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YoY shift: Lean -
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is -0.21pp more bearish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
-0.37pp
Lean -
Net-tone change vs last year's 10-K.
MD&A
-0.05pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
adversely+5
loss+3
delays+3
volatility+3
unable+2
Positive rising
successfully+1
profitability+1
able+1
Risk Factors (Item 1A)
4,520 words
Item 1A. Risk Factors
Our business, financial condition, results of operations and cash flows may be affected by several factors including but not limited to those set forth below. This discussion should be considered in conjunction with the discussion under the caption “Forward-Looking Information” preceding Part I, the information set forth under Item 1, “Business” and with the discussion of the business included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These risks comprise the material risks of which we are aware. If any of the events or developments described below or elsewhere in this Annual Report on Form 10-K, or in any documents that we subsequently file publicly were to occur, it could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Risks Relating to Our Business
Macroeconomic fluctuations may harm our business, results of operations and stock price.
Our business, financial condition, operating results and cash flows may be adversely affected by changes in global economic conditions and geopolitical risks, including credit market conditions, trade policies, levels of consumer and business confidence, commodity prices and availability, inflationary pressures, exchange rates, levels of government spending and deficits, political conditions, market , extraordinary public health issues such as large-scale health epidemics or pandemics and other that could affect the global economy including impacts associated with any economic sanctions imposed on countries or regions in which we are doing business. Such conditions could have an impact on our flexibility to react to changing economic and business conditions and on our ability to fund our operations for growth or refinance maturing debt balances at economically interest rates. In addition, such conditions could affect the ability of our customers to obtain financing for significant purchases, result in decreases in or of orders for our products and services, and impact the ability of our customers to make payments. Similarly, such macroeconomic fluctuations may affect our supplier base and increase the potential for one or more of our suppliers to experience financial or .
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
restructuring+8
loss+2
against+2
impaired+1
delisting+1
Positive rising
favorable+3
strengthening+2
gain+2
benefit+1
advances+1
MD&A (Item 7)
7,378 words
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated and combined financial statements and related notes included under Item 8 of this Annual Report on Form 10-K.
We are a leading provider of trusted technology solutions to secure, detect, and authenticate our customers’ most valuable assets. 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 to organic growth. We maintain a balance sheet with financial flexibility, allowing us the ability to expand the business through strategic acquisitions into higher-growth adjacencies. We continuously evaluate our portfolio, pursue acquisitions that complement our existing businesses and are accretive to our growth profile, and selectively businesses where appropriate. We foster a performance-based culture with clearly defined values and utilize our well-established Crane Business System (CBS) to drive operational and growth.
Demand for our products is variable and subject to factors beyond our control, any of which could adversely affect our financial condition, results of operations or cash flow.
A substantial portion of our sales is concentrated in industries that are subject to market conditions which may cause customer demand for our products to be volatile. Global trends in the use of cash as well as increased durability of banknotes could impact demand. Reductions in demand by these industries would reduce the sales and profitability of our business. Our CPI segment could be affected by sustained weakness in certain geographic markets or certain end markets such as gaming, retail or banking, as well as low employment levels, office occupancy rates and factors affecting vending operator profitability such as higher fuel, food and equipment financing costs; results could also be impacted by unforeseenadvances in payment processing technologies. In addition, our results in the SAT segment are subject to significant variability due to the timing and size of contract awards by central banks for banknote production and actual order rates, particularly with the U.S. government. If any of these factors comes to fruition, it could adversely affect our financial condition, results of operation and/or cash flow.
We conduct a substantial portion of our business outside the U.S. and face risks inherent in non-domestic operations.
Net sales by destination outside the U.S. were 50% of our consolidated amounts in 2025. We expect that non-U.S. sales will continue to account for a significant portion of our revenues for the foreseeable future. In addition, our operations outside the U.S. are subject to the risks associated with conducting business internationally, including, but not limited to:
• Economic and political instability, including the risk of geopolitical conflict or territorial incursions, in the countries and regions in which we operate;
• The risks of fluctuations in foreign currency exchange rates, primarily the Japanese yen, the British pound, the euro, and the Swedish krona, could adversely affect our reported results, as amounts earned in other countries are translated into U.S. dollars for reporting purposes; and
• Developments in global trade policy, including possible changes to U.S. trade policies and tariffs and retaliatory trade measures taken by other countries. While we continue to expect to be able to largely offset the impact of tariffs on operating profit with pricing and productivity initiatives, the broader economic implications resulting from market volatility may decrease customer demand and negatively impact revenue and profitability. The adoption and expansion of trade restrictions, the occurrence of a trade war, or other governmental action related to tariffs (including in Mexico where our facility operates under the Mexican Maquiladora program, which provides for reduced tariffs and eased import regulations) may adversely impact demand for our products, our costs, our customers, our suppliers, and the U.S. economy, which in turn could have a material adverse effect on our business, financial condition, results of operations and cash flows. U.S. and foreign policy changes and uncertainty about such changes have resulted in increased market volatility and currency exchange rate fluctuations and may have a material adverse effect on our business, financial condition and results of operations.
Information systems and technology networks failures and breaches in data security, personally identifiable and other information, non-compliance with our contractual or other legal obligations regarding such information, or a violation of our privacy and security policies with respect to such information, could adversely affect us.
