What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2020-12-09 compared with 2020-09-09 · 79 added, 85 removed, 237 unchanged (41% of the section changed)

31 unchanged sentences

Our revenue over the last three years has been generated primarily from sales of our SoC solutions for incorporation into specialized video and image capture devices such as wearable sports cameras, automotive aftermarket cameras, IP security cameras and cameras incorporated into drones.

Our revenue from several of these markets, however, has recently experienced significant declines.

Our revenue from several of these markets, however, has recently exp erienced significant declines.

As a result, we believe that our future revenue growth, if any, will significantly depend upon our ability to expand within camera markets, particularly in the professional IP security and home security and monitoring camera markets, as well as emerging markets such as AI-enabled security cameras, AI-based driving applications, including auto-parking, driver monitoring systems, advanced blind spot detection, object detection, and deep learning algorithms for HD mapping solutions, OEM automotive advanced driver assistance systems , or ADAS, applications , and industrial and robotics markets.

13 unchanged sentences

F inancial Highlights and Trends

We recorded revenue of $50.1 million and $104.8 million for the three and six months ended July 31, 2020, respectively.

This represented a decrease of 11.2% for the three months ended July 31, 2020 and an increase of 1.1% for the six months ended July 31, 2020, respectively, as compared to the same periods in the prior fiscal year.

The decreased revenue for the three months ended July 31, 2020 was primarily attributable to lower revenue from the sports camera, professional IP security camera, and automotive markets.

In the sports camera market, incorporation of our solutions into newly launched sports camera products from Dajiang Innovation Technology Inc., or DJI, resulted in a ramp of SoC shipments in the second quarter of fiscal year 2020 that did not recur in the current fiscal period.

In the professional IP security camera market, despite continued growth in the North America and Asia regions, lower demand from our two largest China customers caused by higher inventory build-up in fiscal year 2020 and escalated trade tensions between the United States and China, together with less demand from the Europe region, resulted in a significant revenue decrease in this market.

We recorded revenue of $56.1 million and $160.8 million for the three and nine months ended October 31, 2020, respectively.

This represented a decrease of 17.4% and 6.2% for the three and nine months ended October 31, 2020, respectively, as compared to the same periods in the prior fiscal year.

The decreases in revenue were primarily attributable to lower revenue from the professional IP security camera and automotive markets.

In the professional IP security camera market, despite continued growth in the North America and Asia regions in fiscal year 2021, lower demand from our two largest China customers caused by higher inventory build-up in fiscal year 2020 and escalated trade tensions between the United States and China, together with less demand from the Europe region, resulted in a significant revenue decrease in this market.

The decreased revenue in the automotive markets was primarily due to an overall slowdown in the automotive industry.

The lower revenue was partially offset by increased revenue in the consumer IP security camera and other consumer markets, including drone and wearable camera markets.

In the consumer IP security camera market, revenue growth was led by the home security and monitoring market in the North America region.

For the six months ended July 31, 2020, increased revenue was primarily attributable to higher revenue in the consumer IP security camera and drone markets, partially offset by decreased revenue in the sports camera and professional IP security camera markets.

While revenue was relatively flat for the six months ended July 31, 2020 compared to the same period in the prior fiscal year, we experienced continued demand for our new CV-based solutions in the professional IP security camera market and made initial shipments of our CV-based solutions into the consumer IP security camera and automotive markets in fiscal year 2021.

We recorded operating losses of $15.3 million and $30.9 million for the three and six months ended July 31, 2020, respectively, as compared to operating losses of $10.4 million and $28.6 million for the three and six months ended July 31, 2019, respectively.

In addition to the changes in revenue, the increased operating losses were also attributable to increased operating expenses, partially offset by increased gross margin.

The increase in expenses primarily related to approximately $3.2 million of research and development grants from a foreign government in the second quarter of fiscal year 2020 that did not recur in fiscal year 2021.

The increased expenses were also attributable to increased employee benefit expense and SoC development cost, partially offset by decreased equipment expense, travel expense, consulting services and a foreign subsidy granted due to the COVID-19 pandemic .

We generated cash flows from operating activities of $5.2 million for the six months ended July 31, 2020, as compared to $13.4 million for the six months ended July 31, 2019.

