WD-40 COMPANY 
Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is designed to provide the reader of our financial statements with a narrative from the perspective of management on our financial condition, results of operations, liquidity and certain other factors that may affect future results. This MD&A includes the following sections: Overview, Highlights, Results of Operations, Performance Measures and Non-GAAP Reconciliations, Liquidity and Capital Resources, Critical Accounting Policies and Estimates, and Recently Issued Accounting Standards. The MD&A is provided as a supplement to, and should be read in conjunction with, our audited consolidated financial statements and the related notes included in Item 15 of this report.
Use of Non-GAAP Constant Currency
In order to show the impact of changes in foreign currency exchange rates on our
results of operations, we have included constant currency disclosures, where
necessary, in the Overview and Results of Operations sections which follow.
Constant currency disclosures represent the translation of our current fiscal
year revenues, expenses and net income from the functional currencies of our
subsidiaries to
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Overview
The Company
Our products are sold in various locations around the world. Maintenance
products are sold worldwide in markets throughout North, Central and
Highlights
The following summarizes the financial and operational highlights for our
business during the fiscal year ended
?Consolidated net sales increased
?Gross profit as a percentage of net sales decreased to 49.1% for fiscal year 2022 compared to 54.0% for the prior fiscal year, primarily due to ongoing global supply chain challenges, including the increased cost of raw materials and constraints related to the ongoing COVID-19 pandemic. These ongoing challenges have resulted in increased inflation rates globally. See the Impact of COVID-19 on Our Business section which follows for details, including actions we are taking in response to these challenges.
?Consolidated net income decreased
?Diluted earnings per common share for fiscal year 2022 were
Our strategic initiatives and the areas where we will continue to focus our time, talent and resources in future periods include: (i) building a business for the future; (ii) attracting, developing and engaging outstanding tribe members; (iii) striving for operational excellence; (iv) growing WD-40 Multi-Use Product; (v) growing WD-40 Specialist product line; and (vi) expanding and supporting portfolio opportunities that help us grow.
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Significant Developments
Impact of COVID-19 on Our Business
Our financial results and operations continue to be impacted by the COVID-19
pandemic that began during our fiscal year 2020. The ongoing COVID-19 pandemic
has impacted global economies, the rate of inflation, supply chains,
distribution networks and consumer behavior around the world. We have
experienced both favorable and unfavorable impacts to our financial results and
our operations as a result of the direct and indirect effects of the COVID-19
pandemic. For example, sales have been negatively impacted at varying times in
the regions in which we operate due to health and safety restrictions required
by local governmental authorities; such restrictions most recently impacted our
Some of the increasing supply chain challenges that we have experienced include
general aerosol production capacity constraints and competition for such
capacity by other companies who also utilize third-party manufacturers for their
aerosol production. Supply chains at many companies globally are being strained
due to shortages of certain materials and this is impacting the ability of our
third-party manufacturers to procure certain raw materials needed to manufacture
our products. These challenges have periodically resulted in us not being able
to meet the high level of demand for our products by customers and end-users in
certain markets, most significantly those markets in our
To offset these unfavorable impacts to gross margin, significant price increases have been implemented across all of our markets and geographies in fiscal year 2022 and further price increases may be implemented in certain regions in fiscal year 2023. Although we are beginning to see the favorable impacts of these price increases, it will take additional time before the full impact of these price increases is reflected in our reported results, especially those in some of our largest markets which we implemented late in the third quarter and in the fourth quarter of fiscal year 2022. However, it is possible that sales volumes may be impacted unfavorably in the short term as customers and end users adjust to increased sales prices. The severity and duration of the COVID-19 pandemic and its effects on our supply chain, changes in end-user demand and the current inflationary environment remain uncertain and it is not possible to estimate the extent to which these conditions will impact our financial results and operations in future periods.
We have continued to follow a variety of measures to promote the safety and security of our employees during the pandemic, support the communities in which we operate and ensure the availability and functioning of our critical infrastructure. These measures have included allowing for or requiring remote working arrangements for employees in some regions and the imposition of various travel restrictions. In addition, we continue to develop and monitor plans to support a safe working environment for our employees in the various office locations in which we operate around the world. These plans vary by region based on the evolving situations within those regions. In connection with these plans, we have put in place our "Work from Where" philosophy to support work-life integration, and enable management and employees to align on where work is completed.
See our risk factors disclosed in Part I-Item 1A, "Risk Factors," for further information on risks associated with pandemics, including COVID-19.
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The Impact of Russian Military Action in
On
As a result of this conflict, commodity markets remain subject to heightened
levels of uncertainty, especially as they relate to the price of crude oil,
which increased significantly in the immediate aftermath of the sanctions
against
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Results of Operations
Fiscal Year Ended
Operating Items
The following table summarizes operating data for our consolidated operations (in thousands, except percentages and per share amounts):
Fiscal Year Ended August 31,
Change from
?Prior Year
2022 2021 Dollars Percent
Net sales:
Maintenance products $ 485,326 $ 448,817 $ 36,509 8%
Homecare and cleaning products 33,494 39,292 (5,798) (15)%
Total net sales 518,820 488,109 30,711 6%
Cost of products sold 264,055 224,370 39,685 18%
Gross profit 254,765 263,739 (8,974) (3)%
Operating expenses 167,435 174,898 (7,463) (4)%
Income from operations $ 87,330 $ 88,841 $ (1,511) (2)%
Net income $ 67,329 $ 70,229 $ (2,900) (4)%
Earnings per common share - diluted
The following table summarizes net sales by segment (in thousands, except
percentages):
Fiscal Year Ended August 31,
Change from
?Prior Year
2022 2021 Dollars Percent
Americas $ 240,233 $ 214,601 $ 25,632 12%
EMEA 204,688 208,252 (3,564) (2)%
Asia-Pacific 73,899 65,256 8,643 13%
Total $ 518,820 $ 488,109 $ 30,711 6%
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Americas Sales
The following table summarizes net sales by product line for the
Fiscal Year Ended August 31,
Change from
?Prior Year
2022 2021 Dollars Percent
Maintenance products $ 223,470 $ 194,295 $ 29,175 15%
Homecare and cleaning products 16,763 20,306 (3,543) (17)%
Total $ 240,233 $ 214,601 $ 25,632 12%
% of consolidated net sales 47% 44%
CC Net sales - non-GAAP (1) $ 240,190 $ 214,601 $ 25,589 12%
(1)Current fiscal year constant currency ("CC") net sales translated at the foreign currency exchange rates in effect for the corresponding period of the prior fiscal year, compared to prior period actual net sales
Americas Sales - Fiscal Year Ended -
Net sales of maintenance products in the
?
Net sales of homecare and cleaning products in the
?Challenges in our
For the
?
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EMEA Sales
The following table summarizes net sales by product line for the EMEA segment (in thousands, except percentages):
Fiscal Year Ended August 31,
Change from
?Prior Year
2022 2021 Dollars Percent
Maintenance products $ 196,524 $ 198,309 $ (1,785) (1)%
Homecare and cleaning products 8,164 9,943 (1,779) (18)%
Total (1) $ 204,688 $ 208,252 $ (3,564) (2)%
% of consolidated net sales 39% 43%
CC Net sales - non-GAAP (2) $ 212,319 $ 208,252 $ 4,067 2%
(1)While our reporting currency is the
(2)Current fiscal year constant currency net sales translated at the foreign currency exchange rates in effect for the corresponding period of the prior fiscal year, compared to prior period actual net sales.
EMEA Sales - Fiscal Year Ended -
Net sales decreased in the EMEA segment due to the following drivers:
Direct Markets - EMEA (67% of net sales YTD FY2022 vs 68% YTD FY2021)
?Direct markets decreased
?Decreased sales in the
Distributor Markets - EMEA (33% of net sales YTD FY2022 vs 32% YTD FY2021)
?Sales increased
?
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Asia-Pacific Sales
The following table summarizes net sales by product line for the
Fiscal Year Ended August 31,
Change from
?Prior Year
2022 2021 Dollars Percent
Maintenance products $ 65,332 $ 56,213 $ 9,119 16%
Homecare and cleaning products 8,567 9,043 (476) (5)%
Total $ 73,899 $ 65,256 $ 8,643 13%
% of consolidated net sales 14% 13%
CC Net sales - non-GAAP (1) $ 74,621 $ 65,256 $ 9,365 14%
(1)Current fiscal year constant currency net sales translated at the foreign currency exchange rates in effect for the corresponding period of the prior fiscal year, compared to prior period actual net sales
Asia-Pacific Sales - Fiscal Year Ended -
Net sales in the
?Sales in the
?
