5 unchanged sentences
The Company operates in one business segment as a systems integrator that designs, develops, manufactures, sells, and services, air data equipment, engine display systems, standby equipment, primary flight guidance, autothrottles and cockpit display systems for retrofit applications and original equipment manufacturers (“OEMs”).
−Removed: The Company supplies integrated Flight Management Systems (“FMS”), Flat Panel Display Systems (“FPDS”), FPDS with Autothrottle, air data equipment, Integrated Standby Units (“ISU”), ISU with Autothrottle and advanced Global Positioning System (“GPS”) receivers that enable reduced carbon footprint navigation.
+Added: The Company supplies integrated Flight Management Systems (“FMS”), Flat Panel Display Systems (“FPDS”), FPDS with Autothrottle, air data equipment, Integrated Standby Units (“ISU”), ISU with Autothrottle and advanced GPS receivers that enable reduced carbon footprint navigation.
The Company has continued to position itself as a system integrator, which provides the Company with the capability and potential to generate more substantive orders over a broader product base.
20 unchanged sentences
Such changes may cause customers to curtail or delay their spending on both new and existing aircraft.
−Removed: Factors that can impact
−Removed: general economic conditions and the level of spending by customers include, but are not limited to, the impact of the ongoing COVID-19 pandemic, general levels of consumer spending, increases in fuel and energy costs, conditions in the real estate and mortgage markets, labor and healthcare costs, access to credit, consumer confidence, and other macroeconomic factors that affect spending behavior.
+Added: Factors that can impact general economic conditions and the level of spending by customers include, but are not limited to, the impact of the ongoing COVID-19 pandemic, general levels of consumer spending, increases in fuel and energy costs, conditions in the real estate and mortgage markets, labor and healthcare costs, access to credit, consumer confidence, and other macroeconomic factors that affect spending behavior.
Furthermore, spending by government agencies may be reduced in the future if tax revenues decline.
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Income before income taxes
−Removed: Income tax (benefit) expense
+Added: Income tax expense (benefit)
Fiscal Year Ended September 30, 2022 Compared to Fiscal Year Ended September 30, 2021
Net sales for fiscal 2022 increased $4.7 million, or 20.4%, to $27.7 million from $23.0 million for fiscal 2021.
−Removed: For fiscal 2021, product sales increased $1.9 million and EDC sales decreased $0.5 million, in each case, compared to fiscal 2020.
−Removed: This increase in product sales primarily reflects increased shipments for OEM programs to general aviation customers and displays for retrofit programs to commercial transport customers.
−Removed: These increases were partially offset by reduced shipments under the U.S.
−Removed: Navy F-5 production contract and displays for retrofit programs to other military customers compared to fiscal 2020.
−Removed: The decrease in EDC sales was primarily the result of the completion of a modification contract with the U.S.
−Removed: Navy in 2020.
+Added: For fiscal 2022, product sales increased $3.7 million and customer service sales increased $0.8, or 20.8% from fiscal 2021.
+Added: This increase in product sales primarily reflects increased shipments of aftermarket retrofit displays to commercial customers.
+Added: OEM sales to general aviation customers were relatively flat compared to fiscal 2021 at $10.4 million.
+Added: Military sales were up slightly from fiscal 2021 at $2.8 million, which was up $0.3 million or 13.5%.
+Added: The increase in customer service revenue was mainly due to increases in repair work from the Department of Defense.
Cost of sales .
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The Company’s overall gross margin in fiscal 2021 was 60.1% compared to 55.5% in fiscal 2021.
−Removed: The fiscal 2021 gross margin percentage increase was attributable to product mix as well as the favorable leverage achieved by the growth in revenues.
+Added: The fiscal 2022 gross margin percentage increase was attributable to operating leverage achieved due to increased sales that resulted in increased cost absorption, as well as a favorable product mix.
Research and development .
1 unchanged sentence
R&D expense decreased to 9.8% of net sales in fiscal 2022 compared to 11.4% of net sales in fiscal 2021.
−Removed: This decrease in R&D expense was primarily the result of a decrease in third party costs related to STC certifications offset by an increase in payroll and payroll related benefits.
+Added: This decrease in R&D expense as a percent of net sales was due to lower salaries and benefits due to lower headcount, along with fewer R&D related projects, including STC certifications.
Selling, general, and administrative (“SG&A”) .
−Removed: SG&A expense increased $0.2 million or 2.6% to $6.3 million or 27.2% of net sales, for fiscal 2021 from $6.1 million, or 28.2%, for fiscal 2020.
