What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-03-30 compared with 2021-03-31 · 86 added, 119 removed, 105 unchanged (66% of the section changed)

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Forward-Looking Information

The Company may from time to time make written or oral “forward-looking statements” including statements contained in this report and in other communications by the Company, which are made in good faith pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.

Such statements are based on our beliefs as well as assumptions made by and information currently available to us.

When used in this document, words like “may,” “might,” “will,” “except,” “anticipate,” “believe,” “potential,” and similar expressions are intended to identify forward-looking statements.

Actual results could differ materially from our current expectations.

Forward-looking statements in this report, including without limitation, statements related to the Company’s plans, strategies, objectives, expectations, intentions and adequacy of resources, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Investors are cautioned that such forward-looking statements involve risks and uncertainties including the impact that the global COVID-19 pandemic has had and will continue to have on the Company’s business, operations and financial results.

These include the duration, spread, severity, and any recurrence of the COVID-19 pandemic including through any new variant strains of the underlying virus;

the effectiveness, availability, and public acceptance of vaccines;

the duration and scope of pandemic-related government restrictions on commercial and other activities, including retail store, office, school and restaurant closures;

the duration and scope of the Company’s actions to maintain employee health at our offices, production facilities and distribution centers;

the extent of the impact of the COVID-19 pandemic on overall demand for the Company’s products;

the effect of measures taken by the Company to protect the health of our employees at our offices and distribution centers the pace of recovery when an effective vaccine is widely available or when the pandemic otherwise subsides and the heightened impact the pandemic has on many of the risks described herein, including without limitation risks relating to the on-going world-wide economic downturn and disruptions in our supply chain, any of which could adversely impact the Company’s ability to manufacture, source or distribute its products, both domestically and internationally.

Investors are cautioned that such forward-looking statements involve risks and uncertainties that may impact the Company’s business, operations and financial results, including those risks and uncertainties resulting from the global COVID-19 pandemic, future waves of COVID-19, including through the Delta and Omicrom variants and any new variant strains of the underlying virus;

any future pandemics;

the continuing effectiveness, global availability, and public acceptance of existing vaccines;

the effectiveness, availability, and public acceptance of vaccines against variant strains of potential new viruses;

and the heightened impact the pandemic has on many of the risks described herein, including, without limitation, risks relating to disruptions in our supply chain, and labor shortages, any of which could materially adversely impact the Company’s ability to manufacture, source or distribute its products, both domestically and internationally.

These risks and uncertainties further include, without limitation, the following:

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(ii) the impact of uncertainties in global economic conditions, whether caused by COVID-19 or otherwise, including the impact on the Company’s suppliers and customers;

(iii) changes in client needs and consumer spending habits, including COVID-19 related changes;

(iv) the impact of competition;

(v) the impact of technological changes including, specifically, the growth of online marketing and sales activity;

(vi) the Company’s ability to manage its growth effectively, including its ability to successfully integrate any business it might acquire;

(vii) the Company’s ability to effectively manage its inventory in a rapidly changing business environment, including additional inventory acquired to respond to COVID-19 related uncertainties;

(viii) currency fluctuations;

(ix) international trade policies and their impact on demand for our products and our competitive position, including the imposition of new tariffs or changes in existing tariff rates;

and (x) other risks and uncertainties indicated from time to time in the Company’s filings with the Securities and Exchange Commission.

(iii) additional disruptions in the Company’s supply chains, whether caused by COVID-19 or otherwise;

(iv) labor shortages and related costs the Company may incur, including costs of acquiring and training new employees;

(v) the impact of rising inflation rates;

(vi) the Company’s ability to effectively manage its inventory in a rapidly changing business environment, including the additional inventory it acquired in 2020 and 2021 in anticipation of supply chain disruptions;

uncertainties;

(vii) changes in client needs and consumer spending habits;

(viii) the impact of competition;

(ix) the impact of technological changes including, specifically, the growth of online marketing and sales activity;

(x) the Company’s ability to manage its growth effectively, including its ability to successfully integrate any business it might acquire;

(xi) rising wages and benefits;

(xii) currency fluctuations;

(xiii) international trade policies and their impact on demand for our products and our competitive position, including the imposition of new tariffs or changes in existing tariff rates;

and (xiv) other risks and uncertainties indicated from time to time in the Company’s filings with the Securities and Exchange Commission.

For a more detailed discussion of these and other factors affecting the Company, see the Risk Factors described in Item 1A included in this Report Annual Report on Form 10-K and below under “Financial Condition”.

All forward-looking statements in this report are based upon information available to the Company on the date of this report.

The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by applicable law or regulation.

Critical Accounting Policies & Estimates

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For its contracts with customers, the Company identifies the performance obligations (goods or services), determines the transaction price, allocates the contract transaction price to the performance obligations, and recognizes the revenue when (or as) the performance obligation is transferred to the customer.

A good or service is transferred when (or as) the customer obtains control of that good or service.

Depending on the contractual terms of each customer, revenue is recognized either at the time of shipment or upon delivery.

A good or service is transferred when (or as) the

customer obtains control of that good or service.

Depending on the contractual terms of each customer, revenue is recognized either at the time of shipment “FOB Shipping Point” or upon delivery “FOB Destination" .

When revenue is recorded, estimates of returns are made and recorded as a reduction of revenue.

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Management periodically reviews accruals for these rebates and allowances and adjusts accruals when appropriate.

Obsolete and Slow Moving Inventory – Inventories are stated at the lower of cost, determined on the first-in, first-out method, or net realizable value.

Obsolete and Slow Moving Inventory – Inventories are stated at the lower of cost or net realizable value.

Cost of inventories is determined by the first-in, first-out method.

An allowance is established to adjust the cost of inventory to its net realizable value.

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COVID-19 Pandemic Related Considerations

As noted above in the “Forward-Looking Statements”, the spread of the coronavirus (COVID-19) through China, the United States, and other countries globally and the related ongoing economic downturn continue to present certain significant risks and uncertainties to the Company and its operations.

Commencing late in the first quarter of the current fiscal year and continuing through the filing of this report, the COVID-19 pandemic has affected the Company’s financial results and business operations.

During this period, we experienced, and continue to experience, a significant increase in demand for many of the Company’s first aid and safety products, as consumers and commercial enterprises stocked up on these products.

On the other hand, while the Company gained market share in its Westcott craft products, it experienced weakness in the sales of its Westcott office and school supplies with the result that sales for fiscal year 2020 were approximately the same as fiscal year of 2019.

The weakness in sales was due, in part, to pandemic-related continued or reimposed closures of retail stores, schools and offices and other COVID-19 related restrictions imposed in our domestic and international markets.

The ultimate impact of these effects on the Company will depend on the duration, spread, and severity of the COVID-19 pandemic, and any recurrence of the COVID-19 pandemic including through any new variant strains of the underlying virus, the effectiveness, availability, and acceptance by the public of vaccines, the length of time it takes for normal economic and operating conditions to resume, whether commercial closures and other restrictions that have been imposed to date are extended or reimposed, and additional actions that may be taken by governmental authorities or by businesses or individuals of their own initiative in response to the pandemic.

Substantially all of our manufacturing facilities and distribution centers and those of our key suppliers currently remain open and continue to operate despite temporary closures.

We monitor information on COVID-19 from the Centers for Disease Control and Prevention (“CDC”) and believe we are adhering to their recommendations regarding the health and safety of our personnel.

To address the potential human impact of the virus, most of our administrative staff are telecommuting.

For those administrative staff not telecommuting and our warehouse and domestic manufacturing employees, we have implemented social distancing and mask policies, instituted daily temperature checks and have increased facility cleaning at each location.

Non-essential domestic and international travel for our employees has ceased.

As a result of the COVID-19 pandemic, commencing late in the first quarter of 2020 and continuing through the end of 2020 and the date of this report , the Company (i) has had to acquire certain of its products at increased costs due to dramatic increases in demand for such products (while, to date, the Company has been successful in passing along such increased costs to its customers, there is no assurance that the Company will be able to continue to do so in the future);

(ii) had to acquire additional inventory to minimize the impact of any potential disruption to our supply chain;

(iii) has incurred increased labor costs as a result of the payment of additional compensation to employees at its warehouse and distribution centers;

and (iv) has incurred costs associated with the additional cleaning and maintenance of its facilities including the temporary closures of facilities for those purposes.

The Company continued to incur such costs as a result of these conditions in the fourth quarter and through the date of this report.

In addition, the Company has increased reserves relating to outstanding receivables from approximately $ 522 ,000 at December 3 1 , 20 19 , to approximately $ 1,150 ,000 at December 3 1 , 2020, as a result of credit risks related to COVID -19 .

(The Company continuously evaluates credit risks relating to its customers and may need to increase its reserves relating to its receivables further or even, in the event that one or more significant customers should cease operations or declares bankruptcy, write off a substantial amount of receivables.)

The Company has also experienced obstacles and inefficiencies resulting from a number of pandemic-related factors such as travel restrictions imposed by governmental authorities which, e.g., inhibit sales and marketing activities, and inefficiencies resulting from many of the Company’s personnel working remotely.

In addition, the Company experienced inefficiencies in its manufacturing and distribution due to social distancing measures imposed in its facilities, COVID-19 related absenteeism, and higher than normal turnover and training of replacements, together with associated costs.

The increases and decreases in the demand for the Company’s products described above have continued to affect the Company’s operations through the end of fiscal year 2020 and continue to do so through the date of this report.

They are likely to continue to do so in the immediate future.

For example, a decrease could occur in the demand for its first aid and safety products as a result of market saturation potentially resulting from customers having stockpiled those products.

While there is no certainty that the current high levels of demand for our first aid and safety products will continue, we have increased our short-term manufacturing and sourcing capacity for these products.

We also increased manufacturing and sourcing of other key components and finished goods to minimize the impact of any disruption to our supply chain in the event of a resurgence of an outbreak of the coronavirus in any of our key manufacturing or distribution facilities.

The Company anticipates that it has sufficient inventory of its products to meet anticipated demand.

However, any prolonged increase in the duration or severity of the COVID-19 pandemic or a resurgence of the pandemic in the future, might adversely affect the Company’s ability to manufacture, source or distribute its products both domestically and internationally.

As noted above under “Forward-Looking Statements” and the Risk Factors described in Item 1A included in this Report Annual Report on Form 10-K, in response to the COVID-19 pandemic U.S.

federal, state, local, and foreign governments adopted mitigation measures, creating significant uncertainties in the U.S.

and global economies, including the shutdown of large portions of, or imposition of restrictions on, the U.S.

and global economies.

Notwithstanding a general improvement in conditions and reduction of adverse effects from the pandemic, as of December 31, 2021 there continues to be significant uncertainty around the scope, severity, and duration of the pandemic, as well as the breadth and duration of business disruptions related to it and the overall impact on the U.S., global economies, and our operating results in future periods.

Commencing late in the first quarter of 2020 and continuing through the filing of this report, the COVID-19 pandemic and certain related challenges have affected the Company’s financial results and business operations.

These challenges include:

difficulties in hiring employees for

its manufacturing and distribution centers due to current domestic labor shortages, increased labor costs, higher employee turnover compared to pre-pandemic levels.

In addition, a portion of the Company’s workforce in its headquarters and elsewhere continue to work remotely.

As a result, the Company has experienced and continues to experience operating inefficiencies.

In addition, as economies have re-opened, global supply chains have struggled to keep up with increasing demand, and the resulting supply chain disruptions have, in certain cases, affected our ability to ship products in a timely manner.

These supply chain disruptions and the increase in demand have also led to increased freight, labor and product costs that affected our operating margin in 2021, and those disruptions and increased costs are likely to persist in the near term and potentially for the foreseeable future.

As a result, the Company, beginning in April 2020 and continuing through the end of 2021 and through the present has acquired and maintained additional inventory to minimize the impact of any potential disruption to its supply chain.

The Company believes that it has sufficient inventory of its products to meet anticipated demand in the near future.

However, any further increase in the duration or severity of the COVID-19 pandemic or a resurgence of the pandemic and the continuation of related supply chain and labor issues, might adversely affect the Company’s ability to manufacture, source or distribute its products both domestically and internationally.

The occurrence of any of these factors could have a material adverse effect on the Company’s business, operations and financial condition.

Further, the resurgence in the spread of COVID-19 toward the end of 2021 and into 2022 has created greater uncertainty regarding the economic outlook for the near term, even as vaccines have become widely available.

The extent to which the COVID-19 pandemic will continue to affect the Company’s business, financial condition, liquidity and the Company’s operating results will depend on future developments, which are highly uncertain and cannot be predicted.

In 2021, sales increased by $18,084,519, or 11%, to $182,087,559 compared to $164,003,040 in 2020.

segment sales increased by 12%, in 2020 compared to 2019 mainly attributable to strong sales of first aid and safety products, primarily due to continued market share gains in the industrial, safety, home improvement, mass market and e-commerce channels.

Also contributing to the growth in first aid products was a surge demand related to the COVID-19 pandemic which had commenced late in the first quarter.

These sales amounted to approximately $3.0 million in the twelve months ended December 31, 2020.

Net sales in Canada, excluding First Aid Central products, for the year ended December 31, 2020, decreased 4% in U.S.

dollars and 3% in local currency compared to the same period in 2019.

Sales of First Aid Central products were approximately $4.6 million for the year ended December 31, 2020.

European net sales for the year ended December 31, 2020 increased 25% in both U.S.

dollars and local currency, compared with the period in 2019.

The increase in net sales was primarily due to increased sales of Westcott cutting products and Camillus knives in the e-commerce channel as well as continued growth of DMT sharpening products.

segment sales increased by 9%, in 2021 compared to 2020.

Approximately 65% was attributable to strong sales of first aid and medical products, primarily due to continued market share gains in the industrial channel as well as increases in mass market and e-commerce channels.

Approximately 35% of the growth came from strong sales of Westcott craft products.

Net sales in Canada for the year ended December 31, 2021, increased 31% in U.S.

dollars and 22% in local currency compared to the same period in 2020, primarily due to higher sales of first aid products.

European net sales for the year ended December 31, 2021, increased 19% in U.S.

dollars and 15% in local currency, compared with the same period in 2020.

Approximately 75% of the increase was due to increased sales in the e-commerce channel across all brands.

The remaining growth was mainly due to market share gains in Westcott cutting products

Gross profit was 35.6% of net sales in 2021 compared to 36.3% in 2020.

The decline was primarily due to cost inflation pressures and higher transportation costs, which equally contributed to the decline.

Price increases have partially offset the cost increases.

Selling, General and Administrative

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SG&A expenses were 28.6% of net sales in 2021 compared to 29.4% in 2020.

The increase in SG&A expenses was primarily due to higher personnel related costs, commissions and shipping costs related to higher sales, provision for bad debt primarily related to the impact COVID-19 on our customers, as well as added expenses related to the acquisition of First Aid Central, partially offset by lower travel and marketing expenses.

Approximately 80% of the increase in SG&A expenses was due to higher commissions and shipping costs related to higher sales.

The remaining increases was mainly due to added expenses related to the acquisition of Med Nap.

Operating Income

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Operating income in the U.S.

segment increased by approximately $1,673,000, primarily due to higher sales.

Operating income in Canada increased by approximately $561,000, primarily due to the acquisition of First Aid Central.

Operating income in the European segment increased by approximately $750,000, primarily due to higher sales.

segment increased in 2021 by approximately $649,000 over 2020, primarily due to higher sales.

Operating income in Canada increased in 2021 by approximately $561,000 over 2020, primarily due to the acquisition of First Aid Central.

Operating income in the European segment increased in 2021 by approximately $147,000 over 2020, primarily due to higher sales.

Interest Expense, Net

Net interest expense for 2021 was $908,223, compared with $919,709 for 2020, a decrease of $11,486.

The decrease in interest expense, net for 2020, was primarily the result of a lower average interest rate as well as lower average debt outstanding under the Company’s revolving credit facility.

Other Expense

Other expense was $194,877 in 2021 compared to $666,227 in 2020.

The increase in other expense is primarily related to a one-time non-cash charge of approximately $750,000 related to the termination of the Company’s Defined Benefit Pension Plan.

The decrease in other expense is primarily related to a one-time non-cash charge of approximately $750,000 related to the termination of the Company’s Defined Benefit Pension Plan in 2020.

Income Tax Expense

Income tax expense was $1,519,255 in 2021, resulting in an effective tax rate of 10% compared to 1,727,962, an effective tax rate of 18% in 2020.

Income tax expense in 2021 included a $1.4 million tax credit for stock-based compensation.

The Company’s effective tax rate for the year ended December 31, 2021, excluding the tax credit and the income from the PPP Loan forgiveness was 24%, compared to 21% in 2020.

The higher effective tax rate in 2021 is due to a higher proportion of earnings in jurisdictions with a higher tax rate.

Off-Balance Sheet Transactions

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During 2021, working capital increased by approximately $11.5 million compared to December 31, 2020.

Inventory (excluding the impact of acquisitions) increased by approximately $11 million, or 29%.

The increase was primarily due to anticipated growth in our business as well as the acquisition of product to offset the impact of potential supply chain interruptions related to COVID-19.

Inventory increased by approximately $3 million, or 6%.

The increase was primarily due to anticipated growth in our business as well as the acquisition of product to offset the impact of potential supply chain interruptions.

The Company expects that changes in inventory levels will continue to be consistent with changes in sales, including the seasonal impact on the Company’s revenue stream.

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Receivables increased by approximately $7.0 million at December 31, 2021 compared to December 31, 2020.

The increase is primarily due to higher sales in the second half of the fourth quarter.

The average number of days sales outstanding in accounts receivable was 60 days in 2021 compared to 60 days in 2020.

Accounts payable and other current liabilities increased by approximately $3.6 million.

Long-term debt consists of (i) borrowings under the Company’s revolving loan agreement with HSBC Bank, N.A.

(ii) amounts outstanding under the Paycheck Protection Program (PPP) and (iii) amounts outstanding under the variable rate mortgage related on the Company’s manufacturing and distribution facility in Vancouver, WA.

and (ii) amounts outstanding under the fixed rate mortgage related on the Company’s manufacturing and distribution facilities in Rocky Mount, NC and Vancouver, WA.

The revolving loan agreement provides for borrowings of up to $50 million at Prime Rate less 1.25%.

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At December 31, 2021, the Company was in compliance with the covenants then in effect under the loan agreement.

At December 31, 2020, total debt outstanding under the Company’s revolving credit facility increased by approximately $5.5 million compared to total debt at December 31, 2019.

At December 31, 2021, total debt outstanding under the Company’s revolving credit facility decreased by approximately $5.7 million compared to total debt at December 31, 2020.

As of December 31, 2021, $33,037,172 was outstanding and $16,962,828 was available for borrowing under the Company’s revolving credit facility.

On May 7, 2020, the Company received a loan (the “PPP Loan”) from HSBC Bank, N.A.

in the amount of $3,508,047 under the Paycheck Protection Program established by the Coronavirus Aid, Relief and Economic Security Act.

Subject to potential forgiveness, as described below, the PPP Loan matures in two years on May 8, 2022, bears interest at a rate of 1.00% per year and is evidenced by a promissory note dated May 7, 2020 (the “Note”).

Monthly payments of principal and interest are deferred until after any application for forgiveness submitted by the Company has been acted upon, as described below.

The PPP Loan is unsecured and federally guaranteed.

The Note contains customary events of default relating to, among other things, failure to make payments of principal and interest and breaches of representations and warranties.

The Company may prepay the PPP Loan at any time prior to maturity with no penalty.

All or a portion of the PPP Loan may be eligible to be forgiven by the U.S.

Small Business Administration (“SBA”) and the lender upon application by the Company, provided that the Company shall have used the loan proceeds for eligible purposes, including the payment of payroll, benefits, rent, mortgage interest and utilities, during the 24 week period beginning on the date of funding of the loan (the “covered period”).

Not more than 40% of the amount forgiven may be for non-payroll costs.

Consistent with the requirements of the PPP for loan forgiveness, the Company used the loan proceeds solely for payment of payroll and otherwise in a manner which it believes satisfy the requirements for loan forgiveness.

In August 2020, the Company submitted an application for forgiveness of the entire amount of the PPP loan to HSBC Bank, N.A.

(the Lender).

The lender approved the forgiveness application and, on August 26, 2020, submitted the Company’s application to the SBA for its approval.

The SBA subsequently asked the Company to provide certain additional information and documentation in connection with it review of the Company’s forgiveness application and the Company has done so.

The application is presently pending.

No assurance can be given that the Company’s application for loan forgiveness will be approved by the SBA, in whole or in part.

The SBA reserves the right to audit any PPP loan, regardless of size.

These audits may occur after forgiveness has been granted.

Under the CARES Act, all borrowers are required to maintain their loan documentation for six years after the PPP loan was forgiven or repaid in full and to provide that documentation to the SBA upon request.

On April 28, 2020, the U.S.

Department of the Treasury stated that the SBA will review each PPP loan over $2.0 million.

In order to apply for the PPP Loan, we were required to certify, among other things, that the then current uncertainty made the PPP Loan request necessary to support our ongoing operations.

We made this certification in good faith after analyzing, among other things, our financial situation and access to alternative sources of capital.

Following this analysis, we believe that we satisfied all eligibility criteria for the PPP Loan, and that our receipt of the PPP Loan is consistent with the objectives of the PPP of the CARES Act.

If it is later determined that we were ineligible to receive the PPP Loan, we may be required to repay the PPP Loan in its entirety and/or be subject to additional penalties, which could have a material adverse effect on our business, results of operations and financial condition.

The Company’s First Aid Only manufacturing and distribution center in Vancouver, WA was financed by a variable rate mortgage with HSBC Bank, N.A.

at an interest rate of LIBOR plus 2.5%.

Principal payments of $22,222 are due monthly, with all amounts outstanding due on maturity on October 31, 2024.

On May 7, 2020, the Company received a two-year loan (the “PPP Loan”) from HSBC Bank USA, N.A., the lender, in the amount of $3,508,047 under the Paycheck Protection Program established by the Coronavirus Aid, Relief and Economic Security Act (CARES Act).

Under the CARES Act, all or a portion of the PPP Loan was eligible to be forgiven by the U.S.

Small Business Administration (“SBA”) and the lender, upon application by the Company, provided that the Company shall have used the loan proceeds for certain eligible purposes.

The PPP Loan was fully forgiven by the SBA and on June 9, 2021, payment in the amount of $3,508,047 was made by the SBA to the lender.

The Company recorded the amount forgiven as income during the year ended December 31, 2021.

The Company’s manufacturing and distribution facilities in Rocky Mount, NC and Vancouver, WA were financed by a fixed rate mortgage with HSBC Bank, N.A.

at a fixed interest rate of 3.8%.

The Company entered into the agreement on December 1, 2021.

Payments of principal and interest are due monthly, with all amounts outstanding due on maturity on December 1, 2031.

The outstanding principal on December 31, 2021, was $11,620,000.

Capital expenditures during 2021 and 2020 were $6,372,615 and $2,569,174, respectively, which were, in part, financed with borrowings under the Company’s revolving credit facility.

The increase is primarily related to improvements at our distribution center in Rocky Mount, NC including new HVAC (approximately $2 million) and warehouse management systems (approximately $1 million).

The Company believes that cash on hand, and cash generated from operating activities, together with funds available under its revolving credit facility, are expected, under current conditions, to be sufficient to finance the Company’s planned operations for at least the next twelve months from the issuance of this Form 10-K.

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ASU 2019-12 is effective for annual reporting periods beginning after December 15, 2020.

The Company does not expect the adoption of ASU 2019-12 to have a material effect on its consolidated financial statements.

In August 2018, the FASB issued ASU No.

2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20), Disclosure Framework - Changes to the Disclosures Requirements for Defined Benefit Plans Income Statement - Reporting Comprehensive Income (Topic 220) .

This ASU removes disclosures that no longer are considered cost beneficial, clarifies the specific requirements of disclosures, and adds disclosure requirements identified as relevant.

ASU 2018-14 is effective for fiscal years ending after December 15, 2020.

The Company does not expect the adoption of ASU 2018-14 to have a material impact on its consolidated financial statements.

In June 2018, the FASB issued ASU No.

2018-07, Compensation-Stock Compensation (Topic 718):

Improvements to Nonemployee Share-Based Payment Accounting .

ASU 2018-07 aligns the accounting for share-based payment awards issued to employees and non-employees.

ASU 2018-07 is effective for fiscal years beginning after December 15, 2018, including interim periods within that reporting period.

The adoption of ASU 2018-07 did not have a material impact on the consolidated financial statements.

In February 2018, the FASB issued ASU No.

2018-02, Income Statement — Reporting Comprehensive Income (Topic 220):

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income .

2018-02 provides companies with an option to reclassify stranded tax effects within accumulated other comprehensive income (“AOCI”) to retained earnings in each period in which the effect of the change in the U.S.

federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded.

2018-02 also requires disclosure of a description of the accounting policy for releasing income tax effects from AOCI and whether an election was made to reclassify the stranded income tax effects from the Tax Cuts and Jobs Act.

2018-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years.

Companies can adopt the provisions of ASU No.

2018-02 in either the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S.

federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized.

This ASU was adopted effective January 1, 2019 and resulted in a reclassification between retained earnings and accumulated other comprehensive loss.

The impact from this ASU increased retained earnings by approximately $0.1 million, with an offsetting increase to accumulated other comprehensive loss for the same amount.

The adoption of ASU 2019-12 did not have a material effect on the Company’s consolidated financial statements.

In January 2017 , the FASB issued ASU No.

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The amendments in this update eliminate Step 2 from the goodwill impairment test.

The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount.

The annual, or interim, goodwill impairment

test is performed by comparing the fair value of a reporting unit with its carrying amount.

An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value;

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis