Crane Earnings 2020-06-30

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

Document

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 June 30, 2020



☐	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 CO.

(Exact name of registrant as specified in its charter)




Delaware		13-1952290
(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 June 30, 2020

Common stock, $1.00 Par Value – 58,025,501 shares

Crane Co.

Table of Contents

Form 10-Q




		Page

Part I - Financial Information
Item 1.	Financial Statements
	Condensed Consolidated Statements of Operations	Page 1
	Condensed Consolidated Statements of Comprehensive Income	Page 2
	Condensed Consolidated Balance Sheets	Page 3
	Condensed Consolidated Statements of Cash Flows	Page 5
	Notes to Condensed Consolidated Financial Statements	Page 6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	Page 30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	Page 43
Item 4.	Controls and Procedures	Page 43
	Part II - Other Information
Item 1.	Legal Proceedings	Page 44
Item 1A.	Risk Factors	Page 44
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	Page 44
Item 4.	Mine Safety Disclosures	Page 45
Item 5.	Other Information	Page 45
Item 6.	Exhibits	Page 46
	Signatures	Page 47

PART I: FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

CRANE CO. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN MILLIONS, EXCEPT PER SHARE DATA)

(UNAUDITED)



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020			2019			2020			2019
Net sales	$	677.9		$	841.6		$	1,475.7		$	1,673.3
Operating costs and expenses:
Cost of sales	451.7			535.0			962.5			1,063.0
Selling, general and administrative	169.6			179.8			364.0			365.8
Acquisition-related and integration charges	2.3			2.4			7.5			3.5
Restructuring charges, net	23.8			1.6			22.6			4.5
Operating profit	30.5			122.8			119.1			236.5
Other income (expense):
Interest income	0.3			0.7			0.7			1.3
Interest expense	(14.4		)	(11.4		)	(26.9		)	(23.3		)
Miscellaneous income, net	2.5			6.4			6.3			8.4
	(11.6		)	(4.3		)	(19.9		)	(13.6		)
Income before income taxes	18.9			118.5			99.2			222.9
Provision for income taxes	4.1			27.5			21.6			49.4
Net income before allocation to noncontrolling interests	14.8			91.0			77.6			173.5
Less: Noncontrolling interest in subsidiaries’ earnings	—			—			—			0.1
Net income attributable to common shareholders	$	14.8		$	91.0		$	77.6		$	173.4
Earnings per share:
Basic	$	0.26		$	1.52		$	1.33		$	2.90
Diluted	$	0.25		$	1.50		$	1.31		$	2.85
Average shares outstanding:
Basic	58.0			59.9			58.5			59.8
Diluted	58.5			60.8			59.1			60.8

Dividends per share	$	0.43		$	0.39		$	0.86		$	0.78

See Notes to Condensed Consolidated Financial Statements.

Page 1

CRANE CO. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(IN MILLIONS)

(UNAUDITED)



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020			2019
Net income before allocation to noncontrolling interests	$	14.8	$	91.0	$	77.6		$	173.5
Components of other comprehensive income (loss), net of tax
Currency translation adjustment	17.2		4.7		(28.0		)	3.9
Changes in pension and postretirement plan assets and benefit obligation, net of tax	3.6		1.9		7.1			4.8
Other comprehensive income (loss), net of tax	20.8		6.6		(20.9		)	8.7
Comprehensive income before allocation to noncontrolling interests	35.6		97.6		56.7			182.2
Less: Noncontrolling interests in comprehensive income	0.2		—		(0.1		)	(0.1		)
Comprehensive income attributable to common shareholders	$	35.4	$	97.6	$	56.8		$	182.3

See Notes to Condensed Consolidated Financial Statements.

Page 2

CRANE CO. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN MILLIONS)

(UNAUDITED)



	June 30, 2020		December 31, 2019
Assets
Current assets:
Cash and cash equivalents	$	592.1	$	393.9
Accounts receivable, net	444.8		555.1
Current insurance receivable - asbestos	14.1		14.1
Inventories, net:
Finished goods	141.7		130.6
Finished parts and subassemblies	67.8		66.1
Work in process	53.8		47.7
Raw materials	211.8		212.9
Inventories, net	475.1		457.3
Other current assets	103.2		79.5
Total current assets	1,629.3		1,499.9
Property, plant and equipment:
Cost	1,246.6		1,256.9
Less: accumulated depreciation	648.7		640.6
Property, plant and equipment, net	597.9		616.3
Long-term insurance receivable - asbestos	77.4		83.6
Long-term deferred tax assets	7.0		35.1
Other assets	206.5		211.3
Intangible assets, net	534.4		505.1
Goodwill	1,577.8		1,472.4
Total assets	$	4,630.3	$	4,423.7

See Notes to Condensed Consolidated Financial Statements.

Page 3

CRANE CO. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)

(UNAUDITED)



	June 30, 2020			December 31, 2019
Liabilities and equity
Current liabilities:
Short-term borrowings	$	585.3		$	149.4
Accounts payable	226.4			311.1
Current asbestos liability	65.0			65.0
Accrued liabilities	339.6			378.2
U.S. and foreign taxes on income	10.9			13.0
Total current liabilities	1,227.2			916.7
Long-term debt	842.5			842.0
Accrued pension and postretirement benefits	285.8			298.4
Long-term deferred tax liability	51.1			55.8
Long-term asbestos liability	621.2			646.6
Other liabilities	178.9			187.9
Total liabilities	3,206.7			2,947.4
Commitments and contingencies (Note 11)
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	318.7			315.6
Retained earnings	2,139.4			2,112.2
Accumulated other comprehensive loss	(504.5		)	(483.7		)
Treasury stock	(604.9		)	(542.8		)
Total shareholders’ equity	1,421.1			1,473.7
Noncontrolling interests	2.5			2.6
Total equity	1,423.6			1,476.3
Total liabilities and equity	$	4,630.3		$	4,423.7
Share data:
Common shares issued	72,426,139			72,426,139
Less: Common shares held in treasury	14,400,638			13,423,934
Common shares outstanding	58,025,501			59,002,205

See Notes to Condensed Consolidated Financial Statements.

Page 4

CRANE CO. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN MILLIONS)

(UNAUDITED)



	Six Months Ended
	June 30,
	2020			2019
Operating activities:
Net income attributable to common shareholders	$	77.6		$	173.4
Noncontrolling interests in subsidiaries’ earnings	—			0.1
Net income before allocation to noncontrolling interests	77.6			173.5
Loss on deconsolidation of joint venture	—			1.2
Unrealized gain on marketable securities	—			(3.1		)
Depreciation and amortization	62.9			56.3
Stock-based compensation expense	10.5			11.2
Defined benefit plans and postretirement credit	(2.7		)	(4.0		)
Deferred income taxes	7.5			10.8
Cash used for operating working capital	(54.1		)	(171.4		)
Defined benefit plans and postretirement contributions	(2.3		)	(5.1		)
Environmental payments, net of reimbursements	(3.7		)	(4.0		)
Asbestos related payments, net of insurance recoveries	(19.2		)	(17.9		)
Other	0.1			5.0
Total provided by operating activities	76.6			52.5
Investing activities:
Payment for acquisition - net of cash acquired	(172.3		)	—
Proceeds from disposition of capital assets	2.7			0.9
Capital expenditures	(13.5		)	(36.1		)
Purchase of marketable securities	—			(8.8		)
Impact of deconsolidation of joint venture	—			(0.2		)
Total used for investing activities	(183.1		)	(44.2		)
Financing activities:
Dividends paid	(50.4		)	(46.7		)
Reacquisition of shares on open market	(70.0		)	—
Stock options exercised - net of shares reacquired	0.6			1.2
Debt issuance costs	(1.2		)	—
Proceeds received from issuance of long-term debt	—			3.0
Repayment of long-term debt	—			(2.8		)
Proceeds from issuance of commercial paper with maturities greater than 90 days	251.3			—
Repayments of commercial paper with maturities greater than 90 days	(96.5		)	—
Net repayments from issuance of commercial paper with maturities of 90 days or less	(62.8		)	—
Proceeds from revolving credit facility	77.2			—
Repayments from revolving credit facility	(77.2		)	—
Proceeds from term loan	343.9			—
Total provided by (used for) financing activities	314.9			(45.3		)
Effect of exchange rates on cash and cash equivalents	(10.2		)	0.6
Increase (decrease) in cash and cash equivalents	198.2			(36.4		)
Cash and cash equivalents at beginning of period	393.9			343.4
Cash and cash equivalents at end of period	$	592.1		$	307.0
Detail of cash used for operating working capital:
Accounts receivable	$	117.9		$	(29.9	)
Inventories	(19.6		)	(26.3		)
Other current assets	(23.5		)	(6.7		)
Accounts payable	(86.8		)	(54.2		)
Accrued liabilities	(37.6		)	(70.1		)
U.S. and foreign taxes on income	(4.5		)	15.8
Total	$	(54.1	)	$	(171.4	)
Supplemental disclosure of cash flow information:
Interest paid	$	23.8		$	24.0
Income taxes paid	$	18.6		$	24.1

