MILLER INDUSTRIES INC /TN/ (MLR) FY 2022 MD&A
This page reproduces the company's own Item 7 MD&A text from the linked SEC filing. It is filer text, not grepcent analysis, scoring, or investment advice.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our results of operations and financial condition should be read in conjunction with the Consolidated Financial Statements and Notes thereto. Unless the context indicates otherwise, all dollar amounts in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are in thousands.
As disclosed in Note 11, “Correction of Prior Period Errors” to our consolidated financial statements, the Company’s consolidated financial statements as of and for the fiscal year ended December 31, 2022, have been revised to give effect to the correction of certain accounting errors identified during the current fiscal year-end financial reporting process.
Company Background
Miller Industries, Inc. is The World’s Largest Manufacturer of Towing and Recovery Equipment®, with domestic manufacturing subsidiaries in Tennessee and Pennsylvania, and foreign manufacturing subsidiaries in France and the United Kingdom. We offer a broad range of equipment to meet our customers’ design, capacity and cost requirements under our Century®, Vulcan®, Challenger®, Holmes®, Champion®, Chevron™, Eagle®, Titan®, Jige™ and Boniface™ brand names. In this Item 2 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the words “Miller Industries,” “the Company,” “we,” “our,” “ours” and “us” refer to Miller Industries, Inc. and its subsidiaries or any of them.
Our management focuses on a variety of key indicators to monitor our overall operating and financial performance. These indicators include measurements of revenue, operating income, gross margin, net income, earnings per share, capital expenditures and cash flow.
We derive revenues primarily from product sales made to our network of domestic and foreign independent distributors. Our revenues are sensitive to a variety of factors including general economic conditions as well as demand for, and price of, our products, our technological competitiveness, our reputation for providing quality products and reliable service, competition within our industry, and the cost and availability of purchased component parts, truck chassis and raw materials (including aluminum, steel and petroleum-related products).
Our history of innovation in the towing and recovery industry has been an important factor behind our growth over the last decade and we believe that our continued emphasis on research and development will be a key factor in our future growth. We opened a free-standing R&D facility in Chattanooga in 2019, where we pursue various innovations in our products and manufacturing processes, some of which are intended to enhance the safety of our employees and reduce our environmental impact. In addition, our recent domestic plant expansion and modernization projects have installed sophisticated robotics and implemented other advanced technologies to increase our production capacity and optimize our manufacturing processes. These projects were completed during the period from 2017 to 2021 at a cost of over $82,000. We completed phase one of the implementation of an enterprise software solution during 2021, and we continued to implement additional functionality available in the solution in 2022. We expect this software to substantially improve our administrative efficiency and customer service levels. As we retain our focus toward modernization, we expect to continue to invest in robotics and automated material handling equipment across all of our domestic manufacturing facilities.
As of December 31, 2022 and 2021, the Company owed $45,000 and $0, respectively, under its primary credit facility. During 2022, the Company drew $45,000 for working capital needs and retains a balance on its credit facility of $45,000 at February 28, 2023.
Factors That Affect Our Operating Results; Trends
Conditions Affecting Demand
Our industry is, and will continue to be, cyclical in nature, and the overall demand for our products and our resulting revenues are influenced by a variety of factors, including:
| Column 1 | Column 2 | Column 3 |
|---|---|---|
| ● | levels of consumer confidence; |
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| Column 1 | Column 2 | Column 3 |
|---|---|---|
| ● | domestic and international capital and credit markets and the availability and affordability of financing, including floor plan financing, for our customers and towing operators; |
| Column 1 | Column 2 | Column 3 |
|---|---|---|
| ● | fuel and insurance costs, and macro-economic conditions such as broad-based inflation, and their effect on the ability of our customers to purchase towing and related equipment; and |
| Column 1 | Column 2 | Column 3 |
|---|---|---|
| ● | the overall effects of global, political, economic and health conditions. |
We remain concerned about the continuing effects of these factors on the towing and recovery industry, and we continue to monitor our overall cost structure to see that it remains in line with business conditions.
Costs of Components and Raw Materials; Product Availability; Supply Chain Impacts
We have been and will continue to be affected by the availability of, and changes in the prices that we pay for component parts and raw materials, particularly aluminum, steel and petroleum-related products, which represent a substantial part of our total cost of operations.
Supply chain challenges such as shortages and delivery delays in component parts and raw materials were generally lessening as 2022 began but the impact of the war in Ukraine and general economic conditions caused these challenges to substantially increase over the first half of 2022. Supply chain disruptions and workforce retention challenges eased substantially during the second half of 2022, but these challenges continued to reduce our ability to complete finished goods without timing delays and to increase our costs of operations. In addition, general inflationary pressures coupled with rising interest rates have substantially increased in 2022, and the rapid strengthening of the US Dollar in comparison to certain other currencies has caused fluctuations within accumulated other comprehensive loss in our condensed consolidated balance sheet and the recognition of significant losses in our condensed consolidated statement of comprehensive income.
We continue to monitor these pressures closely and, when possible, attempt to mitigate the risk associated with them. Historically, we have implemented price increases on our products to offset price increases in the raw materials that we use, and developed new supplier relationships to provide alternative sources for materials and component parts. We have also developed alternatives to some of the components used in our production process that incorporate these raw materials, and our suppliers have implemented these alternatives in the production of our component parts. In 2022, we implemented several price increases and surcharges and we announced an 8% price increase effective in the first quarter of 2023. We have also sought additional production capabilities through capital deployment (such as our first quarter 2022 purchase of an additional small facility in Ooltewah, TN to be used in the production of small carrier units), by monitoring currency rates and purchasing currency denominations at advantageous times, and by relying more heavily on our in-house fabrication capabilities.
Trends and Outlook
Based on our strong backlog, the surcharge and price increases we have implemented and the current status of our process improvements, our operating results improved towards the end of 2022, and we believe we are well positioned to continue enhancing operating results. However, our performance will be heavily influenced by, among other things, whether supply chain constraints and inflationary pressures worsen, the continuing impact of the war in Ukraine or other geopolitical factors, and the threat of recession and general economic factors. The impact of these factors remains largely out of our control, and we currently anticipate that these factors will continue to have an adverse impact on our production capabilities, financial results and cash flow during 2023.
Critical Accounting Policies
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, which require us to make estimates. Certain accounting policies are deemed “critical,” as they require management’s highest degree of judgment, estimations and assumptions. A discussion of critical accounting policies, the judgments and uncertainties affecting
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their application and the likelihood that materially different amounts would be reported under different conditions or using different assumptions follows:
Accounts Receivable
We extend credit to customers in the normal course of business. Collections from customers are continuously monitored and an allowance for credit losses is maintained based on historical experience and any specific customer collection issues. While such bad debt expenses have historically been within expectations and the allowance established, there can be no assurance that we will continue to experience the same credit loss rates as in the past.
Inventory
Inventory costs include materials, labor and factory overhead. Inventories are stated at the lower of cost or net realizable value, determined on a first-in, first-out basis. Appropriate consideration is given to obsolescence, valuation and other factors in determining net realizable value. Revisions of these estimates could result in the need for adjustments.
Long-Lived Assets
Long-lived assets are reviewed for impairment whenever events or circumstances indicate that the carrying amount of these assets may not be fully recoverable. When a determination has been made that the carrying amount of long-lived asset may not be fully recovered, the amount of impairment is measured by comparing an asset’s estimated fair value to its carrying value. The determination of fair value is based on projected future cash flows discounted at a rate determined by management, or if available, independent appraisals or sales price negotiations. The estimation of fair value includes significant judgment regarding assumptions of revenue, operating costs, interest rates, property and equipment additions, and industry competition and general economic and business conditions among other factors. We believe that these estimates are reasonable; however, changes in any of these factors could affect these evaluations. Based on these estimates, we believe that our long-lived assets are appropriately valued.
Goodwill
Goodwill is tested for impairment annually or if an event or circumstance occurs that would more likely than not reduce the fair value of the reporting unit below the carrying amount. Goodwill is reviewed for impairment utilizing a qualitative assessment and, if necessary, a quantitative assessment. If we perform a qualitative analysis of goodwill and determine that fair value more likely than not exceeds the carrying value of the reporting unit, no further testing is needed. Alternatively, if we elect to utilize a quantitative assessment, an impairment loss would be recognized to the extent that the carrying value of the reporting unit exceeds its fair value, not to exceed the carrying value of the goodwill. We cannot predict the occurrence of certain events or changes in circumstances that might adversely affect the carrying value of goodwill. Such events might include, but are not limited to, the impact of the economic environment or a material change in a relationship with significant customers.
Warranty Reserves
We estimate expense for product warranty claims at the time products are sold. These estimates are established using historical information about the nature, frequency, and average cost of warranty claims. We review trends of warranty claims and take actions to improve product quality and minimize warranty claims. We believe the warranty reserve is adequate; however, actual claims incurred could differ from the original estimates, requiring adjustments to the accrual.
Income Taxes
Our income tax expense, deferred tax assets and liabilities for unrecognized tax benefits reflect management’s best assessment of estimated current and future taxes to be paid. We are subject to income taxes in both the United States and foreign jurisdictions. Significant judgments and estimates are required in determining the consolidated income tax expense. When calculating a provision for income tax for each of the years presented in the consolidated statements of income and deferred tax assets and liabilities as of each date presented in the consolidated balance sheets, we make significant estimates related to tax depreciation and inventory capitalization that are subject to review and that may change significantly prior to filing our income tax return. As such, the estimates made to calculate current and deferred tax expense represent a critical accounting estimate which could materially change in future periods.
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Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in deductible or taxable amounts in the future. In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. The assumptions about future taxable income require significant judgment and are consistent with the plans and estimates we use to manage the underlying businesses.
