Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. This report contains certain forward-looking
statements and information that are based on the beliefs of management as well
as assumptions made by and information currently available to management. The
statements contained in this report relating to matters that are not historical
facts are forward-looking statements that involve risks and uncertainties,
including, but not limited to, changes in economic conditions including
inflation and supply chain disruptions affecting our business, revenues and
earnings adversely; the continued impact of COVID-19 causing delays in the
manufacture and delivery of our mission critical products to end customers; our
reliance on certain key customers; our efforts to develop new commercial
applications for our products; reduced U.S. and foreign military spending
including the uncertainty associated with government budget approvals; the
unique risks associated with our China operations; breaches in information
systems security and other disruptions in our information technology systems;
potential disruptions in our supply of raw materials and components;
fluctuations in the price of oil and the resulting impact on the demand for
downhole drilling; our ability to retain top management and key personnel; our
resources being overwhelmed by our growth; possible future declines in demand
for the products that use our batteries or communications systems; safety risks,
including the risk of fire; variability in our quarterly and annual results and
the price of our common stock; rising interest rates increasing the cost of our
variable borrowings; purchases by our customers of product quantities not
meeting the volume expectations in our supply agreements; potential costs
attributable to the warranties we supply with our products and services; our
inability to comply with changes to the regulations for the shipment of our
products; our ability to utilize our net operating loss carryforwards; our
entrance into new end-markets which could lead to additional financial exposure;
negative publicity concerning Lithium-ion batteries; possible impairments of our
goodwill and other intangible assets; our exposure to foreign currency
fluctuations; the risk that we are unable to protect our proprietary and
intellectual property; rules and procedures regarding contracting with the U.S.
and foreign governments; exposure to possible violations of the U.S. Foreign
Corrupt Practices Act, the U.K. Bribery Act or other anti-corruption laws; known
and unknown environmental matters; possible audits of our contracts by the U.S.
and foreign governments and their respective defense agencies; our ability to
comply with government regulations regarding the use of "conflict minerals";
technological innovations in the non-rechargeable and rechargeable battery
industries; and other risks and uncertainties, certain of which are beyond our
control. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may differ
materially from those forward-looking statements described herein. When used in
this report, the words "anticipate," "believe," "estimate," "expect," "seek,"
"project," "intend," "plan," "may," "will," "should," or words of similar import
are intended to identify forward-looking statements. For further discussion of
certain of the matters described above and other risks and uncertainties, see
Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended
December 31, 2022.
Although we base these forward-looking statements on assumptions that we believe
are reasonable when made, we caution you that forward-looking statements are not
guarantees of future performance and that our actual results of operations,
financial condition and liquidity and the development of the industries in which
we operate may differ materially from those made in or suggested by the
forward-looking statements contained herein. In addition, even if our results of
operations, financial condition and liquidity and the development of the
industries in which we operate are consistent with the forward-looking
statements contained in this quarterly report, those results or developments may
not be indicative of results or developments in subsequent periods. Given these
risks and uncertainties, you are cautioned not to place undue reliance on these
forward-looking statements. Comparisons of results for current and any prior
periods are not intended to express any future trends or indications of future
performance, unless expressed as such, and should only be viewed as historical
data.
Undue reliance should not be placed on our forward-looking statements. Except as
required by law, we disclaim any obligation to update any risk factors or to
publicly announce the results of any revisions to any of the forward looking
statements to reflect new information or risks, future events or other
developments.
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations ("MD&A") should be read in conjunction with the
consolidated financial statements and notes thereto in Part I, Item 1 of this
Form 10-Q, and the consolidated financial statements and notes thereto and risk
factors in our Annual Report on Form 10-K for the year ended December 31, 2022.
The financial information in this MD&A is presented in thousands of dollars,
except for share and per share amounts, unless otherwise specified.
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General
We offer products and services ranging from power solutions to communications
and electronics systems to customers across the globe in the government, defense
and commercial sectors. With an emphasis on strong engineering and a
collaborative approach to problem solving, we design and manufacture power and
communications systems including: rechargeable and non-rechargeable batteries,
charging systems, communications and electronics systems and accessories, and
custom engineered systems related to those product lines. We continually
evaluate ways to grow, including the design, development and sale of new
products, expansion of our sales force to penetrate new markets and territories,
as well as seeking opportunities to expand through acquisitions.