−Removed: The increase in SG&A expense was primarily the result of an increase in employee stock compensation, payroll and payroll related benefits.
−Removed: Interest income, net.
−Removed: Net interest income of $1,234 in fiscal 2021 decreased by $153,716 as compared to fiscal 2020 interest income of $154,950.
−Removed: The decrease in interest income was primarily the result of decreased cash balance and lower interest rates in fiscal 2021 as compared to fiscal 2020.
+Added: SG&A expense increased $0.5 million or 7.9% to $6.8 million from $6.3 million in fiscal 2021.
+Added: The increase in SG&A expense was primarily the result of increased legal, and professional fees, with an offset due to the sale of a PC-12 aircraft.
+Added: Interest income.
+Added: Interest income of $61,051 in fiscal 2022 increased by $59,817 as compared to fiscal 2021 interest income of $1,234.
+Added: The increase in interest income was primarily the result of the increase in the cash balance in fiscal 2022 and a general increase in interest rates as compared to fiscal 2021.
Other income.
−Removed: Other income is primarily composed of royalties earned and increased by $14,409, to $74,906 in fiscal 2021 from $60,497 in fiscal 2020.
+Added: Other income was flat at $0.1 million for both fiscal 2022 and fiscal 2021.
Income taxes.
−Removed: Income tax benefit for the fiscal 2021 was $1,087,783 as compared to income tax benefit of $308,882 for fiscal 2020.
−Removed: The effective tax rate benefit for fiscal 2021 was 27.4% and differs from the statutory rate primarily due to the release of the valuation allowance for all federal and state deferred tax assets with the exception of certain state net operating losses for jurisdictions in which the Company does not believe these net operating losses are more likely than not to be realized.
+Added: Income tax expense of $1.8 million for fiscal 2022 as compared to income tax benefit of $1.1 million in fiscal 2021.
+Added: The effective tax rate benefit for fiscal 2021 was 27.4% and differs from the statutory rate primarily due to the release of the valuation allowance for all federal and state deferred tax assets.
This release both increased the deferred tax asset and removed the valuation allowance.
+Added: Fiscal 2022 income tax expense of $1.8 million represents income taxes due based on an effective tax rate of 24.7% with no related allowances.
As a result of the factors described above, the Company’s net income for fiscal 2022 was $5.5 million compared to net income of $5.1 million for fiscal 2021.
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For fiscal 2021, product sales increased $1.9 million and EDC sales decreased $0.5 million, in each case, compared to fiscal 2020.
−Removed: This increase in product sales primarily reflects increased shipments for OEM programs to general aviation customers, shipments under the U.S.
−Removed: Navy F-5 production contract and increased shipments of displays for retrofit programs to other military customers.
−Removed: These increases were partially offset by reduced shipments of displays for retrofit programs to commercial transport customers compared to fiscal 2019.
−Removed: The decrease in EDC sales was primarily the result of the completion of a development contract for a new air data computer for the U.S.
−Removed: Navy F-5 aircraft and the completion of a development contract in 2019 for a foreign customer on the P-3 aircraft.,
+Added: This increase in product sales primarily reflects increased shipments for OEM programs to general aviation customers and displays for retrofit programs to commercial transport customers.
+Added: These increases were partially offset by reduced shipments under the U.S.
+Added: Navy F-5 production contract and displays for retrofit programs to other military customers compared to fiscal 2020.
+Added: The decrease in EDC sales was primarily the result of the completion of a modification contract with the U.S.
+Added: Navy in 2020.
Cost of sales .
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The Company’s overall gross margin in fiscal 2021 was 55.5% compared to 54.7% in fiscal 2020.
−Removed: The fiscal 2020 gross margin percentage decrease reflects increased warranty costs and material costs which was partially offset by an increase in gross margin on EDC programs to 71.5% in fiscal 2020 as compared to 54.7% in fiscal 2019.
+Added: The fiscal 2021 gross margin percentage increase was attributable to product mix as well as the favorable leverage achieved by the growth in revenues.
Research and development .
1 unchanged sentence
R&D expense decreased to 11.4% of net sales in fiscal 2021 compared to 13.7% of net sales in fiscal 2020.
−Removed: R&D expense in fiscal 2020 was $0.5 million greater than fiscal 2019.
−Removed: This increase in R&D expense resulted primarily from increased personnel, related benefits and the reduction of EDC contract activity whose costs are reflected in cost of sales rather than R&D expense.
+Added: This decrease in R&D expense was primarily the result of a decrease in third party costs related to STC certifications offset by an increase in payroll and payroll related benefits.
