What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-26 compared with 2025-02-20 · 115 added, 78 removed, 285 unchanged (40% of the section changed)

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Credit Facilities

We are party to a senior secured credit agreement (the “Credit Agreement”) entered into on March 17, 2023, which provides for a $500 million, five-year revolving credit facility (the “Revolving Facility”), funding under which became available in connection with the Separation.

On December 9, 2024, we entered into an amendment to the Credit Agreement which increased the Revolving Facility by $200 million to an aggregate $700 million and provided a delayed draw term loan of 300 million British pounds to be used as part of the funding for the De La Rue Authentication Solutions acquisition discussed below.

On March 17, 2023, we also entered into a $350 million, 3-year term loan facility (the “Term Facility”), funding under which became available in connection with the Separation.

On December 9, 2024, proceeds from the Revolving Facility were used to repay the outstanding Term Facility.

OpSec Acquisition

On May 3, 2024, we acquired OpSec Security (“OpSec”), for a base purchase price of $270 million on a cash-free and debt-free basis, subject to customary purchase price adjustments.

We utilized $210.0 million from our Revolving Facility and cash on hand to fund the acquisition.

OpSec is a global leader in brand protection and authentication solutions, serving the world’s most recognized brands, as well as government agencies and financial insti tutions.

In connection with the acquisition of OpSec, we renamed our “Crane Currency” reportable segment to “Security and Authentication Technologies,” which consists of the Crane Currency business and the acquired OpSec business.

The integration of OpSec into our SAT segment is on track.

De La Rue Authentication Solutions Acquisition

On October 15, 2024, we signed a definitive agreement with De La Rue Holdings, a wholly-owned subsidiary of De La Rue plc, to acquire its authentication business (“De La Rue Authentication Solutions”) for 300 million British pounds in cash, subject to customary adjustments.

The transaction is expected to close in the second quarter of 2025, subject to customary closing conditions.

Transaction costs incurred for the year ended December 31, 2024, were $6.5 million.

De La Rue Authentication Solutions is a leading global provider of digital and physical security and authentication technologies to governments and brands.

De La Rue Authentication Solutions will be included within the Security and Authentication Technologies segment upon close.

On December 15, 2025, in connection with the closing of the first phase of the Antares Vision acquisition, we amended our Credit Agreement to provide for a €430 million senior secured delayed draw term loan facility (the “Term Loan B”) with a maturity date of December 15, 2032.

On December 16, 2025, we drew €112.1 million, or $131.7 million, of the Term Loan B.

The remaining Term Loan B will be used to fund the remaining phases of the Antares Vision acquisition.

In addition, the amended credit agreement provides for maturity extensions on our existing Term Loan A and Revolving Facility to December 15, 2030 and increased the Revolving Facility to $800 million.

For the year ended December 31, 2025, we drew $406.5 million and repaid $490.5 million on our Revolving Facility to fund working capital requirements.

We also drew £300.0 million, or $400.4 million, on the Term Loan A to fund the DLR acquisition and repaid $40.9 million.

In the fourth quarter of 2025 we designated our euro‑denominated Term Loan B as a net investment hedge of certain foreign subsidiaries to mitigate the impact of foreign currency exchange rate fluctuations on the Company’s net investments in those subsidiaries.

We recorded $0.2 million gain in Currency Translation Adjustment (“CTA”), a component of Accumulated Other Comprehensive Income (“AOCI”), for the year ended December 31, 2025.

Antares Vision Acquisition

On December 16, 2025, Crane NXT, through a newly formed Italian joint stock company (“ITT”), initiated a multi-phase acquisition of Antares Vision S.p.A.

(“Antares Vision”).

In the first phase, Crane NXT acquired a 32.3% equity interest in Antares Vision for €117.3 million (approximately $137.8 million), at a purchase price of €5.00 per share.

Following the initial investment, Crane NXT launched a mandatory tender offer under applicable Italian law to acquire the remaining publicly traded shares at the same per-share price.

Upon completion of the mandatory tender offer Crane NXT will implement steps aimed at delisting Antares Vision and acquire the remaining stake owned by Regolo S.p.A.

As a result of the transaction, Antares Vision will become a subsidiary of Crane NXT.

We expect the final phase of the transaction to be completed in 2026.

The acquisition is funded through the Term Loan B (as described in Note 14, “Financing”).

Antares Vision is a global provider of inspection and detection systems that ensure product safety and quality control, as well as track and trace software solutions that help prevent counterfeiting and provides visibility of products throughout the supply chain.

The acquisition advances our strategy and expands the Company’s portfolio in growing end markets, including Life Sciences and Food and Beverage.

DLR Acquisition

On May 1, 2025, we acquired De La Rue Authentication Solutions (“DLR”) for a base purchase price of £300 million.

We utilized the Term Loan A to fund the acquisition.

DLR is a leading global provider of digital and physical security and authentication technologies to governments and brands, and expands our portfolio of authentication solutions.

De La Rue was combined with OpSec Security to form “Crane Authentication” within the Security and Authentication Technologies segment upon close.

Restructuring

In 2025 we initiated restructuring actions as follows:

• We recorded $12.1 million of restructuring expense in the SAT segment, predominantly related to severance charges, associated with the integration of the DLR and OpSec businesses.

Certain remaining actions, including completion of facility‑related exit activities are expected to continue into 2026.

Total program costs are expected to be in the range of $15 million to $17 million.

• We recorded $4.7 million of restructuring expense in the CPI segment, predominantly related to severance charges.

We continue to evaluate and align CPI’s cost structure with existing economic conditions which could result in additional actions.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Trade Policies and Regulations

We continue to monitor developments in global trade policies and tariff regulations.

As of February 26, 2026, we expect to mitigate the majority of tariffs on operating profit with pricing and productivity initiatives.

The related macroeconomic uncertainty is also affecting demand, primarily in our CPI vending business, which is driving lower sales volumes.

See Item 1A, “Risk Factors” for more details.

This section of this Form 10-K generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024.

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For the year ended December 31, 2025 vs 2024

(Unfavorable) Change 2023 vs 2022

(Unfavorable) Change

(in millions, except %) 2025 2024 2023 $ % $ %

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Transaction Related Expenses

We incurred transaction related expenses of $19.9 million for the year ended December 31, 2024, and $22.0 million for the year ended December 31, 2023, recorded in “Selling, general and administrative” in the Consolidated and Combined Statements of Operations.

We incurred transaction related expenses of $24.1 million, $19.9 million and $22.0 million for the years ended December 31, 2025, 2024 and 2023, respectively, recorded in “Selling, general and administrative” in the Consolidated and Combined Statements of Operations.

These transaction related expenses primarily consist of professional service fees incurred in connection with acquisitions and the Separation.

There were no allocated transaction-related expenses in connection with the Separation for the year ended December 31, 2022.

These expenses are predominantly recorded in Corporate expense.

Restructuring Charges

In response to challenging industry conditions in the CPI segment, we recorded restructuring charges of $10.1 million, $0.5 million and $6.2 million for the years ended December 31, 2024, 2023 and 2022, respectively.

In response to challenging industry conditions and to realign the cost structure with existing economic conditions in the CPI segment, we recorded restructuring charges of $4.7 million, $10.1 million and $0.5 million for the years ended December 31, 2025, 2024 and 2023, respectively.

In addition, we recorded restructuring expenses of $12.1 million in the SAT segment during 2025, primarily associated with the integration of the DLR and OpSec businesses.

2025 compared with 2024

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The change in sales included:

• sales benefit from the OpSec acquisition of $86.0 million, or 6.2%,

• core sales growth of $15.7 million, or 1.1%, driven primarily by the Currency business, and

• unfavorable foreign currency translation of $6.2 million, or 0.4%.

• Sales benefit from the De La Rue and OpSec acquisitions of $133.0 million, or 8.9%,

• Core sales growth of $10.1 million, or 0.7%, driven primarily by the Currency business, partially offset by lower volumes in CPI.

• Favorable foreign currency translation of $26.8 million, or 1.8%, driven primarily by the strengthening of the euro, Swedish krona, British pound and Japanese yen against the U.S.

Cost of sales increased by $131.2 million, or 16.0%, to $952.9 million in 2025.

The increase was driven primarily by the impact of the OpSec acquisition of $66.1 million, or 9.0%, and unfavorable mix, partially offset by productivity gains net of inflation and the impact of lower volumes in CPI.

The increase was driven primarily by the impact of acquisitions in SAT, higher material and other manufacturing costs, unfavorable mix and unfavorable foreign currency translation, partially offset by productivity gains and the impact of lower volumes in CPI.