We are dependent on information technology networks and systems, including the Internet, to process, transmit and store electronic information, and, in the normal course of our business, we collect and retain certain types of personally identifiable and other information pertaining to our customers, stockholders and employees. The legal, regulatory and contractual environment surrounding information security and privacy is constantly evolving. Companies that collect and retain such information are under increasingly sophisticated and severe attack by cyber-criminals around the world. A theft, loss, fraudulent use or misuse of customer, vendor, employee or our proprietary data by cybercrime or otherwise, non-compliance with our contractual or other legal obligations regarding such data or a violation of our privacy and security policies with respect to such data could adversely impact our reputation and could result in costs, fines, litigation or regulatory action against us. Security breaches can create system disruptions and shutdowns that could result in disruptions to our operations. We cannot be certain that advances in criminal capabilities, including the use of artificial intelligence, new vulnerabilities or other developments will not compromise or breach the security solutions protecting our information technology, networks and systems. A successful cyber-attack on our information systems technology or those of our partners, vendors, or suppliers could adversely affect our ability to process orders, maintain proper levels of inventory, collect accounts receivable and pay expenses, all of which could have an adverse effect on our results of operations, financial condition and cash flows. Failure to effectively prevent, detect and recover from security breaches, including attacks on information technology and infrastructure by hackers, viruses, breaches due to employee error or actions, or other disruptions, could seriouslyharm our operations as well as the operations of our customers and suppliers. Such seriousharm can involve, among other things, misuse of our assets, business disruptions, loss of data, unauthorized access to trade secrets and confidential business information, unauthorized access to personal information, legal claims or proceedings, reporting errors, processing inefficiencies, negative media attention, reputational harm, loss of sales, remediation and increased insurance costs, and interference with regulatory compliance. We have experienced and expect to continue to experience cybersecurity threats, which could be material in the future.
We may be unable to identify or to complete acquisitions, or to successfully integrate the businesses we acquire.
We have evaluated, and expect to continue to evaluate, a wide array of potential acquisition transactions. Our acquisition program attempts to address the potential risks inherent in assessing the value, strengths, weaknesses, contingent or other liabilities, systems of internal control and potential profitability of acquisition candidates, as well as other challenges such as retaining the employees and integrating the operations of the businesses we acquire. Integrating acquired operations involves significant risks and uncertainties, including:
• Maintenance of uniform standards, controls, policies and procedures;
• Unplanned expenses associated with the integration efforts;
• Inability to achieve planned facility repositioning savings or related efficiencies from recent and ongoing investments;
• Unidentified issues not discovered in the due diligence process, including legal contingencies;
• Inability of acquired businesses to timely report their results of operations; and
• Challenges in retaining key talent and critical employees from acquired businesses, which could impact operational continuity and the realization of anticipated synergies.
There can be no assurance that suitable acquisition opportunities will be available in the future, that we will continue to acquire businesses or that any business acquired will be integrated successfully or prove profitable, which could adversely impact our growth rate. Our ability to achieve our growth goals depends in part upon our ability to identify and successfully acquire, finance and integrate companies and businesses at appropriate prices and realize anticipated cost savings.
Fluctuation in the prices of, or our ability to source, our components and raw materials, and delays in the distribution of our products could adversely affect our results of operations.
Our operations require significant amounts of necessary components and raw materials that are critical to our profitability and can fluctuate in price. We depend on the timely availability of significant quantities of components and raw materials, including metals such as steel and copper, electronic components, and natural fibers such as cotton and flax. The prices of these components and materials are subject to volatility driven by changes in global supply and demand dynamics, trade policies, geopolitical events, and inflationary pressures. In recent periods, we have experienced sustained cost increases for certain materials. Future price escalations, whether due to market conditions or increased tariffs, could negatively impact our cost structure, including margins.
In addition, w e rely on single or sole‑source suppliers for certain critical materials and components. If any such supplier encounters financial instability, capacity limitations, quality issues, regulatory impediments, labor shortages, or operational disruptions, we may be unable to obtain alternative sources on a timely basis or at comparable cost. Such circumstances could result in production delays, cost increases, or our inability to meet customer demand or quality specifications.
If we are unable to timely source necessary components or materials, our manufacturing operations may be disrupted, delayed or temporarily stopped, which in turn could adversely affect our results of operations.
We compete with other industrial technology businesses for employees in the countries in which we operate, and we may not be able to retain our personnel or hire and retain additional personnel needed for us to sustain and grow our business as planned.
Our business segments and corporate offices are dependent upon highly qualified personnel, including necessary technical expertise, and we generally are dependent upon the continued efforts of key management employees. Several factors may adversely affect the labor force available to us or increase labor costs, including high employment levels, federal unemployment subsidies, and other government regulations. We have recently observed an overall tightening and increasingly competitive labor market which has, and could continue to result in, higher compensation costs. While we believe we have a robust intellectual capital process, we may have difficulty retaining key personnel or locating and hiring additional qualified personnel. The loss of personnel or our failure to attract and retain other qualified and experienced personnel could impair our ability to successfully sustain and grow our business and develop and introduce new products, which could adversely affect our results of operations and financial condition.
We may be unable to successfully develop and introduce new products, which would limit our ability to grow and maintain our competitive position and adversely affect our financial condition, results of operations and cash flow.
Our growth depends, in part, on continued sales of existing products, as well as the successful development and introduction of new products or technologies, which face the uncertainty of customer acceptance and reaction from competitors. Any delay in the development or launch of a new product could result in our not being the first to market, which could compromise our competitive position. If new products do not meet targeted performance measures, or a successfulcounterfeit of our security technology products is produced, we could suffer reputational harm and diminished future sales. Further, the development and introduction of new products may require us to make investments in specialized personnel and capital equipment, increase marketing efforts and reallocate resources away from other uses. We also may need to modify our systems and strategy considering new products that we develop. If we are unable to develop and introduce new products in a cost-effective manner or otherwise manage effectively the operations related to new products, our financial condition, results of operations and cash flows could be adversely impacted.
Our businesses are subject to governmental regulation; failure to comply with those regulations, as well as changes in those regulations, could adversely affect our financial condition, results of operations, cash flows and reputation.
We are required to comply with various import and export control laws, which may affect our transactions with certain customers. In certain circumstances, export control and economic sanctions, and other trade-related regulations may prohibit the export of certain products, services and technologies. In other circumstances we may be required to obtain an export license before exporting the controlled item. Failure to comply with these requirements might result in suspension of these contracts and suspension or debarment from government contracting or subcontracting. Further, we are subject to the Foreign Corrupt Practices Act, which prohibits U.S. companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or retaining business or securing any improperadvantage. We are also subject to the anti-bribery laws of other jurisdictions. Moreover, we conduct business with central banks in countries with high corruption indexes. Due to the nature of our businesses, the countries in which we seek to sell products, and robust regulatory regimes, we are at risk of incurring civil and criminal liability, monetary and non-monetary penalties, fines, disruptions to our business, limitations on our ability to export products and services, and damage to our reputation.
Our business is directly and indirectly exposed to changes in government regulations; for example, changes in gaming regulations could influence the spending patterns of our casino operator customers, or changes in anti-money laundering regulations could result in additional technical requirements for our products. We are also subject to investigation and audit for compliance with the requirements governing government contracts, including requirements related to procurement integrity, manufacturing practices and quality procedures, export control, employment practices, the accuracy of records and the recording of costs and information security requirements. A failure to comply with these requirements could result in suspension of these contracts, and suspension or debarment from government contracting or subcontracting. Failure to comply with any of these regulations could result in civil and criminal liability, monetary and non-monetary penalties, fines, disruptions to our business, limitations on our ability to export products and services, and damage to our reputation.
Our business could be harmed if we are unable to protect our intellectual property.
We rely on a combination of trade secrets, patents, trademarks, copyrights and confidentiality practices to protect our products and technology. Existing trade secret, patent, trademark and copyright laws offer only limited protection and in some cases for a limited duration. Further, our patents could be invalidated or circumvented. In addition, others may develop substantially equivalent, or superseding proprietary technology, or competitors may offer equivalent non-infringing products in competition with our products, thereby substantially reducing the value of our proprietary rights and technology position in the market. The laws of some foreign countries in which our products are or may be manufactured or sold may not protect our products or intellectual property rights to the same extent in the U.S. We cannot assure that the steps we take to protect our intellectual property will be adequate to prevent misappropriation of our technology. We could incur significant and/or unexpected costs in our efforts to avoid, manage, defend and litigate intellectual property matters. Our inability to protect our intellectual property could have an adverse effect on our financial condition, results of operations and cash flows.
Our operations expose us to the risk of litigation, claims and investigations, including those related to product liability and warranties, and employee, commercial, intellectual property and environmental matters, that could adversely affect our financial condition, results of operations, cash flows and reputation. We may not have sufficient insurance coverage or indemnification rights to cover such claims.
• Defending lawsuits and becoming involved in investigations may divert our management’s attention and may cause us to incur significant expenses. In addition, we may be required to pay damage awards, penalties or settlements, or become subject to injunctions or other equitable remedies, that could cause reputational harm and have a material adverse effect on our business, financial condition, results of operations and cash flows.
• Our operations are subject to extensive environmental and health and safety laws and regulations, which impose limitations on the discharge of pollutants into the ground, air and water and establish standards for the generation, treatment, use, storage and disposal of solid and hazardous wastes. We must also comply with various health and safety regulations in the U.S. and abroad. The costs of compliance with these regulations may increase over time. Failure to comply with any of these laws could result in civil and criminal liability, substantial monetary and non-monetary penalties and damage to our reputation. In addition, we cannot provide assurance that our costs related to remedial efforts or alleged environmental damage associated with past or current waste disposal practices or other hazardous materials handling practices will not exceed our estimates or adversely affect our financial condition, results of operations and cash flows.
• We face an inherent risk of exposure to product liability and other claims if our products are defective or if their use causes harm to persons or property, and we may incur liability if we are unable to successfullydefend such claims. Consistent with industry practice, we provide warranties on many of our products, and we could incur costs related to warranty or breach‑of‑contract claims if our products contain manufacturing or design defects or fail to meet contractual or customer specifications. Although we estimate future warranty costs based on historical trends and product sales, these estimates may be inaccurate, resulting in insufficient warranty reserves. Because many of our products are sophisticated and complex and may incorporate or rely on third‑party hardware, software, and data, notwithstanding testing and quality control, defects or errors may still occur. Undetecteddefects, performance failures, or deviations from customer expectations could lead to loss of customers, contractual liabilities, additional development and operational costs, or delays in customer acceptance. Moreover, because customers deploy our software in diverse and complex environments, including varied hardware, platforms, system management tools, and network configurations, the likelihood of technical issues may increase, and when products are integrated with other components or software, identifying the source of any defect or error may be difficult. If any of these risks materialize, we could face increased costs and expenses, exposure to liability claims, diversion of technical and other resources, loss of customers, or negative publicity, any of which could adversely affect our business and results of operations.
• While we maintain insurance coverage with respect to certain liability claims, that insurance coverage may not be adequate to cover all claims that may arise, or we may not be able to maintain adequate insurance coverage in the future at an acceptable cost. Any liabilities not covered by insurance or that exceed our established reserves could have an adverse effect on our financial condition, results of operations and cash flows.
We may be unable to improve productivity, reduce costs and align manufacturing capacity with customer demand.
We are committed to continuous productivity improvement, and we continue to evaluate opportunities to reduce costs, simplify or improve global processes, and increase the reliability of order fulfillment and satisfaction of customer needs. To operate more efficiently and control costs, from time to time we execute restructuring activities, which include workforce reductions and facility consolidations. For example, we recorded pre-tax restructuring charges in 2025 and 2024. While these proactive actions are intended to increase our productivity and operating effectiveness, if demand for our products exceeds our available manufacturing capacity or we are unable to scale production quickly, we may experience delays in fulfilling orders, increased lead times, and potential loss of sales or customer relationships. Conversely, our inability to adequately and timely respond to potential declines in global demand for our products and services to properly align our cost base could have an adverse effect on our financial condition, results of operations and cash flows.
We face significant competition which may adversely impact our financial condition, results of operations, and cash flows in the future.
