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Crane Co (NYSE:CR)
Q3 2021 Earnings Call
Oct 26, 2021, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings. Welcome to the Crane Co. Third Quarter 2021 Earnings Call. [Operator Instructions] I will now turn the conference over to Jason Feldman, Vice President Investor Relations. Thank you, you may begin.

Jason D. Feldman -- Vice President of Investor Relations

Thank you operator, and good day everyone. Welcome to our Third Quarter 2021 earnings release Conference Call. I'm Jason Feldman, Vice President of Investor Relations. On our call this morning we have Max Mitchell, our President and Chief Executive Officer, and Rich Maue, our Senior Vice President and Chief Financial Officer. We'll start off the call with a few prepared remarks, after which we will respond to questions. Just a reminder that the comments we make on this call may include some forward-looking statements, we refer you to the cautionary language at the bottom of our earnings release and also in our annual report 10-K and subsequent filings pertaining to forward-looking statements. Also during the call we will be using some non-GAAP numbers which are reconciled to the comparable GAAP numbers and tables at the end of our press release and accompanying slide presentation, both of which are available on our website at www.craneco.com in the Investor Relations section. Now let me turn the call over to Max.

Max H. Mitchell -- President & Chief Executive Officer

Thank you, Jason, and good morning everyone. Thanks for joining the call today. Another exceptional quarter with solid results across the board. Even in this environment of persistent inflationary pressures, random supply and logistics issues and continued various COVID recovery conditions globally. We finished the third quarter with record adjusted EPS from continuing operations of $1.89 up 103% compared to last year along with extremely strong adjusted operating margins of 16.8%. We delivered adjusted core sales growth of 19% with a number of strong leading indicators reflected in core order growth of 31% and core backlog growth of 13% compared to last year. Based on this performance, we are raising our adjusted EPS from continuing operations guidance by $0.35 to a range of $6.35 to $6.45, which is effectively our 5th guidance increase this year. Remember that our original guidance for 2021 was $4.90 to $5.10 and that guidance included $0.44 of earnings contribution from Engineered Materials. That means we have effectively raised guidance more than $1.80 on a comparable basis since January. Compared to 2020 on a like-for-like basis excluding Engineered Materials in both periods, our current guidance midpoint of $6.40 compares to 2020 EPS of approximately $3.52 reflecting more than 80% year-over-year EPS growth. Absolutely stellar performance by any measure. While uncertainty will continue related to COVID variance, sporadic supply chain constraints, inflation and overall global resource challenges, we have a high level of confidence in our revised guidance based on our team's outstanding performance driving customer satisfaction and proactively and effectively managing inflation and the supply chain. For context, we were approximately price cost neutral in the third quarter.

Let me put our performance in perspective another way. The midpoint of the updated guidance at $6.40 is well above our prior peak pre-COVID adjusted EPS of $6.02 in 2019, but with some notable differences this year compared to 2019. Again, the $6.02 in 2019 included earnings contribution from Engineered Materials, which is now classified as discontinued operations and excluded from our '21 guidance. Second, many of our end markets are also still in the early stages of recovery and still remain well below the pre-COVID peak levels with the exception of Crane Currency and our defense business. And thinking about 2022 and beyond, it is worth noting that the commercial side of our Aerospace Electronics business in 2021 will still be approximately $150 million in sales and approximately $80 million in operating profit below 2019 levels this year, and the recovery to pre-COVID levels in this business alone will add about $1 per share to EPS. At Payment & Merchandising Technologies, Crane Payment Innovations will be $200 million below pre-COVID levels in 2021 with more than half of that amount in our very high margin Payment Solutions business. This business continues to benefit from very favorable long-term macro drivers that are accelerating given Global Human Resource and constraints, labor shortages, and wage inflation helping our customers drive productivity and security by automating their payment and transaction processes. In the Process Flow Technologies, we saw the inflection to positive core growth in the second quarter on the process side of the business with sustainable and improving demand across our strongest end-markets including chemical.