The decreased cash flows from operating activities were primarily due to increased net loss adjusted by non-cash expenses, decreased cash receipts associated with the timing of payments from customers, decreased liabilities associated with the timing of payments to suppliers and increased inventory purchases.

The decreased cash flows from operating activities were partially offset by decreased cash payments for other operating asset purchases.

The decreased revenue was partially offset by increased revenue in the consumer IP security camera and consumer markets, including drone and wearable camera markets.

In the consumer IP security camera market, revenue growth continued to be led by the home security and monitoring market in the North America region.

In the consumer markets, incorporation of our solutions into newly launched products from Dajiang Innovation Technology Inc., or DJI, resulted in a ramp of SoC shipments in the third quarter of fiscal year 2021, partially offset by decreased revenue in the sports camera market.

While revenue declined in the three and nine months ended October 31, 2020, respectively, we experienced sustained demand for our new CV-based solutions in the professional IP security camera market, generated revenue from CV-based solutions in the automotive OEM sensing market and made initial shipments of our CV-based solutions into the consumer IP security camera and automotive aftermarket in fiscal year 2021.

We recorded operating losses of $16.2 million and $47.2 million for the three and nine months ended October 31, 2020, respectively, as compared to operating losses of $7.2 million and $35.8 million for the three and nine months ended October 31, 2019, respectively.

In addition to the declines in revenue, the increased operating losses were also attributable to increased operating expenses, partially offset by increased gross margin.

The increase in expenses primarily related to increased employee benefit expense, SoC development cost as well as research and development grants from a foreign government in fiscal year 2020 that did not recur in fiscal year 2021.

The increased expenses were partially offset by decreased travel expense, consulting services and a COVID-19-related foreign subsidy granted in the second quarter of fiscal year 2021.

We generated cash flows from operating activities of $18.3 million for the nine months ended October 31, 2020, as compared to $35.3 million for the nine months ended October 31, 2019.

The decreased cash flows from operating activities were primarily due to increased net loss adjusted by non-cash expenses and decreased cash receipts associated with the timing of payments from customers.

The decreased cash flows from operating activities were partially offset by decreased cash payments for other operating asset purchases and increased liabilities associated with the timing of payments to suppliers and authorities.

On March 16, 2020, we repurchased a total of 25,719 of our ordinary shares for approximately $1.0 million in cash.

On May 29, 2020, our Board of Directors approved an extension of the repurchase program for an additional twelve months ending June 30, 2021.

There were no shares repurchased for the three months ended July 31, 2020.

As of July 31, 2020, there was approximately $49.0 million available for repurchases through June 30, 2021.

There were no shares repurchased for the three months ended October 31, 2020.

As of October 31, 2020, there was approximately $49.0 million available for repurchases through June 30, 2021.

Factors Affecting Our Performance

2 unchanged sentences

While we have not yet experienced a significant disruption of our operations as a result of the COVID-19 pandemic, if the remote or work-from-home conditions in any of our offices continues for an extended period of time, we may experience delays in product development, a decreased ability to support our customers, reduced design win activity, and overall lack of productivity.

Similarly, while we have not yet experienced a major disruption in our supply chain as a result of the COVID-19 pandemic, if there is a significant outbreak that impacts Samsung Electronic Corporation’s ability to manufacture our SoCs or our third-party contractors’ ability to assemble, test and ship our products, we could experience delays or reductions in our ability to ship products to our customers.

Similarly, while we have not yet experienced a major disruption in our supply chain as a result of the COVID-19 pandemic, we are experiencing longer manufacturing times that, if they persist or worsen, could impact our ability to meet our customers’ demand for our solutions and negatively impact our revenue.

Moreover, if there is a significant outbreak that impacts Samsung Electronic Corporation’s ability to manufacture our SoCs or our third-party contractors’ ability to assemble, test and ship our products, we could experience delays or reductions in our ability to ship products to our customers.

The pandemic may also impact our customers’ ability to manufacture their products, support their customers or reduce or delay demand for their products, which could, in turn, reduce such customers’ demand for our solutions.

For example, in the six months ended July 31, 2020, we saw an overall slowdown in the automotive industry which negatively impacted our revenue related to our computer vision-based solutions in the OEM video recorder market.

