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What changed in Crane Co's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Crane Co's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+234 added−564 removedSource: 10-K (2024-02-26) vs 10-K (2023-03-31)

Top changes in Crane Co's 2023 10-K

234 paragraphs added · 564 removed · 183 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

31 edited+8 added−22 removed16 unchanged
Biggest changeAerospace & Electronics The Aerospace & Electronics segment supplies critical components and systems, including original equipment and aftermarket parts, primarily for the commercial aerospace, and the military aerospace, defense and space markets. The commercial market and military market accounted for 57% and 43%, respectively, of total segment sales in 2022.
Biggest changeThe commercial market and military market accounted for 60% and 40%, respectively, of total segment sales in 2023. Sales to original equipment manufacturers ("OEMs") and aftermarket customers were 69% and 31%, respectively, in 2023.
Our unique position to drive sustained growth is driven by differentiated technology investment focused on high-growth market segments, including Low Earth Orbit satellite constellations, next-generation aircraft engines, advanced ground and sea-based radar systems, as well as high-power and bi-directional power conversion for numerous emerging commercial and military applications, including more-electric and hybrid-electric ground vehicles and hybrid-electric and pure electric-propulsion aircraft.
Our unique position to drive sustained growth is driven by differentiated technology investment focused on high-growth market segments, including next-generation aircraft engines, advanced ground and sea-based radar systems, Low Earth Orbit satellite constellations, as well as high-power and bi-directional power conversion for numerous emerging commercial and military applications, including more-electric and hybrid-electric ground vehicles and hybrid-electric and pure electric-propulsion aircraft.
Other related products include lined pipe, fittings and hoses, air operated diaphragm and peristaltic pumps, instrumentation and sampling systems, valve positioning and control systems, valve diagnostic and calibration systems. Across the portfolio, the primary focus is on chemical, pharmaceutical and general industrial end markets.
Other related products include lined pipe, fittings and hoses, air operated diaphragm and peristaltic pumps, instrumentation and sampling systems, valve positioning and control systems, and valve diagnostic and calibration systems. Across the portfolio, the primary focus is on chemical, pharmaceutical and general industrial end markets.
The segment is comprised of Process Valves and Related Products, Pumps and Systems and Commercial Valves. • Process Valves and Related Products: Manufactures a wide range of on/off isolation valves, including check valves, sleeved plug valves, lined valves, process ball valves, high performance butterfly valves, bellows sealed globe valves, aseptic and industrial diaphragm valves and multi / quarter-turn valves actuation.
The segment is comprised of Process Valves and Related Products, Pumps and Systems and Commercial Valves. • Process Valves and Related Products: Manufactures a wide range of on/off isolation valves, including check valves, sleeved plug valves, lined valves, process ball valves, high performance butterfly valves, bellows sealed globe valves, aseptic and industrial diaphragm valves and multi / quarter-turn valve actuation.
The primary geographies served by the manufacturing operations are the United Kingdom, the Middle East and continental Europe. Our portfolio strategically targets the higher growth and less cyclical chemical, general industrial, water and wastewater and pharmaceutical industries.
The primary geographies served by the manufacturing operations are the United Kingdom, the Middle East and continental Europe. 7 Our portfolio strategically targets the higher growth and less cyclical chemical, general industrial, water and wastewater and pharmaceutical industries.
By focusing on accelerating the rate of innovation through R&D investment, we have driven incremental market capture and significantly improved new product sales vitality to support long term profitable growth.
By focusing on accelerating the rate of innovation through R&D investment, we have driven incremental market capture and improved new product sales vitality to support long term profitable growth.
A&E has a solid long term growth profile driven by positions on market leading platforms, recent new program wins and continued investment in technology readiness.
A&E has a long-term growth profile driven by positions on market leading platforms, recent new program wins and continued investment in technology readiness.
Although market forces have at times, including in 2022, caused increases in the costs of key raw materials, there have been no raw materials shortages that have had a material adverse impact on our business. We believe that we will generally be able to obtain adequate supplies of major raw material requirements or reasonable substitutes at acceptable costs.
Although market forces have at times , including in 2023, caused increases in the costs of key raw materials, there have been no raw materials shortages that have had a material adverse impact on our business. We believe that we will generally be able to obtain adequate supplies of major raw material requirements or reasonable substitutes at acceptable costs.
The segment is also positioned to benefit from underlying market growth driven by increasing new commercial aircraft deliveries, air passenger travel growth, defense investment, ongoing maintenance, repair and overhaul organizations (“MRO”) requirements and emerging applications in the space market, as well as a strong trend driving greater electrification for aerospace and defense applications.
The segment is also positioned to benefit from underlying market growth driven by increasing new commercial aircraft deliveries, air passenger travel growth, defense investment, ongoing maintenance, repair and overhaul organizations (“MRO”) requirements and emerging applications in the space market, as well as a strong trend driving greater electrification for aerospace and defense applications.
To be an employer of choice and maintain the strength of our workforce, we consistently assess the current business environment and labor market to refine our compensation and benefits programs and other resources available to our associates. We are committed to developing our associates personally and professionally by leveraging a structured and disciplined Intellectual Capital (“IC”) process.
To be an employer of choice and maintain the strength of our workforce, we consistently assess the current business environment and labor market to refine our compensation and benefits programs and other resources available to our associates. We are committed to developing our associates personally and professionally by leveraging a structured and disciplined Intellectual Capital (“IC”) process.
Crane, resolved “to conduct my business in the strictest honesty and fairness; to avoid all deception and trickery; to deal fairly with both customers and competitors; to be liberal and just toward employees; and to put my whole mind upon the business.” Our strategy is to grow earnings and cash flow by focusing on the manufacturing of highly engineered industrial products for specific markets where our scale is a relative advantage, and where we can compete based on our proprietary and 6 Table of Contents differentiated technology, our deep vertical expertise, and our responsiveness to unique and diverse customer needs.
Crane, resolved “to conduct my business in the strictest honesty and fairness; to avoid all deception and trickery; to deal fairly with both customers and competitors; to be liberal and just toward employees; and to put my whole mind upon the business.” Our strategy is to grow earnings and cash flow by focusing on the manufacturing of highly engineered industrial products for specific markets where our scale is a relative advantage, and where we can compete based on our proprietary and differentiated technology, our deep vertical expertise, and our responsiveness to unique and diverse customer needs.
Our regular IC cadence includes constructive reviews and various talent and leadership development initiatives conducted by the executive management team and provided throughout an associate’s career. We are also committed to an inclusive and high-performance culture at all levels of the organization, based on trust and respect.
Our regular IC cadence includes constructive reviews and various talent and leadership development initiatives conducted by the executive management team and provided throughout an associate’s career. We are also committed to an inclusive and high-performance culture at all levels of the organization, based on trust and respect.
A&E’s integrated capabilities include the following: • Power Solutions: Provides enabling technology to accelerate electrification of air, land, space and sea vehicles and systems. 8 Table of Contents • Sensing Systems: Provides components and systems for condition and position sensing, and pressure and flow measurement, with high-accuracy, reliability and engineering to excel in rugged aerospace environments. • Fluid & Thermal Management: Designs and manufactures positive displacement pumps, centrifugal pumps and true mass flowmeters for aerospace and defense applications. • Landing Systems: Provides hydraulic and electric brake control systems with antiskid and autobrake functionality, as well as electronic and hydraulic subsystems for landing gear control. • Microwave Solutions: Designs and manufactures high-performance RF and IF components and millimeter-wave systems and subsystems for defense, space and commercial end-use customers.
A&E’s integrated capabilities include the following: • Power Solutions: Provides enabling technology to accelerate electrification of air, land, space and sea vehicles and systems. • Sensing Systems: Provides components and systems for condition and position sensing, and pressure and flow measurement, with high-accuracy, reliability and engineering to excel in rugged aerospace environments. • Fluid & Thermal Management: Designs and manufactures positive displacement pumps, centrifugal pumps and true mass flowmeters for aerospace and defense applications. • Landing Systems: Provides hydraulic and electric brake control systems with antiskid and autobrake functionality, as well as electronic and hydraulic subsystems for landing gear control. • Microwave Solutions: Designs and manufactures high-performance RF and IF components and millimeter-wave systems and subsystems for defense, space and commercial end-use customers.
For a further discussion of risks related to raw materials, please refer to Item 1A. “Risk Factors.” 10 Table of Contents Government Contracts We have agreements relating to the sale of products to government entities, primarily involving products in our Aerospace & Electronics and, to a lesser extent, our Process Flow Technologies segment.
For a further discussion of risks related to raw materials, please refer to Item 1A. “Risk Factors.” Government Contracts We have agreements relating to the sale of products to government entities, primarily involving products in our Aerospace & Electronics segment and, to a lesser extent, our Process Flow Technologies segment.
Beginning with a core value of integrity, we incorporate “Voice of the Customer” teachings (specific processes designed to capture our customers’ requirements) and a broad range of tools into a disciplined strategy deployment process to continuously improve safety, quality, delivery, cost and growth.
Beginning with a core value of integrity, we incorporate “Voice of the Customer” teachings (specific processes designed to capture our customers’ requirements) and a broad range of tools into a disciplined strategy deployment process to continuously improve safety, quality, delivery, cost and growth.
We, and Crane Holdings, Co., each also make our filings available free of charge through our Internet website, as soon as reasonably practicable after filing such material electronically with, or furnishing such material, to the SEC. Also posted on our website are Crane Holdings, Co.’s Corporate Governance Guidelines, Standards for Director Independence, Crane Holdings, Co.
The address of the SEC’s website is www.sec.gov. We also make our filings available free of charge through our Internet website, as soon as reasonably practicable after filing such material electronically with, or furnishing such material, to the SEC. Also posted on our website are our Corporate Governance Guidelines, Standards for Director Independence, Crane Company.
Our failure to comply with these laws could result in suspension of these contracts, criminal or civil sanctions, administrative penalties and fines or suspension or debarment from government contracting or subcontracting for a period of time.
Our failure to comply with these laws could result in suspension of these contracts, criminal or civil sanctions, administrative penalties and fines or suspension or debarment from government contracting or subcontracting for a period of time. For a further discussion of risks related to compliance with government contracting requirements, please refer to Item 1A.
When it is reasonably probable we will pay remediation costs at a site, and those costs can be reasonably estimated, we accrue a liability for such future costs with a related charge against our earnings.
When it is reasonably probable we will pay remediation costs at a site, and those costs can be reasonably estimated, we accrue a liability for such future costs with a related charge against our earnings. For further discussion of environmental related risks, please refer to Item 1A.
Sales to original equipment manufacturers (“OEMs”) and aftermarket customers were 72% and 28%, respectively, in 2022. We provide mission critical systems that require high reliability and high accuracy, such as pressure sensors for aircraft engine control, aircraft braking systems for fighter jets, power conversion solutions for spacecraft and lubrication systems for the harshest and most hazardous environmental conditions.
We provide mission critical systems that require high reliability and high accuracy, such as pressure sensors for aircraft engine control, aircraft braking systems for commercial aircraft and fighter jets, power conversion solutions for spacecraft and lubrication systems for the harshest and most hazardous environmental conditions.
Reportable Segments For additional information on recent business developments and other information about us and our business, please refer to the information set forth under the captions, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in Part II, Item 7 of this report, as well as in Part II, Item 8 under Note 4, “Segment Information,” in the Notes to Combined Financial Statements for sales, operating profit and assets employed by each segment.
Reportable Segments For additional information on recent business developments and other information about us and our business, please refer to the information set forth under the captions, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in Part II, Item 7 of this report, as well as in Part II, Item 8 under Note 4, “Segment Information,” in the Notes to Consolidated Financial Statements for sales, operating profit and assets employed by each segment. 6 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.
Code of Ethics and the charters and a brief description of each of Crane Holdings, Co.’s Audit Committee, Management Organization and Compensation Committee and Nominating and Governance Committee. These items are available in the “Investors – Corporate Governance” section of Crane Holdings, Co.’s website at www.craneco.com.
Code of Ethics and the charters and a brief description of each of the Audit Committee, the Management Organization and Compensation Committee and the Nominating and Governance Committee. These items are available in the “Investors – Corporate Governance” section of our website at www.craneco.com. The content of our website is not part of this report. 9
Employees based in some foreign countries may, from time to time, be represented by works councils or unions or subject to collective bargaining agreements. We consider our relations with our employees to be good.
At December 31, 2023, approximately 5% of our U.S. employees were represented by a union under a collective bargaining agreement. Employees based in some foreign countries may, from time to time, be represented by works councils or unions or subject to collective bargaining agreements. We consider our relations with our employees to be good.
Crane has differentiated proprietary technology and know-how supporting many of the fundamental technologies that are supporting solutions where we are often sole source in the areas where we compete, with a track record for performance, reliability and continued innovation.
Crane Company has invented many of the fundamental technologies that are now the industry standard in the areas where we compete, with a track record for performance, reliability and innovation.
For a further discussion of risks related to compliance with government contracting requirements, please refer to Item 1A. “Risk Factors.” Environmental Compliance and Climate Change We are regulated by federal, state and international environmental laws governing our use, transport and disposal of substances and control of emissions.
“Risk Factors.” 8 Environmental Compliance and Climate Change We are regulated by federal, state and international environmental laws governing our use, transport and disposal of substances and control of emissions.
At December 31, 2022, we employed approximately 7,000 persons worldwide, of which substantially all were full time employees. In the United States, we employed approximately 4,000 people across 35 locations. At December 31, 2022, approximately 5% of our U.S. employees were represented by a union under a collective bargaining agreement.
The Company has a diverse global workforce located in 21 countries, spanning five continents. At December 31, 2023, we employed approximately 7,300 persons worldwide, of which substantially all were full time employees. In the United States, we employed approximately 4,000 people across 35 locations.
The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers, like us, that file electronically with the SEC. The address of the SEC’s website is www.sec.gov.
“Risk Factors.” Available Information We file annual, quarterly and current reports and amendments to these reports, proxy statements and other information with the U.S. Securities and Exchange Commission (“SEC”). The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers, like us, that file electronically with the SEC.
We expect these industries to be outsized growth segments of the market, driven by investment in sustainability and clean energy, aging infrastructure, tightening wastewater regulations and an aging population with a growing demand for healthcare. 9 Table of Contents Crane has a strong track record of innovation and being a pioneer in the industry, “writing the book” on the flow of fluids with Technical Paper 410, which is still used as a definitive authority on the topic for engineers, professionals and other practitioners.
Crane has a track record of innovation and being a pioneer in the industry, “writing the book” on the flow of fluids with Technical Paper 410, which is still used as a definitive authority on the topic for engineers, professionals and other practitioners.
Human Capital Resources To remain a leading manufacturer of highly engineered industrial products, it is important that we continue to attract, develop, and retain exceptional talent across our global enterprise. The Company has a diverse global workforce located in 20 countries, spanning six continents.
“Risk Factors.” For further discussion of our environmental matters, please refer to Part II, Item 8 under Note 13, “Commitments and Contingencies,” in the Notes to Consolidated Financial Statements. Human Capital Resources To remain a leading manufacturer of highly engineered industrial products, it is important that we continue to attract, develop, and retain exceptional talent across our global enterprise.
We have been committed to the highest standards of business conduct since inception in 1855 when our founder, R.T.
Our primary end markets include aerospace, defense and space, process industries, non-residential and municipal construction, along with a wide range of general industrial and certain consumer related end markets. We have been committed to the highest standards of business conduct since inception in 1855 when our founder, R.T.