Selling, general, and administrative (“SG&A”) .
SG&A expense increased $0.2 million or 2.6% to $6.3 million or 27.2% of net sales, for fiscal 2021 from $6.1 million, or 28.2%, for fiscal 2020.
−Removed: The increase in SG&A expense was primarily the result of increased personnel costs and related benefits.
+Added: The increase in SG&A expense was primarily the result of an increase in employee stock compensation, payroll and payroll related benefits.
Interest income, net.
Net interest income of $1,234 in fiscal 2021 decreased by $153,716 as compared to fiscal 2020 interest income of $154,950.
−Removed: The decrease in interest income was primarily the result of lower interest rates in fiscal 2020 as compared to fiscal 2019.
+Added: The decrease in interest income was primarily the result of decreased cash balance and lower interest rates in fiscal 2021 as compared to fiscal 2020.
Other income.
−Removed: Other income is primarily composed of royalties earned and decreased by $13,240, to $60,497 in fiscal 2020 from $73,737 in fiscal 2019.
+Added: Other income is primarily composed of royalties earned and increased by $14,409, to $74,906 in fiscal 2021 from $60,497 in fiscal 2020.
Income taxes.
−Removed: Income tax benefit for the fiscal 2020 was $308,882 as compared to income tax expense of $1,805 for fiscal 2019.
−Removed: The effective tax rate benefit for fiscal 2020 was 10.43% and differs from the statutory rate due to the passing of the CARES Act on March 27, 2020 which allowed for the carryback of the 2018 net operating loss (“NOL”) to fiscal 2017 and fiscal 2016.
+Added: Income tax benefit for fiscal 2021 was $1,087,783 as compared to income tax benefit of $308,882 for fiscal 2020.
+Added: The effective tax rate benefit for fiscal 2021 was 27.4% and differs from the statutory rate primarily due to the release of the valuation allowance for all federal and state deferred tax assets with the exception of certain state net operating losses for jurisdictions in which the Company does not believe these net operating losses are more likely than not to be realized.
+Added: This release both increased the deferred tax asset and removed the valuation allowance.
As a result of the factors described above, the Company’s net income for fiscal 2021 was $5.1 million compared to net income of $3.3 million for fiscal 2020.
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Cash and cash equivalents
−Removed: Restricted cash (1)
Accounts receivable
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Net cash provided by operating activities
−Removed: Net cash (used in) investing activities
−Removed: Net cash (used in) financing activities
−Removed: (1) Restricted cash in fiscal year 2020 represents the payment amount for a special cash dividend paid on October 1, 2020
+Added: Net cash provided by (used in) investing activities
+Added: Net cash provided by (used in) financing activities
(1) Excludes contract liability
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The Company’s principal source of liquidity has been cash flows from current year operations and cash accumulated from prior years’ operations.
−Removed: Cash is used principally to finance inventory, accounts receivable, contract assets, and payroll.
+Added: Cash is used principally to finance inventory, accounts receivable, contract assets, and payroll, as well as the Company’s known contractual and other commitments (including those described in Note 16, “Lease Recognition”.
+Added: The Company’s existing cash balances and anticipated cash flows from operations are expected to be adequate to satisfy the Company’s liquidity needs for at least the next 12 months.
Apart from what has been disclosed above, management is not aware of any trends, events or uncertainties that have had or are likely to have a material impact on our liquidity, financial condition and capital resources.
+Added: The Company did not pay cash dividends in fiscal 2022.
+Added: The declaration and payment of any dividend in the future will be at the discretion of the Company’s Board of Directors.
On September 4, 2020, the Company’s Board of Directors declared a special cash dividend in the amount of $0.65 per share, payable on October 1, 2020 to shareholders of record as of the close of business on September 15, 2020.
−Removed: The total dividend payment was approximately $11.2 million and is included in restricted cash on the accompanying consolidated balance sheets.
+Added: The total dividend payment was approximately $11.2 million.
On December 10, 2020, the Company’s Board of Directors declared a special cash dividend in the amount of $0.50 per share, payable on December 30, 2020 to shareholders of record as of the close of business on December 21, 2020.
The total dividend payment was approximately $8.6 million.
−Removed: The Company did not pay dividends in fiscal 2019.
−Removed: The declaration and payment of any dividend in the future will be at the discretion of the Company’s Board of Directors.
The ongoing COVID-19 pandemic is a significant event, driver of market trends, and source of uncertainty that may have a material impact on the Company’s liquidity, financial condition, capital resources, cash flows or operating results.
