Crane Holdings, Co. [CR] Filings

10-Q 1 cr-20220930.htm 10-Q cr-20220930

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 September 30, 2022


☐			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

CRANE HOLDINGS, CO.

(Exact name of registrant as specified in its charter)



Delaware						88-0706021
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


100 First Stamford Place	Stamford	CT	06902
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: 203-363-7300

(Not Applicable)

(Former name, former address and former fiscal year, if changed since last report)

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



Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $1.00	CR	New York Stock Exchange

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

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

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

(check one):

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

The number of shares outstanding of the issuer’s classes of common stock, as of October 31, 2022

Common stock, $1.00 Par Value – 56,144,427 shares

Crane Holdings, Co.

Table of Contents

Form 10-Q

Page

Part I - Financial Information

Item 1.

Financial Statements

Condensed Consolidated Statements of Operations

Page 3

Condensed Consolidated Statements of Comprehensive (Loss) Income

Page 4

Condensed Consolidated Balance Sheets

Page 5

Condensed Consolidated Statements of Cash Flows

Page 7

Notes to Condensed Consolidated Financial Statements

Page 9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Page 28

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Page 46

Item 4.

Controls and Procedures

Page 46

Part II - Other Information

Page 47

Page 47

Unregistered Sales of Equity Securities and Use of Proceeds

Page 47

Item 3.

Defaults Upon Senior Securities

Page 47

Item 4.

Mine Safety Disclosures

Page 47

Page 47

Page 48

Page 49

PART I: FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

CRANE HOLDINGS, CO. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in millions, except per share data)	2022		2021		2022		2021
Net sales	$	815.1	$	893.8	$	2,550.8	$	2,582.8
Operating costs and expenses:
Cost of sales	485.6		556.3		1,547.4		1,593.5
Selling, general and administrative	198.3		193.8		600.8		567.8

Loss on divestiture of asbestos-related assets and liabilities	162.4		—		162.4		—
Restructuring gains, net	—		(1.1)		—		(14.3)
Operating (loss) profit	(31.2)		144.8		240.2		435.8
Other (expense) income:
Interest income	1.4		0.2		2.3		1.1
Interest expense	(13.5)		(11.0)		(36.0)		(36.0)
Gain on sale of business	3.8		—		232.5		—
Miscellaneous income, net	4.5		3.6		22.8		17.2
Total other (expense) income	(3.8)		(7.2)		221.6		(17.7)
(Loss) Income before income taxes	(35.0)		137.6		461.8		418.1
Provision for income taxes	24.3		21.0		157.9		54.8




Net (loss) income attributable to common shareholders	$	(59.3)	$	116.6	$	303.9	$	363.3

(Loss) earnings per share:


Basic	$	(1.06)	$	1.99	$	5.38	$	6.21
Diluted	$	(1.06)	$	1.96	$	5.30	$	6.14





Average shares outstanding:
Basic	56.1		58.7		56.5		58.5
Diluted	56.1		59.5		57.3		59.2

Dividends per share	$	0.47	$	0.43	$	1.41	$	1.29

See Notes to Condensed Consolidated Financial Statements.

CRANE HOLDINGS, CO. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(UNAUDITED)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in millions)	2022		2021		2022		2021
Net (loss) income before allocation to noncontrolling interests	$	(59.3)	$	116.6	$	303.9	$	363.3
Components of other comprehensive income (loss), net of tax
Currency translation adjustment	(77.7)		(24.8)		(175.2)		(52.1)
Changes in pension and postretirement plan assets and benefit obligation, net of tax	2.3		5.2		9.1		15.3
Other comprehensive (loss) income, net of tax	(75.4)		(19.6)		(166.1)		(36.8)
Comprehensive (loss) income before allocation to noncontrolling interests	(134.7)		97.0		137.8		326.5
Less: Noncontrolling interests in comprehensive (loss) income	(0.3)		(0.1)		(0.3)		0.6
Comprehensive (loss) income attributable to common shareholders	$	(134.4)	$	97.1	$	138.1	$	325.9

See Notes to Condensed Consolidated Financial Statements.