An embedded intellectual capital development process helps ensure that we attract, develop, promote and retain talent to drive continuity and repeatable results. 7 Table of Contents Recent Transactions Pending Separation On March 30, 2022, Crane Holdings, Co. announced that its Board of Directors unanimously approved a plan to pursue a separation into two independent, publicly-traded companies (the “Separation”), Crane Company and Crane NXT, Co.
An embedded intellectual capital development process helps ensure that we attract, develop, promote and retain talent to drive continuity and repeatable results.
We utilize strict compliance protocols, training programs, effective risk management practices, and sound science in our operations to minimize risk to our associates. 11 Table of Contents Beginning in 2020, in response to the COVID-19 pandemic, we implemented flexible remote work options and health and safety protocols and procedures across all of our global offices, manufacturing and distribution facilities to ensure the safety and well-being of our associates.
We utilize strict compliance protocols, training programs, effective risk management practices, and sound science in our operations to minimize risk to our associates. For a discussion of risks related to employee relations, please refer to Item 1A.
Removed
Item 1. Business General In March 2022, the board of directors of Crane Holdings, Co. authorized management to pursue a plan to separate spin-off its Aerospace & Electronics, Process Flow Technologies and Engineered Materials segments to Crane Holdings, Co.’s stockholders (the “spin-off”).
Added
Item 1. Business General We are a diversified manufacturer of highly engineered industrial products. Our operations are comprised of three segments: Aerospace & Electronics (“A&E”), Process Flow Technologies (“PFT”), and Engineered Materials (“EM”).
Removed
On February 7, 2023, the SEC declared effective the registrant’s Registration Statement on Form 10, filed on December 15, 2022, as amended by Amendment No. 1 to the Registration Statement on Form 10, filed on January 24, 2023.
Added
Recent Transactions 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.
Removed
Crane Company, a Delaware corporation and a direct, wholly owned subsidiary of Crane Holdings, Co., was newly formed for the purpose of separation and has not engaged in any activities except in preparation for the distribution. The registrant expects the spin-off to be consummated on April 3, 2023. Crane Company We are a diversified manufacturer of highly engineered industrial products.
Added
As a result of the Distribution, Crane Company became an independent public company. Our common stock is listed under the symbol "CR" on the New York Stock Exchange.
Removed
Our operations are currently comprised of three segments: Aerospace & Electronics (“A&E”), Process Flow Technologies (“PFT”) and Engineered Materials (“EM”). Our primary end markets include aerospace, defense and space, process industries, non-residential and municipal construction, along with a wide range of general industrial and certain consumer related end markets.
Added
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.
Removed
Upon completion of the pending Separation, Crane Holdings, Co. will be renamed “Crane NXT, Co.” and will continue to operate Crane Holdings, Co.’s Payment & Merchandising Technologies segment.
Added
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. Acquisitions On October 4, 2023, the Company completed the acquisition of Baum lined piping GmbH (“BAUM”).
Removed
The new company distributed to the stockholders of Crane Holdings, Co. in the Separation, Crane Company, will hold Crane Holdings, Co.’s Aerospace & Electronics and Process Flow Technologies global growth platforms, as well as Crane Holdings, Co.’s Engineered Materials segment.
Added
BAUM is a German based company that designs, manufactures, and distributes lined piping products primarily focused on chemical and industrial end markets. BAUM is included in our Process Flow Technologies segment. On January 2, 2024, the Company completed the acquisition of Vian Enterprises, Inc. (“Vian”).
Removed
The Separation is expected to occur through a tax-free distribution of all of the outstanding shares of Crane Company common stock to holders of Crane Holdings, Co. common stock and is expected to be completed in April, 2023, subject to the satisfaction of customary conditions and final approval by Crane Holdings, Co.’s Board of Directors.
Added
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 highest volume commercial and military aircraft platforms. Vian will be included in the Aerospace & Electronics (“A&E”) segment.
Removed
On February 7, 2023, the SEC declared effective our registration statement on Form 10. Each Crane Holdings, Co. stockholder will receive one share of Crane Company common stock for every one share of Crane Holdings, Co. common stock held on March 23, 2023, the record date for the distribution.
Added
We expect these industries to be outsized growth segments, driven by investment in sustainability and clean energy, aging infrastructure, tightening wastewater regulations and an aging population with a growing demand for healthcare.
Removed
For additional information regarding the Separation, including risk factors, see the Information Statement of Crane Company, filed as Exhibit 99.1 to the registration statement on Form 10 filed by Crane Company with the SEC on December 15, 2022, as amended by Amendment No. 1 filed with the SEC on January 24, 2023.
Removed
Crane Company Credit Facilities On March 17, 2023, Crane Company entered into a new senior unsecured credit agreement (the “Credit Agreement”), which provides 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 will become available substantially concurrently with the spin-off, subject to the satisfaction of customary conditions of facilities of this type.
Removed
The Revolving Facility allows us to borrow, repay and re-borrow funds from time to time prior to 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.
Removed
Borrowings under the Term Facility are prepayable without premium or penalty, subject to customary reimbursement of breakage costs.
Removed
Interest on loans advanced under the Credit Agreement accrues, at our option, at a rate per annum equal to (1) adjusted term SOFR 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 our total net leverage ratio.
Removed
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%, depending on our total net leverage ratio.
Removed
The Credit Agreement contains customary affirmative and negative covenants for credit facilities of this type, including limitations on us and our subsidiaries with respect to indebtedness, liens, mergers, consolidations, liquidations and dissolutions, sales of all or substantially all assets, transactions with affiliates and hedging arrangements.
Removed
As of the last day of each quarter, we must also maintain a total net leverage ratio not to exceed 3.50 to 1.00 (which, at the Crane Company’s election, such maximum ratio may be increased to 4.00 to 1.00 for specified periods following our consummation of certain material acquisitions) and a minimum interest coverage ratio must be at least 3.00 to 1.00.
Removed
The Credit Agreement also includes for customary events of default, including failure to pay principal, interest or fees when due, failure to comply with covenants, any representation or warranty made by us or any of our material subsidiaries being false in any material respect, default under certain other material indebtedness, certain insolvency or receivership events affecting us and our material subsidiaries, certain ERISA events, material judgments and a change in control, in each case, subject to cure periods and thresholds where customary.
Removed
For further discussion of environmental related risks, please refer to Item 1A. “Risk Factors.” For further discussion of our environmental matters, please refer to Part II, Item 8 under Note 13, “Commitments and Contingencies,” in the Notes to Combined Financial Statements.
Removed
These protocols included proper hygiene, social distancing, mask use and temperature screenings and other health and safety standards as required by federal, state and local government agencies, taking into consideration guidelines of the Centers for Disease Control and Prevention in the U.S., and other similar public health authorities in our international locations.
Removed
Today, we continue to deploy various work options and protocols in response to the significantly reduced health risks compared to the initial and early period of the pandemic.
Removed
For a discussion of risks related to employee relations, please refer to Item 1A. “Risk Factors.” Available Information We, and our sole shareholder, Crane Holdings, Co., each file annual, quarterly, and current reports and amendments to these reports, proxy statements and other information with the U.S. Securities and Exchange Commission (“SEC”).
Removed
The content of this website is not part of this report. 12 Table of Contents

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

45 edited+11 added−114 removed61 unchanged
Biggest changeWe conduct a substantial portion of our business outside the U.S. and face risks inherent in non-domestic operations. Net sales by destination outside the U.S. were 42.2% of our combined amounts in 2022. We expect that non-U.S. sales will continue to account for a significant portion of our revenues for the foreseeable future.
Biggest changeWe have experienced and expect to continue to experience some of these types of cybersecurity threats and incidents, which could be material in the future. We conduct a substantial portion of our business outside the U.S. and face risks inherent in non-domestic operations. Net sales by destination outside the U.S. were 39.6% of our consolidated amounts in 2023.
Our acquisition program attempts to address the potential risks inherent in assessing the value, strengths, weaknesses, contingent or other liabilities, systems of internal control and potential profitability of acquisition candidates, as well as other challenges such as retaining the employees and integrating the operations of the businesses we acquire.
Our acquisition program attempts to address the potential risks inherent in assessing the value, strengths, weaknesses, contingent or other liabilities, systems of internal control and profitability of acquisition candidates, as well as other challenges such as retaining the employees and integrating the operations of the businesses we acquire.
Our sales to defense customers are also affected by the level of activity in military flight operations. We rely on certain subcontractors and suppliers to provide and produce raw materials, integrated components and sub-assemblies. The Aerospace and Defense industry is experiencing continued disruptions due to the lingering impacts of COVID-19, global supply chain constraints, and labor instability.
Our sales to defense customers are also affected by the level of activity in military flight operations. We rely on certain subcontractors and suppliers to provide and produce raw materials, integrated components and sub-assemblies. The Aerospace and Defense industry is experiencing continued disruptions due to the lingering impacts of COVID-19 and related global supply chain constraints and labor instability.
In addition, we cannot provide assurance that our costs related to remedial efforts or alleged environmental damage associated with past or current waste disposal practices or other hazardous materials handling practices will not exceed our estimates or adversely affect our financial condition, results of operations and cash flows.
In addition, we cannot provide assurance that our costs related to remedial efforts or alleged environmental damage associated with past or current 13 waste disposal practices or other hazardous materials handling practices will not exceed our estimates or adversely affect our financial condition, results of operations and cash flows.
The adoption and expansion of trade restrictions, the occurrence of a trade war, or other governmental action related to tariffs or trade agreements or policies has the potential to adversely impact demand for our products, our costs, our customers, our suppliers, and the U.S. economy, which in turn could have a material adverse effect on our business, financial condition, results of operations and cash flows. • The COVID-19 pandemic had and may continue to have an adverse impact on our operations and financial performance, as well as on the operations and financial performance of many of the customers and suppliers in industries that we serve.
The adoption and expansion of trade restrictions, the occurrence of a trade war, or other governmental action related to tariffs or trade agreements or policies has the potential to adversely impact demand for our products, our costs, our customers, our suppliers, and the U.S. economy, which in turn could have a material adverse effect on our business, financial condition, results of operations and cash flows. • The COVID-19 pandemic had an adverse impact on our operations and financial performance, as well as on the operations and financial performance of many of the customers and suppliers in industries that we serve.
Engineered Materials Our Engineered Materials segment manufactures and sells fiberglass reinforced plastic (“FRP”) panels and coils, primarily for use in the manufacturing of RVs, trucks, and trailers, with additional applications in commercial and industrial building construction. Demand in these end markets is dependent on general economic conditions, credit availability, and consumer and corporate spending levels.
Engineered Materials Our Engineered Materials segment manufactures and sells fiberglass reinforced plastic (“FRP”) panels and coils, primarily for use in the manufacturing of RVs, trucks, and trailers, with additional applications in commercial and industrial building construction. Demand in these end markets is dependent on general economic conditions, credit availability, and consumer and corporate spending levels.
Process Flow Technologies Our Process Flow Technologies segment competes in markets that are fragmented and highly competitive. The business competes against large, well established global companies, as well as smaller regional and local companies. We compete based on our products’ quality, reliability and safety, our brand reputation, value-added technical expertise and customer support and consistent on-time delivery.
Process Flow Technologies Our Process Flow Technologies segment competes in markets that are fragmented and highly competitive. The business competes against large, well-established global companies, as well as smaller regional and local companies. We compete based on our products’ quality, reliability and safety, our brand reputation, value-added technical expertise and customer support and consistent on-time delivery.
In addition, if we are unable to develop and introduce new products in a cost-effective manner or otherwise effectively manage the introduction of new products and/or programs, our results of operations and financial condition could be adversely impacted. Demand for our products could also be adversely impacted by industry consolidation that could result in greater acceptance of competitors’ products.
In addition, if we are unable to develop and introduce new products in a cost-effective manner or otherwise effectively manage the introduction of new products and/or programs, our results of operations and financial condition could be adversely impacted. Demand for our products could also be adversely impacted by industry consolidation that could result in greater acceptance of competitors' products.
A failure to comply with these requirements might result in suspension of these contracts and suspension or debarment from government contracting or subcontracting.
A failure to comply with these requirements might result in suspension of associated contracts and suspension or debarment from government contracting or subcontracting.
Any decrease in demand for new aircraft or equipment, or use of existing aircraft and equipment, would likely result in decreased sales of our products and services.
Any decrease in demand for new aircraft or equipment, or use of existing aircraft and equipment, would result in decreased sales of our products and services.
We have recently observed an overall tightening and increasingly competitive labor market which has, and could continue to result in higher compensation costs. While we believe we have a robust intellectual capital process, we may have difficulty retaining key personnel or locating and hiring additional qualified personnel.
We have recently observed an increasingly competitive labor market which has and could continue to result in higher compensation costs. While we believe we have a robust intellectual capital process, we may have difficulty retaining key personnel or locating and hiring additional qualified personnel.
We are required to comply with various import and export control laws, which may affect our transactions with certain customers, particularly in our Aerospace & Electronics and Process Flow Technologies segments, as discussed more fully under “Specific Risks Relating to Our Business Segments.” In certain circumstances, export control and economic sanctions, and other trade-related regulations may prohibit the export of certain products, services and technologies, and in other circumstances we may be required to obtain an export license before exporting the controlled item.
We are required to comply with various import and export control laws, which may affect transactions with certain customers, particularly in our Aerospace & Electronics and Process Flow Technologies segments, as discussed more fully under “Specific Risks Relating to Our Business Segments.” In certain circumstances, export control and economic sanctions, and other trade-related regulations may prohibit the export of certain products, services and technologies, and in other circumstances we may be required to obtain an export license before exporting the controlled item.
The defense portion of the segment’s business is dependent primarily on U.S. government spending, and to a lesser extent, foreign government spending, on the specific military platforms and programs where our business participates. Any reduction in appropriations for these platforms or programs could impact the performance of our business.
The defense portion of the segment’s business is dependent primarily on U.S. government spending, and to a lesser extent, foreign government spending, on the specific military platforms and programs where our business participates. Any reduction in appropriations for these platforms or programs could impact the performance of our business.
Any service disruption from one of these suppliers, either due to circumstances beyond the supplier’s control, such as geopolitical developments, could have a material adverse effect on our ability to meet commitments to our customers or increase our operating costs. We are required to comply with various export control laws, which may affect our transactions with certain customers.
Any service disruption from one of these suppliers, either due to circumstances beyond the supplier's control, such as geopolitical developments, could have a material adverse effect on our ability to meet commitments to our customers or increase our operating costs. We are required to comply with various export control laws, which may affect our transactions with certain customers.
Integrating acquired operations involves significant risks and uncertainties, including: • Maintenance of uniform standards, controls, policies and procedures; 16 Table of Contents • Unplanned expenses associated with the integration efforts; • Inability to achieve planned facility repositioning savings or related efficiencies from recent and ongoing investments; and • Unidentified issues not discovered in the due diligence process, including legal contingencies.
Integrating acquired operations involves significant risks and uncertainties, including: • Maintenance of uniform standards, controls, policies and procedures; • Unplanned expenses associated with the integration efforts; • Inability to achieve planned facility repositioning savings or related efficiencies from recent and ongoing investments; and • Unidentified issues not discovered in the due diligence process, including legal contingencies.
Demand for our Process Flow Technologies products is heavily dependent on our customers’ level of new capital investment and planned maintenance expenditures. Customer spending typically depends on general economic conditions, availability of credit, and expectations of future demand.
Demand for our Process Flow Technologies products is heavily dependent on our customers’ level of new capital investment and planned maintenance expenditures. Customer spending typically depends on general economic conditions, availability of credit, and expectations of future demand.
We are also subject to investigation and audit for compliance with the requirements governing government contracts, 19 Table of Contents including requirements related to procurement integrity, manufacturing practices and quality procedures, export control, employment practices, the accuracy of records and the recording of costs and information security requirements.