So let me reiterate the message that we have been consistently communicating. We are innovating and developing new products and solutions to provide value for our customers. We are executing on numerous growth initiatives across our businesses and we operate with a consistent cadence and discipline of the Crane Business System to drive growth, productivity, and cost savings. We have demonstrated an ability to balance those objectives extremely well, delivering on margins and free cash flow while maintaining 100% of our investments in strategic growth initiatives throughout the entirety of the pandemic. We are and we will continue to drive above market growth. Paired with the market recovery in our consistent execution, we're very excited about our growth prospects, strong top line growth and solid operating leverage driving substantial growth in free cash flow incredibly delivering on expectations. I discussed at our February Investor Day event how Crane was at an inflection point for accelerating growth after years of organic investments and consistently excellent execution. In the first quarter you saw substantial evidence of that inflection and the related themes from Investor Day reading through. At our May Aerospace & Electronics Investor Event we showed you numerous examples of how we continue to effectively drive above market growth and our expectation of a 7% to 9% sales compound average growth rate over the next ten years. Also in May, we announced the sale of Engineered Materials as part of our strategic portfolio management process to improve our overall growth profile while continuing our simplification journey, and today you can see even more evidence of that inflection in our core sales growth as well as in our orders and backlog. Consistently executing on our investor thesis, that being we are well positioned for accelerating organic growth as our end markets continue to recover. We are outgrowing our end markets because of our consistent and ongoing investment in technology, new product development, and commercial excellence. Solid execution continues to leverage that growth into earnings and strong free cash generation, which creates substantial flexibility for capital deployment. A continued evidence of the value we create through acquisitions with stellar performance at Crane Currency, Cummins Allison, and instrumentation and sampling. Inflection, we have clear momentum with increasing traction from our growth initiatives. We will continue to generate substantial and sustainable value for all of our stakeholders.

Despite our impressive track record of the results, we believe there is unrecognized value in our stock and the strength of our medium and long-term outlook. And that was one of the key factors behind our newly announced $300 million share repurchase authorization. You should view this as both a return of cash to shareholders following consistently outstanding operational performance and strong free cash generation, as well as a sign of management and the Board's conviction that we have a lot of runway for growth ahead of us. At this point, I'll turn it over to Rich for some additional financial commentary.

Richard A. Maue -- Senior Vice President & Chief Financial Officer

Thank you, Max. And good morning everyone. I have an easy job today because I think our results speak for themselves. Even in these challenging times, we have continued to execute. And my thanks to our leadership teams and associates globally for their consistent focus on driving sustainable value creation for all our stakeholders.

Moving to segment comments I will compare the third quarter of 2021 to 2020 on a continuing operations basis excluding special items as outlined in our press release and slide presentation. At Aerospace & Electronics, sales of $169 million increased 7% compared to last year. Segment margins improved 370 basis points to 19.3%. In the quarter, total aftermarket sales continued to gain momentum and increased 24% compared to last year after 3% of growth last quarter. The strength was driven by commercial aftermarket with spares, repair, and modernization and upgrade sales all up substantially. On the military side, spares and repair both improved in the 10% range but military modernization and upgrade sales were lower. Commercial OE sales increased 31% in the quarter following 4% growth last quarter. As expected, defense OE sales declined in the teens.

On a year-to-date basis, defense OE sales are down 6% after three years of double-digit growth. Given our strong position in major project -- projects that we have already won that will be ramping up over the next few years we remain confident in our ability to grow our defense business at a high single-digit CAGR from 2021 through 2030. The fourth quarter of last year marked the trough for both sales and margins at Aerospace & Electronics. While the delta variant had some short-term impact on demand, the overall momentum in the industry continues. Specifically, we expect near-term relaxation of international air travel rules and rising global vaccination rates to drive higher levels of air travel in the months and quarters ahead.

Looking ahead to next quarter we expect segment sales to be similar to the third quarter with margins in the low teens. The sequential margin decline in the fourth quarter is primarily related to shipment timing and mix with very high commercial aftermarket sales in the third quarter relative to the fourth quarter. On a full-year basis at Aerospace & Electronics, we should close the year with sales just down very slightly compared to last year and with margins above 7.16% both well ahead of our original guidance for this year. As we enter 2022, we expect sales will continue to improve as air travel recovery progresses and the expected timing of a recovery to pre-COVID levels continues to get pulled forward. And remember that our confidence in our outlook for this business is about more than just a market recovery. We are seeing continued accelerating growth resulting from years of consistent investment in technology. For example, during the third quarter we were selected for a $60 million program over a 15 year life with our advanced high accuracy, high performance, pressure sensing technology for a newly targeted adjacent multiplatform turbofan engine application. In this particular case, we replaced an incumbent supplier who had the business for many years. Another example of winning because of the strength of our technology and capabilities, just as we described at our May Aerospace & Electronics Investor Day, which by the way, that is still available to stream on our website today. This is a new targeted application of our historic Sensing technology, a huge win for our team, and just the beginning. And our investments will continue to take us beyond our historical core markets, expanding our addressable market and aligning our business with accelerating secular trends. For example, within the last month we were awarded a $20 million contract for a low Earth orbit satellite constellation using a version of our multi-mix microwave technology with most production sales expected in 2023. We also remain extremely excited about our positioning in investments related to the long-term trends in this industry, most notably electrification. That gave us the confidence to share our 7% to 9% sales CAGR target at last May's Investor Day event. We continue to make substantial progress advancing the technology that will be the critical enabler for a more electric world for more electric and hybrid electric military ground vehicles to electric propulsion aircraft, electric urban air mobility vehicles, and advanced radar and guidance systems. All of these applications require greater levels of electrification and a greater need for integration of power conversion, sensing, and thermal management systems, all that are core technology competencies in our business. We continue to work closely with nearly every major participant in this emerging space and have already been selected for numerous prototyping demonstrator programs. We are seeing the tangible benefit from our investments materialize in these awards.