See Notes to Condensed Consolidated Financial Statements.

Page 5

NOTES TO 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, 2019.

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.

Recent Accounting Pronouncements - Not Yet 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. Early adoption is permitted. Certain amendments should be applied prospectively, while other amendments should be applied retrospectively to all periods presented. We are currently evaluating the timing and impact of the amended guidance on our consolidated financial statements.

Disclosure Requirements for Defined Benefit Plans

In August 2018, the FASB issued amended guidance to add, remove, and clarify disclosure requirements related to defined benefit pension and other postretirement plans. The amended guidance removes the requirements to disclose: amounts in accumulated other comprehensive income (loss) expected to be recognized as components of net periodic benefit cost over the next fiscal year; the amount and timing of plan assets expected to be returned to the entity; and the effects of a one-percentage point change in assumed health care cost trend rates. The amended guidance requires disclosure of an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. This guidance is effective for fiscal years ending after December 15, 2020, with early adoption permitted. The amended guidance is required to be applied on a retrospective basis to all periods presented. We are currently evaluating this guidance to determine the impact on our disclosures.

Recent Accounting Pronouncements - Adopted

Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued amended guidance that changes the impairment model for most financial assets and certain other instruments. For trade receivables, contract assets and other receivables, held-to-maturity debt securities, loans and other instruments, entities are required to use a current expected credit loss ("CECL") model that will immediately recognize an estimate of credit losses that are expected to occur over the life of the financial instruments that are in the scope of this update, including trade receivables. For available-for-sale debt securities with unrealized losses, entities will measure credit losses in a manner similar to current practice, except that the losses will be recognized as an allowance. The CECL model is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect collectability.

On January 1, 2020, we adopted the new CECL standard and developed an expected impairment model based on our historical loss experience. We believe that our previous methodology to calculate credit losses is generally consistent with the new expected credit loss model and did not result in a material adjustment upon adoption. The allowance for doubtful accounts was $16.6 million and $7.2 million as of June 30, 2020 and December 31, 2019, respectively.

Note 2 - Acquisitions

Acquisitions are accounted for in accordance with ASC Topic 805, “Business Combinations” (“ASC 805”). Accordingly, we make an initial allocation of the purchase price at the date of acquisition based upon our understanding of the fair value of the acquired assets and assumed liabilities. We obtain this information during due diligence and through other sources. In the months after closing, as we obtain additional information about these assets and liabilities, including through tangible and intangible asset appraisals, we are able to refine estimates of fair value and more accurately allocate the purchase price. Only items identified as of the acquisition date are considered for subsequent adjustment to the purchase price allocation. We will make appropriate adjustments to the purchase price allocation prior to completion of the measurement period, as required.

Page 6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In order to allocate the consideration transferred for our acquisitions, the fair values of all identifiable assets and liabilities must be established. For accounting and financial reporting purposes, fair value is defined under ASC Topic 820, “Fair Value Measurement and Disclosure” as the price that would be received upon sale of an asset or the amount paid to transfer a liability in an orderly transaction between market participants at the measurement date. Market participants are assumed to be buyers and sellers in the principal (most advantageous) market for the asset or liability. Additionally, fair value measurements for an asset assume the highest and best use of that asset by market participants. Use of different estimates and judgments could yield different results.