We are also subject to investigation and audit for compliance with the requirements governing government contracts, including requirements related to procurement integrity, manufacturing practices and quality procedures, export control, employment practices, the accuracy of records and the recording of costs and information security requirements.
In addition, our operations outside the U.S. are subject to the risks associated with conducting business internationally, including, but not limited to: • economic and political instability, including the risk of geopolitical conflict or territorial incursions, in the countries and regions in which we operate; 15 Table of Contents • the risks of fluctuations in foreign currency exchange rates, primarily the euro, the British pound and the Japanese yen, could adversely affect our reported results, primarily in our Process Flow Technologies, as amounts earned in other countries are translated into U.S. dollars for reporting purposes; and • changes in the U.S. government’s approach to trade policy, including in some cases renegotiating and terminating certain existing bilateral or multi-lateral trade agreements.
In addition, our operations outside the U.S. are subject to the risks associated with conducting business internationally, including, but not limited to: • economic and political instability, including the risk of geopolitical conflict or territorial incursions, in the countries and regions in which we operate; • the risks of fluctuations in foreign currency exchange rates, primarily the euro and the British pound, could adversely affect our reported results, primarily in our Process Flow Technologies segment, as amounts earned in other countries are translated into U.S. dollars for reporting purposes; and • changes in the U.S. government's approach to trade policy, including in some cases renegotiating and terminating certain existing bilateral or multi-lateral trade agreements.
Our financial condition, results of operations and cash flow could be affected by changes to any or all of the following: tax laws, regulations, accounting principles and judicial rulings, the geographic mix of our earnings, the valuation of our deferred tax assets and liabilities, and the results of audits and examinations of previously filed tax returns.
Our financial condition, results of operations and cash flow could be affected by changes to tax laws, regulations, accounting principles and judicial rulings, the geographic mix of our earnings, the valuation of our deferred tax assets and liabilities, and the results of audits and examinations of previously filed tax returns.
We have seen a period of sustained price increases for components and raw materials that may continue into the future as demand increases and supply may remain constrained, which has resulted in, and may continue to result in, increased costs for us.
We have seen a period of sustained price increases for components and raw materials that may continue into the future as demand increases and supply may remain constrained, notably in our A&E segment, which has resulted in, and may continue to result in, increased costs for us.
As of December 31, 2022, we had goodwill and other intangible assets, net of accumulated amortization, of $762.6 million, which represented approximately 34% of our total assets. Our goodwill is subject to an impairment test on an annual basis and is also tested whenever events and circumstances indicate that goodwill may be impaired.
As of December 31, 2023, we had goodwill and other intangible assets, net of accumulated amortization, of $835.6 million, which represented approximately 36% of our total assets. Our goodwill is subject to an impairment test on an annual basis and is also tested whenever events and circumstances indicate that goodwill may be impaired.
Our business, financial condition, operating results and cash flows may be adversely affected by changes in global economic conditions and geopolitical risks, including credit market conditions, trade policies, levels of consumer and business confidence, commodity prices and availability, inflationary pressures, exchange rates, levels of government spending and deficits, political conditions, and other challenges that could affect the global economy including impacts associated with any economic sanctions imposed against Russia, including any territory within the Ukraine that Russia has occupied, in response to their invasion of the Ukraine.
Our business, financial condition, operating results and cash flows may be adversely affected by changes in global economic conditions and geopolitical risks, including credit market conditions, trade policies, levels of consumer and business confidence, commodity prices and availability, inflationary pressures, exchange rates, levels of government spending and deficits, political conditions, and other challenges that could affect the global economy, including the ongoing conflict in the Middle East as well as impacts associated with any economic sanctions imposed against Russia, in response to their invasion of the Ukraine.
Profitability could also be adversely affected by an increase in the price of resin or fiberglass if we are unable to pass the incremental costs on to our customers. Additional risks include the loss of a principal supplier.
Profitability could also be adversely affected by an increase in the price of resin or fiberglass if we are unable to pass the incremental costs on to our customers. Additional risks include the loss of a principal supplier. Item 1B. Unresolved Staff Comments None
This discussion should be considered in conjunction with the discussion under the caption “Forward-Looking Information” preceding Part I, the information set forth under Item 1, “Business” and with the discussion of the business included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These risks comprise the material risks of which we are aware.
This discussion should be considered in conjunction with the discussion under the caption “Forward-Looking Information” preceding Part I, the information set forth under Item 1, “Business” and with the discussion of the business included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These risks comprise the material risks of which we are aware.
See “Specific Risks Related to Our Business Segments.” Our ability to source components and raw materials from our suppliers could be disrupted or delayed in our supply chain which could adversely affect our results of operations. Our operations require significant amounts of necessary components and raw materials.
Our ability to source components and raw materials from our suppliers could be disrupted or delayed in our supply chain, which could adversely affect our results of operations. Our operations require significant amounts of necessary components and raw materials.
Nonetheless, reduced availability or interruption in supplies, whether resulting from more stringent regulatory requirements; supplier financial condition; increases in duties and tariff costs; disruptions in transportation; an outbreak of a severe public health pandemic, such as the COVID-19 pandemic; severe weather; the occurrence or threat of wars, including Russia’s invasion of Ukraine or other conflicts, could have an adverse effect on our financial condition, results of operations and cash flows.
Nonetheless, 10 reduced availability or interruption in supplies, whether resulting from significant changes in demand; more stringent regulatory requirements; supplier financial condition; increases in duties and tariff costs; disruptions in transportation; an outbreak of a severe public health pandemic, such as the COVID-19 pandemic; severe weather; and the occurrence or threat of wars, could have an adverse effect on our financial condition, results of operations and cash flows.
A portion of our indebtedness bears interest at variable rates that are linked to changing market interest rates. As a result, an increase in market interest rates would increase our interest expense and our debt service obligations. As of December 31, 2022, we had approximately $400.0 million of indebtedness that bears interest at variable rates.
Our indebtedness bears interest at variable rates that are linked to changing market interest rates. As a result, an increase in market interest rates would increase our interest expense and our debt service obligations. As of December 31, 2023, we had approximately $249.3 million of indebtedness that bears interest at variable rates.
As of December 31, 2022, a hypothetical 1% increase in prevailing interest rates would increase our 2022 interest expense by approximately $4.0 million. 18 Table of Contents Additional tax expense or exposures could affect our financial condition, results of operations and cash flows. We are subject to income taxes in the U.S. and various international jurisdictions.
As of December 31, 2023, a hypothetical 1% increase in prevailing interest rates would increase our 2023 interest expense by approximately $2.5 million. 14 Additional tax expense or exposures could affect our financial condition, results of operations and cash flows. We are subject to income taxes in the U.S. and various international jurisdictions.
Net periodic pension (benefit) cost and pension contributions associated with our retirement benefit plans may fluctuate significantly depending upon changes in actuarial assumptions and future market performance of plan assets. Total net periodic pension benefit and pension contributions were $2.3 million and $17.8 million, respectively in 2022.
Net periodic pension cost and pension contributions associated with our retirement benefit plans may fluctuate significantly depending upon changes in actuarial assumptions and future market performance of plan assets. Total net periodic pension benefit and pension contributions were $11.2 million and $18.1 million, respectively in 2023.
In addition, our Aerospace & Electronics segment could be impacted to the extent that our major aircraft manufacturing customers encounter problems which impact their production rates and, correspondingly, reduce purchases of our products (for example, the grounding of the 737 MAX and associated suspension of 737 MAX production announced by Boeing in December 2019 reduced our sales and operating profit in 2020), or if pricing pressure from aircraft customers caused the manufacturers to press their suppliers to lower prices and/or extend payment terms; in addition, demand for military and defense products is dependent upon government spending in certain areas which can vary year to year. 14 Table of Contents • Our Process Flow Technologies segment is dependent on global economic conditions, customer capital spending and commodity prices.
In addition, our Aerospace & Electronics segment could be impacted to the extent that our major aircraft manufacturing customers encounter problems which impact their production rates and, correspondingly, reduce purchases of our products, or if pricing pressure from aircraft customers caused the manufacturers to press their suppliers to lower prices and/or extend payment terms; in addition, demand for military and defense products is dependent upon government spending in certain areas which can vary year to year. • Our Process Flow Technologies segment is dependent on global economic conditions, customer capital spending and commodity prices.
Slowing global economic growth, volatility in commodity prices, including the price of oil could all contribute to lower levels of customer spending, and project delays or cancellations. A portion of this segment’s business is subject to government contracting rules and regulations.
Slowing global economic growth and volatility in commodity prices could both contribute to lower levels of customer spending, and project delays or cancellations. A portion of this segment’s business is subject to government contracting rules and regulations.
In addition, our commercial business could also be impacted to the extent that our major aircraft manufacturing customers encounter problems which impact their production rates and, correspondingly, reduce purchases of our products (for example, the grounding of the 737 MAX and associated suspension of 737 MAX production announced by Boeing in December 2019 reduced our sales and operating profit in 2020), or if pricing pressure from aircraft customers caused the manufacturers to press their suppliers to lower prices and/or extend payment terms.
In addition, our commercial business could also be impacted to the extent that our major aircraft manufacturing customers encounter problems which impact their production rates and, correspondingly, reduce purchases of our products, or if pricing pressure from aircraft customers caused the manufacturers to press their suppliers to lower prices and/or extend payment terms.
A substantial portion of our sales is concentrated in industries that are cyclical in nature or subject to market conditions which may cause customer demand for our products to be volatile.
Demand for our products is variable and subject to factors beyond our control, which could result in unanticipated events significantly impacting our results of operations. A substantial portion of our sales is concentrated in industries that are cyclical in nature or subject to market conditions which may cause customer demand for our products to be volatile.
The costs in our business segments are affected by fluctuations in the price of metals such as steel and copper as well as other raw materials such as resin, and electronic components.
The costs of certain components and raw materials that are critical to our profitability can be volatile, which can have a significant impact on our profitability. The costs in our business segments are affected by fluctuations in the price of metals such as steel and copper as well as other raw materials such as resin and electronic components.
While we have taken actions aimed at securing an adequate supply of raw materials at prices which are favorable to us, if the prices of critical components and raw materials continue to increase or we are unable to pass increased costs of components and raw materials to customers, our operating profit could be adversely affected. 13 Table of Contents The COVID-19 pandemic had and may continue to have an adverse impact on our operations and financial performance, as well as on the operations and financial performance of many of the customers and suppliers in industries that we serve.
While we have taken actions aimed at securing an adequate supply of raw materials at prices which are favorable to us, if the prices of critical components and raw materials increase or we are unable to pass increased costs of components and raw materials to customers, our operating profit could be adversely affected.
Our ability to achieve our growth goals depends in part upon our ability to identify and successfully acquire, finance and integrate companies and businesses at appropriate prices and realize anticipated cost savings. Our future results of operations and financial condition could be adversely impacted by intangible asset impairment charges.
Our ability to achieve our growth goals depends in part upon our ability to identify and successfully acquire, finance and integrate companies and businesses at appropriate prices and realize anticipated cost savings.
Similarly, credit restrictions may adversely affect our supplier base and increase the potential for one or more of our suppliers to experience financial distress or bankruptcy.
Similarly, credit restrictions may adversely affect our supplier base and increase the potential for one or more of our suppliers to experience financial distress or bankruptcy. See “Specific Risks Related to Our Business Segments.” The prices of our components and raw materials could fluctuate dramatically, which may adversely affect our profitability.
Existing trade secret, patent, trademark and copyright laws offer only limited protection. Our patents could be invalidated or circumvented. In addition, others may develop substantially equivalent, or superseding proprietary technology, or competitors may offer equivalent non-infringing products in competition with our products, thereby substantially reducing the value of our proprietary rights.
In addition, others may develop substantially equivalent, or superseding 12 proprietary technology, or competitors may offer equivalent non-infringing products in competition with our products, thereby substantially reducing the value of our proprietary rights.
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, or a violation of our privacy and security policies with respect to such information, could adversely affect us.
Failure to comply with any of these and similar regulations could result in civil and criminal liability, monetary and non-monetary penalties, fines, disruptions to our business, limitations on our ability to export products and services, and damage to our reputation. 11 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, or a violation of our privacy and security policies with respect to such information, could adversely affect us.
We deploy a continuous, company-wide process to source our components and raw materials from fewer suppliers, and to obtain parts from suppliers in low-cost countries where possible.
We deploy a continuous, company-wide process to source our components and raw materials from fewer suppliers, and to obtain parts from suppliers in low-cost countries where possible. Due to a variety of factors, our A&E business has been experiencing, and may continue to experience, supply chain disruptions from an insufficient availability of certain components and raw materials.
Due to the lengthy research and development cycle involved in bringing commercial and military products to market, we cannot accurately predict the demand levels that will exist once a given new product is ready for market.
Failure to comply with any of these regulations could result in civil and criminal liability, monetary and non-monetary penalties, fines, disruptions to our business, limitations on our ability to export products and services, and damage to our reputation. 15 Due to the lengthy research and development cycle involved in bringing commercial and military products to market, we cannot accurately predict the demand levels that will exist once a given new product is ready for market.
A number of factors may adversely affect the labor force available to us or increase labor costs, including high employment levels, federal unemployment subsidies, including enhanced or expanded unemployment benefits offered in response to the ongoing COVID-19 pandemic, and other government regulations.
Our business segments and corporate offices are dependent upon highly qualified personnel, and we generally are dependent upon the continued efforts of key management employees. A number of factors may adversely affect the labor force available to us or increase labor costs, including high employment levels, federal unemployment subsidies and other government regulations.
The COVID-19 pandemic continues to present business challenges, and we continue to experience impacts related to COVID-19, primarily in disruptions in global supply chains, delays in supplier deliveries, higher raw material prices, delays in deliveries to customers, travel restrictions, site access and quarantine restrictions, and employee absences.
Any future pandemics or public health emergencies could result in disruptions to global supply chains, delays in supplier deliveries, higher raw material prices, delays in deliveries to customers, travel restrictions, site access and quarantine restrictions, and employee absences.
The COVID-19 pandemic continues to present business challenges, and we continue to experience impacts related to COVID-19, primarily in disruptions in global supply chains, delays in supplier deliveries, higher raw material prices, delays in deliveries to customers, travel restrictions, site access and quarantine restrictions, and employee absences.
Any future pandemics or public health emergencies could result in disruptions to global supply chains, delays in supplier deliveries, higher raw material prices, delays in deliveries to customers, travel restrictions, site access and quarantine restrictions, and employee absences. Our business could be harmed if we are unable to protect our intellectual property.
Variances in related estimates could have an adverse effect on our financial condition, results of operations and cash flows. Our business could be harmed if we are unable to protect our intellectual property. We rely on a combination of trade secrets, patents, trademarks, copyrights and confidentiality procedures to protect our products and technology.
Variances in related estimates could have an adverse effect on our financial condition, results of operations and cash flows. Our future results of operations and financial condition could be adversely impacted by intangible asset impairment charges.
Removed
Due to a variety of global factors, our business has been experiencing, and may continue to experience, supply chain disruptions from an insufficient availability of certain components and raw materials and substantial freight delays in obtaining them.
Added
The COVID-19 pandemic had and may continue to have an adverse impact on our operations and financial performance, as well as on the operations and financial performance of many of the customers and suppliers in industries that we serve.
Removed
The prices of our components and raw materials could fluctuate dramatically, which may adversely affect our profitability. The costs of certain components and raw materials that are critical to our profitability can be volatile which can have a significant impact on our profitability.
Added
Our operations have generally stabilized since the peak of the COVID-19 pandemic and in May 2023, the World Health Organization declared an end to COVID-19 as a public health emergency.
Removed
Because the severity, magnitude and duration of the COVID-19 pandemic and its continuing economic consequences remain uncertain and rapidly changing, it is difficult to predict the extent of the pandemic’s impact on our operations and financial performance.
Added
However, a resurgence of COVID-19, or other public health emergencies, could result in unpredictable responses by health authorities around the world which could negatively impact our global operations, customers and suppliers.
Removed
We have experienced and expect to continue to experience some of these types of cybersecurity threats and incidents, which could be material in the future. Demand for our products is variable and subject to factors beyond our control, which could result in unanticipated events significantly impacting our results of operations.
Added
The extent to which public health emergencies could impact our operations and financial performance is highly uncertain and would depend on future developments, including the duration of any such public health emergency, potential actions taken by governmental authorities, and how quickly economic conditions stabilize.
Removed
Failure to comply with any of these and similar regulations could result in civil and criminal liability, monetary and non-monetary penalties, fines, disruptions to our business, limitations on our ability to export products and services, and damage to our reputation.
Added
We expect that non-U.S. sales will continue to account for a significant portion of our revenues for the foreseeable future.
Removed
Our business segments and corporate offices are dependent upon highly qualified personnel, and we generally are dependent upon the continued efforts of key management employees.
Added
Our operations have substantially recovered since the peak of the COVID-19 pandemic and in May 2023, the World Health Organization declared an end to COVID-19 as a public health emergency.
Removed
Because the severity, magnitude and duration of the COVID-19 pandemic and its continuing economic consequences remain uncertain and rapidly changing, it is difficult to predict the extent of the pandemic’s impact on our operations and financial performance.
Added
However, a resurgence of COVID-19, or other public health emergencies, could result in unpredictable responses by health authorities around the world which could negatively impact our global operations, customers and suppliers.
Removed
In order to operate more efficiently and control costs, from time to time we execute restructuring activities, which include workforce reductions and facility consolidations. For example, we recorded pre-tax restructuring charges of $32.1 million for the 2020 repositioning program related to actions to reduce our global workforce in response to the adverse economic impact of COVID-19.
Added
We rely on a combination of trade secrets, patents, trademarks, copyrights and confidentiality procedures to protect our products and technology. Existing trade secret, patent, trademark and copyright laws offer only limited protection. Our patents could be invalidated or circumvented.
Removed
At the end of 2022, we took modest cost reduction actions in response to continued global economic uncertainty.
Added
In order to operate more efficiently and control costs, from time to time we execute restructuring activities, which include workforce reductions and facility consolidations. We could face potential product liability or warranty claims, we may not accurately estimate costs related to such claims, and we may not have sufficient insurance coverage available to cover such claims.
Removed
While these are proactive actions to increase our productivity and operating effectiveness, our inability to adequately respond to potential declines in global demand for our products and services and properly align our cost base could have an adverse effect on our financial condition, results of operations and cash flows. 17 Table of Contents We could face potential product liability or warranty claims, we may not accurately estimate costs related to such claims, and we may not have sufficient insurance coverage available to cover such claims.
Added
By way of example, the Organization for Economic Co-operation and Development (“OECD”) has been coordinating negotiations among more than 140 countries with the goal of achieving consensus around substantial changes to international tax policies, including the implementation of a minimum global effective tax rate of 15%.
Removed
Failure to comply with any of these regulations could result in civil and criminal liability, monetary and non-monetary penalties, fines, disruptions to our business, limitations on our ability to export products and services, and damage to our reputation.
Added
While various countries have implemented legislation as of January 1, 2024, and we currently do not expect a resulting material change to our tax liabilities in the near term as additional jurisdictions enact such legislation, we do not expect our effective tax rate and cash tax payments to significantly increase in future years.
Removed
Risks Related to the Spin-Off Crane Company may not achieve some or all of the expected benefits of the spin-off, and the spin-off may adversely affect the Company’s business. Crane Company may not be able to achieve the full strategic and financial benefits expected to result from the spin-off, or such benefits may be delayed or not occur at all.
Removed
The spin-off is expected to provide the following benefits, among others: • Enhanced ability to attract a stockholder base aligned with Crane Company’s clear value proposition. • Tailored capital allocation strategies aligned with Crane Company’s distinct business strategies and industry specific dynamics. • Deeper operational focus, accountability and flexibility to meet customer requirements. • Increased operating and financial flexibility to pursue inorganic growth opportunities. • Enhanced ability to pursue accretive M&A opportunities, with the benefit of an independent equity currency reflective of the strength of each company.
Removed
Crane Company may not achieve these and other anticipated benefits for a variety of reasons, including, among others: (i) the spin-off will require significant amounts of management’s time and effort, which may divert management’s attention from operating and growing Crane Company’s business, (ii) following the spin-off, Crane Company’s stock price may be more susceptible to market fluctuations and other events particular to one or more of Crane Company’s products than if it were still a part of Crane and (iii) following the spin-off, Crane Company’s operational and financial profile will change such that Crane Company’s diversification of revenue sources will diminish, and Crane Company’s results of operations, cash flows, working capital and financing requirements may be subject to increased volatility than prior to the spin-off.
Removed
Additionally, Crane Company may experience unanticipated competitive developments, including changes in the conditions of the markets of the Company’s A&E, PFT and Engineered Materials segments, and the other businesses it will hold at the time of the spin-off, that could negate the expected benefits from the spin-off.
Removed
If Crane Company does not realize some or all of the benefits expected to result from the spin-off, or if such benefits are delayed, the business, financial condition, results of operations and cash flows of Crane Company could be adversely affected. 20 Table of Contents Crane Company may incur material costs and expenses as a result of the spin-off.
Removed
Crane Company may incur costs and expenses greater than those Crane Company currently expects to incur as a result of the spin-off. These increased costs and expenses may arise from various factors, including financial reporting and costs associated with complying with federal securities laws (including compliance with the Sarbanes-Oxley Act).
Removed
In addition, Crane Company expects to either maintain similar or have increased corporate and administrative costs and expenses to those Crane Company incurred while part of Crane, even though, following the spin-off, Crane Company will be a smaller, stand-alone company. We cannot assure you that these costs will not be material to Crane Company’s business.
Removed
If, following the spin-off, Crane Company is unable to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, or its internal control over financial reporting is not effective, it could have a material adverse effect on the Company’s businesses and Crane Company’s stock price may suffer.
Removed
Section 404 of the Sarbanes-Oxley Act requires any company subject to the reporting requirements of the U.S. securities laws to do a comprehensive evaluation of its and its consolidated subsidiaries’ internal control over financial reporting. Our financial results previously were included within the consolidated results of Crane.
Removed
However, Crane Company was not directly subject to the reporting and other requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or the Sarbanes-Oxley Act. As a result of the spin-off, Crane Company will be directly subject to reporting and other obligations under the Exchange Act.
Removed
Beginning with its second annual report on Form 10-K, Crane Company will be required to comply with Section 404 of the Sarbanes-Oxley Act which will require it to document and test its internal control procedures, its management will be required to assess and issue a report concerning its internal control over financial reporting and its independent auditors will be required to issue an opinion on Crane Company’s internal controls over financial reporting.
Removed
These reporting and other obligations may place significant demands on our management and administrative and operational resources, including accounting systems and resources. To comply with these requirements, we will need to establish our own systems, implement additional financial and management controls, reporting systems and procedures and hire additional accounting and finance staff.
Removed
We expect to incur additional annual expenses for the purpose of addressing these requirements, and those expenses may be significant.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeProperties The following is a summary of our principal facilities as of December 31, 2022: Facilities - Owned Location Aerospace & Electronics Process Flow Technologies Engineered Materials Corporate Total Number Area (sq. ft.) Number Area (sq. ft.) Number Area (sq. ft.) Number Area (sq. ft.) Number Area (sq. ft.) Manufacturing United States 6 731,575 6 698,573 4 644,333 — — 16 2,074,481 Europe — — 6 753,616 — — — — 6 753,616 Other international — — 4 509,925 — — — — 4 509,925 6 731,575 16 1,962,114 4 644,333 — — 26 3,338,022 Non-Manufacturing United States — — 2 98,510 — — — — 2 98,510 Canada — — — — — — — — — — Europe — — 2 73,780 — — — — 2 73,780 Other international — — — — — — — — — — — — 4 172,290 — — — — 4 172,290 Facilities - Leased Location Aerospace & Electronics Process Flow Technologies Engineered Materials Corporate Total Number Area (sq. ft.) Number Area (sq. ft.) Number Area (sq. ft.) Number Area (sq. ft.) Number Area (sq. ft.) Manufacturing United States — — 2 97,220 — — — — 2 97,220 Canada — — 1 20,572 — — — — 1 20,572 Europe 1 19,418 4 822,573 — — — — 5 841,991 Other international 1 63,653 2 111,594 — — — — 3 175,247 2 83,071 9 1,051,959 — — — — 11 1,135,030 Non-Manufacturing United States 2 8,348 6 186,765 3 78,950 3 39,875 14 313,938 Canada — — 1 11,200 — — — — 1 11,200 Europe 2 1,596 7 50,864 — — — — 9 52,460 Other international — — 18 126,367 — — — — 18 126,367 4 9,944 32 375,196 3 78,950 3 39,875 42 503,965 In our opinion, these properties have been well maintained, are in good operating condition and contain all necessary equipment and facilities for their intended purposes. 26 Table of Contents
Biggest changeProperties The following is a summary of our principal facilities as of December 31, 2023: Facilities - Owned Location Aerospace & Electronics Process Flow Technologies Engineered Materials Corporate Total Number Area (sq. ft.) Number Area (sq. ft.) Number Area (sq. ft.) Number Area (sq. ft.) Number Area (sq. ft.) Manufacturing United States 6 724,240 7 758,573 4 644,333 — — 17 2,127,146 Europe — — 6 753,616 — — — — 6 753,616 Other international — — 4 509,925 — — — — 4 509,925 6 724,240 17 2,022,114 4 644,333 — — 27 3,390,687 Non-Manufacturing United States — — 2 98,510 — — — — 2 98,510 Europe — — 2 73,780 — — — — 2 73,780 Other international — — — — — — — — — — — — 4 172,290 — — — — 4 172,290 Facilities - Leased Location Aerospace & Electronics Process Flow Technologies Engineered Materials Corporate Total Number Area (sq. ft.) Number Area (sq. ft.) Number Area (sq. ft.) Number Area (sq. ft.) Number Area (sq. ft.) Manufacturing United States — — 2 97,220 — — — — 2 97,220 Canada — — 1 20,572 — — — — 1 20,572 Europe 1 19,418 5 716,757 — — — — 6 736,175 Other international 1 63,653 3 130,485 — — — — 4 194,138 2 83,071 11 965,034 — — — — 13 1,048,105 Non-Manufacturing United States 2 8,348 6 186,765 3 78,950 3 29,228 14 303,291 Canada — — 1 11,198 — — — — 1 11,198 Europe 2 1,596 6 49,002 — — — — 8 50,598 Other international — — 18 163,146 — — — — 18 163,146 4 9,944 31 410,111 3 78,950 3 29,228 41 528,233 In our opinion, these properties have been well maintained, are in good operating condition and contain all necessary equipment and facilities for their intended purposes. 18 Item 3.
Added
Legal Proceedings. Discussion of legal matters is incorporated by reference to Part II, Item 8 under Note 13, “Commitments and Contingencies,” in the Notes to Consolidated Financial Statements. Item 4. Mine Safety Disclosures. Not applicable. 19 Part II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

2 edited+0 added−0 removed0 unchanged
Biggest changeManagement’s Discussion and Analysis of Financial Condition and Results of Operations of Crane Page 30 Management’s Discussion and Analysis of Financial Condition and Results of Operations of Crane Company (Supplemental) Page 51 Item 7A. Quantitative and Qualitative Disclosures About Market Risk Page 67 Item 8. Financial Statements and Supplementary Data of Crane Page 70
Biggest changeQuantitative and Qualitative Disclosures About Market Risk Page 39 Item 8. Financial Statements and Supplementary Data Page 40
Item 4. Mine Safety Disclosures Page 27 Part II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Page 28 Item 6. [Reserved] Page 29 Item 7.
Item 4. Mine Safety Disclosures Page 19 Part II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Page 20 Item 6. Supplementary Financial Information Page 21 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Page 22 Item 7A.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+2 added−5 removed0 unchanged
Biggest changeWe did not register the issuance of the issued shares under the Securities Act because such issuance did not constitute a public offering. 28 Table of Contents Equity Compensation Plans For information regarding equity compensation plans, see Item 12 of this annual report on Form 10-K.
Biggest changeEquity Compensation Plans For information regarding equity compensation plans, see Item 12 of this annual report on Form 10-K. 20
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock began “when issued” trading on the New York Stock Exchange (the “NYSE”) on March 29, 2023. “Regular way” trading on the NYSE is expected to begin on April 4, 2023.
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Crane Company, common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol "CR". As of December 31, 2023, there were 1,524 holders of record of Crane Company common stock.
Removed
Our common stock is approved for trading on the NYSE under the symbol “CR.” As of March 29, 2023, Crane Holdings, Co. is the sole shareholder of Crane Company.
Added
Stock Performance Graph The following graph sets forth the cumulative total stockholder return to Crane Company’s stockholders for the period beginning April 3, 2023, the date of the Separation, through December 31, 2023, as well as the corresponding returns on the S&P 500 Index and the S&P 400 MidCap Capital Goods Index.
Removed
Although Crane Company anticipates that it will likely pay quarterly dividends following the distribution, Crane Company has not yet determined the value of the dividend it will pay on its common stock.
Added
The graph assumes that the value of the investment in the common stock and each index was $100 on April 3, 2023, and that all dividends were reinvested. 4/3/2023 6/30/2023 9/30/2023 12/31/2023 Crane Company $ 100.00 $ 119.62 $ 119.48 $ 159.16 S&P 500 100.00 108.34 104.79 117.03 S&P 400 Midcap Capital Goods Index 100.00 114.40 110.02 126.09 Purchases of Equity Securities Neither the Company nor any "affiliated purchaser" repurchased any shares of Company common stock during the year ended December 31, 2023.
Removed
The payment of any dividends in the future, and the timing and amount thereof, to Crane Company stockholders will fall within the sole discretion of Crane Company’s Board of Directors and will depend on many factors, such as our financial condition, earnings, capital requirements, potential obligations in planned financings, industry practice, legal requirements, Delaware corporate surplus requirements and other factors that Crane Company’s Board of Directors deems relevant.
Removed
Crane Company’s ability to pay dividends will depend on its ongoing ability to generate cash from operations and on Crane Company’s access to the capital markets. Crane Company cannot guarantee that it will pay a dividend in the future or continue to pay any dividends if Crane Company commences paying dividends.
