CACI INTERNATIONAL INC The following discussion and analysis of our financial condition and results of operations is provided to enhance the understanding of, and should be read together with, our unaudited consolidated financial statements and the notes to those statements that appear elsewhere in this Quarterly Report on Form 10-Q.
Information Relating to Forward-Looking Statements
There are statements made herein that do not address historical facts and, therefore, could be interpreted to be forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Such statements are subject to risk factors that could cause actual results to be materially different from anticipated results. These risk factors include, but are not limited to, the following:
• our reliance on
the government contract procurement process (such as bid protest, small
business set asides, loss of work due to organizational conflicts of interest,
etc.) and termination risks;
• significant delays or reductions in appropriations for our programs and
broader changes in
• legislation that amends or changes discretionary spending levels or budget
priorities, such as for
COVID-19;
• legal, regulatory, and political change from successive presidential
administrations that could result in economic uncertainty;
• changes in
foreign events, or any other events which may affect the global economy,
including the impact of global pandemics like COVID-19;
• the results of government audits and reviews conducted by the Defense Contract
entities with cognizant oversight;
• competitive factors such as pricing pressures and/or competition to hire and
retain employees (particularly those with security clearances);
• failure to achieve contract awards in connection with re-competes for present
business and/or competition for new business;
• regional and national economic conditions in
including but not limited to: terrorist activities or war, changes in interest
rates, currency fluctuations, significant fluctuations in the equity markets,
and market speculation regarding our continued independence;
• our ability to meet contractual performance obligations, including
technologically complex obligations dependent on factors not wholly within our
control;
• limited access to certain facilities required for us to perform our work,
including during a global pandemic like COVID-19;
• changes in tax law, the interpretation of associated rules and regulations, or
any other events impacting our effective tax rate;
• changes in technology;
• the potential impact of the announcement or consummation of a proposed
transaction and our ability to successfully integrate the operations of our
recent and any future acquisitions;
• our ability to achieve the objectives of near term or long-term business
plans; and
• the effects of health epidemics, pandemics and similar outbreaks may have
material adverse effects on our business, financial position, results of
operations and/or cash flows.
The above non-inclusive list of risk factors may impact the forward-looking
statements contained in this Quarterly Report on Form 10-Q. In addition, other
risk factors include, but are not limited to, those described in "Item 1A. Risk
Factors" within our Annual Report on Form 10-K. The forward-looking statements
contained in this Quarterly Report on Form 10-Q are as of the date of its
filing.
21
--------------------------------------------------------------------------------Overview
The Company provides Expertise and Technology to Enterprise and Mission customers in support of national security missions and government transformation.
• Enterprise - CACI provides capabilities that enable the internal operations of
a government agency. This includes business systems, business process
reengineering, and enterprise information technology (IT). For example, CACI
customizes, implements, and maintains commercial-off-the-shelf (COTS) and
custom enterprise resource planning (ERP) systems. This includes financial,
human capital, asset and material, and logistics and supply chain management
systems. CACI also designs, develops, integrates, deploys and sustains
enterprise-wide IT systems in a variety of models. As an
(AWS) Premier Consulting Partner and Microsoft Cloud Solution Provider for
Government, we deliver cloud-powered solutions, performance-based service
management, mobility, defensive cyber and network security, end-user services,
and infrastructure services.
• Mission - CACI provides capabilities that enable the execution of a government
agency's primary function, or "mission". For example, we support strategic and
tactical Mission customers with capabilities in areas such as command and
control, communications, intelligence collection and analysis, signals
intelligence (SIGINT), electronic warfare (EW), and cyber operations. CACI
develops tools and offerings in an open, software-defined architecture with
multi-domain and multi-mission capabilities.
• Expertise - CACI provides Expertise to both Enterprise and Mission customers.
For Enterprise customers, we deliver talent with the specific technical and
functional knowledge to support internal agency operations. And for Mission
customers, we deliver talent with technical and domain knowledge to support
the execution of an agency's mission.
• Technology - CACI delivers Technology to both Enterprise and Mission
customers. For Enterprise customers, Technology includes developing and
implementing business systems, enterprise applications, and end-to-end IT
systems. We also modernize infrastructure through migration to the cloud and
IT or software as-a-service. For Mission customers, Technology includes
developing and deploying multi-domain offerings for signals intelligence,
electronic warfare, and cyber operations. We also deliver actionable
intelligence through multi-source collection and analysis. And we generate
unique intellectual property through advanced research and development.
