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Item 7. Management’s Discussion and Analysis

2025-02-20 compared with 2024-02-22 · 148 added, 138 removed, 215 unchanged (57% of the section changed)

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We are a leading provider of trusted technology solutions to secure, detect, and authenticate our customers’ most valuable assets.

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

Our operations are comprised of two segments, Crane Payment Innovations (“CPI”) and Crane Currency:

• CPI provides electronic equipment and associated software leveraging extensive and proprietary core capabilities with various detection and sensing technologies for applications including verification and authentication of payment transactions.

CPI also provides advanced automation solutions, and processing systems, field service solutions, and remote diagnostics and productivity software solutions.

• Crane Currency provides advanced security solutions based on proprietary technology for securing physical products, including banknotes, consumer goods and industrial products.

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

Our operations are comprised of two segments, Crane Payment Innovations (“CPI”) and Security and Authentication Technologies (“SAT”):

• CPI provides electronic equipment and software leveraging extensive and proprietary core capabilities with various detection and sensing technologies for applications including verification and authentication of payment transactions.

CPI also provides advanced automation solutions, processing systems, field service solutions, remote diagnostics and productivity software solutions.

• SAT provides advanced security solutions based on proprietary technology for securing physical products, including banknotes, consumer goods and industrial products.

SAT also provides brand protection, authentication solutions, and digital content protection across online marketplaces, social media platforms, and websites.

We are committed to delivering shareholder value by focusing on our proprietary and differentiated technology and investing in core businesses to capitalize on opportunities to enhance organic growth.

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Due to rounding, numbers presented throughout this report may not add up precisely to totals we provide and percentages may not precisely reflect the absolute figures.

Recent Transactions

On April 3, 2023, Holdings was separated (the “Separation”) into two independent, publicly-traded companies, Crane NXT, Co.

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Due to SpinCo’s larger operations, greater tangible assets, greater fair value and greater net sales, in each case, relative to ours, among other factors, SpinCo was considered to be the “accounting spinnor” and therefore is the “accounting successor” to Holdings for accounting purposes, notwithstanding the legal form of the Separation.

Therefore, following the Separation, our historical financial statements are comprised solely of combined carve-out financial statements representing only our operations, assets, liabilities and equity on a stand-alone basis derived from the consolidated financial statements and accounting records of Holdings.

Credit Facilities

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.

On March 31, 2023, we borrowed the full amount of the Term Facility and $245.0 million was repaid as of December 31, 2023.

As such, our financial statements for periods prior to the Separation are comprised of combined carve-out financial statements representing only our operations, assets, liabilities and equity on a stand-alone basis derived from the consolidated financial statements and accounting records of Holdings.

Separation Agreements

On April 3, 2023, we entered into definitive agreements with SpinCo in connection with the Separation.

The agreements set forth the terms and conditions of the Separation and provide a framework for Crane NXT’s relationship with SpinCo following the Separation, including the allocation between Crane NXT and SpinCo of Crane NXT’s and SpinCo’s assets, liabilities and obligations attributable to periods prior to, at and after the Separation.

These agreements include the Separation and Distribution Agreement, which contains certain key provisions related to the Separation, as well as a Transition Services Agreement, a Tax Matters Agreement, an Employee Matters Agreement and an Intellectual Property Matters Agreement (each, as described below).

The agreements set forth the terms and conditions of the Separation and provide a framework for our relationship with SpinCo following the Separation, including the allocation between us and SpinCo of our and SpinCo’s assets, liabilities and obligations attributable to periods prior to, at and after the Separation.

As of December 31, 2024, the term of the Transition Services Agreement has expired.

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

Separation and Distribution Agreement

The Separation and Distribution Agreement sets forth, among other things, the agreements between us and SpinCo regarding the principal transactions necessary to effect the Separation.

It also sets forth other agreements that govern certain aspects of our ongoing relationship with SpinCo after the completion of the Separation.

Transition Services Agreement

The Transition Services Agreement provides for the transition of Holdings into two independent, publicly-traded companies following the consummation of the Separation, and provides each party time to replace certain assets and employees that have been allocated to the other party.

Under the Transition Services Agreement, we agreed with SpinCo to provide transition service support to the other for various periods of time of up to 18 months in the areas of finance, tax, human resources, legal and information technology.

Such services are provided on customary commercial terms, and each such service can be terminated prior to the expected termination date of such service if it is no longer required.

The Transition Services Agreement was negotiated in the context of a parent-subsidiary relationship and in the context of the Separation.

Transactions under this agreement did not have a material impact to our financial statements and services were substantially completed as of December 31, 2023.

Tax Matters Agreement

The Tax Matters Agreement, among other things, governs our and SpinCo’s respective rights, responsibilities and obligations after the Separation with respect to tax liabilities and benefits (including any taxes imposed that are attributable to the failure of the Distribution and certain related transactions to qualify as a transaction that is tax-free for U.S.

federal income tax purposes), tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and other matters regarding taxes.

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

Employee Matters Agreement

The Employee Matters Agreement, among other things, governs Crane NXT’s, SpinCo’s and their respective subsidiaries’ rights, responsibilities and obligations after the Separation with respect to the following matters:

(i) employees and former employees (and their respective dependents and beneficiaries) who are or were employed with Crane NXT, SpinCo or their respective subsidiaries, (ii) the allocation of assets and liabilities generally relating to employees, employment or service-related matters and employee benefit plans, (iii) employee compensation plans and director compensation plans, including equity plans, and (iv) other human resources, employment and employee benefits matters.

Intellectual Property Matters Agreement

The Intellectual Property Matters Agreement, among other things, governs the continued ownership and use by Crane NXT and SpinCo of their respective trademarks and trade names that include or are comprised of the term “Crane” in their respective businesses.

Recent Transactions

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.

This section of this Form 10-K generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023.

Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023.

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

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Crane Payment Innovations $ 873.2 $ 886.4 $ 874.3 $ (13.2) (1.5) % $ 12.1 1.4 %

Crane Currency 504.9 465.6 539.4 39.3 8.4 % (73.8) (13.7) %

Security and Authentication Technologies 613.6 504.9 465.6 108.7 21.5 % 39.3 8.4 %

Total net sales $ 1,486.8 $ 1,391.3 $ 1,339.9 $ 95.5 6.9 % $ 51.4 3.8 %

Sales growth:

Core business $ 57.5 4.3 % $ 60.1 4.5 %

Core sales $ 15.7 1.1 % $ 57.5 4.3 %

Foreign exchange (6.2) (0.4) % (6.1) (0.5) %

Acquisitions 86.0 6.2 % — — %

Total sales growth $ 95.5 6.9 % $ 51.4 3.8 %

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Selling, general and administrative $ 386.2 $ 366.8 $ 318.7 $ (19.4) (5.3) % $ (48.1) (15.1) %

Restructuring charges (gains), net $ 0.5 $ 6.2 $ (3.7) $ 5.7 (91.9) % $ (9.9) NM

Restructuring charges $ 10.1 $ 0.5 $ 6.2 $ (9.6) NM $ 5.7 91.9 %

Operating profit (loss):

Crane Payment Innovations $ 228.4 $ 242.8 $ 217.1 $ (14.4) (5.9) % $ 25.7 11.8 %

Crane Currency 116.3 117.3 145.1 (1.0) (0.9) % (27.8) (19.2) %

Security and Authentication Technologies 110.9 116.3 117.3 (5.4) (4.6) % (1.0) (0.9) %

Corporate (70.5) (72.3) (33.1) 1.8 2.5 % (39.2) (118.4) %

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Crane Payment Innovations 26.2 % 27.4 % 24.8 %

Crane Currency 23.0 % 25.2 % 26.9 %

Security and Authentication Technologies 18.1 % 23.0 % 25.2 %

Total operating margin 18.1 % 20.6 % 22.5 %

NON-GAAP FINANCIAL MEASURES

References to "core," such as "core sales," exclude currency effects and, where applicable, the first-year impacts of acquisitions and divestitures.

Management believes that non-GAAP financial measures that exclude these items provide investors with an alternative metric that can assist in identifying underlying growth trends in our business and facilitate comparison of our sales performance, for example, with prior and future periods that are complementary to GAAP metrics.

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

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The Separation

Following the Separation, our historical financial statements are comprised solely of combined carve-out financial statements representing only our operations, assets, liabilities and equity on a stand-alone basis derived from the consolidated and combined financial statements and accounting records of Holdings.

Our financial statements for periods prior to the Separation are comprised of combined carve-out financial statements representing only our operations, assets, liabilities and equity on a stand-alone basis derived from the consolidated financial statements and accounting records of Holdings.

Transaction Related Expenses

In connection with the Separation, we have incurred transaction related expenses of $20.9 million for the year ended December 31, 2023 recorded in “Selling, general and administrative” in the Consolidated and Combined Statements of Operations.

Separation costs primarily consist of professional service fees.

There were no allocated transaction-related expenses in connection with the Separation for the years ended December 31, 2022 and 2021.

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.

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.

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.

2024 compared with 2023

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The change in sales included:

• an increase in core sales of $57.5 million, or 4.3%, driven primarily by favorable pricing across both segments, and

• 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%.

Cost of sales increased by $84.5 million, or 11.5%, to $821.7 million in 2024.

The increase was driven primarily by unfavorable mix of $69.2 million, or 9.7%, partially offset by productivity gains net of inflation, lower volumes and favorable foreign currency translation.

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.

Selling, general and administrative expenses increased by $19.4 million, or 5.3%, to $386.2 million in 2024.

The increase was driven primarily by higher administrative expenses related to professional services to support the Separation, including transaction related expenses of $20.9 million, or 6.6%, and higher compensation and benefit costs.

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.

Operating profit decreased by $18.0 million, or 6.3%, to $268.8 million in 2024.

The decrease was driven by increased corporate costs related to the Separation and unfavorable mix primarily in the Currency segment, partially offset by favorable pricing, productivity gains, and cost saving actions.

2022 compared with 2021

Sales decreased by $5.2 million, or 0.4%, to $1,339.9 million in 2022.

The change in sales included:

• unfavorable foreign currency translation of $65.3 million, or 4.9%, and

• an increase in core sales of $60.1 million, or 4.5%, driven primarily by favorable pricing, partially offset by lower volumes.

Cost of sales decreased by $32.5 million, or 4.4%, to $713.7 million in 2022.

The decrease was driven primarily by favorable foreign currency translation, lower volumes, and productivity gains, partially offset by increased manufacturing costs and unfavorable mix.

Selling, general and administrative expenses decreased by $4.7 million, or 1.5%, to $318.7 million in 2022.

The decrease was driven primarily by favorable foreign currency translation, partially offset by increased selling costs.

Operating profit increased by $22.1 million, or 7.9%, to $301.3 million in 2022.

The increase was driven by favorable pricing and productivity gains, primarily in the Crane Payment Innovations segment.

Increases were offset by lower volumes, primarily in the Currency segment, unfavorable mix in the Crane Payment Innovations segment, unfavorable foreign currency translation and higher net restructuring charges.

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.

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

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Operating margin 26.2 % 27.4 % 24.8 %

Selling, general and administrative expense includes net restructuring charges of $0.5 million in 2023, $6.2 million in 2022 and net restructuring gains of $0.9 million in 2021.

2023 compared to 2022

Sales increased by $12.1 million, or 1.4%, to $886.4 million in 2023, driven by higher core sales of $21.3 million, or 2.4%, offset by unfavorable foreign currency translation of $9.2 million, or 1.0%.

• Sales of Payment Acceptance and Dispensing Products increased $6.5 million, or 0.9%, to $758.7 million in 2023.

The increase reflected higher core sales of $15.5 million, or 2.1%, primarily due to favorable pricing, partially offset by unfavorable foreign currency translation of $9.0 million, or 1.2%, primarily reflecting the weakening of the Japanese Yen, British pound and Australian dollar against the U.S.

• Service revenue increased by $5.6 million, or 4.6%, to $127.7 million in 2023, primarily driven by favorable pricing.

Cost of sales decreased by $4.7 million, or 1.1%, to $439.4 million in 2023, as lower volumes, productivity gains and favorable foreign currency translation, were partially offset by unfavorable mix.

Selling, general and administrative expense decreased by $8.9 million, or 4.2%, to $204.2 million in 2023, primarily reflecting lower performance-based compensation and cost saving actions.

Operating profit increased by $25.7 million, or 11.8%, to $242.8 million in 2023.

The increase primarily reflected favorable pricing net of inflation, and productivity gains, of $51.8 million, or 23.9%, and cost saving actions of $10.4 million, or 4.8%, partially offset by unfavorable mix of $21.6 million, or 9.9%, and lower volumes of $16.6 million, or 7.6%.

Selling, general and administrative expense includes restructuring charges of $10.1 million, $0.5 million and $6.2 million for the years ended December 31, 2024, 2023 and 2022, respectively.

2024 compared to 2023

Sales increased by $68.6 million, or 8.5%, to $874.3 million in 2022, driven by higher core sales of $103.6 million, or 12.9%, offset by unfavorable foreign currency translation of $35.1 million, or 4.4%.

• Sales of Payment Acceptance and Dispensing Products increased $60.0 million, or 8.7%, to $752.2 million in 2022.

The increase reflected higher core sales of $94.1 million, or 13.6%, primarily due to favorable pricing, partially offset by unfavorable foreign currency translation of $34.1 million, or 4.9%, primarily reflecting the weakening of the British pound, Japanese Yen and Australian dollar against the U.S.

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 of Payment Acceptance and Dispensing Products decreased $18.8 million, or 2.5%, to $739.9 million in 2024.

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.

• Service revenue increased by $5.6 million, or 4.4%, to $133.3 million in 2024, primarily driven by favorable pricing.

Cost of sales increased by $11.2 million, or 2.6%, to $444.1 million in 2022, as increased manufacturing costs and unfavorable mix, were partially offset by favorable foreign currency translation, productivity gains and lower volumes.

Selling, general and administrative expense increased by $4.8 million, or 2.3%, to $213.1 million in 2022, primarily reflecting higher net restructuring charges and higher selling costs, partially offset by favorable foreign currency translation.

Operating profit increased by $52.6 million, or 32.0%, to $217.1 million in 2022.

The increase primarily reflected favorable pricing net of inflation, and productivity gains of $85.6 million, or 52.0%, partially offset by unfavorable mix of $17.9 million, or 10.9%, net restructuring charges of $7.1 million, or 4.3%, and unfavorable foreign currency translation of $6.6 million, or 4.0%.

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.

Operating profit decreased by $14.4 million, or 5.9%, to $228.4 million in 2024.

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%.

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

CRANE CURRENCY

SECURITY AND AUTHENTICATION TECHNOLOGIES

(in millions, except %) For the year ended December 31, 2024 2023 2022

Net sales $ 504.9 $ 465.6 $ 539.4

Net sales by product line:

Banknotes and Security Products $ 521.9 $ 500.4 $ 461.0

Authentication Products and Solutions 91.7 4.5 4.6

Total net sales $ 613.6 $ 504.9 $ 465.6

Cost of sales $ 381.3 $ 297.8 $ 269.6

Selling, general and administrative (a)

$ 90.8 $ 78.7 $ 81.0

Selling, general and administrative $ 121.4 $ 90.8 $ 78.7

Operating profit $ 110.9 $ 116.3 $ 117.3

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Operating margin 18.1 % 23.0 % 25.2 %

Selling, general and administrative expense includes net restructuring gains of $2.8 million in 2021.

2024 compared to 2023

Banknote and security product sales increased by $39.3 million, or 8.4%, to $504.9 million in 2023, reflecting higher core sales of $36.2 million, or 7.8%, predominantly driven by higher sales in international markets, as well as favorable foreign currency translation of $3.1 million, or 0.7%.

Cost of sales increased by $28.2 million, or 10.5%, to $297.8 million in 2023, primarily due to unfavorable mix and higher volumes, partially offset by productivity gains net of inflation, and favorable fixed cost leverage resulting from increased backlog.

Unfavorable mix is related to higher U.S.

demand for lower denomination banknotes in 2023.

Selling, general and administrative expense increased by $12.1 million, or 15.4%, to $90.8 million in 2023, primarily in engineering related to higher compensation and benefit costs.

Operating profit decreased by $1.0 million, or 0.9%, to $116.3 million in 2023, reflecting unfavorable mix of $47.6 million, or 40.6%, partially offset by favorable pricing net of inflation, and productivity gains, of $32.4 million, or 27.6%, and higher volumes of $12.8 million, or 10.9%.

2022 compared to 2021

Banknote and security product sales decreased by $73.8 million, or 13.7%, to $465.6 million in 2022, reflecting lower core sales of $43.6 million, or 8.1%, predominantly driven by lower volumes, as well as unfavorable foreign currency translation of $30.2 million, or 5.6%.

Cost of sales decreased by $43.7 million, or 13.9%, to $269.6 million in 2022, primarily due to lower volumes, favorable foreign currency translation, and productivity gains, partially offset by increased manufacturing costs.

Selling, general and administrative expense decreased by $2.3 million, or 2.8%, to $78.7 million in 2022, primarily due to favorable foreign currency translation, partially offset by net restructuring gains in 2021 which did not repeat in 2022.

Operating profit decreased by $27.8 million, or 19.2%, to $117.3 million in 2022, reflecting lower volumes of $29.7 million, or 20.5%, and unfavorable foreign currency translation of $5.3 million, or 3.7%.

Increased manufacturing costs were more than offset by favorable pricing and productivity gains.

Operating profit included net restructuring gains of $2.8 million in 2021 which did not repeat in 2022.

NON-GAAP FINANCIAL MEASURES

"Core sales" exclude currency effects and, where applicable, the first-year impacts of acquisitions and divestitures from sales.

Management believes that non-GAAP financial measures that exclude these items provide investors with an alternative metric that can assist in identifying underlying growth trends in our business and facilitate comparison of our sales performance with prior and future periods that are complementary to GAAP metrics.

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%.

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

(in millions) For the year ended December 31, 2024 2023 2022

Corporate expense $ 70.5 $ 72.3 $ 33.1

Corporate expense increased by $39.2 million, or 118.4%, in 2023 compared with 2022, primarily related to transaction related expenses of $20.9 million, or 63.1%, and higher compensation and benefit costs.

Corporate expense increased by $2.7 million, or 8.9%, in 2022 compared with 2021 primarily related to higher compensation and benefit costs.

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

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

INTEREST AND MISCELLANEOUS INCOME, NET

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

Interest expense increased by $6.2 million, or 14.8%, in 2023 compared with 2022, primarily due to higher interest rates and the increase in the total debt balance related to the $350 million Term facility, partially offset by the redemption of the $300 million outstanding on the 4.45% senior notes.

Related party interest expense decreased by $11.9 million, or 82.6%, in 2023 compared with 2022 as 2023 only included the period 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.

(in millions, except %) For the year ended December 31, 2024 2023 2022

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Effective tax rate 18.7 % 21.5 % 17.5 %

Our effective tax rate is affected by a number of items, both recurring and discrete, including the amount of income we earn in different jurisdictions and their respective statutory tax rates, acquisitions and dispositions, changes in the valuation of our deferred tax assets and liabilities, changes in tax laws, regulations and accounting principles, the continued availability of statutory tax credits and deductions, and examinations initiated by tax authorities around the world.

Our 2023 effective tax rate of 21.5% is higher than the prior year’s comparable period due to the mix in jurisdictional earnings.

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.

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

We are currently assessing the impact of this minimum tax on our business.

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

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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(in millions) For the year ended December 31, 2024 2023 2022

Net cash (used for) provided by:

Net cash provided by (used for):

Operating activities $ 214.1 $ 276.3 $ 306.0

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Financing activities 62.1 (252.5) (135.0)

Effect of exchange rates on cash and cash equivalents 3.8 (20.2) (7.0)

(Decrease) increase in cash and cash equivalents $ (3.5) $ 129.5 $ (43.9)

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, by divesting businesses that are no longer strategic or aligned with our portfolio and where such divestitures can generate capacity for strategic investments and initiatives that further optimize our portfolio, and by paying dividends and/or repurchasing shares.

Effect of exchange rates on cash, cash equivalents and restricted cash (12.0) 3.8 (20.2)

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

by divesting businesses that are no longer strategic or aligned with our portfolio and where such divestitures can generate capacity for strategic investments and initiatives that further optimize our portfolio;

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.

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

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.

In addition, we believe our credit ratings afford us adequate access to public and private debt markets.

In March 2023, we entered into a senior secured credit agreement, which provides for a $500 million, five-year revolving credit facility and a $350 million, three-year term loan facility.

Funding under each facility became available in connection with the Separation, upon the satisfaction of customary conditions of facilities of this type.

In the third quarter of 2023, we drew down and subsequently repaid $20 million on our revolving credit facility.

On March 31, 2023, we borrowed the full amount of the Term Facility.

As of December 31, 2023, we have repaid $245.0 million on the Term Facility.

Please see Item 8 under Note 13, “Financing” to our Consolidated and Combined Financial Statements for additional details.

On April 3, 2023, prior to the consummation of the Separation, SpinCo paid a dividend to Holdings in the amount of $275 million.

Please see Item 8 under Note 1, “Nature of Operations and Significant Accounting Policies” to our Consolidated and Combined Financial Statements for additional details.

On April 4, 2023, we redeemed all our outstanding 4.45% senior notes due 2023, of which $300 million aggregate principal amount was outstanding upon redemption.

Please see Item 8 under Note 13, “Financing” to our Consolidated and Combined Financial Statements for additional details.

We had net proceeds of $210 million from the Revolving Facility as of December 31, 2024.

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

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

Operating Activities

Cash provided by operating activities was $214.1 million in 2024, compared with $276.3 million in 2023.

The decrease in cash provided by operating activities was primarily driven by transaction related expenses as a result of the Separation, tax-related items and lower working capital requirements.

Cash provided by operating activities was $306.0 million in 2022, compared with $277.0 million in 2021.

The increase in cash provided by operating activities was primarily driven by higher net income.

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

Investing Activities

Cash used for investing activities consists of cash used for capital expenditures.

Cash used for investing activities primarily consists of cash used for capital expenditures and acquisitions.

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

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Cash used for investing activities was $318.0 million in 2024, compared with $31.1 million in 2023.

The increase in cash used for investing activities was primarily driven by higher cash used for capital expenditures to support the U.S.

Currency redesign program and other capital projects.

Cash used for investing activities was $21.3 million in 2022, compared with $15.8 million in 2021.

The increase in cash used for investing activities was primarily driven by higher cash used for capital expenditures primarily related to projects to enhance safety and security in our Currency segment.

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

Financing Activities

Financing cash flows consist primarily of dividend payments to shareholders, repayments of indebtedness, proceeds from the issuance of long-term debt and debt issuance cost on new credit facilities.

Cash used for financing activities was $252.5 million in 2023, compared with $135.0 million in 2022.

The increase in cash used for financing activities was primarily driven by higher repayments of debt.

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 used for financing activities was $135.0 million in 2022, compared with $298.1 million in 2021.

The decrease in cash used for financing activities was primarily driven by lower net transfers to Crane.

Financing Arrangements

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Our indebtedness as of December 31, 2024 was as follows:

• $103.1 million related to the Term Facility;

• $210.0 million related to the Revolving Facility;

• $198.7 million of 6.55% notes due 2036;

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45.6 4.8 8.5 9.0 23.3

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

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

Total $ 1,239.0 $ 84.2 $ 85.0 $ 77.7 $ 992.1

26 unchanged sentences

Net debt, a non-GAAP measure, represents total debt less cash and cash equivalents.

Net debt is comprised of components disclosed above which are presented on our Consolidated and Combined Balance Sheets.

Net debt is comprised of components disclosed above which are presented on our Consolidated Balance Sheets.

Net capitalization, a non-GAAP measure, represents Net Debt plus Equity.

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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 2023, equity increased $180.2 million as a result of the dividend from Crane of $275.0 million, net income attributable to common shareholders of $188.3 million, currency translation adjustment of $18.1 million, and the impact of equity-based awards and related settlement activities of $12.9 million.

These increases were partially offset by net transfers to Crane of $285.2 million, cash dividends of $23.7 million, and changes in pension and postretirement plan assets and benefit obligations, net of tax of $5.2 million.

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.

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

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The effect of a change in tax rates on deferred income taxes is recognized in income in the period when the change is enacted.

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

Based on consideration of all available evidence regarding their utilization, we record net deferred tax assets to the extent that it is more likely than not that they will be realized.

1 unchanged sentence

The evidence we consider in reaching such conclusions includes, but is not limited to;

(1) future reversals of existing taxable temporary differences, (2) future taxable income exclusive of reversing taxable temporary differences, (3) taxable income in prior carryback year(s) if carryback is permitted under the tax law, (4) cumulative losses in recent years, (5) a history of tax losses or credit carryforwards expiring unused, (6) a carryback or carryforward period that is so brief it limits realization of tax

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

benefits, and (7) a strong earnings history exclusive of the loss that created the carryforward and support showing that the loss is an aberration rather than a continuing condition.

We account for unrecognized tax benefits in accordance with ASC 740, which prescribes a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized.

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The tax benefit recognized is the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.

We recognize interest and penalties related to unrecognized tax benefits within the income tax expense line of the Consolidated and Combined Statement of Operations, while accrued interest and penalties are included within the related tax liability line of the Consolidated and Combined Balance Sheets.

Goodwill and Other Intangible Assets.

As of December 31, 2024, we had $956.6 million of goodwill and $419.3 million of net intangible assets, of which $45.5 million were intangibles with indefinite useful lives included within intellectual property rights.

As of December 31, 2023, we had $841.2 million of goodwill and $308.9 million of net intangible assets, of which $45.5 million were intangibles with indefinite useful lives included within intellectual property rights.

Our business acquisitions have typically resulted in the recognition of goodwill and other intangible assets.

We follow the provisions under ASC Topic 350, “Intangibles – Goodwill and Other” (“ASC 350”) as it relates to the accounting for goodwill in the Consolidated and Combined Financial Statements.

These provisions require that we, on at least an annual basis, evaluate the fair value of the reporting units to which goodwill is assigned and attributed and compare that fair value to the carrying value of the reporting unit to determine if an impairment has occurred.

We perform our annual impairment testing during the fourth quarter.

Impairment testing takes place more often than annually if events or circumstances indicate a change in status that would indicate a potential impairment.

We believe that there have been no events or circumstances which would more likely than not reduce the fair value of our reporting units below its carrying value.

A reporting unit is an operating segment unless discrete financial information is prepared and reviewed by segment management for businesses one level below that operating segment (a “component”), in which case the component would be the reporting unit.

As of December 31, 2024, we had three reporting units.

When performing our annual impairment assessment, we compare the fair value of each of our reporting units to our respective carrying value.

Goodwill is potentially impaired when the net book value of the reporting unit exceeds its estimated fair value.

Fair values are established primarily by discounting estimated future cash flows at an estimated cost of capital which varies for each reporting unit and which, as of our most recent annual impairment assessment, ranged between 10.5% and 12.0% (a weighted average of 10.6%), reflecting the respective inherent business risk of each of the reporting units tested.

This methodology for valuing our reporting units (commonly referred to as the Income Method) has not changed since the adoption of the provisions under ASC 350.

The determination of discounted cash flows is based on the businesses’ strategic plans and long-range planning forecasts, which change from year to year.

The revenue growth rates included in the forecasts represent best estimates based on current and forecasted market conditions.

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.

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.

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.

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

If the carrying amount of an indefinite lived intangible asset exceeds its fair value, the intangible asset is written down to its fair value.

Fair value is calculated using the relief from royalty method.

We amortize the cost of definite-lived intangibles over their estimated useful lives.

We review all our definite-lived intangible assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.

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.

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.

Reviews occur at the lowest level for which identifiable cash flows are largely independent of cash flows associated with other long-lived assets or asset groups and include estimated future revenues, gross profit margins, operating profit margins and capital expenditures which are based on the businesses’ strategic plans and long-range planning forecasts, which change from year to year.

The revenue growth rates included in the forecasts represent our best estimates based on current and forecasted market conditions, and the profit margin assumptions are based on the current cost structure and anticipated net cost increases or reductions.

There are inherent uncertainties related to these assumptions, including changes in market conditions, and management’s judgment in applying them to the analysis.

If the future undiscounted cash flows are less than the carrying value, then the definite-lived intangible asset is considered impaired and a charge would be taken against net earnings based on the amount by which the carrying amount exceeds the estimated fair value.

Judgments that we make which impact these assessments relate to the expected useful lives of definite lived assets and its ability to realize any undiscounted cash flows in excess of the carrying amounts of such assets and are affected primarily by changes in the expected use of the assets, changes in technology or development of alternative assets, changes in economic conditions, changes in operating performance and changes in expected future cash flows.

Since judgment is involved in determining the recoverable amount of definite-lived intangible assets, there is risk that the carrying value of our definite-lived intangible assets may require adjustment in future periods.

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.

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

Recent Accounting Pronouncements

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