CRANE HOLDINGS, CO. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


(in millions)	September 30, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	438.6	$	478.6
Accounts receivable, net of allowance for doubtful accounts of $11.2 as of September 30, 2022 and $10.4 as of December 31, 2021	486.9		483.0
Current insurance receivable - asbestos	—		13.7
Inventories, net:
Finished goods	90.0		147.3
Finished parts and subassemblies	73.8		59.5
Work in process	41.6		37.0
Raw materials	230.3		205.3
Inventories, net	435.7		449.1
Other current assets	121.1		118.7

Total current assets	1,482.3		1,543.1
Property, plant and equipment:
Cost	1,219.1		1,288.5
Less: accumulated depreciation	725.2		732.9
Property, plant and equipment, net	493.9		555.6
Long-term insurance receivable - asbestos	—		60.0
Long-term deferred tax assets	5.8		17.7
Other assets	233.4		259.3
Intangible assets, net	419.9		467.1
Goodwill	1,497.1		1,583.8

Total assets	$	4,132.4	$	4,486.6

See Notes to Condensed Consolidated Financial Statements.

CRANE HOLDINGS, CO. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


(in millions, except per share and share data)	September 30, 2022		December 31, 2021
Liabilities and equity
Current liabilities:
Short-term borrowings	$	399.5	$	—
Accounts payable	241.1		273.7
Current asbestos liability	—		62.3
Accrued liabilities	395.9		442.7
U.S. and foreign taxes on income	39.3		10.6

Total current liabilities	1,075.8		789.3
Long-term debt	843.2		842.4
Accrued pension and postretirement benefits	192.3		231.9
Long-term deferred tax liability	165.7		76.9
Long-term asbestos liability	—		549.8
Other liabilities	144.6		161.2

Total liabilities	2,421.6		2,651.5
Commitments and contingencies (Note 10)
Equity:
Preferred shares, par value $0.01; 5,000,000 shares authorized	—		—
Common shares, par value $1.00; 200,000,000 shares authorized, 72,426,139 shares issued	72.4		72.4
Capital surplus	368.2		363.9
Retained earnings	2,752.0		2,527.3
Accumulated other comprehensive loss	(606.0)		(440.2)
Treasury stock	(878.3)		(691.1)
Total shareholders’ equity	1,708.3		1,832.3
Noncontrolling interests	2.5		2.8
Total equity	1,710.8		1,835.1
Total liabilities and equity	$	4,132.4	$	4,486.6


Share data:
Common shares issued	72,426,139		72,426,139
Less: Common shares held in treasury	16,289,559		14,590,274
Common shares outstanding	56,136,580		57,835,865

See Notes to Condensed Consolidated Financial Statements.

CRANE HOLDINGS, CO. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Nine Months Ended
	September 30,
(in millions)	2022		2021
Operating activities:
Net income attributable to common shareholders	$	303.9	$	363.3
Loss on divestiture of asbestos-related assets and liabilities	148.9		—
Gain on sale of business	(232.5)		—
Gain on sale of property	—		(18.5)
Depreciation and amortization	89.8		91.4
Stock-based compensation expense	17.8		18.6
Defined benefit plans and postretirement credit	(10.5)		(6.0)
Deferred income taxes	20.2		(25.9)
Cash used for operating working capital	(135.0)		(39.4)
Defined benefit plans and postretirement contributions	(19.3)		(22.8)
Environmental payments, net of reimbursements	(5.4)		(4.6)
Asbestos related payments, net of insurance recoveries	(29.3)		(29.6)
Divestiture of asbestos-related assets and liabilities	(550.0)		—
Other	23.4		0.5
Total (used for) provided by operating activities	(378.0)		327.0
Investing activities:

Proceeds from disposition of capital assets	0.1		23.3
Capital expenditures	(36.8)		(26.7)
Proceeds from sale of business	318.1		—
Purchase of marketable securities	—		(10.0)
Proceeds from sale of marketable securities	—		40.0
Total provided by investing activities	281.4		26.6
Financing activities:
Dividends paid	(79.5)		(75.5)
Reacquisition of shares on open market	(203.7)		—
Stock options exercised, net of shares reacquired	3.1		9.9