We sell our products worldwide through a variety of trade channels, including
original equipment manufacturers ("OEMs"), industrial and defense supply
distributors, and directly to U.S. and foreign defense departments. We enjoy
strong name recognition in our markets under our Ultralife® Batteries, Lithium
Power®, McDowell Research®, AMTITM, ABLETM, ACCUTRONICS™, ACCUPRO™, ENTELLION™,
SWE Southwest Electronic Energy Group™, SWE DRILL-DATA™, SWE SEASAFE™, Excell
Battery Group and Criterion Gauge brands. We have sales, operations and product
development facilities in North America, Europe and Asia.
We report our results in two operating segments: Battery & Energy Products and
Communications Systems. The Battery & Energy Products segment includes Lithium
9-volt, cylindrical, thin cell and other non-rechargeable batteries, in addition
to rechargeable batteries, uninterruptable power supplies, charging systems and
accessories. The Communications Systems segment includes RF amplifiers, power
supplies, cable and connector assemblies, amplified speakers, equipment mounts,
case equipment, man-portable systems, integrated communication systems for fixed
or vehicle applications and communications and electronics systems design. We
believe that reporting performance at the gross profit level is the best
indicator of segment performance. As such, we report segment performance at the
gross profit level and operating expenses as Corporate charges (See Note 10 in
the notes to consolidated financial statements.)
Our website address is www.ultralifecorporation.com. We make available free of
charge via a hyperlink on our website (see Investor Relations link on the
website) our annual reports on Form 10-K, proxy statements, quarterly reports on
Form 10-Q, current reports on Form 8-K, and any amendments to those reports and
statements as soon as reasonably practicable after such material is
electronically filed with or furnished to the Securities and Exchange Commission
("SEC"). We will provide copies of these reports upon written request to the
attention of Philip A. Fain, CFO, Treasurer and Secretary, Ultralife
Corporation, 2000 Technology Parkway, Newark, New York, 14513. Our filings with
the SEC are also available through the SEC website at www.sec.gov or at the SEC
Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 or by
calling 1-800-SEC-0330.
COVID-19
The COVID-19 pandemic and other illnesses has caused and may continue to create
significant economic and social disruption and uncertainty around the world, may
impact the health of our employees, and that of our suppliers and customers
causing delays in the manufacture and delivery of our mission critical products
to end customers, and may disrupt business with our collaborative business
partners and service providers, which may continue to adversely impact our
operating results. As we enter the third year of the pandemic, our workforce,
customers and vendors still face the risk of the emergence of new strains,
availability of effective treatment, and potential regulatory and macroeconomic
effects stemming from such impacts. Except for certain situations in China,
lockdowns, shelter-in-place restrictions, and vaccine mandates, prevalent during
the initial stages of the pandemic, have now been lifted for most companies.
While we have maintained normal business operations at all our facilities with
the exception of the well-publicized shutdowns in China which impacted our
Shenzhen facility in the first quarter of 2022, the related supply chain
disruptions including increased lead times on key components experienced within
our business and by our customers and vendors, continue to impact our work
schedules and timing of shipments. The lingering impact of these conditions on
our business and financial results, potentially exacerbated by the emergence of
new strains, is uncertain and will depend on many evolving factors which we
continue to monitor but cannot predict. These factors include the resistance to
treatments and current vaccinations, the duration and scope of any new pandemic
variants, the resulting actions taken by governments, businesses and
individuals, and the flow-through impact on operations and supply chains.
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Overview
Consolidated revenues of $31,916 for the three-month period ended March 31,
2023, increased by $1,543 or 5.1%, over $30,373 for the three-month period ended
March 31, 2022, reflecting an increase in government/defense sales of 24.7%
partially offset by a 1.7% decline in commercial sales. During the first quarter
of 2023, the Company experienced a cybersecurity ransomware attack which
impacted our ability to process orders, ship products, provide services to our
customers and effectively manage our sales and operating planning process over a
several-week period for our Newark, NY location and an even longer period for
our Virginia Beach, VA location. While production and shipping have been resumed
in both locations, considerable time during the first quarter was devoted to
data restoration, systems recovery, systems security augmentation, and
regulatory reporting of the attack. Management continues to work on its
cybersecurity insurance claim covering the cost of engaging external
cybersecurity experts and the business interruption impact. The Company's
deductible for its cyber-insurance policy of $100 is included in first quarter
results. No ransom was paid.
Gross profit was $7,436, or 23.3% of revenue, for the three-month period ended
March 31, 2023, compared to $6,958, or 22.9% of revenue, for the same quarter a
year ago. The 40-basis point improvement primarily resulted from higher factory
volume for our Communications Systems business and price realization, tempered
by the inefficiencies associated with the cybersecurity attack, lingering supply
chain disruptions and higher material costs across both business segments.
Operating expenses increased to $7,410 for the three-month period ended March
31, 2023, compared to $7,253 for the three-month period ended March 31, 2022.
The increase of $157 or 2.2% was primarily attributable to the recording of the
$100 deductible on our cyber insurance policy for expenses incurred during the
quarter and continued investment in new product development. Operating expenses
were 23.2% of revenue compared to 23.9% of revenue for the year-earlier period.
Operating income for the three-month period ended March 31, 2023 was $26, or
0.01% of revenues, compared to operating loss of $295, or (1.0%) of revenues,
for the year-earlier period. The increase in operating income primarily resulted
from the 181.8% revenue increase for our Communications Systems segment.
Net loss attributable to Ultralife was ($346), or ($0.02) per share - basic and
diluted, for the three-month period ended March 31, 2023, compared to ($168) or
($0.01) per share - basic and diluted, for the three-month period ended March
31, 2022.
Adjusted EBITDA, defined as net income (loss) attributable to Ultralife before
net interest expense, provision (benefit) for income taxes, depreciation and
amortization, and stock-based compensation expense, plus/minus expenses/income
that we do not consider reflective of our ongoing operations, amounted to
$1,155, or 3.6% of revenues, for the first quarter of 2023, compared to $1,103,
or 3.6% of revenues, for the first quarter of 2022. See the section "Adjusted
EBITDA" beginning on Page 19 for a reconciliation of adjusted EBITDA to net
income attributable to Ultralife.
We are focused on fulfilling orders that were held back in the first quarter due
to the cybersecurity attack and meeting increased demand from our medical and
government/defense customers while satisfying ongoing demand from other
commercial end markets, particularly oil and gas. Our goal for 2023 remains to
deliver high-quality, profitable growth through execution of operational
improvements, and to generate incremental cash flow to pay down our acquisition
debt.
Results of Operations
Three-Month Periods Ended March 31, 2023 and March 31, 2022
Revenues. Consolidated revenues for the three-month period ended March 31, 2023
were $31,916, an increase of $1,543, or 5.1%, over $30,373 for the three-month
period ended March 31, 2022. Overall, government/defense sales increased 24.7%
partially offset by 1.7% decline in commercial sales. During the first quarter
of 2023, the Company experienced a cybersecurity ransomware attack which
impacted our ability to process orders, ship products, provide services to our
customers and effectively manage our sales and operating planning process over a
several week period for our Newark, NY location and an even longer period for
our Virginia Beach, VA location. A large portion of our time during the quarter
was devoted to data restoration, systems security augmentation, and regulatory
reporting of the attack, all of which were successfully accomplished with no
ransom paid.
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Battery & Energy Products revenues decreased $680, or 2.3%, from $29,150 for the
three-month period ended March 31, 2022 to $28,470 for the three-month period
ended March 31, 2023. The decrease was primarily attributable to the impact of
the cybersecurity attack, which was reflected in a decline in medical sales and
government sales of 18.5% and 4.7%, respectively, compared to the year earlier
period. These declines were partially offset by a 21.3% increase in oil & gas
market sales.
Communications Systems sales increased $2,223, or 181.8%, from $1,223 for the
three-month period ended March 31, 2022 to $3,446 for the three-month period
ended March 31, 2023. The cybersecurity event negatively impacted 2023 first
quarter sales of Communication Systems by approximately $2,000.
Communications Systems sales increased $2,223, or 181.8%, from $1,223 for the
three-month period ended March 31, 2022 to $3,446 for the three-month period
ended March 31, 2023. The increase was primarily related to shipments under a
vehicle-amplifier adaptor order with a global defense contractor received in
July 2022, partially offset by the impact of the cybersecurity attack.