Budgetary Environment
We carefully follow federal budget, legislative and contracting trends and activities and evolve our strategies to take these into consideration. OnAugust 2, 2019 , the Bipartisan Budget Act of 2019 (BBA 2019) was signed into law. BBA 2019 called for defense spending, including Overseas Contingency Operations (OCO) funds, of$738 billion in government fiscal year (GFY) 2020 and$740.5 billion in GFY 2021. Both represent increases from GFY 2019 levels of$716 billion . OnJanuary 1, 2021 , the$740 billion National Defense Authorization Act (NDAA) for GFY 2021 became law. While a detailed GFY 2022 budget proposal has not yet been released, the Biden administration has released a top-line proposal for GFY 2022, which proposes aggregate defense spending of$753 billion , up 1.7% from GFY 2021. We believe that bipartisan support remains for continued investment in the areas of defense and national security. While we view the budget environment as stable and believe there is bipartisan support for continued investment in the areas of defense and national security, it is uncertain when in any particular GFY that appropriations bills will be passed. During those periods of time when appropriations bills have not been passed and signed into law, government agencies operate under a continuing resolution (CR). Depending on their scope, duration, and other factors, CRs can negatively impact our business due to delays in new program starts, delays in contract award decisions, and other factors. When a CR expires, unless appropriations bills have been passed byCongress and signed by the President, or a new CR is passed and signed into law, the government must cease operations, or shutdown, except in certain emergency situations or when the law authorizes continued activity. We continuously review our operations in an attempt to identify programs potentially at risk from CRs so that we can consider appropriate contingency plans. 22 --------------------------------------------------------------------------------
Impact of COVID-19
As travel restrictions, social distancing advisories, and other requirements began to be implemented inMarch 2020 , we instructed our workforce to begin to work remotely to the extent possible. While a majority of our workforce is able to work remotely, some employees must still travel to client or company facilities in order to work. While CACI employees were deemed part of the 'critical infrastructure workforce', ensuring their ability to work despite state travel limitations, our business still experienced some impacts as a result of COVID-19 risk mitigation efforts. For example, in order to reduce personnel concentration and ensure social distancing in classified environments, shift work was implemented, which reduced the number of hours our employees could work and we could bill customers on certain programs. The Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was passed byCongress and signed by the President onMarch 27, 2020 , provided a mechanism to bill hours where our employees are ready and able to work but unable to access required facilities due to COVID-19. This support was subsequently extended throughSeptember 30, 2021 as part of the American Rescue Plan Act of 2021, which was signed into law onMarch 11, 2021 . We continue to work with our customers to implement the related provisions of the CARES Act, as well as appropriate risk mitigation efforts and alternative work arrangements.
Market Environment
Across our addressable market, we provide expertise and technology to government enterprise and mission customers. Based on the analysis of an independent market consultant retained by the Company, we believe that the total addressable market for our offerings is approximately$230 billion . Our addressable market is expected to continue to grow over the next several years. Approximately 70 percent of our revenue comes from defense-related customers, including those in the Intelligence Community (IC), with additional revenue coming from non-defense IC,homeland security , and other federal civilian customers. We continue to align the Company's capabilities with well-funded budget priorities and took steps to maintain a competitive cost structure in line with our expectations of future business opportunities. In light of these actions, as well as the budgetary environment discussed above, we believe we are well positioned to continue to win new business in our large addressable market. We believe that the following trends will influence the USG's spending in our addressable market:
• A stable USG budget environment, particularly in defense and
intelligence-related areas;
• A shift in focus from readiness toward increased capabilities, effectiveness,
and responsiveness;
• Increased USG interest in faster contracting and acquisition processes;
• Increased focus on cyber, space, and the electromagnetic spectrum as key
domains for National Security;
• Continued focus on counterterrorism, counterintelligence, and counter
proliferation as key
• Balanced focus on enterprise cost reductions through efficiency, with
increased spend on IT infrastructure modernization and enhancements to cyber
security protections; and
• Increased investments in advanced technologies (e.g., Artificial Intelligence,
5G).
We believe that our customers' use of lowest price/technically acceptable (LPTA)
procurements, which contributed to pricing pressures in prior years, has
moderated, though price still remains an important factor in procurements. We
also continue to see protests of major contract awards and delays in USG
procurement activities. In addition, many of our federal government contracts
require us to employ personnel with security clearances, specific levels of
education and specific past work experience. Depending on the level of
clearance, security clearances can be difficult and time-consuming to obtain and
competition for skilled personnel in the information technology services
industry is intense. Additional factors that could affect USG spending in our
addressable market include changes in set-asides for small businesses, changes
in budget priorities as a result of the COVID-19 pandemic, and budgetary
priorities limiting or delaying federal government spending in general.
23
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Results of Operations for the Three Months Ended
The following table provides our results of operations:
Dollar Amount Percentage of Revenue
Three Months Ended Three Months Ended
March 31, March 31, Change
(dollars in thousands) 2021 2020 2021 2020 $ %
Revenue $ 1,551,918 $ 1,465,600 100.0 % 100.0 % $ 86,318 5.9 %
Operating costs and
expenses:
Costs of revenue 1,000,235 953,630 64.4 65.1 46,605 4.9
Indirect costs and selling
expenses 369,015 371,135 23.8 25.2 (2,120 ) (0.6 )
Depreciation and
amortization 31,230 27,159 2.0 1.9 4,071 15.0
Total operating costs and
expenses 1,400,480 1,351,924 90.2 92.2 48,556 3.6
Income from operations 151,438 113,676 9.8 7.8 37,762 33.2
Interest expense and other,
net 8,954 14,087 0.6 1.0 (5,133 ) (36.4 )
Income before income taxes 142,484 99,589 9.2 6.8 42,895 43.1
Income tax expense 22,140 19,012 1.4 1.3 3,128 16.5
Net income $ 120,344 $ 80,577 7.8 % 5.5 % $ 39,767 49.4 %
Revenue. For the three months ended March 31, 2021 , total revenue was $1.6
billion , 5.9 percent greater than last year with 5.3 percent from organic
growth. The remaining growth in revenue was attributable to acquired
revenues. Out of our primary customer groups, Department of Defense and Federal
Civilian revenue increased by $36.8 million (2.8 percent organic) and $44.5
million (12.3 percent organic), respectively, compared with the same period a
year ago.
The following table summarizes revenue by customer type with related percentages
of revenue for the three months ended March 31, 2021 and 2020, respectively:
Dollar Amount Percentage of Revenue
Three Months Ended Three Months Ended
March 31, March 31, Change
(dollars in thousands) 2021 2020 2021 2020 $ %
Department of Defense $ 1,074,056 $ 1,037,242 69.2 % 70.7 % $ 36,814 3.5 %
Federal Civilian Agencies 405,855 361,320 26.2 24.7 44,535 12.3
Commercial and other 72,007 67,038 4.6 4.6 4,969 7.4
Total $ 1,551,918 $ 1,465,600 100.0 % 100.0 % $ 86,318 5.9 %
•
single largest customer, where our services focus on supporting readiness,
tactical military intelligence, and communications systems.
includes contracts with the
• Federal civilian agencies' revenue primarily includes services and products
provided to non-
including intelligence agencies and Departments of Justice, Agriculture,
• Commercial and other revenue primarily includes services and products provided
to
governments and agencies through our International reportable segment.