Repayments of commercial paper with maturities greater than 90 days	—		(27.1)



Proceeds from term loan	399.4		—
Repayment of term loan	—		(348.1)
Total provided by (used for) financing activities	119.3		(440.8)




Effect of exchange rates on cash and cash equivalents	(62.7)		(13.0)
Decrease in cash and cash equivalents	(40.0)		(100.2)
Cash and cash equivalents at beginning of period	478.6		551.0
Cash and cash equivalents at end of period	$	438.6	$	450.8

CRANE HOLDINGS, CO. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Nine Months Ended
	September 30,
(in millions)	2022		2021
Detail of cash used for operating working capital:
Accounts receivable	$	(74.9)	$	(106.8)
Inventories	(61.5)		(21.6)
Other current assets	(6.4)		(10.9)
Accounts payable	13.8		52.8
Accrued liabilities	(21.2)		14.9
U.S. and foreign taxes on income	15.2		32.2
Total	$	(135.0)	$	(39.4)

Supplemental disclosure of cash flow information:
Interest paid	$	29.9	$	31.2
Income taxes paid	$	118.1	$	47.9

See Notes to Condensed Consolidated Financial Statements.

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, 2021.

As used in these notes, the terms "we," "us," "our," "Crane" and the "Company" mean Crane Holdings, Co. and our subsidiaries unless the context specifically states or implies otherwise.

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.

Holding Company Reorganization

On May 16, 2022, Crane Co., a Delaware corporation (“Crane Co.”), completed its previously announced reorganization merger pursuant to the Agreement and Plan of Merger, dated as of February 28, 2022 (the “Reorganization Agreement”), by and among Crane Co., Crane Holdings, Co., a Delaware corporation (“Crane Holdings”), and Crane Transaction Company, LLC, a Delaware limited liability company and, as of immediately prior to the consummation of such merger, a wholly-owned subsidiary of Crane Holdings (“Merger Sub”). The Reorganization Agreement provided for the merger of Crane Co. and Merger Sub, with Crane Co. surviving the merger as a wholly-owned subsidiary of Crane Holdings (the “Reorganization Merger”).

Following the Reorganization Merger, on May 16, 2022, Crane Co. converted from a Delaware corporation into a Delaware limited liability company named “Crane LLC” (such conversion, together with the Reorganization Merger, the “Reorganization”). Following the Reorganization, substantially all of the assets of Crane LLC were distributed, assigned, transferred, conveyed and delivered to, and certain non-asbestos related liabilities of Crane LLC were assumed by, Crane Holdings. On May 17, 2022, Crane LLC converted from a Delaware limited liability company to a Delaware corporation named “Crane Co.” Subsequently, on May 26, 2022, Crane Co. filed a Certificate of Amendment to its Certificate of Incorporation (the “Certificate of Amendment”) with the Secretary of State of the State of Delaware, which became effective upon filing, pursuant to which the Crane Co. officially changed its name from “Crane Co.” to “Redco Corporation”. The “Crane Co.” name has been reserved for future use by Crane Holdings.

Divestiture of asbestos-related assets and liabilities

On August 12, 2022, Crane Holdings, Co., Crane Company, a wholly-owned subsidiary of Crane Holdings, Co., and Redco Corporation (“Redco”), then a wholly-owned subsidiary of Crane Company that held liabilities including asbestos liabilities and related insurance assets, entered into a Stock Purchase Agreement (the “Redco Purchase Agreement”) with Spruce Lake Liability Management Holdco LLC (“Redco Buyer”), an unrelated third party and 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”). In connection with the Redco Sale, Crane Holdings, Co., on behalf of Crane Company, contributed approximately $550 million in cash to Redco, which was funded by a combination of short-term borrowings and cash on hand. As a result of the Redco Sale, all asbestos obligations and liabilities, related insurance assets and associated deferred tax assets have been removed from Crane Holdings, Co.’s condensed consolidated balance sheets effective August 12, 2022. A loss on the divestiture of asbestos-related assets and liabilities of $162.4 million was recognized in the condensed consolidated statements of operations for the nine months ended September 30, 2022.