Selling, general and administrative expenses increased by $54.1 million, or 14.0%, to $440.3 million in 2025.

The increase was driven primarily by the impact of the OpSec acquisition of $29.7 million, or 8.1%, partially offset by cost saving actions.

The increase was driven primarily by the SAT acquisitions of $45.3 million, or 11.7% and unfavorable foreign currency transaction.

Operating profit decreased by $22.1 million, or 8.2%, to $246.7 million in 2025.

The decrease was primarily driven by the CPI segment due to unfavorable mix, lower volumes and restructuring charges, partially offset by favorable pricing, lower material and other manufacturing costs, and cost saving actions.

In the SAT segment, the decrease in operating profit was driven by the dilutive impact of the OpSec acquisition and higher material and other manufacturing costs, partially offset by favorable pricing in the Currency business.

Both segments achieved productivity gains.

The decrease was primarily driven by the dilutive impact of acquisitions, higher material and other manufacturing costs, unfavorable mix and the impact of lower volumes in CPI, partially offset by favorable pricing, cost saving actions and productivity gains.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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2025 compared to 2024

Sales decreased by $13.2 million, or 1.5%, to $873.2 million in 2024, driven by lower core sales of $6.9 million, or 0.8%, and unfavorable foreign currency translation of $6.3 million, or 0.7%.

Sales decreased by $26.6 million, or 3.0%, to $846.6 million in 2025, driven by lower core sales of $31.7 million, or 3.6%, offset by favorable foreign currency translation of $5.1 million, or 0.6%.

• Sales of Payment Acceptance and Dispensing Products decreased $30.5 million, or 4.1%, to $709.4 million in 2025.

The decrease reflected lower core sales of $12.5 million, or 1.6%, as favorable pricing was more than offset by lower volumes primarily in gaming.

Included in the sales decrease was unfavorable foreign currency translation of $6.3 million, or 0.8%, primarily reflecting the weakening of the Japanese Yen, partially offset by the strengthening of the British pound against the U.S.

The decrease reflected lower core sales of $35.6 million, or 4.8%, as favorable pricing was more than offset by lower volumes primarily in vending.

The decrease was partially offset by favorable foreign currency translation of $5.1 million, or 0.7%, primarily reflecting the strengthening of the British pound and Japanese yen against the U.S.

• Service revenue increased by $3.9 million, or 2.9%, to $137.2 million in 2025, primarily driven by favorable pricing.

Cost of sales increased by $1.0 million, or 0.2%, to $440.4 million in 2024, as lower material and other manufacturing costs, the impact of lower sales volumes and productivity gains were more than offset by unfavorable mix.

Selling, general and administrative expense increased by $0.2 million, or 0.1%, to $204.4 million in 2024, primarily due to higher restructuring charges, partially offset by the impact of cost saving actions, and favorable foreign currency translation.

Cost of sales decreased by $8.1 million, or 1.8%, to $432.3 million in 2025, driven by the impact of lower sales volumes and productivity gains, partially offset by unfavorable mix, higher material and other manufacturing costs and unfavorable foreign currency translation.

Selling, general and administrative expense decreased by $11.7 million, or 5.7%, to $192.7 million in 2025, primarily due to cost saving actions and lower restructuring charges.

Operating profit decreased by $6.8 million, or 3.0%, to $221.6 million in 2025.

The decrease primarily reflected unfavorable mix of $36.3 million, or 15.0%, the impact of lower volumes of $14.4 million, or 5.9%, higher restructuring charges of $9.6 million, or 4.0%, and unfavorable foreign currency translation of $2.9 million, or 1.2%, partially offset by favorable pricing, lower material and other manufacturing costs and productivity gains of $41.8 million, or 17.2%, and the impact of cost saving actions of $9.1 million, or 3.7%.

The decrease primarily reflected the impact of lower volumes of $27.8 million, or 12.2%, and unfavorable mix of $16.4 million, or 7.2%, partially offset by favorable pricing, net of inflation, productivity gains and cost saving actions of $32.0 million, or 14.0%, and lower restructuring charges of $5.4 million, or 2.4%.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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Operating margin 12.0 % 18.1 % 23.0 %

Selling, general and administrative expense includes restructuring charges of $12.1 million for the years ended December 31, 2025.