While we cannot quantify specific impacts of the COVID-19 pandemic or actions taken by governments and businesses in response thereto, our results of operations and financial condition may be negatively affected if we encounter supply chain problems, reductions in demand due to our customers or end customers having problems, or other unexpected COVID-19 ramifications.

For example, in the nine months ended October 31, 2020, we saw an overall slowdown in the automotive industry which negatively impacted our revenue related to our computer vision-based solutions in the OEM video recorder market.

While we cannot quantify specific impacts of the COVID-19 pandemic or actions taken by governments and businesses in response thereto, our results of operations and financial condition may be negatively affected if we encounter significant supply chain problems, reductions in demand due to our customers or end customers having problems, or other unexpected COVID-19 ramifications.

Political and Trade Relations Between the United States and China Could Adversely Affect our Business in a Material Way.

1 unchanged sentence

If additional tariffs or trade restrictions are imposed on our SoC solutions or the products of our customers, or trade restrictions are imposed on our ability to conduct business with certain customers, there could be a negative impact on our operations and financial performance.

For instance, during the six months ended July 31, 2020, lower demand from our two largest China customers resulted in our revenue decreased in the professional IP security camera market.

For instance, during the nine months ended October 31, 2020, lower demand from our two largest China customers r esulted in our revenue decreasing in the professional IP security camera market.

Even in the absence of new tariffs or trade restrictions, it is possible that China customers or potential customers could take actions to reduce dependence on the supply of components subject to United States trade laws, including our solutions.

1 unchanged sentence

In addition, the escalating social and political tensions in Hong Kong could, in the future, impact the operation of our warehouse facility in Hong Kong, through which a substantial majority of our finished SoCs are shipped to customers or logistic partners.

Continued deterioration in political, social or economic conditions in Hong Kong or future actions by the Chinese or U.S.

C ontinued deterioration in political, social or economic conditions in Hong Kong or future actions by the Chinese or U.S.

governments , could possibly result in business interruptions, substantially delayed or lost sales, loss of inventory, or increased expenses .

49 unchanged sentences

We typically commence commercial shipments from six to 18 months following a design win;

however, in some markets, more lengthy product and development cycles are possible, depending on the scope and nature of the project, such as in the automotive OEM market.

however, in some markets, lengthier product and development cycles are possible, depending on the scope and nature of the project, such as in the automotive OEM market.

A portable consumer device typically has a product life cycle of six to 18 months, and an IP security camera typically has a product life cycle of 12 to 24 months.

2 unchanged sentences

The following table sets forth a summary of our statement of operations for the periods indicated:

Three Months Ended July 31,

Six Months Ended July 31,

Three Months Ended October 31,

Nine Months Ended October 31,

(dollars in thousands)

7 unchanged sentences

Loss before income taxes

Provision for income taxes

Provision (benefit) for income taxes

The following table sets forth operating results as a percentage of revenue of each line item for the periods indicated:

Three Months Ended July 31,

Six Months Ended July 31,

Three Months Ended October 31,

Nine Months Ended October 31,

Cost of revenue

6 unchanged sentences

Loss before income taxes

Provision for income taxes

Provision (benefit) for income taxes

We derive substantially all of our revenue from the sale of HD and Ultra HD video and image processing SoC solutions to IP security camera OEMs, IP security camera ODMs, OEM automotive or Tier-1 automotive suppliers, either directly or through our distributors.

27 unchanged sentences

Other income, net, consists primarily of interest and other income from debt security investments and cash deposits with financial institutions.

Provision for Income Taxes

Provision (Benefit) for Income Taxes

We are incorporated and domiciled in the Cayman Islands and also conduct business in several countries such as the United States, China, Taiwan, Hong Kong, Italy, South Korea and Japan, and we are subject to taxation in those jurisdictions.

13 unchanged sentences

In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.

Comparison of the Three and Six Months Ended July 31, 2020 and 2019

Three Months Ended July 31,

Six Months Ended July 31,

Comparison of the Three and Nine Months Ended October 31, 2020 and 2019

Three Months Ended October 31,

Nine Months Ended October 31,

(dollars in thousands)

The decreased revenue for the three months ended July 31, 2020, as compared to the same period in the prior fiscal year, was primarily attributable to lower revenue from the sports camera, professional IP security camera, and automotive markets.

The decreased revenue for the three and nine months ended October 31, 2020, as compared to the same periods in the prior fiscal year, was primarily attributable to lower revenue from the professional IP security camera and automotive markets.

The decreased revenue in the automotive markets was primarily due to an overall slowdown in the automotive industry.

The lower revenue was partially offset by increased revenue in the consumer IP security camera and other consumer markets, including drone and wearable camera markets.

In the consumer IP security camera market, revenue growth was led by the home security and monitoring market in the North America region.

The decreased revenue was partially offset by increased revenue in the consumer IP security camera and consumer markets, including drone and wearable camera markets.

In the consumer IP security camera market, revenue growth continued to be led by the home security and monitoring market in the North America region.

In the consumer markets, incorporation of our solutions into newly launched products from DJI resulted in a ramp of SoC shipments in the third quarter of fiscal year 2021, partially offset by decreased revenue in the sports camera market.

Cost of Revenue and Gross Margin

Three Months Ended July 31,

Six Months Ended July 31,

Three Months Ended October 31,

Nine Months Ended October 31,

(dollars in thousands)

Cost of revenue

Cost of revenue decreased for the three months ended July 31, 2020, as compared to the same period in the prior fiscal year, primarily due to lower volumes of SoC shipments associated with decreased revenue.

Cost of revenue decreased for the six months ended July 31, 2020, as compared to the same period in the prior fiscal year, primarily due to lower SoC shipments in the professional IP security camera market, partially offset by increased shipments in the consumer IP security camera and drone markets.

Gross margin increased for the three and six months ended July 31, 2020, as compared to the same periods in the prior fiscal year, primarily due to gross margin improvement in the professional IP security camera market as a result of customer concentration shift from the China region to the North America and Asia regions other than China.

Cost of revenue decreased for the three and nine months ended October 31, 2020, as compared to the same periods in the prior fiscal year, primarily due to lower SoC shipments in the professional IP security camera market, partially offset by increased shipments in the consumer IP security camera and consumer markets.

Gross margin increased for the three and nine months ended October 31, 2020, as compared to the same periods in the prior fiscal year, primarily due to gross margin improvement in the professional IP security camera market as a result of customer concentration shift from the China region to the North America and Asia regions other than China.

Research and Development

Three Months Ended July 31,

Six Months Ended July 31,

Three Months Ended October 31,

Nine Months Ended October 31,

(dollars in thousands)

Research and development

Research and development expense increased for the three and six months ended July 31, 2020, as compared to the same periods in the prior fiscal year, primarily due to approximately $3.2 million of research and development grants from a foreign government in the second quarter of prior fiscal year that did not recur in the current fiscal year.

For the three and six months ended July 31, 2020, employee benefit expense increased by approximately $0.5 million and $0.5 million, respectively, as a result of issuance of stock and benefit programs.

Our engineering headcount was flat at 561 at July 31, 2020 compared to 559 at July 31, 2019.

SoC development cost increased by $0.9 million and $2.6 million for the three and six months ended July 31, 2020, respectively, due to project timing and number of chips in development.

In the second quarter of fiscal year 2021, there was approximately $0.7 million of a foreign subsidy granted related to the COVID-19 pandemic.

For the three and six months ended July 31, 2020, the equipment expense, travel expense and contractor services decreased by aggregate of $1.4 million and $2.1 million, respectively, caused by COVID-19 pandemic restrictions.

Research and development expense increased for the three and nine months ended October 31, 2020, as compared to the same periods in the prior fiscal year, primarily due to increased employee benefit expense and SoC development cost.

For the three and nine months ended October 31, 2020, employee benefit expense increased by approximately $1.3 million and $1.9 million, respectively, as a result of issuance of stock awards, employee benefit programs and an increase in headcount.

Our engineering headcount was 568 at October 31, 2020 compared to 560 at October 31, 2019.

SoC development cost increased by $2.7 million and $4.2 million for the three and nine months ended October 31, 2020, respectively, due to project timing and the number of chips in development.

The increased expense was also attributable to approximately $0.5 million and $3.7 million of research and development grants from a foreign government during the three and nine months ended October 31, 2019, respectively, that did not recur in the current fiscal year.

The increased expense was partially offset by decreased travel expense and contractor services caused by COVID-19 pandemic restrictions.

For the three and nine months ended October 31, 2020, travel expense and contractor services decreased by an aggregate of $0.4 million and $1.4 million, respectively .

For the nine months ended October 31, 2020, approximately $0.7 million of a COVID-19-related subsidy was granted by a foreign government.

Selling, General and Administrative

Three Months Ended July 31,

Six Months Ended July 31,

Three Months Ended October 31,

Nine Months Ended October 31,

(dollars in thousands)

Selling, general and administrative

Selling, general and administrative expense increased for the three and six months ended July 31, 2020, as compared to the same periods in the prior fiscal year, primarily due to increased employee benefit expense, as well as increased professional services and facility cost.

For the three and six months ended July 31, 2020, employee benefit expense increased by approximately $0.3 million and $0.6 million, respectively, as a result of issuance of stock and benefit programs.

Professional services and facility related cost increased by approximately $1.1 million and $1.4 million, respectively.

The increases were partially offset by approximately $0.4 million and $0.7 million of less expenditures on travel and marketing activities for the three and six months ended July 31, 2020, respectively, caused by COVID-19 pandemic restrictions.

Selling, general and administrative expense increased for the three and nine months ended October 31, 2020, as compared to the same periods in the prior fiscal year, primarily due to approximately $1.0 million and $1.6 million of additional employee benefit expense, respectively, as a result of issuance of stock awards and employee benefit programs.

For the nine months ended October 31, 2020, the increase was also attributable to approximately $1.6 million of additional professional services and facility related cost.

The increased expense was partially offset by approximately $0.4 million and $1.2 million of less expenditures on travel and marketing activities for the three and nine months ended October 31, 2020, respectively, caused by COVID-19 pandemic restrictions.

Other Income, Net

Three Months Ended July 31,

Six Months Ended July 31,

Three Months Ended October 31,

Nine Months Ended October 31,

(dollars in thousands)

Other income, net

The decrease in other income, net, for the three and six months ended July 31, 2020, as compared to the same periods in the prior fiscal year, was primarily due to decreases of approximately $1.3 million and $1.8 million, respectively, in interest and other income from our deposits and debt security investments as a result of lower interest rates during the current fiscal year due to COVID-19 pandemic and a higher number of debt securities purchased at premium.

The decrease was also attributable to an approximately $0.3 million of a foreign subsidy granted during the first half of fiscal year 2020 that did not recur in the current fiscal year.

The decrease was partially offset by approximately $0.5 million and $0.4 million of net gains from foreign currency transactions and remeasurements for the three and six months ended July 31, 2020, respectively.

Provision for Income Taxes

Three Months Ended July 31,

Six Months Ended July 31,

The decrease in other income, net, for the three and nine months ended October 31, 2020, as compared to the same periods in the prior fiscal year, was primarily due to decreases of approximately $1.3 million and $3.2 million, respectively, in interest and other income from our deposits and debt security investments as a result of lower interest rates and a higher number of debt securities purchased at a premium in the current fiscal year.

Provision (Benefit) for Income Taxes

Three Months Ended October 31,

Nine Months Ended October 31,

(dollars in thousands)

Provision for income taxes

Provision (benefit) for income taxes

Effective tax rate

The quarterly income taxes reflect an estimate of the corresponding fiscal year’s annual effective tax rate and include, when applicable, adjustments from discrete tax items arising in that quarter.

The decrease in income tax expense for the three and six months ended July 31, 2020, as compared to the same periods in the prior fiscal year, was primarily due to a decrease in the proportion of profits generated in higher tax jurisdictions, as well as an increase in the U.S.

federal research tax credit, partially offset by an increase in non-deductible stock-based compensation.

The increase in income tax expense for the three and nine months ended October 31, 2020, as compared to the same periods in the prior fiscal year, was primarily due to a decrease in the proportion of profits generated in lower tax jurisdictions, as well as an increase in non-deductible stock-based compensation.

Liquidity and Capital Resources

As of July 31, 2020 and January 31, 2020, we had cash, cash equivalents and marketable debt securities of approximately $410.7 million and $404.7 million, respectively.

As of October 31, 2020 and January 31, 2020, we had cash, cash equivalents and marketable debt securities of approximately $423.6 million and $404.7 million, respectively.

We invest in highly liquid, short-term marketable debt securities and hold these investments as available-for-sale securities.

As of July 31, 2020, these securities had a fair value of approximately $214.0 million with immaterial unrealized losses caused by market fluctuations.