Sale of Crane Supply

On April 8, 2022, the Company entered into an agreement to sell the Crane Supply business for CAD 380 million on a cash-free and debt-free basis. Subsequent to net working capital and other closing adjustments, the sale closed on May 31, 2022 for CAD 402 million. In August 2022, the Company received CAD 5 million related to a final working capital adjustment. The Company recognized a total gain on sale of $232.5 million.

Pending Separation

On March 30, 2022, the Company announced that its Board of Directors unanimously approved a plan to pursue a separation into two independent, publicly-traded companies (the “Separation”). The Separation is expected to occur through a tax-free distribution and is expected to be completed within approximately 12 months, subject to the satisfaction of customary conditions and final approval by Crane Holdings, Co.’s Board of Directors.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Termination of Agreement to Sell Engineered Materials

On May 16, 2021, we entered into an agreement to sell the Engineered Materials segment to Grupo Verzatec S.A. de C.V. for $360 million on a cash-free and debt-free basis. In the second quarter of 2021, the assets and liabilities of the segment were classified as held for sale. On May 26, 2022, Verzatec terminated the sale agreement and paid $7.5 million to the Company in termination fees, which is presented within Miscellaneous income, net on the Condensed Statements of Operations. As such, as of June 30, 2022 the Engineered Materials segment is no longer classified as assets held for sale and is presented herein as continuing operations for all periods presented.

Recent Accounting Pronouncements - Adopted

Simplifying the Accounting for Income Taxes

In December 2019, the Financial Accounting Standards Board (“FASB”) issued amended guidance to simplify the accounting for income taxes. The guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Certain amendments are to be applied prospectively, while other amendments are to be applied retrospectively to all periods presented. We have adopted this standard effective January 1, 2021. The adoption of this new standard did not impact our consolidated financial statements.

Note 2 - Segment Results

Our segments are reported on the same basis used internally for evaluating performance and for allocating resources. We have 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 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. Products include a wide range of custom designed, highly engineered products used in landing systems, sensing and utility systems, fluid management, seat actuation, power and microelectronic applications, and microwave systems.

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 manufactures on/off isolation valves, instrumentation and controls, and related products for critical and demanding applications primarily in the chemical and petrochemical, general industrial, energy-related and pharmaceutical end markets. Commercial Valves is engaged primarily in the manufacturing of valves and related products for the non-residential construction, general industrial, and municipal markets, and the distribution of pipe, valves and fittings (PVF) for the non-residential construction market. Pumps and Systems manufactures pumps and related products 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 high technology payment acceptance and dispensing products to original equipment manufacturers, and for certain vertical markets, it also provides currency handling and processing systems, complete cash and cashless payment and merchandising solutions, equipment service solutions, and fully connected managed service solutions. Crane Currency is a supplier of banknotes and highly engineered banknote security features as well as a provider of security features for product authentication.

Engineered Materials

The Engineered Materials segment manufactures fiberglass-reinforced plastic panels and coils, primarily for use in the manufacturing of recreational vehicles ("RVs"), and in commercial and industrial buildings applications, with some additional applications including trailers and other transportation-related products. Engineered Materials sells the majority of its products directly to RV, trailer, and truck manufacturers, and it uses distributors and retailers to serve the commercial and industrial construction markets.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Financial information by reportable segment is set forth below.


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in millions)	2022		2021		2022		2021
Net sales:
Aerospace & Electronics	$	167.2	$	168.6	$	485.8	$	480.2
Process Flow Technologies	250.0		299.1		857.4		897.9
Payment & Merchandising Technologies	335.1		365.8		1,001.7		1,031.4
Engineered Materials	62.8		60.3		205.9		173.3
Total	$	815.1	$	893.8	$	2,550.8	$	2,582.8

Operating profit (loss):
Aerospace & Electronics	$	28.2	$	32.5	$	84.4	$	89.3
Process Flow Technologies	41.3		44.3		130.9		140.9
Payment & Merchandising Technologies	86.7		83.7		251.6		247.4
Engineered Materials	6.7		6.6		26.9		20.7
Corporate	(194.1)		(22.3)		(253.6)		(62.5)
Total	$	(31.2)	$	144.8	$	240.2	$	435.8
Interest income	1.4		0.2		2.3		1.1
Interest expense	(13.5)		(11.0)		(36.0)		(36.0)
Gain on sale of business	3.8		—		232.5		—
Miscellaneous income, net	4.5		3.6		22.8		17.2
(Loss) income before income taxes	$	(35.0)	$	137.6	$	461.8	$	418.1


(in millions)	September 30, 2022		December 31, 2021
Assets:
Aerospace & Electronics	$	642.0	$	604.7
Process Flow Technologies	1,057.4		1,240.4
Payment & Merchandising Technologies	2,043.8		2,096.5
Engineered Materials	226.9		220.5
Corporate	162.3		324.5

Total	$	4,132.4	$	4,486.6


(in millions)	September 30, 2022		December 31, 2021
Goodwill:
Aerospace & Electronics	$	202.2	$	202.5
Process Flow Technologies	305.3		349.4
Payment & Merchandising Technologies	818.4		860.6
Engineered Materials	171.2		171.3
Total	$	1,497.1	$	1,583.8

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				Nine Months Ended
	September 30,				September 30,
(in millions)	2022		2021		2022		2021
Aerospace & Electronics
Commercial Original Equipment	$	63.7	$	62.2	$	182.9	$	170.5
Military and Other Original Equipment	57.1		58.4		171.5		184.0
Commercial Aftermarket Products	34.8		30.2		92.5		75.1
Military Aftermarket Products	11.6		17.8		38.9		50.6
Total Aerospace & Electronics	$	167.2	$	168.6	$	485.8	$	480.2

Process Flow Technologies
Process Valves and Related Products	$	186.2	$	176.6	$	555.8	$	535.4
Commercial Valves	30.4		95.8		205.8		283.3
Pumps and Systems	33.4		26.7		95.8		79.2
Total Process Flow Technologies	$	250.0	$	299.1	$	857.4	$	897.9

Payment & Merchandising Technologies
Payment Acceptance and Dispensing Products	$	220.8	$	206.0	$	643.2	$	588.3
Banknotes and Security Products	114.3		159.8		358.5		443.1
Total Payment & Merchandising Technologies	$	335.1	$	365.8	$	1,001.7	$	1,031.4

Engineered Materials
FRP - Recreational Vehicles	$	24.9	$	28.9	$	92.8	$	78.1
FRP - Building Products	29.0		23.7		88.2		72.0
FRP - Transportation	8.9		7.7		24.9		23.2
Total Engineered Materials	62.8		60.3		205.9		173.3
Net sales	$	815.1	$	893.8	$	2,550.8	$	2,582.8

Remaining Performance Obligations

The transaction price allocated to remaining performance obligations represents the transaction price of firm orders which have not yet been fulfilled, which we also refer to as total backlog. As of September 30, 2022, total backlog was $1,463.6 million. We expect to recognize approximately 40% of our remaining performance obligations as revenue in the fourth quarter of 2022, an additional 53% in 2023 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)	September 30, 2022		December 31, 2021
Contract assets	$	85.9	$	73.0
Contract liabilities	$	117.6	$	101.1

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

We recognized revenue of $19.4 million and $74.4 million during the three-and nine-month periods ended September 30, 2022, respectively, related to contract liabilities as of December 31, 2021.

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. Potentially dilutive common shares are excluded from the computations of diluted earnings per share if their effect would be anti-dilutive. For the three months ended September 30, 2022, the Company had a net loss attributable to common shareholders which causes all potentially dilutive securities to be anti-dilutive and are therefore not included in the calculation of earnings per share.