Cummins-Allison Acquisition

On December 31, 2019, we completed the acquisition of Cummins-Allison Corp. (“Cummins-Allison”). The base purchase price of the acquisition was $160 million on a cash-free, debt-free basis, subject to a later adjustment reflecting Cummins-Allison’s net working capital, cash, and Cummins-Allison’s transaction expenses. The amount paid, net of cash acquired, was $156.2 million. We funded the acquisition through short-term borrowings consisting of $150 million of commercial paper, and cash on hand.

Cummins-Allison is a leading provider of high speed, cash and coin counting and sorting machines and retail cash office solutions which are primarily used in back-office applications. Cummins-Allison also has a nationwide service network to support these hardware sales. Cummins-Allison was integrated into the Payment & Merchandising Technologies segment. The amount allocated to goodwill reflects the expected synergies related to material costs, supply chain manufacturing productivity and research and development. Goodwill from this acquisition is not deductible for tax purposes.

Allocation of Consideration Transferred to Net Assets Acquired

The following amounts represent the preliminary determination of the fair value of identifiable assets acquired and liabilities assumed from our acquisition of Cummins-Allison. The final determination of the fair value of certain assets and liabilities will be completed within the one year measurement period as required by ASC 805. The changes to the preliminary purchase price allocation primarily relate to the valuation of inventory. We have not yet completed our evaluation and determination of certain assets acquired and liabilities assumed, primarily related to the final assessment and valuation of certain tax amounts. Therefore, the final fair values of the assets acquired and liabilities assumed may vary from our preliminary estimates presented below:



Net assets acquired (in millions)
Total current assets	$	87.4
Property, plant and equipment	26.4
Other assets	12.0
Intangible assets	66.0
Goodwill	58.7
Total assets acquired	$	250.5

Total current liabilities	$	66.9
Other liabilities	27.4
Total assumed liabilities	$	94.3
Net assets acquired	$	156.2

The amounts allocated to acquired intangible assets, and their associated weighted-average useful lives which were determined based on the period in which the assets are expected to contribute directly or indirectly to our future cash flows, consist of the following:



Intangible Assets (dollars in millions)	Intangible Fair Value		Weighted Average Life
Trademarks/trade names	$	3.0	7
Customer relationships	54.5		18
Product technology	8.5		10
Total acquired intangible assets	$	66.0

Page 7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Therefore, a portion of Cummins-Allison’s earnings, equal to the after-tax royalty that would have been paid for the use of the asset, can be attributed to our ownership. The trade name Cummins Allison is being amortized on a straight-line basis (which approximates the economic pattern of benefits) over the estimated economic life of seven years.

The fair values of the customer relationships intangible assets were determined by using an income approach which is a commonly accepted valuation approach. Under this approach, the net earnings attributable to the asset or liability being measured are isolated using the discounted projected net cash flows. These projected cash flows are isolated from the projected cash flows of the combined asset group over the remaining economic life of the intangible asset or liability being measured. Both the amount and the duration of the cash flows are considered from a market participant perspective. Our estimates of market participant net cash flows considered historical and projected pricing, operational performance including market participant synergies, aftermarket retention, product life cycles, material and labor pricing, and other relevant customer, contractual and market factors. Where appropriate, the net cash flows were adjusted to reflect the potential attrition of existing customers in the future, as existing customers are expected to decline over time. The attrition-adjusted future cash flows are then discounted to present value using an appropriate discount rate. The customer relationship asset is being amortized on a straight-line basis (which approximates the economic pattern of benefits) over the estimated economic life of 18 years.

The fair values of the product technology intangible assets were also determined by the relief-from-royalty approach. Similarly, this approach is based on the assumption that in lieu of ownership, a firm would be willing to pay a royalty in order to exploit the related benefits of the technology. Therefore, a portion of Cummins-Allison’s earnings, equal to the after-tax royalty that would have been paid for the use of the technology, can be attributed to the firm’s ownership of the technology. The technology assets are being amortized on a straight-line basis (which approximates the economic pattern of benefits) over the estimated economic life of 10 years.

