Crane NXT Co

Note 1 -Organization and Basis of Presentation

Crane NXT, Co. is a leading provider of trusted technology solutions to secure, detect, and authenticate our customers’ most valuable assets. We are comprised oftwo reporting segments: Crane Payment Innovations (“CPI”) and Security and Authentication Technologies (“SAT”). Our primary end markets include governments, brands, financial insti tutions 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).

References herein to “Crane NXT,” “we,” “us” and “our” refer to Crane NXT, Co. and its subsidiaries, including when Crane NXT, Co. was named “Crane Holdings, Co.” unless the context implies otherwise. References herein to “Holdings” refer to Crane Holdings, Co. and its subsidiaries prior to the consummation of the Separation unless the context implies otherwise.

Separation

On April 3, 2023, Holdings was separated (the “Separation”) into two independent, publicly-traded companies, Crane NXT, Co. and Crane Company (“SpinCo”), through a pro-rata distribution (the “Distribution”) of all the issued and outstanding common stock of SpinCo to the stockholders of Holdings. As part of the Separation, we entered into definitive agreements with SpinCo, including a Tax Matters Agreement, which set forth the terms and conditions of the Separation and provided a framework for our relationship with SpinCo following the Separation. See Note 9, “Income Taxes” for more details on the Tax Matters Agreement.

Basis of Presentation

The accompanying Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial reporting and, therefore, reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. All such adjustments are of a normal recurring nature. These Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Crane NXT Consolidated and Combined Financial Statements and Notes to Consolidated and Combined Financial Statements for the year ended December 31, 2024, previously filed on Form 10-K on February 20, 2025.

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 Accounting Pronouncements

Recently Issued Accounting Standards

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures which intends to improve the transparency of income tax disclosures. The new standard requires public entities to provide greater disaggregation in their rate reconciliation, including new requirements to present reconciling items on a gross basis within specified categories, to disclose both percentages and dollar amounts, and to disaggregate individual reconciling items by jurisdiction and nature when the effect of the items meets a quantitative threshold. The guidance also includes new requirements to provide users of the financial statements with better information on future cash flow prospects. The standard is effective for all public entities for annual periods beginning after December 15, 2024, on a prospective basis, with a retrospective option, and early adoption permitted for annual financial statements that have not yet been issued. The Company is currently evaluating the potential impact of this standard on its Financial Statements and Disclosures. We do not expect the new standard to have a material impact on our disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses which intends to improve the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions (such as cost of sales, SG&A, and research and development). The standard requires disclosure of these expenses on an interim and annual basis in the notes to the financial statements. The standard is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the potential impact of this standard on its Financial Statements and Disclosures.

The Company considered the applicability and impact of other Accounting Standards Updates issued by the Financial Accounting Standards Board (FASB) and determined them to be either not applicable or are not expected to have a material impact on the Company's Unaudited Condensed Consolidated Statements of Operations, Balance Sheets and Cash Flows.

Note 2 -Related Parties

After the Separation, SpinCo and its subsidiaries became related parties. As of March 31, 2025 and December 31, 2024, we had outstanding receivables from SpinCo and its subsidiaries of $3.2 million and $0.7 million, respectively, related to indemnification under the Tax Matters Agreement.

Note 3 -Acquisitions

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. The amount paid, net of cash acquired and working capital adjustments, was $268.4 million. We utilized $210.0 million from our Revolving Facility (as defined in Note 13, “Financing”) and cash on hand to fund the acquisition.

OpSec provides authentication solutions, brand and digital content protection serving various commercial brands, government agencies and financial institutions.

Allocation of Consideration Transferred to Net Assets Acquired

The following amounts represent the preliminary determination of the fair value of identifiable assets acquired and liabilities assumed from our acquisition of OpSec, pending the finalization of certain tangible assets and liabilities to be completed within the measurement period as required by ASC 805. Potential adjustments are not expected to be material in relation to the preliminary values presented below:

The amount allocated to other assumed liabilities includes a contingent liability of $1.5 million related to a prior OpSec acquisition. The amount payable is contingent upon achievement of specific revenue targets and is capped at $2.2 million. The contingency conditions expire at the end of 2026, at which point if the contingency conditions have not been met, no payment will occur. The contingent liability is measured at fair value. See Note 14, “Fair Value Measurements” for further details.

The amount allocated to goodwill reflects expected sales synergies, manufacturing efficiency and research and development. Goodwill from this acquisition is not deductible for tax purposes.

The amounts allocated to acquired intangible assets, and their associated weighted-average useful lives which were determined based on the period in which the assets are expected to contribute directly or indirectly to our future cash flows, consist of the following:

Supplemental Pro Forma Data

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.