Process Flow Technologies, sales of $299 million increased 19% driven by a 16% increase in core sales and a 3% benefit from favorable foreign exchange. Process Flow Technologies operating profit increased by 60% to $46 million. Operating margins increased 410 basis points to $15.5%, primarily reflecting higher volumes, favorable price cost dynamics and strong execution and productivity. Sequentially, FX-neutral backlog increased 3% and with FX-neutral orders down 5%. Compared to the prior year, FX-neutral backlog increased 14% and FX-neutral core orders increased 20%. During the first quarter, order growth was strongest in our shorter cycle commercial business. Then in March, orders at our core process business inflected positive on a year-over-year basis, and that trend has continued for the last six months. We continue to see clear evidence of improving end demand and in some cases ongoing release of pent-up demand. Through the third quarter, order growth is still a little stronger in our commercial business, but process orders are not far behind with growth in the mid-teens range. As orders convert to sales in these core process markets later into 2022, we continue to expect strong operating leverage.

Trends in activity in the process markets are similar to last quarter. Broadly, we are seeing signs of new capital projects moving through the pipeline and we expect to see more projects converting to orders in 2022. By vertical, chemical remains strong driven heavily by continued consumer demand, and general industrial markets also improved further along with industrial activity and production. For pharmaceuticals we are seeing a number of projects we started after being put on hold, given the intense focus on vaccine production over the last 18 months. Many of these restarted projects are related to diabetes treatment, oncology drugs and biologics. Refinery and power markets remain fairly flat. From a geographic perspective, year-to-date orders have been strongest in North America. MRO orders are stable at approximately pre-COVID levels. Project related orders are up substantially compared to last year, and based on our project funnel we expect further pickup next year. In Europe, MRO activity slowed in the third quarter consistent with normal seasonality and summer shutdowns. Adjusted for seasonality, MRO activity is close to normal pre-COVID levels and project activity has progressively improved over the last several months with project orders above 2019 levels. In China, we are seeing some new project delays related to government requirements for new energy assessment approvals. No cancellations, but project progress has slowed given these new requirements.

While the markets continue to improve, we are also very excited about progress with our growth initiatives in Process Flow Technologies. In February we discussed a breakthrough innovation to our triple offset valve line, the FK-TrieX. This product just launched a few months ago, but we are already seeing great momentum with chemical and petrochemical customers that quickly recognize the value this new valve design offers. Bidirectional shut off, superior fugitive emissions control, high flow, a self-cleaning design and lower weight. We installed our first valve during the third quarter at a US chemical plant in a polymer application. Typically it takes years after launch to get customer approvals for a new valve design, but we believe we are on track for $5 million of sales next year, growing to $30 million within five years. Also on the process side, our tough seat metal seated ball valve launched earlier this year focused on slurry and high cycle applications with a superior design that gives a valve a 50% longer life. We are on track for about $3 million of sales this year, which should double in 2022. We also have exciting developments in our municipal pump business, our chopper pump which we introduced in 2018 reduces clogging and cut -- cuts maintenance costs by 75%. That value proposition is driving 30% growth this year, and we are adding about 10 new customers each month to our existing base of approximately 250 municipalities. Taken together, these growth initiatives and many others across the segment are driving above market growth. For Process Flow Technologies overall, our full year outlook continues to improve with full-year margins in the mid 14% range, full year core sales growth in the low double digits, a 4% FX benefit, and the $5 million of contribution from acquisitions that we saw in the first quarter. For the fourth quarter, that implies a modest sequential decline in sales and margins given typical and expected seasonality and associated mix.

At Payment & Merchandising Technologies, sales of $366 million in the quarter increased 31% compared to the prior year, driven by 29% core sales growth and a 2% benefit from favorable foreign exchange. Sales increased substantially across both Crane Currency and Crane Payment Innovations, although Payment Innovation sales are still well below pre-COVID run rates. Segment operating profit increased 87% to $83 million. Operating margins increased 680 basis points to 2.26%. Continued impressive performance again at Crane Currency and with Crane Payment Innovations now recovering and contributing meaningfully. For Crane Payment Innovations, similar trends to the last quarter and across the business we are seeing accelerating results from growth initiatives. Starting with retail, our solutions provide productivity through automation, security and hygiene, and that value proposition is resonating now more than ever. Retailers in the service industry in general are struggling with labor availability and inflationary wage pressure and they are investing in productivity. Our solutions provide immediate value and have high proven ROIs and those returns are even more attractive in the current environment. We continue to see broad based strength across the space including traditional self checkout systems from the large OEMs and we are also seeing momentum with some retailers partnering directly with us on customized self checkout and kiosk based solutions. For customized self checkout solutions, our current funnel of opportunities is now approximately $185 million, double the size it was at the end of 2020. Our semi-attended system solutions like Paypod and Pay Tower are also getting traction with an increasingly wide range of retailers including categories that have not historically been active with automation such as convenience stores. To put this higher demand into perspective, our funnel of Paypod opportunities today is approximately $13 million, more than four times the size it was at the end of 2019 and more than twice the size it was at the end of last year. In gaming, the North American and Australian Casino markets are nearly back to pre-COVID levels of activity. We are now seeing the European and Latin American casinos beginning to recover lagging about 9 to 12 months behind North America. This is good news for 2022. We continue to gain share in this market given the strength of our technology as customers realize the benefits of our easy tracks connectivity solution. The combination of our traditional bill and coin products along with easy tracks and now with the back office and service offerings from the Cummins Allison acquisition give us the most comprehensive cash management solution in the gaming world. This combination of products and services is also helping our customers substantially improve efficiency and driving incremental revenue by enhancing communication and coordination between the back office and front of the house environments. The Cummins Allison business has also benefited from customer labor shortages as CITs, casinos and retailers continue to invest in advanced larger scale back office coin and bill counting and sorting units. Cummins Allison has products with differentiated technology as well as a service offering, which most of our competitors in North America do not have. At Crane Currency, we continue to see strength in both domestic and international markets and we continue to gain share both with our technology and banknote offerings. In the United States, we expect continued elevated levels of demand for currency for another few years and we continue working to secure our position on the new series of banknotes that will be rolled out over the next several years.

In our international business, our expanding portfolio of micro optic security products has helped us double the rate of new denominations secured compared to prior years with 15 new denominations won to date this year from a wide range of countries across the Caribbean, Northern and Eastern Europe, Asia, Africa and the Middle East. When our technology is specified in a new denomination it typically drives recurring revenue from reprints from more than ten years. We are winning as central banks realize that our technology is more secure and difficult to counterfeit and because it is completely customizable and can be integrated into innovative and stunning banknote designs, such as the new Bahamas $100 banknote. With our latest products, we also have successfully demonstrated that our technology can be used on any substrate including polymer expanding our addressable market.

We are also very excited about the progress we have made with our Product Authentication and brand protection business. We believe that our micro-optic technology is the best solution for a high-end authentication applications and far superior to the foils and holograms typically used to prevent counterfeiting for consumer goods. We recently signed a long-term agreement with Octane5, one of the leaders in the high growth brand licensing management software and security solutions market. Today, Octane5 supplies some of the world's most iconic and valuable brands with product security and licensing solutions, and with our partnership we have already won a few blue-chip customers with well-known global consumer brands that we hope to share with you more next year. This is an extremely exciting potential opportunity that opens a new $800 million addressable market to us.

As we have explained all year, we do expect margins to moderate further in the fourth quarter for Payment & Merchandising Technologies given both timing and mix. We now expect full year margins in the 22% range at or above the high end of our long-term target range of 18% to 22%. Full year core sales growth is now expected to be in the high teens with a 3% favorable FX benefit. For the fourth quarter sales should still increase on a year-over-year basis in the mid-single digit range on tough comparisons, but with a substantial sequential decline given the currency shipment timing that we have discussed and explained consistently over the last several quarters. No surprises here, fully expected. Given the sequential decline in sales, margins are likely to moderate to the high-teens range in the fourth quarter before rebounding to the 20s again next year.

Turning now to more detail on our total company results and guidance. We have had extremely strong cash flow performance year-to-date with free cash flow of $286 million compared to $177 million last year. As a reminder, on May 24th we announced that we had signed an agreement to sell our Engineered Materials segment for $360 million. That process is ongoing and we continue to work on obtaining regulatory approvals. When the transaction closes we expect proceeds net of tax to be approximately $320 million. Our balance sheet is in extremely good shape. We currently have no short-term or pre-payable debt remaining. And at the end of the third quarter, we had approximately $450 million of cash on hand. By the end of the year we expect adjusted gross leverage toward the bottom end of the two to three times range target for our current credit rating, and we estimate that by year-end we will have approximately $1 billion of additional capacity.

While we continue to be active in pursuit of acquisitions across both Process Flow Technologies in Aerospace & Electronics as all -- you all know, valuations today are quite lofty and we will remain both financially and strategically disciplined. Over the long term, we continue to believe that we will be able to add the most value through acquisitions. However, we will also maintain discipline about our balance sheet efficiency. As I mentioned last quarter, during periods where our acquisition capacity exceeds the size of our likely an actionable M&A pipeline, we will consider returning excess cash to shareholders rather than maintaining an inefficient balance sheet. As Max mentioned, we announced Board authorization for $300 million share repurchase program. We believe this program properly balances two objectives, maintaining balance sheet efficiency while preserving ample financial flexibility for the volume of M&A activity we believe is actionable, while also providing an attractive return of cash to shareholders. We believe that share repurchases are advantageous at this time given our very high confidence in our medium and long-term outlook, paired with our current stocks -- current discount to both trading peers and fully synergized acquisition multiples. We will continue to evaluate all capital deployment and strategic portfolio options to drive shareholder return with strict financial discipline and a focus on long-term sustainable value creation.

Turning to guidance, as Max explained we are raising our adjusted EPS guidance by $0.35 to a range of $6.35 to $6.45 reflecting continued excellent execution and stronger end markets. There are four major moving pieces in the higher and narrower guidance range. First, we now expect a tax rate of approximately 17.5% compared to our prior guidance of 20.5%. The lower tax rate is a roughly 23% -- $0.23 per share benefit compared to prior guidance. The lower tax rate primarily reflects discrete items related to the expiration of the statute of limitations on audits in certain jurisdictions. We continue to expect a tax rate of approximately 21% on a normalized basis. Second, we now expect corporate cost of approximately $90 million, $10 million or $0.13 per share higher than our prior guidance. The higher corporate costs reflect a number of factors including a charge related to a foreign pension plan that we are restructuring and a higher professional service cost level particularly legal costs related to M&A due diligence and other matters. Third, the core operational improvement reflected in the guidance is approximately $0.25 per share compared to the prior guidance. This improvement reflects strong leverage on sales now forecast at $50 million higher, with full year core sales guidance up 300 basis points to a range of 10% to 12%, partially offset by FX translation down 100 basis points to an approximate 2.5% benefit. Fourth, in addition to raising the midpoint of our guidance range we narrowed the range from $0.20 per share to $0.10 per share, reflecting both how close we are to the end of the year as well as ongoing supply constraints that are likely to cap further upside this year.

Our revised guidance continues to reflect the same cadence of earnings progression that we have discussed since the beginning of the year. Specifically, we continue to expect a step down on EPS next quarter given order and shipment timing particularly at currency and with the fourth quarter following its usual pattern of seasonality -- seasonally weakest quarter across most of our businesses. Overall, there is little change to our fourth quarter expectations after adjusting for the changes in assumptions related to corporate expense and our tax rate, but the third quarter was certainly better than we expected given extremely strong operational performance and robust demand. We also increased free cash flow guidance to a range of $340 million to $365 million, up 17.5 million from prior guidance at the midpoint, reflecting higher earnings and lower capex now forecast at $60 million. Full details of our adjusted guidance are included both in our earnings press release as well as our earnings slide presentation. Overall, an excellent year continuing to unfold with outstanding execution from all of our teams driving exceptional results, growth margins, free cash flow, and we remain excited about continued tailwinds in 2022 and 2023 as end markets continue to recover.

Before we turn to Q&A, a quick note about our 2022 Investor Day. We typically host our Annual Investor Day event the last week of February. For 2022 we are moving this event given certain scheduling issues and our desire to maximize the likelihood that we can host the event in person. We are targeting the week of March 28, and we will provide more details as our plans solidify over the next few months. Operator, we are now ready to take our first question.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question is from Elizabeth Grenfell with Bank of America. Please proceed.

Elizabeth Grenfell -- Bank of America -- Analyst

Hi, good morning guys.

Jason D. Feldman -- Vice President of Investor Relations

Good morning, Elizabeth.

Richard A. Maue -- Senior Vice President & Chief Financial Officer

Good morning.

Elizabeth Grenfell -- Bank of America -- Analyst

Good morning. I just had a few questions. The first one is, how do you think of like the minimum cash balance that you'd want to have on the balance sheet to maintain that flexibility for M&A versus what you could deploy for share buybacks assuming you could obviously do more than the $300 million authorization that you announced.

Richard A. Maue -- Senior Vice President & Chief Financial Officer

Yeah, I think it's more about just general capacity versus cash on the balance sheet. So we target anywhere from two to three times debt to EBITDA in line with how our rating agencies view capacity. So that's -- probably that's our first starting point as we think about how much we would then allocate potentially to capital deployment to shareholders.

Elizabeth Grenfell -- Bank of America -- Analyst

Okay, got it. And then secondly, when we think about margins in Aerospace, is there any reason to -- I think you said it could be greater than 17% but it seems like it could be much greater than 17% just given where we are year-to-date and what that would imply for the fourth quarter. Is that accurate?

Richard A. Maue -- Senior Vice President & Chief Financial Officer

Yeah, we do expect margins to moderate in the fourth quarter a bit. We had some very strong aftermarket shipments that shipped in Q3 versus Q4 that we were otherwise expecting in Q4. So some of the margin outperformance in Q3 was timing related and we see that as -- at the expense to an extent to Q4. So, the guidance that we gave you here for Q4 is what you all should be modeling. And as Rich has commented before by the way for next year, he has said that we expect to reach 20% by the second half of next year. Right. So we've committed to good growth in '22.

Elizabeth Grenfell -- Bank of America -- Analyst

Okay, great. And then my next one is just can you speak to any concerns you're seeing with regards to the supply chain and inflation, any sort of headwinds you're potentially seeing or how you're mitigating those?

Max H. Mitchell -- President & Chief Executive Officer

You know Elizabeth, let me take that one. This is Max. The way we've approached this all year even going all the way back to our operating plan in November of last year, we made some assumptions about the operating environment. Inflation was going to be with us for quite a while. The COVID we're going to continue to see in and out. We're going to have X number of associates potentially quarantining on any given day. Sub suppliers are going to see the same. Labor availability continue to be a challenge, wage pressure, logistics. I mean we're seeing on the ports, it just continues. The way I think about this, the way we are operating at Crane is that we have forecasted at the current run rate expecting continued disruption. What that means is on any given month or quarter, things come in, you get surprised, on some upside, you get some new surprises that you should have expected but you just can't exactly pinpoint. That's the reality of the environment that we're in today. It's not getting any better. It's not getting any worse. The machine is working globally. It's just with higher variability, higher levels of disruption. So I find it interesting to see how others continue to call this out whether they call it out specifically whether things are cited. This is the environment, we're going to be in, and we're planning on for '22 as well. I think what we have done in this environment are those decisions that we make every single day that our outstanding team of 11,000 associates globally are making to operate as effectively as possible in this environment. And that is starting with being very selective and intentional in how we serve our key customers. Protecting our factories and our workers from overstress, overburden, making sure that we balance customer needs with our ability to execute and manage through the supply chain disruptions. And I think we're doing a phenomenal job which all leads through to outstanding performance in the P&L.

So I know it's a long-winded answer, I'm sure others have the same question. I think generally the questions want to be specifically what component, what commodity, where you're seeing it, and it's everywhere and it's nowhere. It's constantly changing, and it's the environment that we're in. And we think we're well positioned to continue to operate effectively in that environment and continue to grow in that environment, and that's what I think we're clearly demonstrating as well.

Richard A. Maue -- Senior Vice President & Chief Financial Officer

I just -- I would just echo on that Max that the comments you made about the new reality and that we saw this early -- earlier as Max pointed out back in November during our plan season and our outlook that we have that we provided back in July, as well as the updated outlook that we have today for you accepts that new reality. So our forecast considers the environment that we're operating in today.

Max H. Mitchell -- President & Chief Executive Officer

Does that help, Elizabeth?

Elizabeth Grenfell -- Bank of America -- Analyst

Yeah, that helps. And then if I can just ask one more. How are you thinking about the vaccine mandate and will that -- how that will impact you to the extent that your defense contracts exist?

Max H. Mitchell -- President & Chief Executive Officer

Right now we have no vaccine mandate in place and we're evaluating rules, regulations, we will certainly comply with the law. But we have nothing more than that right now.

Elizabeth Grenfell -- Bank of America -- Analyst

Okay, great, thanks so much.

Max H. Mitchell -- President & Chief Executive Officer

Thank you.

Richard A. Maue -- Senior Vice President & Chief Financial Officer

Thank you.

Operator

Thank you. Our next question is from Nathan Jones with Stifel. Please proceed.

Nathan Jones -- Stifel -- Analyst

Good morning, everyone.

Richard A. Maue -- Senior Vice President & Chief Financial Officer

Good morning, Nathan.

Nathan Jones -- Stifel -- Analyst

I'm going to start on the couple of businesses that are still fairly well below 2019. Max, I think you said the INA business is $150 million in revs, $80 million in profits below where it was in '19. That would have you pretty much sitting on the same margin as you did in 2019, $200 million out at Payment Merchandising, I would think most of that probably about average margin given currency is doing so well. Do you guys have any commentary on when you think you'll be able to get those back to the 2019 levels? I mean if we think things are going in your favor at the moment, more travels, casinos open, more businesses open, all those kinds of things. Plus some tailwinds from labor shortages and things like that that might even help you to eclipse that level, so just any commentary you can provide us on when you think you'll be able to get those back to 2019 levels.

Richard A. Maue -- Senior Vice President & Chief Financial Officer

Broadly, I would say within two years, give or take would be the quick answer, Nathan. So you're right about A&E with respect to the tailwinds there and how we should see ourselves lever up quite a bit. I made a commitment as Jason mentioned that we should be at the 20% level by the end of next year as things continue to recover and how we operate in that business, by 2023 we don't see them as being an issue. And I would agree with your comment with respect to payment.

Nathan Jones -- Stifel -- Analyst

Okay. And then I wanted to ask about this high-priced consumer good opportunity that you were talking about using the Crane Currency technology that it sounds like a very interesting opportunity, you mentioned $800 million addressable market. What kind of market share do you think your technology could take in that business?

Max H. Mitchell -- President & Chief Executive Officer

Well, just to clarify the technology itself. So, anytime you buy, let's say, it's a sporting good device. You know the hologram that you see -- you might see on some tags for -- all of this is aimed at trying to prevent counterfeit goods from coming into the country and easy identification. Well, the counterfeiters continue to get more and more sophisticated. The high-end retailers and brand managers continue to care about the physical products and the counterfeiters and continue to seek higher and more difficult to counterfeit solutions like we provide with our micro optic thread. And so we come up with some -- and credit with our design team, some incredibly attractive designs that are used in conjunction with broader spectrum like Octane5 offers in terms of software solutions traceability. And we're pretty excited about the opportunity to capture share. I would say that I don't have an exact share number right now, Nathan but I clearly have $50 million in sight honestly in the foreseeable future as we continue to attack this marketplace.

Nathan Jones -- Stifel -- Analyst

Okay. My last one is going to be on the Crane Currency. I know you typically dropped down in the fourth quarter. I don't think the Fed released the bill order for fiscal 2022 even though we've already started that. Is the fact that they haven't put that out yet, part of the reason that you're dropping off here in the fourth quarter and you should make that up I guess first three quarters next year?

Richard A. Maue -- Senior Vice President & Chief Financial Officer

No. No, I mean it wouldn't -- demand profile like that doesn't change that fast in that environment. So absolutely not any part of the rationale. It's the timing that we expected. Again, we've been reiterating since the beginning of the year.

Max H. Mitchell -- President & Chief Executive Officer

It's just more around international.

Richard A. Maue -- Senior Vice President & Chief Financial Officer

It was more about international, not domestic.

Max H. Mitchell -- President & Chief Executive Officer

So the [Technical Issues] normal timing. And on US, you're right. The Fed has not put out the order yet. I think as we've discussed and described the 7.6 to 9.6 range we had this year, which was highly unusual for a myriad number of reasons difficult to hold at the low end. I think it's -- what we're probably going to see is that as we predicted, is that this is going to help extend a higher run rate for the foreseeable future. We can probably expect that low end of that rate range again this year. It's kind of how we're thinking about it.

Nathan Jones -- Stifel -- Analyst

Great, thanks for taking my questions.

Max H. Mitchell -- President & Chief Executive Officer

Thanks, Nathan.

Operator

Our next question is from Damian Karas with UBS. Please proceed.

Max H. Mitchell -- President & Chief Executive Officer

Hey Damian.

Damian Karas -- UBS -- Analyst

Hey, good morning everyone. Congrats on the quarter.

Richard A. Maue -- Senior Vice President & Chief Financial Officer

Thank you, Damian.

Damian Karas -- UBS -- Analyst

So just -- you bet. So just a follow-up question on currency here. You've talked about sort of the step down in the fourth quarter margin as you've been discussing due to shipment timing. Just I guess, thinking about kind of going forward and the margin trajectory, is 4Q sort of the run rate we should be thinking about for the business then? I mean obviously this year you had some positive mix from the US side of the business earlier. So should we be thinking of the fourth quarter is kind of the run rate on margin or more of kind of like the full year results.

Jason D. Feldman -- Vice President of Investor Relations

Damian, it's Jason, I wouldn't use the fourth quarter as a jump-off point for '22 for currency or any of the businesses actually. Every quarter is going to be a little bit different. Rich actually said in his prepared remarks that we expect that Payment & Merchandising segments to be back into the 20s again next year. Right? So we're not going to give more precise guidance than that at this point in time. It will be in the 20s.

Damian Karas -- UBS -- Analyst

Okay, great, great. And did you have to give the break out on how much the underlying growth was for both currency and then the payment side in the quarter?

Jason D. Feldman -- Vice President of Investor Relations

No, we did not, but it's in the high double-digit range for both.

Nathan Jones -- Stifel -- Analyst

Okay, great, thanks. And then just one last question on the the corporate cost about significantly higher $10 million or so. Rich, what's the reason for that?

Richard A. Maue -- Senior Vice President & Chief Financial Officer

Yeah. So we took -- in my prepared remarks I mentioned that we did take a charge in the quarter, or we anticipate in the quarter -- in the fourth quarter taking a charge related to closing out a foreign pension plan, and so it's non-cash charge in the quarter. So that hits us. And then general professional fees that we're spending across a myriad of things that we're working primarily around M&A, due diligence and things of that nature. We would expect to come back down as we look at next year.

Damian Karas -- UBS -- Analyst

Okay, great. Really helpful. I'll get back in the queue. Thanks guys.

Jason D. Feldman -- Vice President of Investor Relations

Thank you.

Operator

Our next question is from Matt Summerville with D.A. Davidson. Please proceed.

Max H. Mitchell -- President & Chief Executive Officer

Good morning, Matt.

Matt Summerville -- D.A. Davidson -- Analyst

Thanks. Hey, good morning. Couple of numbers that you gave that really struck -- I want to focus on, one is the [Indecipherable] to CPI. I think Rich mentioned that with respect to the retail vertical with some of the things you're doing on a more of a customized or partner basis with retailers that follow being $185 million. I guess I'm curious over what time frame does that follow convert and is that still growing or is that showing signs of kicking out. I was just -- I was pretty struck by that number.

Richard A. Maue -- Senior Vice President & Chief Financial Officer

Yeah, I would say -- I would probably think of that as about a two year funnel in terms of when ideation starts and when program would be executed by one of our customers. I would say two years is a typical timeline for that. We would expect to win a good piece of that, as you might expect. So I think that would be the way to think about it, Matt.

Matt Summerville -- D.A. Davidson -- Analyst

And then with respect to pricing and how you're thinking about '22 Max, how much incremental price you feel like you need to go get, and I guess are you thinking about it strategically different how you implement these increases versus how you went about '21 in kind of your late stage planning process that you highlighted earlier?

Max H. Mitchell -- President & Chief Executive Officer

Yeah, I'll start off and I'll see if Rich has anything else to add. But in terms of pricing, all of our businesses are very, very different. There is no one size fits all. I would say that certainly as it relates to certain charges that are more immediate, we've -- it hasn't been baked into prices. We've actually implemented surcharges. So we expect those surcharges to go away when certain sets of logistics charges and so forth would go away. Others, we've been openly communicating with our customers about why the pricing increases. We think we've been very, very effective in managing that. Quite honestly, Matt, I view it as we're going to react as we need to based on inflationary pressures. We're also going to look to stay as competitive as possible. We need to be careful that we're prepared on some of those surcharges if the market improves, if inflationary pressures subside, that we're able to adjust when necessary and continue to grow. So I think we've got an incredible balance. I think our teams are doing an awesome job. I would say it's a continuation of how we are operating in 2021 into '22.

Richard A. Maue -- Senior Vice President & Chief Financial Officer

I would say the same thing in terms of its -- we don't see these challenges subsiding in the near term. So we will continue the same discipline.

Matt Summerville -- D.A. Davidson -- Analyst

Got it. Thank you, guys.

Operator

We have reached the end of our question-and-answer session. I would like to turn the conference back over to Max for closing comments.

Max H. Mitchell -- President & Chief Executive Officer

Super. Thank you so much. Another excellent quarter in continuing to deliver on our promise of inflection and momentum, further evidence that the investment thesis we presented last February is playing out as expected. We are in the very early stages of a strong market recovery. We've invested heavily in our organic growth initiatives and results are reading through and consistent above-market sales growth. We have growing opportunities for acquisitions and Process Flow Technologies in Aerospace & Electronics. Building on our core competencies, we continue to have confidence in our ability to add value through acquisitions. However, we remain financially disciplined. And as shown with our repurchase announcement yesterday, we will return excess cash when it is attractive and appropriate to do so. And we have an incredibly strong foundation to build upon grounded in the Crane Business System driving consistent execution, along with the culture of ethics and integrity. And as the late great inventor of the Veg-o-matic and creator of the infomercial Ron Popeil would say, 'But wait, there's more' very fitting for us today, we're just getting started. And I'm incredibly excited about our opportunities to drive continued shareholder value in the quarters ahead. And remember, Crane stock is limited supply, not available in store, so act now. I look forward to speaking with you in January on our fourth quarter earnings call and then hopefully to see many of you in person later at our March 2022 Investor Day event. Thank you for your interest in Crane, and have a great day.

Operator

[Operator Closing Remarks]

Duration: 51 minutes

Call participants:

Jason D. Feldman -- Vice President of Investor Relations

Max H. Mitchell -- President & Chief Executive Officer

Richard A. Maue -- Senior Vice President & Chief Financial Officer

Elizabeth Grenfell -- Bank of America -- Analyst

Nathan Jones -- Stifel -- Analyst

Damian Karas -- UBS -- Analyst

Matt Summerville -- D.A. Davidson -- Analyst

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