As of October 31, 2020, these securities had a fair value of approximately $214.4 million with immaterial unrealized losses caused by market fluctuations.

The following table summarizes our cash flows for the periods indicated:

Six Months Ended July 31,

Nine Months Ended October 31,

(in thousands)

4 unchanged sentences

Net Cash Provided by Operating Activities

Net cash provided by operating activities decreased for the six months ended July 31, 2020, as compared to the same period in the prior fiscal year, primarily due to increased net loss adjusted by non-cash expenses, decreased cash receipts associated with the timing of payments from customers, decreased liabilities associated with the timing of payments to suppliers and increased inventory purchases.

The decreased cash flows from operating activities were partially offset by decreased cash payments for other operating asset purchases.

Net cash provided by operating activities decreased for the nine months ended October 31, 2020, as compared to the same period in the prior fiscal year, primarily due to increased net loss adjusted by non-cash expenses and decreased cash receipts associated with the timing of payments from customers.

Net Cash Provided by (Used in) Investing Activities

Net cash used in investing activities increased for the six months ended July 31, 2020, as compared to the same period in the prior fiscal year, primarily due to approximately $18.0 million of additional investments in debt securities, as well as approximately $10.7 million less cash receipts from the sale and maturity of debt securities.

The increase was partially offset by approximately $0.3 million of less expenditure on capital asset purchases.

Net cash used in investing activities increased for the nine months ended October 31, 2020, as compared to the same period in the prior fiscal year, primarily due to approximately $14.3 million of additional investments in debt securities, as well as approximately $27.9 million less cash receipts from the sale and maturity of debt securities.

Net Cash Provided by Financing Activities

Net cash provided by financing activities decreased for the six months ended July 31, 2020, as compared to the same period in the prior fiscal year, primarily due to approximately $1.6 million of less cash proceeds from option exercises and employee stock purchase withholdings, $1.0 million of cash used for the repurchasing of our ordinary shares under the stock repurchase program, as well as an additional $0.2 million of payment for intangible asset purchases.

Net cash provided by financing activities decreased for the nine months ended October 31, 2020, as compared to the same period in the prior fiscal year, primarily due to approximately $3.0 million of less cash proceeds from option exercises and employee stock purchase withholdings, $1.0 million of cash used for the repurchasing of our ordinary shares under the stock repurchase program, as well as an additional $0.8 million of payment for intangible asset purchases.

Stock Repurchase Program

Since the inception of the stock repurchase programs in June 2016, a total of $275.0 million has been authorized for repurchase, and to date, we have repurchased a total of 4,011,595 shares for approximately $175.8 million in cash under the programs.

As of July 31, 2020, $49.0 million remained available for repurchases under the current repurchase program through June 30, 2021.

As of October 31, 2020, $49.0 million remained available for repurchases under the current repurchase program through June 30, 2021.

Repurchases under the program may be made from time-to-time through open market purchases, 10b5-1 plans or privately negotiated transactions subject to market conditions, applicable legal requirements and other relevant factors.

2 unchanged sentences

Operating and Capital Expenditure Requirements

As of July 31, 2020, we had cash, cash equivalents and marketable debt securities of approximately $410.7 million.

As of October 31, 2020, we had cash, cash equivalents and marketable debt securities of approximately $423.6 million.

We believe that our existing cash balances will be sufficient to meet our anticipated cash requirements through at least the next 12 months.

16 unchanged sentences

Manufacturing Purchase Obligations

As of July 31, 2020, we had purchase obligations with our independent contract manufacturers of $24.4 million.

As of October 31, 2020, we had purchase obligations with our independent contract manufacturers of $37.1 million.

Except as described above with respect to the manufacturing purchase obligations, there were no other material changes in our contractual obligations, commitments and contingencies from those disclosed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2020.

1 unchanged sentence

Off-Balance Sheet Arrangements

As of July 31, 2020, we did not engage in any off-balance sheet arrangements, including the use of structured finance, special purpose entities or variable interest entities.

As of October 31, 2020, we did not engage in any off-balance sheet arrangements, including the use of structured finance, special purpose entities or variable interest entities.

Recent Authoritative Accounting Guidance

3 unchanged sentences

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-Q

Item 2. Management’s Discussion and Analysis