customers across end markets including aerospace, defense, chemical and petrochemical, water and wastewater, payment automation, and banknote security and production, as well as for a wide range of general industrial and consumer applications. The Company has four business segments: Aerospace & Electronics, Process Flow Technologies, Payment & Merchandising Technologies, and Engineered Materials. Crane has approximately 11,000 employees in the Americas, Europe, the Middle East, Asia and Australia. Crane is traded on the New York Stock Exchange (NYSE:CR). For more information, visit www.craneco.com.
Forward-Looking Statements Disclaimer
This press release contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements include all statements that are not historical statements of fact and those regarding our intent, belief, or expectations, including, but not limited to: statements regarding Crane’s and the ultimate spin-off company’s (“SpinCo”) portfolio composition and their relationship following the business separation; the anticipated timing, structure, benefits, and tax treatment of the spin-off; benefits and synergies of the spin-off; strategic and competitive advantages of each of Crane and SpinCo; future financing plans and opportunities; and business strategies, prospects and projected operating and financial results. In addition, there is also no assurance that the spin-off will be completed, that Crane’s Board of Directors will continue to pursue the spin-off (even if there are no impediments to completion), that Crane will be able to separate its businesses or that the spin-off will be the most beneficial alternative considered. We caution investors not to place undue reliance on any such forward-looking statements.
Words such as “anticipate(s),” “expect(s),” “intend(s),” “plan(s),” “believe(s),” “plan(s),” “may,” “will,” “would,” “could,” “should,” “seek(s),” and similar expressions, or the negative of these terms, are intended to identify such forward-looking statements. These statements are based on management’s current expectations and beliefs and are subject to a number of risks and uncertainties that could lead to actual results differing materially from those projected, forecasted or expected. Although we believe that the assumptions underlying the forward-looking statements are reasonable, we can give no assurance that our expectations will be attained.
Risks and uncertainties that could cause actual results to differ materially from our expectations include, but are not limited to: changes in global economic conditions (including inflationary pressures) and geopolitical risks, including macroeconomic fluctuations that may harm our business, results of operation and stock price; the effects of the ongoing coronavirus pandemic on our business and the global and U.S. economies generally; information systems and technology networks failures and breaches in data security, personally identifiable and other information, non-compliance with our contractual or other legal obligations regarding such information; potential exposure from numerous lawsuits for asbestos-related personal injury; our ability to source components and raw materials from
5
suppliers, including disruptions and delays in our supply chain; demand for our products, which is variable and subject to factors beyond our control; governmental regulations and failure to comply with those regulations; fluctuations in the prices of our components and raw materials; loss of personnel or being able to hire and retain additional personnel needed to sustain and grow our business as planned; risks from environmental liabilities, costs, litigation and violations that could adversely affect our financial condition, results of operations, cash flows and reputation; risks associated with conducting a substantial portion of our business outside the U.S.; being unable to identify or complete acquisitions, or to successfully integrate the businesses we acquire, or complete dispositions; adverse impacts from intangible asset impairment charges; potential product liability or warranty claims; being unable to successfully develop and introduce new products, which would limit our ability to grow and maintain our competitive position and adversely affect our financial condition, results of operations and cash flow; significant competition in our markets; additional tax expenses or exposures that could affect our financial condition, results of operations and cash flows; inadequate or ineffective internal controls; specific risks relating to our reportable segments, including Aerospace & Electronics, Process Flow Technologies, Payment & Merchandising Technologies and Engineered Materials; the ability and willingness of Crane and SpinCo to meet and/or perform their obligations under any contractual arrangements that are entered into among the parties in connection with the spin-off and any of their obligations to indemnify, defend and hold the other party harmless from and against various claims, litigation and liabilities; and the ability to achieve some or all the benefits that we expect to achieve from the spin-off.
Readers should carefully review Crane’s financial statements and the notes thereto, as well as the section entitled “Risk Factors” in Item 1A of Crane’s Annual Report on Form 10-K for the year ended December 31, 2021 and the other documents Crane and its subsidiaries file from time to time with the SEC. Readers should also carefully review the “Risk Factors” section of the registration statement relating to the business separation, which is expected to be filed by SpinCo with the SEC. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements.
These forward-looking statements reflect management’s judgment as of this date, and Crane assumes no (and disclaims any) obligation to revise or update them to reflect future events or circumstances.