Our total backlog at March 31, 2023 was $108.1 million, with $96.1 million due
to ship over the remaining nine months of 2023 representing a 30.2% increase
over the comparable $73.8 million for the same period last year. Total backlog
decreased $2.9 million or 2.6% compared to the backlog of $111.0 million at
December 31, 2022, which was the highest in the Company's history.
Cost of Products Sold / Gross Profit. Cost of products sold totaled $24,480 for
the quarter ended March 31, 2023, an increase of $1,065, or 4.5%, from the
$23,415 reported for the same three-month period a year ago. Consolidated cost
of products sold as a percentage of total revenue decreased from 77.1% for the
three-month period ended March 31, 2022 to 76.7% for the three-month period
ended March 31, 2023. Correspondingly, consolidated gross margin increased from
22.9% for the three-month period ended March 31, 2022, to 23.3% for the
three-month period ended March 31, 2023, primarily reflecting higher factory
volume for our Communications Systems business, tempered by the inefficiencies
associated with the cybersecurity event, lingering supply chain disruptions and
higher material costs in advance of price realization from customers across both
business segments and the transition of new products to higher volume production
for our Battery & Energy Products segment.
For our Battery & Energy Products segment, gross profit for the first quarter of
2023 was $6,512, a decrease of $209 or 3.1% from gross profit of $6,721 for the
first quarter of 2022. Battery & Energy Products' gross margin of 22.9%
decreased by 20-basis points from the 23.1% gross margin for the year-earlier
period, primarily reflecting inefficiencies resulting from the cybersecurity
attack as well as lingering supply chain disruptions, higher material and
logistics costs, and continued investments in the transition of new products to
high volume production, partially offset by improved price realization.
For our Communications Systems segment, gross profit for the first quarter of
2023 was $924 or 26.8% of revenues, compared to gross profit of $237 or 19.4% of
revenues for the first quarter of 2022. The 740-basis point increase in gross
margin was primarily due to higher factory volume partially offset by
inefficiencies resulting from the cybersecurity attack.
Operating Expenses. Operating expenses for the three-month period ended March
31, 2023 were $7,410, an increase of $157 or 2.2% from the $7,253 for the
three-month period ended March 31, 2022. The increase is primarily attributable
to the recording of the $100 deductible on our cyber insurance policy for
expenses incurred during the quarter and continued investment in new product
development. Both periods reflected continued tight control over discretionary
spending.
Overall, operating expenses were 23.2% of revenue for the quarter ended March
31, 2023 compared to 23.9% of revenue for the quarter ended March 31, 2022.
Amortization expense associated with intangible assets related to our
acquisitions was $209 for the first quarter of 2023 ($185 in selling, general
and administrative expenses and $24 in research and development costs), compared
with $328 for the first quarter of 2022 ($302 in selling, general, and
administrative expenses and $26 in research and development costs). Research and
development costs were $2,032 for the three-month period ended March 31, 2023,
an increase of $175 or 9.4%, from $1,857 for the three-months ended March 31,
2022. The increase is largely attributable to an increase in new product
development in our Communications Systems business to aggressively pursue both
government/defense major programs and commercial opportunities. Selling,
general, and administrative expenses were essentially flat year over year,
decreasing from $5,378 for the first quarter of 2023 from $5,396 for the first
quarter of 2022. The 2023 first quarter amount includes recognition of the $100
deductible associated with our cyber insurance policy.
Other Expense. Other expense totaled $494 for the three-month period ended March
31, 2023 compared to $117 for the three-month period ended March 31, 2022.
Interest and financing expense increased $290, or 216.4%, from $134 for the
first quarter of 2022 to $424 for the comparable period in 2023. The increase is
primarily due to the financing of our acquisition of Excell in December 2021 and
rising interest rates. Miscellaneous income (expense) amounted to ($70) for the
first quarter of 2023 compared to $17 for the first quarter of 2022, primarily
attributable to foreign exchange gains and loss due to fluctuations in foreign
currency exchange rates.
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Income Taxes. For the three-month period ended March 31, 2023, Ultralife
recognized an income tax benefit of $133, comprised of a current provision of
$257 and deferred benefit of $390, compared to a benefit of $251 comprised of a
current provision of $151 and deferred benefit of $402 for the three-month
period ended March 31, 2022. Our effective tax rate was 28.4% for the first
quarter of 2023 as compared to 60.9% for the first quarter of 2022, primarily
attributable to the geographic mix of our operating results and the larger
impact of discrete adjustments in the prior year. See Note 6 to the consolidated
financial statements in Item 1 of Part I of this Form 10-Q for additional
information regarding our income taxes.
Loss Income Attributable to Ultralife. Net loss attributable to Ultralife was
($346), or ($0.02) per share - basic and diluted, for the three-month period
ended March 31, 2023, compared to ($168), or ($0.01) per share - basic and
diluted, for the three-month period ended March 31, 2022. Weighted average
shares outstanding used to compute basic and diluted earnings per share
increased from 16,103,599 for the first quarter of 2022 to 16,135,358 for the
first quarter of 2023. The increase is attributable to the exercise of stock
options and the vesting of restricted stock since the first quarter of 2022.
There was no dilutive effect of outstanding stock awards for the first quarters
of 2022 and 2023 due to the net loss recognized for these periods.
Adjusted EBITDA
In evaluating our business, we consider and use adjusted EBITDA, a non-GAAP
financial measure, as a supplemental measure of our operating performance. We
define adjusted EBITDA as net income (loss) attributable to Ultralife before
interest expense, provision (benefit) for income taxes, depreciation and
amortization, and stock-based compensation expense, plus/minus expense/income
that we do not consider reflective of our ongoing continuing operations. We also
use adjusted EBITDA as a supplemental measure to review and assess our operating
performance and to enhance comparability between periods. We believe the use of
adjusted EBITDA facilitates investors' understanding of operating performance
from period to period by backing out potential differences caused by variations
in such items as capital structures (affecting relative interest expense and
stock-based compensation expense), the amortization of intangible assets
acquired through our business acquisitions (affecting relative amortization
expense and provision (benefit) for income taxes), the age and book value of
facilities and equipment (affecting relative depreciation expense) and one-time
charges/benefits relating to income taxes. We also present adjusted EBITDA from
operations because we believe it is frequently used by securities analysts,
investors and other interested parties as a measure of financial performance. We
reconcile adjusted EBITDA to net income (loss) attributable to Ultralife, the
most comparable financial measure under GAAP.
We use adjusted EBITDA in our decision-making processes relating to the
operation of our business together with GAAP financial measures such as
operating income (loss). We believe that adjusted EBITDA permits a comparative
assessment of our operating performance, relative to our performance based on
our GAAP results, while eliminating the effects of depreciation and
amortization, which may vary from period to period without any correlation to
underlying operating performance, and of stock-based compensation, which is a
non-cash expense that varies widely among companies. We believe that by
presenting adjusted EBITDA, we assist investors in gaining a better
understanding of our business on a going forward basis. We provide information
relating to our adjusted EBITDA so that securities analysts, investors and other
interested parties have the same data that we employ in assessing our overall
operations. We believe that trends in our adjusted EBITDA are a valuable
indicator of our operating performance on a consolidated basis and of our
ability to produce operating cash flows to fund working capital needs, to
service debt obligations and to fund capital expenditures.
The term adjusted EBITDA is not defined under GAAP and is not a measure of
operating income (loss), operating performance or liquidity presented in
accordance with GAAP. Our adjusted EBITDA has limitations as an analytical tool,
and when assessing our operating performance, adjusted EBITDA should not be
considered in isolation or as a substitute for net income (loss) attributable to
Ultralife or other consolidated statement of operations data prepared in
accordance with GAAP. Some of these limitations include, but are not limited to,
the following:
? Adjusted EBITDA does not reflect (1) our cash expenditures or future
requirements for capital expenditures or contractual commitments; (2) changes
in, or cash requirements for, our working capital needs; (3) the interest
expense, or the cash requirements necessary to service interest or principal
payments, on our debt; (4) income taxes or the cash requirements for any tax
payments; and (5) all of the costs associated with operating our business;
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? Although depreciation and amortization are non-cash charges, the assets being
depreciated and amortized often will have to be replaced in the future, and
adjusted EBITDA from continuing operations does not reflect any cash
requirements for such replacements;
? While stock-based compensation is a component of cost of products sold and
operating expenses, the impact on our consolidated financial statements
compared to other companies can vary significantly due to such factors as
assumed life of the stock-based awards and assumed volatility of our common
stock; and
? Other companies may calculate adjusted EBITDA differently than we do, limiting
its usefulness as a comparative measure.
We compensate for these limitations by relying primarily on our GAAP results and
using adjusted EBITDA only on a supplemental basis. Neither current nor
potential investors in our securities should rely on adjusted EBITDA as a
substitute for any GAAP measures and we encourage investors to review the
following reconciliation of adjusted EBITDA to net loss attributable to
Ultralife.
Adjusted EBITDA is calculated as follows for the periods presented:
Three-month period
ended
March 31, March 31,
2023 2022
Net loss attributable to Ultralife $ (346 ) $ (168 )
Add:
Interest expense
424 134
Income tax benefit provision (133 ) (251 )
Depreciation expense 762 816
Amortization of intangible assets 209 328
Stock-based compensation expense 139 189
Cyber insurance deductible 100 -
Non-cash purchase accounting adjustments - 55
Adjusted EBITDA $ 1,155 $ 1,103Liquidity and Capital Resources
As of March 31, 2023, cash totaled $5,605 (including restricted cash of $81), a
decrease of $108 as compared to $5,713 of cash held at December 31, 2022,
primarily attributable to the cybersecurity attack experienced during the
quarter and the procurement of inventory amidst challenging supply chain
conditions.
During the three-month period ended March 31, 2023, cash used in our operations
was $1,365 as compared to $3,222 for the three-month period ended March 31,
2022. For the 2023 period, cash used was comprised of a $335 net loss and a
$1,766 increase in net working capital, partially offset by non-cash items
totaling $736 for depreciation, amortization, stock-based compensation, and
deferred taxes. The increase in working capital was driven by a $6,026 increase
in inventory attributable to the cybersecurity attack as well as procurement of
inventory to proactively manage our supply chain, reduce lead times and the
impact of potential cost increases on components and raw materials, and enhance
our position to service customer orders, partially offset by the timing of cash
collections and disbursements.
Cash used in investing activities for the three months ended March 31, 2023 was
$497 for capital expenditures, primarily reflecting investments in equipment for
new products transitioning to high-volume manufacturing.
Cash provided by financing activities for the three months ended March 31, 2023
was $1,800, attributable to draws on our credit facility primarily caused by the
sales impact of the cybersecurity attack as well as the advance purchase of
certain critical raw materials, partially offset by $500 of principle payments
on our term loan during the quarter.
We continue to have significant U.S. net operating loss carryforwards available
to utilize as an offset to future taxable income. See Note 6 to the consolidated
financial statements of this Form 10-Q for additional information.
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Going forward, we expect positive operating cash flow and the availability under
our Revolving Credit Facility will be sufficient to meet our general funding
requirements for the foreseeable future.
To provide flexibility in accessing the capital market, the Company filed a
shelf registration statement on Form S-3 on March 30, 2021, which was declared
effective by the SEC on April 2, 2021. Under this registration statement, upon
the filing of an appropriate supplemental prospectus, we may offer and sell
certain of our securities from time to time in one or more offerings, at our
discretion, of up to an aggregate offering price of $100 million. We intend to
use the net proceeds resulting from any sales of our securities for general
corporate purposes which may include, but are not limited to, potential
acquisitions of complementary businesses or technologies, strategic capital
expenditures to expand and protect our competitive position, and investments in
the development of transformational, competitively-differentiated products for
attractive growth markets.
Commitments
As of March 31, 2023, the Company had $15,630 outstanding borrowings on the
Revolving Credit Facility and $7,667 on the Term Loan Facility. The Company was
in full compliance with all covenants under the Credit Facilities as of March
31, 2023.
As of March 31, 2023, we had made commitments to purchase approximately $873 of
production machinery and equipment.
Critical Accounting Policies
Management exercises judgment in making important decisions pertaining to
choosing and applying accounting policies and methodologies in many areas. Not
only are these decisions necessary to comply with GAAP, but they also reflect
management's view of the most appropriate manner in which to record and report
our overall financial performance. All accounting policies are important, and
all policies described in Note 1 to the consolidated financial statements in our
2022 Annual Report on Form 10-K should be reviewed for a greater understanding
of how our financial performance is recorded and reported.
During the first quarter of 2023, there were no significant changes in the
manner in which our significant accounting policies were applied or in which
related assumptions and estimates were developed.
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