While we are a principal competitor in most of our markets, all our markets are highly competitive. The competitors in many of our business segments can be expected to improve technologies, reduce costs and develop and introduce new products. The ability of our business segments to achieve similar advances will be important to our competitive positions. Competitive pressures, including those discussed above, could cause one or more of our business segments to lose market share or could result in significant price erosion, which could have an adverse effect on our financial condition, results of operations and cash flows.
Additional tax expense or exposures could adversely affect our financial condition, results of operations and cash flows.
We are subject to income taxes in the U.S. and various international jurisdictions. Our financial condition, results of operations and cash flow could be adversely affected by changes to any or all the following: tax laws, regulations, accounting principles and judicial rulings, the geographic mix of our earnings, the valuation of our deferred tax assets and liabilities, and the results of audits and examinations of previously filed tax returns.
Our future results of operations and financial condition could be adversely impacted by intangible asset impairment charges.
As of December 31, 2025, we had goodwill and other intangible assets, net of accumulated amortization, of $1,721.2 million, which represented approximately 55% of our total assets. Our goodwill is subject to an impairment test on an annual basis and is also tested whenever events and circumstances indicate that goodwill may be impaired. Any excess goodwill resulting from the impairment test must be written off in the period of determination. Intangible assets (other than goodwill) are generally amortized over the useful life of such assets. In addition, from time to time, we may acquire or make an investment in a business that will require us to record goodwill based on the purchase price and the value of the acquired assets. We may subsequently experience unforeseen issues with such business that adversely affect the anticipated returns of the business or value of the intangible assets and trigger an evaluation of the recoverability of the recorded goodwill and intangible assets for such business. Future determinations of significant write-offs of goodwill or intangible assets as a result of an impairment test or any accelerated amortization of other intangible assets could have an adverse effect on our future financial condition and results of operations.
If our internal controls are found to be ineffective, our financial results or our stock price may be adversely affected.
We believe that we have adequate internal control procedures in place for future periods, including processes related to newly acquired businesses; however, increased risk of internal control breakdowns generally exists in any business environment that is decentralized such as ours. In addition, if our internal control over financial reporting is found to be ineffective, investors may lose confidence in the reliability of our financial statements, which may adversely affect our stock price.
We are subject to risks related to the Separation that could negatively impact our results including not obtaining the intended tax treatment of the Separation transaction, failure of Crane Company to perform under the various transaction agreements and actual or potential conflicts of interest with Crane Company.
• In connection with the Separation, we received an Internal Revenue Service (the “IRS”) ruling (the “IRS Ruling”) on certain issues relevant to the qualification of the distribution under sections 368(a)(1)(D) and 355 of the Internal Revenue Code, based on certain facts and representations set forth in such request. The IRS Ruling does not address all of the requirements relevant to the qualification of the distribution for the intended tax treatment. It was a condition to the completion of the distribution that Crane Holdings, Co. receive a tax opinion regarding the tax treatment of the distribution (the “Tax Opinion”). The Tax Opinion relied on certain facts, assumptions, representations and undertakings from us and Crane Company, including those regarding the past and future conduct of the companies’ respective businesses and other matters. Notwithstanding the Tax Opinion, the IRS could determine that the distribution or any such related transaction is taxable if it determines that any of these facts, assumptions, representations or undertakings are not correct or have been violated, or that the distribution should be taxable for other reasons, including if the IRS were to disagree with the conclusions in the Tax Opinion. If the distribution or any of the above referenced related transactions is determined to be taxable for U.S. federal income tax purposes, we could incur significant U.S. federal income tax liabilities.
• We and Crane Company entered into certain agreements in connection with the separation transaction, including a separation and distribution agreement, a transition services agreement, a tax matters agreement, an intellectual property matters agreement and an employee matters agreement, which provide for certain obligations of each company for the benefit of the other for a period of time after the completion of the separation transaction. If Crane Company is unable, or otherwise fails, to satisfy its indemnification obligations, we could incur operational difficulties or losses and experience an adverse impact on our financial condition, results of operations and cash flows.
• Crane Company is not restricted from competing with us. If Crane Company in the future decides to engage in the type of business we conduct, it may have a competitive advantage over us, which may cause our business, financial condition and results of operations to be materially adversely affected.
• Because of their positions with us prior to the completion of the separation transaction, certain of our executive officers and directors have a financial interest in shares of Crane Company common stock. Continuing ownership of shares of Crane Company common stock and equity awards could create, or appear to create, potential conflicts of interest if we and Crane Company pursue the same corporate opportunities or face decisions that could have different implications for Crane Company and us.
opportunities
enhance
strong
divest
excellence
profitable
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.
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, the Aerospace & Electronics, Process Flow Technologies and Engineered Materials businesses of Holdings were spun off to SpinCo. Also, as part of the Separation, Holdings retained the Payment and Merchandising Technologies business and was renamed “Crane NXT, Co.” on April 3, 2023. Following the consummation of the Separation, our common stock is listed under the symbol “CXT” on the New York Stock Exchange.
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. 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 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. 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. 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
Recent Transactions
Credit Facilities
On December 15, 2025, in connection with the closing of the first phase of the Antares Vision acquisition, we amended our Credit Agreement to provide for a €430 million senior secured delayed draw term loan facility (the “Term Loan B”) with a maturity date of December 15, 2032. On December 16, 2025, we drew €112.1 million, or $131.7 million, of the Term Loan B. The remaining Term Loan B will be used to fund the remaining phases of the Antares Vision acquisition. In addition, the amended credit agreement provides for maturity extensions on our existing Term Loan A and Revolving Facility to December 15, 2030 and increased the Revolving Facility to $800 million.
For the year ended December 31, 2025, we drew $406.5 million and repaid $490.5 million on our Revolving Facility to fund working capital requirements. We also drew £300.0 million, or $400.4 million, on the Term Loan A to fund the DLR acquisition and repaid $40.9 million.
In the fourth quarter of 2025 we designated our euro‑denominated Term Loan B as a net investment hedge of certain foreign subsidiaries to mitigate the impact of foreign currency exchange rate fluctuations on the Company’s net investments in those subsidiaries. We recorded $0.2 million gain in Currency Translation Adjustment (“CTA”), a component of Accumulated Other Comprehensive Income (“AOCI”), for the year ended December 31, 2025.
Antares Vision Acquisition
On December 16, 2025, Crane NXT, through a newly formed Italian joint stock company (“ITT”), initiated a multi-phase acquisition of Antares Vision S.p.A. (“Antares Vision”). In the first phase, Crane NXT acquired a 32.3% equity interest in Antares Vision for €117.3 million (approximately $137.8 million), at a purchase price of €5.00 per share. Following the initial investment, Crane NXT launched a mandatory tender offer under applicable Italian law to acquire the remaining publicly traded shares at the same per-share price. Upon completion of the mandatory tender offer Crane NXT will implement steps aimed at delisting Antares Vision and acquire the remaining stake owned by Regolo S.p.A. As a result of the transaction, Antares Vision will become a subsidiary of Crane NXT. We expect the final phase of the transaction to be completed in 2026. The acquisition is funded through the Term Loan B (as described in Note 14, “Financing”).
Antares Vision is a global provider of inspection and detection systems that ensure product safety and quality control, as well as track and trace software solutions that help prevent counterfeiting and provides visibility of products throughout the supply chain. The acquisition advances our strategy and expands the Company’s portfolio in growing end markets, including Life Sciences and Food and Beverage.
DLR Acquisition
On May 1, 2025, we acquired De La Rue Authentication Solutions (“DLR”) for a base purchase price of £300 million. We utilized the Term Loan A to fund the acquisition. DLR is a leading global provider of digital and physical security and authentication technologies to governments and brands, and expands our portfolio of authentication solutions.
De La Rue was combined with OpSec Security to form “Crane Authentication” within the Security and Authentication Technologies segment upon close.
Restructuring
In 2025 we initiated restructuring actions as follows:
• We recorded $12.1 million of restructuring expense in the SAT segment, predominantly related to severance charges, associated with the integration of the DLR and OpSec businesses. Certain remaining actions, including completion of facility‑related exit activities are expected to continue into 2026. Total program costs are expected to be in the range of $15 million to $17 million.
• We recorded $4.7 million of restructuring expense in the CPI segment, predominantly related to severance charges. We continue to evaluate and align CPI’s cost structure with existing economic conditions which could result in additional actions.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Trade Policies and Regulations
We continue to monitor developments in global trade policies and tariff regulations. As of February 26, 2026, we expect to mitigate the majority of tariffs on operating profit with pricing and productivity initiatives. The related macroeconomic uncertainty is also affecting demand, primarily in our CPI vending business, which is driving lower sales volumes. See Item 1A, “Risk Factors” for more details.
This section of this Form 10-K generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. Discussions of 2023 items and year-to-year comparisons between 2024 and 2023 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, 2024.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results from Operations - For the Years ended December 31, 2025, 2024 and 2023
For the year ended December 31,
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Total operating profit
Operating margin:
Crane Payment Innovations
Security and Authentication Technologies
Total operating margin
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
Items Affecting Comparability of Reported Results
The comparability of our results for the years ended December 31, 2025, 2024 and 2023 is affected by the following significant items:
The Separation
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
We incurred transaction related expenses of $24.1 million, $19.9 million and $22.0 million for the years ended December 31, 2025, 2024 and 2023, respectively, recorded in “Selling, general and administrative” in the Consolidated and Combined Statements of Operations. These transaction related expenses primarily consist of professional service fees incurred in connection with acquisitions and the Separation. These expenses are predominantly recorded in Corporate expense.
Restructuring Charges
In response to challenging industry conditions and to realign the cost structure with existing economic conditions in the CPI segment, we recorded restructuring charges of $4.7 million, $10.1 million and $0.5 million for the years ended December 31, 2025, 2024 and 2023, respectively. In addition, we recorded restructuring expenses of $12.1 million in the SAT segment during 2025, primarily associated with the integration of the DLR and OpSec businesses.
OVERALL
2025 compared with 2024
Sales increased by $169.9 million, or 11.4%, to $1,656.7 million in 2025. The change in sales included:
• Sales benefit from the De La Rue and OpSec acquisitions of $133.0 million, or 8.9%,
• Core sales growth of $10.1 million, or 0.7%, driven primarily by the Currency business, partially offset by lower volumes in CPI.
• Favorable foreign currency translation of $26.8 million, or 1.8%, driven primarily by the strengthening of the euro, Swedish krona, British pound and Japanese yen against the U.S. dollar.
Cost of sales increased by $131.2 million, or 16.0%, to $952.9 million in 2025. The increase was driven primarily by the impact of acquisitions in SAT, higher material and other manufacturing costs, unfavorable mix and unfavorable foreign currency translation, partially offset by productivity gains and the impact of lower volumes in CPI.
Selling, general and administrative expenses increased by $54.1 million, or 14.0%, to $440.3 million in 2025. The increase was driven primarily by the SAT acquisitions of $45.3 million, or 11.7% and unfavorable foreign currency transaction.
Operating profit decreased by $22.1 million, or 8.2%, to $246.7 million in 2025. The decrease was primarily driven by the dilutive impact of acquisitions, higher material and other manufacturing costs, unfavorable mix and the impact of lower volumes in CPI, partially offset by favorable pricing, cost saving actions and productivity gains.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CRANE PAYMENT INNOVATIONS
(in millions, except %) For the year ended December 31,
Net sales by product line:
Payment Acceptance and Dispensing Products
Services
Total net sales
Cost of sales
Selling, general and administrative (a)
Operating profit
Assets
Backlog
Operating margin
Selling, general and administrative expense includes restructuring charges of $4.7 million, $10.1 million and $0.5 million for the years ended December 31, 2025, 2024 and 2023, respectively.
2025 compared to 2024
Sales decreased by $26.6 million, or 3.0%, to $846.6 million in 2025, driven by lower core sales of $31.7 million, or 3.6%, offset by favorable foreign currency translation of $5.1 million, or 0.6%.
• Sales of Payment Acceptance and Dispensing Products decreased $30.5 million, or 4.1%, to $709.4 million in 2025. The decrease reflected lower core sales of $35.6 million, or 4.8%, as favorable pricing was more than offset by lower volumes primarily in vending. The decrease was partially offset by favorable foreign currency translation of $5.1 million, or 0.7%, primarily reflecting the strengthening of the British pound and Japanese yen against the U.S. dollar.
• Service revenue increased by $3.9 million, or 2.9%, to $137.2 million in 2025, primarily driven by favorable pricing.
Cost of sales decreased by $8.1 million, or 1.8%, to $432.3 million in 2025, driven by the impact of lower sales volumes and productivity gains, partially offset by unfavorable mix, higher material and other manufacturing costs and unfavorable foreign currency translation.
Selling, general and administrative expense decreased by $11.7 million, or 5.7%, to $192.7 million in 2025, primarily due to cost saving actions and lower restructuring charges.
Operating profit decreased by $6.8 million, or 3.0%, to $221.6 million in 2025. The decrease primarily reflected the impact of lower volumes of $27.8 million, or 12.2%, and unfavorable mix of $16.4 million, or 7.2%, partially offset by favorable pricing, net of inflation, productivity gains and cost saving actions of $32.0 million, or 14.0%, and lower restructuring charges of $5.4 million, or 2.4%.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SECURITY AND AUTHENTICATION TECHNOLOGIES
(in millions, except %) For the year ended December 31,
Net sales by product line:
Banknotes and Security Products
Authentication Products and Solutions
Total net sales
Cost of sales
Selling, general and administrative
Operating profit
Assets
Backlog
Operating margin
Selling, general and administrative expense includes restructuring charges of $12.1 million for the years ended December 31, 2025.
2025 compared to 2024
Sales increased by $196.5 million, or 32.0%, to $810.1 million in 2025, primarily reflecting the sales benefit of acquisitions of $133.0 million, or 21.7%, higher core sales of $41.8 million, or 6.8% and favorable foreign currency translation of $21.7 million, or 3.5%.
• Banknote and security product sales increased by $70.5 million, or 13.5%, to $592.4 million in 2025, driven by higher sales in international markets and favorable foreign currency translation reflecting the strengthening of the Euro and Swedish Krona against the U.S. dollar.
• Authentication products and solutions sales increased by $126.0 million to $217.7 million in 2025, driven by the sales benefit from acquisitions.
Cost of sales increased by $139.3 million, or 36.5%, to $520.6 million in 2025, primarily due to the impact of the SAT acquisitions of $79.4M million, or 20.8%, acquisition related amortization and fair value step-up, higher material and other manufacturing costs, and unfavorable foreign currency translation, partially offset by productivity gains.
Selling, general and administrative expense increased by $70.7 million, or 58.2%, to $192.1 million in 2025, primarily due to the impact of acquisitions and restructuring charges associated with the integration of the De La Rue and OpSec businesses.
Operating profit decreased by $13.5 million, or 12.2%, to $97.4 million in 2025, primarily due to higher material and other manufacturing costs net of favorable pricing of $31.2 million, or 28.1%, higher restructuring charges of $12.1 million, or 10.9%, partially offset by productivity gains and cost saving actions of $26.7 million, or 24.0%. The dilutive impact of acquisitions of $15.0 million, or 13.5%, was offset by the impact of higher volumes.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CORPORATE
(in millions) For the year ended December 31,
Corporate expenses
Corporate expenses increased by $1.8 million, or 2.6%, in 2025 compared with 2024, primarily related to higher compensation and benefit costs.
INTEREST AND MISCELLANEOUS INCOME, NET
(in millions) For the year ended December 31,
Interest income
Interest expense
Related party interest expense*
Equity investment (loss) gain
Miscellaneous income, net
* Related party interest with Crane Company incurred prior to the Separation.
Interest expense increased by $12.5 million, or 26.2%, in 2025 compared with 2024 due to higher debt outstanding in 2025 to fund acquisitions.
Equity investment loss increased by $12.3 million in 2025 compared with 2024 driven by stock-based compensation issued to senior management of Antares Vision, as a result of acquiring a 32.3% equity interest in the fourth quarter of 2025. See Note 3 “Acquisitions”
INCOME TAX
(in millions, except %) For the year ended December 31,
Income before tax — U.S.
Income before tax — non-U.S.
Income before tax — worldwide
Provision for income taxes
Effective tax rate
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 2025 effective tax rate of 19.8% is higher than the prior year’s comparable period due to the mix in jurisdictional earnings.
On July 4, 2025, the U.S. government enacted The One Big Beautiful Bill Act of 2025 which includes various changes to the U.S. corporate income tax system including, but not limited to, the immediate expensing of qualifying research and development expenses and the permanent extension of certain provisions initially enacted within the Tax Cuts and Jobs Act. Based on the Company’s evaluation of the provisions, these tax law changes did not have a material impact on the Company’s financial statements.
The Organization for Economic Co-operation and Development (“OECD”) has proposed a global minimum tax of 15% of reported profits (“Pillar 2 tax”) that has been agreed upon by over 140 member jurisdictions including the United States. Pillar 2 addresses the risks associated with profit shifting to entities in low tax jurisdictions. The Pillar 2 tax liability for the Company in 2025 was approximately $1.3 million. On January 5, 2026, the US Treasury Department and OECD have agreed in principle to adopt a side-by-side tax system that will exempt US parented companies from Pillar 2 taxes starting in 2026.
See "Application of Critical Accounting Policies" included later in this Item 7 for additional information about our provision for income taxes. A reconciliation of the statutory U.S. federal tax rate to our effective tax rate is set forth in Item 8 under Note 10, "Income Taxes" in the Notes to Consolidated and Combined Financial Statements.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
(in millions) For the year ended December 31,
Net cash provided by (used for):
Operating activities
Investing activities
Financing activities
Effect of exchange rates on cash, cash equivalents and restricted cash
Increase (Decrease) in cash, cash equivalents and restricted cash
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; 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.
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.
We had net proceeds of $126.0 million from the Revolving Facility as of December 31, 2025. As of December 31, 2025, we drew down $532 million on term loans to fund the De La Rue and Antares acquisitions, and repaid $40.9 million. Please see Item 8 under Note 14, “Financing” in the Consolidated and Combined Financial Statements for additional details.
Operating Activities
Cash provided by operating activities was $241.5 million in 2025, compared with $214.1 million in 2024. The increase in cash provided by operating activities was primarily driven by improved working capital management.
Investing Activities
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. We expect capital expenditures of approximately $75 million to $80 million in 2026.
Cash used for investing activities was $549.0 million in 2025, compared with $318.0 million in 2024. The increase was primarily driven by the $391.1 million De La Rue acquisition and $116.5 million investment in Antares Vision in 2025, which together were $237.7 million higher than the $269.9 million OpSec acquisition in 2024.
Financing Activities
Cash provided by (used for) financing activities consists primarily of d ividend payments to shareholders, repayments of indebtedness, proceeds from our credit facilities and investments from our stakeholders .
Cash provided by financing activities was $363.6 million in 2025, compared with $62.1 million in 2024. The increase was primarily attributable to proceeds from term loan borrowings in 2025 to fund the De La Rue and Antares Vision acquisitions, partially offset by higher repayments on the Revolving Facility.
Financing Arrangements
Total debt was $1,139.5 million and $750.6 million as of December 31, 2025, and 2024, respectively. Our indebtedness as of December 31, 2025 was as follows:
• $126.0 million related to the Revolving Facility;
• $198.8 million of 6.55% notes due 2036;
• $346.9 million of 4.20% notes due 2048; and
• $481.2 million related to the term loan borrowings.
See Item 8 under Note 14, “Financing,” in the Notes to Consolidated and Combined Financial Statements for details regarding our financing arrangements.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Credit Ratings
As of December 31, 2025, Crane NXT’s Corporate Rating was BB+ by S&P Global Ratings with a Stable Outlook and Ba1 with a Stable Outlook by Moody’s Investor Services. Our senior secured debt was rated BB+ by S&P Global Ratings with a Stable outlook and Baa3 with a Stable Outlook by Moody’s Investor Service. Our senior unsecured debt was rated BB- by S&P Global Ratings with a Stable outlook and Ba2 with a Stable outlook by Moody’s Investors Service. We believe that these ratings afford us adequate access to the public and private debt markets.
Contractual Obligations
Under various agreements, we are obligated to make future cash payments in fixed amounts. These include payments under our short-term and long-term debt agreements and rent payments required under operating lease agreements. The following table summarizes our cash obligations as of December 31, 2025:
Payment due by Period
(in millions)
Total
2031 and after
Debt (a)
Fixed interest payments (b)
Operating lease payments
Purchase obligations
Pension and postretirement benefits (c)
Other long-term liabilities reflected on Consolidated Balance Sheets (d)
Total
(a) Debt includes scheduled principal payments.
(b) Variable interest payments are excluded because the underlying interest rates will depend on changes in market-based rates and cannot be reasonably estimated.
(c) Pension benefits are funded by the respective pension trusts. The postretirement benefit component of the obligation is approximately $1.0 million per year for which there is no trust and will be directly funded by us. Pension benefits are included through 2035.
(d) As the timing of future cash outflows is uncertain, the following long-term liabilities (and related balances) are excluded from the above table: gross unrecognized tax benefits of $5.5 million and related gross interest and penalties of $1.1 million.
(e) Pursuant to the Antares acquisition agreements, the Company is obligated to initiate a mandatory tender offer for the acquisition of the publicly traded shares of Antares. These contractual obligations are not included in the schedule above due to uncertainty regarding the number of shares that will be tendered. The transaction is expected to be funded through available capacity under the Term Loan B facility. Refer to Note 3, “Acquisition,” and Note 14, “Financing,” for additional information.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Capital Structure
The following table sets forth our capitalization:
(in millions, except %) December 31,
Short-term borrowings
Long-term debt
Total debt
Equity
Capitalization
Debt to capitalization
Total debt
Less cash and cash equivalents
Net debt (a)
Equity
Net capitalization (a)
Net debt to equity (a)
Net debt to net capitalization (a)
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 Balance Sheets. Net capitalization, a non-GAAP measure, represents Net Debt plus Equity. We report our financial results in accordance with U.S. generally accepted accounting principles (U.S. GAAP). However, management believes that certain non-GAAP financial measures, which include the presentation of net debt and net capitalization, provide useful information about our ability to satisfy our debt obligation with currently available funds. Management also uses these non-GAAP financial measures in making financial, operating, planning and compensation decisions and in evaluating our performance. 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. GAAP.
In 2025, equity increased $185.0 million as a result of net income attributable to common shareholders of $145.1 million, the impact of equity-based awards and related settlement activities of $9.8 million, currency translation adjustment of $72.2 million, and changes in pension and postretirement plan assets and benefit obligations, net of tax of $0.5 million. These increases were partially offset by cash dividends of $39.0 million, and noncontrolling interest of acquired entity of $3.6 million.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
APPLICATION OF CRITICAL ACCOUNTING ESTIMATES
Our Consolidated and Combined Financial Statements are prepared in accordance with accounting principles generally accepted in the United States. Certain accounting policies require us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. On an ongoing basis, we evaluate our estimates and assumptions, and the effects of revisions are reflected in the financial statements in the period in which they are determined to be necessary. The accounting estimates described below are those that most frequently require us to make estimates and judgments and, therefore, are critical to understanding our results of operations. We have discussed the development and selection of these accounting estimates and the related disclosures with the Audit Committee of our Board of Directors. Our significant accounting policies are more fully described in Item 8 under Note 1, “Nature of Operations and Significant Accounting Policies” in the Notes to Consolidated and Combined Financial Statements.
Revenue Recognition. We primarily generate revenue through the manufacture and sale of technology solutions including advanced detection and sensing systems, software to authenticate and manage transactions and micro-optics materials technology. Each product within a contract generally represents a separate performance obligation, as we do not provide a significant service of integrating or installing the products, the products do not customize each other, and the products can function independently of each other. Control of products generally transfers to the customer at a point in time, as the customer does not control the products as they are manufactured. We exercise judgment and consider the timing of right to payment, transfer of risk and rewards, transfer of title, transfer of physical possession, and customer acceptance when determining when control transfers to the customer. As a result, revenue from the sale of products is generally recognized at a point in time - either upon shipment or delivery - based on the specific shipping terms in the contract.
When products are customized or products are sold directly to the U.S. government or indirectly to the U.S. government through subcontracts, and under certain international government contracts, revenue is recognized over time because control is transferred continuously to customers, as the contract progresses. We exercise judgment to determine whether the products have an alternative use to us. When an alternative use does not exist for these products and we are entitled to payment for performance completed to date which includes a reasonable profit margin, revenue is recognized over time. When a contract contains clauses indicating that the customer owns any work-in-progress as the contracted product is being built, revenue is recognized over time. The measure of progress applied by us is the cost-to-cost method as this provides the most faithful depiction of the pattern of transfer of control. Under this method, we measure progress by comparing costs incurred to date to the total estimated costs to provide the performance obligation. This method effectively reflects our progress toward completion, as this methodology includes any work-in-process amounts as part of the measure of progress. Costs incurred represent work performed, which corresponds with, and thereby depicts, the transfer of control to the customer. Total revenue recognized and cost estimates are updated monthly. In 2025, the Company recognized approximately $225 million in revenue over time related to products.
These estimates are subject to uncertainties and require judgment. Estimates of contract costs include labor hours and rates, and material costs. These estimates consider historical performance, the complexity of the work to be performed, the estimated time to complete the project, and other economic factors such as inflation and market rates. We update our estimates on a periodic basis and any revisions to such estimates are recorded in earnings in the period in which they are determined. Provisions for estimated losses, if any, on uncompleted long-term contracts, are made in the period in which such losses are determined. We do not believe that any discrete event or adjustment in contract estimates for 2025, 2024 or 2023 was material to the consolidated and combined statements of operations for such annual periods.
Income Taxes. We account for income taxes in accordance with ASC Topic 740 “Income Taxes” (“ASC 740”), which requires an asset and liability approach for the financial accounting and reporting of income taxes. Under this method, deferred income taxes are recognized for the expected future tax consequences of differences between the tax bases of assets and liabilities and their reported amounts in the financial statements. These balances are measured using the enacted tax rates expected to apply in the year(s) in which these temporary differences are expected to reverse. 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. Where, based on the weight of all available evidence, it is more likely than not that some amount of a deferred tax asset will not be realized, we establish a valuation allowance for the amount that, in our judgment, is sufficient to reduce the deferred tax asset to an amount that is more likely than not to be realized. 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 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. The minimum threshold is defined as a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation, based solely on the technical merits of the position. 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 Balance Sheets.
Goodwill and Other Intangible Assets. As of December 31, 2025, we had $1,164.0 million of goodwill and $557.2 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, 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.
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, 2025, 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 11.0% and 12.0% (a weighted average of 11.5%), 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 factors outside management control such as market conditions, and management judgment is necessary in applying them to the analysis of goodwill impairment. In addition to the foregoing, for each reporting unit, market multiples are used to corroborate discounted cash flow results where fair value is estimated based on earnings multiples determined by available public information of comparable businesses. No impairment charges have been required during 2025, 2024 and 2023.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Furthermore, to evaluate the sensitivity of the fair value calculations on the goodwill impairment test, we applied a hypothetical, reasonably possible 10% decrease to the fair values of each reporting unit. The effects of this hypothetical 10% decrease would still result in a fair value calculation significantly exceeding our carrying value for each of our reporting units, except for the recently acquired Authentication reporting unit which was less than 10%. Authentication’s goodwill represents 27.9% of the total goodwill of the Company. Due to the nature of acquisitions, these reporting units are inherently more sensitive to fluctuations in projected performance or market conditions. Although we believe our estimates and assumptions are reasonable, actual results may differ due to factors such as market conditions, interest rate changes, or lower than expected business performance. If they do, goodwill and other intangible assets could become impaired, requiring a charge against net earnings.
Intangibles with indefinite useful lives are tested annually for impairment, or when events or changes in circumstances indicate the potential for impairment. 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. During the year ended December 31, 2025, we impaired software related to a discontinued product line of $1.5 million as a result of the integration of DLR and OpSec businesses within our SAT segment. See Note 16, “Restructuring”. Recoverability is based upon projections of anticipated future undiscounted cash flows associated with the use and eventual disposal of the definite-lived intangible asset (or asset group), as well as specific appraisal in certain instances. 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, other than described above, or circumstances which would more likely than not reduce the fair value of our indefinite-lived or any of our definite-lived intangible assets below their carrying value. As of the last annual assessment, fair values have been substantially in excess of carrying values.
Recent Accounting Pronouncements
Information regarding new accounting pronouncements is included in Item 8 under Note 1 to the Consolidated and Combined Financial Statements.
