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, 2019

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 

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 28, 2019

Common stock, $1.00 Par Value – 59,948,466 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 31
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	Page 44
Item 4.	Controls and Procedures	Page 44
	Part II - Other Information
Item 1.	Legal Proceedings	Page 45
Item 1A.	Risk Factors	Page 45
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	Page 45
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,
	2019			2018			2019			2018
Net sales	$	841.6		$	851.0		$	1,673.3		$	1,650.0
Operating costs and expenses:
Cost of sales	535.0			545.6			1,063.0			1,066.8
Selling, general and administrative	179.8			188.9			365.8			366.5
Acquisition-related and integration charges	2.4			4.1			3.5			9.2
Restructuring charges	1.6			(0.6		)	4.5			0.2
Operating profit	122.8			113.0			236.5			207.3
Other income (expense):
Interest income	0.7			0.4			1.3			1.2
Interest expense	(11.4		)	(12.8		)	(23.3		)	(27.5		)
Miscellaneous income, net	6.4			4.3			8.4			8.3
	(4.3		)	(8.1		)	(13.6		)	(18.0		)
Income before income taxes	118.5			104.9			222.9			189.3
Provision for income taxes	27.5			24.2			49.4			39.9
Net income before allocation to noncontrolling interests	91.0			80.7			173.5			149.4
Less: Noncontrolling interest in subsidiaries’ earnings	—			—			0.1			—
Net income attributable to common shareholders	$	91.0		$	80.7		$	173.4		$	149.4
Earnings per share:
Basic	$	1.52		$	1.35		$	2.90		$	2.50
Diluted	$	1.50		$	1.32		$	2.85		$	2.45
Average shares outstanding:
Basic	59.9			59.7			59.8			59.7
Diluted	60.8			61.1			60.8			61.0
Dividends per share	$	0.39		$	0.35		$	0.78		$	0.70

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,
	2019		2018			2019			2018
Net income before allocation to noncontrolling interests	$	91.0	$	80.7		$	173.5		$	149.4
Components of other comprehensive income (loss), net of tax
Currency translation adjustment	4.7		(46.9		)	3.9			(21.5		)
Changes in pension and postretirement plan assets and benefit obligation, net of tax	1.9		4.5			4.8			14.1
Other comprehensive income (loss), net of tax	6.6		(42.4		)	8.7			(7.4		)
Comprehensive income before allocation to noncontrolling interests	97.6		38.3			182.2			142.0
Less: Noncontrolling interests in comprehensive income	—		(0.2		)	(0.1		)	(0.2		)
Comprehensive income attributable to common shareholders	$	97.6	$	38.5		$	182.3		$	142.2

See Notes to Condensed Consolidated Financial Statements.

Page 2

CRANE CO. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN MILLIONS)

(UNAUDITED) 

	June 30, 2019		December 31, 2018
Assets
Current assets:
Cash and cash equivalents	$	307.0	$	343.4
Accounts receivable, net	543.2		515.8
Current insurance receivable - asbestos	16.0		16.0
Inventories, net:
Finished goods	124.6		116.2
Finished parts and subassemblies	42.7		45.9
Work in process	53.9		55.4
Raw materials	209.4		194.0
Inventories, net	430.6		411.5
Other current assets	83.1		76.2
Total current assets	1,379.9		1,362.9
Property, plant and equipment:
Cost	1,200.2		1,185.6
Less: accumulated depreciation	604.7		586.5
Property, plant and equipment, net	595.5		599.1
Long-term insurance receivable - asbestos	67.1		75.0
Long-term deferred tax assets	1.2		18.8
Other assets	221.6		101.4
Intangible assets, net	462.2		481.8
Goodwill	1,414.3		1,403.7
Total assets	$	4,141.8	$	4,042.7

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, 2019			December 31, 2018
Liabilities and equity
Current liabilities:
Current maturities of long-term debt	$	7.8		$	6.9
Accounts payable	275.2			329.2
Current asbestos liability	66.0			66.0
Accrued liabilities	281.0			337.1
U.S. and foreign taxes on income	4.6			1.0
Total current liabilities	634.6			740.2
Long-term debt	940.3			942.3
Accrued pension and postretirement benefits	233.2			244.0
Long-term deferred tax liability	60.3			53.2
Long-term asbestos liability	425.4			451.3
Other liabilities	173.6			84.6
Total liabilities	2,467.4			2,515.6
Commitments and contingencies (Note 12)
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	304.1			303.5
Retained earnings	2,198.8			2,072.1
Accumulated other comprehensive loss	(438.9		)	(447.6		)
Treasury stock	(464.4		)	(476.2		)
Total shareholders’ equity	1,672.0			1,524.2
Noncontrolling interests	2.4			2.9
Total equity	1,674.4			1,527.1
Total liabilities and equity	$	4,141.8		$	4,042.7
Share data:
Common shares issued	72,426,139			72,426,139
Less: Common shares held in treasury	(12,477,673		)	(12,917,713		)
Common shares outstanding	59,948,466			59,508,426

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,
	2019			2018
Operating activities:
Net income attributable to common shareholders	$	173.4		$	149.4
Noncontrolling interests in subsidiaries’ earnings	0.1			—
Net income before allocation to noncontrolling interests	173.5			149.4
Loss on deconsolidation of joint venture	1.2			—
Unrealized gain on marketable securities	(3.1		)	—
Depreciation and amortization	56.3			56.3
Stock-based compensation expense	11.2			11.2
Defined benefit plans and postretirement credit	(4.0		)	(7.7		)
Deferred income taxes	10.8			11.0
Cash used for operating working capital	(171.4		)	(45.8		)
Defined benefit plans and postretirement contributions	(5.1		)	(16.5		)
Environmental payments, net of reimbursements	(4.0		)	(4.2		)
Asbestos related payments, net of insurance recoveries	(17.9		)	(34.9		)
Other	5.0			12.6
Total provided by operating activities	52.5			131.4
Investing activities:
Capital expenditures	(36.1		)	(44.0		)
Proceeds from disposition of capital assets	0.9			0.5
Impact of deconsolidation of joint venture	(0.2		)	—
Purchase of marketable securities	(8.8		)	—
Payment for acquisition - net of cash acquired	—			(672.3		)
Total used for investing activities	(44.2		)	(715.8		)
Financing activities:
Dividends paid	(46.7		)	(41.8		)
Reacquisition of shares on open market	—			(25.0		)
Stock options exercised - net of shares reacquired	1.2			5.0
Debt issuance costs	—			(5.4		)
Proceeds received from issuance of long-term debt	3.0			550.0
Proceeds received from issuance of short-term debt	—			100.0
Repayment of long-term debt	(2.8		)	(450.0		)
Repayment of short-term debt	—			(100.0		)
Proceeds received from issuance of commercial paper, net	—			171.4
Total (used for) provided by financing activities	(45.3		)	204.2
Effect of exchange rates on cash and cash equivalents	0.6			(7.8		)
Decrease in cash and cash equivalents	(36.4		)	(388.0		)
Cash and cash equivalents at beginning of period	343.4			706.2
Cash and cash equivalents at end of period	$	307.0		$	318.2
Detail of cash used for operating working capital:
Accounts receivable	$	(29.9	)	$	(17.3	)
Inventories	(26.3		)	(31.8		)
Other current assets	(6.7		)	(11.8		)
Accounts payable	(54.2		)	(22.1		)
Accrued liabilities	(70.1		)	37.8
U.S. and foreign taxes on income	15.8			(0.6		)
Total	$	(171.4	)	$	(45.8	)
Supplemental disclosure of cash flow information:
Interest paid	$	24.0		$	21.9
Income taxes paid	$	24.1		$	29.5

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, 2018.

Recent Accounting Pronouncements - Not Yet Adopted

Disclosure Requirements for Defined Benefit Plans

In August 2018, the Financial Accounting Standards Board (“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.

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 and other receivables, held-to-maturity debt securities, loans and other instruments, entities will be required to use a new forward-looking “expected loss” model that will replace today’s “incurred loss” model and generally will result in the earlier recognition of allowances for losses. 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. This amended guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first effective reporting period. We do not expect that the amended guidance will have a material effect on our consolidated financial statements and related disclosures.

Recent Accounting Pronouncements - Adopted

Leases

In February 2016, the FASB issued amended guidance on accounting for leases. The amended guidance requires the recognition of a right-of-use asset and a lease liability for all leases by lessees with the exception of leases with an initial term of twelve months or less and amends disclosure requirements associated with leasing arrangements.

On January 1, 2019, we adopted Accounting Standards Codification (“ASC”) 842, “Leases” (“the new standard” or “ASC 842”) using the modified retrospective method. Under this method, we elected to apply the new standard as of the application date. Results for reporting periods beginning after January 1, 2019 are presented under ASC 842, while prior period amounts continue to be reported under ASC 840, “Leases” (“ASC 840). We elected to apply the package of practical expedients permitted within the new standard, which among other things, allows us to carryforward the historical lease classification. No other transition practical expedients were elected. We implemented a new system, processes, and controls to enable the preparation of financial information upon adoption.

The adoption of the new standard primarily impacted our accounting for operating leases which resulted in the recognition of right-of-use assets and corresponding lease liabilities. The accounting for finance leases did not substantially change under the new standard and we do not have significant finance leases. Upon adoption, we established a right-of-use asset of $109.1 million (included in Other assets) and a lease liability of $110.4 million (included in Accrued liabilities and Other liabilities) at January 1, 2019. The adoption did not result in a cumulative-effect adjustment to retained earnings. The new standard did not impact our consolidated statements of operations or consolidated statements of cash flows.

Page 6

NOTES TO 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: 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 Other Products. 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. Other Products 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"), 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. CMS provides merchandising equipment, including include food, snack and beverage vending machines and vending machine software and online solutions. Crane Currency is a supplier of banknotes and highly engineered banknote security features.

Aerospace & Electronics

The 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

The Engineered Materials segment manufactures fiberglass-reinforced plastic ("FRP") 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 7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the three and six months ended June 30, 2019, operating profit includes acquisition-related and integration charges and restructuring charges. For the three and six months ended June 30, 2018, operating profit includes acquisition-related and integration charges, acquisition-related inventory and backlog amortization and restructuring charges. See Note 4, “Acquisitions” for discussion of the acquisition-related costs. See Note 15, “Restructuring” for discussion of the restructuring charges.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(in millions)	2019			2018			2019			2018
Net sales
Fluid Handling	$	290.6		$	276.9		$	564.3		$	543.5
Payment & Merchandising Technologies	291.0			324.3			594.8			616.7
Aerospace & Electronics	204.5			187.2			399.1			357.5
Engineered Materials	55.5			62.6			115.1			132.3
Total	$	841.6		$	851.0		$	1,673.3		$	1,650.0
Operating profit (loss)
Fluid Handling	$	37.3		$	29.5		$	71.4		$	57.6
Payment & Merchandising Technologies	46.5			46.1			89.7			82.6
Aerospace & Electronics	49.4			43.3			94.2			77.5
Engineered Materials	7.5			11.2			16.9			23.7
Corporate	(17.9		)	(17.1		)	(35.7		)	(34.1		)
Total	122.8			113.0			236.5			207.3
Interest income	0.7			0.4			1.3			1.2
Interest expense	(11.4		)	(12.8		)	(23.3		)	(27.5		)
Miscellaneous income	6.4			4.3			8.4			8.3
Income before income taxes	$	118.5		$	104.9		$	222.9		$	189.3

(in millions)	June 30, 2019		December 31, 2018
Assets
Fluid Handling	$	932.4	$	878.2
Payment & Merchandising Technologies	2,094.2		2,074.4
Aerospace & Electronics	635.4		603.9
Engineered Materials	228.3		222.1
Corporate	251.5		264.1
Total	$	4,141.8	$	4,042.7

(in millions)	June 30, 2019		December 31,  2018
Goodwill
Fluid Handling	$	240.5	$	240.8
Payment & Merchandising Technologies	800.2		789.2
Aerospace & Electronics	202.3		202.4
Engineered Materials	171.3		171.3
Total	$	1,414.3	$	1,403.7

Page 8

NOTES TO 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				Six Months Ended
	June 30,				June 30,
(in millions)	2019		2018		2019		2018
Fluid Handling
Process Valves and Related Products	$	182.4	$	175.4	$	350.4	$	340.4
Commercial Valves	83.6		79.2		164.4		159.7
Other Products	24.6		22.3		49.5		43.4
Total Fluid Handling	$	290.6	$	276.9	$	564.3	$	543.5
Payment & Merchandising Technologies
Payment Acceptance and Dispensing Products	$	154.0	$	155.3	$	312.7	$	300.7
Banknotes and Security Products	88.5		121.6		187.1		221.4
Merchandising Equipment	48.5		47.4		95.0		94.6
Total Payment & Merchandising Technologies	$	291.0	$	324.3	$	594.8	$	616.7
Aerospace & Electronics
Commercial Original Equipment	$	91.3	$	86.2	$	181.7	$	170.8
Military and Other Original Equipment	55.4		48.7		106.9		90.7
Commercial Aftermarket Products	41.4		37.5		79.6		70.2
Military Aftermarket Products	16.4		14.8		30.9		25.8
Total Aerospace & Electronics	$	204.5	$	187.2	$	399.1	$	357.5
Engineered Materials
FRP - Recreational Vehicles	$	22.2	$	31.2	$	48.7	$	68.5
FRP - Building Products	24.0		23.4		47.7		47.2
FRP - Transportation	9.3		8.0		18.7		16.6
Total Engineered Materials	$	55.5	$	62.6	$	115.1	$	132.3
Total net sales	$	841.6	$	851.0	$	1,673.3	$	1,650.0

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 June 30, 2019, backlog was $1,076.0 million. We expect to recognize approximately 76% of our remaining performance obligations as revenue in 2019, an additional 20% by 2020 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)	June 30, 2019		December 31, 2018
Contract assets	$	59.0	$	54.9
Contract liabilities	$	33.1	$	50.8

Page 9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We recognized revenue of $20.4 million and $37.2 million during the three and six month periods ended June 30, 2019, respectively, related to contract liabilities as of December 31, 2018.

Note 4 - 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. We will make appropriate adjustments to the purchase price allocation prior to completion of the measurement period, as required.

Crane Currency Acquisition

On January 10, 2018, we completed the acquisition of Crane & Co., Inc. (“Crane Currency”). The base purchase price of the acquisition was $800 million on a cash-free, debt-free basis, subject to a later adjustment reflecting Crane Currency’s net working capital, cash, the assumption of certain debt-like items, and Crane Currency’s transaction expenses. The amount paid, net of cash acquired, was $672.3 million. In July 2018, we received $24.3 million related to the final working capital adjustment of the Crane Currency acquisition, resulting in net cash paid of $648.0 million. To finance the acquisition, we issued commercial paper under our commercial paper program and utilized proceeds from term loans that we issued at the closing of the acquisition, as well as available cash on hand. At the closing, the transitory subsidiary of Crane Co. merged with and into Crane Currency, with Crane Currency surviving as a wholly owned subsidiary of Crane Co.

Crane Currency is a supplier of banknotes and highly engineered banknote security features which complement the existing portfolio of currency and payment products within the Payment & Merchandising Technologies segment. As such, Crane Currency was integrated into our Payment & Merchandising Technologies segment. The amount allocated to goodwill reflects the benefits we expect to realize from the acquisition, as the acquisition is expected to strengthen and broaden our product offering within the currency and payment markets. Goodwill from this acquisition is not deductible for tax purposes.

Crane Currency’s results of operations have been included in our condensed consolidated financial statements for the periods subsequent to the completion of the acquisition on January 10, 2018. The pro forma impact for the stub period (January 1, 2018 through January 9, 2018) is not material.

Allocation of Consideration Transferred to Net Assets Acquired

The following amounts represent the determination of the fair value of identifiable assets acquired and liabilities assumed from our acquisition of Crane Currency. The fair value of certain assets and liabilities has been completed as required by ASC 805.

Net assets acquired (in millions)
Total current assets	$	199.6
Property, plant and equipment	298.0
Other assets	5.3
Intangible assets	252.8
Goodwill	217.1
Total assets acquired	$	972.8
Total current liabilities	$	107.2
Long-term debt	97.3
Other liabilities	120.3
Total assumed liabilities	$	324.8
Net assets acquired	$	648.0

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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	$	42.0	indefinite
Customer relationships	135.8		23.1
Product technology	74.0		8.4
Backlog	1.0		1.0
Total acquired intangible assets	$	252.8

In order to allocate the consideration transferred for Crane Currency, 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.

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 Crane Currency’s earnings, equal to the after-tax royalty that would have been paid for the use of the asset, can be attributed to the firm’s ownership. The trademark and trade names, Crane Currency and Crane are assigned an indefinite life and, therefore, will not be amortized.

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 Crane Currency’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 7 to 11 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 a “wasting” asset and 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 is being amortized on a straight-line basis (which approximates the economic pattern of benefits) over the estimated economic life of 18 to 24 years.

Acquisition-Related Costs

Acquisition-related costs are expensed as incurred. For the three months ended June 30, 2019 and 2018, we recorded $2.4 million and $4.1 million, respectively, of integration and transaction costs in our Condensed Consolidated Statements of Operations. For the six months ended June 30, 2019 and 2018, the Company recorded $3.5 million and $9.2 million, respectively, of integration and transaction costs in the Condensed Consolidated Statements of Operations. For the three and six months ended June 30, 2018, we also recorded $1.9 million and $8.5 million of inventory step-up and backlog amortization within “Cost of sales” in our Condensed Consolidated Statements of Operations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 5 - 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				Six Months Ended
	June 30,				June 30,
(in millions, except per share data)	2019		2018		2019		2018
Net income attributable to common shareholders	$	91.0	$	80.7	$	173.4	$	149.4
Average basic shares outstanding	59.9		59.7		59.8		59.7
Effect of dilutive stock options	0.9		1.4		1.0		1.3
Average diluted shares outstanding	60.8		61.1		60.8		61.0
Earnings per basic share	$	1.52	$	1.35	$	2.90	$	2.50
Earnings per diluted share	$	1.50	$	1.32	$	2.85	$	2.45

The computation of diluted earnings per share excludes the effect of the potential exercise of stock options when the average market price of the common stock is lower than the exercise price of the related stock options. For the three-month periods ended June 30, 2019 and 2018, the number of stock options excluded from the computation was 1.3 million and 0.4 million, respectively. For the six-month periods ended June 30, 2019 and 2018, the number of stock options excluded from the computation was 1.2 million and 0.4 million, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 6 - Changes in Equity and Accumulated Other Comprehensive Loss

A summary of changes in equity for the year-to-date interim periods ended June 30, 2019 and 2018 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 Shareholders’ Equity			Noncontrolling Interest		Total Equity
BALANCE DECEMBER 31, 2017	72.4	$	291.7		$	1,813.3		$	(380.1	)	$	(452.1	)	$	1,345.2		$	3.3	$	1,348.5
Net income	—	—			68.7			—			—			68.7			—		68.7
Cash dividends ($0.35 per share)	—	—			(20.9		)	—			—			(20.9		)	—		(20.9		)
Cumulative effect of adoption ASC 606	—	—			6.7			—			—			6.7			—		6.7
Impact from settlement of share-based awards, net of shares acquired	—	(9.7		)	—			—			14.2			4.5			—		4.5
Stock-based compensation expense	—	5.6			—			—			—			5.6			—		5.6
Changes in pension and postretirement plan assets and benefit obligation, net of tax	—	—			—			9.6			—			9.6			—		9.6
Currency translation adjustment	—	—			—			25.4			—			25.4			—		25.4
BALANCE MARCH 31, 2018	72.4	$	287.6		$	1,867.8		$	(345.1	)	$	(437.9	)	$	1,444.8		$	3.3	$	1,448.1
Net income	—	—			80.7			—			—			80.7			—		80.7
Cash dividends ($0.35 per share)	—	—			(20.9		)	—			—			(20.9		)	—		(20.9		)
Reacquisition of shares on open market	—	—			—			—			(25.0		)	(25.0		)			(25.0		)
Impact from settlement of share-based awards, net of shares acquired	—	—			—			—			0.5			0.5			—		0.5
Stock-based compensation expense	—	5.6			—			—			—			5.6			—		5.6
Changes in pension and postretirement plan assets and benefit obligation, net of tax	—	—			—			4.5			—			4.5			—		4.5
Currency translation adjustment	—	—			—			(46.7		)	—			(46.7		)