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Operating Activities
+Added: The Company generated $6.1 million of cash from operating activities during fiscal 2022 as compared to cash generated of $4.6 million during fiscal 2021.
+Added: The cash generated by operating activities for the year ended September 30, 2022 was primarily generated by net income of $5.5 million, increase in accrued expenses of $1.3 million and a decrease in deferred income tax assets of $1.0 million, partially offset by the gain on sale of the Company’s Pilatus PC-12 airplane of $1.2 million and an increase in inventories of $0.7 million.
The Company generated $4.6 million of cash in operating activities during fiscal 2021 as compared to cash generated of $2.2 million during fiscal 2020.
The cash generated by operating activities for the year ended September 30, 2021 was primarily generated by net income of $5.1 million, depreciation and amortization of $0.4 million and a decrease in accounts receivable of $0.3 million, partially offset by an increase in deferred income tax assets of $1.2 million.
−Removed: The Company generated $2.2 million of cash in operating activities during fiscal 2020 as compared to cash generated of $2.1 million during fiscal 2019.
−Removed: The cash generated by operating activities for the year ended September 30, 2020 was primarily generated by net income of $3.3 million, depreciation and amortization of $0.4 million and an increase in both contract liability of $0.3 million and accrued expenses of $0.2 million, partially offset by an increase in accounts receivable of $2.0 million.
Investing Activities
+Added: Cash provided by investing activities was $2.6 million for fiscal year 2022 and consisted primarily of proceeds from the sale of the Company’s Pilatus PC-12 airplane offset by spending of $0.2 million primarily for quality test equipment and computer hardware.
+Added: The Company plans to continue investing in capital equipment to support engineering development efforts and operations.
Cash used in investing activities was $0.3 million for fiscal year 2021 and consisted of spending for manufacturing facility and laboratory test equipment.
The Company plans to continue investing in capital equipment to support engineering development efforts and operations.
−Removed: Cash used in investing activities was $0.1 million for fiscal year 2020 and consisted of spending for production equipment and laboratory test equipment.
Financing Activities
+Added: Cash provided by financing activities was $0.3 million for fiscal year 2022 and consisted of proceeds from employees’ exercise of stock options.
Cash used by financing activities was $19.8 million for fiscal year 2021 and consisted primarily of dividends paid.
−Removed: Cash used by financing activities was $0.7 million for fiscal year 2020 and consisted of tax withholding payments related to an employee’s cashless exercise of stock options of $0.9 million, partially offset by proceeds from exercise of stock options of $0.2 million.
Future capital requirements depend upon numerous factors, including market acceptance of the Company’s products, the timing and rate of expansion of business, acquisitions, joint ventures, and other factors.
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however, it cannot predict future effects of inflation.
−Removed: Critical Accounting Policies
+Added: Impact of the COVID-19 Pandemic
+Added: The Company has not yet seen a material impact from the COVID-19 pandemic on its business, financial position, liquidity, or ability to service customers or maintain critical operations.
+Added: However, some parts of the world are continuing to see a rise in COVID-19 cases and hospitalizations and it is possible that new, more virulent strains and variants of COVID-19 may emerge and lead governments and private sectors to re-institute quarantine and trade restrictions, which could adversely impact market conditions.
+Added: IS&S will continue to monitor the impact of the COVID-19 pandemic on its business, including how it has impacted and will impact the Company’s employees, customers, suppliers and distribution channels.
+Added: The Company could face liquidity shortages, weaker product demand from its customers, disruptions in its supply chain, and/or staffing shortages in its workforce in the future due to the direct and indirect effects of the COVID-19 pandemic.
+Added: Environmental, Social and Governance Considerations
+Added: In recent years, environmental, social and governance (“ESG”) issues have become an increasing area of focus for some of our shareholders, customers and suppliers.
+Added: Management and the Company’s Board of Directors are committed to identifying, assessing, and understanding the potential impact of ESG issues and related risks on the Company’s business model, as well as potential areas of improvement.
+Added: We are committed to recruiting, motivating and developing a diversity of talent.
+Added: We are an equal opportunity employer and a Vietnam Era Veterans’ Readjustment Assistance Act federal contractor.
+Added: All qualified applicants receive consideration for employment without regard to race, color, religion, sex, sexual orientation, gender identity, national origin, disability status, protected veteran status, or any other characteristic protected by law.
+Added: The nature of our business also supports long-term sustainability.
+Added: Historically, a majority of the Company’s sales have come from the retrofit market, in which the Company, by making upgrades to improve the functionality and safety of existing machinery, facilitates the re-use and recycling of aircraft and equipment that might otherwise be scrapped as obsolete.
+Added: The Company’s GPS receivers also facilitate reduced carbon footprint navigation.
+Added: The Company also plans to enhance its focus on the environmental impact of its operations.
+Added: Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period.
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Revenue from Contracts with Customers
−Removed: In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, “ Revenue from Contracts with Customers ,” which provides a single, comprehensive revenue recognition model for all contracts with customers, and contains principles to determine the measurement of revenue and timing of when it is recognized.
−Removed: The model supersedes most previous revenue recognition guidance, and also requires enhanced revenue-related disclosures.
−Removed: Under the new standard and its related amendments (collectively known as “ASC 606”), revenue is recognized when a customer obtains control of promised goods or services.
−Removed: The amount of revenue recognized will reflect the consideration that the entity expects to receive in exchange for those goods or services.
−Removed: In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.
−Removed: The Company adopted ASC 606 on October 1, 2018 using the modified retrospective method for all contracts not completed as of the date of adoption.
−Removed: The reported results for fiscal years ended September 30, 2021, September 30, 2020 and September 30, 2019 reflect the application of ASC 606 guidance while the reported results for the fiscal years ended September 30, 2018 and September 30, 2017 were prepared under the guidance of ASC 605, “Revenue Recognition” (“ASC 605”), which is also referred to herein as “legacy GAAP” or the “previous guidance.” The adoption of ASC 606 represents a change in accounting principles.
−Removed: In accordance with ASC 606, revenue is recognized when a customer obtains control of promised goods or services.
+Added: The Company accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”).
+Added: The core principle of ASC 606 is that an entity recognizes revenue when a customer obtains control of promised goods or services.
The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods or services.
3 unchanged sentences
For the purpose of accounting for revenue under ASC 606, a contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for goods or services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration.
+Added: Payment terms are defined by when payment is typically due.
The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.
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Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised good or service to a customer.
−Removed: Revenue from products transferred to customers at a point in time accounted for 100 percent and 97 percent of our revenue for the fiscal years ended September 30, 2021 and 2020, respectively and is typically recognized at the time of shipment of products to the customer.
−Removed: The remaining revenue results from EDC contracts and is recognized over time using an input measure (e.g., costs incurred to date relative to total estimated costs at completion) to measure progress.
+Added: Historically, the Company has also recognized revenue from EDC contracts and is recognized over time using an input measure (e.g., costs incurred to date relative to total estimated costs at completion) to measure progress.
Contract costs include material, components and third-party avionics purchased from suppliers, direct labor, and overhead costs.
45 unchanged sentences
This legislation did not have a material impact on the Company’s tax position.
+Added: In August 2022, the U.S government enacted the Inflation Reduction Act (the “IRA”).
+Added: The IRA makes the following changes to the U.S tax code:
+Added: imposes a corporate alternative minimum tax of 15% on corporations with an average annual Adjusted Financial Statement Income over a three year period in excess of $1 billion, increases the amount of R&D credit that qualified businesses can apply against payroll taxes to $500,000, imposes an excise tax equal to one percent of the fair market value of stock of a publicly traded U.S.
+Added: corporation that is repurchased by the company.
+Added: These changes predominately apply to tax years beginning after December 31, 2022.
+Added: It does not appear that this legislation will have a material impact on the Company’s tax position.
Inventory valuation
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ASU 2016-13 is effective for SEC small business filers for fiscal years beginning after December 15, 2022.
−Removed: Management is currently assessing the impact ASU 2016-13 will have on the Company.
−Removed: In August 2018, the FASB issued ASU 2018-13, “ Fair Value Measurement (Topic 820):
−Removed: Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement ,” (“ASU 2018-13”) which modifies the disclosures on fair value measurements by removing the requirement to disclose the amount and reason for transfers between Level 1 and Level 2 of the fair value hierarchy and the policy for timing of such transfers.
−Removed: The ASU expands the disclosure requirements for Level 3 fair value measurements, primarily focused on changes in unrealized gains and losses included in other comprehensive income.
−Removed: We adopted this update effective October 1, 2020.
−Removed: The adoption of this standard did not have a material impact on our condensed consolidated financial statements.
+Added: The adoption of this standard is not expected to have a material impact on our condensed consolidated financial statements or related disclosures.
In December 2019, the FASB issued ASU 2019-12, “ Income Taxes (Topic 740):
10 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.