Supplemental Pro Forma Data

The following unaudited pro forma combined information assumes that the acquisition was completed on January 1, 2019. The unaudited pro forma consolidated net sales for the three and six months ended June 30, 2019 would have been $888.9 million and $1,769.0 million, respectively. The unaudited pro forma consolidated net sales are provided for illustrative purposes only and are not indicative of our actual consolidated results of operations or consolidated financial position. Consolidated pro forma net income attributable to common shareholders has not been presented since the impact is not material to our financial results.

Instrumentation & Sampling Business Acquisition

On January 31, 2020, we completed the acquisition of CIRCOR International, Inc.’s Instrumentation & Sampling Business (“I&S”) for $172.3 million on a cash-free and debt-free basis, subject to a later adjustment reflecting I&S' net working capital, cash, the assumption of certain debt-like items, and I&S' transaction expenses. We funded the acquisition through short-term borrowings consisting of $100 million of commercial paper and $67 million from our revolving credit facility, and cash on hand.

I&S designs, engineers and manufactures a broad range of critical fluid control instrumentation and sampling solutions used in severe service environments which complements our existing portfolio of chemical, refining, petrochemical and upstream oil and gas applications. I&S was integrated into the Fluid Handling segment. The amount allocated to goodwill reflects the expected sales synergies, manufacturing efficiency and procurement savings. Goodwill from this acquisition is not deductible for tax purposes.

Allocation of Consideration Transferred to Net Assets Acquired

The following amounts represent the preliminary determination of the fair value of identifiable assets acquired and liabilities assumed from our acquisition of I&S. The final determination of the fair value of certain assets and liabilities will be completed within the one-year measurement period as required by ASC 805. We have not yet completed our evaluation and determination of certain assets acquired and liabilities assumed, primarily the final assessment and valuation of current assets and other liabilities, and certain tax amounts. Any potential adjustments made could be material in relation to the preliminary values presented below:

Page 8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Net assets acquired (in millions)
Total current assets	$	21.0
Property, plant and equipment	11.7
Other assets	6.2
Intangible assets	52.5
Goodwill	108.6
Total assets acquired	$	200.0

Total current liabilities	$	8.1
Other liabilities	19.6
Total assumed liabilities	$	27.7
Net assets acquired	$	172.3



Intangible Assets (dollars in millions)	Intangible Fair Value		Weighted Average Life
Trademarks/trade names	$	2.6	13
Customer relationships	49.0		14
Backlog	0.9		1
Total acquired intangible assets	$	52.5

The fair values of the trademark and trade name intangible assets were determined by using an income approach, specifically the relief-from-royalty approach, which is a commonly accepted valuation approach. This approach is based on the assumption that in lieu of ownership, a firm would be willing to pay a royalty in order to exploit the related benefits of this asset. Therefore, a portion of I&S’s earnings, equal to the after-tax royalty that would have been paid for the use of the asset, can be attributed to our ownership. The trade names are being amortized on a straight-line basis (which approximates the economic pattern of benefits) over the estimated economic life of 13 years.

The fair values of the customer relationships and backlog intangible assets were determined by using an income approach which is a commonly accepted valuation approach. Under this approach, the net earnings attributable to the asset or liability being measured are isolated using the discounted projected net cash flows. These projected cash flows are isolated from the projected cash flows of the combined asset group over the remaining economic life of the intangible asset or liability being measured. Both the amount and the duration of the cash flows are considered from a market participant perspective. Our estimates of market participant net cash flows considered historical and projected pricing, operational performance including market participant synergies, aftermarket retention, product life cycles, material and labor pricing, and other relevant customer, contractual and market factors. Where appropriate, the net cash flows were adjusted to reflect the potential attrition of existing customers in the future, as existing customers are expected to decline over time. The attrition-adjusted future cash flows are then discounted to present value using an appropriate discount rate. The customer relationship asset is being amortized on a straight-line basis (which approximates the economic pattern of benefits) over the estimated economic life of 14 years.

Supplemental Pro Forma Data

I&S’s results of operations have been included in our financial statements for the period subsequent to the completion of the acquisition on January 31, 2020. Consolidated pro forma revenue and net income attributable to common shareholders has not been presented since the impact is not material to our financial results for either period.

Acquisition-Related Costs

Acquisition-related costs are expensed as incurred. For the three months ended June 30, 2020 and 2019, we recorded $2.3 million and $2.4 million, respectively, of integration and transaction costs in our Condensed Consolidated Statements of Operations. For the six months ended June 30, 2020 and 2019, we recorded $7.5 million and $3.5 million, respectively, of integration and transaction costs in our Condensed Consolidated Statements of Operations.

Page 9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3 - Segment Results

Our segments are reported on the same basis used internally for evaluating performance and for allocating resources. We have four reportable segments: Fluid Handling, Payment & Merchandising Technologies, Aerospace & Electronics 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:

Fluid Handling

The Fluid Handling segment is a provider of highly engineered fluid handling equipment for critical performance 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 and distribution of valves and related products for the non-residential construction, general industrial, and to a lesser extent, municipal markets. Pumps and Systems include pumps and related products primarily for water and wastewater applications in the industrial, municipal, commercial and military markets. The recent acquisition of I&S will be integrated into Process Valves and Related Products business. See discussion in Note 2, “Acquisitions” for further details.

Payment & Merchandising Technologies

The Payment & Merchandising Technologies segment consists of Crane Payment Innovations (“CPI”), Crane Merchandising Systems (“CMS”) and Crane Currency. CPI provides high technology payment acceptance and dispensing products to original equipment manufacturers, including coin accepters and dispensers, coin hoppers, coin recyclers, bill validators and bill recyclers. Crane Currency is a supplier of banknotes and highly engineered banknote security features. CMS provides merchandising equipment, including include food, snack and beverage vending machines and vending machine software and online solutions. The recent acquisition of Cummins-Allison will be integrated into our CPI business. See discussion in Note 2, “Acquisitions” for further details.

Aerospace & Electronics

Aerospace & Electronics segment supplies critical components and systems, including original equipment and aftermarket parts, primarily for the commercial aerospace and military aerospace and defense markets.

Engineered Materials

Engineered Materials segment manufactures fiberglass-reinforced plastic panels and coils, primarily for use in the manufacturing of recreational vehicles, truck bodies and trailers (Transportation), with additional applications in commercial and industrial buildings (Building Products).

Page 10

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the three- and six-months ended June 30, 2020 and 2019, operating profit includes acquisition-related and integration charges and restructuring charges, net. See Note 2, “Acquisitions” for discussion of the acquisition-related costs. See Note 14, “Restructuring” for discussion of the restructuring charges, net.



	Three Months Ended						Six Months Ended
	June 30,						June 30,
(in millions)	2020			2019			2020			2019
Net sales
Fluid Handling	$	239.3		$	290.6		$	495.9		$	564.3
Payment & Merchandising Technologies	247.6			291.0			544.9			594.8
Aerospace & Electronics	157.4			204.5			350.3			399.1
Engineered Materials	33.6			55.5			84.6			115.1
Total	$	677.9		$	841.6		$	1,475.7		$	1,673.3
Operating profit (loss)
Fluid Handling	$	20.2		$	37.3		$	48.2		$	71.4
Payment & Merchandising Technologies	2.0			46.5			28.4			89.7
Aerospace & Electronics	19.5			49.4			63.3			94.2
Engineered Materials	1.8			7.5			8.7			16.9
Corporate	(13.0		)	(17.9		)	(29.5		)	(35.7		)
Total	30.5			122.8			119.1			236.5
Interest income	0.3			0.7			0.7			1.3
Interest expense	(14.4		)	(11.4		)	(26.9		)	(23.3		)
Miscellaneous income, net	2.5			6.4			6.3			8.4
Income before income taxes	$	18.9		$	118.5		$	99.2		$	222.9



(in millions)	June 30, 2020		December 31, 2019
Assets
Fluid Handling	$	1,092.3	$	941.6
Payment & Merchandising Technologies	2,192.3		2,303.4
Aerospace & Electronics	629.0		638.1
Engineered Materials	217.7		219.6
Corporate	499.0		321.0
Total	$	4,630.3	$	4,423.7