2025 compared to 2024

Sales increased by $108.7 million, or 21.5%, to $613.6 million in 2024, primarily reflecting the sales benefit from the OpSec acquisition of $86.0 million, or 17.0%, and higher core sales of $22.6 million, or 4.5%.

• Banknote and security product sales increased by $21.5 million, or 4.3%, to $521.9 million in 2024, driven by higher sales in international markets.

• Authentication products and solutions sales increased by $87.2 million to $91.7 million in 2024, driven by the sales benefit from the OpSec acquisition.

Cost of sales increased by $83.5 million, or 28.0%, to $381.3 million in 2024, primarily due to the impact of the OpSec acquisition of $66.1 million, or 22.2%, higher material and other manufacturing costs, the impact of higher volumes, and unfavorable mix, partially offset by productivity gains.

Selling, general and administrative expense increased by $30.6 million, or 33.7%, to $121.4 million in 2024, primarily due to the impact of the OpSec acquisition of $29.7 million, or 32.7%.

Operating profit decreased by $5.4 million, or 4.6%, to $110.9 million in 2024, reflecting the dilutive impact of the OpSec acquisition of $10.2 million, or 8.7%, higher material and other manufacturing costs net of favorable pricing of $8.4 million, or 7.2%, and unfavorable mix of $3.1 million, or 2.7%, partially offset by productivity gains of $17.9 million, or 15.4%.

Sales increased by $196.5 million, or 32.0%, to $810.1 million in 2025, primarily reflecting the sales benefit of acquisitions of $133.0 million, or 21.7%, higher core sales of $41.8 million, or 6.8% and favorable foreign currency translation of $21.7 million, or 3.5%.

• Banknote and security product sales increased by $70.5 million, or 13.5%, to $592.4 million in 2025, driven by higher sales in international markets and favorable foreign currency translation reflecting the strengthening of the Euro and Swedish Krona against the U.S.

• Authentication products and solutions sales increased by $126.0 million to $217.7 million in 2025, driven by the sales benefit from acquisitions.

Cost of sales increased by $139.3 million, or 36.5%, to $520.6 million in 2025, primarily due to the impact of the SAT acquisitions of $79.4M million, or 20.8%, acquisition related amortization and fair value step-up, higher material and other manufacturing costs, and unfavorable foreign currency translation, partially offset by productivity gains.

Selling, general and administrative expense increased by $70.7 million, or 58.2%, to $192.1 million in 2025, primarily due to the impact of acquisitions and restructuring charges associated with the integration of the De La Rue and OpSec businesses.

Operating profit decreased by $13.5 million, or 12.2%, to $97.4 million in 2025, primarily due to higher material and other manufacturing costs net of favorable pricing of $31.2 million, or 28.1%, higher restructuring charges of $12.1 million, or 10.9%, partially offset by productivity gains and cost saving actions of $26.7 million, or 24.0%.

The dilutive impact of acquisitions of $15.0 million, or 13.5%, was offset by the impact of higher volumes.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(in millions) For the year ended December 31, 2025 2024 2023

Corporate expense $ 70.5 $ 72.3 $ 33.1

Corporate expense decreased by $1.8 million, or 2.5%, in 2024 compared with 2023, primarily related to lower transaction related expenses.

Corporate expenses $ 72.3 $ 70.5 $ 72.3

Corporate expenses increased by $1.8 million, or 2.6%, in 2025 compared with 2024, primarily related to higher compensation and benefit costs.

INTEREST AND MISCELLANEOUS INCOME, NET

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Related party interest expense* $ — $ — $ (2.5)

Equity investment (loss) gain $ (11.5) $ 0.8 $ —

Miscellaneous income, net $ 5.1 $ 3.0 $ 2.5

* Related party interest with Crane Company incurred prior to the Separation.

Related party interest expense decreased by $2.5 million, or 100%, in 2024 compared with 2023 as related party interest expense was only incurred in the period prior to the Separation.

Interest expense increased by $12.5 million, or 26.2%, in 2025 compared with 2024 due to higher debt outstanding in 2025 to fund acquisitions.

Equity investment loss increased by $12.3 million in 2025 compared with 2024 driven by stock-based compensation issued to senior management of Antares Vision, as a result of acquiring a 32.3% equity interest in the fourth quarter of 2025.

See Note 3 “Acquisitions”

(in millions, except %) For the year ended December 31, 2025 2024 2023

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Our effective tax rate is affected by both recurring and discrete items, including the mix of jurisdictional earnings, acquisitions and dispositions, changes in the valuation of our deferred tax assets and liabilities, changing regulations, the continued availability of statutory tax credits and deductions, and examinations initiated by tax authorities around the world.

Our 2024 effective tax rate of 18.7% is lower than the prior year’s comparable period due to the mix in jurisdictional earnings and release of uncertain tax positions due to the expiration of statute of limitations.

The Organization for Economic Co-operation and Development (“OECD”) has proposed a global minimum tax of 15% of reported profits (“Pillar 2”) that has been agreed upon by over 140 member jurisdictions including the United States.

Our 2025 effective tax rate of 19.8% is higher than the prior year’s comparable period due to the mix in jurisdictional earnings.

On July 4, 2025, the U.S.

government enacted The One Big Beautiful Bill Act of 2025 which includes various changes to the U.S.

corporate income tax system including, but not limited to, the immediate expensing of qualifying research and development expenses and the permanent extension of certain provisions initially enacted within the Tax Cuts and Jobs Act.

Based on the Company’s evaluation of the provisions, these tax law changes did not have a material impact on the Company’s financial statements.

The Organization for Economic Co-operation and Development (“OECD”) has proposed a global minimum tax of 15% of reported profits (“Pillar 2 tax”) that has been agreed upon by over 140 member jurisdictions including the United States.

Pillar 2 addresses the risks associated with profit shifting to entities in low tax jurisdictions.

The impact of the adoption of Pillar 2 in 2024 was approximately $2.8 million.

The Pillar 2 tax liability for the Company in 2025 was approximately $1.3 million.

On January 5, 2026, the US Treasury Department and OECD have agreed in principle to adopt a side-by-side tax system that will exempt US parented companies from Pillar 2 taxes starting in 2026.

See "Application of Critical Accounting Policies" included later in this Item 7 for additional information about our provision for income taxes.

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Effect of exchange rates on cash, cash equivalents and restricted cash 16.7 (12.0) 3.8

(Decrease) increase in cash, cash equivalents and restricted cash $ (53.8) $ (3.5) $ 129.5

Increase (Decrease) in cash, cash equivalents and restricted cash $ 72.8 $ (53.8) $ (3.5)

Our operating philosophy is to deploy cash provided from operating activities, when appropriate, to provide value to stockholders by reinvesting in existing businesses, by making acquisitions that will strengthen and complement our portfolio;

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by paying dividends and repaying prepayable debt.

At any given time, and from time to time, we may be evaluating one or more of these opportunities, although we cannot assure you if or when we will consummate any such transactions.

At any given time, and from time to time, we may be evaluating one or more of these opportunities.

Our current cash balance, together with cash we expect to generate from future operations along with borrowings available under the Credit Agreement, is expected to be sufficient to finance our short- and long-term capital requirements.

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We had net proceeds of $126.0 million from the Revolving Facility as of December 31, 2025.

As of December 31, 2024, we repaid in full the outstanding $105.0 million debt on the Term Facility.

As of December 31, 2025, we drew down $532 million on term loans to fund the De La Rue and Antares acquisitions, and repaid $40.9 million.

Please see Item 8 under Note 14, “Financing” in the Consolidated and Combined Financial Statements for additional details.

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Cash provided by operating activities was $241.5 million in 2025, compared with $214.1 million in 2024.

The decrease in cash provided by operating activities was primarily driven by the timing of shipments which impacted working capital.

The increase in cash provided by operating activities was primarily driven by improved working capital management.

Investing Activities

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Capital expenditures are made primarily for increasing capacity, replacing equipment, supporting new product development, and improving information systems.

We expect capital expenditures of approximately $30 million in 2025.

We expect capital expenditures of approximately $75 million to $80 million in 2026.

Cash used for investing activities was $549.0 million in 2025, compared with $318.0 million in 2024.

The increase in cash used for investing activities was primarily driven by the OpSec acquisition.

The increase was primarily driven by the $391.1 million De La Rue acquisition and $116.5 million investment in Antares Vision in 2025, which together were $237.7 million higher than the $269.9 million OpSec acquisition in 2024.

Financing Activities

Cash provided by (used for) financing activities consists primarily of d ividend payments to shareholders, repayments of indebtedness, and proceeds from our credit facilities .

