What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-11-06 compared with 2024-08-07 · 67 added, 60 removed, 188 unchanged (40% of the section changed)

44 unchanged sentences

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, 3-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.

As of June 30, 2024, we drew down $215.0 million, net on our Revolving Facility.

As of September 30, 2024, we drew down $310.5 million and repaid $160.5 million on our Revolving Facility.

2024 Restructuring

In the first quarter of 2024, in response to challenging industry conditions, we initiated workforce reductions in Crane Payment Innovations (“CPI”), incurring $2.7 million of severance charges during the six months ended June 30, 2024.

We expect to substantially complete these restructuring actions in 2025.

4 unchanged sentences

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.

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 (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.

Transaction costs incurred for the three-and-nine months ended September 30, 2024, were $3.3 million and $5.0 million, respectively.

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.

Basis of Presentation

1 unchanged sentence

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

Results from Operations – Three Month Periods Ended June 30,

Results from Operations – Three Month Periods Ended September 30,

The following information should be read in conjunction with our Unaudited Consolidated and Combined Condensed financial statements and related notes.

All comparisons below refer to the second quarter 2024 versus the second quarter 2023 , unless otherwise specified.

Three Months Ended June 30, Favorable/(Unfavorable) Change

All comparisons below refer to the third quarter 2024 versus the third quarter 2023 , unless otherwise specified.

Three Months Ended September 30, Favorable/(Unfavorable) Change

(in millions) 2024 2023 $ %

9 unchanged sentences

Interest expense (13.4) (12.8) (0.6) (4.7) %

Miscellaneous (expense) income, net (0.2) 1.0 (1.2) (120.0) %

Miscellaneous income, net 1.3 0.7 0.6 85.7 %

Total other expense, net (11.7) (11.8) 0.1 0.8 %

4 unchanged sentences

The change in sales included:

• benefit in sales from the May 2024 OpSec acquisition of $20.5 million, or 5.8%,

• core sales growth of $2.9 million, or 0.8%, driven primarily by higher core sales at CPI;

• unfavorable foreign currency translation of $5.2 million, or 1.4%.

• a benefit in sales from the May 2024 OpSec acquisition of $32.3 million, or 9.1%,

• core sales growth of $16.7 million, or 4.7%, driven primarily by higher core sales in Security and Authentication Technologies (“SAT”) as a result of favorable pricing and higher banknote volumes in our international currency business, and

• favorable foreign currency translation of $1.6 million, or 0.5%.

Cost of sales increased by $44.8 million, or 23.9%, to $232.2 million in 2024.

The increase was driven primarily by the impact from the OpSec acquisition, unfavorable mix in CPI, and higher material and other manufacturing costs in SAT, partially offset by productivity gains.

Selling, general and administrative expenses decreased by $6.3 million, or 6.3%, to $93.3 million in 2024.

The decrease was driven primarily by lower transaction related expenses, cost saving actions, and favorable foreign currency translation, partially offset by the impact from the OpSec acquisition.

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

Selling, general and administrative expenses increased by $10.5 million, or 12.2%, to $96.3 million in 2024.

The increase was driven primarily by the impact of the OpSec acquisition.

Operating profit decreased by $4.7 million, or 5.9%, to $75.0 million in 2024.

The decrease was primarily driven by unfavorable product mix at CPI, and the impact from the OpSec acquisition, partially offset by lower transaction related expenses, and productivity gains.

Our effective tax rate for the three months ended June 30, 2024 is higher than the prior year’s comparable period primarily due to the mix of non-U.S.

The decrease was primarily driven by unfavorable mix in both segments, and the impact of the OpSec acquisition, partially offset by productivity gains and the impact of cost saving actions.

Our effective tax rate for the three months ended September 30, 2024 was higher than the prior year’s comparable period primarily due to the mix of non-U.S.

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

Segment Results of Operations - Three Month Periods Ended June 30,

Crane Payment Innovations

Three Months Ended June 30, Favorable/(Unfavorable) Change

Segment Results of Operations - Three Month Periods Ended September 30,

Crane Payment Innovations (“CPI”)

Three Months Ended September 30, Favorable/(Unfavorable) Change

(in millions) 2024 2023 $ %

9 unchanged sentences

Operating margin 28.7 % 26.9 %

Sales decreased by $1.5 million, or 0.7%, to $224.4 million in 2024, driven by unfavorable foreign currency translation of $4.2 million, or 1.9%, partially offset by higher core sales of $2.7 million, or 1.2%.

• Sales of Payment Acceptance and Dispensing Products decreased by $2.5 million, or 1.3%, to $190.6 million in 2024.

The decrease was driven by unfavorable foreign currency translation of $4.2 million, or 2.2%, partially offset by higher core sales of $1.7 million, or 0.9%.

Unfavorable foreign currency translation primarily reflected the weakening of the Japanese yen against the U.S.

dollar, partially offset by the strengthening of the British pound against the U.S.

Sales increased by $3.3 million, or 1.5%, to $224.9 million in 2024, driven by higher core sales.

• Sales of Payment Acceptance and Dispensing Products increased by $1.8 million, or 1.0%, to $190.9 million in 2024.

The increase was driven by higher core sales.

The favorable foreign currency translation from the strengthening of the British pound against the U.S.

dollar was offset by unfavorable foreign currency translation from the weakening of the Japanese yen against the U.S.

• Service revenue increased by $1.5 million, or 4.6%, to $34.0 million in 2024, primarily driven by favorable pricing.

Cost of sales increased by $2.8 million, or 2.5%, to $114.6 million, as lower material and other manufacturing costs, productivity gains and favorable foreign currency translation were more than offset by unfavorable mix.

Selling, general and administrative expense decreased by $0.9 million, or 1.8%, to $48.4 million, primarily due to lower compensation and benefits through cost saving actions, and favorable foreign currency translation.

Operating profit decreased by $3.4 million, or 5.2%, to $61.4 million in 2024.

The decrease primarily reflected unfavorable mix of $13.2 million, or 20.3%, partially offset by lower material and other manufacturing costs, and productivity gains of $8.1 million, or 12.5%.

Cost of sales increased by $2.5 million, or 2.3%, to $113.6 million, as productivity gains, and lower material and other manufacturing costs were more than offset by unfavorable mix.

Selling, general and administrative expense decreased by $4.1 million, or 8.1%, to $46.7 million, primarily due to cost saving actions.

Operating profit increased by $4.9 million, or 8.2%, to $64.6 million in 2024.

The increase primarily reflected favorable pricing, lower material and other manufacturing costs, and productivity gains of $8.8 million, or 14.7%, the impact of cost saving actions of $2.3 million, or 3.8%, partially offset by unfavorable mix of $6.2 million, or 10.4%.

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

Security and Authentication Technologies

Three Months Ended June 30, Favorable/(Unfavorable) Change

Security and Authentication Technologies (“SAT”)

Three Months Ended September 30, Favorable/(Unfavorable) Change

(in millions) 2024 2023 $ %

9 unchanged sentences

Operating margin 16.4 % 25.0 %

Sales increased by $19.7 million, or 15.6%, to $146.2 million in 2024, primarily driven by the sales benefit from the OpSec acquisition of $20.5 million, or 16.2%.

• Banknote and security product sales decreased by $1.4 million, or 1.1%, to $124.1 million in 2024, reflecting lower core sales predominantly driven by lower volumes in international markets impacted by the timing of shipments, and unfavorable foreign currency translation, as the Swedish krona and the euro weakened against the U.S.

Sales increased by $47.3 million, or 36.0%, to $178.6 million in 2024, primarily driven by the sales benefit from the OpSec acquisition of $32.3 million, or 24.6%, and higher core sales of $13.4 million, or 10.2%.

• Banknote and security product sales increased by $15.3 million, or 11.8%, to $145.4 million in 2024, reflecting higher core sales predominantly driven by higher volumes in international markets, and favorable foreign currency translation, as the euro and the Swedish krona strengthened against the U.S.

• Authentication products and solutions sales increased to $33.2 million in 2024, primarily driven by the sales benefit from the OpSec acquisition.

Cost of sales increased by $22.9 million, or 31.7%, to $95.1 million in 2024, primarily due to the impact from the OpSec acquisition, and higher material and other manufacturing costs, partially offset by productivity gains.

Selling, general and administrative expense increased by $7.5 million, or 38.3%, to $27.1 million in 2024, primarily due to the impact from the OpSec acquisition.

Operating profit decreased by $10.7 million, or 30.8%, to $24.0 million in 2024, reflecting higher material and other manufacturing costs net of favorable pricing of $8.0 million, or 23.1%, and the impact from the OpSec acquisition of $5.4 million, or 15.6%, partially offset by productivity gains of $5.2 million, or 15.0%.

Cost of sales increased by $42.3 million, or 55.4%, to $118.6 million in 2024, primarily due to the impact of the OpSec acquisition, higher material and other manufacturing costs, and unfavorable mix.

Selling, general and administrative expense increased by $8.5 million, or 38.3%, to $30.7 million in 2024, primarily due to the impact of the OpSec acquisition.

Operating profit decreased by $3.5 million, or 10.7%, to $29.3 million in 2024, reflecting unfavorable mix of $4.3 million, or 13.1%, and the impact of the OpSec acquisition of $3.5 million, or 10.7%, partially offset by productivity gains of $4.2 million, or 12.8%.

Favorable pricing and higher volumes of $13.4 million were mostly offset by higher material and other manufacturing costs.

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

Results from Operations – Six Month Periods Ended June 30,

Results from Operations – Nine Month Periods Ended September 30,

The following information should be read in conjunction with our Unaudited Consolidated and Combined Condensed Financial Statements and related notes.

All comparisons below refer to the first six months of 2024 versus the first six months of 2023, unless otherwise specified.

Six Months Ended June 30, Favorable/(Unfavorable) Change

All comparisons below refer to the first nine months of 2024 versus the first nine months of 2023, unless otherwise specified.

Nine Months Ended September 30, Favorable/(Unfavorable) Change

(in millions) 2024 2023 $ %

20 unchanged sentences

• sales benefit from the OpSec acquisition of $52.7 million, or 5.1%,

• core sales decline of $11.0 million, or 1.6%, driven primarily by lower volumes at CPI, and

• core sales growth of $5.7 million, or 0.6%, driven primarily by favorable pricing in SAT, and

• unfavorable foreign currency translation of $5.1 million, or 0.5%.

Cost of sales increased by $57.3 million, or 10.5%, to $603.1 million in 2024.

The increase was driven primarily by unfavorable mix, and the impact of the OpSec acquisition, partially offset by productivity gains, the impact of lower sales volumes, and favorable foreign currency translation.

Selling, general and administrative expenses decreased by $0.8 million, or 0.4%, to $187.6 million in 2024.

The decrease was driven primarily by cost saving actions, favorable foreign currency translation, and productivity gains, partially offset by the impact from the OpSec acquisition.

The increase was driven primarily by the impact of the OpSec acquisition, and unfavorable mix, partially offset by productivity gains.

Selling, general and administrative expenses increased by $9.7 million, or 3.5%, to $283.9 million in 2024.

The increase was driven primarily by the impact of the OpSec acquisition, partially offset by cost saving actions.

Operating profit decreased by $16.4 million, or 7.6%, to $198.0 million in 2024.

The decrease was primarily driven by CPI unfavorable mix and lower volumes, as well as the impact from the OpSec acquisition, partially offset by favorable pricing across both segments and productivity gains.

Our effective tax rate for the six months ended June 30, 2024 is higher than the prior year’s comparable period primarily due to the mix of non-U.S.

The decrease was primarily driven by unfavorable mix and lower volumes in CPI, the impact of the OpSec acquisition, as well as unfavorable foreign currency translation, partially offset by favorable pricing, net of inflation and productivity gains, and the impact of cost saving actions in CPI.

Our effective tax rate for the nine months ended September 30, 2024 was higher than the prior year’s comparable period primarily due to the mix of non-U.S.

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

Segment Results of Operations - Six Month Periods Ended June 30,

Segment Results of Operations - Nine Month Periods Ended September 30,

Crane Payment Innovations

Six Months Ended June 30, Favorable/(Unfavorable) Change

Nine Months Ended September 30,

Favorable/(Unfavorable) Change

(in millions) 2024 2023 $ %

16 unchanged sentences

• Service revenue increased by $4.0 million, or 4.1%, to $100.4 million in 2024, primarily driven by favorable pricing.

Cost of sales increased by $0.2 million, or 0.1%, to $219.4 million in 2024, as lower manufacturing costs, the impact of lower sales volumes, productivity gains and favorable foreign currency translation were more than offset by unfavorable mix.

Cost of sales increased by $2.7 million, or 0.8%, to $333.0 million in 2024, as lower material and other manufacturing costs, the impact of lower sales volumes, productivity gains and favorable foreign currency translation were more than offset by unfavorable mix.

Selling, general and administrative expense decreased by $10.8 million, or 7.0%, to $143.9 million in 2024, primarily due to cost saving actions, and lower reserves on customer receivables driven by higher collections.

Operating profit decreased by $7.6 million, or 4.1%, to $178.7 million in 2024.

The decrease primarily reflected unfavorable mix of $24.3 million, or 19.2%, and lower volumes of $11.9 million, or 9.4%, partially offset by favorable pricing, lower manufacturing costs and productivity gains of $24.4 million, or 19.2%.

Cost saving actions of $4.9 million, or 3.9%, were mostly offset by restructuring charges and unfavorable foreign currency translation.

The decrease primarily reflected unfavorable mix of $30.5 million, or 16.4%, lower volumes of $12.6 million, or 6.8%, and unfavorable foreign currency translation of $3.1 million, or 1.6%, partially offset by favorable pricing, lower material and other manufacturing costs and productivity gains of $32.4 million, or 17.4%, and the impact of cost saving actions of $7.2 million, or 3.9%.

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

Security and Authentication Technologies

Six Months Ended June 30, Favorable/(Unfavorable) Change

Nine Months Ended September 30, Favorable/(Unfavorable) Change

(in millions) 2024 2023 $ %

9 unchanged sentences

Operating margin 17.1 % 23.4 %

Sales increased by $19.0 million, or 8.2%, to $250.8 million in 2024, reflecting the sales benefit from the OpSec acquisition of $20.5 million, or 8.8%, partially offset by lower core sales of $1.0 million, or 0.4%.

• Banknote and security product sales decreased by $2.0 million, or 0.9%, to $227.5 million in 2024, reflecting lower core sales predominantly driven by lower volumes in international markets impacted by the timing of shipments, and unfavorable foreign currency translation, as the Swedish krona weakened against the U.S.

Sales increased by $66.3 million, or 18.3%, to $429.4 million in 2024, reflecting the sales benefit from the OpSec acquisition of $52.7 million, or 14.5%, and higher core sales of $12.3 million, or 3.4%.

• Banknote and security product sales increased by $13.3 million, or 3.7%, to $372.9 million in 2024, reflecting higher core sales predominantly driven by favorable pricing, and favorable foreign currency translation, as the euro strengthened against the U.S.

• Authentication products and solutions sales increased by $53.0 million to $56.5 million in 2024, primarily driven by the sales benefit from the OpSec acquisition.

Cost of sales increased by $12.3 million, or 8.8%, to $151.5 million in 2024, primarily due to the impact of the OpSec acquisition, and higher material and other manufacturing costs, partially offset by productivity gains, favorable mix, and the impact of lower sales volumes.

Selling, general and administrative expense increased by $14.8 million, or 36.7%, to $55.1 million in 2024, primarily due to higher compensation and benefits, higher engineering costs associated with the U.S.

Currency redesign program, and the impact of the OpSec acquisition.

Operating profit decreased by $8.1 million, or 15.5%, to $44.2 million in 2024, reflecting higher compensation, benefits and engineering costs of $7.3 million, or 13.9%, the impact of the OpSec acquisition of $5.4 million, or 10.3%, lower sales volumes of $4.7 million, or 9.1%, and higher material and other manufacturing costs net of favorable pricing of $3.6 million, or 6.8%, partially offset by productivity gains of $8.8 million, or 16.8%, and favorable mix of $4.6 million, or 8.8%.

Cost of sales increased by $54.6 million, or 25.3%, to $270.1 million in 2024, primarily due to the impact of the OpSec acquisition, and higher material and other manufacturing costs, partially offset by productivity gains.

Selling, general and administrative expense increased by $23.3 million, or 37.3%, to $85.8 million in 2024, primarily due to the impact of the OpSec acquisition, and higher engineering costs associated with the U.S.

Currency redesign program.

Operating profit decreased by $11.6 million, or 13.6%, to $73.5 million in 2024, reflecting higher material and other manufacturing costs net of favorable pricing of $9.3 million, or 11.0%, the impact of the OpSec acquisition of $8.9 million, or 10.4%, higher engineering costs of $4.3 million, or 5.1%, partially offset by productivity gains of $12.9 million, or 15.2%.

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

Liquidity and Capital Resources

Six Months Ended June 30,

Nine Months Ended September 30,

(in millions) 2024 2023

8 unchanged sentences

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

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

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

Operating Activities

Cash provided by operating activities was $66.3 million in the first six months of 2024, as compared to $95.0 million during the same period last year.

Cash provided by operating activities was $133.0 million in the first nine months of 2024, as compared to $197.8 million during the same period last year.

The decrease in cash provided by operating activities was primarily driven by increased working capital requirements.

2 unchanged sentences

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

Cash used for investing activities was $291.1 million in the first six months of 2024, as compared to $8.5 million in the comparable period last year.

Cash used for investing activities was $304.4 million in the first nine months of 2024, as compared to $16.1 million in the comparable period last year.

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

1 unchanged sentence

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 $190.2 million during the first six months of 2024 compared to cash used for financing activities of $43.7 million in the comparable period last year.

The increase in cash provided by financing activities was primarily driven by higher net proceeds from the Revolving Facility used to fund the acquisition of OpSec.

Cash provided by financing activities was $115.8 million during the first nine months of 2024 compared to cash used for financing activities of $176.5 million in the comparable period last year.

The increase in cash provided by financing activities was primarily driven by higher net proceeds from the Revolving Facility used to fund the acquisition of OpSec, and lower repayments on the term facility.

Recent Accounting Pronouncements

3 unchanged sentences

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 2. Management’s Discussion and Analysis