(in millions)	June 30, 2020		December 31, 2019
Goodwill
Fluid Handling	$	349.0	$	240.9
Payment & Merchandising Technologies	855.2		857.8
Aerospace & Electronics	202.3		202.4
Engineered Materials	171.3		171.3
Total	$	1,577.8	$	1,472.4

Page 11

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 4 - Revenue

Disaggregation of Revenues

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



	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in millions)	2020		2019		2020		2019
Fluid Handling
Process Valves and Related Products	$	160.8	$	182.4	$	317.9	$	350.4
Commercial Valves	58.3		83.6		134.1

Price	80.84	EPS	6
Shares	61	P/E	15
MCap	4,915	P/FCF	29
Net Debt	645	EBIT	441
TEV	5,560	TEV/EBIT	13
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-06-30	Filed 2020-07-29
10-Q	2020-03-31	Filed 2020-04-30
10-K	2019-12-31	Filed 2020-02-25
10-Q	2019-09-30	Filed 2019-10-30
10-Q	2019-06-30	Filed 2019-07-30
10-Q	2019-03-31	Filed 2019-05-01
10-K	2018-12-31	Filed 2019-02-26
10-Q	2018-09-30	Filed 2018-11-02
10-Q	2018-06-30	Filed 2018-08-03
10-Q	2018-03-31	Filed 2018-05-02
10-K	2017-12-31	Filed 2018-02-27
10-Q	2017-09-30	Filed 2017-11-07
10-Q	2017-06-30	Filed 2017-08-03
10-Q	2017-03-31	Filed 2017-05-05
10-K	2016-12-31	Filed 2017-02-28
10-Q	2016-09-30	Filed 2016-11-03
10-Q	2016-06-30	Filed 2016-08-03
10-Q	2016-03-31	Filed 2016-05-06
10-K	2015-12-31	Filed 2016-02-23
10-Q	2015-09-30	Filed 2015-11-06
10-Q	2015-06-30	Filed 2015-08-05
10-Q	2015-03-31	Filed 2015-05-08
10-K	2014-12-31	Filed 2015-02-25
10-Q	2014-09-30	Filed 2014-11-07
10-Q	2014-06-30	Filed 2014-08-06
10-Q	2014-03-31	Filed 2014-05-08
10-K	2013-12-31	Filed 2014-02-25
10-Q	2013-09-30	Filed 2013-11-05
10-Q	2013-06-30	Filed 2013-08-02
10-K	2012-12-31	Filed 2013-02-26
10-Q	2012-09-30	Filed 2012-11-05
10-Q	2012-06-30	Filed 2012-08-03
10-Q	2012-03-31	Filed 2012-05-04
10-K	2011-12-31	Filed 2012-02-27
10-Q	2011-09-30	Filed 2011-11-07
10-Q	2011-06-30	Filed 2011-08-08
10-Q	2011-03-31	Filed 2011-05-06
10-K	2010-12-31	Filed 2011-02-28
10-Q	2010-09-30	Filed 2010-11-05
10-Q	2010-06-30	Filed 2010-08-05
10-Q	2010-03-31	Filed 2010-05-05
10-K	2009-12-31	Filed 2010-02-25

8-K	2020-07-27	Earnings, Other Events, Exhibits
8-K	2020-05-08
8-K	2020-04-28
8-K	2020-04-27
8-K	2020-04-16
8-K	2020-02-24
8-K	2020-01-27
8-K	2019-10-28
8-K	2019-07-31
8-K	2019-07-22
8-K	2019-07-19
8-K	2019-07-15
8-K	2019-07-08
8-K	2019-06-25
8-K	2019-06-17
8-K	2019-06-04
8-K	2019-05-21
8-K	2019-05-21
8-K	2019-04-29
8-K	2019-03-14
8-K	2019-01-28
8-K	2018-10-23
8-K	2018-10-22
8-K	2018-07-23
8-K	2018-04-23
8-K	2018-02-01
8-K	2018-01-29
8-K	2018-01-10

EX-31.1	cr-ex31120200630.htm
EX-31.2	cr-ex31220200630.htm
EX-32.1	cr-ex32120200630.htm
EX-32.2	cr-ex32220200630.htm

CR 10Q Quarterly Report

Crane Earnings 2020-06-30