Gross Profit
The following general information regarding the timing and nature of our product costs is important when assessing fluctuations in our gross margin from period to period:
?There is often a delay of one quarter or more before changes in costs of raw
materials, such as specialty chemicals used in the formulation of our products,
impact cost of products sold due to production and inventory life cycles;
?In general, the timing of advertising, promotional and other discounts may
cause fluctuations in gross margin from period to period. Advertising,
promotional and other discounts that are given to our customers are recorded as
a reduction to sales, whereas advertising and sales promotional costs associated
with promotional activities that we pay to third parties are recorded as
advertising and sales promotion expenses;
?In the EMEA segment, the majority of our cost of goods sold is denominated in
Pound Sterling whereas sales are generated in Pound Sterling, Euro and the
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?For further information pertaining to recent trends and economic conditions affecting gross margin, please see the section titled "Significant Developments".
The following table summarizes gross margin and gross profit (in thousands, except percentages):
Fiscal Year Ended August 31,
Change from
2022 2021 ?Prior Year
Gross profit $ 254,765 $ 263,739 $ (8,974)
Gross margin 49.1% 54.0% (490) bps (1)
(1)Basis points ("bps") change in gross margin.
Gross Margin - Fiscal Year Ended -
Gross margin decreased 490 bps primarily due to the following unfavorable impacts, partially offset by favorable impacts:
1010
(Unfavorable)/Favorable Explanations
(430) bps Higher costs of specialty chemicals used in the formulation of
our products.
(180) bps Higher costs of aerosol cans.
(110) bps Higher warehousing, distribution and freight costs associated
with supply chain constraints as a result of the ongoing
COVID-19 pandemic, the worsening inflationary environment and
initiatives to increase production capacity while these
constraints exist.
(100) bps Higher filling fees paid to our third-party contract
manufacturers, primarily in the Americas segment.
(50) bps Changes in foreign currency exchange rates in the EMEA
segment.
390 bps Sales price increases implemented in all three segments at
varying times during the last 12 months.
Selling, General and Administrative ("SG&A") Expenses
Fiscal Year Ended August 31,
Change from
?Prior Year
2022 2021 Dollars Percent
SG&A expenses $ 138,658 $ 145,493 $ (6,835) (5)%
% of net sales 26.7% 29.8%
SG&A Expenses - Fiscal Year Ended -
The decrease in SG&A expenses from period to period was primarily due lower
employee-related costs, which decreased
We continued our research and development investment, the majority of which is
associated with our maintenance products, in support of our focus on innovation
and renovation of our products. Research and development costs for the fiscal
years ended
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Advertising and Sales Promotion ("A&P") Expenses
Fiscal Year Ended August 31,
Change from
?Prior Year
2022 2021 Dollars Percent
A&P expenses $ 27,343 $ 27,956 $ (613) (2)%
% of net sales 5.3% 5.7%
Changes in foreign currency exchange rates had a favorable impact of
As a percentage of net sales,
Income from Operations by Segment
The following table summarizes income from operations by segment (in thousands,
except percentages):
Fiscal Year Ended August 31,
Change from
?Prior Year
2022 2021 Dollars Percent
Americas $ 54,198 $ 51,591 $ 2,607 5%
EMEA 42,058 53,003 (10,945) (21)%
Asia-Pacific 22,590 19,121 3,469 18%Unallocated corporate (1) (31,516) (34,874) 3,358 (10)% Total
$ 87,330 $ 88,841 $ (1,511) (2)%
(1)Unallocated corporate expenses are general corporate overhead expenses not directly attributable to any one of the business segments. These expenses are reported separate from our identified segments and are included in Selling, General and Administrative expenses on our consolidated statements of operations.
Americas Operating Income - Fiscal Year Ended -
Income from operations for the
?
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EMEA
EMEA Operating Income - Fiscal Year Ended -
Income from operations for the EMEA segment decreased to
Asia-Pacific Operating Income - Fiscal Year Ended -
Income from operations for the
Non-Operating Items
The following table summarizes non-operating income and expenses for our consolidated operations (in thousands):
Fiscal Year Ended August 31,
2022 2021 Change
Interest income $ 102 $ 81 $ 21
Interest expense $ 2,742 $ 2,395 $ 347
Other (expense) income, net $ (582) $ (28) $ (554)
Provision for income taxes $ 16,779 $ 16,270 $ 509
Interest Income
Interest income was not significant for both the fiscal years ended
Interest Expense
Interest expense increased primarily due to an increased weighted average outstanding balance on our revolving credit facility and higher interest rates related to draws on this credit facility.
Other (Expense) Income, Net
Other (expense) income, net was
Provision for Income Taxes
The provision for income taxes was 19.9% of income before income taxes for the
fiscal year ended
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Net Income
Net income was
Results of Operations
Fiscal Year Ended
For discussion related to changes in financial condition and the results of
operations for fiscal year 2021 compared to fiscal year 2020, refer to Part II -
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations included in our Annual Report on Form 10-K for the fiscal year
ended
Performance Measures and Non-GAAP Reconciliations
In managing our business operations and assessing our financial performance, we supplement the information provided by our financial statements with certain non-GAAP performance measures. These performance measures are part of our current 55/30/25 business model, which includes gross margin, cost of doing business, and earnings before interest, income taxes, depreciation and amortization ("EBITDA"), the latter two of which are non-GAAP performance measures. Cost of doing business is defined as total operating expenses less amortization of definite-lived intangible assets, impairment charges related to intangible assets and depreciation in operating departments, and EBITDA is defined as net income before interest, income taxes, depreciation and amortization. We target our gross margin to be at or above 55% of net sales, our cost of doing business to be at 30% of net sales, and our EBITDA to be at or above 25% of net sales. Results for these performance measures may vary from period to period depending on various factors, including economic conditions and our level of investment in activities for the future such as those related to quality assurance, regulatory compliance, and intellectual property protection in order to safeguard our WD-40 brand. Our financial results and operations continue to be impacted by increased global supply chain constraints and an inflationary environment, both of which have significantly lowered our gross margin percentage over the last twelve months and moved us well below our target of 55%. Although we have been implementing strategic sales price increases across all segments at varying times in response to increased costs, it will take time before the full impact of these sales price increases are reflected in our reported results. In addition, it is difficult to determine how long these supply chain and inflationary conditions will exist and if they will worsen or improve over time. However, the targets for gross margin and these other performance measures are long-term in nature and we expect to make progress towards achieving them over time. For more detailed information pertaining to recent trends and economic conditions and the actions we are taking to respond to them, please see the section titled "Significant Developments".
The following table summarizes the results of these performance measures:
Fiscal Year Ended August 31,
2022 2021 2020
Gross margin - GAAP 49% 54% 55%
Cost of doing business as a percentage of
net sales - non-GAAP 31% 35% 34%
EBITDA as a percentage of net sales -
non-GAAP (1) 18% 20% 21%
(1)Percentages may not aggregate to EBITDA percentage due to rounding and because amounts recorded in other income (expense), net on our consolidated statement of operations are not included as an adjustment to earnings in the EBITDA calculation.
We use the performance measures above to establish financial goals and to gain an understanding of our comparative performance from period to period. We believe that these measures provide our shareholders with additional insights into how we run our business. We believe these measures also provide investors with additional financial information that should be considered when assessing our underlying business performance and trends. These non-GAAP financial measures are supplemental in nature and should not be considered in isolation or as alternatives to net income, income from operations or other financial information prepared in accordance with GAAP as indicators of our performance or operations. The use of any non-GAAP measure may produce results that vary from the GAAP measure and may not be comparable to a similarly defined non-GAAP measure used by other companies.
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Reconciliations of these non-GAAP financial measures to our financial statements as prepared in accordance with GAAP are as follows:
Cost of Doing Business (in thousands, except percentages):
Fiscal Year Ended August 31,
2022 2021 2020
Total operating expenses - GAAP $ 167,435 $ 174,898 $ 145,797
Amortization of definite-lived intangible
assets (1,434) (1,449) (2,211)
Depreciation (in operating departments) (4,369) (4,311) (4,095)
Cost of doing business - non-GAAP
$ 518,820 $ 488,109 $ 408,498 Cost of doing business as a percentage of net sales - non-GAAP 31% 35% 34%
EBITDA (in thousands, except percentages):
Fiscal Year Ended August 31,
2022 2021 2020
Net income - GAAP $ 67,329 $ 70,229 $ 60,710
Provision for income taxes 16,779 16,270 14,805
Interest income (102) (81) (93)
Interest expense 2,742 2,395 2,439
Amortization of definite-lived
intangible assets 1,434 1,449 2,211
Depreciation 6,860 5,570 5,490
EBITDA $ 95,042 $ 95,832 $ 85,562
Net sales $ 518,820 $ 488,109 $ 408,498
EBITDA as a percentage of net sales - non-GAAP 18% 20% 21%
Liquidity and Capital Resources
Overview
Our financial condition and liquidity remain strong. Although there continues to be uncertainty related to the ongoing and anticipated impact of the current COVID-19 pandemic on our future results, we believe our efficient business model and the steps that we have taken position us to manage our business through the situation as it continues to develop. We continue to manage all aspects of our business including, but not limited to, monitoring our liquidity, the financial health of our customers, suppliers and other third-party relationships, implementing gross margin enhancement strategies and developing new opportunities for growth
Our principal sources of liquidity are cash generated from operations and cash currently available from our existing unsecured revolving credit facility under the Credit Agreement with Bank of America. We use proceeds of the revolving credit facility primarily for our general working capital needs. We also hold borrowings under the Note Agreement. See Note 8 - Debt for additional information on these agreements.
We have historically held a balance of outstanding draws on our line of credit
in either
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amount available on our line of credit or notes. Per the terms of both the Note
Agreement and the Credit Agreement, our consolidated leverage ratio cannot be
greater than three and a half to one and our consolidated interest coverage
ratio cannot be less than three to one. See Note 8 - Debt for additional
information on these financial covenants. At
We believe that our future cash from domestic and international operations,
together with our access to funds available under our unsecured revolving credit
facility, will provide adequate resources to fund short-term and long-term
operating requirements, capital expenditures, dividend payments, acquisitions,
new business development activities and share repurchases. On
Cash Flows
The following table summarizes our cash flows by category for the periods presented (in thousands):
Fiscal Year Ended August 31,
2022 2021 2020
Net cash provided by operating activities
(7,691) (14,460) (18,945)
Net cash used in financing activities (38,011) (40,749) (26,709)
Effect of exchange rate changes on cash and
cash equivalents (5,020) (6) 2,219
Net (decrease) increase in cash and cash
equivalents $ (48,118) $ 29,499 $ 29,229
Operating Activities
Net cash provided by operating activities decreased
Investing Activities
Net cash used in investing activities decreased
Financing Activities
Net cash used in financing activities decreased
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Effect of Exchange Rate Changes All of our foreign subsidiaries currently operate in currencies other than theU.S. Dollar and a significant portion of our consolidated cash balance is denominated in these foreign functional currencies, particularly at ourU.K. subsidiary which operates in Pound Sterling. As a result, our cash and cash equivalents balances are subject to the effects of the fluctuations in these functional currencies against theU.S. Dollar at the end of each reporting period. The net effect of exchange rate changes on cash and cash equivalents, when expressed inU.S. Dollar terms was a decrease in cash of$5.0 million in fiscal year 2022, while such changes were not significant in fiscal year 2021 and resulted in an increase in cash of$2.2 million for fiscal year 2020. These changes were primarily due to fluctuations in various foreign currency exchange rates from period to period, but the majority is related to the fluctuations in the Pound Sterling against theU.S. Dollar. Cash Flows
Fiscal Year Ended
For discussion related to changes in the consolidated statements of cash flows
for fiscal year 2021 compared to fiscal year 2020, refer to Part II - Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations included in our Annual Report on Form 10-K for the fiscal year ended
Share Repurchase Plans
The information required by this item is incorporated by reference to Part IV-Item 15, "Exhibits, Financial Statement Schedules" Note 9 - Share Repurchase Plans, included in this report.
Dividends
We have historically paid regular quarterly cash dividends on our common stock.
In
Contractual Obligations
We hold borrowings under our Note Purchase and Private Shelf Agreement with fixed repayment requirements and under a Revolving Credit Facility that has variable underlying interest rates. For additional details on these borrowings, including ability and intent assessment on our credit facility agreement with Bank of America, refer to the information set forth in Part IV-Item 15, "Exhibits, Financial Statement Schedules", Note 8 - Debt.
Additionally, we have ongoing relationships with various third-party suppliers (contract manufacturers) that manufacture our products and third-party distribution centers which warehouse and ship our products to customers. The contract manufacturers maintain title and control of certain raw materials and components, materials utilized in finished products, and of the finished products themselves until shipment to our customers or third-party distribution centers in accordance with agreed upon shipment terms. Although we have definitive minimum purchase obligations in the contract terms with certain of our contract manufacturers, when such obligations have been included, they have either been immaterial or the minimum amounts have been such that they are well below the volume of goods that we have historically purchased. In addition, in the ordinary course of business, we communicate supply needs to our contract manufacturers based on orders and short-term projections, ranging from two to six months. We are committed to purchase the products produced by the contract manufacturers based on the projections provided. Upon the termination of contracts with contract manufacturers, we obtain certain inventory control rights and are obligated to work with the contract manufacturer to sell through all product held by or manufactured by the contract manufacturer on our behalf during the termination notification period. If any inventory remains at the contract manufacturer at the termination date, we are obligated to purchase such inventory which may include raw materials, components and finished goods. The amounts for inventory purchased under termination commitments have been immaterial.
In addition to the commitments to purchase products from contract manufacturers
described above, we may also enter into commitments with other manufacturers to
purchase finished goods and components to support innovation initiatives and/or
supply chain initiatives. As of
At
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unrecognized tax benefits related to income tax positions may be affected by the resolution of tax examinations or expiring statutes of limitation within the next twelve months.
Critical Accounting Policies and Estimates
Our results of operations and financial condition, as reflected in our
consolidated financial statements, have been prepared in accordance with
accounting principles generally accepted in
Revenue Recognition
Sales are recognized as revenue at a point in time upon transferring control of the product to the customer. This typically occurs when products are shipped or delivered, depending on when risks of loss and title have passed to the customer per the terms of the contract. For certain of our sales we must make judgments and certain assumptions in order to determine when delivery has occurred. Through an analysis of end-of-period shipments for these particular sales, we determine an average time of transit of product to our customers, and this is used to estimate the time of delivery and whether revenue should be recognized during the current reporting period for such shipments. Differences in judgments or estimates related to the lengthening or shortening of the estimated delivery time used could result in material differences in the timing of revenue recognition.
Sales are recorded net of allowances for damaged goods and other sales returns, sales incentives, trade promotions and cash discounts. We apply a five-step approach in determining the amount and timing of revenue to be recognized which includes the following: (1) identifying the contract with a customer, (2) identifying the performance obligations in the contract, (3) determining the transaction price, (4) allocating the transaction price to the performance obligations in the contract and (5) recognizing revenue when the performance obligation is satisfied.
In determining the transaction price, management evaluates whether the price is
subject to refund or adjustment related to variable consideration to determine
the net consideration to which we expect to be entitled. We record estimates of
variable consideration, which primarily includes rebates/other discounts
(cooperative marketing programs, volume-based discounts, shelf price reductions
and allowances for shelf space, charges from customers for services they
provided to us related to the sale and penalties/fines charged to us by our
customers for failing to adhere to contractual obligations), coupon offers, cash
discount allowances, and sales returns, as a reduction of sales in the
consolidated statements of operations. These estimates are based on the expected
value method considering all reasonably available information, including current
and past trade promotion spending patterns, status of trade promotion activities
and the interpretation of historical spending trends by customer and category,
customer agreements and/or currently known factors that arise in the normal
course of business. We review our assumptions and adjust these estimates
accordingly on a quarterly basis. Our consolidated financial statements could be
materially impacted if the actual promotion rates are different from the
estimated rates. If our accrual estimates for sales incentives at
Accounting for Income Taxes
Current income tax expense is the amount of income taxes expected to be payable for the current year. A deferred income tax liability or asset is established for the expected future tax consequences resulting from the differences in financial reporting and tax bases of assets and liabilities. Based on changes in the related tax law as well as forecasted results, a valuation allowance is provided if it is more likely than not that some or all of the deferred tax assets will not be realized. In addition to valuation allowances, we provide for uncertain tax positions when such tax positions do not meet the recognition thresholds or measurement standards prescribed by the authoritative guidance on income taxes. Amounts for uncertain tax positions are adjusted in periods when new information becomes available or when positions are effectively settled. We recognize accrued interest and penalties related to uncertain tax positions as a component of income tax expense.
We are required to make assertions on whether our foreign subsidiaries will
invest their undistributed earnings indefinitely and these assertions are based
on the capital needs of the foreign subsidiaries. Generally, unremitted earnings
of our foreign subsidiaries are not considered to be indefinitely reinvested.
However, there is an exception regarding specific statutory remittance
restrictions imposed on our
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information on income tax matters, see Part IV-Item 15, "Exhibits, Financial Statement Schedules" Note 13 - Income Taxes, included in this report.
Recently Issued Accounting Standards
Information on Recently Issued Accounting Standards that could potentially impact our consolidated financial statements and related disclosures is incorporated by reference to Part IV-Item 15, "Exhibits, Financial Statement Schedules" Note 2 - Basis of Presentation and Summary of Significant Accounting Policies, included in this report.
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