What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-11-06 compared with 2024-08-07 · 123 added, 88 removed, 618 unchanged (25% of the section changed)

3 unchanged sentences

CONSOLIDATED AND COMBINED CONDENSED STATEMENTS OF OPERATIONS

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

(in millions, except per share data) 2024 2023 2024 2023

9 unchanged sentences

Related party interest expense — — — ( 2.5 )

Miscellaneous (expense) income, net ( 0.2 ) 1.0 0.4 2.4

Miscellaneous income, net 1.3 0.7 1.7 3.1

Total other expense, net ( 11.7 ) ( 11.8 ) ( 32.6 ) ( 36.0 )

13 unchanged sentences

CONSOLIDATED AND COMBINED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

(in millions) 2024 2023 2024 2023

Net income attributable to common shareholders $ 47.1 $ 51.9 $ 126.5 $ 138.8

Components of other comprehensive (loss) income, net of tax

Components of other comprehensive income (loss), net of tax

Currency translation adjustment 42.2 ( 21.1 ) 6.9 ( 19.3 )

Changes in pension and postretirement plan assets and benefit obligation, net of tax ( 3.0 ) ( 0.5 ) ( 3.9 ) ( 1.5 )

Other comprehensive (loss) income, net of tax ( 9.1 ) ( 3.6 ) ( 36.2 ) 0.8

Other comprehensive income (loss), net of tax 39.2 ( 21.6 ) 3.0 ( 20.8 )

Comprehensive income attributable to common shareholders $ 86.3 $ 30.3 $ 129.5 $ 118.0

3 unchanged sentences

CONSOLIDATED AND CONDENSED BALANCE SHEETS

(in millions) June 30,

(in millions) September 30,

2024 December 31,

1 unchanged sentence

Cash and cash equivalents $ 165.1 $ 227.2

Accounts receivable, net of allowance for credit losses of $ 10.5 as of June 30, 2024 and $ 11.8 as of December 31, 2023

Accounts receivable, net of allowance for credit losses of $ 9.5 as of September 30, 2024 and $ 11.8 as of December 31, 2023

and foreign taxes on income 18.0 —

20 unchanged sentences

CONSOLIDATED AND CONDENSED BALANCE SHEETS

(in millions, except per share and share data) June 30,

(in millions, except per share and share data) September 30,

2024 December 31,

29 unchanged sentences

CONSOLIDATED AND COMBINED CONDENSED STATEMENTS OF CASH FLOWS

Six Months Ended

Nine Months Ended

September 30,

(in millions) 2024 2023

4 unchanged sentences

Stock-based compensation expense 7.7 7.4

Unrealized loss on forward contracts 0.2 —

Defined benefit plans and postretirement credit ( 1.9 ) ( 0.6 )

4 unchanged sentences

Investing activities:

Payment for acquisition, net of cash acquired ( 269.8 ) —

Payment for acquisitions, net of cash acquired ( 269.9 ) —

Capital expenditures ( 34.6 ) ( 16.1 )

19 unchanged sentences

1 Includes both current and non-current balances of restricted cash.

Current restricted cash, included within “Other current assets” in our Unaudited Consolidated and Combined Condensed Balance Sheets, was $ 1.4 million and $ 0.0 million as of June 30, 2024, and June 30, 2023, respectively.

Non-current restricted cash, included within “Other assets” in our Unaudited Consolidated and Combined Condensed Balance Sheets, was $ 6.2 million and $ 0.0 million as of June 30, 2024, and June 30, 2023, respectively.

Current restricted cash, included within “Other current assets” in our Unaudited Consolidated and Combined Condensed Balance Sheets, was $ 2.2 million and $ 0.0 million as of September 30, 2024, and September 30, 2023, respectively.

Non-current restricted cash, included within “Other assets” in our Unaudited Consolidated and Combined Condensed Balance Sheets, was $ 6.7 million and $ 0.0 million as of September 30, 2024, and September 30, 2023, respectively.

See Notes to Unaudited Consolidated and Combined Condensed Financial Statements.

2 unchanged sentences

CONSOLIDATED AND COMBINED CONDENSED STATEMENTS OF CASH FLOWS

Six Months Ended

Nine Months Ended

September 30,

(in millions) 2024 2023

43 unchanged sentences

Balance as of June 30, 2024 $ 72.4 $ 1,716.8 $ 182.0 $ ( 154.8 ) $ ( 826.6 ) $ 989.8

Net income attributable to common shareholders — — 47.1 — — 47.1

Cash dividends ($ 0.16 per share)

— — ( 9.1 ) — — ( 9.1 )

Exercise of stock options of 41,207 shares

— — — — 1.1 1.1

Impact from settlement of share-based awards, net of shares acquired — ( 1.2 ) — — 1.2 —

Stock-based compensation expense — 2.6 — — — 2.6

Changes in pension and postretirement plan assets and benefit obligation, net of tax — — — ( 3.0 ) — ( 3.0 )

Currency translation adjustment — — — 42.2 — 42.2

Balance as of September 30, 2024 $ 72.4 $ 1,718.2 $ 220.0 $ ( 115.6 ) $ ( 824.3 ) $ 1,070.7

CRANE NXT, CO.

30 unchanged sentences

Balance as of June 30, 2023 $ 72.4 $ 1,722.6 $ 35.3 $ ( 130.7 ) $ ( 844.4 ) $ — $ 855.2

Net income attributable to common shareholders — — 51.9 — — — 51.9

Cash dividends ($ 0.14 per share)

— — ( 7.9 ) — — — ( 7.9 )

Crane transfer 2

— ( 7.5 ) — — — — ( 7.5 )

Exercise of stock options, net of shares reacquired of 7,465 shares

— — — — 0.2 — 0.2

Impact from settlement of share-based awards, net of shares acquired — ( 0.3 ) — — 0.3 — —

Stock-based compensation expense — 2.3 — — — — 2.3

Changes in pension and postretirement plan assets and benefit obligation, net of tax — — — ( 0.5 ) — — ( 0.5 )

Currency translation adjustment — — — ( 21.1 ) — — ( 21.1 )

Balance as of September 30, 2023 $ 72.4 $ 1,717.1 $ 79.3 $ ( 152.3 ) $ (843.9) $ — $ 872.6

1 Reclassification of stock-based compensation due to modification resulting from equity award conversions.

See Note 1, “Organization and Basis of Presentation” for additional information.

2 Additional liabilities attributable to the Business identified as a result of the Separation during the three months ended September 30, 2023.

See Notes to Unaudited Consolidated and Combined Condensed Financial Statements.

5 unchanged sentences

Crane Payment Innovations (“CPI”) and Security and Authentication Technologies (“SAT”).

Our primary end markets include governments and a wide range of consumer related end markets including retail and gaming.

Our primary end markets include governments and a wide range of consumer related end markets including convenience merchandising (vending), retail and gaming.

See Note 4, “Segment Results” for the relative size of these segments in relation to the total company (both net sales and total assets).

17 unchanged sentences

The modification of the performance-based restricted share units resulted in a liability recorded upon Separation.

The amount of the liability was $ 1.2 million and $ 1.9 million as of June 30, 2024, and December 31, 2023, respectively.

The amount of the liability was $ 1.5 million and $ 1.9 million as of September 30, 2024, and December 31, 2023, respectively.

Separation Agreements

61 unchanged sentences

Separation Costs .

In connection with the Separation, we incurred transaction related expenses of $ 15.2 million and $ 17.0 million for the three-and-six months ended June 30, 2023 recorded in “Selling, general and administrative” in the Unaudited Consolidated and Combined Condensed Statements of Operations.

In connection with the Separation, we incurred expenses of $ 2.7 million and $ 19.7 million for the three-and-nine months ended September 30, 2023 recorded in “Selling, general and administrative” in the Unaudited Consolidated and Combined Condensed Statements of Operations.

Expenses primarily consisted of professional service fees.

11 unchanged sentences

After the Separation, SpinCo and its subsidiaries were identified as related parties.

As of June 30, 2024, we had net outstanding payables with SpinCo and its subsidiaries of less than $ 0.1 million related to the Transition Services Agreement and net outstanding receivables with SpinCo and its subsidiaries of $ 6.5 million related to indemnification under the Tax Matters Agreement.

As of September 30, 2024, we had net outstanding payables of less than $ 0.1 million with SpinCo and its subsidiaries related to the Transition Services Agreement and outstanding receivables with SpinCo and its subsidiaries of $ 6.5 million related to indemnification under the Tax Matters Agreement.

As of December 31, 2023, we had net outstanding receivables with SpinCo and its subsidiaries of $ 0.3 million related to the Transition Services Agreement and $ 4.5 million related to indemnification under the Tax Matters Agreement.

Note 3 - Acquisition

Acquisitions are accounted for in accordance with ASC Topic 805, “Business Combinations” (“ASC 805”).

Note 3 - Acquisitions

Business Combinations

Business combinations 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.

3 unchanged sentences

We utilized $ 210.0 million from our Revolving Facility (as defined in Note 13, “Financing”) and cash on hand to fund the acquisition.

In September 2024, we received $1.4 million related to the final working capital adjustment of the OpSec acquisition, resulting in net cash paid of $ 268.4 million.

OpSec is a global leader in authentication and brand integrity with a heritage that spans four decades.

7 unchanged sentences

The final determination of the fair value of certain assets and liabilities will be completed within the measurement period as required by ASC 805.

The purchase price allocation is preliminary, pending our evaluation and determination of post-closing and final working capital adjustments.

Potential adjustments made are not expected to be material in relation to the preliminary values presented below:

Potential adjustments are not expected to be material in relation to the preliminary values presented below:

Net assets acquired (in millions)

43 unchanged sentences

OpSec’s results of operations have been included in our financial statements for the period subsequent to the completion of the acquisition on May 3, 2024.

During the period since acquisition, OpSec contributed net sales of $32.3 million and $52.7 million for the three-and-nine months ended September 30, 2024, respectively, resulting in operating loss of $3.5 million and $8.9 million for the three-and-nine months ended September 30, 2024, respectively.

The following unaudited pro forma consolidated and combined information assumes that the acquisition was completed on January 1, 2023.

The unaudited pro forma consolidated and combined net sales for the three-and-six months ended June 30, 2024 would have been $ 382.0 million and $ 729.4 million, respectively.

The unaudited pro forma consolidated and combined net sales for the three-and-six months ended June 30, 2023 would have been $ 379.3 million and $ 738.1 million, respectively.

The unaudited pro forma consolidated and combined net income attributable to common shareholders for the three-and-six months ended June 30, 2024 would have been $ 47.8 million and $ 88.8 million, respectively.

The unaudited pro forma consolidated and combined net income attributable to common shareholders for the three-and-six months ended June 30, 2023 would have been $ 32.7 million and $ 67.5 million, respectively.

The unaudited pro forma consolidated and combined information is provided for illustrative purposes only and is not indicative of our actual consolidated and combined results of operations or consolidated financial position.

Three Months Ended Nine Months Ended

September 30, September 30,

(in millions) 2024 2023 2024 2023

Net sales $ 403.5 $ 381.8 $ 1,132.9 $ 1,119.9

Net income attributable to common shareholders $ 50.9 $ 50.0 $ 139.7 $ 117.5

Acquisition-Related Costs

Acquisition-related costs are expensed as incurred.

For the three-and-six months ended June 30, 2024, we recorded $ 6.1 million and $ 10.0 million, respectively, of integration and transaction costs in our Unaudited Consolidated and Combined Condensed Statements of Operations.

In addition, the Company recorded $ 4.0 million of inventory step-up amortization within “Cost of sales” in the Unaudited Consolidated and Combined Condensed Statements of Operations.

For the three-and-nine months ended September 30, 2024, we recorded $ 6.1 million and $ 16.1 million, respectively, of integration and transaction costs within “Selling, general and administrative” in our Unaudited Consolidated and Combined Condensed Statements of Operations.

Note 4 - Segment Results

3 unchanged sentences

This updated structure is consistent with how the Chief Operating Decision Maker evaluates performance and allocates resources, and better aligns with our mission to secure, detect and authenticate our customers’ most valuable assets.

As of June 30, 2024, we had two reportable segments:

As of September 30, 2024, we had two reportable segments:

Crane Payment Innovations and Security and Authentication Technologies.

1 unchanged sentence

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 as of June 30, 2024, is as follows:

A brief description of each of our segments as of September 30, 2024, is as follows:

Crane Payment Innovations

8 unchanged sentences

Financial information by reportable segment is set forth below.

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

(in millions) 2024 2023 2024 2023

10 unchanged sentences

Related party interest expense — — — ( 2.5 )

Miscellaneous (expense) income, net ( 0.2 ) 1.0 0.4 2.4

Miscellaneous income, net 1.3 0.7 1.7 3.1

Income before income taxes $ 63.3 $ 67.9 $ 165.4 $ 178.4

(in millions) June 30, 2024 December 31, 2023

(in millions) September 30, 2024 December 31, 2023

Crane Payment Innovations $ 1,203.4 $ 1,279.1

2 unchanged sentences

Total $ 2,410.6 $ 2,129.4

(in millions) June 30, 2024 December 31, 2023

(in millions) September 30, 2024 December 31, 2023

Crane Payment Innovations $ 627.8 $ 626.7

5 unchanged sentences

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

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

(in millions) 2024 2023 2024 2023

10 unchanged sentences

The transaction price allocated to remaining performance obligations represents the transaction price of firm orders which have not yet been fulfilled.

As of June 30, 2024, our performance obligations were $ 501.9 million.

As of September 30, 2024, our performance obligations were $ 484.8 million.

We expect to recognize approximately 54 % of our remaining performance obligations as revenue in 2024, 38 % in 2025 and the balance thereafter.

8 unchanged sentences

Net contract assets and contract liabilities consisted of the following:

(in millions) June 30, 2024 December 31, 2023

(in millions) September 30, 2024 December 31, 2023

Contract assets $ 40.1 $ 30.3

Contract liabilities $ 78.0 $ 92.5

We recognized revenue of $ 20.5 million and $ 48.2 million during the three-and-six months ended June 30, 2024, related to contract liabilities as of December 31, 2023.

We recognized revenue of $ 17.3 million and $ 65.5 million during the three-and-nine months ended September 30, 2024, related to contract liabilities as of December 31, 2023.

NOTES TO THE UNAUDITED CONSOLIDATED AND COMBINED CONDENSED FINANCIAL STATEMENTS

7 unchanged sentences

For periods prior to the Separation, it is assumed that there are no dilutive equity instruments as there were no Crane NXT stock-based awards outstanding prior to the Separation.

The weighted average number of common shares outstanding during the three-and-six-months ended June 30, 2023 was based on the weighted average number of common shares after the Separation.

Three Months Ended Six Months Ended

June 30, June 30,

The weighted average number of common shares outstanding during the three-and-nine-months ended September 30, 2023 was based on the weighted average number of common shares after the Separation.

Three Months Ended Nine Months Ended

September 30, September 30,

(in millions, except per share data) 2024 2023 2024 2023

5 unchanged sentences

Earnings per diluted share $ 0.81 $ 0.90 $ 2.19 $ 2.42

Stock options, restricted share units, deferred stock units and performance-based restricted share units that were excluded from the calculation of diluted earnings per share because their effect is anti‑dilutive were 0.3 million for the three-and-six-months ended June 30, 2024, and 0.5 million for the three-and-six-months ended June 30, 2023.

Stock options, restricted share units, deferred stock units and performance-based restricted share units that were excluded from the calculation of diluted earnings per share because their effect is anti‑dilutive were 0.2 million and 0.3 million for the three-and-nine-months ended September 30, 2024, respectively, and 0.4 million for the three-and-nine-months ended September 30, 2023.

Note 7 - Changes in Accumulated Other Comprehensive Loss

5 unchanged sentences

Amounts reclassified from accumulated other comprehensive loss ( 2.7 ) — ( 2.7 )

Net period other comprehensive loss ( 0.9 ) ( 35.3 ) ( 36.2 )

Balance as of June 30, 2024 $ 2.9 $ ( 157.7 ) $ ( 154.8 )

(a) Net of tax detriment of $ 1.3 million and $ 1.5 million as of June 30, 2024 and December 31, 2023, respectively.

Net period other comprehensive (loss) income ( 3.9 ) 6.9 3.0

Balance as of September 30, 2024 $ ( 0.1 ) $ ( 115.5 ) $ ( 115.6 )

(a) Net of tax detriment of $ 1.1 million and $ 1.5 million as of September 30, 2024 and December 31, 2023, respectively.

NOTES TO THE UNAUDITED CONSOLIDATED AND COMBINED CONDENSED FINANCIAL STATEMENTS

The table below illustrates the amounts reclassified out of each component of accumulated other comprehensive loss for the three-and-six month periods ended June 30, 2024, and 2023.

Amortization of pension and postretirement components has been recorded within “Miscellaneous (expense) income, net” on our Unaudited Consolidated and Combined Condensed Statements of Operations.

Three Months Ended June 30, Six Months Ended June 30,

The table below illustrates the amounts reclassified out of each component of accumulated other comprehensive loss for the three-and-nine month periods ended September 30, 2024, and 2023.

Amortization of pension and postretirement components has been recorded within “Miscellaneous income, net” on our Unaudited Consolidated and Combined Condensed Statements of Operations.

Three Months Ended September 30, Nine Months Ended September 30,

(in millions) 2024 2023 2024 2023

5 unchanged sentences

Net gain ( 0.2 ) ( 0.2 ) ( 0.6 ) ( 0.5 )

Other ( 1.4 ) — ( 1.4 ) —

Total before tax $ ( 2.0 ) $ ( 0.6 ) $ ( 3.1 ) $ ( 1.8 )

2 unchanged sentences

Note 8 - Pension and Postretirement Benefits

For all plans, the components of net periodic benefit for the three months ended June 30, 2024, and 2023 are as follows:

For all plans, the components of net periodic (benefit) expense for the three months ended September 30, 2024, and 2023 are as follows:

Pension Postretirement

4 unchanged sentences

Amortization of prior service cost ( 0.2 ) ( 0.1 ) ( 0.3 ) ( 0.3 )

Amortization of net gain — — ( 0.2 ) ( 0.2 )

Net periodic expense (benefit) $ 0.1 $ — $ ( 0.2 ) $ ( 0.2 )

For all plans, the components of net periodic benefit for the six months ended June 30, 2024, and 2023 are as follows:

Amortization of net loss (gain) 0.1 — ( 0.2 ) ( 0.2 )

Other ( 1.4 ) — — —

Net periodic (benefit) expense $ ( 1.3 ) $ 0.1 $ ( 0.3 ) $ ( 0.3 )

For all plans, the components of net periodic (benefit) expense for the nine months ended September 30, 2024, and 2023 are as follows:

Pension Postretirement

5 unchanged sentences

Amortization of net loss (gain) 0.2 — ( 0.6 ) ( 0.5 )

Net periodic expense (benefit) $ 0.2 $ — $ ( 0.5 ) $ ( 0.4 )

The components of net periodic benefit, other than the service cost component, are included in “Miscellaneous (expense) income, net” in our Unaudited Consolidated and Combined Condensed Statements of Operations.

Other ( 1.4 ) — — —

Net periodic (benefit) expense $ ( 1.1 ) $ 0.1 $ ( 0.8 ) $ ( 0.7 )

NOTES TO THE UNAUDITED CONSOLIDATED AND COMBINED CONDENSED FINANCIAL STATEMENTS

The components of net periodic benefit, other than the service cost component, are included in “Miscellaneous income, net” in our Unaudited Consolidated and Combined Condensed Statements of Operations.

Service cost is recorded within “Cost of sales” and “Selling, general and administrative” in our Unaudited Consolidated and Combined Condensed Statements of Operations.

2 unchanged sentences

Expected contributions in 2024

Amounts contributed during the six months ended June 30, 2024

NOTES TO THE UNAUDITED CONSOLIDATED AND COMBINED CONDENSED FINANCIAL STATEMENTS

Amounts contributed during the nine months ended September 30, 2024

Note 9 - Income Taxes

2 unchanged sentences

Our effective tax rates are as follows:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

Effective Tax Rate 25.5 % 23.5 % 23.5 % 22.2 %

Our effective tax rates for the three-and-six months ended June 30, 2024 are higher than in the prior year’s comparable periods primarily due to the mix of non-U.S.

Our effective tax rates for the three-and-six months ended June 30, 2024 are higher than the statutory U.S.

Our effective tax rates for the three-and-nine months ended September 30, 2024 were higher than the prior year’s comparable periods primarily due to the mix of non-U.S.

Our effective tax rates for the three-and-nine months ended September 30, 2024 were higher than the statutory U.S.

federal tax rate of 21% primarily due to the mix of non-U.S.

5 unchanged sentences

Although enforceable as between the parties, the Tax Matters Agreement will not be binding on the Internal Revenue Service or other tax authorities.

As of June 30, 2024 and December 31, 2023, we had gross unrecognized tax benefits of $ 18.2 million and $ 19.3 million, respectively included in “Other liabilities” in our Unaudited Consolidated and Condensed Balance Sheets.

As of September 30, 2024 and December 31, 2023, we had gross unrecognized tax benefits of $ 18.2 million and $ 19.3 million, respectively included in “Other liabilities” in our Unaudited Consolidated and Condensed Balance Sheets.

NOTES TO THE UNAUDITED CONSOLIDATED AND COMBINED CONDENSED FINANCIAL STATEMENTS

Note 10 - Goodwill and Intangible Assets

5 unchanged sentences

Currency translation 1.1 ( 0.1 ) 1.0

Balance as of June 30, 2024

Balance as of September 30, 2024

$ 627.8 $ 337.6 $ 965.4

As of June 30, 2024, we had $ 443.6 million of net intangible assets, of which $ 45.5 million were intangibles with indefinite useful lives.

As of September 30, 2024, we had $ 440.2 million of net intangible assets, of which $ 45.5 million were intangibles with indefinite useful lives.

As of December 31, 2023, we had $ 308.9 million of net intangible assets, of which $ 45.5 million were intangibles with indefinite useful lives.

Changes to intangible assets are as follows:

(in millions) Six Months Ended June 30, 2024 Year Ended December 31, 2023

(in millions) Nine Months Ended September 30, 2024 Year Ended December 31, 2023

Balance at beginning of period, net of accumulated amortization $ 308.9 $ 344.9

3 unchanged sentences

Balance at end of period, net of accumulated amortization $ 440.2 $ 308.9

NOTES TO THE UNAUDITED CONSOLIDATED AND COMBINED CONDENSED FINANCIAL STATEMENTS

A summary of intangible assets are as follows:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

(in millions) Weighted Average

14 unchanged sentences

2029 and after 207.6

NOTES TO THE UNAUDITED CONSOLIDATED AND COMBINED CONDENSED FINANCIAL STATEMENTS

Note 11 - Accrued Liabilities

Accrued liabilities consist of:

(in millions) June 30,

(in millions) September 30,

2024 December 31,

12 unchanged sentences

If there is a reasonable possibility that a loss or additional loss may have been incurred for such matters, we disclose the estimate of the amount of loss or range of loss, disclose that the amount is immaterial, or disclose that an estimate of loss cannot be made, as applicable.

We believe that as of June 30, 2024, there was no reasonable possibility that a material loss, or any additional material losses, may have been incurred for such matters.

NOTES TO THE UNAUDITED CONSOLIDATED AND COMBINED CONDENSED FINANCIAL STATEMENTS

We believe that as of September 30, 2024, there was no reasonable possibility that a material loss, or any additional material losses, may have been incurred for such matters.

On April 3, 2023, Crane NXT and SpinCo entered into a Tax Matters Agreement which, among other things, governs our and SpinCo’s respective rights, responsibilities and obligations after the Separation with respect to tax liabilities and benefits.

The agreement specifies the allocation of tax liabilities between us and SpinCo, and we and SpinCo agreed to indemnify each other for any amounts for which they are not responsible.

As of June 30, 2024, there were no amounts owing to SpinCo pursuant to this agreement.

As of September 30, 2024, there were no amounts owing to SpinCo pursuant to this agreement.

The Tax Matters Agreement also specifies allocation of tax liabilities in the event that the Distribution is determined not to be tax-free.

We believe that as of June 30, 2024, there was no reasonable possibility that such a tax liability will be incurred in connection with the Distribution.

We believe that as of September 30, 2024, there was no reasonable possibility that such a tax liability will be incurred in connection with the Distribution.

Note 13 - Financing

Our debt consisted of the following:

(in millions) June 30,

(in millions) September 30,

2024 December 31,

9 unchanged sentences

$ 638.2 $ 640.3

(a) Debt discounts and debt issuance costs totaled $ 9.0 million and $ 10.1 million as of June 30, 2024, and December 31, 2023, respectively, and have been netted against the aggregate principal amounts of the related debt in the components of the debt table above, where applicable.

(a) Debt discounts and debt issuance costs totaled $ 8.5 million and $ 10.1 million as of September 30, 2024, and December 31, 2023, respectively, and have been netted against the aggregate principal amounts of the related debt in the components of the debt table above, where applicable.

NOTES TO THE UNAUDITED CONSOLIDATED AND COMBINED CONDENSED FINANCIAL STATEMENTS

Credit Faciliti es - We are party to a senior secured credit agreement (the “Credit Agreement”) entered into on March 17, 2023, which provides for (i) a $ 500 million, five-year revolving credit facility (the “Revolving Facility”) and (ii) a $ 350 million, three-year term loan facility (the “Term Facility”), funding under each of which became available in connection with the Separation, upon the satisfaction of customary conditions of facilities of this type.

In the six months ended June 30, 2024, we drew down $ 280.0 million, primarily to fund the OpSec acquisition, and repaid $ 65.0 million on our Revolving Facility.

In the nine months ended September 30, 2024, we drew down $ 310.5 million, primarily to fund the OpSec acquisition, and repaid $ 160.5 million on our Revolving Facility.

The Revolving Facility allows us to borrow, repay and re-borrow funds from time to time prior to the maturity of the Revolving Facility without any penalty or premium, subject to customary borrowing conditions for facilities of this type and the reimbursement of breakage costs.

5 unchanged sentences

The Credit Agreement also includes customary events of default, including failure to pay principal, interest or fees when due, failure to comply with covenants, any representation or warranty made by us or any of our material subsidiaries being false in any material respect, default under certain other material indebtedness, certain insolvency or receivership events affecting us and our material subsidiaries, certain ERISA events, material judgments and a change in control, in each case, subject to cure periods and thresholds where customary.

NOTES TO THE UNAUDITED CONSOLIDATED AND COMBINED CONDENSED FINANCIAL STATEMENTS

Note 14 - Fair Value Measurements

9 unchanged sentences

The carrying value of our financial assets and liabilities, including cash and cash equivalents, accounts receivable and accounts payable approximate fair value, without being discounted, due to the short periods during which these amounts are outstanding.

NOTES TO THE UNAUDITED CONSOLIDATED AND COMBINED CONDENSED FINANCIAL STATEMENTS

We are exposed to certain risks related to our ongoing business operations, including market risks related to fluctuation in currency exchange.

1 unchanged sentence

We do not hold or issue derivative financial instruments for trading or speculative purposes.

Foreign exchange contracts not designated as hedging instruments had a notional value of $ 10.7 million as of June 30, 2024.

Foreign exchange contracts not designated as hedging instruments had a notional value of $ 70.9 million as of September 30, 2024.

Our derivative assets and liabilities include foreign exchange contract derivatives that are measured at fair value using internal models based on observable market inputs such as forward rates and interest rates.

Based on these inputs, the derivatives are classified within Level 2 of the valuation hierarchy.

Such derivative liability amounts are recorded within “Accrued liabilities” on our Consolidated and Condensed Balance Sheets and were $ 0.2 million as of June 30, 2024.

Such derivative assets of $ 0.3 million are recorded within “Accounts receivable” and derivative liabilities of $ 0.2 million are recorded within “Accrued liabilities” on our Consolidated and Condensed Balance Sheets as of September 30, 2024.

We had no such hedging instruments as of December 31, 2023.

2 unchanged sentences

The amount of the liability is measured at fair value using Level 1 inputs such as the quoted market price of the underlying company’s stock.

The fair value of the liability was $ 1.2 million and $ 1.9 million as of June 30, 2024, and December 31, 2023, respectively.

The fair value of the liability was $ 1.5 million and $ 1.9 million as of September 30, 2024, and December 31, 2023, respectively.

Long-term debt rates currently available to us for debt with similar terms and remaining maturities are used to estimate the fair value for debt issues that are not quoted on an exchange.

The estimated fair value of notes due, measured using Level 2 inputs, was $ 448.4 million and $ 469.5 million as of June 30, 2024, and December 31, 2023, respectively.

The estimated fair value of notes due, measured using Level 2 inputs, was $ 451.4 million and $ 469.5 million as of September 30, 2024, and December 31, 2023, respectively.

As a result of the OpSec acquisition, we assumed OpSec’s contingent liability related to a prior OpSec acquisition.

The amount of the liability is measured at fair value using Level 3 inputs as the fair value is determined by estimating the net present value of the expected cash flows based on the probability of the achievement of the contingent revenue targets.

The fair value of the liability is recorded within “Other liabilities” on our Consolidated and Condensed Balance Sheets and was $ 1.5 million as of June 30, 2024.

The fair value of the liability is recorded within “Other liabilities” on our Consolidated and Condensed Balance Sheets and was $ 1.5 million as of September 30, 2024.

We had no such contingent liabilities as of December 31, 2023.

See Note 3, “Acquisition” for further details.

NOTES TO THE UNAUDITED CONSOLIDATED AND COMBINED CONDENSED FINANCIAL STATEMENTS

See Note 3, “Acquisitions” for further details.

Note 15 - Restructuring

2024 Restructuring - In the first quarter of 2024, in response to challenging industry conditions, we initiated workforce reductions in CPI, incurring $ 2.7 million of cumulative severance charges, net through June 30, 2024.

We do no t expect to incur additional costs to complete these actions.

We expect to substantially complete the restructuring program in 2025.

2022 Restructuring - In the fourth quarter of 2022, in response to economic uncertainty, we initiated workforce reductions in CPI, incurring $ 6.7 million of cumulative restructuring charges, net through June 30, 2024, of which $ 5.8 million related to severance and $ 0.9 million related to other costs.

2022 Restructuring - In the fourth quarter of 2022, in response to economic uncertainty, we initiated workforce reductions in CPI, incurring $ 6.7 million of cumulative restructuring charges, net through September 30, 2024, of which $ 5.8 million related to severance and $ 0.9 million related to other costs.

We do no t expect to incur additional costs to complete these actions.

5 unchanged sentences

Utilization ( 2.4 ) ( 0.4 ) ( 2.8 )

Balance as of June 30, 2024 (a)

Balance as of September 30, 2024 (a)

$ 0.3 $ 0.2 $ 0.5

1 unchanged sentence

Included within “Restructuring charges, net” in the Unaudited Consolidated and Combined Condensed Statements of Operations.

NOTES TO THE UNAUDITED CONSOLIDATED AND COMBINED CONDENSED FINANCIAL STATEMENTS

Note 16 - Subsequent Events

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 (approximately $390 million) in cash, subject to customary adjustments.

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

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 combined with OpSec within the Security and Authentication Technologies segment upon close.

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-Q

Item 1. Financial Statements