Cash provided by financing activities was $62.1 million in 2024, compared with cash used for financing activities of $252.5 million in 2023.

The increase in cash provided by financing activities was primarily driven by the redemption of senior notes in 2023.

Higher net proceeds from the Revolving Facility were offset by higher net repayments on the Term Facility in 2024.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cash provided by (used for) financing activities consists primarily of d ividend payments to shareholders, repayments of indebtedness, proceeds from our credit facilities and investments from our stakeholders .

Cash provided by financing activities was $363.6 million in 2025, compared with $62.1 million in 2024.

The increase was primarily attributable to proceeds from term loan borrowings in 2025 to fund the De La Rue and Antares Vision acquisitions, partially offset by higher repayments on the Revolving Facility.

Financing Arrangements

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• $346.9 million of 4.20% notes due 2048;

• $481.2 million related to the term loan borrowings.

See Item 8 under Note 14, “Financing,” in the Notes to Consolidated and Combined Financial Statements for details regarding our financing arrangements.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Credit Ratings

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These include payments under our short-term and long-term debt agreements and rent payments required under operating lease agreements.

The following table summarizes our fixed cash obligations as of December 31, 2024:

The following table summarizes our cash obligations as of December 31, 2025:

Payment due by Period

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$ 1,044.2 $ 9.1 $ 27.2 $ 326.3 $ 681.6

Fixed interest payments 508.4 27.8 55.6 55.6 369.4

Fixed interest payments (b)

480.6 27.8 55.6 55.6 341.6

Operating lease payments 102.6 17.7 23.1 13.9 47.9

Purchase obligations 44.8 34.2 7.8 2.8 —

Pension and postretirement benefits (b)

Pension and postretirement benefits (c)

50.2 4.9 10.0 10.1 25.2

Other long-term liabilities reflected on Consolidated Balance Sheets (c)

Other long-term liabilities reflected on Consolidated Balance Sheets (d)

Total $ 1,722.4 $ 93.7 $ 123.7 $ 408.7 $ 1,096.3

(a) Debt includes scheduled principal payments.

(b) Pension benefits are funded by the respective pension trusts.

(b) Variable interest payments are excluded because the underlying interest rates will depend on changes in market-based rates and cannot be reasonably estimated.

The postretirement benefit component of the obligation is approximately $1.0 million per year for which there is no trust and will be directly funded by us.

Pension benefits are included through 2035.

(c) As the timing of future cash outflows is uncertain, the following long-term liabilities (and related balances) are excluded from the above table:

(d) As the timing of future cash outflows is uncertain, the following long-term liabilities (and related balances) are excluded from the above table:

gross unrecognized tax benefits of $5.5 million and related gross interest and penalties of $1.1 million.

(e) Pursuant to the Antares acquisition agreements, the Company is obligated to initiate a mandatory tender offer for the acquisition of the publicly traded shares of Antares.

These contractual obligations are not included in the schedule above due to uncertainty regarding the number of shares that will be tendered.

The transaction is expected to be funded through available capacity under the Term Loan B facility.

Refer to Note 3, “Acquisition,” and Note 14, “Financing,” for additional information.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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Non-GAAP financial measures, which may be inconsistent with similarly captioned measures presented by other companies, should be viewed in the context of the definitions of the elements of such measures we provide and in addition to, and not as a substitute for, our reported results prepared and presented in accordance with U.S.

In 2024, equity increased $100.9 million as a result of net income attributable to common shareholders of $184.1 million, and the impact of equity-based awards and related settlement activities of $7.4 million.

These increases were partially offset by currency translation adjustment of $50.9 million, cash dividends of $36.6 million, and changes in pension and postretirement plan assets and benefit obligations, net of tax of $3.1 million.

In 2025, equity increased $185.0 million as a result of net income attributable to common shareholders of $145.1 million, the impact of equity-based awards and related settlement activities of $9.8 million, currency translation adjustment of $72.2 million, and changes in pension and postretirement plan assets and benefit obligations, net of tax of $0.5 million.

These increases were partially offset by cash dividends of $39.0 million, and noncontrolling interest of acquired entity of $3.6 million.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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When products are customized or products are sold directly to the U.S.

government, revenue is recognized over time because control is transferred continuously to customers, as the contract progresses.

government or indirectly to the U.S.

government through subcontracts, and under certain international government contracts, revenue is recognized over time because control is transferred continuously to customers, as the contract progresses.

We exercise judgment to determine whether the products have an alternative use to us.

When an alternative use does not exist for these products and we are entitled to payment for performance completed to date which includes a reasonable profit margin, revenue is recognized over time.

When a contract with the U.S.

government contains clauses indicating that the U.S.

government owns any work-in-progress as the contracted product is being built, revenue is recognized over time.

When a contract contains clauses indicating that the customer owns any work-in-progress as the contracted product is being built, revenue is recognized over time.

The measure of progress applied by us is the cost-to-cost method as this provides the most faithful depiction of the pattern of transfer of control.

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Provisions for estimated losses, if any, on uncompleted long-term contracts, are made in the period in which such losses are determined.

We do not believe that any discrete event or adjustment to an individual contract within the aggregate changes in contract estimates for 2024, 2023 or 2022 was material to the consolidated and combined statements of operations for such annual periods.

We do not believe that any discrete event or adjustment in contract estimates for 2025, 2024 or 2023 was material to the consolidated and combined statements of operations for such annual periods.

Income Taxes.

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Profit margin assumptions are projected by each reporting unit based on the current cost structure and anticipated net cost increases/reductions.

There are inherent uncertainties related to these assumptions, including changes in market conditions, and management judgment is necessary in applying them to the analysis of goodwill impairment.

There are inherent uncertainties related to these assumptions, including changes in factors outside management control such as market conditions, and management judgment is necessary in applying them to the analysis of goodwill impairment.

In addition to the foregoing, for each reporting unit, market multiples are used to corroborate discounted cash flow results where fair value is estimated based on earnings multiples determined by available public information of comparable businesses.

No impairment charges have been required during 2024, 2023 or 2022.

No impairment charges have been required during 2025, 2024 and 2023.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Furthermore, to evaluate the sensitivity of the fair value calculations on the goodwill impairment test, we applied a hypothetical, reasonably possible 10% decrease to the fair values of each reporting unit.

The effects of this hypothetical 10% decrease would still result in a fair value calculation significantly exceeding our carrying value for each of our reporting units, except for the recently acquired OpSec reporting unit which was less than 10%.

OpSec’s goodwill represents 14% of the total goodwill of the Company.

While we believe we have made reasonable estimates and assumptions to calculate the fair value of all our reporting units, it is possible a material change could occur.

If actual results are not consistent with management’s estimates and assumptions, goodwill and other intangible assets may then be determined to be impaired and a charge would need to be taken against net earnings.

Authentication’s goodwill represents 27.9% of the total goodwill of the Company.

Due to the nature of acquisitions, these reporting units are inherently more sensitive to fluctuations in projected performance or market conditions.

Although we believe our estimates and assumptions are reasonable, actual results may differ due to factors such as market conditions, interest rate changes, or lower than expected business performance.

If they do, goodwill and other intangible assets could become impaired, requiring a charge against net earnings.

Intangibles with indefinite useful lives are tested annually for impairment, or when events or changes in circumstances indicate the potential for impairment.

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Examples of events or changes in circumstances could include, but are not limited to, a prolonged economic downturn, current period operating or cash flow losses combined with a history of losses or a forecast of continuing losses associated with the use of an asset or asset group, or a current expectation that an asset or asset group will be sold or disposed of before the end of its previously estimated useful life.

During the year ended December 31, 2025, we impaired software related to a discontinued product line of $1.5 million as a result of the integration of DLR and OpSec businesses within our SAT segment.

See Note 16, “Restructuring”.

Recoverability is based upon projections of anticipated future undiscounted cash flows associated with the use and eventual disposal of the definite-lived intangible asset (or asset group), as well as specific appraisal in certain instances.

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Historical results to date have generally approximated expected cash flows for the identifiable cash flow generating level.

We believe there have been no events or circumstances which would more likely than not reduce the fair value of our indefinite-lived or definite-lived intangible assets below their carrying value.

We believe there have been no events, other than described above, or circumstances which would more likely than not reduce the fair value of our indefinite-lived or any of our definite-lived intangible assets below their carrying value.

As of the last annual assessment, fair values have been substantially in excess of carrying values.

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Information regarding new accounting pronouncements is included in Item 8 under Note 1 to the Consolidated and Combined Financial Statements.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis