Crane NXT, Co 10-Q for FY2023 Q1
Crane NXT, Co. (CXT)
10-Q
2023-05-10
For: 2023-03-31
View Original
Added on
April 07, 2026
About this 10-Q
Crane NXT, Co filed this 10-Q on May 10, 2023, covering the quarter ended March 31, 2023 (FY2023 Q1).
Headline figures
Quarter ended March 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $842.9M
- down 3.3% from $871.5M a year earlier
- Net income
- $105.7M
- up 0.7% from net income of $105M a year earlier
- Diluted EPS
- $1.84
- up 1.7% from $1.81 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Mark One:
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the Quarterly Period Ended March 31, 2023
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the Transition Period from to
Commission File Number: 1-1657
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
| (Address of principal executive offices) | (Zip Code) | ||||||||||
Registrant’s telephone number, including area code: 610 -430-2510
(Not Applicable)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||
| | ||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non–accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| (check one): | ||||||||||||||||||||
| ☒ | Accelerated filer | ☐ | ||||||||||||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ||||||||||||||||||
| Emerging growth company | ||||||||||||||||||||
| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ | ||||||||||||||||||||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of shares outstanding of the issuer’s classes of common stock, as of April 30, 2023
Common stock, $1.00 Par Value – 56,730,163 shares
1
Crane NXT, Co.
Table of Contents
Form 10-Q
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| Part I - Financial Information | ||||||||||||||||||||
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| Part II - Other Information | ||||||||||||||||||||
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2
EXPLANATORY NOTE
As used in this Quarterly Report on Form 10-Q, the terms "we," "us," "our," "Crane Holdings, Co." and the "Company" mean Crane NXT, Co. and our subsidiaries. Prior to April 3, 2023, Crane NXT, Co. was named “Crane Holdings, Co.” Accordingly, we refer to Crane NXT, Co. as “Crane Holdings, Co.” in certain disclosures that are as of dates or related to periods ended prior to April 3, 2023.
3
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
CRANE HOLDINGS, CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three Months Ended | |||||||||||||||||||||||
| March 31, | |||||||||||||||||||||||
| (in millions, except per share data) | 2023 | 2022 | |||||||||||||||||||||
| Net sales | $ | $ | |||||||||||||||||||||
| Operating costs and expenses: | |||||||||||||||||||||||
| Cost of sales | |||||||||||||||||||||||
| Selling, general and administrative | |||||||||||||||||||||||
| Operating profit | |||||||||||||||||||||||
| Other (expense) income: | |||||||||||||||||||||||
| Interest income | |||||||||||||||||||||||
| Interest expense | ( | ( | |||||||||||||||||||||
| Miscellaneous (expense) income, net | ( | ||||||||||||||||||||||
| Total other expense, net | ( | ( | |||||||||||||||||||||
| Income before income taxes | |||||||||||||||||||||||
| Provision for income taxes | |||||||||||||||||||||||
| Net income attributable to common shareholders | $ | $ | |||||||||||||||||||||
| Earnings per share: | |||||||||||||||||||||||
| Basic | $ | $ | |||||||||||||||||||||
| Diluted | $ | $ | |||||||||||||||||||||
| Average shares outstanding: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
| Dividends per share | $ | $ | |||||||||||||||||||||
See Notes to Condensed Consolidated Financial Statements.
4
CRANE HOLDINGS, CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
| Three Months Ended | ||||||||||||||||||||
| March 31, | ||||||||||||||||||||
| (in millions) | 2023 | 2022 | ||||||||||||||||||
| Net income before allocation to noncontrolling interests | $ | $ | ||||||||||||||||||
| Components of other comprehensive income (loss), net of tax | ||||||||||||||||||||
| Currency translation adjustment | ( | |||||||||||||||||||
| Changes in pension and postretirement plan assets and benefit obligation, net of tax | ||||||||||||||||||||
| Other comprehensive income (loss), net of tax | ( | |||||||||||||||||||
| Comprehensive income before allocation to noncontrolling interests | ||||||||||||||||||||
| Less: Noncontrolling interests in comprehensive income | ( | |||||||||||||||||||
| Comprehensive income attributable to common shareholders | $ | $ | ||||||||||||||||||
See Notes to Condensed Consolidated Financial Statements.
5
CRANE HOLDINGS, CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| (in millions) | March 31, 2023 | December 31, 2022 | ||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
Accounts receivable, net of allowance for doubtful accounts of $ | ||||||||
| Inventories, net: | ||||||||
| Finished goods | ||||||||
| Finished parts and subassemblies | ||||||||
| Work in process | ||||||||
| Raw materials | ||||||||
| Inventories, net | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment: | ||||||||
| Cost | ||||||||
| Less: accumulated depreciation | ||||||||
| Property, plant and equipment, net | ||||||||
| Long-term deferred tax assets | ||||||||
| Other assets | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Total assets | $ | $ | ||||||
See Notes to Condensed Consolidated Financial Statements.
6
CRANE HOLDINGS, CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| (in millions, except per share and share data) | March 31, 2023 | December 31, 2022 | ||||||
| Liabilities and equity | ||||||||
| Current liabilities: | ||||||||
| Short-term borrowings | $ | $ | ||||||
| Accounts payable | ||||||||
| Accrued liabilities | ||||||||
| U.S. and foreign taxes on income | ||||||||
| Total current liabilities | ||||||||
| Long-term debt | ||||||||
| Accrued pension and postretirement benefits | ||||||||
| Long-term deferred tax liability | ||||||||
| Other liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 10) | ||||||||
| Equity: | ||||||||
Preferred shares, par value $ | ||||||||
Common shares, par value $ | ||||||||
| Capital surplus | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive loss | ( | ( | ||||||
| Treasury stock | ( | ( | ||||||
| Total shareholders’ equity | ||||||||
| Noncontrolling interests | ||||||||
| Total equity | ||||||||
| Total liabilities and equity | $ | $ | ||||||
| Share data: | ||||||||
| Common shares issued | ||||||||
| Less: Common shares held in treasury | ||||||||
| Common shares outstanding | ||||||||
See Notes to Condensed Consolidated Financial Statements.
7
CRANE HOLDINGS, CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Three Months Ended | |||||||||||
| March 31, | |||||||||||
| (in millions) | 2023 | 2022 | |||||||||
| Operating activities: | |||||||||||
| Net income attributable to common shareholders | $ | $ | |||||||||
| Depreciation and amortization | |||||||||||
| Stock-based compensation expense | |||||||||||
| Defined benefit plans and postretirement credit | ( | ||||||||||
| Deferred income taxes | ( | ( | |||||||||
| Cash used for operating working capital | ( | ( | |||||||||
| Defined benefit plans and postretirement contributions | ( | ( | |||||||||
| Environmental payments, net of reimbursements | ( | ( | |||||||||
| Asbestos related payments, net of insurance recoveries | ( | ||||||||||
| Other | |||||||||||
| Total used for operating activities | ( | ( | |||||||||
| Investing activities: | |||||||||||
| Proceeds from disposition of capital assets | |||||||||||
| Capital expenditures | ( | ( | |||||||||
| Total used for investing activities | ( | ( | |||||||||
| Financing activities: | |||||||||||
| Dividends paid | ( | ( | |||||||||
| Reacquisition of shares on open market | ( | ||||||||||
| Stock options exercised, net of shares reacquired | |||||||||||
| Debt issuance costs | ( | ||||||||||
| Net borrowings from issuance of commercial paper with maturities of 90 days or less | |||||||||||
| Proceeds from term loan | |||||||||||
| Repayment of term loan | ( | ||||||||||
| Total used for financing activities | ( | ( | |||||||||
| Effect of exchange rates on cash and cash equivalents | ( | ||||||||||
| Decrease in cash and cash equivalents | ( | ( | |||||||||
| Cash and cash equivalents at beginning of period | |||||||||||
| Cash and cash equivalents at end of period | $ | $ | |||||||||
See Notes to Condensed Consolidated Financial Statements.
8
CRANE HOLDINGS, CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Three Months Ended | |||||||||||
| March 31, | |||||||||||
| (in millions) | 2023 | 2022 | |||||||||
| Detail of cash used for operating working capital: | |||||||||||
| Accounts receivable | $ | ( | $ | ( | |||||||
| Inventories | ( | ( | |||||||||
| Other current assets | ( | ( | |||||||||
| Accounts payable | ( | ( | |||||||||
| Accrued liabilities | ( | ( | |||||||||
| U.S. and foreign taxes on income | ( | ||||||||||
| Total | $ | ( | $ | ( | |||||||
| Supplemental disclosure of cash flow information: | |||||||||||
| Interest paid | $ | $ | |||||||||
| Income taxes paid | $ | $ | |||||||||
See Notes to Condensed Consolidated Financial Statements.
9
CRANE HOLDINGS, CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)
| (in millions, except share data) | Common Shares Issued at Par Value | Capital Surplus | Retained Earnings | Accumulated Other Comprehensive Loss | Treasury Stock | Total Share- holders’ Equity | Non-controlling Interest | Total Equity | |||||||||||||||||||||||||||||||||||||||
| BALANCE DECEMBER 31, 2022 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Cash dividends ($ | — | — | ( | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
Exercise of stock options, net of shares reacquired of | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Impact from settlement of share-based awards, net of shares acquired | — | ( | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Changes in pension and postretirement plan assets and benefit obligation, net of tax | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Currency translation adjustment | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||
| BALANCE MARCH 31, 2023 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
| (in millions, except share data) | Common Shares Issued at Par Value | Capital Surplus | Retained Earnings | Accumulated Other Comprehensive Loss | Treasury Stock | Total Share- holders’ Equity | Non-controlling Interest | Total Equity | |||||||||||||||||||||||||||||||||||||||
| BALANCE DECEMBER 31, 2021 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Cash dividends ($ | — | — | ( | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
Reacquisition on open market of | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
Exercise of stock options, net of shares reacquired of | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Impact from settlement of share-based awards, net of shares acquired | — | ( | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Changes in pension and postretirement plan assets and benefit obligation, net of tax | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Currency translation adjustment | — | — | — | ( | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||
| BALANCE MARCH 31, 2022 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
See Notes to Condensed Consolidated Financial Statements.
10
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial reporting and the instructions to Form 10-Q and, therefore, reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. All such adjustments are of a normal recurring nature. These interim condensed consolidated financial statements should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2022.
As used in these notes, the terms "we," "us," "our," and the "Company" mean Crane Holdings, Co., which was renamed “Crane NXT, Co.” on April 3, 2023.
Due to rounding, numbers presented throughout this report may not add up precisely to totals we provide, and percentages may not precisely reflect the absolute figures. Certain amounts in the prior periods’ condensed consolidated financial statements have been reclassified to conform to the current period presentation.
Separation
On April 3, 2023, the Company, was separated into two independent, publicly-traded companies, in a transaction in which the Company retained its Payment & Merchandising Technologies segment and spun off its Aerospace & Electronics, Process Flow Technologies and Engineered Materials segments to the Company’s stockholders (the “Separation”).
Recent Accounting Pronouncements
The Company considered the applicability and impact of all Accounting Standards Updates issued by the Financial Accounting Standards Board (FASB) and determined them to be either not applicable or are not expected to have a material impact on the Company's Condensed Consolidated Statement of Operations, Balance Sheets and Cash Flows.
Note 2 - Segment Results
Our segments are reported on the same basis used internally for evaluating performance and for allocating resources. As of March 31, 2023, we had four reportable segments: Aerospace & Electronics, Process Flow Technologies, Payment & Merchandising Technologies and Engineered Materials. Assets of the reportable segments exclude general corporate assets, which principally consist of cash, deferred tax assets, insurance receivables, certain property, plant and equipment, and certain other assets. Corporate consists of corporate office expenses including compensation and benefits for corporate employees, occupancy, depreciation, and other administrative costs.
A brief description of each of our segments as of March 31, 2023 are as follows:
Aerospace & Electronics
The Aerospace & Electronics segment supplies critical components and systems, including original equipment and aftermarket parts, primarily for the commercial aerospace, and the military aerospace, defense and space markets. Its brands have decades of proven experience, and in many cases invented the critical technologies in their respective markets. The business designs and delivers proven systems, reliable components, and flexible power solutions that excel in tough and mission-critical environments. Products and services are organized into six integrated solutions: Sensing Components & Systems, Electrical Power Solutions, Fluid Management Solutions, Landing & Control Systems, and Microwave Solutions.
Process Flow Technologies
The Process Flow Technologies segment is a provider of highly engineered fluid handling equipment for mission critical applications that require high reliability. The segment is comprised of Process Valves and Related Products, Commercial Valves, and Pumps and Systems. Process Valves and Related Products include on/off valves and related products for critical and demanding applications in the chemical, oil & gas, power, and general industrial end markets globally. Commercial Valves includes the manufacturing of valves and related products for the non-residential construction, general industrial, and to a lesser extent, municipal markets. Pumps and Systems include pumps and related products primarily for water and wastewater applications in the industrial, municipal, commercial and military markets.
Payment & Merchandising Technologies
The Payment & Merchandising Technologies segment consists of Crane Payment Innovations (“CPI”) and Crane Currency. CPI provides electronic equipment and associated software leveraging extensive and proprietary core capabilities with various detection and sensing technologies for applications including verification and authentication of payment transactions. CPI also provides advanced automation solutions, and processing systems, field service solutions, and remote diagnostics and productivity software solutions. Crane Currency provides advance security solutions based on proprietary micro-optic technology for the global banknote industry.
11
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Engineered Materials
The Engineered Materials segment manufactures fiberglass-reinforced plastic ("FRP") panels and coils, primarily for use in the manufacturing of recreational vehicles ("RVs"), truck bodies and trailers (Transportation), with additional applications in commercial and industrial buildings (Building Products). In the second quarter of 2022, Engineered Materials segment was no longer classified as held for sale and as such, the results of Engineered Materials segment are presented as continuing operations from second quarter of 2022. This change was applied on retroactive basis.
Financial information by reportable segment is set forth below.
| Three Months Ended | |||||||||||||||||||||||
| March 31, | |||||||||||||||||||||||
| (in millions) | 2023 | 2022 | |||||||||||||||||||||
| Net sales: | |||||||||||||||||||||||
| Aerospace & Electronics | $ | $ | |||||||||||||||||||||
| Process Flow Technologies | |||||||||||||||||||||||
| Payment & Merchandising Technologies | |||||||||||||||||||||||
| Engineered Materials | |||||||||||||||||||||||
| Total | $ | $ | |||||||||||||||||||||
| Operating profit: | |||||||||||||||||||||||
| Aerospace & Electronics | $ | $ | |||||||||||||||||||||
| Process Flow Technologies | |||||||||||||||||||||||
| Payment & Merchandising Technologies | |||||||||||||||||||||||
| Engineered Materials | |||||||||||||||||||||||
| Corporate | ( | ( | |||||||||||||||||||||
| Total | $ | $ | |||||||||||||||||||||
| Interest income | |||||||||||||||||||||||
| Interest expense | ( | ( | |||||||||||||||||||||
| Miscellaneous (expense) income, net | ( | ||||||||||||||||||||||
| Income before income taxes | $ | $ | |||||||||||||||||||||
| (in millions) | March 31, 2023 | December 31, 2022 | |||||||||
| Assets: | |||||||||||
| Aerospace & Electronics | $ | $ | |||||||||
| Process Flow Technologies | |||||||||||
| Payment & Merchandising Technologies | |||||||||||
| Engineered Materials | |||||||||||
| Corporate | |||||||||||
| Total | $ | $ | |||||||||
| (in millions) | March 31, 2023 | December 31, 2022 | |||||||||
| Goodwill: | |||||||||||
| Aerospace & Electronics | $ | $ | |||||||||
| Process Flow Technologies | |||||||||||
| Payment & Merchandising Technologies | |||||||||||
| Engineered Materials | |||||||||||
| Total | $ | $ | |||||||||
12
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 3 - Revenue
Disaggregation of Revenues
The following table presents net sales disaggregated by product line for each segment:
| Three Months Ended | ||||||||||||||||||||||||||
| March 31, | ||||||||||||||||||||||||||
| (in millions) | 2023 | 2022 | ||||||||||||||||||||||||
| Aerospace & Electronics | ||||||||||||||||||||||||||
| Commercial Original Equipment | $ | $ | ||||||||||||||||||||||||
| Military and Other Original Equipment | ||||||||||||||||||||||||||
| Commercial Aftermarket Products | ||||||||||||||||||||||||||
| Military Aftermarket Products | ||||||||||||||||||||||||||
| Total Aerospace & Electronics | $ | $ | ||||||||||||||||||||||||
| Process Flow Technologies | ||||||||||||||||||||||||||
| Process Valves and Related Products | $ | $ | ||||||||||||||||||||||||
| Commercial Valves | ||||||||||||||||||||||||||
| Pumps and Systems | ||||||||||||||||||||||||||
| Total Process Flow Technologies | $ | $ | ||||||||||||||||||||||||
| Payment & Merchandising Technologies | ||||||||||||||||||||||||||
| Payment Acceptance and Dispensing Products | $ | $ | ||||||||||||||||||||||||
| Banknotes and Security Products | ||||||||||||||||||||||||||
| Total Payment & Merchandising Technologies | $ | $ | ||||||||||||||||||||||||
| Engineered Materials | ||||||||||||||||||||||||||
| FRP - Recreational Vehicles | $ | $ | ||||||||||||||||||||||||
| FRP - Building Products | ||||||||||||||||||||||||||
| FRP - Transportation | ||||||||||||||||||||||||||
| Total Engineered Materials | $ | $ | ||||||||||||||||||||||||
| Net sales | $ | $ | ||||||||||||||||||||||||
Remaining Performance Obligations
The transaction price allocated to remaining performance obligations represents the transaction price of firm orders which have not yet been fulfilled, which we also refer to as total backlog. As of March 31, 2023, total backlog was $1,580.5 million. We expect to recognize approximately 84 % of our remaining performance obligations as revenue in 2023, an additional 14 % in 2024 and the balance thereafter.
Contract Assets and Contract Liabilities
Contract assets represent unbilled amounts that typically arise from contracts for customized products or contracts for products sold directly to the U.S. government or indirectly to the U.S. government through subcontracts, where revenue recognized using the cost-to-cost method exceeds the amount billed to the customer. Contract assets are assessed for impairment and recorded at their net realizable value. Contract liabilities represent advance payments from customers. Revenue related to contract liabilities is recognized when control is transferred to the customer. We report contract assets, which are included within “Other current assets” in our Condensed Consolidated Balance Sheets, and contract liabilities, which are included within “Accrued liabilities” on our Condensed Consolidated Balance Sheets, on a contract-by-contract net basis at the end of each reporting period. Net contract assets and contract liabilities consisted of the following:
| (in millions) | March 31, 2023 | December 31, 2022 | |||||||||||||||||||||
| Contract assets | $ | $ | |||||||||||||||||||||
| Contract liabilities | $ | $ | |||||||||||||||||||||
13
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 4 - Earnings Per Share
Our basic earnings per share calculations are based on the weighted average number of common shares outstanding during the period. Potentially dilutive securities include outstanding stock options, restricted share units, deferred stock units and performance-based restricted share units. The effect of potentially dilutive securities is reflected in diluted earnings per common share by application of the treasury method. Diluted earnings per share gives effect to all potentially dilutive common shares outstanding during the period.
| Three Months Ended | |||||||||||||||||||||||
| March 31, | |||||||||||||||||||||||
| (in millions, except per share data) | 2023 | 2022 | |||||||||||||||||||||
| Net income attributable to common shareholders | $ | $ | |||||||||||||||||||||
| Average basic shares outstanding | |||||||||||||||||||||||
| Effect of dilutive share-based awards | |||||||||||||||||||||||
| Average diluted shares outstanding | |||||||||||||||||||||||
| Earnings per basic share | $ | $ | |||||||||||||||||||||
| Earnings per diluted share | $ | $ | |||||||||||||||||||||
14
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 5 - Changes in Accumulated Other Comprehensive Loss
The table below provides the accumulated balances for each classification of accumulated other comprehensive income (loss), as reflected on our Condensed Consolidated Balance Sheets.
| (in millions) | Defined Benefit Pension and Postretirement Items | Currency Translation Adjustment | Total a | |||||||||||||||||
| Balance as of December 31, 2022 | $ | ( | $ | ( | $ | ( | ||||||||||||||
| Other comprehensive income (loss) before reclassifications | — | |||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss | — | |||||||||||||||||||
| Net period other comprehensive income (loss) | ||||||||||||||||||||
| Balance as of March 31, 2023 | $ | ( | $ | ( | $ | ( | ||||||||||||||
a | Net of tax benefit of $ | ||||
The table below illustrates the amounts reclassified out of each component of accumulated other comprehensive loss for the three month ended March 31, 2023, and 2022. Amortization of pension and postretirement components has been recorded within “Miscellaneous (expense) income, net” on our Condensed Consolidated Statements of Operations.
| Three Months Ended March 31, | ||||||||||||||||||||||||||
| (in millions) | 2023 | 2022 | ||||||||||||||||||||||||
| Amortization of pension items: | ||||||||||||||||||||||||||
| Net loss | ||||||||||||||||||||||||||
| Amortization of postretirement items: | ||||||||||||||||||||||||||
| Prior service costs | ( | ( | ||||||||||||||||||||||||
| Net gain | ( | |||||||||||||||||||||||||
| Total before tax | $ | $ | ||||||||||||||||||||||||
| Tax impact | ||||||||||||||||||||||||||
| Total reclassifications for the period | $ | $ | ||||||||||||||||||||||||
15
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 6 - Defined Benefit and Postretirement Benefits
For all plans, the components of net periodic benefit for the three months ended March 31, 2023, and 2022 are as follows:
| Pension | Postretirement | ||||||||||||||||||||||
| (in millions) | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
| Service cost | $ | $ | $ | $ | |||||||||||||||||||
| Interest cost | |||||||||||||||||||||||
| Expected return on plan assets | ( | ( | |||||||||||||||||||||
| Amortization of prior service cost | ( | ( | |||||||||||||||||||||
| Amortization of net (gain) loss | ( | ||||||||||||||||||||||
| Settlement loss | — | — | — | ||||||||||||||||||||
| Curtailment loss | — | — | — | ||||||||||||||||||||
| Net periodic loss (benefit) | $ | $ | ( | $ | ( | $ | |||||||||||||||||
The components of net periodic benefit, other than the service cost component, are included in “Miscellaneous (expense) income, net” in our Condensed Consolidated Statements of Operations. Service cost is recorded within “Cost of sales” and “Selling, general and administrative” in our Condensed Consolidated Statements of Operations.
We expect to contribute the following to our pension and postretirement plans:
| (in millions) | Pension | Postretirement | |||||||||
| Expected contributions in 2023 | $ | $ | |||||||||
| Amounts contributed during the three months ended March 31, 2023 | $ | $ | |||||||||
16
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 7 - Income Taxes
Effective Tax Rates
Our quarterly provision for income taxes is measured using an annual effective tax rate, adjusted for discrete items within the periods presented.
Our effective tax rates are as follows:
| Three Months Ended March 31, | ||||||||||||||||||||
| 2023 | 2022 | |||||||||||||||||||
| Effective Tax Rate | ||||||||||||||||||||
Our effective tax rate for the three months ended March 31, 2023 is lower than the prior year’s comparable period primarily due to the greater benefit related to share-based compensation partially offset by higher non-U.S. taxes.
Our effective tax rate attributable to continuing operations for the three months ended March 31, 2023 is equal to the statutory U.S. federal tax rate of 21%. The effective tax rate is the result of permanent increases and decreases that net against each other and offset.
Unrecognized Tax Benefits
During the three months ended March 31, 2023, our gross unrecognized tax benefits, excluding interest and penalties, increased by $0.5 million, primarily due to increases in tax positions taken in the current periods, partially offset by reductions as a result of positions taken during prior period. During the three months ended March 31, 2023, the total amount of unrecognized tax benefits that, if recognized, would cause our effective tax rate to increase by $0.8 million . The difference between these amounts relates to (1) offsetting tax effects from other tax jurisdictions, and (2) interest expense, net of deferred taxes.
During the three months ended March 31, 2023, we recognized $0.5 million of interest expense related to unrecognized tax benefits in our Condensed Consolidated Statement of Operations. As of March 31, 2023 and December 31, 2022, the total amount of accrued interest and penalty expense related to unrecognized tax benefits recorded in our Condensed Consolidated Balance Sheets was $5.3 million and $4.8 million, respectively.
17
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 8 - Goodwill and Intangible Assets
Our business acquisitions have typically resulted in the recognition of goodwill and other intangible assets. We follow the provisions under ASC Topic 350, “Intangibles – Goodwill and Other” as it relates to the accounting for goodwill in our condensed consolidated financial statements. These provisions require that we, on at least an annual basis, evaluate the fair value of the reporting units to which goodwill is assigned and attributed and compare that fair value to the carrying value of the reporting unit to determine if an impairment has occurred. We perform our annual impairment testing during the fourth quarter. Impairment testing takes place more often than annually if events or circumstances indicate a change in status that would indicate a potential impairment. We believe that there have been no events or circumstances which would more likely than not reduce the fair value for our reporting units below its carrying value. A reporting unit is an operating segment unless discrete financial information is prepared and reviewed by segment management for businesses one level below that operating segment (a “component”), in which case the component would be the reporting unit. As of March 31, 2023, we had six reporting units.
Intangibles with indefinite useful lives, consisting of trade names, are tested annually for impairment, or when events or changes in circumstances indicate the potential for impairment. If the carrying amount of an indefinite lived intangible asset exceeds its fair value, the intangible asset is written down to its fair value. Fair value is calculated using relief from royalty method. We amortize the cost of definite-lived intangibles over their estimated useful lives. We also review all of our definite-lived intangible assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.
Changes to goodwill are as follows:
| (in millions) | Aerospace & Electronics | Process Flow Technologies | Payment & Merchandising Technologies | Engineered Materials | Total | ||||||||||||
| Balance as of December 31, 2022 | $ | $ | $ | $ | $ | ||||||||||||
| Currency translation | |||||||||||||||||
| Balance as of March 31, 2023 | $ | $ | $ | $ | $ | ||||||||||||
As of March 31, 2023, we had $406.5 million of net intangible assets, of which $67.4 million were intangibles with indefinite useful lives. As of December 31, 2022, we had $416.6 million of net intangible assets, of which $67.3 million were intangibles with indefinite useful lives.
Changes to intangible assets are as follows:
| (in millions) | Three Months Ended March 31, 2023 | Year Ended December 31, 2022 | |||||||||
| Balance at beginning of period, net of accumulated amortization | $ | $ | |||||||||
| Amortization expense | ( | ( | |||||||||
| Currency translation and other | ( | ||||||||||
| Balance at end of period, net of accumulated amortization | $ | $ | |||||||||
18
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| March 31, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||||||||||||||
| (in millions) | Weighted Average Amortization Period of Finite Lived Assets (in years) | Gross Asset | Accumulated Amortization | Net | Gross Asset | Accumulated Amortization | Net | ||||||||||||||||||||||||||||||||||
| Intellectual property rights | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||
| Customer relationships and backlog | |||||||||||||||||||||||||||||||||||||||||
| Drawings | |||||||||||||||||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||
Future amortization expense associated with intangible assets is expected to be:
| (in millions) | |||||
| Remainder of 2023 | $ | ||||
| 2024 | |||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| 2028 and after | |||||
Note 9 - Accrued Liabilities
Accrued liabilities consist of:
| (in millions) | March 31, 2023 | December 31, 2022 | |||||||||
| Employee related expenses | $ | $ | |||||||||
| Warranty | |||||||||||
| Current lease liabilities | |||||||||||
| Contract liabilities | |||||||||||
| Other | |||||||||||
| Total | $ | $ | |||||||||
19
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 10 - Commitments and Contingencies
Environmental Matters
For environmental matters, we record a liability for estimated remediation costs when it is probable that we will be responsible for such costs and they can be reasonably estimated. Generally, third party specialists assist in the estimation of remediation costs. The environmental remediation liability as of March 31, 2023 is substantially related to the former manufacturing site in Goodyear, Arizona (the “Goodyear Site”) discussed below. On June 21, 2021, we completed the sale of substantially all of the property associated with what we have historically called the Goodyear Site for $8.7 million, retaining only a small parcel on which our remediation and treatment systems are located. We will continue to be responsible for all remediation costs associated with the Goodyear Site.
On August 12, 2022, Crane Holdings, Co., Crane Company, a then wholly-owned subsidiary of Crane Holdings, Co., and Redco Corporation (f/k/a Crane Co., (“Redco”) a then wholly-owned subsidiary of Crane Company that held liabilities including asbestos liabilities and related insurance assets, entered into the a Stock Purchase Agreement (the “Redco Purchase Agreement”) with Spruce Lake Liability Management Holdco LLC (“Redco Buyer”), an unrelated third party long-term liability management company specializing in the acquisition and management of legacy corporate liabilities, whereby Crane Company transferred to Redco Buyer all of the issued and outstanding shares of Redco (the “Redco Sale”). Pursuant to the terms of the Redco Purchase Agreement, Crane Company and Redco Buyer will each indemnify the other for breaches of representations and warranties, breaches of covenants and obligations and certain liabilities, subject to the terms of the Redco Purchase Agreement. Such covenants and obligations include obligations of Crane Company to indemnify Redco and its affiliates for all other historical liabilities of Redco, which include certain potential environmental liabilities. Crane Holdings, Co. guaranteed the full payment and performance of Crane Company’s indemnification obligations under the Redco Purchase Agreement. On April 3, 2023, Crane Holdings, Co. completed the Separation, pursuant to which, among other things, all outstanding shares of Crane Company were distributed to Crane Holdings, Co.’s stockholders. Upon completion of the Separation, pursuant to the terms of the Redco Purchase Agreement, Crane Holdings, Co was released from its guarantee of Crane Company’s indemnification obligations under the Redco Purchase Agreement. Prior to the effective date of the Redco Sale, the U.S. Department of Justice agreed that Crane Holdings, Co. and, following completion of the Separation, Crane Company will be primarily liable for the Goodyear Site. The New Jersey Department of Environmental Protection agreed to transfer the liability of the Roseland Site to Crane Holdings, Co., and to further transfer this environmental liability to Crane Company upon effectiveness of the Separation. The potential liability for the Crab Orchard Site referenced below remains a direct obligation of Redco. As noted above, however, Crane Company, and Crane Holdings, Co. (as guarantor until the completion of the Separation), agreed to indemnify Redco Buyer against the Goodyear, Roseland, and Crab Orchard environmental liabilities. Thus, references below to “we”, and “us” refer to Crane Company in its capacity as the primarily responsible party for the Goodyear and Roseland Sites, and as indemnitor to the Redco Buyer on the Crab Orchard Site.
Goodyear Site
The Goodyear Site was operated by Unidynamics/Phoenix, Inc. (“UPI”), which became an indirect subsidiary in 1985 when Crane Co. (n/k/a Redco) acquired UPI’s parent company, UniDynamics Corporation. UPI was an indirect subsidiary of Crane Holdings, Co. pre-Separation and became an indirect subsidiary of Crane Company following completion of the Separation. UPI manufactured explosive and pyrotechnic compounds, including components for critical military programs, for the U.S. Government at the Goodyear Site from 1962 to 1993, under contracts with the U.S. Department of Defense and other government agencies and certain of their prime contractors. In 1990, the U.S. Environmental Protection Agency (“EPA”) issued administrative orders requiring UPI to design and conduct certain remedial actions, which UPI has done. Groundwater extraction and treatment systems have been in operation at the Goodyear Site since 1994. On July 26, 2006, we entered a consent decree with the EPA with respect to the Goodyear Site providing for, among other things, a work plan for further investigation and remediation activities (inclusive of a supplemental remediation investigation and feasibility study). During the third quarter of 2014, the EPA issued a Record of Decision (“ROD”) amendment permitting, among other things, additional source area remediation resulting in us recording a charge of $49.0 million, extending the accrued costs through 2022. Following the 2014 ROD amendment, we continued our remediation activities and explored an alternative strategy to accelerate remediation of the site. During the fourth quarter of 2019, we received conceptual agreement from the EPA on our alternative remediation strategy which is expected to further reduce the contaminant plume. Accordingly, in 2019, we recorded a pre-tax charge of $18.9 million, net of reimbursements, to extend our forecast period through 2027 and reflect our revised workplan. The total estimated gross liability was $23.7 million and $24.8 million as of March 31, 2023 and December 31, 2022, respectively and as described below, a portion is reimbursable by the U.S. Government. The current portion of the total estimated liability was $7.8 million and $7.7 million as of March 31, 2023 and December 31, 2022, respectively, and represents our best estimate, in consultation with our technical advisors, of total remediation costs expected to be paid during the next twelve-month period. It is not possible at this point to reasonably estimate the amount of any obligation in excess of our current accruals through the 2027 forecast period because of the aforementioned uncertainties, in particular,
20
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
the continued significant changes in the Goodyear Site conditions and additional expectations of remediation activities experienced in recent years.
On July 31, 2006, we entered into a consent decree with the U.S. Department of Justice on behalf of the Department of Defense and the Department of Energy pursuant to which, among other things, the U.S. Government reimburses us for 21 % of qualifying costs of investigation and remediation activities at the Goodyear Site. As of March 31, 2023 and December 31, 2022, we recorded a receivable of $4.7 million and $4.8 million, respectively, for the expected reimbursements from the U.S. Government in respect of the aggregate liability as at that date. The receivable is reduced as reimbursements and other payments from the U.S. Government are received.
Other Environmental Matters
Roseland, NJ Site
The Roseland Site was operated by Resistoflex Corporation (“Resistoflex”), which became an indirect subsidiary in 1985 when Crane Co. (n/k/a Redco) acquired Resistoflex’s parent company, UniDynamics Corporation. Resistoflex manufactured specialty lined pipe and fittings at the site from the 1950s until it was closed in the mid-1980s. We undertook an extensive soil remediation effort at the Roseland Site following our closure and had been monitoring the Site’s condition in the years that followed. In response to changes in remediation standards, in 2014 we began to conduct further site characterization and delineation studies at the Site. We are in the late stages of our remediation activities at the Site, which include a comprehensive delineation of contaminants of concern in soil, groundwater, surface water, sediment, and indoor air in certain buildings, all in accordance with the New Jersey Department of Environmental Protection guidelines and directives.
Marion, IL Site
Crane Co. (n/k/a Redco) has been identified as a potentially responsible party (“PRP”) with respect to environmental contamination at the Crab Orchard National Wildlife Refuge Superfund Site (the “Crab Orchard Site”). The Crab Orchard Site is located near Marion, Illinois, and consists of approximately 55,000 acres. Beginning in 1941, the United States used the Crab Orchard Site for the production of ordnance and other related products for use in World War II. In 1947, about half of the Crab Orchard Site was leased to a variety of industrial tenants whose activities (which continue to this day) included manufacturing ordnance and explosives. Unidynamics Corporation formerly leased portions of the Crab Orchard Site and conducted manufacturing operations at the Crab Orchard Site from 1952 until 1964. General Dynamics Ordnance and Tactical Systems, Inc. (“GD-OTS”) is in the process of conducting a remedial investigation and feasibility study (“RI-FS”) for a portion of the Crab Orchard Site (the “AUS-OU”), which includes an area where we maintained operations, pursuant to an Administrative Order on Consent (the “AOC”). A remedial investigation report was approved in February 2015, and work on the feasibility study is underway. It is unclear when the final feasibility study will be completed, or when a final Record of Decision (“ROD”) may be issued. As noted above, we have agreed to indemnify Redco Buyer against the Crab Orchard environmental liabilities, and accordingly we act as Redco’s agent with respect to such liabilities.
GD-OTS asked Crane Co. (n/k/a Redco) to participate in a voluntary, multi-party mediation exercise with respect to response costs that GD-OTS has incurred or will incur with respect to the AUS-OU, and Crane Co. (n/k/a Redco), the U.S. Government, and other PRPs entered into a non-binding mediation agreement in 2015. We have stepped into Redco’s position as a participant in the mediation. The first phase of the mediation, involving certain former munitions or ordnance storage areas, began in November 2017, but did not result in a multi-party settlement agreement. Subsequently, Redco entered discussions directly with GD-OTS and reached an agreement, as of July 13, 2021, to contribute toward GD-OTS’s past RI-FS costs associated with the first-phase areas for an immaterial amount. We, as indemnitor, have also agreed to pay a modest percentage of future RI-FS costs and the United States’ claimed past response costs relative to the first-phase areas, a sum that has proven to be and we expect to continue to be, in the aggregate, an immaterial amount. We understand that GD-OTS has also reached agreements with the U.S. Government and the other participating PRPs related to the first-phase areas of concern.
Negotiations between GD-OTS, the U.S. Government and remaining participants are underway with respect to resolution of the U.S. Government’s liability for, and contribution claims with respect to, RI/FS costs associated with the remaining areas of the site, including those portions of the Crab Orchard Site where Redco’s predecessor conducted manufacturing and research activities. The participants have reached agreement in principle on a framework for resolving the U.S. Government’s share of RI/FS costs, subject to consummation of a mutually-agreeable consent decree, but we at present cannot predict whether or when these negotiations will result in a definitive agreement. Further, negotiations are ongoing between us and GD-OTS
21
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
regarding a potential resolution of GD-OTS’ claim for costs that it has incurred in performing its obligations under the AOC. We at present cannot predict when any determination of the ultimate allocable shares of GD-OTS and U.S. Government response costs for which we may be liable is likely to be completed. None of these discussions address responsibility for the performance of, or payment of costs incurred in connection with, any remedial design or remedial action that may be required pursuant to the ROD (when it is ultimately issued). It is not possible at this time to reasonably estimate the total amount of any obligation for remediation of the Crab Orchard Site as a whole because the allocation among PRPs, selection of remediation alternatives, and concurrence of regulatory authorities have not yet advanced to the stage where a reasonable estimate can be made. Insurers with contractual coverage obligations for this site have been notified of this potential liability and have been providing coverage, subject to reservations of rights.
Asbestos Liability
As a result of the Redco Sale, all asbestos obligations and liabilities, related insurance assets and associated deferred tax assets of Redco were removed from the Company’s condensed consolidated balance sheets effective August 12, 2022 and the Company no longer has any obligation with respect to pending and future asbestos claims.
The gross settlement and defense costs incurred for the periods presented was as follows:
| Three Months Ended | |||||||||||||||||||||||
| March 31, | |||||||||||||||||||||||
| (in millions) | 2023 | 2022 | |||||||||||||||||||||
| Settlement / indemnity costs incurred | $ | $ | |||||||||||||||||||||
| Defense costs incurred | |||||||||||||||||||||||
| Total costs incurred | $ | $ | |||||||||||||||||||||
The total pre-tax payments for settlement and defense costs, net of funds received from insurers, for the periods presented was as follows:
| Three Months Ended | |||||||||||||||||||||||
| March 31, | |||||||||||||||||||||||
| (in millions) | 2023 | 2022 | |||||||||||||||||||||
| Settlement / indemnity payments | $ | $ | |||||||||||||||||||||
| Defense payments | |||||||||||||||||||||||
| Insurance receipts | ( | ||||||||||||||||||||||
| Pre-tax cash payments, net | $ | $ | |||||||||||||||||||||
Other Proceedings
We regularly review the status of lawsuits, claims and proceedings that have been or may be asserted against us relating to the conduct of our business, including those pertaining to product liability, patent infringement, commercial, employment, employee benefits, environmental and stockholder matters. We record a provision for a liability for such matters when it is considered probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions, if any, are reviewed quarterly and adjusted as additional information becomes available. If either or both of the criteria are not met, we assess whether there is at least a reasonable possibility that a loss, or additional losses, may have been incurred. If there is a reasonable possibility that a loss or additional loss may have been incurred for such matters, we disclose the estimate of the amount of loss or range of loss, disclose that the amount is immaterial, or disclose that an estimate of loss cannot be made, as applicable. We believe that as of March 31, 2023, there was no reasonable possibility that a material loss, or any additional material losses, may have been incurred for such matters, and that adequate provision has been made in our financial statements for the potential impact of all such matters.
22
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 11 - Financing
Our debt consisted of the following:
| (in millions) | March 31, 2023 | December 31, 2022 | ||||||||||||
| $ | $ | |||||||||||||
| Term Facility | ||||||||||||||
| Total short-term borrowings | $ | $ | ||||||||||||
Term Facility a | $ | $ | ||||||||||||
| Other deferred financing costs associated with credit facilities | ( | ( | ||||||||||||
| Total long-term debt | $ | $ | ||||||||||||
(a) Debt discounts and debt issuance costs totaled $ | ||||||||||||||
Credit Facilities – On March 17, 2023, the Company entered into a new senior secured credit agreement (the “Credit Agreement”), which provides for (i) a $500 million, 5 -year revolving credit facility (the “Revolving Facility”) and (ii) a $350 million, 3 -year term loan facility (the “Term Facility”), funding under each of which became available in connection with the Separation, upon the satisfaction of customary conditions of facilities of this type. On March 31, 2023, the Company borrowed the full amount of the Term Facility.
The Revolving Facility allows us to borrow, repay and re-borrow funds from time to time prior to the maturity of the Revolving Facility without any penalty or premium, subject to customary borrowing conditions for facilities of this type and the reimbursement of breakage costs. Borrowings under the Term Facility are prepayable without premium or penalty, subject to customary reimbursement of breakage costs. Interest on loans advanced under the Credit Agreement accrues, at our option, at a rate per annum equal to (1) adjusted term SOFR plus a credit spread adjustment of 0.10 % for the applicable interest period plus a margin ranging from 1.50 % to 2.25 % or (2) a base rate plus a margin ranging from 0.50 % to 1.25 %, in each case, with such margin determined based on the lower of the ratings of our senior, unsecured long-term debt (the “Ratings”) and our total net leverage ratio. We are required to pay a fee on undrawn commitments under the Revolving Facility at a rate per annum that ranges from 0.20 % to 0.35 %, based on the lower of the Ratings and our total net leverage ratio. The Credit Agreement contains customary affirmative and negative covenants for credit facilities of this type, including limitations on our and our subsidiaries with respect to indebtedness, liens, mergers, consolidations, liquidations and dissolutions, sales of all or substantially all assets, transactions with affiliates, hedging arrangements and amendments to our organizational documents or to certain subordinated debt agreements. As of the last day of each fiscal quarter, our total net leverage ratio cannot exceed 3.50 to 1.00 (provided that, at our election, such maximum ratio may be increased to 4.00 to 1.00 for specified periods following our consummation of certain material acquisitions) and our minimum interest coverage ratio must be at least 3.00 to 1.00. The Credit Agreement also includes customary events of default, including failure to pay principal, interest or fees when due, failure to comply with covenants, any representation or warranty made by us or any of our material subsidiaries being false in any material respect, default under certain other material indebtedness, certain insolvency or receivership events affecting us and our material subsidiaries, certain ERISA events, material judgments and a change in control, in each case, subject to cure periods and thresholds where customary.
The $650 million revolving credit facility and commercial paper program disclosed below were replaced by commitments under the new $500 million, 5 -year Revolving Credit Agreement, with funding available upon Separation, subject to customary conditions precedent for facilities of this type. The commercial paper program will no longer be available upon Separation.
364-Day Credit Agreement - On August 11, 2022, the Company entered into a senior unsecured 364 -day credit facility (the “364 -Day Credit Agreement”) under which it borrowed term loans denominated in U.S. dollars (the “Term Loans”) in an aggregate principal amount of $400 million. Interest on the Term Loans accrued at a rate per annum equal to, at the Company’s option, (a) a base rate (determined in a customary manner), plus a margin of 0.25 % or 0.50 % that was determined based upon the ratings by S&P and Moody’s of the Company’s senior unsecured long-term debt (the “Index Debt Rating”) or (b) an adjusted Term SOFR (determined in a customary manner) for an interest period to be selected by the Company, plus a margin of 1.25 % or 1.50 % that was determined based upon the Index Debt Rating. During the first quarter of 2023, the Company repaid the remaining principal of $400 million under the 364 -Day Credit Agreement.
23
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Commercial paper program - On July 28, 2021, we increased the size of the commercial paper program (“CP Program”) to permit the issuance of short-term, unsecured commercial paper notes in an aggregate principal amount not to exceed $650 million at any time outstanding. Prior to this increase, the CP Program permitted us to issue commercial paper notes in an aggregate principal amount not to exceed $550 million at any time outstanding. The notes ranked at least pari passu with all of our other unsecured and unsubordinated indebtedness. As of March 31, 2023 and December 31, 2022, there were no outstanding borrowings under the commercial paper program.
Revolving Credit Facility - On July 28, 2021, we entered into a $650 million, 5 -year Revolving Credit Agreement (the “2021 Facility”). The 2021 Facility allowed us to borrow, repay, or to the extent permitted by the agreement, prepay and re-borrow funds at any time prior to the stated maturity date. Interest on loans made under the 2021 Facility accrued, at our option, at a rate per annum equal to (1) a base rate, plus a margin ranging from 0.00 % to 0.50 % depending upon the ratings by S&P and Moody’s of our senior unsecured long-term debt (the "Index Debt Rating"), or (2) an adjusted LIBO rate or the applicable replacement rate (determined based on “hardwired” LIBOR transition provisions consistent with those published by the Alternative References Rates Committee) for an interest period to be selected by us, plus a margin ranging from 0.805 % to 1.50 % depending upon the Index Debt Rating. The 2021 Facility contained customary affirmative and negative covenants for credit facilities of this type, including limitations on us and our subsidiaries with respect to indebtedness, liens, mergers, consolidations, liquidations and dissolutions, sales of all or substantially all assets, transactions with affiliates and hedging arrangements. We also were required to maintain a debt to capitalization ratio not to exceed 0.65 to 1.00 at all times. The 2021 Facility also provided for customary events of default, including failure to pay principal, interest or fees when due, failure to comply with covenants, any representation or warranty made by us or any of our material subsidiaries being false in any material respect, default under certain other material indebtedness, certain insolvency or receivership events affecting us and our material subsidiaries, certain ERISA events, material judgments and a change in control of us. As of March 31, 2023 and December 31, 2022, there were no
Note 12 - Fair Value Measurements
Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are to be considered from the perspective of a market participant that holds the asset or owes the liability. The standards also establish a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
The standards describe three levels of inputs that may be used to measure fair value:
Level 1: Quoted prices in active markets for identical or similar assets and liabilities.
Level 2: Quoted prices for identical or similar assets and liabilities in markets that are not active or observable inputs other than quoted prices in active markets for identical or similar assets and liabilities. Level 2 assets and liabilities include over-the-counter derivatives, principally forward foreign exchange contracts, whose value is determined using pricing models with inputs that are generally based on published foreign exchange rates and exchange traded prices, adjusted for other specific inputs that are primarily observable in the market or can be derived principally from or corroborated by observable market data.
Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Valuation Technique
The carrying value of our financial assets and liabilities, including cash and cash equivalents, accounts receivable and accounts payable approximate fair value, without being discounted, due to the short periods during which these amounts are outstanding.
24
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
We are exposed to certain risks related to our ongoing business operations, including market risks related to fluctuation in currency exchange. We use foreign exchange contracts to manage the risk of certain cross-currency business relationships to minimize the impact of currency exchange fluctuations on our earnings and cash flows. We do not hold or issue derivative financial instruments for trading or speculative purposes. Foreign exchange contracts not designated as hedging instruments had a notional value of $4.9 million and $89.7 million as of March 31, 2023 and December 31, 2022, respectively. Our derivative assets and liabilities include foreign exchange contract derivatives that are measured at fair value using internal models based on observable market inputs such as forward rates and interest rates. Based on these inputs, the derivatives are classified within Level 2 of the valuation hierarchy. Such derivative receivable amounts are recorded within “Other current assets” on our Condensed Consolidated Balance Sheets and were $0.1 million and $5.9 million as of March 31, 2023 and December 31, 2022, respectively. Such derivative liability amounts are recorded within “Accrued liabilities” on our Condensed Consolidated Balance Sheets and there were no derivative liabilities as of March 31, 2023 and December 31, 2022, respectively.
Available-for-sale securities consist of rabbi trust investments that hold marketable securities for the benefit of participants in our Supplemental Executive Retirement Plan. These investments are measured at fair value using quoted market prices in an active market and are therefore classified within Level 1 of the valuation hierarchy. The fair value of available-for-sale securities was $0.4 million and $0.4 million as of March 31, 2023 and December 31, 2022, respectively. These investments are included in “Other assets” on our Condensed Consolidated Balance Sheets.
25
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 13 - Restructuring
Overview
2022 Repositioning - In the fourth quarter of 2022, in response to economic uncertainty, we initiated modest workforce reductions of approximately 300 employees, or about 3 % of our global workforce. We expect to complete the program in the first quarter of 2024.
2019 Repositioning - In the fourth quarter of 2019, we initiated actions to consolidate two manufacturing operations in Europe within our Process Flow Technologies segment. In 2020, we recorded additional severance costs related to the final negotiation with the works council/union at both locations. These actions, taken together, included workforce reductions of approximately 180 employees, or less than 1 % of our global workforce. We expect to complete the program in the fourth quarter of 2023.
The following table summarizes the cumulative restructuring costs, net incurred through March 31, 2023. As of March 31, 2023, we do not expect to incur additional facility consolidation costs to complete these actions.
| Cumulative Restructuring Costs, Net | |||||||||||||||||
| (in millions) | Severance | Other | Total | ||||||||||||||
| Aerospace & Electronics | $ | $ | $ | ||||||||||||||
| Process Flow Technologies | |||||||||||||||||
| Payment & Merchandising Technologies | |||||||||||||||||
| Engineered Materials | |||||||||||||||||
| 2022 Repositioning | $ | $ | $ | ||||||||||||||
| Process Flow Technologies | $ | $ | ( | $ | |||||||||||||
| 2019 Repositioning | $ | $ | ( | $ | |||||||||||||
Restructuring Liability
The following table summarizes the accrual balances related to each restructuring program:
| (in millions) | 2022 Repositioning | 2019 Repositioning | Total | |||||||||||||||||
| Severance: | ||||||||||||||||||||
Balance as of December 31, 2022 (a) | $ | $ | $ | |||||||||||||||||
| Utilization | ( | ( | ( | |||||||||||||||||
Balance as of March 31, 2023 (a) | $ | $ | $ | |||||||||||||||||
| (a) | Included within Accrued Liabilities in the Condensed Consolidated Balance Sheets. | ||||
26
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 14- Subsequent Event
Dividend from Crane Company
Prior to the consummation of the Separation, the Board of Directors of Crane Company declared a one-time cash dividend in the amount of $275 million to Crane Holdings, Co., its sole stockholder at that time, and paid such dividend on April 3, 2023, prior to the consummation of the Separation.
The Separation and Distribution
On April 3, 2023, the Separation was completed. In connection with the Separation, Crane Holdings, Co., which was renamed “Crane NXT, Co.,” and Crane Company entered into various agreements to effect the Separation and provide a framework for their relationship after the Separation, including a separation and distribution agreement, a transition services agreement, an employee matters agreement, a tax matters agreement and an intellectual property matters agreement. These agreements provide for the allocation between Crane NXT, Co. and Crane Company of assets, employees, liabilities and obligations (including property and employee benefits and tax-related assets and liabilities) attributable to periods prior to, at, and after the consummation of the Separation and govern certain relationships between Crane NXT, Co. and Crane Company after the Separation.
4.45% Senior Notes due 2023
On April 4, 2023, the Company redeemed all of its outstanding 4.45 % senior notes due 2023, of which $300 million aggregate principal amount was outstanding upon redemption.
27
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Quarterly Report on Form 10-Q contains information about Crane Holdings, Co. (which was renamed to Crane NXT, Co. effective as of immediately following the consummation of the Separation on April 3, 2023), some of which includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements other than historical information or statements about our current condition. You can identify forward-looking statements by the use of terms such as “believes,” “contemplates,” “expects,” “may,” “could,” “should,” “would,” or “anticipates,” other similar phrases, or the negatives of these terms.
References herein to “we,” “us,” “our,” “Crane Holdings, Co.” and the “Company” refer to Crane NXT, Co. and our subsidiaries. Prior to April 3, 2023, Crane NXT, Co. was named “Crane Holdings, Co.” Accordingly, we refer to Crane NXT, Co.as “Crane Holdings, Co.” in certain disclosures that are as of dates or related to periods ended prior to April 3, 2023. References to “core business” or “core sales” in this report include sales from acquired businesses starting from and after the first anniversary of the acquisition but exclude currency effects. Amounts in the following discussion are presented in millions, except employee, share and per share data, or unless otherwise stated.
We have based the forward-looking statements relating to our operations on our current expectations, estimates and projections about us and the markets we serve. We caution you that these statements are not guarantees of future performance and involve risks and uncertainties. In addition, we have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. There are a number of other factors, including risks and uncertainties related to the ongoing effects of the COVID-19 pandemic, that could cause actual results or outcomes to differ materially from those expressed or implied in the forward-looking statements. Such factors also include, among others: changes in global economic conditions (including inflationary pressures) and geopolitical risks, including macroeconomic fluctuations that may harm our business, results of operations and stock price; the effects of the ongoing coronavirus pandemic on our business and the global and U.S. economies generally; information systems and technology networks failures and breaches in data security, personally identifiable and other information, non-compliance with our contractual or other legal obligations regarding such information; our ability to source components and raw materials from suppliers, including disruptions and delays in our supply chain; demand for our products, which is variable and subject to factors beyond our control; governmental regulations and failure to comply with those regulations; fluctuations in the prices of our components and raw materials; loss of personnel or being able to hire and retain additional personnel needed to sustain and grow our business as planned; risks from environmental liabilities, costs, litigation and violations that could adversely affect our financial condition, results of operations, cash flows and reputation; risks associated with conducting a substantial portion of our business outside the United States; being unable to identify or complete acquisitions, or to successfully integrate the businesses we acquire, or complete dispositions; adverse impacts from intangible asset impairment charges; potential product liability or warranty claims; being unable to successfully develop and introduce new products, which would limit our ability to grow and maintain our competitive position and adversely affect our financial condition, results of operations and cash flow; significant competition in our markets; additional tax expenses or exposures that could affect our financial condition, results of operations and cash flows; inadequate or ineffective internal controls; specific risks relating to our reportable segments, including Aerospace & Electronics, Process Flow Technologies, Payment & Merchandising Technologies and Engineered Materials (as a result of the Separation, Crane Holdings, Co. retained its Payment & Merchandising Technologies segment and spun-off its Aerospace & Electronics, Process Flow Technologies and Engineered Materials segments to Crane Holdings, Co.’s stockholders); the ability and willingness of Crane NXT, Co. and Crane Company to meet and/or perform their obligations under any contractual arrangements entered into among the parties in connection with the Separation and any of their obligations to indemnify, defend and hold the other party harmless from and against various claims, litigation and liabilities; our ability to achieve some or all the benefits that we expect to achieve from the Separation; and other risks noted in reports that we file with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, and subsequent reports and other documents filed by us with the Securities and Exchange Commission, including any registration statement relating to our business separation. We do not undertake any obligation to update or revise any forward-looking statements to reflect any future events or circumstances.
28
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Recent Transactions
Separation
On April 3, 2023, Crane Holdings, Co., was separated into two independent, publicly-traded companies in a transaction in which Crane Holdings, Co. retained its Payment & Merchandising Technologies segment and spun-off its Aerospace & Electronics, Process Flow Technologies and Engineered Materials segments to Crane Holdings, Co. stockholders. Upon consummation of the Separation, each of our stockholders received one share of Crane Company common stock for every one share of our common stock held on March 23, 2023, the record date for the distribution.
29
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results from Operations – Three Month Periods Ended March 31,
The following information should be read in conjunction with our condensed consolidated financial statements and related notes. All comparisons below refer to the first quarter 2023 versus the first quarter 2022, unless otherwise specified.
| First Quarter | Favorable/(Unfavorable) Change | ||||||||||||||||||||||
| (dollars in millions) | 2023 | 2022 | $ | % | |||||||||||||||||||
| Net sales | $ | 842.9 | $ | 871.5 | $ | (28.6) | (3.3) | % | |||||||||||||||
| Cost of sales | 481.3 | 526.2 | 44.9 | 8.5 | % | ||||||||||||||||||
| as a percentage of sales | 57.1 | % | 60.4 | % | |||||||||||||||||||
| Selling, general and administrative | 209.4 | 198.3 | (11.1) | (5.6) | % | ||||||||||||||||||
| as a percentage of sales | 24.8 | % | 22.8 | % | |||||||||||||||||||
| Operating profit | 152.2 | 147.0 | 5.2 | 3.5 | % | ||||||||||||||||||
| Operating margin | 18.1 | % | 16.9 | % | |||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||
| Interest income | 1.0 | 0.3 | 0.7 | 233.3 | % | ||||||||||||||||||
| Interest expense | (17.0) | (11.1) | (5.9) | (53.2) | % | ||||||||||||||||||
| Miscellaneous (expense) income, net | (2.4) | 3.5 | (5.9) | (168.6) | % | ||||||||||||||||||
| Total other expense | (18.4) | (7.3) | (11.1) | 152.1 | % | ||||||||||||||||||
| Income before income taxes | 133.8 | 139.7 | (5.9) | (4.2) | % | ||||||||||||||||||
| Provision for income taxes | 28.1 | 34.7 | 6.6 | 19.0 | % | ||||||||||||||||||
| Net income attributable to common shareholders | $ | 105.7 | $ | 105.0 | $ | 0.7 | 0.7 | % | |||||||||||||||
Sales decreased by $28.6 million, or 3.3%, to $842.9 million in 2023. The year-over-year change in sales included:
•an increase in core sales of $54.2 million, or 6.2%, which was driven primarily by higher pricing;
•unfavorable foreign currency translation of $21.0 million, or 2.4%; and
•a decrease in sales related to the May 2022 divestiture of Crane Supply of $61.7 million, or 7.1%.
Cost of sales decreased by $44.9 million, or 8.5%, to $481.3 million in 2023. The decrease is primarily related to the impact of the sale of Crane Supply of $46.0 million, or 8.7%, strong productivity gains of $17.2 million, or 3.3%, favorable foreign currency translation of $12.0 million, or 2.3%, the impact of lower volumes of $9.6 million, or 1.8%, partially offset by unfavorable mix of $23.9 million, or 4.5%, and an increase in material, labor and other manufacturing costs of $17.6 million, or 3.3%.
Selling, general and administrative expenses increased by $11.1 million, or 5.6%, to $209.4 million in 2023 primarily related to a $19.9 million, or 10.0%, increase in administrative expenses, including transaction related expenses of $11.7 million, or 5.9%, partially offset by the impact of the sale of Crane Supply of $6.0 million, or 3.0%, and favorable foreign currency translation of $4.0 million, or 2.0%.
Operating profit increased by $5.2 million, or 3.5%, to $152.2 million in 2023. The increase primarily reflected higher pricing net of inflation, and productivity, of $43.9 million, or 29.9%, partially offset by unfavorable mix of $23.9 million, or 16.3%, the impact of the sale of Crane Supply of $9.7 million, or 6.6%, and unfavorable foreign currency translation of $5.1 million, or 3.5%.
Our effective tax rate for the three months ended March 31, 2023 is lower than the prior year’s comparable period primarily due to a greater benefit related to share-based compensation.
Our effective tax rate for the three months ended March 31, 2023 is equal to the statutory U.S. federal tax rate of 21%. The effective tax rate is the result of permanent increases and decreases that net against each other and offset.
30
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Comprehensive Income
| Three Months Ended | |||||||||||
| March 31, | |||||||||||
| (in millions) | 2023 | 2022 | |||||||||
| Net income before allocation to noncontrolling interests | $ | 105.7 | $ | 105.0 | |||||||
| Components of other comprehensive income (loss), net of tax | |||||||||||
| Currency translation adjustment | 12.7 | (21.6) | |||||||||
| Changes in pension and postretirement plan assets and benefit obligation, net of tax | 2.7 | 3.3 | |||||||||
| Other comprehensive income (loss), net of tax | 15.4 | (18.3) | |||||||||
| Comprehensive income before allocation to noncontrolling interests | 121.1 | 86.7 | |||||||||
| Less: Noncontrolling interests in comprehensive income | (0.1) | 0.1 | |||||||||
| Comprehensive income attributable to common shareholders | $ | 121.2 | $ | 86.6 | |||||||
For the three months ended March 31, 2023, comprehensive income before allocation to noncontrolling interests was $121.1 million compared to $86.7 million in the same period of 2022. The $34.4 million increase was primarily driven by a $34.3 million year-over-year favorable impact of foreign currency translation, primarily related to the British pound and euro.
31
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Segment Results of Operations - Three Month Periods Ended March 31,
Aerospace & Electronics
| First Quarter | Favorable/(Unfavorable) Change | ||||||||||||||||||||||
| (dollars in millions) | 2023 | 2022 | $ | % | |||||||||||||||||||
| Net sales by product line: | |||||||||||||||||||||||
| Commercial Original Equipment | $ | 68.4 | $ | 58.7 | $ | 9.7 | 16.5 | % | |||||||||||||||
| Military Original Equipment | 61.9 | 57.4 | 4.5 | 7.8 | % | ||||||||||||||||||
| Commercial Aftermarket Products | 37.9 | 28.6 | 9.3 | 32.5 | % | ||||||||||||||||||
| Military Aftermarket Products | 11.9 | 12.5 | (0.6) | (4.8) | % | ||||||||||||||||||
| Total net sales | $ | 180.1 | $ | 157.2 | $ | 22.9 | 14.6 | % | |||||||||||||||
| Cost of sales | $ | 111.0 | $ | 97.4 | $ | (13.6) | (14.0) | % | |||||||||||||||
| as a percentage of sales | 61.6 | % | 62.0 | % | |||||||||||||||||||
| Selling, general and administrative | $ | 31.4 | $ | 31.7 | $ | 0.3 | 0.9 | % | |||||||||||||||
| as a percentage of sales | 17.4 | % | 20.2 | % | |||||||||||||||||||
| Operating profit | $ | 37.7 | $ | 28.1 | $ | 9.6 | 34.2 | % | |||||||||||||||
| Operating margin | 20.9 | % | 17.9 | % | |||||||||||||||||||
| Supplemental Data: | |||||||||||||||||||||||
| Backlog | $ | 644.8 | $ | 508.4 | $ | 136.4 | 26.8 | % | |||||||||||||||
Sales increased $22.9 million, or 14.6%, to $180.1 million in 2023, primarily due to higher volumes and strong pricing.
•Sales of Commercial Original Equipment increased $9.7 million, or 16.5%, to $68.4 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 material availability constraints.
•Sales of Military Original Equipment increased $4.5 million, or 7.8%, to $61.9 million in 2023, primarily reflecting strong demand from defense and space customers.
•Sales of Commercial Aftermarket Products increased $9.3 million, or 32.5%, to $37.9 million in 2023, reflecting continued strong demand from the airlines due to improving air traffic.
•Sales of Military Aftermarket Products decreased $0.6 million, or 4.8%, to $11.9 million in 2023, primarily reflecting timing of government orders for certain programs.
Cost of sales increased by $13.6 million, or 14.0%, to $111.0 million in 2023, primarily reflecting an unfavorable mix of $9.7 million, or 10.0%, increased volumes of $5.7 million, or 5.9%, partially offset by $3.1 million, or 3.2%, of productivity gains.
Operating profit increased by $9.6 million, or 34.2%, to $37.7 million in 2023. The increase primarily reflected higher pricing net of inflation and productivity of $12.0 million, or 42.7%, coupled with the impact from higher volumes of $6.2 million, or 22%, partially offset by an unfavorable mix of $9.7 million, or 34.5%.
32
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Process Flow Technologies
| First Quarter | Favorable/(Unfavorable) Change | ||||||||||||||||||||||
| (dollars in millions) | 2023 | 2022 | $ | % | |||||||||||||||||||
| Net sales by product line: | |||||||||||||||||||||||
| Process Valves and Related Products | $ | 202.9 | $ | 182.9 | $ | 20.0 | 10.9 | % | |||||||||||||||
| Commercial Valves | 30.6 | 98.2 | (67.6) | (68.8) | % | ||||||||||||||||||
| Pumps and Systems | 37.9 | 30.2 | 7.7 | 25.5 | % | ||||||||||||||||||
| Total net sales | $ | 271.4 | $ | 311.3 | $ | (39.9) | (12.8) | % | |||||||||||||||
| Cost of sales | $ | 150.1 | $ | 196.8 | $ | 46.7 | 23.7 | % | |||||||||||||||
| as a percentage of sales | 55.3 | % | 63.2 | % | |||||||||||||||||||
| Selling, general and administrative | $ | 58.0 | $ | 65.5 | $ | 7.5 | 11.5 | % | |||||||||||||||
| as a percentage of sales | 21.4 | % | 21.0 | % | |||||||||||||||||||
| Operating profit | $ | 63.3 | $ | 49.0 | $ | 14.3 | 29.2 | % | |||||||||||||||
| Operating margin | 23.3 | % | 15.7 | % | |||||||||||||||||||
| Supplemental Data: | |||||||||||||||||||||||
| Backlog | $ | 363.0 | $ | 372.4 | $ | (9.4) | (2.5) | % | |||||||||||||||
Sales decreased by $39.9 million, or 12.8%, to $271.4 million in 2023, driven by a $61.7 million, or 19.8%, impact from the sale of Crane Supply and $8.3 million, or 2.7%, of unfavorable foreign currency translation, partially offset by core sales growth of $30.2 million, or 9.7%. Core sales growth was driven by higher pricing and volumes.
•Sales of Process Valves and Related Products increased by $20.0 million, or 10.9%, to $202.9 million in 2023, reflecting an increase in core sales, partially offset by unfavorable foreign currency translation as the euro weakened against the U.S. dollar. Sales growth was driven primarily by strength in the Chemical vertical.
•Sales of Commercial Valves decreased by $67.6 million, or 68.8%, to $30.6 million in 2023, primarily driven by the impact of the divestiture of Crane Supply of $61.7 million, or 62.8%, and, to a lesser extent, unfavorable foreign currency translation as the British pound weakened against the U.S. dollar.
•Sales of Pumps & Systems increased by $7.7 million, or 25.5%, to $37.9 million in 2023, reflecting an increase in core sales primarily driven by higher volumes across all key end markets.
Cost of sales decreased by $46.7 million, or 23.7%, to $150.1 million, primarily related to the impact of the sale of Crane Supply of $46.0 million, or 23.4%, productivity gains of $4.9 million, or 2.5%, and favorable foreign currency translation of $4.6 million, or 2.3%, partially offset by increased material, labor and other manufacturing costs and of $5.4 million, or 2.7%, and the impact of the higher volumes of $4.0 million, or 2.0%.
Selling, general and administrative expense decreased by $7.5 million, or 11.5%, to $58.0 million primarily related to the impact of the sale of Crane Supply of $6.0 million, or 9.2%, and favorable foreign currency translation of $1.8 million, or 2.7%.
Operating profit increased by $14.3 million, or 29.2%, to $63.3 million in 2023. The increase is primarily due to higher pricing net of inflation and productivity of $18.6 million, or 38%, the impact of higher volumes of $6.2 million, or 12.7%, partially offset by the impact from the sale of Crane Supply of $9.7 million, or 19.8%.
33
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Payment & Merchandising Technologies
| First Quarter | Favorable/(Unfavorable) Change | ||||||||||||||||||||||
| (dollars in millions) | 2023 | 2022 | $ | % | |||||||||||||||||||
| Net sales by product line: | |||||||||||||||||||||||
| Payment Acceptance and Dispensing Products | $ | 223.8 | $ | 211.0 | $ | 12.8 | 6.1 | % | |||||||||||||||
| Banknotes and Security Products | 105.3 | 121.6 | (16.3) | (13.4) | % | ||||||||||||||||||
| Total net sales | $ | 329.1 | $ | 332.6 | $ | (3.5) | (1.1) | % | |||||||||||||||
| Cost of sales | $ | 174.4 | $ | 179.1 | $ | 4.7 | 2.6 | % | |||||||||||||||
| as a percentage of sales | 53.0 | % | 53.8 | % | |||||||||||||||||||
| Selling, general and administrative | $ | 75.3 | $ | 69.3 | $ | (6.0) | (8.7) | % | |||||||||||||||
| as a percentage of sales | 22.9 | % | 20.8 | % | |||||||||||||||||||
| Operating profit | $ | 79.4 | $ | 84.2 | $ | (4.8) | (5.7) | % | |||||||||||||||
| Operating margin | 24.1 | % | 25.3 | % | |||||||||||||||||||
| Supplemental Data: | |||||||||||||||||||||||
| Backlog | $ | 556.0 | $ | 429.0 | $ | 127.0 | 29.6 | % | |||||||||||||||
Sales decreased $3.5 million, or 1.1%, to $329.1 million in 2023, driven by unfavorable foreign currency translation of $12.4 million, or 3.7%, partially offset by higher core sales of $8.9 million, or 2.7%. The higher core sales reflected higher pricing, largely offset by lower volumes.
•Sales of Payment Acceptance and Dispensing Products increased $12.8 million, or 6.1%, to $223.8 million in 2023. The increase reflected higher core sales of $21.7 million, or 10.3%, partially offset by unfavorable foreign currency translation of $8.9 million, or 4.2%, primarily due to the British pound and Japanese yen weakening against the U.S. dollar. The core sales increase primarily reflected higher component sales.
•Sales of Banknotes and Security Products decreased $16.3 million, or 13.4%, to $105.3 million in 2023. The decrease primarily related to lower core sales of $12.8 million, or 10.5%, and unfavorable foreign currency translation of $3.5 million, or 2.9%, as the euro weakened against the U.S. dollar. The core sales decrease primarily reflected lower sales to the U.S. Government.
Cost of sales decreased by $4.7 million, or 2.6%, to $174.4 million, primarily reflecting lower volumes of $9.0 million, or 5.0%, strong productivity of $8.5 million, or 4.7%, and favorable foreign currency translation of $7.4 million, or 4.1%, partially offset by an unfavorable mix $14.2 million, or 7.9%, and increased in material, labor and other manufacturing costs of $6.0 million, or 3.4%.
Selling, general and administrative expense increased by $6.0 million, or 8.7%, to $75.3 million, primarily due to higher selling and administrative expenses of $9.1 million, or 13.1%, partially offset by favorable currency translation of $2.1 million, or 3.0%.
Operating profit decreased by $4.8 million, or 5.7%, to $79.4 million in 2023. The decrease primarily reflected an unfavorable mix of $14.2 million, or 16.9%, lower volumes of $12.0 million, or 14.3%, and unfavorable foreign currency translation of $2.9 million, or 3.4%, partially offset by higher pricing net of inflation and productivity gains of $24.7 million, or 29.3%.
34
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Engineered Materials
| First Quarter | Favorable/(Unfavorable) Change | ||||||||||||||||||||||
| (dollars in millions) | 2023 | 2022 | $ | % | |||||||||||||||||||
| Net sales by product line: | |||||||||||||||||||||||
| FRP - Recreational Vehicles | $ | 20.3 | $ | 35.7 | $ | (15.4) | (43.1) | % | |||||||||||||||
| FRP - Building Products | 32.3 | 27.4 | 4.9 | 17.9 | % | ||||||||||||||||||
| FRP - Transportation | 9.7 | 7.3 | 2.4 | 32.9 | % | ||||||||||||||||||
| Total net sales | $ | 62.3 | $ | 70.4 | $ | (8.1) | (11.5) | % | |||||||||||||||
| Cost of sales | $ | 45.8 | $ | 52.4 | $ | 6.6 | 12.6 | % | |||||||||||||||
| as a percentage of sales | 73.5 | % | 74.4 | % | |||||||||||||||||||
| Selling, general and administrative | $ | 5.1 | $ | 4.6 | $ | (0.5) | (10.9) | % | |||||||||||||||
| as a percentage of sales | 8.2 | % | 6.5 | % | |||||||||||||||||||
| Operating profit | $ | 11.4 | $ | 13.4 | $ | (2.0) | (14.9) | % | |||||||||||||||
| Operating margin | 18.3 | % | 19.0 | % | |||||||||||||||||||
| Supplemental Data: | |||||||||||||||||||||||
| Backlog | $ | 16.8 | $ | 30.4 | $ | (13.6) | (44.7) | % | |||||||||||||||
Sales decreased $8.1 million, or 11.5%, to $62.3 million in 2023, reflecting lower volumes, partially offset by higher pricing. The decrease was driven by lower sales to recreational vehicle manufacturers, offset by higher sales to building products customers and transportation customers.
Cost of sales decreased $6.6 million, or 12.6%, to $45.8 million in 2023, primarily related to lower volumes of $10.3 million, or 19.7%, partially offset by higher raw materials, labor, and other manufacturing costs of $5.0 million, or 9.5%.
Operating profit decreased by $2.0 million, or 14.9%, to $11.4 million in 2023, reflecting the impact from the lower volumes offset by higher pricing, net of inflation.
35
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
| Three Months Ended | ||||||||||||||
| March 31, | ||||||||||||||
| (in millions) | 2023 | 2022 | ||||||||||||
| Net cash (used for) provided by: | ||||||||||||||
| Operating activities | $ | (70.8) | $ | (55.5) | ||||||||||
| Investing activities | (12.8) | (13.0) | ||||||||||||
| Financing activities | (67.8) | (97.8) | ||||||||||||
| Effect of exchange rates on cash and cash equivalents | 4.0 | (5.1) | ||||||||||||
| Decrease in cash and cash equivalents | $ | (147.4) | $ | (171.4) | ||||||||||
Our operating philosophy is to deploy cash provided from operating activities, when appropriate, to provide value to shareholders by reinvesting in existing businesses, by making acquisitions that will strengthen and complement our portfolio, by divesting businesses that are no longer strategic or aligned with our portfolio and where such divestitures can generate capacity for strategic investments and initiatives that further optimize our portfolio, and by paying dividends and/or repurchasing shares. At any given time, and from time to time, we may be evaluating one or more of these opportunities, although we cannot assure you if or when we will consummate any such transactions.
Our current cash balance, together with cash we expect to generate from future operations along with our borrowings available under our revolving credit facility is expected to be sufficient to finance our short- and long-term capital requirements, as well as to fund expected pension contributions.
In July 2021, we entered a $650 million, 5-year Revolving Credit Agreement, which replaced the existing $550 million revolving credit facility. The $650 million revolving credit facility and the CP Program were replaced by commitments under a new $500 million, 5-year Revolving Credit Agreement that was entered into on March 17, 2023, with funding available upon consummation of the Separation, subject to customary conditions precedent for facilities of this type. As of the Separation, the CP Program is no longer available.
We also entered into a $350 million, 3-year term loan facility. Funding under each facility became available in connection with the Separation, upon the satisfaction of customary conditions of facilities of this type. On March 31, 2023, Crane Holdings, Co. borrowed the full amount of the Term Facility.
In August 2022, we entered into a $400 million senior unsecured 364-day Credit Agreement. The proceeds were used to partially fund the $550 million contribution related to the Redco Sale. See Note 10 and Note 11 to our Condensed Consolidated Financial Statements for additional details. On March 31, 2023, we repaid the amount outstanding under the 364-Day Credit Agreement.
On April 3, 2023, prior to the consummation of the Separation, Crane Company paid a dividend to Crane Holdings, Co. in the amount of $275 million.
On April 4, 2023, we redeemed all of our outstanding 4.45% senior notes due 2023, of which $300 million aggregate principal amount was outstanding upon redemption.
Operating Activities
Cash used for operating activities was $70.8 million in the first three months of 2023, as compared to $55.5 million during the same period last year. The increase in cash used for operating activities was primarily driven by increased working capital investments supporting higher levels of demand across most businesses.
Investing Activities
Cash flows relating to investing activities consist primarily of cash used for capital expenditures and cash provided by divestitures of assets. Cash used for investing activities was $12.8 million in the first three months of 2023, as compared to $13.0 in the comparable period of 2022. Capital expenditures are made primarily for increasing capacity, replacing equipment, supporting new product development, and improving information systems.
Financing Activities
Financing cash flows consist primarily of dividend payments to shareholders, share repurchases and repayments of indebtedness, proceeds from the issuance of long-term debt and commercial paper and proceeds from the issuance of common stock. Cash used for financing activities was $67.8 million during the first three months of 2023 compared to $97.8 million in the comparable period of 2022. The decreased in cash used for financing activities was primarily driven by the absence of $175.8 million in cash used for share repurchases in the prior year.
36
Recent Accounting Pronouncements
Information regarding new accounting pronouncements is included in Note 1 to our Condensed Consolidated Financial Statements.
37
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in the information called for by this item since the disclosure in our Annual Report on Form 10-K for the year ended December 31, 2022.
Item 4. Controls and Procedures
Disclosure Controls and Procedures. The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this quarterly report. The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that are filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that the information is accumulated and communicated to the Company’s Chief Executive Officer and Chief Financial Officer to allow timely decisions regarding required disclosure. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that these controls are effective as of the end of the period covered by this quarterly report.
Changes in Internal Control over Financial Reporting. During the fiscal quarter ended March 31, 2023, there have been no changes in the Company’s internal control over financial reporting, identified in connection with our evaluation thereof, that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.
38
Part II: Other Information
Item 1. Legal Proceedings
Discussion of legal matters is incorporated by reference from Part 1, Item 1, Note 10, “Commitments and Contingencies”, of this Quarterly Report on Form 10-Q, and should be considered an integral part of Part II, Item 1, “Legal Proceedings.”
Item 1A. Risk Factors
Information regarding risk factors appears in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a) Not applicable
(b) Not applicable
(c) Share Repurchases
We did not make any open-market share repurchases of our common stock during the quarter ended March 31, 2023. We routinely receive shares of our common stock as payment for stock option exercises and the withholding taxes due on stock option exercises and the vesting of restricted share units from stock-based compensation program participants.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable
Item 5. Other Information
Not applicable
39
Item 6. Exhibits
| Exhibit 2.1 | |||||||||||
| Exhibit 3.1 | |||||||||||
| Exhibit 3.2 | |||||||||||
| Exhibit 3.3 | |||||||||||
| Exhibit 10.1* | |||||||||||
| Exhibit 10.2* | |||||||||||
| Exhibit 10.3* | |||||||||||
| Exhibit 10.4* | |||||||||||
| Exhibit 10.5* | |||||||||||
| Exhibit 10.6* | |||||||||||
| Exhibit 10.7 | |||||||||||
| Exhibit 10.8 | |||||||||||
| Exhibit 10.9 | |||||||||||
| Exhibit 10.10 | |||||||||||
| Exhibit 10.11 | |||||||||||
| Exhibit 10.12 | |||||||||||
| Exhibit 31.1* | |||||||||||
| Exhibit 31.2* | |||||||||||
| Exhibit 32.1** | |||||||||||
| Exhibit 32.2** | |||||||||||
| 101.INS | XBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document. | ||||||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema (filed herewith) | ||||||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase (filed herewith) | ||||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase (filed herewith) | ||||||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase (filed herewith) | ||||||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase (filed herewith) | ||||||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | ||||||||||
* Filed with this report
** Furnished with this report
40
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| CRANE NXT, CO. | ||||||||
| REGISTRANT | ||||||||
| Date | ||||||||
| May 10, 2023 | By | /s/ Aaron Saak | ||||||
| Aaron Saak | ||||||||
| President and Chief Executive Officer | ||||||||
| Date | By | /s/ Christina Cristiano | ||||||
| May 10, 2023 | Christina Cristiano | |||||||
| Senior Vice President and Chief Financial Officer | ||||||||
41
Exhibit 10.1
CRANE HOLDINGS CO. 100 FIRST STAMFORD PLACE STAMFORD, CT 06902-6784
February 24, 2023
Christina Cristiano
[Address Omitted]
[Address Omitted]
Dear Christina,
Congratulations on your promotion to Senior Vice President, Chief Financial Officer of Crane NXT! We are excited for you to continue in the next journey of your career! I’m looking forward to us partnering together on strategy, capital structure and future growth opportunities. Your successful career makes you an ideal fit for this critical leadership role. This promotion is effective February 27, 2023.
I am pleased to present you with the compensation details for your new role:
1.Your new annual base salary will be $450,000. This represents an increase of 31%. You will be eligible for a merit increase in January 2024.
2.You will be eligible for a target discretionary bonus of 70% of your new base salary. The bonus is based on achievement of Crane NXT Earnings Per Share and Free Cash Flow relative to plan as well as personal performance. The annual incentive plan is capped at 200% of target payout. Your 2023 earned bonus will not be pro-rated.
3.You will continue to be eligible for consideration in the Crane Holdings, Co. Amended & Restated Stock Incentive Plan. Stock awarded annually is at the discretion of the Management Organization and Compensation Committee of the Board of Directors. Please note that in conjunction with any stock award granted to you, you will be required to sign a Confidentiality, Non-Solicit and Non-Competition Agreement.
To the extent that the terms of the Stock Incentive Plan may be amended from time to time or differ from the above descriptions, the terms of the then current plans will control the benefits to which you may be entitled. As a Corporate Senior Vice President, you will be required to retain a minimum of five (5) times base salary in Crane NXT Common Stock. We believe this executive stock holding requirement aligns our senior leaders with the best interests of Crane NXT, Co.’s shareholders.
4.In addition to the annual equity award you received in February 2023, a true-up equity award with a value of $650,000 will be granted to you on April 20, 2023. This award will be granted for the difference in LTI value between your previous job level and your new job promotion.
5.Upon separation, your new total cash compensation represents an increase of 49%.
6.Your current benefits and vacation will remain unchanged including eligibility with Benefit Equalization Plan – Part B (BEP), the company vehicle, executive physical and three (3) year Change in Control (CIC).
Christina, this promotion is in recognition of both your achievements, dedication, and efforts on behalf of Crane. I look forward to continuing working with you! Please return a signed copy of this letter to my attention.
Sincerely,
/s/ Aaron Saak
Aaron Saak
President and CEO Crane NXT
Accepted:
/s/ Christina Cristiano___________ February 27, 2023___________
Christina Cristiano Date
Exhibit 10.2
CRANE HOLDINGS CO. 100 FIRST STAMFORD PLACE STAMFORD, CT 06902-6784
February 9, 2023
Paul Igoe
[Address Omitted]
[Address Omitted]
Paul:
Thank you for your continued interest in Crane NXT and the exciting opportunity to lead the Legal organization at such a critical juncture. It has been a pleasure getting to know you through our recruitment process. You have an incredible background including a strong academic foundation and significant leadership and functional experience.
We are excited to offer you the opportunity to join Crane Holdings, Co. (the “Company”) as SVP, General Counsel and Secretary Designate for Crane NXT, Co. (“Crane NXT”) reporting directly to me (upon completion of the separation transaction, Crane Holdings, Co. will be renamed Crane NXT, Co.).
We are pleased to share the following offer details:
1.Annual base salary of $475,000.00. You will be paid on a biweekly basis.
2.In 2023 and future years, you will be eligible to participate in the annual incentive plan applicable to executives of Crane NXT. At “target” performance you would receive a payout equal to 70% of your annual base salary. The bonus will be based on achievement of financial or other performance goals established by the Compensation Committee. The annual incentive plan payout is capped at 200% of target payout (or such other level as determined by the Compensation Committee).
3.To replace the equity compensation that will be forfeited when you terminate with your current employer to join Crane, we will provide you with a long-term incentive compensation grant under the Crane Holdings, Co. 2018 Amended and Restated Stock Incentive Plan (or its successor plan, the “Stock Plan”) having a grant date value equivalent to $800,000.00. This grant will be delivered in restricted share units (“RSUs”) that vest 25% each year on the anniversary of the grant date, subject to your continued employment, with the number of RSUs determined based on the closing price of the Company’s common stock on your start date. The RSUs will be evidenced by an award agreement under the Stock Plan, and these RSUs will be governed solely by the terms of that award agreement and the Stock Plan. In conjunction with the RSU award, you will be required to sign a Confidentiality and Noncompetition Agreement, which is attached for your review and execution.
You will be eligible for future annual equity grants under the long-term incentive compensation program applicable to Crane NXT’s executive officers, as approved by the
Exhibit 10.2
Compensation Committee. Amounts and forms of awards for future years to be determined by the Compensation Committee.
All outstanding equity grants awarded prior to completion of the separation transaction will be treated under the “replacement method” for adjusting equity awards as a result of the separation transaction. Under this method, awards will be adjusted to be solely in shares of Crane NXT stock with approximately the same value immediately after the separation transaction as the awards were valued immediately before the separation transaction, all as determined by the Compensation Committee and subject to the terms of the Stock Plan.
As GC Designate of Crane NXT, you will be required to retain a minimum of four (4) times base salary in Company common stock under the Company’s stock ownership policy. While there is not a specific time horizon to reach that level, you will be required to retain at least 50% of the net shares received in each vesting cycle or subsequent individual equity transaction until you reach the required stock-holding requirement. We believe this executive stock holding requirement aligns our senior leaders with the best interests of our shareholders.
4.In addition, we are prepared to reimburse you for any retention bonus repayment you are obligated to provide your current employer as a result of your joining Crane, in an amount not to exceed $600,000, less required tax withholding. This reimbursement payment will be made in the payroll following receipt of proof of repayment of your current Company retention bonus. The reimbursement payment includes a repayment agreement in the event you voluntarily terminate your employment with Crane or are terminated for cause within the first 24 months of your employment. The repayment agreement is attached for your review and execution.
5.You will also be eligible for the following benefits, subject to the terms of the applicable plans:
a.Health and welfare benefits are effective on the first day of the month following your date of hire. Enclosed are collateral materials to familiarize you with the Company’s benefit offerings.
b.Savings & Investment Plan (401(k)): Information will be sent directly to you from Vanguard. The Company’s Plan provides an annual non-matching contribution of 3% of base salary and a matching contribution of 50% of the first 6% you contribute on a pre-tax basis.
c.Participate in the Company’s Benefit Equalization Plan – Part B (BEP). The BEP is a non-qualified, deferred compensation plan, that provides participants with annual benefit credits equal to 3% of eligible annual compensation in excess of the IRS compensation limitation ($330,000 in 2023) that is applicable to contributions under the Savings & Investment Plan.
d.Participation in the bi-annual executive physical program
e.You will be eligible for four (4) weeks of vacation each year.
Exhibit 10.2
f.You will be eligible to receive a company car as part of the Company’s Fleet Program. This program includes a company-leased vehicle with insurance and maintenance expenses paid by the Company.
g.You can take advantage of the Company’s executive home network security program whereby the Company partners with Total Digital Security to provide industry-leading cyber security solutions for protection from cybercrime and online risk.
6.As a senior officer of the Company, you will be provided with a Change in Control Agreement and an Indemnification Agreement, the forms of which are attached for your reference.
Your entitlement to the above benefits is subject to change, to the extent that the Company enhances, diminishes, or otherwise changes such benefit programs offered to other employees at levels similar to yours. Like other employees of the Company, you will remain an employee-at-will, which means that you may resign from your employment or be separated by the Company at any time for any lawful reason. This offer is contingent upon successful completion of the pre-employment process which includes reference checking, confirmation of education, proof of work eligibility, and a criminal background investigation. Exhibit A to this letter includes certain provisions related to compliance with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).
Paul, we are very excited to have you join our team. We look forward to your formal acceptance of this offer, and to working with you to grow the Crane NXT business.
If acceptable to you, we propose a March 20, 2023, start date or sooner. Please sign and return (scan / email, then mail original) the document to me. Please feel free to call me if you have any questions or comments generally and to Tami Polmanteer if specifically tied to the offer ((203) 363-7341 (O) or (203) 979-0484 (M)).
Sincerely,
/s/ Aaron Saak____
Aaron Saak
President and CEO Crane NXT
I acknowledge that I have read, understand, and agree to the conditions of employment as set forth above.
/s/ Paul Igoe__________________ February 12, 2023____________
Paul Igoe Date
Exhibit 10.2
Exhibit A
Section 409A
This letter is intended to comply with Section 409A of the Code or an exemption thereto, and, to the extent necessary in order to avoid the imposition of an additional tax on you under Section 409A of the Code, payments may only be made under this letter upon an event and in a manner permitted by Section 409A of the Code. For purposes of Section 409A of the Code, the right to a series of installment payments under this letter shall be treated as a right to a series of separate payments. Any payments or benefits that are provided upon a termination of employment shall, to the extent necessary in order to avoid the imposition of any additional tax on you under Section 409A of the Code, not be provided unless such termination constitutes a “separation from service” within the meaning of Section 409A of the Code. Any payments that qualify for the “short term deferral” exception or another exception under Section 409A of the Code shall be paid under the applicable exception. Notwithstanding anything in this letter to the contrary, if you are considered a “specified employee” (as defined in Section 409A of the Code), any amounts paid or provided under this letter due to your separation from service shall, to the extent necessary in order to avoid the imposition of an additional tax on you under Section 409A of the Code, be delayed for six months after your “separation from service” within the meaning of Section 409A of the Code, and the accumulated amounts shall be paid in a lump sum within 10 calendar days after the end of the 6-month period. If you die during the 6-month postponement period prior to the payment of benefits, the amounts the payment of which is deferred on account of Section 409A of the Code shall be paid to the personal representative of your estate within 60 calendar days after the date of your death. The Company makes no representations that the payments and benefits provided under this letter comply with Section 409A of the Code and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by you on account of noncompliance with Section 409A of the Code.
Exhibit 10.3
CRANE HOLDINGS CO. 100 FIRST STAMFORD PLACE STAMFORD, CT 06902-6784
March 3, 2023
Jennifer Kartono
[Address Omitted]
[Address Omitted]
Jennifer:
Thank you for your continued interest in Crane NXT and the exciting opportunity to lead the Human Resource organization at such a critical juncture. It has been a pleasure getting to know you through our recruitment process. You have an incredible background including a strong academic foundation and significant leadership and functional experience.
We are excited to offer you the opportunity to join Crane Holdings, Co. (the “Company”) as SVP and Chief Human Resource Officer Designate for Crane NXT, Co. (“Crane NXT”) reporting directly to me (upon completion of the separation transaction, Crane Holdings, Co. will be renamed Crane NXT, Co.).
We are pleased to share the following offer details:
1.Annual base salary of $425,000. You will be paid on a biweekly basis.
2.In 2023 and future years, you will be eligible to participate in the annual incentive plan applicable to executives of Crane NXT. At “target” performance you would receive a payout equal to 70% of your annual base salary. The bonus will be based on achievement of financial or other performance goals established by the Compensation Committee. The annual incentive plan payout is capped at 200% of target payout (or such other level as determined by the Compensation Committee). Your 2023 bonus will not be pro-rated.
3.To replace the equity compensation that will be forfeited when you terminate with your current employer to join Crane, we will put forward for Compensation Committee approval a long-term incentive compensation grant under the Crane Holdings, Co. 2018 Amended and Restated Stock Incentive Plan (or its successor plan, the “Stock Plan”) having a grant date value equivalent to $550,000. This grant will be delivered in restricted share units (“RSUs”) that vest 25% each year on the anniversary of the grant date, subject to your continued employment, with the number of RSUs determined based on the closing price of the Company’s common stock on April 20, 2023. The RSUs will be evidenced by an award agreement under the Stock Plan, and these RSUs will be governed solely by the terms of that award agreement and the Stock Plan. In conjunction with the RSU award, you will be required to sign a Confidentiality and Noncompetition Agreement, which is attached for your review and execution.
Exhibit 10.3
You will be eligible for future annual equity grants under the long-term incentive compensation program applicable to Crane NXT’s executive officers, as approved by the Compensation Committee. Amounts and forms of awards for future years to be determined by the Compensation Committee.
All outstanding equity grants awarded prior to completion of the separation transaction will be treated under the “replacement method” for adjusting equity awards as a result of the separation transaction. Under this method, awards will be adjusted to be solely in shares of Crane NXT stock with approximately the same value immediately after the separation transaction as the awards were valued immediately before the separation transaction, all as determined by the Compensation Committee and subject to the terms of the Stock Plan.
As CHRO Designate of Crane NXT, you will be required to retain a minimum of four (4) times base salary in Company common stock under the Company’s stock ownership policy. While there is not a specific time horizon to reach that level, you will be required to retain at least 50% of the net shares received in each vesting cycle or subsequent individual equity transaction until you reach the required stock-holding requirement. We believe this executive stock holding requirement aligns our senior leaders with the best interests of our shareholders.
4.You are entitled to a cash sign-on bonus of $250,000.00 less required tax withholding, payable on the first payroll period following your first day of employment with Crane. The sign-on bonus includes a 24-month repayment agreement in the event you voluntarily terminate your employment with Crane or are terminated for cause. The repayment agreement is attached or your review and execution.
5.You will also be eligible for the following benefits, subject to the terms of the applicable plans:
a.Health and welfare benefits are effective on the first day of the month following your date of hire. Enclosed are collateral materials to familiarize you with the Company’s benefit offerings.
b.Savings & Investment Plan (401(k)): Information will be sent directly to you from Vanguard. The Company’s Plan provides an annual non-matching contribution of 3% of base salary and a matching contribution of 50% of the first 6% you contribute on a pre-tax basis.
c.Participate in the Company’s Benefit Equalization Plan – Part B (BEP). The BEP is a non-qualified, deferred compensation plan, that provides participants with annual benefit credits equal to 3% of eligible annual compensation in excess of the IRS compensation limitation ($330,000 in 2023) that is applicable to contributions under the Savings & Investment Plan.
d.Participation in the bi-annual executive physical program
e.You will be eligible for four (4) weeks of vacation each year.
Exhibit 10.3
f.You will be eligible to receive a company car as part of the Company’s Fleet Program. This program includes a company-leased vehicle with insurance and maintenance expenses paid by the Company.
g.You can take advantage of the Company’s executive home network security program whereby the Company partners with Total Digital Security to provide industry-leading cyber security solutions for protection from cybercrime and online risk.
6.As a senior officer of the Company, you will be provided with a Change in Control Agreement and an Indemnification Agreement, the forms of which are attached for your reference.
Your entitlement to the above benefits is subject to change, to the extent that the Company enhances, diminishes, or otherwise changes such benefit programs offered to other employees at levels similar to yours. Like other employees of the Company, you will remain an employee-at-will, which means that you may resign from your employment or be separated by the Company at any time for any lawful reason. This offer is contingent upon successful completion of the pre-employment process which includes reference checking, confirmation of education, proof of work eligibility, and a criminal background investigation. Exhibit A to this letter includes certain provisions related to compliance with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).
Jennifer, we are very excited to have you join our team. We look forward to your formal acceptance of this offer, and to working with you to grow the Crane NXT business.
If acceptable to you, we propose an April 10, 2023 start date. Please sign and return (scan / email, then mail original) the document to me. Please feel free to call me if you have any questions or comments generally and to Tami Polmanteer if specifically tied to the offer ((203) 363-7341 (O) or (203) 979-0484 (M)).
Sincerely,
/s/ Aaron Saak
Aaron Saak
President and CEO Crane NXT
I acknowledge that I have read, understand, and agree to the conditions of employment as set forth above.
/s/ Jennifer Kartono____________ March 7, 2023______________
Name Date
Exhibit 10.3
Exhibit A
Section 409A
This letter is intended to comply with Section 409A of the Code or an exemption thereto, and, to the extent necessary in order to avoid the imposition of an additional tax on you under Section 409A of the Code, payments may only be made under this letter upon an event and in a manner permitted by Section 409A of the Code. For purposes of Section 409A of the Code, the right to a series of installment payments under this letter shall be treated as a right to a series of separate payments. Any payments or benefits that are provided upon a termination of employment shall, to the extent necessary in order to avoid the imposition of any additional tax on you under Section 409A of the Code, not be provided unless such termination constitutes a “separation from service” within the meaning of Section 409A of the Code. Any payments that qualify for the “short term deferral” exception or another exception under Section 409A of the Code shall be paid under the applicable exception. Notwithstanding anything in this letter to the contrary, if you are considered a “specified employee” (as defined in Section 409A of the Code), any amounts paid or provided under this letter due to your separation from service shall, to the extent necessary in order to avoid the imposition of an additional tax on you under Section 409A of the Code, be delayed for six months after your “separation from service” within the meaning of Section 409A of the Code, and the accumulated amounts shall be paid in a lump sum within 10 calendar days after the end of the 6-month period. If you die during the 6-month postponement period prior to the payment of benefits, the amounts the payment of which is deferred on account of Section 409A of the Code shall be paid to the personal representative of your estate within 60 calendar days after the date of your death. The Company makes no representations that the payments and benefits provided under this letter comply with Section 409A of the Code and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by you on account of noncompliance with Section 409A of the Code.
Exhibit 10.4
CRANE HOLDINGS CO. 100 FIRST STAMFORD PLACE STAMFORD, CT 06902-6784
February 27, 2023
Bianca Shardelow
[Address Omitted]
[Address Omitted]
Dear Bianca,
Congratulations on your promotion to Vice President, Controller & Chief Accounting Officer! We are excited for you to continue in the next journey of your career at Crane NXT! You have an impressive background and have shown proven success working at Crane. This promotion is expected to be effective February 27, 2023.
I am pleased to present you with the compensation details for your new role:
1.Your new annual base salary will be $290,000. This represents an increase of 6%. You will be eligible for a merit increase in January 2024.
2.You will be eligible for a target discretionary bonus of 50% of your new base salary. The bonus is based on achievement of Crane NXT Earnings Per Share and Free Cash Flow relative to plan as well as personal performance. The annual incentive plan is capped at 200% of target payout. Your 2023 earned bonus will not be pro-rated.
3.You will continue to be eligible for consideration in the Amended & Restated Crane Holdings, Co. Stock Incentive Plan. Stock awarded annually is at the discretion of the Management Organization and Compensation Committee of the Board of Directors. Please note that in conjunction with any stock award granted to you, you will be required to sign a Confidentiality, Non-Solicit and Non-Competition Agreement.
In future years, you will be eligible to participate in the Company’s annual long-term incentive plan. As a senior leader at Crane, our current plan annual awards consist of Performance Restricted Share Units (“PRSUs”; 50% of annual grant value), Non-Qualified Stock Options (“Options”’ 25% of annual grant value) and Restricted Share Units (“RSUs”; 25% of annual grant value).
To the extent that the terms of the Stock Incentive Plan may be amended from time to time or differ from the above descriptions, the terms of the then current plans will control the benefits to which you may be entitled. As an Executive Officer, you will be required to retain a minimum of three (3) times base salary in Crane NXT Common Stock. We believe this executive stock holding requirement aligns our senior leaders with the best interests of Crane NXT’s shareholders.
Once you meet the ownership requirement, you are free to trade within the confines of the established Insider Trading window. Until you meet the ownership requirement, and with respect to Insider Trading window/limitations, you are required to hold 50% of net profit (post-tax) shares resulting from stock option exercises or vesting of other stock-based awards until achieving the applicable stock ownership level.
Ownership includes: Dollar value of all wholly owned shares of Crane stock, wherever held and 65% of value of unvested RSUs. All other forms of equity compensation do not count toward ownership requirement (e.g., Stock options, whether vested or unvested or PRSUs)
4.In addition to the annual equity award you received in February 2023, a true-up equity award with a value of $70,000 will be granted to you on April 20, 2023. This award will be granted for the difference in LTI value between your previous job level and your new job promotion. For 2023, the total LTI value February grant + the true-up is equal to $150,000.
5.Your new total cash compensation represents an increase of 14% and your total direct compensation is an increase of 27%.
Exhibit 10.4
6.As a Section 16 officer of the Company, will also be eligible for the following benefits, subject to the terms of the applicable plans:
A.Beginning January 1, 2024, you will be eligible to participate in the Company's Benefit Equalization Plan - Part B (BEP). The BEP is a nonqualified, deferred compensation plan, that provides participants with annual benefit credits equal to 3% of eligible annual compensation in excess of the IRS compensation limitation ($330,000 in 2023) that is applicable to contributions under the Savings & Investment Plan.
B.You will be eligible to receive a company car as part of the Company’s Fleet Program. This program includes a company-leased vehicle with insurance and maintenance expenses paid by the Company. You may choose from one of the following all-wheel drive vehicles: Mercedes Benz E350, BMW540, BMW X5, Mercedes Benz GLE450, or Toyota Sequoia.
C.Participation in the bi-annual executive physical program
D.You can take advantage of the Company's executive home network security program whereby the Company partners with Total Digital Security to provide industry-leading cyber security solutions for protection from cybercrime and online risk.
E.You will be provided with a 3 year Change in Control Agreement and an Indemnification Agreement.
F.Your current health insurance benefits and vacation allotment will remain unchanged.
Bianca, this promotion is in recognition of both your hard work and efforts on behalf of Crane. I look forward to continuing working with you! Please return a signed copy of this letter to my attention.
Sincerely,
/s/ Christina Cristiano
Christina Cristiano
Accepted:
/s/ Bianca Shardelow_____________ ___March 8, 2023___________
Bianca Shardelow Date
Exhibit 10.5
CRANE NXT
BENEFIT EQUALIZATION PLAN
Effective as of April 3, 2023
PREAMBLE
Crane Holdings, Co., a Delaware corporation (the “Company”), hereby establishes, effective as of the closing on the Distribution Date (as defined below) (the “Effective Date”), a nonqualified deferred compensation plan referred to as the Crane NXT Benefit Equalization Plan (the “Plan”) for the benefit of designated employees of the Company. In 2023, the Company intends to enter into a Separation and Distribution Agreement with its wholly owned subsidiary, Crane Company (“Crane Company”), whereby Crane Company will separate from the Company in a spin-off transaction (the “Spin-Off”) expected to close on or about April 3, 2023 (the “Distribution Date”), after which the Company and Crane Company will each operate as stand-alone, publicly traded companies. Following the Distribution Date, references to the “Company” shall refer to Crane NXT, Co. (“Crane NXT”).
In connection with the Spin-Off, certain assets and liabilities attributable to the benefits accrued for the Crane NXT Spin-Off Participants (as defined below) under the Crane Co. Benefit Equalization Plan (the “Prior Plan”) have been assigned to and assumed by Crane NXT. Effective as of the Distribution Date, (i) the Company shall cease to be a participating employer, and the Crane NXT Spin-Off Participants shall cease to be participants, in the Prior Plan, (ii) the Crane NXT Spin-Off Participants shall become participants under this Plan, and (iii) the terms of this Plan shall exclusively govern the benefits for the Crane NXT Spin-Off Participants, including those benefits accrued through the Distribution Date under the Prior Plan.
It is intended that the Plan be exempt from the reporting, disclosure, participation, vesting, funding and fiduciary responsibility requirements of Title I of the Employee Retirement Income Security Act of 1974 because it is an unfunded plan maintained by an employer for the purpose of providing benefits for a select group of management or highly compensated employees.
ARTICLE I
DEFINITIONS
DEFINITIONS
The following words and phrases when used in the Plan shall have the meanings indicated in this Article I. Unless indicated otherwise, references herein to articles and sections are to articles and sections of the Plan.
“Affiliate” means an entity in which the Company has a controlling interest or such entity has a controlling interest (as defined under Treasury Regulation Sec. 1.409A-1(b)(5)(iii)(E)(1)) in the Company, in either case directly or indirectly through one or more intermediaries.
“Beneficiary” means the Participant’s surviving spouse or such other individual or individuals entitled to receive a survivor or death benefit with respect to all or any portion of the Participant’s vested account balance under the Savings Plan.
“Board” means the Board of Directors of the Company.
“Code” means the Internal Revenue Code of 1986, as amended.
“Committee” means the Management Organization and Compensation Committee of the Board.
“Company” means Crane Holdings prior to the Distribution Date and Crane NXT following the Distribution Date.
“Crane NXT Spin-Off Participant” means any individual who participated in the Prior Plan and is employed immediately after the Distribution Date by the Company or its subsidiaries and Affiliates.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations thereunder.
“Excess Compensation” means the Participant’s “Compensation” (as defined in the Savings Plan) for the applicable Plan Year, reduced by the amount of the compensation limit under Section 401(a)(17) of the Code in effect for the applicable Plan Year ($330,000 for 2023).
“Participant” means a Crane NXT Spin-Off Participant or an employee of the Company who is designated for participation in accordance with Section 2.1.
“Permanent Disability” means a disability by bodily injury or disease, either occupational or nonoccupational in cause, for which the Participant qualifies and actually receives disability income benefits due to a permanent and total disability under either (i) the Federal Social Security Act or (ii) a long-term disability plan or policy sponsored by the Company or an Affiliate and that is issued, maintained or otherwise administered by a non-affiliated insurance company or other party.
“Plan” means this Crane NXT Benefit Equalization Plan, as amended and restated herein and as amended from time to time.
“Plan Year” means the calendar year.
“Retirement Account” means a bookkeeping account maintained by the Company to record the Company’s payment obligation to a Participant with respect to his or her accrued Retirement Benefit under Article III of the Plan.
“Retirement Benefit” means the applicable lump sum benefit described in Article III.
“Savings Plan” means the Crane NXT, Co. Savings and Investment Plan, as amended from time to time and any successor plan.
“Separation from Service” means a Participant’s death, disability, retirement or other termination of employment with the Company and its subsidiaries; provided, however, that, for purposes of this definition, the employment relationship is treated as continuing intact while the Participant is on military leave, sick leave, or other bona fide leave of absence (such as temporary employment by the government) if the period of such leave does not exceed six months, or if longer, so long as the Participant’s right to reemployment with the Company is provided either by statute or by contract. If the period of leave exceeds six months and the Participant’s right to reemployment is not provided either by statute or by contract, the employment relationship is deemed to terminate on the first date immediately following such six-month period. The term “Separation from Service” shall be interpreted and applied in accordance with Section 409A of the Code and any regulations or other guidance thereunder.
“Vesting Service” means “Years of Service” credited to a Participant under the Savings Plan.
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ARTICLE II
PARTICIPATION AND DISTRIBUTION ELECTIONS
PARTICIPATION AND DISTRIBUTION ELECTIONS
1.1Participation.
(a)Participants. The following individuals shall be eligible to receive a Retirement Benefit:
(i)Each Crane NXT Spin-Off Participant;
(ii)Each individual designated by the Board as an “Executive Officer” of the Company within the meaning of Rule 405 under the Securities Act of 1933, as amended, and Rule 3b-7 under the Securities Exchange Act of 1934, as amended; and
(iii)Each individual having the title of Business Unit President with respect to a business unit based in the United States; provided, however, that any individual who is designated as a Business Unit President on an acting, interim, temporary, or similar basis, as determined by the Company in its sole discretion, shall not be eligible to participate under this clause (iii).
(b)Other Participants. The Committee may designate, in its sole discretion, other employees of the Company or any Affiliate from time to time to participate in the Plan, under such terms and conditions as the Committee may establish.
(c)Notice of Participation. At least annually, the Company shall provide a notice of participation, in a form and substance determined in the discretion of the Company, to each individual who is eligible to participate under the Plan.
(d)Date Participation Commences. Each Crane NXT Spin-Off Participant shall automatically be a Participant in the Plan immediately after the Spin-Off. Each individual who first meets the criteria of participation described in Section 2.1 after the Effective Date shall be deemed to have commenced participation in the Plan for purposes of accruing a Retirement Benefit and making any elections hereunder beginning on the first day of the calendar year next following the date such individual met the criteria of participation described in Section 2.1 above, unless otherwise communicated to the Participant in the Participant’s individual notice of participation.
(e)Continued Eligibility for Interest Credits. Participants who previously accrued a Retirement Benefit (including Crane NXT Spin-Off Participants who accrued all or part of such benefit under the Prior Plan), but are no longer eligible to accrue a future benefit under Section 2.1, shall continue to be eligible for Interest Credits under Section 3.4 below.
1.2Initial Distribution Elections.
Within thirty (30) days of commencing participation in the Plan with respect to a Retirement Benefit, or at such later date and under such conditions as may be permitted under Section 409A of the Code and any guidance of the Internal Revenue Service thereunder, the Participant may elect, in such form or by such method as may be authorized by the Committee with respect to any Retirement Benefit to which the Participant may be entitled, to designate a different commencement date, subject to compliance with Section 409A’s payment date requirements, for payment of the Participant’s Retirement Benefit, than the date specified in Section 3.5.
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1.3Subsequent Elections.
A Participant may elect, in such form or by such method as may be authorized by the Committee, to change the commencement date with respect to a Retirement Benefit provided under Section 3.5 or as previously-elected by the Participant to a later commencement date; provided, however, that, except as may be otherwise permitted by the Committee consistent with the requirements of Section 409A of the Code and any guidance of the Internal Revenue Service thereunder, any election by a Participant to change the commencement date of his or her Retirement Benefit shall be subject to the following requirements: (i) the election must not take effect until at least twelve (12) months after the date on which the election is made; (ii) the commencement date elected must be at least five (5) years later than the commencement date otherwise applicable under the Plan or an existing election; and (iii) the election may not be made less than twelve (12) months prior to the commencement date otherwise applicable under the Plan or an existing election.
1.4Existing Elections
For Crane NXT Spin-Off Participants, all payment elections in effect as of immediately prior to the Spin-Off under the Prior Plan shall be deemed to have been made instead under this Plan, and no Crane NXT Spin-Off Participant shall have the right to file a new election due solely to commencing participation in this Plan in connection with the Spin-Off.
ARTICLE III
RETIREMENT BENEFIT
RETIREMENT BENEFIT
1.1Retirement Account
The Retirement Account is equal to the sum of (i) the balance of the “Part B Retirement Account” under the Prior Plan (as defined therein) immediately before the Effective Date for a Crane NXT Spin-Off Participant and (ii) amounts credited under Section 3.2 from and after the Effective Date, plus Interest Credits accumulated to the date of determination.
1.2Benefit Credits
(a)Plan Year Credits. Each Participant who is eligible under Section 2.1 to participate in the Retirement Benefit program for such Plan Year shall be entitled to a benefit credit under the Participant’s Retirement Account equal to three percent (3%) of the Participant’s Excess Compensation for such Plan Year.
(b)Allocation of Benefit Credits. Benefit credits to a Participant’s Retirement Account shall be deemed to be allocated as of December 31 of the Plan Year to which the credit relates. In the event a Participant ceases to be eligible to participate during the year as a result of a Separation from Service, a change in title from an eligible to an ineligible position, or for any other reason, and subject to the provisions of Section 3.6, benefit credits to a Participant's Retirement Account for the year in which the Participant ceases to be eligible will be determined and allocated as of the date the Participant's eligibility ceases.
1.3Death Benefit
If a Participant dies prior to a distribution of the Participant’s Retirement Benefit, the Participant’s Beneficiary shall receive a distribution of the balance allocated to the Participant’s Retirement Account as of the date of the Participant’s death in lieu of any benefit payable under Section 3.1. For purposes of any such distribution, the balance allocated to Participant’s Retirement Account shall include any credits to which the Participant would be entitled under
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Section 3.1 for the Plan Year in which the Participant dies. The distribution to the Participant’s Beneficiary shall be made no later than sixty (60) days following the date of Participant’s death.
1.4Interest Credits
Each Participant’s Retirement Account shall be credited with interest, compounded monthly, accrued at a rate equal to the average 10-year Treasury Constant Maturities for the month of December immediately preceding such Plan Year. Interest shall be credited each year until the earlier of the date of distribution and the end of such Plan Year.
1.5Timing and Form of Payment
(a)Timing of Distribution. Unless the Participant has elected, in accordance with Article II a later commencement date, the vested balance allocated to the Participant’s Retirement Account shall be paid on the first day of the seventh calendar month following the month that includes the date of the Participant’s Separation from Service.
(b)Form of Benefit. The applicable Retirement Benefit shall be paid in a single lump sum cash payment.
1.6Vesting
A Participant’s vested interest in his or her Retirement Account shall be determined in accordance with the following table:
| Participant’s Vesting Service | Vested Interest | ||||
| Less than 1 year | 0% | ||||
| 1 year but fewer than 2 | 20% | ||||
| 2 years but fewer than 3 | 40% | ||||
| 3 years but fewer than 4 | 60% | ||||
| 4 years but fewer than 5 | 80% | ||||
| 5 years or more | 100% | ||||
Notwithstanding the foregoing, if a Participant has a Separation from Service by reason of death or Permanent Disability, the Participant shall be deemed to be fully vested in his or her Retirement Account regardless of his or her Vesting Service.
1.7Effect of Separation from Service
If a Participant incurs a Separation from Service for any reason, the unvested portion of the Participant’s Retirement Account shall be forfeited as of the date of the Participant’s Separation from Service and the Participant shall have no further rights or interest with respect to such amounts. The Participant’s reemployment with the Company following distribution of the Participant’s Retirement Benefit hereunder shall have no effect on payment of the Participant’s Retirement Benefit.
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ARTICLE IV
ADMINISTRATION
ADMINISTRATION
1.1Committee
(a)Responsibilities. The Plan shall be administered by the Committee. The Committee (and its delegates) shall have full discretionary authority to interpret and administer the Plan, make factual findings and determine the amount, if any, payable to any person under the Plan. The Committee’s (and its delegates) decision in any matter involving the interpretation and application of this Plan shall be final and binding on all parties; provided that the Committee may override any decision of a delegate within thirty business days of such decision. The Committee, the Company or any employee, officer or director of the Company or any of its affiliates shall not be liable for any action or determination made in good faith with respect to the Plan or the rights of any person under the Plan.
(b)Authority of Members. The Committee may authorize one or more of their members to execute or deliver any instrument, make any payment or perform any other act that the Plan authorizes or requires the Committee to do, including, without limitation, the retention of counsel and other agents as it may require in carrying out the provisions of the Plan.
(c)Authority to Delegate. Any responsibility or authority assigned to the Committee under this Article IV may be delegated to any other person or persons, by name or in the case of a delegation to an employee of the Company or any of its affiliates by title or position with the Company, consistent with the by-laws or other procedures of the Committee, provided that such delegation is revocable by the Committee at any time, in its discretion. As of the Effective Date, the Committee delegates responsibility to the officers of the Company to carry out day-to-day administration of the Plan, including without limitation, (i) routine communications with Participants, (ii) providing periodic reports to the extent required or desirable under the Plan, (iii) preparing forms and documentation in order to implement the provisions of the Plan, (iv) processing routine payments under the Plan, (v) executing agreements with Plan service providers, (vi) keeping such records as may be necessary for the administration of the Plan, and (vii) such other tasks and duties that the officers deem necessary or desirable to carry out the day-to-day administration of the Plan. Notwithstanding the foregoing, the Committee may revoke its delegation to the officers of the Company as described herein at any time, in its discretion.
(d)Expenses. All expenses of administering the Plan (whether incurred by the Committee or its delegate) shall be paid by the Company and shall not affect a Participant’s right to, or the amount of, benefits.
1.2Claims Procedures
(a)General. The Committee shall have sole discretionary authority with regard to the adjudication of any claims under the Plan. All claims for benefits under the Plan shall be submitted on a form provided for that purpose, which shall be signed by the Participant, beneficiary or any authorized representative thereof (the “Claimant”) and shall be considered filed on the date the claim is received by the Committee. Any claim for benefits under the Plan must be filed within one (1) year after the Claimant first has knowledge of such claim. If a claim for benefits under the Plan is not filed within this period, the Claimant’s claim will be deemed permanently waived and abandoned, and the Claimant will be precluded from reasserting it under these procedures or in a court or any other venue.
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(b)Denial of Claims.
(i)Timing of Claims Decision and Notification of Denial. In the event a claim is filed in accordance with Section 4.2(a) and is subsequently denied, in whole or in part, the Committee shall within ninety (90) days provide the Claimant with a written notice which shall be delivered or mailed to the Claimant’s last known address. The notice will include (i) the specific reason or reasons for the adverse determination; (ii) references to the specific Plan provisions on which the determination is based; (iii) a description of any additional material or information necessary for the Claimant to perfect the claim and an explanation of why such material or information is necessary; and (iv) a description of the Plan’s review procedures and the time limits applicable to such procedures, including a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA following an adverse benefit determination on review.
(ii)Extension of Timing of Claims Decision. If special circumstances require additional time for processing the claim, the Committee shall advise the Claimant prior to the end of the initial ninety (90)-day period, setting forth the reasons for the delay and the approximate date the Committee expects to render its decision. Any such extension shall not exceed ninety (90) days.
(c)Review of Denied Claims.
(i)Right to Appeal. Within sixty (60) days after receipt of the written notice of denial of a claim as provided in Section 4.2(b), a Claimant may request a review of the denial upon written application to the Committee. If a Claimant fails to file a request for review within sixty (60) days of the denial notification, the claim will be deemed permanently waived and abandoned, and the Claimant will be precluded from reasserting it under these claims procedures or in a court or any other venue. The Claimant shall have, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the Claimant’s claim and may submit issues and comments in writing. The review shall take into account all comments, documents, records and other information the Claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.
(ii)Timing of Appeal Decision. Within sixty (60) days after receipt of a written request for review, the Committee shall render a decision with respect to the appeal of the claim, unless special circumstances require an extension of the time within which to render such decision, in which event such decision shall be rendered as soon as possible and in no event more than 120 days after receipt of the request for review. If an extension of time is required, written notice of the expected decision date and the reasons for the extension shall be furnished to the Claimant before the end of the initial sixty (60)-day period.
(iii)Notification of Appeal Denial. A Claimant whose appeal has been denied by the Committee, in whole or in part, shall be provided written notice from the Committee in a manner reasonably calculated to be understood by the Claimant, which shall set forth (i) the specific reason or reasons for the adverse determination; (ii) references to the specific Plan provisions on which the benefit determination is based; (iii) a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the Claimant’s claim for benefits; and (iv) a statement describing any voluntary appeal procedures offered by the Plan and the Claimant’s right to obtain information about those procedures, and a statement about the Claimant’s right to bring a civil action under Section 502(a) of ERISA.
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(d)Limitations of Actions. Claimants must follow the claims procedures described in this Article before taking action in any other forum regarding a claim. Any suit or legal action initiated by a Claimant under the Plan must be brought by the Claimant no later than one (1) year following a final decision on the claim as described in Section 4.2(c). The one (1)-year statute of limitations on suits for benefits shall apply in any forum where a Claimant initiates such suit or legal action. If a civil action is not filed within this period, the Claimant’s claim will be deemed permanently waived and abandoned, and the Claimant will be precluded from reasserting it under these procedures or in a court or any other venue.
(e)Discretionary Authority. The Committee shall have full authority to interpret and apply in its sole discretion the provisions of the Plan. The decision of the Committee on appeal shall be final and binding upon any and all Claimants.
(f)Authorized Representative. The claimant may, at his or her own expense, have an authorized representative to act on the claimant’s behalf in pursuing a benefit claim or appeal of the denial of the benefit. In order for a representative to be recognized as acting on behalf of the claimant, the claimant must provide in writing to the Committee the name, address and phone number of the claimant’s authorized representative and a statement that the representative is authorized to act in the claimant’s behalf concerning the claim for benefit, and if applicable, an appeal of the denial of the benefit.
(g)Overpayments. If there has been an overpayment of a benefit to a Participant or Beneficiary, such person, upon receipt of a written notice and explanation, shall promptly return the amount of the overpayment to the Company.
1.3Certain Accelerated Payments. Notwithstanding any other provisions of the Plan to the contrary, the provisions of Section 3.5 shall not be applicable to a payment that becomes due under the following circumstances:
(a)QDROs. The time or schedule of a payment of any Retirement Benefit to an individual other than the Participant may be accelerated as may be necessary to fulfill the requirements of a domestic relations order (as defined in Code Section 414(p)(1)(B)).
(b)Payments Upon Income Inclusion Under Section 409A. The time or schedule of a payment of any Retirement Benefit to a Participant may be accelerated if at any time the Plan fails to meet the requirements of Section 409A of the Code and regulations and other guidance promulgated thereunder; provided, however, that any such payment shall not exceed the amount required to be included in income as a result of the failure to comply with the requirements of Section 409A of the Code and the regulations and other guidance.
ARTICLE V
FUNDING
FUNDING
The Plan is an unfunded arrangement. No portion of any funds of the Company or any of its subsidiaries shall be required to be set apart for a Participant or Beneficiary. The rights of a Participant or Beneficiary to the payment of a Retirement Benefit shall be limited to those of a general, unsecured creditor of the Company who has a claim equal to the value of the Participant’s Retirement Benefit. Retirement Benefits shall be payable from the general assets of the Company, and/or from any grantor trust or other funding vehicle that the Company, in its discretion, may establish consistent with the tax deferral objective of this Plan; provided, however, that no Participant or Beneficiary shall at any time have any right to all or any portion of the assets of or associated with any such trust or other funding vehicle.
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ARTICLE VI
AMENDMENT AND TERMINATION
AMENDMENT AND TERMINATION
1.1Amendment
The Committee shall have the right to amend the Plan for any reason, at any time and from time to time. No amendment of the Plan shall cause, without the Participant’s written consent, a reduction in the vested Retirement Benefit to which the Participant or the Participant’s Beneficiary would have been entitled as of the effective date of such amendment under the terms of this Plan absent such amendment. Furthermore, no amendment may result in an acceleration of benefit payment (except as may be permitted by Section 409A of the Code).
1.2Termination
The Company may, by action of the Board, terminate the Plan subject to the following provisions:
Upon termination of the Plan, Retirement Benefits accrued and vested as of the date of termination of the Plan shall be held, administered and distributed in accordance with the terms and conditions of the Plan as in effect on the date of Plan termination, except that: Retirement Benefits under the Plan may be distributed prior to the time required under Article III, if all nonqualified deferred compensation arrangements sponsored by the Company and any company required to be aggregated with the Company under Section 414(b) and (c) of the Code that are treated as one arrangement under Section 409A of the Code, are terminated, subject to the following requirements: (i) no payments other than payments that would be payable under the terms of the Plan and such other arrangements if the termination had not occurred are made within twelve (12) months of the termination of the Plan and such other arrangements, (ii) all payments under the Plan and such other arrangements are made within twenty-four (24) months of the date of such termination, and (iii) neither the Company nor any company required to be aggregated with the Company under Section 414(b) or (c) of the Code adopts a new arrangement that would, with the Plan or any such other terminated arrangement, be treated as a single arrangement under Section 409A of the Code, at any time within three (3) years following the date of termination of the Plan and such other arrangements.
ARTICLE VII
GENERAL PROVISIONS
GENERAL PROVISIONS
1.1Payments to Minors and Incompetents
If the Participant or any Beneficiary entitled to receive any benefits hereunder is a minor or is deemed by the Board or is adjudged to be legally incapable of giving valid receipt and discharge for such benefits, they will be paid to such person or institution as the Board may designate or to a duly appointed guardian. Such payment shall, to the extent made, be deemed a complete discharge of any such payment under the Plan.
1.2No Contract
This Plan shall not be deemed a contract of employment with the Participant, and no provision hereof shall affect the right of the Company to terminate the Participant’s employment.
1.3Non-Alienation of Benefits
No amount payable to, or held under the Plan for the account of, the Participant or any Beneficiary shall be subject, in any manner, to anticipation, alienation, sale, transfer, assignment,
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pledge, encumbrance or charge, and any attempt to so anticipate, alienate, sell, transfer, assign, pledge, encumber or charge the same shall be void. No amount payable to, or held under the Plan for the account of, the Participant shall be subject to any legal process of levy or attachment.
1.4Tax Withholding
The Company may withhold from any payments hereunder such amount as it may be required to withhold under applicable federal, state or other tax law or regulation, and transmit such withheld amounts to the appropriate taxing authority. In lieu thereof, the Company shall have the right, to the extent permitted by law, to withhold the amount of such taxes from any other sums due from the Company to the Participant upon such terms and conditions as the Committee may prescribe.
1.5Governing Law
The provisions of the Plan shall be interpreted, construed and administered under the laws of the State of New York applicable to contracts entered into and performed in such state, without regard to the choice of law provisions thereof and to the extent that ERISA and other federal laws do not apply.
1.6Captions
The captions contained in the Plan are inserted only as a matter of convenience and for reference and in no way define, limit, enlarge or describe the scope or intent of the Plan or in any way affect the construction of any provision of the Plan.
1.7Severability
If any provision of the Plan is held invalid or unenforceable, its invalidity or unenforceability will not affect any other provision of the Plan, and the Plan will be construed and enforced as if such provision had not been included.
1.8Notices
The Participant shall be responsible for furnishing the Committee with the current and proper address for the mailing of notices and delivery of agreements and payments. Any notice required or permitted to be given shall be deemed given if directed to the person to whom addressed at such address and mailed by regular United States first class mail, postage prepaid. If any item mailed to such address is returned as undeliverable to the addressee, mailing shall be suspended until the Participant furnishes the proper address.
1.9Binding Nature; Assignability
This Plan shall be binding upon the successors and assigns of the Company. The rights or obligations of the Company under this Plan may be assigned or transferred pursuant to a merger or consolidation in which the Company is not the continuing entity, or a sale, liquidation or other disposition of all or substantially all of the assets of the Company, provided that the assignee or transferee is the successor to all or substantially all of the assets of the Company and assumes the liabilities, obligations and duties of the Company under this Plan, either contractually or as a matter of law.
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1.10Gender, Singular and Plural
All pronouns and variations thereof shall be deemed to refer to the masculine, feminine, or neuter, as the identity of the person(s) requires. As the context may require, the singular may be read as the plural and the plural as the singular.
1.11409A Compliance
The Plan is intended to comply with the requirements of Section 409A of the Code. Consistent with that intent, the Plan shall be interpreted in a manner consistent with Section 409A and in the event that any provision that is necessary for the Plan to comply with Section 409A is determined by the Board, in its sole discretion, to have been omitted, such omitted provision shall be deemed included herein and is hereby incorporated as part of the Plan.
1.12Recovery of Retirement Benefits in Certain Circumstances
Notwithstanding any other provision of this Plan, if the Committee determines that the Company is required to restate its financial statements due to material noncompliance with any financial reporting requirement under the law, whether such noncompliance is the result of misconduct or other circumstances, the Participant’s Retirement Benefits shall be offset, or the Participant shall be required to reimburse the Company, for any amounts credited, earned or payable with respect to any Retirement Benefits to the extent required by and otherwise in accordance with applicable law and any Company policies.
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IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its duly authorized officer on the 29th day of March, 2023.
CRANE HOLDINGS, CO.
By: /s/ Christina Cristiano________________
Name: Christina Cristiano
Title: Chief Financial Officer
Exhibit 10.6
CRANE NXT, CO. ANNUAL INCENTIVE PLAN
1. PURPOSE
The purpose of the Crane NXT, Co. Annual Incentive Plan (the “Plan”) is to enhance the ability of Crane NXT, Co. (the “Company”) and its subsidiaries to motivate, attract and retain the services of individuals upon whose judgment, interest and special effort the successful conduct of the Company’s business is largely dependent. The Plan furthers these goals by providing eligible employees of the Company and its subsidiaries an opportunity to participate in the Company’s success by earning cash incentive compensation based on the achievement by the Company of certain pre-established goals and the employees’ contributions towards meeting the goals.
On April 3, 2023, the Company, entered into a Separation and Distribution Agreement (the “Separation Agreement”) with Crane Company, a then wholly-owned subsidiary of the Company (“Crane Company”). The Separation Agreement provides for, among other things, that the Company will retain its Payment & Merchandising Technologies segment and spin-off its Aerospace & Electronics, Process Flow Technologies and Engineered Materials segments to its stockholders (the “Spin-Off” and the effective time of the Spin-Off, the “Effective Time”). Following the Effective Time, the Company and Crane Company each operate as stand-alone, publicly traded companies. On April 3, 2023, the Company and Crane Company also entered into an Employee Matters Agreement which provides, among other things, that Crane Company will assume the annual incentive plan that had been in effect for the Company prior to the Effective Time, and that the Company would adopt its own annual incentive plan as of the Effective Time. This Plan is that annual incentive plan for the Company as contemplated by the Employee Matters Agreement.
2. DEFINITIONS
For purposes of this Plan, the following capitalized terms shall have the respective meanings set forth below:
(a) “Award” means an annual cash incentive award granted under the terms of this Plan earned based on performance over a Performance Period.
(b) “Board” means the Board of Directors of the Company.
(c) “Cause” means, with respect to a Participant, any of the following as determined by the Company: (i) personal dishonesty or breach of fiduciary duty by the Participant involving personal profit at the expense of the Company; (ii) repeated violations by the Participant of the Participant’s obligations under any written employment or other agreement with the Company which are demonstrably willful and deliberate on the Participant’s part and which are not remedied in a reasonable period of time after receipt of written notice from the Company; (iii) the Participant’s commission of a criminal act related to the performance of the Participant’s duties, or the Participant’s furnishing of proprietary confidential information about the Company to a competitor, or potential competitor, or third party whose interests are adverse to those of the Company; (iv) the Participant’s habitual intoxication by alcohol or drugs during work hours; or (v) the Participant’s conviction of a felony.
(d) “Change in Control” means a “Change in Control” as defined in the Company’s Amended and Restated 2018 Stock Incentive Plan (or any successor plan).
(e) “Code” means the Internal Revenue Code of 1986, as amended from time to time, and the rulings and regulations issued thereunder.
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(f) “Company” shall have the meaning given to such term in Section 1.
(g) “Committee” means the Management Organization and Compensation Committee of the Board.
(i) “Participant” means an individual designated in accordance with Section 4 as eligible to participate in the Plan.
(j) “Performance Period” means each calendar year, which is the Company’s fiscal year.
(k) “Permanent Disability” means a physical or mental disability or infirmity that prevents the performance of the Participant’s services for the Company and its subsidiaries lasting (or likely to last, based on competent medical evidence presented to the Committee) for a period of six months or longer. The Committee’s determination of Permanent Disability shall be final and shall be based on such competent medical evidence as shall be presented to it by such Participant or by any physician or group of physicians or other competent medical expert employed by the Participant or the Company to advise the Committee.
(l) “Retirement” means the Participant’s termination of employment for any reason other than death, Permanent Disability or Cause upon or after the earlier of the date that the Participant attains (i) age 65 or (ii) age 62 and would be credited with at least 10 “Years of Service” (as defined in Crane Co.’s Pension Plan for All Eligible Employees or the equivalent service term in any successor to the Pension Plan, and regardless of whether the Participant is a participant in such Pension Plan).
3. ADMINISTRATION
(a) Committee Duties and Authority. The Plan will be administered by the Committee. The Committee’s decisions in the administration of the Plan shall be final and binding on all parties. The Committee shall have the sole discretionary authority to interpret the Plan, to establish and modify administrative rules for the Plan, to designate the employees eligible to participate in the Plan, to establish and adjust any Awards, to impose such conditions and restrictions on Awards under the Plan as it determines appropriate, and to take such steps in connection with the Plan and Awards made under the Plan as it may deem necessary or advisable. Notwithstanding the foregoing, the Committee may, in its discretion, delegate any or all of its powers and duties hereunder to the Company’s Chief Executive Officer with respect to Awards to Participants who are not executive officers of the Company.
(b) Other Administrative Matters. The Committee may employ attorneys, consultants, accountants or other persons and the Committee and the Company and its officers and directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. All usual and reasonable expenses of the Committee shall be paid by the Company. No Committee member shall receive compensation with respect to his or her services for the Committee except as may be authorized by the Board. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon all employees who have received Awards, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation taken or made in good faith with respect to this Plan or Awards made hereunder, and all members of the Committee shall be fully indemnified and protected by the Company in respect of any such action, determination or interpretation.
4. ELIGIBILITY
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The persons who shall participate in this Plan shall be such officers and other key employees of the Company and its subsidiaries as may be designated as Participants by the Company’s Chief Executive Officer; provided that participation in the Plan shall be determined by the Committee for any executive officer of the Company.
5. PERFORMANCE-BASED AWARDS
(a) Award Terms. The Committee is authorized to grant Awards to Participants on such terms and conditions as may be selected by the Committee consistent with the terms of this Plan. An Award earned for a Performance Period shall be paid no later than March 15 of the immediately following calendar year in a single cash payment.
(b) General Provisions Regarding Performance Goals. The performance goals for Awards may consist of one or more business criteria and a targeted level or levels of performance with respect to each of such criteria, as specified by the Committee consistent with this Section 5. Performance goals may be objective or subjective, as determined by the Committee. The Committee may determine that such Awards shall be earned upon achievement of any one performance goal or that two or more of the performance goals must be achieved as a condition to the Award becoming earned, and such determinations by the Committee may include degrees to which the Award becomes earned based on degrees of achievement of the applicable performance goals. Performance goals may, in the discretion of the Committee, be established on a Company-wide basis, or with respect to one or more business units, divisions, subsidiaries or business segments, as applicable. Performance goals may be absolute or relative (for example, to the performance of one or more comparable companies or indices or based on year-over-year growth). Performance goals may differ for Awards granted to any one Participant or to different Participants. Notwithstanding any provision herein to the contrary, the Committee may apply discretion to either increase or decrease Award amounts.
(c) Authorized Performance Goals. Performance goals for Awards established by the Committee may be expressed as a specified target amount, target amount of growth, target rate of growth, or similar numerical goal, with respect to such business criteria as the Committee may determine, including one or more of the following business criteria, by the Company on a consolidated basis, and/or (except for criteria relating to share price or per-share financial measures) by one or more specified business units, divisions, subsidiaries or business segments of the Company:
(i) net sales; sales of a particular product or line of products;
(ii) gross profit; ratio of gross profit to sales;
(iii) operating profit; ratio of operating profit to sales (in each case before or after taxes and before or after allocation of corporate overhead and bonuses);
(iv) net income; earnings per share;
(v) adjusted earnings (including earnings before taxes, earnings before interest and taxes, or earnings before interest, taxes, depreciation and amortization);
(vi) cash flow from operations; free cash flow (in each case either absolutely or in proportion to another financial statement item such as net income);
(vii) return on equity, assets, net assets, total capital, or total invested capital; economic value added models or equivalent metrics;
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(viii) share price; total shareholder return (in each case either absolutely or as compared with a peer group or stock market index);
(ix) financial statement items such as cash, total debt, shareholders’ equity, working capital, material costs and engineering, selling and administrative expenses(in each case either absolutely or in proportion to another financial statement item such as assets or sales); or
(x) implementation, completion or attainment of measurable objectives with respect to specific operational goals and targets, such as: (A) environmental, health and/or safety goals (including lost workday rates); (B) customer satisfaction; (C) inventory turns; (D) lead time; (E) on-time delivery; (F) purchase price index; (G) days sales outstanding; (H) quality; (I) research and development, (J) specific products/projects (including new product introductions); and (K) recruitment or retention of personnel;
provided, however, that such business criteria shall include any derivations of business criteria listed above (e.g., net income includes pre-tax income, operating income or income attributable to common shareholders).
(d) Timing. Performance goals for an Award shall be established at such time as the Committee may determine.
(e) Adjustments for Special Items. The Committee may determine, at the time that goals under this Section 5 are established or such other time as the Committee may determine, whether or not to adjust the applicable performance results for the applicable Performance Period to take into consideration and/or mitigate the impact of any gains or losses, reserves or other charges to earnings, accounting changes, acquisitions, dispositions and/or divestitures (“special items”), including any of the following that occur during the Performance Period: (i) asset write-downs or impairment charges; (ii) litigation or claim costs, judgments or settlements, including changes in reserves for asbestos claims and defense costs; (iii) environmental costs; (iv) the effect of changes in tax laws, accounting principles or other laws or provisions affecting reported results; (v) restatements occurring as a result of errors that arise from events other than fraud or other misconduct; (vi) provisions for reorganization, repositioning and restructuring programs; (vii) nonrecurring items as described in management's discussion and analysis of financial condition and results of operations appearing in the Company’s annual report to shareholders for the applicable year; (viii) acquisitions or divestitures; (ix) foreign exchange gains and losses; and (x) recapitalizations, reorganizations or changes in the corporate structure or capital structure of the Company.
(f) Adjustments for Job Changes. If a Participant is promoted, demoted or transferred to a different business unit or function during a performance period, the Committee may determine that the performance goals or performance period are no longer appropriate and may (i) adjust, change or eliminate the performance goals or the applicable performance period as it deems appropriate to make such goals and period comparable to the initial goals and period, or (ii) make a cash payment to the Participant in an amount determined by the Committee.
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6. IMPACT OF TERMINATION OF EMPLOYMENT OR CHANGE IN CONTROL
(a) Impact of Termination of Employment. In the event a Participant voluntarily terminates employment or is terminated involuntarily (in either case, other than Retirement) during a Performance Period, any outstanding Award for the Participant will be forfeited. In the event of death, Permanent Disability or Retirement during a Performance Period, the Award will be paid on a prorated basis to the Participant based on the actual performance determined after the end of such Performance Period. In the event of any termination of employment after the end of a Performance Period (including death, Permanent Disability, Retirement, voluntary termination or involuntary termination for any reason other than Cause), any Award for such Performance Period will be determined based on actual performance and paid at the same time as Awards are paid to all other Participants for such Performance Period. In case of involuntary termination for Cause, any unpaid Award for such prior Performance Period will be forfeited.
(b) Impact of Change in Control. In the event of a Change in Control, the Company shall pay to each Participant for the Performance Period then in effect an interim lump-sum cash payment (the “CIC Payment”) within 30 days following the occurrence of the Change in Control. The amount of the CIC Payment shall equal the Participant’s target Award for such Performance Period multiplied by a fraction in which (x) the numerator is the number of months, including fractional months, that have elapsed during the applicable Performance Period through the occurrence of the Change in Control and (y) the denominator is twelve. The CIC Payment shall not reduce the obligation of the Company to make a final payment under the terms of the Plan, but any CIC Payment made shall be offset against any later payment required under the terms of the Plan for the Performance Period in which the Change in Control occurs. Notwithstanding the foregoing, unless otherwise required by law, in no event shall a Participant be required to refund to the Company, or have offset against any other payment due the Participant from or on behalf of the Company, all or any portion of the CIC Payment.
7. MISCELLANEOUS
(a) Effective Date. The Plan is effective as of the Effective Time.
(b) Plan Amendment and Termination. The Board may modify, suspend or terminate the Plan at any time.
(c) Effect of Award on Other Employee Benefits. By acceptance of participation in this Plan, each Participant agrees that his or her Award is special additional compensation and that it will not affect any employee benefit, e.g., life insurance, etc., in which the recipient participates, except that payments made under this Plan shall be included in the employee’s compensation for purposes of the Company’s qualified and nonqualified retirement plans to the extent provided in such plans.
(d) No Right to Continued Employment or Additional Awards. The receipt of an Award shall not give the Participant any right to continued employment, and the right and power to dismiss any Participant from his or her employment is specifically reserved to the Company. In addition, the receipt of an Award with respect to any fiscal year or other performance period shall not entitle the Participant to an Award with respect to any subsequent fiscal year or other performance period.
(e) Withholding Taxes. The Company shall have the right to deduct from all payments under this Plan any Federal, state or local taxes required by law to be withheld with respect to such payments.
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(f) Governing Law. This Plan shall be construed in accordance with and governed by the laws of the State of Delaware, other than the conflict of law provisions thereof.
(g) Recovery of Compensation in Certain Circumstances. Notwithstanding any other provision of this Plan, if the Committee determines that the Company is required to restate its financial statements due to material noncompliance with any financial reporting requirement under the law, whether such noncompliance is the result of misconduct or other circumstances, a Participant shall be required to reimburse the Company for any amounts earned or payable with respect to any Award to the extent required by and otherwise in accordance with applicable law and any Company policies. In addition, to the extent permitted by applicable law, the Committee may determine that an Award shall be subject to the requirements of (i) Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (regarding recovery of erroneously awarded compensation) and any implementing rules and regulations thereunder, (ii) similar rules under the laws of any other jurisdiction, (iii) any compensation recovery policies adopted by the Company to implement any such requirements or (iv) any other compensation recovery policies as may be adopted from time to time by the Company, all to the extent determined by the Committee in its discretion to be applicable to a Participant.
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Exhibit 31.1
CERTIFICATION
I, Aaron Saak, certify that:
(1)I have reviewed this Quarterly Report on Form 10-Q of Crane NXT, Co.;
(2)Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
(3)Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
(4)The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
(5)The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| By /s/ Aaron Saak | ||
| Aaron Saak | ||
| President and Chief Executive Officer | ||
| May 10, 2023 | ||
Exhibit 31.2
CERTIFICATION
I, Christina Cristiano, certify that:
(1) I have reviewed this Quarterly Report on Form 10-Q of Crane NXT, Co.;
(2)Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
(4)The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
(5)The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| By /s/ Christina Cristiano | ||
| Christina Cristiano | ||
| Principal Financial Officer | ||
| May 10, 2023 | ||
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Crane NXT, Co. (the “Registrant”) on Form 10-Q for the quarter ended March 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Aaron Saak, President and Chief Executive Officer of the Registrant, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, hereby certify to the best of my knowledge that:
(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
This Certification accompanies this Quarterly Report on Form 10-Q and shall not be treated as having been filed as part of this Quarterly Report on Form 10-Q.
| By /s/ Aaron Saak | ||
| Aaron Saak | ||
| President and Chief Executive Officer | ||
| May 10, 2023 | ||
Exhibit 32.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Crane NXT, Co. (the “Registrant”) on Form 10-Q for the quarter ended March 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Christina Cristiano, Principal Financial Officer of the Registrant, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, hereby certify to the best of my knowledge that:
(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
This Certification accompanies this Quarterly Report on Form 10-Q and shall not be treated as having been filed as part of this Quarterly Report on Form 10-Q.
| By /s/Christina Cristiano | ||
| Christina Cristiano | ||
| Principal Financial Officer | ||
| May 10, 2023 | ||