The following discussion should be read in conjunction with the Consolidated
Financial Statements and Notes thereto and refers to our results from continuing
operations except where noted.
Selected financial information for each of our business segments is provided in
the discussion below and in Note 12 to the Company's Consolidated Financial
This section includes comparisons of certain 2021 financial information to the
same information for 2020. Year-to-year comparisons of the 2020 financial
information to the same information for 2019 are contained in Item 7 of our Form
10-K for 2020 filed with the Securities and Exchange Commission on November 30,
2020 and available through the SEC's website at
We classify our business operations into three segments for financial reporting
purposes, although for reporting certain financial information we treat
Corporate activities as a separate segment. Our three operating segments during
2021 were Aerospace & Defense (A&D), Utility Solutions Group (USG), and RF
Shielding and Test (Test). Our operating segments are comprised of the following
primary operating subsidiaries:
A&D: PTI Technologies Inc. (PTI); VACCO Industries (VACCO); Crissair, Inc.
? (Crissair); Westland Technologies, Inc. (Westland); Mayday Manufacturing Co.
(Mayday), Hi-Tech Metals, Inc. (Hi-Tech); and Globe Composite Solutions, LLC
USG: Doble Engineering Company, I.S.A. - Altanova Group S.r.l. and affiliates
? (Altanova) and Morgan Schaffer Ltd. (collectively, Doble); and NRG Systems,
? Test: ETS-Lindgren Inc. (ETS-Lindgren).
A&D. PTI, VACCO and Crissair primarily design and manufacture specialty
filtration products, including hydraulic filter elements and fluid control
devices used in commercial aerospace applications, unique filter mechanisms used
in micro-propulsion devices for satellites and custom designed filters for
manned aircraft and submarines. Westland and Globe design, develop and
manufacture elastomeric-based signature reduction solutions for U.S. naval
vessels. Mayday designs and manufactures mission-critical bushings, pins,
sleeves and precision-tolerance machined components for landing gear, rotor
heads, engine mounts, flight controls, and actuation systems for the aerospace
and defense industries.
USG. Doble develops, manufactures and delivers diagnostic testing solutions that
enable electric power grid operators to assess the integrity of high-voltage
power delivery equipment. NRG designs and manufactures decision support tools
for the renewable energy industry, primarily wind and solar.
Test. ETS-Lindgren is an industry leader in providing its customers with the
ability to identify, measure and contain magnetic, electromagnetic and acoustic
We continue to operate with meaningful growth prospects in our primary served
markets and with considerable financial flexibility. We continue to focus on new
products that incorporate proprietary design and process technologies. Our
Management is committed to delivering shareholder value through organic growth,
ongoing performance improvement initiatives, and acquisitions.
In December 2019, we sold the businesses comprising our former Technical
Packaging segment. We received net proceeds from the sale of approximately $184
million and recorded $76.5 million of after-tax net earnings on the sale in
2020. The Technical Packaging segment is reflected as discontinued operations in
the Consolidated Financial Statements and related notes for all periods
presented, in accordance with accounting principles generally accepted in the
United States of America (GAAP). See Note 3 to the Consolidated Financial
Statements for further discussion.
Table of Contents
COVID-19 Trends and Uncertainties
The COVID-19 global pandemic has continued to create significant and
unprecedented challenges, and during these highly uncertain times, our top
priority remains the health and safety of our employees, customers and
suppliers, thereby securing the financial well-being of the Company and
supporting business continuity. Given our diverse portfolio of strong, durable
businesses serving non-discretionary end-markets, the strength and resilience of
our business model positions us to continue to support our long-term outlook.
A portion of our workforce has worked from home at times due to COVID-19,
however we have not had to redesign or design new internal controls over
financial reporting at this time. Depending on the duration of COVID-19, it may
become necessary for us to redesign or design new internal controls over
financial reporting in a future period. We do not believe such an event will
have a material impact on our business.
The economic uncertainty, changes in the propensity for the general public to
travel by air, and reductions in demand for commercial aircraft as a result of
the COVID-19 pandemic have adversely impacted net sales and operating results in
certain of our A&D reporting units. We continue to monitor the impacts of
COVID-19 for events or changes in circumstances that indicate the carrying
amount of our assets may be impaired.
Throughout 2021, our Navy, defense aerospace, space and Test segment end-markets
have remained solid and now we are beginning to see recovery in our core markets
most affected by the pandemic. We are encouraged by the growing strength of our
entered orders across the commercial aerospace, electric utility and renewable
energy end-markets. While there is still uncertainty as to the timing and pace
of recovery in the commercial aerospace and electric utility markets, we believe
we now have a clearer picture of the near term. Increased U.S. domestic
passenger boardings and recent orders for new planes by major airlines are
encouraging signs for 2022.
The effects of the COVID-19 pandemic have adversely impacted our net sales and
operating results in certain of our A&D reporting units that have a higher
concentration of business serving the commercial aerospace industry. For the
year ended September 30, 2021, we reviewed our indefinite lived intangible
assets, long-lived assets and goodwill for impairment and determined that there
was no impairment. The valuation methodology we use involves estimates of
discounted cash flows, which are subject to change, and if they change
negatively it could result in the need to write down those assets to fair value.
We will continue to monitor the impacts of COVID-19 on the fair value of assets.
The defense portion of A&D, both military aerospace and navy products, is
expected to remain at approximately historical business levels given its backlog
coupled with the timing of expected platform deliveries.
See also Item 1A, "Risk Factors" in Part I above, and "Outlook" below for
Highlights of 2021
Diluted EPS - GAAP for 2021 was $2.42, compared to Diluted EPS - GAAP for 2020
? of $3.81, which consisted of $0.88 per share from continuing operations and
$2.93 from discontinued operations.
Sales, net earnings and diluted earnings per share from continuing operations
in 2021 were $715.4 million, $63.5 million and $2.42 per share, respectively,
? compared to sales, net earnings and diluted earnings per share from continuing
operations in 2020 of $730.5 million, $22.9 million and $0.88 per share,
Table of Contents
Diluted EPS - Continuing Operations As Adjusted for 2021 was $2.59 and excludes
$6.0 million of pretax charges (or $0.17 per share after tax) consisting of
one-time compensation and acquisition related costs at Corporate ($0.12 per
share); restructuring costs within the USG segment, primarily facility
consolidation charges ($0.08 per share); purchase accounting adjustments
related to the Phenix and Altanova acquisitions, primarily inventory step-up
charges ($0.03 per share); partially offset by the final settlement from the
? sale of the Doble Watertown facility ($0.06 per share). Diluted EPS -
Continuing Operations As Adjusted for 2020 was $2.67 and excludes the pension
plan termination charge of $40.6 million (or $1.55 per share after tax) and
$8.3 million of pretax charges (or $0.24 per share after tax) consisting
primarily of facility consolidation charges for the Doble Manta facility
(including employee severance and compensation benefits), asset impairment
charges and the incremental costs associated with the COVID-19 pandemic. See
"Non-GAAP Financial Measures" below.
Fiscal year ended
(Dollars in millions) 2021 2020
Diluted EPS - Continuing Operations GAAP $ 2.42 0.88
One time compensation & acquisition related costs 0.12 -
Restructuring adjustments 0.08 0.24
Purchase accounting adjustments 0.03 -
Gain on building sale (0.06) -
Pension termination adjustment - 1.55
Diluted EPS - Continuing Operations As Adjusted $ 2.59 2.67
? Net cash provided by operating activities from continuing operations was $123.1
million in 2021 compared to $108.5 million in 2020.
At September 30, 2021, cash on hand was $56.2 million and outstanding debt was
? $154.0 million, for a net debt position (total debt less cash on hand) of
approximately $97.8 million.
Entered orders for 2021 were $796.3 million (including $29 million of acquired
? backlog) resulting in a book-to-bill ratio of 1.11x. Backlog at September 30,
2021 was $592.0 million compared to $511.2 million at September 30, 2020.
? The Company declared dividends of $0.32 per share during 2021, totaling $8.3
million in dividend payments.
Results of Continuing Operations
Fiscal year ended 2021
(Dollars in millions) 2021 2020 vs. 2020
A&D $ 314.8 351.9 (10.5) %
USG 202.9 191.7 5.8 %
Test 197.7 186.9 5.8 %
Total $ 715.4 730.5 (2.1) %
Net sales decreased $15.1 million, or 2.1%, to $715.4 million in 2021 from
$730.5 million in 2020. The decrease in net sales in 2021 as compared to 2020
was mainly due to a $37.1 million decrease in the A&D segment, partially offset
by an $11.2 million increase in the USG segment, including $4.4 million of sales
from the acquisitions of Altanova and the assets of Phenix, and a $10.8 million
increase in the Test segment.
The $37.1 million, or 10.5%, decrease in net sales in 2021 as compared to 2020
was mainly due to a $16.7 million decrease in net sales at Mayday, an $11.0
million decrease in net sales at Crissair, a $9.8 million decrease in net sales
at PTI all primarily driven by the impact of the COVID-19 pandemic, and a $3.7
million decrease in net sales at Westland driven by new product development
challenges, partially offset by a $3.7 million increase in net sales at Globe
and a $0.4 million increase in net sales at VACCO driven by an increase in navy
Table of Contents
The $11.2 million, or 5.8%, increase in net sales in 2021 as compared to 2020
was mainly due to a $7.7 million increase in net sales at NRG driven by
renewable energy products and $4.4 million of sales from the acquisitions of
Altanova and the assets of Phenix that closed during the fourth quarter of 2021.
The $10.8 million, or 5.8%, increase in net sales in 2021 as compared to 2020
was mainly due to a $4.1 million increase in net sales from the Company's Asian
operations, $3.7 million increase in net sales from the Company's U.S.
operations and a $3.0 million increase in net sales from the Company's European
operations, primarily driven by the timing of test and measurement chamber
Orders and Backlog
New orders received were $796.3 million in both 2021 and 2020. Order backlog was
$592.0 million at September 30, 2021, compared to order backlog of $511.2
million at September 30, 2020. Orders are entered into backlog as firm purchase
order commitments are received.
By operating segment, 2021 orders were $337.4 million related to A&D products,
$243.9 million related to USG products (including $29 million of acquired
backlog), and $215.0 million related to Test products; and 2020 orders were
$420.4 million related to A&D products, $200.7 million related to USG products,
and $175.3 million related to Test products.
Selling, General and Administrative Expenses
Selling, general and administrative (SG&A) expenses were $167.5 million, or
23.4% of net sales, in 2021, and $159.5 million, or 21.8% of net sales, in 2020.
The increase in SG&A expenses in 2021 as compared to 2020 was mainly due to an
increase at Doble due to the return of discretionary spending to more normal
levels, the inclusion of SG&A from the Phenix and Altanova acquisitions,
compensation expenses due to the transition of key executives, and an increase
in acquisition related costs at Corporate.
Amortization of Intangible Assets
Amortization of intangible assets was $20.8 million in 2021 and $21.8 million in
2020, including $14.3 million and $13.0 million of amortization of acquired
intangible assets in 2021 and 2020, respectively, related to our acquisitions.
The amortization of acquired intangible assets related to acquisitions is
included in the Corporate segment's results. The remaining amortization expenses
relate to other identifiable intangible assets (primarily software, patents and
licenses), which are included in the respective segment's operating results. The
decrease in amortization expense in 2021 as compared to 2020 was mainly due to a
decrease in amortization of capitalized software.
Other Expenses or Income, Net
Other income, net, was $0.9 million in 2021, compared to other expenses, net, of
$7.1 million in 2020. The principal components of other, net, in 2021 included a
gain of approximately $2 million for the final settlement on the sale of the
Doble Watertown, MA property, partially offset by facility consolidation charges
within the USG segment (Doble Manta, Morgan Schaffer and Altanova facilities).
The principal components of other expenses, net, in 2020 included approximately
$8 million of pretax charges consisting primarily of facility consolidation
charges for the Doble Manta facility, including employee severance and
compensation benefits, and asset impairment charges. There were no other
individually significant items included in other expenses, net, in 2021 or 2020.
Non-GAAP Financial Measures
The information reported herein includes the financial measures Diluted EPS -
Continuing Operations As Adjusted, which we define as Diluted EPS - Continuing
Operations excluding the per-share net impact of one-time compensation and
acquisition related costs, facility consolidation charges within the USG
segment, and purchase accounting charges related to the Company's recent
Table of Contents
in 2021, partially offset by a gain on the final installment of the Double
Watertown, MA prrperty sale; and pension plan termination charge and
restructuring charges related to our facility consolidation restructuring plans
in 2020; EBIT, which we define as earnings before interest and taxes; and EBIT
margin, which we define as EBIT expressed as a percentage of net sales. Diluted
EPS - Continuing Operations As Adjusted, EBIT on a consolidated basis, and EBIT
margin on a consolidated basis are not recognized in accordance with U.S.
generally accepted accounting principles (GAAP). However, we believe that EBIT
and EBIT margin provide investors and Management with valuable information for
assessing our operating results. Management evaluates the performance of our
operating segments based on EBIT and believes that EBIT is useful to investors
to demonstrate the operational profitability of our business segments by
excluding interest and taxes, which are generally accounted for across the
entire company on a consolidated basis. EBIT is also one of the measures
Management uses to determine resource allocations and incentive compensation. We
believe that the presentation of EBIT, EBIT margin and Diluted EPS - Continuing
Operations As Adjusted provides important supplemental information to investors
by facilitating comparisons with other companies, many of which use similar
non-GAAP financial measures to supplement their GAAP results. The use of
non-GAAP financial measures is not intended to replace any measures of
performance determined in accordance with GAAP.
The reconciliation of EBIT to a GAAP financial measure is as follows:
(Dollars in millions) 2021 2020
Net earnings from continuing operations $ 63.5 22.9
Plus: Interest expense 2.2 6.7
Plus: Income tax expense 17.2 13.5
EBIT $ 82.9 43.1
EBIT by business segment is as follows:
Fiscal year ended 2021
(Dollars in millions) 2021 2020 vs. 2020
A&D $ 56.5 69.9 (19.2) %
% of net sales 17.9 % 19.9 %
USG 40.9 24.4 67.6 %
% of net sales 20.2 % 12.7 %
Test 27.6 27.2 1.5 %
% of net sales 14.0 % 14.6 %
Corporate (42.1) (78.4) 46.3 %
Total $ 82.9 43.1 92.3 %
% of net sales 11.6 % 5.9 %
The $13.4 million decrease in EBIT in 2021 as compared to 2020 was primarily due
to charges at Westland driven by new product development challenges, increased
production costs, and product quality issues; lower sales volumes at Mayday,
Crissair and PTI; partially offset by an increase in EBIT at VACCO and Globe due
to the higher sales volumes mentioned above. In addition, EBIT in 2021 was
negatively impacted by a $0.3 million inventory step-up charge related to the
acquisition of ATM.
The $16.5 million increase in EBIT in 2021 as compared to 2020 was mainly due to
higher sales volumes with a favorable product mix, approximately $2 million
final settlement received on the sale of the Doble Watertown property, partially
offset by $2.4 million of facility consolidation charges at its Doble Manta,
Morgan Schaffer and Altanova facilities, and purchase accounting charges of
approximately $1.0 million related to the Phenix and Altanova acquisitions
mainly consisting of inventory step-up charges. In addition, NRG's EBIT
increased $3.1 million in 2021 due to higher sales volumes as compared to the
Table of Contents
The $0.4 million increase in EBIT in 2021 as compared to 2020 was primarily due
to product mix and increase in sales volumes as mentioned above partially offset
by higher material prices.
Corporate operating charges included in 2021 consolidated EBIT decreased to
$42.1 million as compared to $78.4 million in 2020 mainly due to a $40.6 million
pension plan termination charge in 2020 as a result of the decision to terminate
and annuitize the Company's defined benefit pension plan. Corporate's operating
charges were negatively impacted in 2021 due to higher compensation expenses due
to the transition of key executives and an increase in acquisition related
The "Reconciliation to Consolidated Totals (Corporate)" in Note 12 to the
Consolidated Financial Statements represents Corporate office operating charges.
Interest Expense, Net
Interest expense, net was $2.2 million and $6.7 million in 2021 and 2020,
respectively. The decrease in interest expense in 2021 was mainly due to lower
average outstanding borrowings and lower average interest rates. Average
outstanding borrowings were $71 million in 2021 compared to $176 million in
2020. The weighted average interest rates were 1.20% in 2021 compared to 3.20%
Income Tax Expense
The effective tax rates from continuing operations for 2021, 2020 and 2019 were
21.3%, 37.1% and 20.8%, respectively. The 2020 effective tax rate was
unfavorably impacted by a pension plan termination charge of $40.6 million which
is not deductible for tax purposes, increasing the effective tax rate by 23.4%.
The 2020 effective tax rate was favorably impacted by the following: (1) an
increase in the available 2019 foreign tax credit which was attributable to new
information and tax planning strategies reducing the 2020 effective tax rate by
1.9%; (2) the release of a valuation allowance of $2.8 million for foreign net
operating losses decreasing the effective tax rate by 7.8%; and (3) favorable
2019 state tax return to provision true-ups decreasing the effective tax rate by
The 2017 Tax Cut and Jobs Act (TCJA) made comprehensive changes to U.S. federal
income tax laws by moving from a global to a modified territorial tax regime. As
a result, cash repatriated to the U.S. is generally no longer subject to U.S.
federal income tax. No provision is made for foreign withholding any applicable
U.S. income taxes on the undistributed earnings of non-U.S. subsidiaries where
these earnings are considered indefinitely invested or otherwise retained for
continuing international operations. Determination of the amount of taxes that
might be paid on these undistributed earnings if eventually remitted is not
Acquisitions and Divestiture
Information regarding our acquisitions and divestiture during 2021, 2020 and
2019 is set forth in Notes 2 and 3 to the Consolidated Financial Statements,
which Notes are incorporated by reference herein.
All of our acquisitions have been accounted for using the purchase method of
accounting, and accordingly, the respective purchase prices were allocated to
the assets (including intangible assets) acquired and liabilities assumed based
on estimated fair values at the date of acquisition. The financial results from
these acquisitions have been included in our financial statements from the date
Capital Resources and Liquidity
Our overall financial position and liquidity are strong. Working capital from
continuing operations (current assets less current liabilities) increased to
$188.4 million at September 30, 2021 from $187.8 million at September 30, 2020.
Inventories increased by $11.9 million during 2021 mainly due to a $14.7 million
increase within the USG segment driven by the acquisitions of Altanova and the
assets of Phenix. Accounts payable increased by $6.1 million during 2021 mainly
due to the USG segment driven by the Altanova and Phenix acquisitions.
Table of Contents
Net cash provided by operating activities from continuing operations was $123.1
million in 2021 and $108.5 million in 2020.
Net cash used in investing activities from continuing operations was $202.4
million in 2021 and $41.1 million in 2020. The increase in net cash used in
investing activities in 2021 as compared to 2020 was mainly due to the Altanova
and Phenix acquisitions totaling approximately $162 million. Capital
expenditures from continuing operations were $26.7 million in 2021 and $32.1
million in 2020. The decrease in 2021as compared to 2020 was mainly due to the
building improvement additions in 2020 at the new Doble headquarters facility.
In addition, the Company incurred expenditures for capitalized software of $8.8
million in 2021 and $9.0 million in 2020.
There were no commitments outstanding that were considered material for capital
expenditures at September 30, 2021, except for a commitment to purchase the NRG
building for approximately $10 million which closed in the first quarter of
Net cash provided by financing activities from continuing operations was $81.5
million in 2021 compared to net cash used by financing activities from
continuing operations of $(234.1) million in 2020, primarily due to the increase
in borrowings in 2021 as a result of the Company's recent acquisitions.
Bank Credit Facility
A description of our credit facility (the "Credit Facility") is set forth in
Note 8 to the Consolidated Financial Statements, which Note is incorporated by
Cash flow from operations and borrowings under the Credit Facility is expected
to provide adequate resources to meet our capital requirements and operational
needs both for the next 12 months and for the foreseeable future.
Since 2010, we have paid a regular quarterly cash dividend at an annual rate of
$0.32 per share. We paid dividends totaling $8.3 million in both 2021 and 2020.
We had no off-balance-sheet arrangements outstanding at September 30, 2021.
Information about our common stock repurchases is provided in Note 9 to the
Consolidated Financial Statements.
On November 4, 2021, the Company acquired Networks Electronic Company, LLC.
(NEco) which provides miniature electro-explosive devices utilized in
mission-critical defense and aerospace applications. NEco is based in
Chatsworth, CA and will become part of the A&D segment. Their annual sales are
expected to be approximately $7 million in 2022.
Critical Accounting Policies
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles (GAAP) requires Management to make estimates and
assumptions in certain circumstances that affect amounts reported in the
Consolidated Financial Statements. In preparing these financial statements,
Management has made its best estimates and judgments of certain amounts included
in the Consolidated Financial Statements, giving due consideration to
materiality. We do not believe there is a great likelihood that materially
different amounts would be reported under different conditions or using
different assumptions related to the accounting policies described below.
However, application of these accounting policies involves the exercise of
judgment and use of assumptions as to future uncertainties and, as a result,
actual results could differ from these estimates. Our senior Management
discusses the critical accounting policies described below with the Audit and
Finance Committee of our Board of Directors on a periodic basis.
Table of Contents
The following discussion of critical accounting policies is intended to bring to
the attention of readers those accounting policies which Management believes are
critical to the Consolidated Financial Statements and other financial
disclosure. It is not intended to be a comprehensive list of all significant
accounting policies that are more fully described in Note 1 to the Consolidated
We account for revenue in accordance with ASC Topic 606, Revenue from Contracts
with Customers. The unit of account in ASC Topic 606 is a performance
obligation. The transaction price for our contracts represents our best estimate
of the consideration we will receive and includes assumptions regarding variable
consideration, as applicable, which are based on historical, current and
forecasted information. The transaction price is allocated to each distinct
performance obligation within the contract and recognized as revenue when, or
as, the performance obligation is satisfied. Certain of our long-term contracts
contain incentive fees that can increase the transaction price. These variable
amounts generally are awarded upon achievement of certain performance metrics,
program milestones or cost targets and can be based upon customer discretion. We
include estimated amounts in the transaction price to the extent it is probable
that a significant reversal of cumulative revenue recognized will not occur. The
estimated amounts are based on an assessment of our anticipated performance and
all other information that is reasonably available to us.
Approximately 57% of the A&D segment's revenue (25% of consolidated revenue) is
recognized over time as the products do not have an alternative use and either
we have an enforceable right to payment for costs incurred plus a reasonable
margin or the inventory is owned by the customer. Selecting the method to
measure progress towards completion for our contracts requires judgment and is
based on the nature of the products or services to be provided.
The A&D segment generally uses the cost-to-cost method to measure progress on
our contracts, as the rate at which costs are incurred to fulfill a contract
best depicts the transfer of control to the customer. Under this method, we
measure the extent of progress towards completion based on the ratio of costs
incurred to date to the estimated costs at completion of the performance
obligation, and we record revenue proportionally as costs are incurred based on
an estimated profit margin.
The Test segment generally uses the milestone output method to measure progress
on our contracts because it best depicts the transfer of control to the customer
that occurs as we incur costs on our contracts. Under this method, we estimate
profit as the difference between total revenue and total estimated costs at
completion of a contract and recognize these revenues and costs based on
Total contract cost estimates are based on current contract specifications and
expected engineering requirements and require us to make estimates on expected
profit. The estimates on profit are based on judgments we make to project the
outcome of future events, and can often span more than one year and include
labor productivity and availability, the complexity of the work to be performed,
change orders issued by our customers, and other specialized engineering and
production related activities. Our cost estimation process is based on
historical results of contracts and historical actuals to original estimates,
and the application of professional knowledge and experience of engineers and
program managers along with finance professionals to these historical results.
We review and update our estimates of costs quarterly or more frequently when
circumstances significantly change, which can affect the profitability of our
For contracts where revenue is recognized over time, we recognize changes in
estimated contract revenues, costs and profits using the cumulative catch-up
method of accounting. This method recognizes the cumulative effect of changes on
current and prior periods with the impact of the change from inception-to-date
recorded in the current period. We have net revenue recognized in the current
year from performance obligations satisfied in the prior year due to changes in
our estimated costs to complete the related performance obligations. We
recognize anticipated losses on contracts in full in the period in which the
losses become known.
The impact of adjustments in contract estimates on our operating earnings can be
reflected in either revenue or operating costs and expenses. The aggregate
impact of adjustments in contract estimates increased our earnings before income
tax and diluted earnings per share by $1.7 million and $0.05 per share,
respectively, in 2021.
We operate in numerous taxing jurisdictions and are subject to examination by
various U.S. Federal, state and foreign jurisdictions for various tax periods.
Our income tax positions are based on research and interpretations of the income
tax laws and rulings in each of
Table of Contents
the jurisdictions in which we do business. Due to the subjectivity of
interpretations of laws and rulings in each jurisdiction, the differences and
interplay in tax laws between those jurisdictions, as well as the inherent
uncertainty in estimating the final resolution of complex tax audit matters,
Management's estimates of income tax liabilities may differ from actual payments
We account for income taxes under the asset and liability method. We recognize
deferred tax assets and liabilities for the future tax consequences attributable
to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. We measure deferred tax
assets and liabilities using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. We may reduce deferred tax assets by a valuation allowance
if it is more likely than not that some portion of the deferred tax assets will
not be realized. We recognize the effect on deferred tax assets and liabilities
of a change in tax rates in income in the period that includes the enactment
date. We regularly review our deferred tax assets for recoverability and
establish a valuation allowance when Management believes it is more likely than
not such assets will not be recovered, taking into consideration historical
operating results, expectations of future earnings, tax planning strategies, and
the expected timing of the reversals of existing temporary differences.
Goodwill and Other Long-Lived Assets
Our Management annually reviews goodwill and other long-lived assets for
impairment or whenever events or changes in circumstances indicate the carrying
amount may not be recoverable. If we determine that the carrying value of the
goodwill and other long-lived assets may not be recoverable, we record a
permanent impairment charge for the amount by which the carrying value of the
goodwill and other long-lived assets exceeds its fair value. We measure fair
value based on a discounted cash flow method using a discount rate determined by
Management to be commensurate with the risk inherent in each of our reporting
units' or asset groups' current business models. Our estimates of cash flows and
discount rate are subject to change due to the economic environment, including
such factors as interest rates, expected market returns and volatility of
markets served. We believe that Management's estimates of future cash flows and
fair value are reasonable; however, changes in estimates could result in
impairment charges. At September 30, 2021 we have determined that no goodwill or
other long-lived assets were impaired.
We amortize intangible assets with estimable useful lives over their respective
estimated useful lives to their estimated residual values, and review them for
impairment whenever events or changes in business circumstances indicate the
carrying value of the assets may not be recoverable.
© Edgar Online, source Glimpses