Removed
In addition, Crane Company expects that its Board of Directors will be permitted to authorize share repurchase programs if circumstances warrant. On June 15, 2022, we issued 100 shares of our common stock to Crane Holdings, Co. in exchange for $1.00 per share pursuant to Section 4(a)(2) of the Securities Act.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

98 edited+28 added−234 removed53 unchanged
Biggest changeOn May 26, 2022, Verzatec terminated the sale agreement and paid $7.5 million to Crane in termination fees, which is presented within Miscellaneous income, net on the Supplemental Combined Statements of Operations. 54 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results from Operations - For the Years ended December 31, 2022, 2021 and 2020 For the year ended December 31, 2022 vs 2021 Favorable / (Unfavorable) Change 2021 vs 2020 Favorable / (Unfavorable) Change (in millions, except %) 2022 2021 2020 $ % $ % Net sales: Aerospace & Electronics $ 667.3 $ 638.3 $ 650.7 $ 29.0 4.5 % $ (12.4 ) (1.9 )% Process Flow Technologies 1,109.4 1,196.6 1,007.5 $ (87.2 ) (7.3 )% $ 189.1 18.8 % Engineered Materials 258.3 228.0 175.6 30.3 13.3 % 52.4 29.8 % Total net sales $ 2,035.0 $ 2,062.9 $ 1,833.8 $ (27.9 ) (1.4 )% $ 229.1 12.5 % Sales growth: Core business $ 159.5 7.7 % $ 183.2 10.0 % Foreign exchange (48.3 ) (2.3 )% 40.9 2.2 % Acquisitions/dispositions (139.1 ) (6.7 )% 5.0 0.3 % Total sales growth $ (27.9 ) (1.4 )% $ 229.1 12.5 % Cost of sales $ 1,321.4 $ 1,374.1 $ 1,250.7 $ 52.7 3.8 % $ (123.4 ) (9.9 )% Selling, general and administrative $ 478.8 $ 451.4 $ 378.8 $ (27.4 ) (6.1 )% $ (72.6 ) (19.2 )% Restructuring charges (gains), net $ 4.2 $ (13.2 ) $ 13.2 $ (17.4 ) (131.8 )% $ 26.4 NM Acquisition-related and integration charges — — 6.4 $ — — % $ 6.4 NM Loss on divestiture of asbestos-related assets and liabilities $ 162.4 — — $ (162.4 ) NM — — % Operating profit (loss): Aerospace & Electronics $ 120.3 $ 110.0 $ 100.7 $ 10.3 9.4 % $ 9.3 9.2 % Process Flow Technologies 168.2 182.5 101.0 $ (14.3 ) (7.8 )% $ 81.5 80.7 % Engineered Materials 32.6 26.9 22.7 $ 5.7 21.2 % $ 4.2 18.5 % Corporate expense (252.9 ) (68.8 ) (39.7 ) $ (184.1 ) (267.6 )% $ (29.1 ) (73.3 )% Total operating profit $ 68.2 $ 250.6 $ 184.7 $ (182.4 ) (72.8 )% $ 65.9 35.7 % Operating margin: Aerospace & Electronics 18.0 % 17.2 % 15.5 % Process Flow Technologies 15.2 % 15.2 % 10.0 % Engineered Materials 12.6 % 11.8 % 12.9 % Total operating margin 3.4 % 12.1 % 10.1 % 55 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Items Affecting Comparability of Reported Results The comparability of our results for the years ended December 31, 2022, 2021 and 2020 is affected by the following significant items: Divestiture of asbestos-related assets and liabilities In 2022, we recognized a loss on the divestiture of asbestos-related assets and liabilities of $162.4 million.
Biggest changeVian will be included in the Aerospace & Electronics segment. 22 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results from Operations - For the Years ended December 31, 2023, 2022 and 2021 For the year ended December 31, 2023 vs 2022 Favorable / (Unfavorable) Change 2022 vs 2021 Favorable / (Unfavorable) Change (in millions, except %) 2023 2022 2021 $ % $ % Net sales: Aerospace & Electronics $ 789.3 $ 667.3 $ 638.3 $ 122.0 18.3 % $ 29.0 4.5 % Process Flow Technologies 1,072.8 1,109.4 1,196.6 (36.6) (3.3) % (87.2) (7.3) % Engineered Materials 224.3 258.3 228.0 (34.0) (13.2) % 30.3 13.3 % Total net sales $ 2,086.4 $ 2,035.0 $ 2,062.9 $ 51.4 2.5 % $ (27.9) (1.4) % Sales growth: Core business $ 141.3 6.9 % $ 159.5 7.7 % Foreign exchange 0.5 — % (48.3) (2.3) % Acquisitions/dispositions (90.4) (4.4) % (139.1) (6.7) % Total sales growth $ 51.4 2.5 % $ (27.9) (1.4) % Cost of sales $ 1,281.4 $ 1,321.4 $ 1,374.1 $ 40.0 3.0 % $ 52.7 3.8 % Selling, general and administrative $ 521.2 $ 513.3 $ 467.1 $ (7.9) (1.5) % $ (46.2) (9.9) % Loss on divestiture of asbestos-related assets and liabilities $ — 162.4 — $ 162.4 NM (162.4) NM Operating profit: Aerospace & Electronics $ 159.0 $ 120.3 $ 110.0 $ 38.7 32.2 % $ 10.3 9.4 % Process Flow Technologies 208.5 168.2 182.5 40.3 24.0 % (14.3) (7.8) % Engineered Materials 33.4 32.6 26.9 0.8 2.5 % 5.7 21.2 % Corporate expense (a) (b) (117.1) (283.2) (97.7) 166.1 58.7 % (185.5) (189.9) % Total operating profit $ 283.8 $ 37.9 $ 221.7 $ 245.9 648.8 % $ (183.8) (82.9) % Operating margin: Aerospace & Electronics 20.1 % 18.0 % 17.2 % Process Flow Technologies 19.4 % 15.2 % 15.2 % Engineered Materials 14.9 % 12.6 % 11.8 % Total operating margin 13.6 % 1.9 % 10.7 % (a) For the years ended December 31, 2023, 2022 and 2021, Corporate expense included transaction related expenses of $41.5 million, $40.5 million and $8.2 million, respectively.
Core sales growth was driven primarily by pricing, with modestly higher volumes. • Sales of Process Valves and Related Products increased by $32.7 million, or 4.6%, to $749.8 million in 2022.
Core sales growth was driven primarily by higher pricing, with modestly higher volumes. • Sales of Process Valves and Related Products increased by $32.7 million, or 4.6%, to $749.8 million in 2022.
The increase reflected higher sales to building products customers and recreational vehicle manufacturers. Cost of sales increased by $24.9 million, or 13.7%, to $206.2 million, primarily related to higher increase in material, labor and other manufacturing costs of $36.7 million, or 20.2%, offset by the impact of the lower volumes of $12.2 million, or 6.7%.
The increase reflected higher sales to building products customers and recreational vehicle manufacturers. Cost of sales increased by $24.9 million, or 13.7%, to $206.2 million, primarily related to an increase in material, labor and other manufacturing costs of $36.7 million, or 20.2%, offset by the impact of the lower volumes of $12.2 million, or 6.7%.
The increase in cash provided by financing activities was primarily driven by $399.4 million in net borrowings from the 2022 364-Day Credit Agreement, compared to a $348.1 million repayment of the outstanding amount under the 364-Day Credit Agreement in 2021. This was partially offset by $107.4 million increase in share repurchases.
The increase in cash provided by financing activities was primarily driven by $399.4 million in net borrowings from the 2022 364-Day Credit Agreement, compared to a $348.1 million repayment of the outstanding amount under the 364-Day Credit Agreement in 2021. This was partially offset by an $107.4 million increase in share repurchases.
Reviews occur at the lowest level for which identifiable cash flows are largely independent of cash flows associated with other long-lived assets or asset groups and include estimated future revenues, gross profit margins, operating profit margins and capital expenditures which are based on the businesses’ strategic plans and long-range planning forecasts, which change from year to year.
Reviews occur at the lowest level for which identifiable cash flows are largely independent of cash flows associated with other long-lived assets or asset groups and include estimated future revenues, gross profit margins, operating profit margins and capital expenditures which are based on the businesses’ strategic plans and long-range planning forecasts, which change from year to year.
No impairment charges have been required during 2022, 2021 or 2020. Intangibles with indefinite useful lives 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.
No impairment charges have been required during 2023, 2022 or 2021. Intangibles with indefinite useful lives 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.
This methodology for valuing our reporting units (commonly referred to as the Income Method) has not changed since the adoption of the provisions under ASC 350. The determination of discounted cash flows is based on the businesses’ strategic plans and long-range planning forecasts, which change from year to year.
This methodology for valuing our reporting units (commonly referred to as the Income Method) has not changed since the adoption of the provisions under ASC 350. The determination of discounted cash flows is based on the businesses’ strategic plans and long-range planning forecasts, which change from year to year.
In the United States, we sponsor a defined benefit pension plan that covers approximately 12% of all U.S. employees. Effective January 1, 2013, pension eligible non-union employees no longer earn future benefits in the domestic defined benefit pension plan.
In the United States, we sponsor a defined benefit pension plan that covers approximately 18% of all U.S. employees. Effective January 1, 2013, pension eligible non-union employees no longer earn future benefits in the domestic defined benefit pension plan.
Fair values are established primarily by discounting estimated future cash flows at an estimated cost of capital which varies for each reporting unit and which, as of our most recent annual impairment assessment, ranged between 9.5% and 11.5% (a weighted average of 10.8%), reflecting the respective inherent business risk of each of the reporting units tested.
Fair values are established primarily by discounting estimated future cash flows at an estimated cost of capital which varies for each reporting unit and which, as of our most recent annual impairment assessment, ranged between 9.5% and 10.0% (a weighted average of 9.9%), reflecting the respective inherent business risk of each of the reporting units tested.
Additionally, a number of our non-U.S. subsidiaries sponsor defined benefit pension plans that cover approximately 12% of all non-U.S. employees. The benefits are typically based upon years of service and compensation. Most of these plans are funded by company contributions to pension funds, which are held for the sole benefit of plan participants and beneficiaries.
Additionally, a number of our non-U.S. subsidiaries sponsor defined benefit pension plans cover approximately 10% of all non-U.S. employees. The benefits are typically based upon years of service and compensation. Most of these plans are funded by company contributions to pension funds, which are held for the sole benefit of plan participants and beneficiaries.
On May 26, 2022, Verzatec terminated the sale agreement and paid $7.5 million to the Company in termination fees, which is presented within Miscellaneous income, net on the Consolidated Statements of Operations.
In 2022, Verzatec terminated the sale agreement and paid $7.5 million to the Company in termination fees, which is presented within Miscellaneous income, net on the Consolidated Statements of Operations.
The revenue growth rates included in the forecasts represent our best estimates based on current and forecasted market conditions, and the profit margin assumptions are based on the current cost structure and anticipated net cost increases or reductions. There are inherent uncertainties related to these assumptions, including changes in market conditions, and management’s judgment in applying them to the analysis.
The revenue growth rates included in the forecasts represent our best estimates based on current and forecasted market conditions, and the profit margin assumptions are based on the current cost structure and anticipated net cost increases or reductions. There are inherent uncertainties related to these assumptions, including changes in market conditions, and management’s judgment in applying them to the analysis.
Government reimburses us for 21% of qualifying costs of investigation and remediation activities at the Goodyear Site. We have recorded a receivable of $4.8 million and $7.3 million for the expected reimbursements from the U.S. Government in respect of the aggregate liability as of December 31, 2022 and 2021, respectively. Pension Plans.
Government reimburses us for 21% of qualifying costs of investigation and remediation activities at the Goodyear Site. We have recorded a receivable of $3.8 million and $4.8 million for the expected reimbursements from the U.S. Government in respect of the aggregate liability as of December 31, 2023 and 2022, respectively. Pension Plans.
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 transaction.
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.
We have discussed the development and selection of these accounting estimates and the related disclosures with the Audit Committee of our Board of Directors. Our significant accounting policies are more fully described in Item 8 under Note 1, “Nature of Operations and Significant Accounting Policies” in the Notes to Consolidated Financial Statements. Revenue Recognition.
We have discussed the development and selection of these accounting estimates and the related disclosures with the Audit Committee of our Board of Directors. Our significant accounting policies are more fully described in Item 8 under Note 1, “Nature of Operations and Significant Accounting Policies” in the Notes to Consolidated Financial Statements. Revenue Recognition.
Sales to OEM and aftermarket customers in 2022 were 72% and 28% of total segment sales, respectively. 35 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS • Sales of Commercial Original Equipment increased by $21.1 million, or 9.2%, to $250.5 million in 2022, reflecting strong demand from aircraft manufacturers as the industry aircraft build rates continue to recover from the COVID-19 related slowdown, partially offset by material availability constraints. • Sales of Military Original Equipment decreased by $8.5 million, or 3.5%, to $231.2 million in 2022, primarily reflecting lower shipments due to order timing and material availability constraints. • Sales of Commercial Aftermarket increased by $24.8 million, or 23.7%, to $129.3 million in 2022, reflecting strong demand from the airlines due to improving air traffic as the industry continues to recover from the COVID-19 related slowdown, along with higher pricing. • Sales of Military Aftermarket decreased by $8.4 million, or 13.0%, to $56.3 million in 2022, primarily reflecting timing of government orders for certain programs and material availability constraints.
Sales to OEM and aftermarket customers in 2022 were 72% and 28% of total segment sales, respectively. • Sales of Commercial Original Equipment increased by $21.1 million, or 9.2%, to $250.5 million in 2022, reflecting strong demand from aircraft manufacturers as the industry aircraft build rates continue to recover from the COVID-19 related slowdown, partially offset by material availability constraints. • Sales of Military Original Equipment decreased by $8.5 million, or 3.5%, to $231.2 million in 2022, primarily reflecting lower shipments due to order timing and material availability constraints. 26 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS • Sales of Commercial Aftermarket increased by $24.8 million, or 23.7%, to $129.3 million in 2022, reflecting strong demand from the airlines due to improving air traffic as the industry continues to recover from the COVID-19 related slowdown, along with higher pricing. • Sales of Military Aftermarket decreased by $8.4 million, or 13.0%, to $56.3 million in 2022, primarily reflecting timing of government orders for certain programs and material availability constraints.
The evidence we consider in reaching such conclusions includes, but is not limited to; (1) future reversals of existing taxable temporary differences, (2) future taxable income exclusive of reversing taxable temporary differences, (3) taxable income in prior carryback year(s) if carryback is permitted under the tax law, (4) cumulative losses in recent years, (5) a history of tax losses or credit carryforwards expiring unused, (6) a carryback or carryforward period that is so brief it limits realization of tax benefits, and (7) a strong earnings history exclusive of the loss that created the carryforward and support showing that the loss is an aberration rather than a continuing condition.
The evidence we consider in reaching such conclusions includes, but is not limited to; (1) future reversals of existing taxable temporary differences, (2) future taxable income exclusive of reversing taxable temporary differences, (3) taxable income in prior carryback year(s) if carryback is permitted under the tax law, (4) cumulative losses in recent years, (5) a history of tax losses or credit carryforwards expiring unused, (6) a carryback or carryforward period that is so brief it limits realization of tax 36 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS benefits, and (7) a strong earnings history exclusive of the loss that created the carryforward and support showing that the loss is an aberration rather than a continuing condition.
Restructuring and Related (Gains) Charges, net In 2022, we recorded net pre-tax restructuring and related charges of $8.7 million primarily related to modest cost reduction efforts across our businesses in response to continued macroeconomic uncertainty. In 2021, we recorded total pre-tax restructuring and related gains of $13.2 million primarily related to a gain on the sale of real estate.
Restructuring and Related (Gains) Charges, net In 2022, we recorded net pre-tax restructuring and related charges of $8.7 million primarily related to modest cost reduction efforts across our businesses in response to continued macroeconomic uncertainty. In 2021, we recorded total pre-tax restructuring and related gains of $5.9 million primarily related to a gain on the sale of real estate.
If actual results are not consistent with management’s estimates and assumptions, goodwill and other intangible assets may then be determined to be overstated and a charge would need to be taken against net earnings.
If actual results are not consistent with management’s estimates and assumptions, goodwill and other intangible assets may then be determined to be overstated and a charge would need to be taken against net earnings.