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in millions, except per share data)	2022		2021		2022		2021


Net (loss) income attributable to common shareholders	$	(59.3)	$	116.6	$	303.9	$	363.3

Average basic shares outstanding	56.1		58.7		56.5		58.5
Effect of dilutive share-based awards	—		0.8		0.8		0.7
Average diluted shares outstanding	56.1		59.5		57.3		59.2




(Loss) earnings per basic share	$	(1.06)	$	1.99	$	5.38	$	6.21




(Loss) earnings per diluted share	$	(1.06)	$	1.96	$	5.30	$	6.14

The computation of diluted earnings per share excludes the effect of the potentially anti-dilutive securities which was 1.2 million and 1.0 million for the three months ended September 30, 2022, and 2021, respectively, and 0.4 million and 1.4 million for the nine months ending September 30, 2022 and 2021, respectively.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 5 - Changes in Equity and Accumulated Other Comprehensive Loss

A summary of changes in equity for the year-to-date interim periods ended September 30, 2022 and 2021 is provided below:


(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	72.4	$	363.9	$	2,527.3	$	(440.2)	$	(691.1)	$	1,832.3	$	2.8	$	1,835.1
Net income	—	—		105.0		—		—		105.0		—		105.0
Cash dividends ($0.47 per share)	—	—		(26.4)		—		—		(26.4)		—		(26.4)
Reacquisition on open market of 1,699,949 shares	—	—		—		—		(175.8)		(175.8)		—		(175.8)
Exercise of stock options, net of shares reacquired of 79,214 shares	—	—		—		—		6.1		6.1		—		6.1
Impact from settlement of share-based awards, net of shares acquired	—	(5.1)		—		—		(0.3)		(5.4)		—		(5.4)
Stock-based compensation expense	—	5.9		—		—		—		5.9		—		5.9
Changes in pension and postretirement plan assets and benefit obligation, net of tax	—	—		—		3.3		—		3.3		—		3.3
Currency translation adjustment	—	—		—		(21.7)		—		(21.7)		0.1		(21.6)
BALANCE MARCH 31, 2022	72.4	$	364.7	$	2,605.9	$	(458.6)	$	(861.1)	$	1,723.3	$	2.9	$	1,726.2


Net income	—	—		258.2		—		—		258.2		—		258.2
Cash dividends ($0.47 per share)	—	—		(26.4)		—		—		(26.4)		—		(26.4)

Reacquisition on open market of 1,959,069 shares	—	—		—		—		(27.9)		(27.9)		—		(27.9)
Exercise of stock options, net of shares reacquired of 94,774 shares	—	—		—		—		1.1		1.1		—		1.1
Impact from settlement of share-based awards, net of shares acquired	—	(1.3)		—		—		1.2		(0.1)		—		(0.1)
Stock-based compensation expense	—	5.9		—		—		—		5.9		—		5.9
Changes in pension and postretirement plan assets and benefit obligation, net of tax	—	—		—		3.5		—		3.5		—		3.5
Currency translation adjustment	—	—		—		(75.8)		—		(75.8)		(0.1)		(75.9)
BALANCE JUNE 30, 2022	72.4	$	369.3	$	2,837.7	$	(530.9)	$	(886.7)	$	1,861.8	$	2.8	$	1,864.6
Net loss	—	—		(59.3)		—		—		(59.3)		—		(59.3)
Cash dividends ($0.47 per share)	—	—		(26.4)		—		—		(26.4)		—		(26.4)

Exercise of stock options, net of shares reacquired of 81,642 shares	—	—		—		—		1.5		1.5		—		1.5
Impact from settlement of share-based awards, net of shares acquired	—	(7.0)		—		—		6.9		(0.1)		—		(0.1)
Stock-based compensation expense	—	5.9		—		—		—		5.9		—		5.9
Changes in pension and postretirement plan assets and benefit obligation, net of tax	—	—		—		2.3		—		2.3		—		2.3
Currency translation adjustment	—	—		—		(77.4)		—		(77.4)		(0.3)		(77.7)
BALANCE SEPTEMBER 30, 2022	72.4	$	368.2	$	2,752.0	$	(606.0)	$	(878.3)	$	1,708.3	$	2.5	$	1,710.8

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(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, 2020

72.4