We make no representations or warranties as to the accuracy of any projections, statements or information contained in this document. It is understood and agreed that any such projections, targets, statements and information are not to be viewed as facts and are subject to significant business, financial, economic, operating, competitive and other risks, uncertainties and contingencies many of which are beyond our control, that no assurance can be given that any particular financial projections ranges, or targets will be realized, that actual results may differ from projected results and that such differences may be material. While all financial projections, estimates and targets are necessarily speculative, we believe that the preparation of prospective financial information involves increasingly higher levels of uncertainty the further out the projection, estimate or target extends from the date of preparation. The assumptions and estimates underlying the projected, expected or target results are inherently uncertain and are subject to a wide variety of significant business, economic and competitive risks and uncertainties that could cause actual results to differ materially from those contained in the financial projections, estimates and targets. The inclusion of financial projections, estimates and targets in this press release should not be regarded as an indication that we or our representatives, considered or consider the financial projections, estimates and targets to be a reliable prediction of future events.
This press release does not constitute an offer to sell, or a solicitation of an offer to buy, securities for sale.
(Financial Tables Follow)
6
CRANE HOLDINGS, CO.
Income Statement Data
(in millions, except per share data)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Net sales: | |||||||||||||||||||||||
| Aerospace & Electronics | $ | 161.5 | $ | 157.5 | $ | 318.6 | $ | 311.5 | |||||||||||||||
| Process Flow Technologies | 296.0 | 310.7 | 607.4 | 598.8 | |||||||||||||||||||
| Payment & Merchandising Technologies | 334.0 | 328.2 | 666.6 | 665.6 | |||||||||||||||||||
| Engineered Materials | 72.8 | 59.1 | 143.1 | 113.0 | |||||||||||||||||||
| Total net sales | $ | 864.3 | $ | 855.5 | $ | 1,735.7 | $ | 1,688.9 | |||||||||||||||
| Operating profit: | |||||||||||||||||||||||
| Aerospace & Electronics | $ | 28.2 | $ | 30.8 | $ | 56.2 | $ | 56.8 | |||||||||||||||
| Process Flow Technologies | 40.6 | 46.5 | 89.6 | 96.6 | |||||||||||||||||||
| Payment & Merchandising Technologies | 80.7 | 77.9 | 164.9 | 163.7 | |||||||||||||||||||
| Engineered Materials | 7.3 | 7.7 | 20.2 | 14.1 | |||||||||||||||||||
| Corporate | (32.4) | (18.3) | (59.5) | (40.2) | |||||||||||||||||||
| Total operating profit | $ | 124.4 | $ | 144.6 | $ | 271.4 | $ | 291.0 | |||||||||||||||
| Interest income | $ | 0.6 | $ | 0.4 | $ | 0.9 | $ | 0.9 | |||||||||||||||
| Interest expense | (11.4) | (11.4) | (22.5) | (25.0) | |||||||||||||||||||
| Gain on sale of business | 251.0 | — | 251.0 | — | |||||||||||||||||||
| Miscellaneous, net | 14.8 | 9.7 | 18.3 | 13.6 | |||||||||||||||||||
| Income before income taxes | 379.4 | 143.3 | 519.1 | 280.5 | |||||||||||||||||||
| Provision for income taxes | 98.9 | 5.0 | 133.6 | 33.8 | |||||||||||||||||||
| Net income attributable to common shareholders | $ | 280.5 | $ | 138.3 | $ | 385.5 | $ | 246.7 | |||||||||||||||
| Earnings per diluted share | $ | 4.93 | $ | 2.33 | $ | 6.71 | $ | 4.17 | |||||||||||||||
| Average diluted shares outstanding | 56.9 | 59.3 | 57.5 | 59.1 | |||||||||||||||||||
| Average basic shares outstanding | 56.1 | 58.5 | 56.7 | 58.4 | |||||||||||||||||||
| Supplemental data: | |||||||||||||||||||||||
| Cost of sales | $ | 535.7 | $ | 523.5 | $ | 1,061.8 | $ | 1,037.0 | |||||||||||||||
| Selling, general & administrative | 204.2 | 187.4 | 402.5 | 360.9 | |||||||||||||||||||
Transaction related expenses 1 | 19.6 | 0.8 | 25.6 | 0.8 | |||||||||||||||||||
Repositioning related charges (gains), net 1 | 1.3 | 2.2 | 3.1 | (9.5) | |||||||||||||||||||
Depreciation and amortization 1 | 32.4 | 30.7 | 61.0 | 62.3 | |||||||||||||||||||
Stock-based compensation expense 1 | 5.9 | 6.1 | 11.9 | 12.4 | |||||||||||||||||||
1 Amounts included within Cost of sales and/or Selling, general & administrative costs. | |||||||||||||||||||||||
7
CRANE HOLDINGS, CO.
Condensed Balance Sheets
(in millions)
| June 30, 2022 | December 31, 2021 | |||||||||||||
| Assets | ||||||||||||||
| Current assets | ||||||||||||||
| Cash and cash equivalents | $ | 650.6 | $ | 478.6 | ||||||||||
| Accounts receivable, net | 490.4 | 483.0 | ||||||||||||
| Current insurance receivable - asbestos | 13.7 | 13.7 | ||||||||||||
| Inventories, net | 442.9 | 449.1 | ||||||||||||
| Other current assets | 130.8 | 118.7 | ||||||||||||
| Total current assets | 1,728.4 | 1,543.1 | ||||||||||||
| Property, plant and equipment, net | 514.2 | 555.6 | ||||||||||||
| Long-term insurance receivable - asbestos | 51.2 | 60.0 | ||||||||||||
| Other assets | 681.6 | 744.1 | ||||||||||||
| Goodwill | 1,546.0 | 1,583.8 | ||||||||||||
| Total assets | $ | 4,521.4 | $ | 4,486.6 | ||||||||||
| Liabilities and equity | ||||||||||||||
| Current liabilities | ||||||||||||||
| Short-term borrowings | $ | 119.4 | $ | — | ||||||||||
| Accounts payable | 247.9 | 273.7 | ||||||||||||
| Current asbestos liability | 62.3 | 62.3 | ||||||||||||
| Accrued liabilities | 361.6 | 442.7 | ||||||||||||
| Income taxes | 54.1 | 10.6 | ||||||||||||
| Total current liabilities | 845.3 | 789.3 | ||||||||||||
| Long-term debt | 842.9 | 842.4 | ||||||||||||
| Long-term deferred tax liability | 75.1 | 76.9 | ||||||||||||
| Long-term asbestos liability | 517.5 | 549.8 | ||||||||||||
| Other liabilities | 353.7 | 393.1 | ||||||||||||
| Total equity | 1,886.9 | 1,835.1 | ||||||||||||
| Total liabilities and equity | $ | 4,521.4 | $ | 4,486.6 | ||||||||||
8
CRANE HOLDINGS, CO.
Condensed Statements of Cash Flows
(in millions)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Operating activities: | ||||||||||||||||||||||||||
| Net income attributable to common shareholders | $ | 280.5 | $ | 138.3 | $ | 385.5 | $ | 246.7 | ||||||||||||||||||
| Gain on sale of business | (251.0) | — | (251.0) | — | ||||||||||||||||||||||
| Gain on sale of property | — | (5.7) | — | (18.5) | ||||||||||||||||||||||
| Depreciation and amortization | 32.4 | 30.7 | 61.0 | 62.3 | ||||||||||||||||||||||
| Stock-based compensation expense | 5.9 | 6.1 | 11.9 | 12.4 | ||||||||||||||||||||||
| Defined benefit plans and postretirement credit | (3.9) | (2.5) | (6.6) | (4.2) | ||||||||||||||||||||||
| Deferred income taxes | 20.8 | (21.7) | 19.9 | (21.4) | ||||||||||||||||||||||
| Cash provided by (used for) operating working capital | 34.7 | 25.7 | (149.0) | (29.1) | ||||||||||||||||||||||
| Defined benefit plans and postretirement contributions | (5.8) | (1.4) | (8.6) | (17.2) | ||||||||||||||||||||||
| Environmental payments, net of reimbursements | (3.7) | (2.2) | (5.0) | (3.6) | ||||||||||||||||||||||
| Asbestos related payments, net of insurance recoveries | (15.9) | (9.4) | (23.4) | (20.2) | ||||||||||||||||||||||
| Other | 10.5 | (1.4) | 14.3 | (0.5) | ||||||||||||||||||||||
| Total provided by operating activities | $ | 104.5 | $ | 156.5 | $ | 49.0 | $ | 206.7 | ||||||||||||||||||
| Investing activities: | ||||||||||||||||||||||||||
| Proceeds from disposition of capital assets | $ | 0.1 | $ | 8.8 | $ | 0.1 | $ | 23.3 | ||||||||||||||||||
| Capital expenditures | (12.2) | (9.7) | (25.2) | (14.6) | ||||||||||||||||||||||
| Proceeds from sale of business | 314.3 | — | 314.3 | — | ||||||||||||||||||||||
| Purchase of marketable securities | — | — | — | (10.0) | ||||||||||||||||||||||
| Proceeds from sale of marketable securities | — | 10.0 | — | 40.0 | ||||||||||||||||||||||
| Total provided by investing activities | $ | 302.2 | $ | 9.1 | $ | 289.2 | $ | 38.7 | ||||||||||||||||||
| Financing activities: | ||||||||||||||||||||||||||
| Dividends paid | $ | (26.4) | $ | (25.2) | $ | (53.1) | $ | (50.2) | ||||||||||||||||||
| Reacquisition of shares on open market | (27.9) | — | (203.7) | — | ||||||||||||||||||||||
| Stock options exercised, net of shares reacquired | 1.1 | (2.0) | 1.8 | 5.2 | ||||||||||||||||||||||
| Repayments of commercial paper with maturities greater than 90 days | — | — | — | (27.1) | ||||||||||||||||||||||
| Net borrowings from issuance of commercial paper with maturities of 90 days or less | 15.4 | 15.0 | 119.4 | 15.0 | ||||||||||||||||||||||
| Repayment of term loan | — | (348.1) | — | (348.1) | ||||||||||||||||||||||
| Total (used for) provided by financing activities | $ | (37.8) | $ | (360.3) | $ | (135.6) | $ | (405.2) | ||||||||||||||||||
| Effect of exchange rate on cash and cash equivalents | (25.5) | 3.0 | (30.6) | (4.5) | ||||||||||||||||||||||
| Increase (decrease) in cash and cash equivalents | 343.4 | (191.7) | 172.0 | (164.3) | ||||||||||||||||||||||
| Cash and cash equivalents at beginning of period | 307.2 | 578.4 | 478.6 | 551.0 | ||||||||||||||||||||||
| Cash and cash equivalents at end of period | $ | 650.6 | $ | 386.7 | $ | 650.6 | $ | 386.7 | ||||||||||||||||||
9
CRANE HOLDINGS, CO.
Order Backlog
(in millions)
| June 30, 2022 | March 31, 2022 | December 31, 2021 | September 30, 2021 | June 30, 2021 | ||||||||||||||||||||||||||||
| Aerospace & Electronics | $ | 534.4 | $ | 508.4 | $ | 459.8 | $ | 478.5 | $ | 472.9 | ||||||||||||||||||||||
| Process Flow Technologies | 348.6 | 372.4 | 357.9 | 351.4 | 344.1 | |||||||||||||||||||||||||||
| Payment & Merchandising Technologies | 482.0 | 429.0 | 438.0 | 387.9 | 374.7 | |||||||||||||||||||||||||||
| Engineered Materials | 22.0 | 30.4 | 20.1 | 18.0 | 17.6 | |||||||||||||||||||||||||||
| Total backlog | $ | 1,387.0 | $ | 1,340.2 | $ | 1,275.8 | $ | 1,235.8 | $ | 1,209.3 | ||||||||||||||||||||||
10
CRANE HOLDINGS, CO.
Non-GAAP Financial Measures
(in millions, except per share data)
| Three Months Ended June 30, | ||||||||||||||||||||||||||||||||
| 2022 | 2021 | % Change | ||||||||||||||||||||||||||||||
| $ | Per Share | $ | Per Share | (on $) | ||||||||||||||||||||||||||||
| Net sales (GAAP) | $ | 864.3 | $ | 855.5 | 1.0 | % | ||||||||||||||||||||||||||
| Operating profit (GAAP) | $ | 124.4 | $ | 144.6 | (14.0) | % | ||||||||||||||||||||||||||
| Operating profit margin (GAAP) | 14.4 | % | 16.9 | % | ||||||||||||||||||||||||||||
| Special items impacting operating profit: | ||||||||||||||||||||||||||||||||
| Transaction related expenses | 19.6 | 0.8 | ||||||||||||||||||||||||||||||
| Repositioning related charges (gains), net | 1.3 | 2.2 | ||||||||||||||||||||||||||||||
| Operating profit before special items (adjusted) | $ | 145.3 | $ | 147.6 | (1.6) | % | ||||||||||||||||||||||||||
| Operating profit margin before special items (adjusted) | 16.8 | % | 17.3 | % | ||||||||||||||||||||||||||||
| Net income attributable to common shareholders (GAAP) | $ | 280.5 | $ | 4.93 | $ | 138.3 | $ | 2.33 | 102.8 | % | ||||||||||||||||||||||
| Special items, net of tax, impacting net income attributable to common shareholders: | ||||||||||||||||||||||||||||||||
| Transaction related expenses (income), net | 10.8 | 0.19 | 0.6 | 0.01 | ||||||||||||||||||||||||||||
| Repositioning related charges (gains), net | 0.9 | 0.02 | 1.7 | 0.03 | ||||||||||||||||||||||||||||
| Impact of pension curtailments and settlements | (0.9) | (0.02) | — | — | ||||||||||||||||||||||||||||
| Gain on sale of business | (203.8) | (3.58) | — | — | ||||||||||||||||||||||||||||
| Deferred tax adjustment related to sale of business | 20.7 | 0.36 | (21.5) | (0.36) | ||||||||||||||||||||||||||||
| Gain on sale of property | — | — | (4.5) | (0.08) | ||||||||||||||||||||||||||||
| Net income, net of tax, attributable to common shareholders before special items (adjusted) | $ | 108.2 | $ | 1.90 | $ | 114.6 | $ | 1.93 | (5.6) | % | ||||||||||||||||||||||
| Special items impacting provision for income taxes: | ||||||||||||||||||||||||||||||||
| Provision for income taxes (GAAP) | $ | 98.9 | $ | 5.0 | ||||||||||||||||||||||||||||
| Tax effect of transaction related expenses (income), net | 1.4 | 0.2 | ||||||||||||||||||||||||||||||
| Tax effect of repositioning related charges (gains), net | 0.4 | 0.5 | ||||||||||||||||||||||||||||||
| Tax effect of impact of pension curtailments and settlements | (0.3) | — | ||||||||||||||||||||||||||||||
| Tax effect of gain on sale of business | (47.2) | — | ||||||||||||||||||||||||||||||
| Tax effect of deferred tax adjustment related to sale of business | (20.7) | 21.5 | ||||||||||||||||||||||||||||||
| Tax effect of gain on sale of property | — | (1.2) | ||||||||||||||||||||||||||||||
| Provision for income taxes before special items (adjusted) | $ | 32.5 | $ | 26.0 | ||||||||||||||||||||||||||||
| Totals may not sum due to rounding | ||||||||||||||||||||||||||||||||
11
CRANE HOLDINGS, CO.
Non-GAAP Financial Measures
(in millions, except per share data)
| Six Months Ended June 30, | ||||||||||||||||||||||||||||||||
| 2022 | 2021 | % Change | ||||||||||||||||||||||||||||||
| $ | Per Share | $ | Per Share | (on $) | ||||||||||||||||||||||||||||
| Net sales (GAAP) | $ | 1,735.7 | $ | 1,688.9 | 2.8 | % | ||||||||||||||||||||||||||
| Operating profit (GAAP) | $ | 271.4 | $ | 291.0 | (6.7) | % | ||||||||||||||||||||||||||
| Operating profit margin (GAAP) | 15.6 | % | 17.2 | % | ||||||||||||||||||||||||||||
| Special items impacting operating profit: | ||||||||||||||||||||||||||||||||
| Transaction related expenses | 25.6 | 0.8 | ||||||||||||||||||||||||||||||
| Repositioning related charges (gains), net | 3.1 | (9.5) | ||||||||||||||||||||||||||||||
| Operating profit before special items (adjusted) | $ | 300.1 | $ | 282.3 | 6.3 | % | ||||||||||||||||||||||||||
| Operating profit margin before special items (adjusted) | 17.3 | % | 16.7 | % | ||||||||||||||||||||||||||||
| Net income attributable to common shareholders (GAAP) | $ | 385.5 | $ | 6.71 | $ | 246.7 | $ | 4.17 | 56.3 | % | ||||||||||||||||||||||
| Special items, net of tax, impacting net income attributable to common shareholders: | ||||||||||||||||||||||||||||||||
| Transaction related expenses (income), net | 19.8 | $ | 0.34 | 0.6 | 0.01 | |||||||||||||||||||||||||||
| Repositioning related charges (gains), net | 2.2 | 0.04 | (9.1) | (0.15) | ||||||||||||||||||||||||||||
| Impact of pension curtailments and settlements | (0.9) | (0.02) | — | — | ||||||||||||||||||||||||||||
| Gain on sale of business | (203.8) | (3.54) | — | — | ||||||||||||||||||||||||||||
| Deferred tax adjustment related to sale of business | 20.7 | 0.36 | (21.5) | (0.36) | ||||||||||||||||||||||||||||
| Gain on sale of property | — | — | (4.5) | (0.08) | ||||||||||||||||||||||||||||
| Net income, net of tax, attributable to common shareholders before special items (adjusted) | $ | 223.5 | $ | 3.89 | $ | 212.2 | $ | 3.59 | 5.3 | % | ||||||||||||||||||||||
| Special items impacting provision for income taxes: | ||||||||||||||||||||||||||||||||
| Provision for income taxes (GAAP) | $ | 133.6 | $ | 33.8 | ||||||||||||||||||||||||||||
| Tax effect of transaction related (income) expenses, net | (1.5) | 0.2 | ||||||||||||||||||||||||||||||
| Tax effect of repositioning related charges (gains), net | 0.9 | (0.5) | ||||||||||||||||||||||||||||||
| Tax effect of impact of pension curtailments and settlements | (0.3) | — | ||||||||||||||||||||||||||||||
| Tax effect of gain on sale of business | (47.2) | — | ||||||||||||||||||||||||||||||
| Tax effect of deferred tax adjustment related to sale of business | (20.7) | 21.5 | ||||||||||||||||||||||||||||||
| Tax effect of gain on sale of property | — | (1.2) | ||||||||||||||||||||||||||||||
| Provision for income taxes before special items (adjusted) | $ | 64.8 | $ | 53.8 | ||||||||||||||||||||||||||||
| Totals may not sum due to rounding | ||||||||||||||||||||||||||||||||
12
CRANE HOLDINGS, CO.
Non-GAAP Financial Measures by Segment
(in millions)
| Three Months Ended June 30, 2022 | Aerospace & Electronics | Process Flow Technologies | Payment & Merchandising Technologies | Engineered Materials | Corporate | Total Company | |||||||||||||||||||||||||||||
| Net sales (GAAP) | $ | 161.5 | $ | 296.0 | $ | 334.0 | $ | 72.8 | $ | — | $ | 864.3 | |||||||||||||||||||||||
| Operating profit (GAAP) | $ | 28.2 | $ | 40.6 | $ | 80.7 | $ | 7.3 | $ | (32.4) | $ | 124.4 | |||||||||||||||||||||||
| Operating profit margin (GAAP) | 17.5 | % | 13.7 | % | 24.2 | % | 10.0 | % | 14.4 | % | |||||||||||||||||||||||||
| Special items impacting operating profit: | |||||||||||||||||||||||||||||||||||
| Transaction related expenses | $ | — | $ | 4.2 | $ | — | $ | 3.5 | $ | 11.9 | $ | 19.6 | |||||||||||||||||||||||
| Repositioning related charges (gains), net | — | 1.3 | — | — | — | 1.3 | |||||||||||||||||||||||||||||
| Operating profit before special items (adjusted) | $ | 28.2 | $ | 46.1 | $ | 80.7 | $ | 10.8 | $ | (20.5) | $ | 145.3 | |||||||||||||||||||||||
| Operating profit margin before special items (adjusted) | 17.5 | % | 15.6 | % | 24.2 | % | 14.8 | % | 16.8 | % | |||||||||||||||||||||||||
| Three Months Ended June 30, 2021 | |||||||||||||||||||||||||||||||||||
| Net sales (GAAP) | $ | 157.5 | $ | 310.7 | $ | 328.2 | $ | 59.1 | $ | — | $ | 855.5 | |||||||||||||||||||||||
| Operating profit (GAAP) | $ | 30.8 | $ | 46.5 | $ | 77.9 | $ | 7.7 | $ | (18.3) | $ | 144.6 | |||||||||||||||||||||||
| Operating profit margin (GAAP) | 19.6 | % | 15.0 | % | 23.7 | % | 13.0 | % | 16.9 | % | |||||||||||||||||||||||||
| Special items impacting operating profit: | |||||||||||||||||||||||||||||||||||
| Transaction related expenses | — | — | — | — | 0.8 | 0.8 | |||||||||||||||||||||||||||||
| Repositioning related charges (gains), net | — | 2.4 | (0.2) | — | — | 2.2 | |||||||||||||||||||||||||||||
| Operating profit before special items (adjusted) | $ | 30.8 | $ | 48.9 | $ | 77.7 | $ | 7.7 | $ | (17.5) | $ | 147.6 | |||||||||||||||||||||||
| Operating profit margin before special items (adjusted) | 19.6 | % | 15.7 | % | 23.7 | % | 13.0 | % | 17.3 | % | |||||||||||||||||||||||||
| Totals may not sum due to rounding | |||||||||||||||||||||||||||||||||||
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CRANE HOLDINGS, CO.
Non-GAAP Financial Measures by Segment
(in millions)
| Six Months Ended June 30, 2022 | Aerospace & Electronics | Process Flow Technologies | Payment & Merchandising Technologies | Engineered Materials | Corporate | Total Company | |||||||||||||||||||||||||||||
| Net sales (GAAP) | $ | 318.6 | $ | 607.4 | $ | 666.6 | $ | 143.1 | $ | — | $ | 1,735.7 | |||||||||||||||||||||||
| Operating profit (GAAP) | $ | 56.2 | $ | 89.6 | $ | 164.9 | $ | 20.2 | $ | (59.5) | $ | 271.4 | |||||||||||||||||||||||
| Operating profit margin (GAAP) | 17.6 | % | 14.8 | % | 24.7 | % | 14.1 | % | 15.6 | % | |||||||||||||||||||||||||
| Special items impacting operating profit: | |||||||||||||||||||||||||||||||||||
| Transaction related expenses | $ | — | $ | 4.2 | $ | — | $ | 3.5 | $ | 17.9 | $ | 25.6 | |||||||||||||||||||||||
| Repositioning related charges (gains), net | — | 3.1 | — | — | — | 3.1 | |||||||||||||||||||||||||||||
| Operating profit before special items (adjusted) | $ | 56.2 | $ | 96.9 | $ | 164.9 | $ | 23.7 | $ | (41.6) | $ | 300.1 | |||||||||||||||||||||||
| Operating profit margin before special items (adjusted) | 17.6 | % | 16.0 | % | 24.7 | % | 16.6 | % | 17.3 | % | |||||||||||||||||||||||||
| Six Months Ended June 30, 2021 | |||||||||||||||||||||||||||||||||||
| Net sales (GAAP) | $ | 311.5 | $ | 598.8 | $ | 665.6 | $ | 113.0 | $ | — | $ | 1,688.9 | |||||||||||||||||||||||
| Operating profit (GAAP) | $ | 56.8 | $ | 96.6 | $ | 163.7 | $ | 14.1 | $ | (40.2) | $ | 291.0 | |||||||||||||||||||||||
| Operating profit margin (GAAP) | 18.2 | % | 16.1 | % | 24.6 | % | 12.5 | % | 17.2 | % | |||||||||||||||||||||||||
| Special items impacting operating profit: | |||||||||||||||||||||||||||||||||||
| Acquisition-related and integration charges | $ | — | $ | — | $ | — | $ | — | $ | 0.8 | $ | 0.8 | |||||||||||||||||||||||
| Repositioning related charges (gains), net | — | (8.8) | (0.7) | — | — | (9.5) | |||||||||||||||||||||||||||||
| Operating profit before special items (adjusted) | $ | 56.8 | $ | 87.8 | $ | 163.0 | $ | 14.1 | $ | (39.4) | $ | 282.3 | |||||||||||||||||||||||
| Operating profit margin before special items (adjusted) | 18.2 | % | 14.7 | % | 24.5 | % | 12.5 | % | 16.7 | % | |||||||||||||||||||||||||
| Totals may not sum due to rounding | |||||||||||||||||||||||||||||||||||
14
CRANE HOLDINGS, CO.
Full Year Guidance
(in millions, except per share data)
| 2022 Earnings per Share Guidance | Low | High | ||||||||||||
| Earnings per diluted share (GAAP) | $ | 9.80 | $ | 10.20 | ||||||||||
| Special items impacting earnings per share | (2.35) | (2.35) | ||||||||||||
| Earnings per diluted share before special items (adjusted) | $ | 7.45 | $ | 7.85 | ||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | 2022 Guidance | ||||||||||||||||||||||||||||||||||||
| Cash Flow Items | 2022 | 2021 | 2022 | 2021 | Low | High | ||||||||||||||||||||||||||||||||
| Cash provided by operating activities before asbestos-related payments | $ | 120.4 | $ | 165.9 | $ | 72.4 | $ | 226.9 | $ | 430.0 | $ | 470.0 | ||||||||||||||||||||||||||
| Asbestos-related payments, net of insurance recoveries | (15.9) | (9.4) | (23.4) | (20.2) | (45.0) | (45.0) | ||||||||||||||||||||||||||||||||
| Cash provided by operating activities | 104.5 | 156.5 | 49.0 | 206.7 | 385.0 | 425.0 | ||||||||||||||||||||||||||||||||
| Less: Capital expenditures | (12.2) | (9.7) | (25.2) | (14.6) | (60.0) | (60.0) | ||||||||||||||||||||||||||||||||
| Free cash flow | $ | 92.3 | $ | 146.8 | $ | 23.8 | $ | 192.1 | $ | 325.0 | $ | 365.0 | ||||||||||||||||||||||||||
| Cash flow items related to 2022 portfolio actions | $ | 25.0 | $ | 25.0 | ||||||||||||||||||||||||||||||||||
| Adjusted free cash flow | $ | 350.0 | $ | 390.0 | ||||||||||||||||||||||||||||||||||
Crane Holdings, Co. reports its financial results in accordance with U.S. generally accepted accounting principles (“GAAP”). This press release includes certain non-GAAP financial measures, including adjusted operating profit, adjusted operating margin, adjusted EPS, and Free Cash Flow, that are not prepared in accordance with GAAP. These non-GAAP measures are an addition, and not a substitute for or superior to, measures of financial performance prepared in accordance with GAAP and should not be considered as an alternative to operating income, net income or any other performance measures derived in accordance with GAAP. We believe that these non-GAAP measures of financial results (including on a forward-looking or projected basis) provide useful supplemental information to investors about Crane Holdings, Co. prior to the proposed separation, and about Crane Holdings, Co. and Crane NXT after the proposed separation transaction. Our management uses certain forward looking non-GAAP measures to evaluate projected financial and operating results. However, there are a number of limitations related to the use of these non-GAAP measures and their nearest GAAP equivalents. For example, other companies may calculate non-GAAP measures differently, or may use other measures to calculate their financial performance, and therefore our non-GAAP measures may not be directly comparable to similarly titled measures of other companies.
We believe that each of the following non-GAAP measures provides useful information to investors regarding the Company’s financial conditions and operations:
•Operating Profit before Special Items (“Adjusted Operating Profit”) and Operating Margin before Special Items (“Adjusted Operating Margin”) add back to Operating Profit items which are outside of our core performance, some of which may or may not be non-recurring, and which we believe may complicate the interpretation of the Company’s underlying earnings and operational performance. These items include income and expense such as: Acquisition-related deferred revenue, Acquisition-related and integration charges, Transaction related expenses, Repositioning related (gains) charges, and Asbestos and environmental provisions. These items are not incurred in all periods, the size of these items is difficult to predict, and none of these items are indicative of the operations of the underlying businesses. We believe that non-GAAP financial measures that exclude these items provide investors with an alternative metric that can assist in predicting future earnings and profitability that are complementary to GAAP metrics.
•Net income attributable to common shareholders before special items (“Adjusted Net Income”) and Adjusted Earnings per Diluted Share (“Adjusted EPS”) exclude items which are outside of our core performance, some of which may or may not be non-recurring, and which we believe may complicate the presentation of the Company’s underlying earnings and operational performance. These measures include income and expense items that impacted Operating Profit such as: Acquisition-related deferred revenue, Acquisition-related and integration charges, Transaction related expenses, Repositioning related (gains) charges, and Asbestos and environmental provisions. Additionally, these non-GAAP financial measures exclude income and expense items that impacted Net Income and Earnings per Diluted Share such as: Pension Curtailments and Settlements, gain on the sale of property, realized gain on marketable securities, impact of non-cash pension cost adjustment, and deconsolidation of joint venture. These items are not incurred in all periods, the size of these items is difficult to predict, and none of these items are indicative of the operations of the underlying businesses. We believe that non-GAAP financial measures that exclude these items provide investors with an alternative metric that can assist in predicting future earnings and profitability that are complementary to GAAP metrics.
•“Free Cash Flow” and “Adjusted Free Cash Flow” provides supplemental information to assist management and investors in analyzing the Company’s ability to generate liquidity from its operating activities. The measure of free cash flow does not take into consideration certain other non-discretionary cash requirements such as, for example, mandatory principal payments on the
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Company’s long-term debt. Free Cash Flow is calculated as cash provided by operating activities less capital spending. Adjusted Free Cash Flow is calculated as Free Cash Flow adjusted for certain cash items which we believe may complicate the interpretation of the Company’s underlying free cash flow performance such as certain transaction related cash flow items related to 2022 portfolio actions. These items are not incurred in all periods, the size of these items is difficult to predict, and none of these items are indicative of the operations of the underlying businesses. We believe that non-GAAP financial measures that exclude these items provide investors with an alternative metric that can assist in predicting future cash flows that are complementary to GAAP metrics.
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