The following unaudited pro forma Condensed Consolidated information assumes that the acquisition was completed on January 1, 2023. The unaudited pro forma Condensed Consolidated information is provided for illustrative purposes only and is not indicative of our actual Condensed Consolidated results of operations or Condensed Consolidated financial position.

Note 4 -Segment Results

As of March 31, 2025, we hadtwo reportable segments: Crane Payment Innovations and Security and Authentication Technologies. Assets of the reportable segments exclude general corporate assets which principally consist of cash and tax-related balances. Corporate consists of corporate office expenses including compensation and benefits for corporate employees, occupancy, professional services and other administrative costs.

A brief description of each of our segments as of March 31, 2025 is as follows:

Crane Payment Innovations (CPI)

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. Key research and development and manufacturing facilities are located in the United States, the United Kingdom, Mexico, Japan, and Germany, with additional sales offices across the world.

Security and Authentication Technologies (SAT)

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. These solutions serve various brands, as well as government agencies and financial insti tutions. Key research and development and manufacturing facilities are located in the United States, United Kingdom, Sweden and Malta.

Financial information by reportable segment is set forth below:

Note 5 -Revenue

Disaggregation of Revenues

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

Remaining Performance Obligations

The transaction price allocated to remaining performance obligations represents the transaction price of firm orders which have not yet been fulfilled. As of March 31, 2025, our performance obligations were $547.8 million. We expect to recognize approximately 76% of our remaining performance obligations as revenue in 2025, and 24% in 2026.

Contract Assets and Contract Liabilities

Contract assets represent unbilled amounts that typically arise from contracts for customized products or contracts for products sold directly to the U.S. government or indirectly to the U.S. government through subcontracts, where revenue recognized using the cost-to-cost method exceeds the amount billed to the customer. Contract assets are assessed for impairment and recorded at their net realizable value. Contract liabilities represent advance payments from customers. Revenue related to contract liabilities is recognized when control is transferred to the customer. We report contract assets, which are included within “Other current assets” in our Unaudited Condensed Consolidated Balance Sheets, and contract liabilities, which are included within “Accrued liabilities” and “Other liabilities” on our Unaudited Condensed Consolidated Balance Sheets, on a contract-by-contract net basis at the end of each reporting period. Net contract assets and contract liabilities consisted of the following:

We recognized revenue of $24.5 million during the three months ended March 31, 2025, related to contract liabilities as of December 31, 2024.

Note 6 -Earnings Per Share

Our basic earnings per share calculations are based on the weighted average number of common shares outstanding during the period. Potentially dilutive securities include outstanding stock options, restricted share units, deferred stock units and performance-based restricted share units. The effect of potentially dilutive securities is reflected in diluted earnings per common share by application of the treasury method. Diluted earnings per share gives effect to all potentially dilutive common shares outstanding during the period.

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 and 0.3 million for the three months ended March 31, 2025, and 2024, respectively.

Note 7 -Changes in Accumulated Other Comprehensive Loss

The table below provides the accumulated balances for each classification of accumulated other comprehensive income (loss), as reflected on our Unaudited Condensed Consolidated Balance Sheets.

(a) Net of tax detriment of $1.2 million and $1.3 million as of March 31, 2025 and December 31, 2024, respectively.

The table below illustrates the amounts reclassified out of each component of accumulated other comprehensive loss for the three months periods ended March 31, 2025, and 2024. Amortization of pension and postretirement components has been recorded within “Miscellaneous income, net” on our Unaudited Condensed Consolidated Statements of Operations.

Note 8 -Pension and Postretirement Benefits

For all plans, the components of net periodic (benefit) expense for the three months ended March 31, 2025, and 2024 are as follows:

The components of net periodic benefit, other than the service cost component, are included in “Miscellaneous income, net” in our Unaudited Condensed Consolidated Statements of Operations. Service cost is recorded within “Cost of sales” and “Selling, general and administrative” in our Unaudited Condensed Consolidated Statements of Operations.

We expect to contribute the following to our pension and postretirement plans:

Note 9 -Income Taxes

Effective Tax Rates

Our quarterly provision for income taxes is measured using an annual effective tax rate, adjusted for discrete items within the periods presented.

Our effective tax rates are as follows:

Our effective tax rate for the three months ended March 31, 2025 is higher than the prior year’s comparable period primarily due to the mix of non-U.S. earnings.

Our effective tax rate for the three months ended March 31, 2025 is higher than the statutory U.S. federal tax rate of 21% primarily due to the mix of non-U.S. earnings.

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 adopted Pillar 2 in 2024 and the anticipated impact of Pillar 2 on our business for the fiscal year ending December 31, 2025 is approximately $2.6 million.

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.

As of March 31, 2025 and December 31, 2024, we had gross unrecognized tax benefits of $9.4 million included in “Other liabilities” in our Unaudited Condensed Consolidated Balance Sheets.

Note 10 -Goodwill and Intangible Assets

Changes to goodwill are as follows:

As of March 31, 2025, we had $412.3 million of net intangible assets, of which $45.5 million were intangibles with indefinite useful lives. As of December 31, 2024, we had $419.3 million of net intangible assets, of which $45.5 million were intangibles with indefinite useful lives.

Changes to intangible assets are as follows:

A summary of intangible assets are as follows:

Future amortization expense associated with intangible assets is expected to be:

Note 11 -Accrued Liabilities

Accrued liabilities consist of:

Note 12 -Commitments and Contingencies

We regularly review the status of lawsuits, claims and proceedings that have been or may be asserted against us relating to the conduct of our business, including those pertaining to product liability, patent infringement, commercial, employment, employee benefits, environmental and stockholder matters. We record a provision for a liability for such matters when it is considered probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions, if any, are reviewed quarterly and adjusted as additional information becomes available. If either or both criteria are not met, we assess whether there is at least a reasonable possibility that a loss, or additional losses, may have been incurred. 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 March 31, 2025, there was no reasonable possibility that a material loss, or any additional material losses, may have been incurred for such matters.

Note 13 -Financing

Our debt consisted of the following:

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”). 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 (the “Delayed Draw”) of £300 million to be used as part of the funding for the De La Rue Authentication Solutions acquisition. The delayed draw term loan is subject to customary closing conditions including the closing of the De La Rue Authentication Solutions acquisition.

On March 17, 2023, we also entered into a $350 million, 3-year term loan facility (the “Term Facility”). On December 9, 2024, proceeds from the Revolving Facility were used to repay the outstanding Term Facility.

In the three months ended March 31, 2025, we drew down $106.0 million, and repaid $52.5 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. Interest on loans advanced under the Credit Agreement accrues, at our option, at a rate per annum equal to (1) adjusted term Secured Overnight Financing Rate (SOFR) plus a credit spread adjustment of 0.10% for the applicable interest period plus a margin ranging from 1.50% to 2.25% or (2) a base rate plus a margin ranging from 0.50% to 1.25%, in each case, with such margin as determined by the lower of corporate family credit ratings issued by Moody’s and S&P (the “Ratings”) and our total net leverage ratio. We are required to pay a fee on undrawn commitments under the Revolving Facility at a rate per annum that ranges from 0.20% to 0.35%, based on the lower of the Ratings and our total net leverage ratio. The Credit Agreement contains customary affirmative and negative covenants for credit facilities of this type, including limitations on our and our subsidiaries with respect to indebtedness, liens, mergers, consolidations, liquidations and dissolutions, sales of all or substantially all assets, transactions with affiliates, investments, hedging arrangements and amendments to our organizational documents or to certain subordinated debt agreements. As of the last day of each fiscal quarter, our total net leverage ratio cannot exceed 3.50 to 1.00 (provided that, at our election, such maximum ratio may be increased to 4.00 to 1.00 for specified periods following our consummation of certain material acquisitions) and our minimum interest coverage ratio must be at least 3.00 to 1.00. 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.

Note 14 -Fair Value Measurements

The following tables provide information regarding the Company’s assets and liabilities measured at fair value as of March 31, 2025, and December 31, 2024.

1 Notional value of $38.9 million

1 Notional value of $65.0 million

Note 15 -Restructuring

2024 Restructuring - In the first and fourth quarters of 2024, in response to challenging industry conditions, we initiated workforce reductions in CPI, incurring $10.1 million of cumulative severance charges, net through March 31, 2025. We expect to substantially complete the restructuring program in 2025 and do not expect to incur significant additional 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 through March 31, 2025, of which $5.8 million related to severance and $0.9 million related to other costs. This restructuring program has been completed.

The following table summarizes the accrual balances related to these restructuring charges by program:

Note 16 -Subsequent Events

On May 1, 2025, we acquired De La Rue plc’s authentication business, De La Rue Authentication Solutions (“DLR”) for a base purchase price of £300 million on a cash-free and debt-free basis, subject to customary adjustments reflecting DLR’s net working capital, cash, the assumption of certain debt-like items, and DLR's transaction expenses. We utilized our Delayed Draw to fund the acquisition.

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.