Costs of Revenue. For the three months endedMarch 31, 2021 , costs of revenue increased$46.6 million or 4.9 percent, compared with the same period a year ago. The increase is primarily related to direct and subcontractor labor costs from organic growth on existing programs and acquired contracts and higher other direct costs against our revenue arrangements, partially offset by a reduction in travel related expenses. As a percentage of revenue, costs of revenue were 64.4 percent and 65.1 percent for the three months endedMarch 31, 2021 and 2020, respectively. The improvement in margins against the comparative period is primarily due to strong program performance and our ability to deliver on certain fixed-price contracts with less costs than originally estimated. In addition, the Company's margins increased from a higher percentage of Technology revenue as compared against the prior period. Indirect Costs and Selling Expenses. For the three months endedMarch 31, 2021 , indirect costs and selling expenses decreased$2.1 million or 0.6 percent, compared with the same period a year ago. The decrease is primarily related to reduced labor-related expenses, including lower incentive compensation expense and fringe benefits, and reduced indirect travel, partially offset by increases in bid and proposal (B&P) costs and other professional services. 24 -------------------------------------------------------------------------------- Depreciation and Amortization. For the three months endedMarch 31, 2021 , depreciation and amortization expense increased$4.1 million or 15.0 percent, compared with the same period a year ago. The increase is primarily attributable to intangible amortization from recent acquisitions and increased depreciation from the Company's higher average property and equipment balances. Interest Expense and Other, Net. For the three months endedMarch 31, 2021 , interest expense and other, net decreased$5.1 million or 36.4 percent, compared with the same period a year ago. The decrease in interest expense is primarily attributable to lower average outstanding debt balances on the Company's Credit Facility and lower interest rates. Income Tax Expense. For the three months endedMarch 31, 2021 , the effective income tax rate was 15.5 percent compared to 19.1 percent for the same period a year ago. The decrease in the effective income tax rate in the current period was primarily due to an increase in research and development credits for past and current year tax filings. 25
--------------------------------------------------------------------------------
Results of Operations for the Nine Months Ended
The following table provides our results of operations:
Dollar Amount Percentage of Revenue
Nine Months Ended Nine Months Ended
March 31, March 31, Change
(dollars in thousands) 2021 2020 2021 2020 $ %
Revenue $ 4,480,135 $ 4,224,461 100.0 % 100.0 % $ 255,674 6.1 %
Operating costs and
expenses:
Costs of revenue 2,887,300 2,737,378 64.5 64.8 149,922 5.5
Indirect costs and selling
expenses 1,071,826 1,081,175 23.9 25.6 (9,349 ) (0.9 )
Depreciation and
amortization 93,608 81,888 2.1 1.9 11,720 14.3
Total operating costs and
expenses 4,052,734 3,900,441 90.5 92.3 152,293 3.9
Income from operations 427,401 324,020 9.5 7.7 103,381 31.9
Interest expense and other,
net 28,021 45,612 0.6 1.1 (17,591 ) (38.6 )
Income before income taxes 399,380 278,408 8.9 6.6 120,972 43.5
Income tax expense 78,914 50,659 1.7 1.2 28,255 55.8
Net income $ 320,466 $ 227,749 7.2 % 5.4 % $ 92,717 40.7 %
Revenue. For the nine months ended March 31, 2021 , total revenue was $4.5
billion , 6.1 percent greater than last year with 5.2 percent from organic
growth. The remaining growth in revenue was attributable to acquired
revenues. Out of our primary customer groups, Department of Defense and Federal
Civilian revenue increased by $125.9 million (3.3 percent organic) and $118.7
million (11.0 percent organic), respectively, compared with the same period a
year ago.
The following table summarizes revenue by customer type with related percentages
of revenue for the nine months ended
Dollar Amount Percentage of Revenue
Nine Months Ended Nine Months Ended
March 31, March 31, Change
(dollars in thousands) 2021 2020 2021 2020 $ %
Department of Defense $ 3,091,126 $ 2,965,263 69.0 % 70.2 % $ 125,863 4.2 %
Federal Civilian Agencies 1,186,068 1,067,342 26.5 25.3 118,726 11.1
Commercial and other 202,941 191,856 4.5 4.5 11,085 5.8
Total $ 4,480,135 $ 4,224,461 100.0 % 100.0 % $ 255,674 6.1 %
•
single largest customer, where our services focus on supporting readiness,
tactical military intelligence, and communications systems.
includes contracts with the
• Federal civilian agencies' revenue primarily includes services and products
provided to non-
including intelligence agencies and Departments of Justice, Agriculture,
• Commercial and other revenue primarily includes services and products provided
to
governments and agencies through our International reportable segment.
Costs of Revenue. For the nine months endedMarch 31, 2021 , costs of revenue increased$149.9 million or 5.5 percent, compared with the same period a year ago. The increase is primarily related to direct and subcontractor labor costs from organic growth on existing programs and acquired contracts and higher other direct costs against our revenue arrangements, partially offset by a reduction in travel related expenses. As a percentage of revenue, costs of revenue were 64.5 percent and 64.8 percent for the nine months endedMarch 31, 2021 and 2020, respectively. The improvement in margins against the comparative period is primarily due to strong program performance and our ability to deliver on certain fixed-price contracts with less costs than originally estimated. In addition, the Company's margins increased from a higher percentage of Technology revenue as compared against the prior period. 26 -------------------------------------------------------------------------------- Indirect Costs and Selling Expenses. For the nine months endedMarch 31, 2021 , indirect costs and selling expenses decreased$9.3 million or 0.9 percent, compared with the same period a year ago. The decrease is primarily related to reduced B&P costs, indirect travel, and incentive compensation, partially offset by increased indirect labor and other professional services. Depreciation and Amortization. For the nine months endedMarch 31, 2021 , depreciation and amortization expense increased$11.7 million or 14.3 percent, compared with the same period a year ago. The increase is primarily attributable to intangible amortization from recent acquisitions and increased depreciation from the Company's higher average property and equipment balances.
Interest Expense and Other, Net. For the nine months ended
Income Tax Expense. For the nine months endedMarch 31, 2021 , the effective income tax rate was 19.8 percent compared to 18.2 percent for the same period a year ago. The increase in the effective income tax rate in the current period was primarily due to a decrease in excess tax benefits related to employee stock-based compensation, partially offset by an increase in research and development credits for past and current year tax filings. 27 --------------------------------------------------------------------------------
Contract Backlog The Company's backlog represents total value on our existing contracts that has the potential to be recognized into revenue as work is performed. The Company includes unexercised option years in its backlog amount and excludes task orders that may be issued underneath a multiple award IDIQ vehicle until such task orders are issued.
The Company's backlog as of period end is either funded or unfunded:
• Funded backlog represents contract value appropriated by a customer that is
expected to be recognized into revenue.
• Unfunded backlog represents the sum of unappropriated contract value on
executed contracts and unexercised option years that is expected to be
recognized into revenue.
As ofMarch 31, 2021 , the Company had total backlog of$22.3 billion , compared with$19.9 billion a year ago, an increase of 12.3 percent. Contract awards were$1.6 billion for the three months endedMarch 31, 2021 . Funded backlog as ofMarch 31, 2021 was$3.0 billion , compared with$2.96 billion a year ago, an increase of 1.3 percent. The total backlog consists of remaining performance obligations (see Note 6) plus unexercised options. There is no assurance that all funded or potential contract value will result in revenue being recognized. The Company continues to monitor our backlog as it is subject to change from execution of new contracts, contract modifications or extensions, government deobligations, or early terminations. Based on this analysis, an adjustment to the period end balance may be required.
Liquidity and Capital Resources
To date, COVID-19 has not had a significant impact on our liquidity, cash flows or capital resources. However, the continued spread of COVID-19 has led to disruption and volatility in the global capital markets, which, depending on future developments, could impact our capital resources and liquidity in the future. Existing cash and cash equivalents and cash generated by operations are our primary sources of liquidity, as well as sales of receivables under our MARPA (as defined and discussed in Note 10) and available borrowings under our Credit Facility (as defined in Note 11) described below. The Company has a$2,438.4 million Credit Facility, which consists of an$1,500.0 million Revolving Facility and a$938.4 million Term Loan. The Revolving Facility is a secured facility that permits continuously renewable borrowings and has subfacilities of$100.0 million for same-day swing line borrowings and$25.0 million for stand-by letters of credit. As ofMarch 31, 2021 , we had$1,020.0 million outstanding under the Revolving Facility and no borrowings on the swing line. The Term Loan is a five-year secured facility under which principal payments are due in quarterly installments of$11.7 million until the balance is due in full onJune 30, 2024 . As ofMarch 31, 2021 ,$809.4 million was outstanding under the Term Loan. The interest rates applicable to loans under the Credit Facility are floating interest rates that, at our option, equal a base rate or a Eurodollar rate plus, in each case, an applicable margin based upon our consolidated total leverage ratio. The Credit Facility requires us to comply with certain financial covenants, including a maximum total leverage ratio and a minimum interest coverage ratio. The Credit Facility also includes customary negative covenants restricting or limiting our ability to guarantee or incur additional indebtedness, grant liens or other security interests to third parties, make loans or investments, transfer assets, declare dividends or redeem or repurchase capital stock or make other distributions, prepay subordinated indebtedness and engage in mergers, acquisitions or other business combinations, in each case except as expressly permitted under the Credit Facility. Since the inception of the Credit Facility, we have been in compliance with all of the financial covenants. A majority of our assets serve as collateral under the Credit Facility.
A summary of the change in cash and cash equivalents is presented below:
Nine Months Ended
March 31,
2021 2020
Net cash provided by operating activities $ 500,516 $ 357,825
Net cash used in investing activities (403,981 ) (156,768 ) Net cash used in financing activities (103,546 ) (194,627 ) Effect of exchange rate changes on cash and cash equivalents 5,366 (1,302 ) Net increase (decrease) in cash and cash equivalents$ (1,645 ) $ 5,128 28
-------------------------------------------------------------------------------- Our operating cash flow was$500.5 million for the nine months endedMarch 31, 2021 . This represents an increase of$142.7 million or 39.9 percent, from our operating cash flows of$357.8 million for the nine months endedMarch 31, 2020 . The year-over-year increase primarily relates to increases of$92.7 million in FY2021 net income,$52.5 million related to deferrals of employer related social security taxes under the CARES Act, and$8.6 million of other net favorable working capital changes, partially offset by$11.1 million decrease in net cash received from the Company's MARPA. Cash used in investing activities was$404.0 million and$156.8 million during the nine months endedMarch 31, 2021 and 2020, respectively. During the nine months endedMarch 31, 2021 , we paid$355.5 million for business acquisitions, as compared to$102.4 million during the same period a year ago. Capital expenditures of$51.3 million and$54.3 million during the first nine months of FY2021 and FY2020, respectively, accounted for the remaining funds used in investing activities. Cash used in financing activities was$103.5 million and$194.6 million during the nine months endedMarch 31, 2021 and 2020, respectively. During the nine months endedMarch 31, 2021 , we had net borrowings under our Credit Facility of$415.8 million compared to net repayments of$155.2 million during the same period a year ago. During FY2021, our net borrowings were primarily used to finance the$500.0 million repurchase of our common stock. During the nine months endedMarch 31, 2021 andMarch 31, 2020 , we also used cash of$19.6 million and$30.6 million , respectively, to pay taxes on equity transactions. We believe that the combination of internally generated funds, available bank borrowings and cash and cash equivalents on hand will provide the required liquidity and capital resources necessary to fund on-going operations, customary capital expenditures, debt service obligations, share repurchases, and other working capital requirements over the next twelve months. We may in the future seek to borrow additional amounts under a long-term debt security. Over the longer term, our ability to generate sufficient cash flows from operations necessary to fulfill the obligations under the Credit Facility and any other indebtedness we may incur will depend on our future financial performance which will be affected by many factors outside of our control, including worldwide economic and financial market conditions.
Critical Accounting Policies
There have been no significant changes to the Company's critical accounting
policies as disclosed in our Annual Report on Form 10-K for the year ended
Off-Balance Sheet Arrangements and Contractual Obligations
We have no material off-balance sheet financing arrangements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The interest rates on both the Term Loan and the Revolving Facility are affected by changes in market interest rates. We have the ability to manage these fluctuations in part through interest rate hedging alternatives in the form of interest rate swaps. We have entered into floating-to-fixed interest rate swap agreements for an aggregate notional amount of$800.0 million related to a portion of our floating rate indebtedness. All remaining balances under our Term Loan, and any additional amounts that may be borrowed under our Revolving Facility, are currently subject to interest rate fluctuations. With every one percent fluctuation in the applicable interest rates, interest expense on our variable rate debt for the nine months endedMarch 31, 2021 would have fluctuated by approximately$4.9 million . Approximately 2.9 percent and 3.0 percent of our total revenue in nine months endedMarch 31, 2021 and 2020, respectively, was derived from our international operations headquartered in theU.K. Our practice in our international operations is to negotiate contracts in the same currency in which the predominant expenses are incurred, thereby mitigating the exposure to foreign currency exchange fluctuations. It is not possible to accomplish this in all cases; thus, there is some risk that profits will be affected by foreign currency exchange fluctuations. As ofMarch 31, 2021 , we held a combination of euros and pounds sterling in theU.K. andthe Netherlands equivalent to approximately$57.3 million . This allows us to better utilize our cash resources on behalf of our foreign subsidiaries, thereby mitigating foreign currency conversion risks.
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