Transaction Related Expenses In 2022, we recorded pre-tax transaction related expenses of $49.8 million most of which related to the planned separation, coupled with expenses associated with defending the asbestos liability and to a lesser extent, divestiture costs related to the intended sale of Engineered Materials and the completed sale of Crane Supply.
In 2022, we recorded pre-tax transaction related expenses of $48.3 million most of which related to the planned separation, coupled with expenses associated with defending the asbestos liability and to a lesser extent, divestiture costs related to the intended sale of Engineered Materials and the completed sale of Crane Supply.
Also, holding all other factors constant, a decrease in the discount rate used to determine net periodic pension cost by 0.25 percentage points would have decreased 2022 pension expense by $0.1 million for U.S. pension plans and increased 2022 pension expense by $0.5 million for non-U.S. pension plans.
Also, holding all other factors constant, a decrease in the discount rate used to determine net periodic pension cost by 0.25 percentage points would have increased 2023 pension expense by $0.1 million for U.S. pension plans and $0.1 million for non-U.S. pension plans.
Operating segment performance was strong across the Company, with pricing actions and strong productivity more than offsetting higher material, labor and other manufacturing costs. Operating profit in 2022 included net restructuring and related charges of $8.7 million and transaction related expenses of $47.1 million.
Operating segment performance was strong across the Company, with pricing actions and strong productivity more than offsetting higher material, labor and other manufacturing costs. Operating profit in 2022 included net restructuring and related charges of $8.7 million and transaction related expenses of $48.3 million.
Operating profit in 2021 included net restructuring and related gains of $9.6 million and transaction related expenses of $8.2 million.
Operating profit in 2021 included net restructuring and related gains of $5.9 million and transaction related expenses of $8.2 million.
Costs incurred represent work performed, which corresponds with, and thereby depicts, the transfer of control to the customer. Total revenue recognized and cost estimates are updated monthly. In 2022, the Company recognized approximately $120 million in revenue over time related to contracts in progress as of December 31, 2022. These estimates are subject to uncertainties and require judgment.
Costs incurred represent work performed, which corresponds with, and thereby depicts, the transfer of control to the customer. Total revenue recognized and cost estimates are updated monthly. In 2023, the Company recognized approximately $100.0 million in revenue over time related to contracts in progress as of December 31, 2023. These estimates are subject to uncertainties and require judgment.
Demand remained strong across Chemical, Pharmaceutical and General Industrial end markets. • Sales of Commercial Valves decreased by $142.0 million, or 37.9%, to $232.2 million in 2022, primarily driven by lost sales associated with the divestiture of Crane Supply of $139.1 million, or 37.2%, and unfavorable foreign currency translation of $15.1 million, or 4.0%, as the British pound weakened against the U.S. dollar, partially offset by an increase in core sales of $12.2 million, or 3.3%.
Demand remained strong across Chemical, Pharmaceutical and General Industrial end markets. • Sales of Commercial Valves decreased by $142.0 million, or 37.9%, to $232.2 million in 2022, primarily driven by lost sales associated with the divestiture of Crane Supply of $139.1 million, or 37.2%, and unfavorable foreign currency translation of $15.1 million, or 4.0%, as the British pound weakened against the U.S. dollar, partially offset by an 28 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS increase in core sales of $12.2 million, or 3.3%.
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 December 31, 2022, we had six reporting units.
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 December 31, 2023, we had four reporting units.
The total estimated gross liability was $24.8 million and $32.3 million as of December 31, 2022 and 2021, respectively. 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.
The total estimated gross liability was $20.7 million and $24.8 million as of December 31, 2023 and 2022, respectively. 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.
We do not believe that any discrete event or adjustment to an individual contract within the aggregate changes in contract estimates for 2022, 2021 or 2020 was material to the consolidated statements of income for such annual periods. Income Taxes.
We do not believe that any discrete event or adjustment to an individual contract within the aggregate changes in contract estimates for 2023, 2022 or 2021 was material to the Consolidated Statement of Operations for such annual periods. Income Taxes.
Recent Accounting Pronouncements Information regarding new accounting pronouncements is included in Item 8 under Note 1 to the Supplemental Combined Financial Statements.
Recent Accounting Pronouncements Information regarding new accounting pronouncements is included in Item 8 under Note 1 to the Consolidated Financial Statements.
We account for income taxes in accordance with ASC Topic 740 “Income Taxes” (“ASC 740”), which requires an asset and liability approach for the financial accounting and reporting of income taxes.
We account for income taxes in accordance with ASC Topic 740 “Income Taxes” (“ASC 740”), which requires an asset and liability approach for the financial accounting and reporting of income taxes.
Our current cash balance, together with cash we expect to generate from future operations along with borrowings available under our revolving credit facility are expected to be sufficient to finance our short- and long-term capital requirements, as well as to fund expected pension contributions.
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.
Examples of events or changes in circumstances could include, but are not limited to, a prolonged economic downturn, current period operating or cash flow losses combined with a history of losses or a forecast of continuing losses associated with the use of an asset or asset group, or a current expectation that an asset or asset group will be sold or disposed of before the end of its previously estimated useful life.
Examples of events or changes in circumstances could include, but are not limited to, a prolonged economic downturn, current period operating or cash flow losses combined with a history of 37 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS losses or a forecast of continuing losses associated with the use of an asset or asset group, or a current expectation that an asset or asset group will be sold or disposed of before the end of its previously estimated useful life.
Operating profit decreased by $182.4 million, or 72.8%, to $68.2 million in 2022. The decrease in operating profit is primarily related to the loss on divestiture of asbestos-related assets and liabilities of $162.4 million, coupled with the divested operating profit of $20.2 million related to the sale of Crane Supply.
Operating profit decreased by $183.8 million, or 82.9%, to $37.9 million in 2022. The decrease in operating profit is primarily related to the loss on divestiture of asbestos-related assets and liabilities of $162.4 million, coupled with the divested operating profit of $20.2 million related to the sale of Crane Supply.
A reconciliation of the statutory U.S. federal tax rate to our effective tax rate is set forth in Item 8 under Note 9, “Income Taxes” in the Notes to Consolidated Financial Statements. 43 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES (in millions) For the year ended December 31, 2022 2021 2020 Net cash (used for) provided by: Operating activities $ (151.6 ) $ 498.5 $ 309.5 Investing activities 264.0 (0.3 ) (229.1 ) Financing activities 106.0 (557.9 ) 55.1 Effect of exchange rates on cash and cash equivalents (39.4 ) (12.7 ) 21.6 Increase (decrease) in cash and cash equivalents $ 179.0 $ (72.4 ) $ 157.1 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.
A reconciliation of the statutory U.S. federal tax rate to our effective tax rate is set forth under Note 10, "Income Taxes" in the Notes to Consolidated Financial Statements. 31 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES (in millions) For the year ended December 31, 2023 2022 2021 Net cash provided by (used for): Operating activities from continuing operations $ 193.6 $ (472.2) $ 185.1 Investing activities from continuing operations (132.5) 285.3 18.2 Financing activities (423.2) 106.0 (557.9) Discontinued operations 30.5 299.3 294.9 Effect of exchange rates on cash and cash equivalents 3.6 (39.4) (12.7) (Decrease) increase in cash and cash equivalents $ (328.0) $ 179.0 $ (72.4) 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.
The effect of a change in tax rates on deferred income taxes is recognized in income in the period when the change is enacted. 47 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Based on consideration of all available evidence regarding their utilization, we record net deferred tax assets to the extent that it is more likely than not that they will be realized.
The effect of a change in tax rates on deferred income taxes is recognized in income in the period when the change is enacted. Based on consideration of all available evidence regarding their utilization, we record net deferred tax assets to the extent that it is more likely than not that they will be realized.
For the year ended December 31, 2021, comprehensive income before allocation to noncontrolling interests was $462.2 million compared to $197.9 million in 2020.
For the year ended December 31, 2022, comprehensive income before allocation to noncontrolling interests was $337.8 million compared to $462.2 million in 2021.
We follow the provisions under ASC Topic 350, “Intangibles – Goodwill and Other” (“ASC 350”) as it relates to the accounting for goodwill in the Consolidated Financial Statements.
We follow the provisions under ASC Topic 350, “Intangibles – Goodwill and Other” (“ASC 350”) as it relates to the accounting for goodwill in the Consolidated Financial Statements.
The increase was driven primarily by increased costs of $66.8 million, or 14.8%, including transaction related expenses of $41.6 million, or 9.2%, supporting the Crane Supply and asbestos divestiture as well as the planned Separation, partially offset by favorable foreign currency translation of $10.5 million, or 2.3%, the impact of the sale of Crane Supply of $16.5 million, or 3.7%, and strong productivity of $4.7 million, or 1%.
The increase was driven primarily by increased costs of $65.3 million, or 14.0%, including transaction related expenses of $40.1 million, or 8.6%, primarily related to sale of Crane Supply, asbestos divestiture and the planned Separation, increased net restructuring costs of $12.7 million, or 2.7%, partially offset by favorable foreign currency translation of $10.5 million, or 2.2%, the impact of the sale of Crane Supply of $16.5 million, or 3.5%, and strong productivity of $4.7 million, or 1%.
As of December 31, 2021, we had $1,583.8 million of goodwill and $467.1 million of net intangible assets, of which $70.6 million were intangibles with indefinite useful lives, consisting of trade names. Our business acquisitions have typically resulted in the recognition of goodwill and other intangible assets.
As of December 31, 2022, we had $690.9 million of goodwill and $71.7 million of net intangible assets, of which $21.8 million were intangibles with indefinite useful lives, consisting of trade names. Our business acquisitions have typically resulted in the recognition of goodwill and other intangible assets.
Cash used for financing activities was $557.9 million in 2021, compared to cash provided by financing activities of $55.1 million in 2020.
Cash provided by financing activities was $106.0 million in 2022, compared to cash used for financing activities of $557.9 million in 2021.
The decrease is primarily related to the sale of Crane Supply of $102.4 million, or 7.5%, favorable foreign currency translation of $30.5 million, or 2.2%, the impact of lower volumes of $9.1 million, or 0.7%, and strong productivity of $33.1 million, or 2.4%, partially offset by an increase in material, labor and other manufacturing costs of $109.6 million, or 8.0%, and unfavorable mix of $20.2 million, or 1.5%. 56 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Selling general and administrative expenses increased by $27.4 million, or 6.1%, to $478.8 million in 2022.
The decrease is primarily related to the impact of the sale of Crane Supply of $102.4 million, or 7.5%, favorable foreign currency translation of $30.5 million, or 2.2%, lower volumes of $9.1 million, or 0.7%, and strong productivity of $33.1 million, or 2.4%, partially offset by an increase in material, labor and other manufacturing costs of $109.6 million, or 8.0%, and unfavorable mix of $20.2 million, or 1.5%.
The increase in cash used by operating activities was primarily driven by the $550.0 million payment related to the divestiture of asbestos-related assets, together with increased working capital investments supporting higher levels of demand across most businesses. Cash provided by operating activities was $498.5 million in 2021, compared to $309.5 million in 2020.
The increase in cash used for operating activities from continuing operations was primarily driven by the $550.0 million payment in 2022 related to the divestiture of the asbestos-related assets and liabilities, together with increased working capital investments supporting higher levels of demand across most businesses.
Employer cash contributions were $19.7 million, $26.7 million and $26.1 million in 2022, 2021 and 2020, respectively. Holding all other factors constant, a decrease in the expected long-term rate of return on plan assets by 0.25 percentage points would have increased 2022 pension expense by $1.3 million for U.S. pension plans and $0.9 million for non-U.S. pension plans.
Holding all other factors constant, a decrease in the expected long-term rate of return on plan assets by 0.25 percentage points would have increased 2023 pension expense by $1.0 million for U.S. pension plans and $0.6 million for non-U.S. pension plans.
INCOME TAX (in millions, except %) For the year ended December 31, 2022 2021 2020 Income before tax — U.S. $ 133.6 $ 342.1 $ 124.9 Income before tax — non-U.S. 429.4 160.7 99.6 Income before tax — worldwide $ 563.0 $ 502.8 $ 224.5 Provision for income taxes $ 161.9 $ 67.4 $ 43.4 Effective tax rate 28.8 % 13.4 % 19.3 % Our effective tax rate is affected by a number of items, both recurring and discrete, including the amount of income we earn in different jurisdictions and their respective statutory tax rates, acquisitions and dispositions, changes in the valuation of our deferred tax assets and liabilities, changes in tax laws, regulations and accounting principles, the continued availability of statutory tax credits and deductions, and examinations initiated by tax authorities around the world.
INCOME TAX (in millions, except %) For the year ended December 31, 2023 2022 2021 Income before tax — U.S. $ 155.4 $ (82.2) $ 201.1 Income before tax — non-U.S. 111.6 353.6 32.6 Income before tax — worldwide $ 267.0 $ 271.4 $ 233.7 Provision for income taxes $ 63.2 $ 99.8 $ 36.3 Effective tax rate 23.7 % 36.7 % 15.6 % Our effective tax rate is affected by a number of items, both recurring and discrete, including the amount of income we earn in different jurisdictions and their respective statutory tax rates, acquisitions and dispositions, changes in the valuation of our deferred tax assets and liabilities, changes in tax laws, regulations and accounting principles, the continued availability of statutory tax credits and deductions, and examinations initiated by tax authorities around the world.
The amortization period for plans with a significant number of active participants accruing benefits is the average future working lifetime of plan participants. The prior service cost (credit) is amortized over the average future working lifetime of plan participants whose prior service benefits were changed.
The amortization period for plans with a significant number of active participants accruing benefits is the average future working lifetime of plan participants.
The commercial market and military market accounted for 52% and 48%, respectively, of total segment sales in 2021.
The commercial market and military market accounted for 60% and 40%, respectively, of total segment sales in 2023.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Crane Holdings, Co. The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes included under Item 8 of this Annual Report on Form 10-K.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read together with our Consolidated financial statements and related notes included under Item 8 of this Annual Report on Form 10-K. We are a diversified manufacturer of highly engineered industrial products.
As of December 31, 2022, our total debt to total capitalization ratio was 39.5%, computed as follows: (in millions) Short-term borrowings $ 699.3 Long-term debt $ 543.7 Total debt $ 1,243.0 Equity 1,904.0 Capitalization $ 3,147.0 Total indebtedness to capitalization 39.5 % See Item 8 under Note 13, “Financing,” in the Notes to Consolidated Financial Statements for details regarding our financing arrangements.
As of December 31, 2023, our total debt to total capitalization ratio was 15.4%, computed as follows: (in millions) Short-term borrowings $ — Long-term debt $ 248.5 Total debt $ 248.5 Equity 1,360.3 Capitalization $ 1,608.8 Total indebtedness to capitalization 15.4 % See Item 8 under Note 14, “Financing,” in the Notes to Consolidated Financial Statements for details regarding our financing arrangements.
Our primary end markets include commercial and military aerospace, defense and space, chemical production, pharmaceutical production, water and wastewater, non-residential and municipal construction, energy, banknote design and production, payment automation solutions, along with a wide range of general industrial and certain consumer related end markets.
Our operations are currently comprised of three segments: Aerospace & Electronics, Process Flow Technologies, and Engineered Materials. Our primary end markets include commercial and military aerospace, defense and space, chemical production, pharmaceutical production, water and wastewater, non-residential and municipal construction, energy, along with a wide range of general industrial and certain consumer related end markets.
Cost of sales increased $18.1 million, or 4.5%, to $417.7 million in 2022 compared to 2021, primarily reflecting $29.5 million, or 7.4%, of increased material, labor and other manufacturing costs supporting the higher sales, partially offset by $14.3 million, or 3.6%, of productivity gains.
Cost of sales increased $77.5 million, or 18.6%, to $495.2 million in 2023 compared to 2022, primarily reflecting $48.7 million, or 11.7%, of increased material, labor and other manufacturing costs, increased volumes of $29.3 million, or 7.0%, unfavorable mix of $10.1 million, or 2.4%, partially offset by $ 11.1 million, or 2.7% of productivity gains.
Operating Activities Cash used for operating activities, a key source of our liquidity, was $151.6 million in 2022, compared to cash provided by operating activities of $498.5 million in 2021.
Operating Activities Cash provided by operating activities from continuing operations, a key source of our liquidity, was $193.6 million in 2023, compared to cash used for operating activities from continuing operations of $472.2 million in 2022.
The following table summarizes our fixed cash obligations as of December 31, 2022: Payment due by Period (in millions) Total 2023 2024 -2025 2026 -2027 2028 and after Debt (a) $ 400.0 $ 400.0 $ — $ — $ — Operating lease payments 70.5 13.3 20.4 13.3 23.5 Purchase obligations 240.2 223.3 13.6 3.0 0.3 Pension and postretirement benefits (b) 507.7 49.2 99.9 103.5 255.1 Other long-term liabilities reflected on Consolidated Balance Sheets (c) — — — — — Total $ 1,218.4 $ 685.8 $ 133.9 $ 119.8 $ 278.9 (a) Debt includes scheduled principal payments.
The following table summarizes our fixed cash obligations as of December 31, 2023: Payment due by Period (in millions) Total 2024 2025 -2026 2027 -2028 2029 and after Debt (a) $ 249.4 $ — $ 249.4 $ — $ — Operating lease payments 81.2 14.9 24.6 17.7 24.0 Purchase obligations 272.1 252.0 19.7 0.2 0.2 Pension and postretirement benefits (b) 515.1 50.3 103.2 106.9 254.7 Other long-term liabilities reflected on Consolidated Balance Sheets (c) — — — — — Total $ 1,117.8 $ 317.2 $ 396.9 $ 124.8 $ 278.9 (a) Debt includes scheduled principal payments.
As of December 31, 2022, we had $1,527.5 million of goodwill and $416.6 million of net intangible assets, of which $67.3 million were intangibles with indefinite useful lives, consisting of trade names.
As of December 31, 2023, we had $747.7 million of goodwill and $87.9 million of net intangible assets, of which $22.1 million were intangibles with indefinite useful lives, consisting of trade names.
CORPORATE (in millions) For the year ended December 31, 2022 2021 2020 Corporate expense $ (122.3 ) $ (97.7 ) $ (58.8 ) Loss on divestiture of asbestos-related assets and liabilities (162.4 ) — — Total Corporate expense $ (284.7 ) $ (97.7 ) $ (58.8 ) Total Corporate expense increased by $187.0 million, or 191.4%, in 2022, primarily related to the loss on divestiture of asbestos related assets and liabilities of $162.4 million, or 166.2%, and higher transaction related expenses of $33.9 million, or 34.7%, partially offset by slightly lower compensation and benefit costs.
Total Corporate expense increased by $185.5 million, or 189.9%, in 2022, primarily related to the loss on divestiture of asbestos related assets and liabilities of $162.4 million, or 166.2%, and higher transaction related expenses of $32.5 million, or 33.3%, partially offset by slightly lower compensation and benefit costs.
Operating profit increased by $5.7 million, or 21.2%, to $32.6 million in 2022, primarily reflecting higher pricing net of inflation, and productivity gains, of $16.8 million, or 62.5%, partially offset by the impact of the lower volumes of $11.1 million, or 41.3%. 2021 compared to 2020 Engineered Materials sales increased $52.4 million, or 29.8%, to $228.0 million in 2021 compared to 2020, primarily due to higher core sales to RV manufacturers, and to a lesser extent, to building product and transportation customers.
Operating profit increased by $5.7 million, or 21.2%, to $32.6 million in 2022, primarily reflecting higher pricing net of inflation, and productivity gains, of $16.8 million, or 62.5%, partially offset by the impact of the lower volumes of $11.1 million, or 41.3%.
Operating profit in 2020 included restructuring and related charges of $37.4 million and acquisition-related and integration charges of $12.9 million. 34 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Comprehensive income (in millions) For the year ended December 31, 2022 2021 2020 Net income before allocation to noncontrolling interests $ 401.1 $ 435.4 $ 181.1 Other comprehensive (loss) income, net of tax Currency translation adjustment (93.3 ) (69.2 ) 70.4 Changes in pension and postretirement plan assets and benefit obligation, net of tax 30.0 96.0 (53.6 ) Other comprehensive (loss) income, net of tax (63.3 ) 26.8 16.8 Comprehensive income before allocation to noncontrolling interests 337.8 462.2 197.9 Less: Noncontrolling interests in comprehensive income (loss) (0.2 ) 0.6 (0.5 ) Comprehensive income attributable to common shareholders $ 338.0 $ 461.6 $ 198.4 For the year ended December 31, 2022, comprehensive income before allocation to noncontrolling interests was $337.8 million compared to $462.2 million in 2021.
Comprehensive income (in millions) For the year ended December 31, 2023 2022 2021 Net income before allocation to noncontrolling interests $ 255.9 $ 401.1 $ 435.4 Other comprehensive income (loss), net of tax Currency translation adjustment 20.7 (93.3) (69.2) Changes in pension and postretirement plan assets and benefit obligation, net of tax 10.0 30.0 96.0 Other comprehensive income (loss), net of tax 30.7 (63.3) 26.8 Comprehensive income before allocation to noncontrolling interests 286.6 337.8 462.2 Less: Noncontrolling interests in comprehensive income (loss) (0.1) (0.2) 0.6 Comprehensive income attributable to common shareholders $ 286.7 $ 338.0 $ 461.6 For the year ended December 31, 2023, comprehensive income before allocation to noncontrolling interests was $286.6 million compared to $337.8 million in 2022.
INTEREST AND MISCELLANEOUS INCOME, NET (in millions) For the year ended December 31, 2022 2021 2020 Interest income $ 3.2 $ 1.3 $ 2.0 Interest expense $ (10.3 ) $ (5.1 ) $ (13.5 ) Related interest income $ 14.4 $ 16.1 $ 15.9 Gain on sale of business $ 232.5 $ — $ — Miscellaneous income, net $ 6.6 $ 14.4 $ 10.2 2022 compared to 2021 Interest expense increased $5.2 million, or 102.0%, primarily due to interest paid for the 364-day credit facility that was entered into on August 11, 2022.
INTEREST AND MISCELLANEOUS INCOME, NET (in millions) For the year ended December 31, 2023 2022 2021 Interest income $ 5.1 $ 3.2 $ 1.3 Interest expense $ (22.7) $ (10.1) $ (4.9) Gain on sale of business $ — $ 232.5 $ — Miscellaneous income, net $ 0.8 $ 7.9 $ 15.6 2023 compared to 2022 Interest expense increased by $12.6 million, or 124.7%, primarily due to interest on the $300 million, 3-year term loan facility .
Operating profit increased by $9.3 million, or 9.2%, to $110.0 million in 2021 compared to 2020, primarily as a result of savings from 2020 repositioning actions of $19.0 million, or 18.9%, and productivity benefits of $16.5 million, or 16.4%, largely offset by the impact of lower sales volumes of $21.3 million, or 21.2%. 36 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Process Flow Technologies (in millions, except %) For the year ended December 31, 2022 2021 2020 Net sales by product line: Process Valves and Related Products $ 749.8 $ 717.1 $ 631.6 Commercial Valves 232.2 374.2 286.3 Pumps and Systems 127.4 105.3 87.9 Total net sales $ 1,109.4 $ 1,196.6 $ 1,005.8 Cost of sales $ 697.8 $ 791.5 $ 689.5 Selling, general and administrative (a) $ 243.4 $ 222.6 $ 218.6 Operating profit $ 168.2 $ 182.5 $ 97.7 Assets $ 1,064.7 $ 1,240.4 $ 1,106.1 Backlog $ 368.8 $ 357.9 $ 313.4 Operating margin 15.2 % 15.2 % 9.7 % (a) Selling, general and administrative expense includes net restructuring charges of $2.3 million in 2022, net restructuring gain of $13.2 million in 2021 and net restructuring charges of $6.1 million in 2020. 2022 compared to 2021 Sales decreased by $87.2 million, or 7.3%, to $1,109.4 million in 2022, driven by lost sales associated with the divestiture of Crane Supply of $139.1 million, or 11.6%, and unfavorable foreign currency translation of $46.6 million, or 3.9%, partially offset by higher core sales of $98.3 million, or 8.2%.
Operating profit increased $10.3 million, or 9.4%, to $120.3 million in 2022 compared to 2021, primarily due to productivity gains of $16.0 million, or 14.5%, partially offset by increased material, labor and other costs of $2.4 million, or 2.2%, and unfavorable mix of $2.1 million, or 1.9%. 27 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Process Flow Technologies (in millions, except %) For the year ended December 31, 2023 2022 2021 Net sales by product line: Process Valves and Related Products $ 811.3 $ 749.8 $ 717.1 Commercial Valves 116.4 232.2 374.2 Pumps and Systems 145.1 127.4 105.3 Total net sales $ 1,072.8 $ 1,109.4 $ 1,196.6 Cost of sales $ 615.9 $ 697.8 $ 791.5 Selling, general and administrative (a) $ 248.4 $ 243.4 $ 222.6 Operating profit $ 208.5 $ 168.2 $ 182.5 Assets $ 1,164.5 $ 1,064.7 $ 1,240.4 Backlog $ 379.0 $ 368.8 $ 357.9 Operating margin 19.4 % 15.2 % 15.2 % (a) Selling, general and administrative expense includes net restructuring charges of $0.9 million, $2.3 million and net restructuring gain of $13.2 million in 2023, 2022 and 2021, respectively. 2023 compared to 2022 Sales decreased by $36.6 million, or 3.3%, to $1,072.8 million in 2023, driven by the impact of the sale of Crane Supply of $105.8 million, or 9.5%, partially offset by the impact of the BAUM acquisition of $15.4 million or 1.4%, and higher core sales of $54.1 million, or 4.9%.
Engineered Materials (in millions, except %) For the year ended December 31, 2022 2021 2020 Net sales by product line: FRP - Recreational Vehicles $ 111.9 $ 102.5 $ 68.9 FRP - Building Products 112.5 94.9 83.1 FRP - Transportation 33.9 30.6 23.6 Total net sales $ 258.3 $ 228.0 $ 175.6 Cost of sales $ 206.2 $ 181.3 $ 134.5 Selling, general and administrative (a) $ 19.5 $ 19.8 $ 18.4 Operating profit $ 32.6 $ 26.9 $ 22.7 Assets $ 218.6 $ 220.5 $ 217.3 Backlog $ 16.2 $ 20.1 $ 12.8 Operating margin 12.6 % 11.8 % 12.9 % (a) Selling, general and administrative expense includes net restructuring charges of $0.4 million, $0.0 million and $0.6 million in 2022, 2021 and 2020 respectively. 2022 compared to 2021 Sales increased by $30.3 million, or 13.3%, to $258.3 million in 2022 with higher pricing more than offsetting a decline in volume, primarily related to softening end market demand in the RV industry.
The decrease was primarily due to divested operating profit of $20.2 million related to the sale of Crane Supply, or 11.1%, and lower net restructuring gains of $15.5 million, or 8.5%, partially offset by productivity gains of $20.1 million, or 11.0%. 29 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Engineered Materials (in millions, except %) For the year ended December 31, 2023 2022 2021 Net sales by product line: FRP - Recreational Vehicles $ 73.0 $ 111.9 $ 102.5 FRP - Building Products 117.0 112.5 94.9 FRP - Transportation 34.3 33.9 30.6 Total net sales $ 224.3 $ 258.3 $ 228.0 Cost of sales $ 170.5 $ 206.2 $ 181.3 Selling, general and administrative (a) $ 20.4 $ 19.5 $ 19.8 Operating profit $ 33.4 $ 32.6 $ 26.9 Assets $ 191.8 $ 218.6 $ 220.5 Backlog $ 11.3 $ 16.2 $ 20.1 Operating margin 14.9 % 12.6 % 11.8 % (a) Selling, general and administrative expense includes net restructuring gain of $0.3 million, restructuring charges of $0.4 million and $0.0 million in 2023, 2022 and 2021, respectively. 2023 compared to 2022 Sales decreased by $34.0 million, or 13.2%, to $224.3 million in 2023 reflecting lower core sales of $34.0 million, or 13.2%, primarily due to lower volumes, partially offset by higher pricing.
The $124.4 million decrease was primarily driven by $34.3 million of lower net income before allocation to noncontrolling interests, a $66.0 million decrease primarily related to changes in pension discount rates and a $24.1 million unfavorable impact of foreign currency translation adjustments, primarily related to the British pound and euro.
The $51.2 million decrease was primarily driven by $145.2 million of lower net income before allocation to noncontrolling interests which reflects the 2022 gain on sale of Crane Supply of $232.5 million, a $20.0 million decrease primarily related to changes in pension discount rates and a $114.0 million favorable impact of foreign currency translation adjustments, primarily related to the British pound and euro.
Cash provided by financing activities was $242.1 million in 2022, compared to cash used for financing activities of $250.8 million in 2021.
Cash used for operating activities from continuing operations was $472.2 million in 2022, compared to cash provided by operating activities from continuing operations of $185.1 million in 2021.
Cost of sales decreased by $32.5 million, or 4.4%, to $713.7 million, primarily related to favorable foreign currency translation of $42.1 million, or 5.6%, the impact of lower volumes of $37.7 million, or 5.1%, and productivity gains of $26.4 million, or 3.5%, partially offset by an increase in material, labor and other manufacturing costs of $59.4 million, or 8.0%, and unfavorable mix of $14.4 million, or 1.9%.
The decrease is primarily related to the sale of Crane Supply of $66.1 million, or 5.0%, strong productivity gains of $37.6 million, or 2.8%, lower volumes of $9.9 million, or 0.7%, partially offset by an increase in material, labor and other manufacturing costs of $52.7 million, or 4.0%, and unfavorable mix of $24.0 million, or 1.8%.
During 2021, we recorded pre-tax transaction related expenses of $8.2 million related to the previously proposed divestiture of Engineered Materials which was terminated in May 2022 and other professional fees. Acquisition-Related and Integration Charges During 2020, we recorded pre-tax acquisition-related and integration charges of $6.4 million.
During 2021, we recorded pre-tax transaction related expenses of $8.2 million related to the previously proposed divestiture of Engineered Materials and other professional fees. OVERALL 2023 compared with 2022 Sales increased by $51.4 million, or 2.5%, to $2,086.4 million in 2023.
Investing Activities Cash flows relating to investing activities consist primarily of cash provided by divestitures of businesses or assets, capital expenditures and cash used for acquisitions. Capital expenditures are made primarily for increasing capacity, replacing equipment, supporting new product development, and improving information systems. Cash provided by investing activities was $285.3 million in 2022, compared to $18.3 million in 2021.
Investing Activities Cash flows relating to investing activities from continuing operations consist primarily of cash used for capital expenditures, acquisitions of businesses and cash provided by divestitures of businesses or assets. Cash used for investing activities from continuing operations was $132.5 million in 2023, compared to cash provided by investing activities from continuing operations of $285.3 million in 2022.
Financing Arrangements Total net debt was $1,243.0 million and $842.4 million as of December 31, 2022 and 2021, respectively.
Financing Arrangements Total net debt was $248.5 million and $399.6 million as of December 31, 2023 and 2022, respectively.
Core sales growth was driven primarily by pricing, with modestly higher volumes. • Sales of Process Valves and Related Products increased by $32.7 million, or 4.6%, to $749.8 million in 2022.
Core sales growth was driven by higher pricing. • Sales of Process Valves and Related Products increased by $61.5 million, or 8.2%, to $811.3 million in 2023.
Cash provided by investing activities was $264.0 million in 2022, compared to cash used for investing activities of $0.3 million in 2021.
Cash provided by investing activities from continuing operations was $285.3 million in 2022, compared to $18.2 million in 2021.
On February 7, 2023, the SEC declared effective the registration statement of Crane Company on Form 10. Each of our stockholders will receive one share of Crane Company common stock for every one share of our common stock held on March 23, 2023, the record date for the distribution.
Upon consummation of the Separation, each of its stockholders received one share of Crane Company common stock for every one share of its common stock held on March 23, 2023, the record date for the distribution.
Estimates of our environmental liabilities at the 49 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Goodyear Site are based on currently available facts, present laws and regulations and current technology available for remediation, and are recorded on an undiscounted basis.
The environmental remediation liability as of December 31, 2023 is substantially all for the former manufacturing site in Goodyear, Arizona (the "Goodyear Site"). Estimates of our environmental liabilities at the Goodyear Site are based on currently available facts, present laws and regulations and current technology available for remediation, and are recorded on an undiscounted basis.
Cost of sales decreased by $93.7 million, or 11.8%, to $697.8 million, primarily related to $102.4 million of divested cost related to the sale of Crane Supply, or 12.9%, favorable foreign currency of $30.0 million, or 3.8%, and productivity gains of $17.1 million, or 2.2%, partially offset by a $45.3 million, or 5.7%, increase in material, labor and other manufacturing costs and unfavorable mix of $16.1 million, or 2.0%.
Cost of sales decreased by $81.9 million, or 11.7%, to $615.9 million, primarily related to the net impacts of the sale of Crane Supply and the BAUM acquisition of $66.1 million or 9.5%, productivity gains of $23.6 million, or 3.4%, lower volumes of $13.3 million, or 1.9%, offset by unfavorable mix of 17.3 million, or 2.5%, and modestly higher material, labor and other manufacturing costs of $7.3 million, or 1.0%.
The revenue growth rates included in the forecasts represent best estimates based on current and forecasted market conditions.
The revenue growth rates included in the forecasts represent best estimates based on current and forecasted market conditions. Profit margin assumptions are projected by each reporting unit based on the current cost structure and anticipated net cost increases/reductions.
In August 2022, Crane Holdings, Co. received CAD 5 million related to a final working capital adjustment. The Business recognized a total gain on sale of $232.5 million. Termination of Agreement to Sell Engineered Materials On May 16, 2021, Crane entered into an agreement to sell the Engineered Materials segment to Grupo Verzatec S.A. de C.V.
In connection with the divestiture, the Company recognized a total gain on sale of $232.5 million which is presented within Gain on sale of business on the Consolidated Statement of Operations. Termination of Agreement to Sell Engineered Materials In 2021, we entered into an agreement to sell the Engineered Materials segment to Grupo Verzatec S.A. de C.V. (“Verzatec”).
Financing Activities Financing cash flows consist primarily of dividend payments to shareholders, share repurchases, repayments of indebtedness, proceeds from the issuance of long-term debt and commercial paper and proceeds from the issuance of common stock. Cash provided by financing activities was $106.0 million in 2022, compared to cash used for financing activities of $557.9 million in 2021.
The increase in cash provided by investing activities from continuing operations was primarily related to $318.1 million of proceeds related to the divestiture of Crane Supply. 32 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Financing Activities Financing cash flows consist primarily of dividend payments to shareholders, share repurchases and repayments of indebtedness, proceeds from the issuance of long-term debt and proceeds from the issuance of common stock.
Please refer to item 8 under Note 12, “Commitments and Contingencies” in the Notes to Consolidated Financial Statements for further discussion. Sale of Crane Supply In 2022, we recognized a gain on sale of $232.5 million related to the sale of Crane Supply, which is presented within Gain on sale of business on the Consolidated Statements of Operations.
Please refer to item 8 under Note 13, “Commitments and Contingencies” in the Notes to Consolidated Financial Statements for further discussion. Sale of Crane Supply On May 31, 2022, the Company divested its Crane Supply business.
Profit margin assumptions are projected by each reporting unit based on the current cost structure and anticipated net cost increases/reductions. 48 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS There are inherent uncertainties related to these assumptions, including changes in market conditions, and management judgment is necessary in applying them to the analysis of goodwill impairment.
There are inherent uncertainties related to these assumptions, including changes in market conditions, and management judgment is necessary in applying them to the analysis of goodwill impairment.
AEROSPACE & ELECTRONICS (in millions, except %) For the year ended December 31, 2022 2021 2020 Net sales by product line: Commercial Original Equipment $ 250.5 $ 229.4 $ 226.4 Military Original Equipment 231.2 239.7 258.7 Commercial Aftermarket 129.3 104.5 93.0 Military Aftermarket 56.3 64.7 72.6 Total net sales $ 667.3 $ 638.3 $ 650.7 Cost of sales $ 417.7 $ 399.6 $ 428.2 Selling, general and administrative (a) $ 129.3 $ 128.7 $ 121.8 Operating profit $ 120.3 $ 110.0 $ 100.7 Assets $ 663.3 $ 604.7 $ 593.9 Backlog $ 613.1 $ 459.8 $ 491.2 Operating margin 18.0 % 17.2 % 15.5 % (a) Selling, general and administrative expense includes net restructuring charges of $1.5 million, $0.0 million and $6.5 million in 2022, 2021 and 2020, respectively. 2022 compared to 2021 Aerospace & Electronics sales increased $29.0 million, or 4.5%, to $667.3 million in 2022.
The $124.4 million decrease was primarily driven by $34.3 million of lower net income before allocation to noncontrolling interests, a $66.0 million decrease primarily related to changes in pension discount rates and a $24.1 million unfavorable impact of foreign currency translation adjustments, primarily related to the British pound and euro. 25 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS AEROSPACE & ELECTRONICS (in millions, except %) For the year ended December 31, 2023 2022 2021 Net sales by product line: Commercial Original Equipment $ 291.4 $ 250.5 $ 229.4 Military Original Equipment 252.4 231.2 239.7 Commercial Aftermarket Products 180.2 129.3 104.5 Military Aftermarket Products 65.3 56.3 64.7 Total net sales $ 789.3 $ 667.3 $ 638.3 Cost of sales $ 495.2 $ 417.7 $ 399.6 Selling, general and administrative $ 135.1 $ 129.3 $ 128.7 Operating profit $ 159.0 $ 120.3 $ 110.0 Assets $ 744.6 $ 663.3 $ 604.7 Backlog $ 700.9 $ 613.1 $ 459.8 Operating margin 20.1 % 18.0 % 17.2 % 2023 compared to 2022 Aerospace & Electronics sales increased $122.0 million, or 18.3%, to $789.3 million in 2023 primarily due to higher volumes and strong pricing.
The year-over-year lower sales included: • an increase in core sales of $219.6 million, or 6.4%; • unfavorable foreign currency translation of $113.6 million, or 3.3%; and • a decrease in sales related to the sale of Crane Supply of $139.1 million, or 4.1%. Cost of sales decreased by $85.2 million, or 4.0%, to $2,035.1 million in 2022.
The year-over-year higher sales included: • an increase in core sales of $141.3 million, or 6.9%, which was driven primarily by higher pricing; • an increase in sales related to the October 2023 acquisition of BAUM of $15.4 million, or 0.8%; • favorable foreign currency translation of $0.5 million, and • a decrease in sales related to the May 2022 divestiture Crane Supply of $105.8, or 5.2%.
We believe that these ratings afford us adequate access to the public and private debt markets. 45 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Contractual Obligations Under various agreements, we are obligated to make future cash payments in fixed amounts.
Although the Company is currently unrated, we believe that we have adequate access to capital through the bank market and our current Revolving Credit Facility. 33 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Contractual Obligations Under various agreements, we are obligated to make future cash payments in fixed amounts.
Selling, general and administrative expense increased by $20.8 million, or 9.3%, to $243.4 million primarily reflecting higher administrative and selling costs of $36.1 million, or 16.2%, and lower net restructuring gains of $15.5 million, or 7.0%, partially offset by favorable currency translation of $10.6 million, or 4.8%, and the divested cost related to the sale of Crane Supply of $16.5 million, or 7.4%.
Selling, general and administrative expense increased by $5.8 million, or 4.5%, to $135.1 million in 2023, primarily reflecting higher engineering, administrative and selling costs of $12.9 million, or 10.0%, partially offset by restructuring savings of $5.1 million, or 4.0%, and productivity gains of $1.9 million, or 1.5%.
Sales to OEM and aftermarket customers in 2022 were 72% and 28% of total segment sales, respectively. 58 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS • Sales of Commercial Original Equipment increased by $21.1 million, or 9.2%, to $250.5 million in 2022, reflecting strong demand from aircraft manufacturers as the industry aircraft build rates continue to recover from the COVID-19 related slowdown, partially offset by material availability constraints. • Sales of Military Original Equipment decreased by $8.5 million, or 3.5%, to $231.2 million in 2022, primarily reflecting lower shipments due to order timing and material availability constraints. • Sales of Commercial Aftermarket increased by $24.8 million, or 23.7%, to $129.3 million in 2022, reflecting strong demand from the airlines due to improving air traffic as the industry continues to recover from the COVID-19 related slowdown, along with higher pricing. • Sales of Military Aftermarket decreased by $8.4 million, or 13.0%, to $56.3 million in 2022, primarily reflecting timing of government orders for certain programs and material availability constraints.
Sales to OEM and aftermarket customers in 2023 were 69% and 31% of total segment sales, respectively. • Sales of Commercial Original Equipment increased by $40.9 million, or 16.3%, to $291.4 million in 2023, 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 by $21.2 million, or 9.2%, to $252.4 million in 2023, primarily reflecting strong demand from defense customers. • Sales of Commercial Aftermarket Products increased by $50.9 million, or 39.4%, to $180.2 million in 2023, reflecting continued strong demand from the airlines due to improving air traffic and inventory restocking. • Sales of Military Aftermarket Products increased by $9.0 million, or 16.0%, to $65.3 million in 2023, reflecting stronger demand from military customers.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeTotal net debt outstanding was $399.6 million as of December 31, 2022, which was at variable rates of interest of; (a) a base rate (determined in a customary manner), plus a margin of 0.25% or 0.50% that is determined based upon the ratings by S&P and Moody’s of the Company’s senior unsecured long-term debt (the “Index Debt Rating”) or (b) an adjusted Term SOFR (determined in a customary manner) for an interest period to be selected by the Company, plus a margin of 1.25% or 1.50% that is determined based upon the Index Debt Rating.
Biggest changeInterest on loans advanced under the Credit Agreement accrues, at our option, at a rate per annum equal to ; (a) 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 (b) 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 and our total net leverage ratio.
As of December 31, 2022, a hypothetical 1% increase in prevailing interest rates would increase Crane Holdings, Co.’s variable rate interest expense by approximately $4.0 million. • Based on a sensitivity analysis as of December 31, 2022, a 10% change in the foreign currency exchange rates for the year ended December 31, 2022 would have impacted our net earnings by approximately $15.2 million, due primarily to the British pound, euro and Canadian dollar.
These are not forecasts. • As of December 31, 2023, a hypothetical 1% increase in prevailing interest rates would increase our variable rate interest expense by approximately $2.5 million. • Based on a sensitivity analysis as of December 31, 2023, a 10% change in the foreign currency exchange rates for the year ended December 31, 2023 would have impacted our net earnings by approximately $11.2 million, due primarily to the British pound and Canadian dollar.
This calculation assumes that all currencies change in the same direction and proportion relative to the U.S. dollar and there are no indirect effects, such as changes in non-U.S. dollar sales volumes or prices. Crane Company Our cash flows and earnings are subject to fluctuations from changes in interest rates and foreign currency exchange rates.
This calculation assumes that all currencies change in the same direction and proportion relative to the U.S. dollar and there are no indirect effects, such as changes in non-U.S. dollar sales volumes or prices. 39
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Crane Holdings, Co. Crane Holdings, Co.’s cash flows and earnings are subject to fluctuations from changes in interest rates and foreign currency exchange rates.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Our cash flows and earnings are subject to fluctuations from changes in interest rates and foreign currency exchange rates. We manage our exposures to these market risks through internally established policies and procedures and, when deemed appropriate, through the use of interest-rate swap agreements and forward exchange contracts.
Removed
Crane Holdings, Co. manages its exposures to these market risks through internally established policies and procedures and, when deemed appropriate, through the use of interest-rate swap agreements and forward exchange contracts.
Added
We do not enter into derivatives or other financial instruments for trading or speculative purposes. Total net debt outstanding was $248.5 million as of December 31, 2023.
Removed
Crane Holdings, Co. does not enter into derivatives or other financial instruments for trading or speculative purposes. 67 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Total net debt outstanding was $1,243.0 million as of December 31, 2022, which was at fixed rates of interest ranging from 4.20% to 6.55% and variable rates of interest of; (a) a base rate (determined in a customary manner), plus a margin of 0.25% or 0.50% that is determined based upon the ratings by S&P and Moody’s of Crane Holdings, Co.’s senior unsecured long-term debt (the “Index Debt Rating”) or (b) an adjusted Term SOFR (determined in a customary manner) for an interest period to be selected by Crane Holdings, Co., plus a margin of 1.25% or 1.50% that is determined based upon the Index Debt Rating.
Removed
The following is an analysis of the potential changes in interest rates and currency exchange rates based upon sensitivity analysis that models effects of shifts in rates. These are not forecasts. • 68% of Crane Holdings, Co.’s year-end portfolio is comprised of fixed-rate debt; therefore, the effect of a market change in interest rates would not be significant.
Removed
We manage our exposures to these market risks through internally established policies and procedures and, when deemed appropriate, through the use of interest-rate swap agreements and forward exchange contracts. We do not enter into derivatives or other financial instruments for trading or speculative purposes.
Removed
These are not forecasts. • As of December 31, 2022, a hypothetical 1% increase in prevailing interest rates would increase our variable rate interest expense by approximately $4.0 million. 68 Table of Contents INDEX TO FINANCIAL STATEMENTS Crane Holdings, Co.
Removed
Page Audited Consolidated Financial Statements Management’s Responsibility for Financial Reporting 70 Report of Independent Registered Public Accounting Firm 71 Consolidated Statements of Operations for the years ended December 31, 2022, 2021 and 2020 73 Consolidated Statements of Comprehensive Income for the years ended December 31, 2022, 2021 and 2020 74 Consolidated Balance Sheets as of December 31, 2022 and 2021 75 Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020 76 Consolidated Statements of Changes in Equity for the years ended December 31, 2022, 2021 and 2020 78 Notes to Consolidated Financial Statements 79 Crane Company (Supplemental) Page Audited Combined Financial Statements Report of Independent Registered Public Accounting Firm 124 Combined Statements of Operations for the years ended December 31, 2022, 2021 and 2020 126 Combined Statements of Comprehensive Income for the years ended December 31, 2022, 2021 and 2020 127 Combined Balance Sheets as of December 31, 2022 and 2021 128 Combined Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020 129 Combined Statements of Changes in Net Investment for the years ended December 31, 2022, 2021 and 2020 130 Notes to Combined Financial Statements 131 69 Table of Contents

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