The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in multiple jurisdictions. Accounting Standards Codification (“ASC”) 740 states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation process, on the basis of the technical merits.
We record unrecognized tax benefits as liabilities in accordance with ASC 740 and adjust these liabilities when our judgment changes because of the evaluation of new information not previously available to us. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the unrecognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available.
Revenues
Under our accounting policies, revenues are recognized when obligations under the terms of a contract with a customer are satisfied. Generally, this occurs upon shipment, which is when control has transferred to independent distributors or other customers. From time to time, revenue is recognized under a bill and hold arrangement. Recognition of revenue on bill and hold arrangements occurs when control transfers to the customer. Our policy requires the reason for the bill and hold arrangement to be substantive, and the product to be separately identified as belonging to the customer, ready for physical transfer, and unavailable to be used or directed to another customer.
Revenue is measured as the amount of consideration expected to be received in exchange for the transfer of products. Sales and other taxes collected concurrent with revenue-producing activities are excluded from revenue. Warranty related costs are recognized as an expense at the time products are sold. Depending on the terms of the arrangement, for certain contracts the Company may defer the recognition of a portion of the consideration received because a future obligation has not yet been satisfied, such as an extended service contract. An observable stand-alone selling price for separate performance obligations or a cost plus margin approach is utilized when one is not available.
While we manufacture only the bodies of wreckers and car carriers, which are installed on truck chassis manufactured by third parties, we frequently purchase truck chassis for resale to our customers. Sales of company-purchased truck chassis are included in net sales. Margin percentages are substantially lower on completed recovery vehicles containing company-purchased chassis.
Foreign Currency Translation
The functional currency for our foreign operations is the applicable local currency. The translation from the applicable foreign currencies to U.S. dollars is performed for balance sheet accounts using current exchange rates in effect at the balance sheet date, historical rates for equity and the weighted average exchange rate during the period for revenue and expense accounts. Foreign currency translation adjustments are included in shareholders’ equity. Intercompany transactions denominated in a currency other than the functional currency are remeasured into the functional currency. Gains and losses resulting from foreign currency transactions are included in other (income) expense, net in our consolidated statements of income.
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Results of Operations
The following table sets forth, for the years indicated, the components of the consolidated statements of income expressed as a percentage of net sales.
| | | | | | | | |
|---|---|---|---|---|---|---|---|
| | 2022 | 2021 | 2020 | ||||
| Net Sales | 100.0 | % | 100.0 | % | 100.0 | % | |
| Costs of operations | 90.3 | % | 90.3 | % | 88.0 | % | |
| Gross Profit | 9.7 | % | 9.7 | % | 12.0 | % | |
| Operating Expenses: | |||||||
| Selling, general and administrative | 6.2 | % | 6.4 | % | 6.1 | % | |
| Non-operating (income) expenses | |||||||
| Interest expense, net | 0.4 | % | 0.2 | % | 0.2 | % | |
| Other (income) expense, net | 0.1 | % | 0.1 | % | (0.1) | % | |
| Total expenses, net | 6.7 | % | 6.7 | % | 6.2 | % | |
| Income before income taxes | 3.0 | % | 3.0 | % | 5.8 | % |
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021
Net sales were $848,456 for the year ended December 31, 2022, compared to $717,476 for the year ended December 31, 2021, an increase of 18.3%. The increase in our revenue stream was largely attributable to improvement in supply chain disruptions during the latter part of the year, which was in part due to onboarding of new suppliers as well as reengineering our products to overcome part scarcity. Net domestic sales increased from $627,573 for the year ended December 31, 2021 to $765,307 for the year ended December 31, 2022, and net foreign sales decreased from $89,903 to $83,149 during the same periods.
Costs of operations also increased 18.3% to $766,037 for the year ended December 31, 2022 from $647,624 for the year ended December 31, 2021. Overall, costs of operations as a percentage of net sales remained consistent at 90.3% for both the year ended December 31, 2022 and the year ended December 31, 2021. The sales price increases implemented in the second half of 2022 offset the dramatic rise of our component part costs during the first half of the year.
Selling, general and administrative expenses for the year ended December 31, 2022 increased to $52,827 from $46,233 for the year ended December 31, 2021, primarily due to increased employee compensation and continued inflationary pressures. In addition, we experienced increases in travel related expenses as marketing activites resumed and we intensified efforts to expand our supply chain network during 2022. As a percentage of net sales, selling, general and administrative expenses decreased to 6.2% for 2022 from 6.4% for 2021.
Interest expense, net increased to $3,379 for the year ended December 31, 2022 from $1,355 for the year ended December 31, 2021. Increases in interest expense, net were primarily due to an increase in interest payments on distributor floor planning, as well interest payments on the credit facility.
When the Company has transactions that are denominated in a currency other than its functional currency, the Company is exposed to foreign currency transaction risk and must record gains and losses through other (income) expense when the related balance sheet items are remeasured in the functional currency of the Company. Other (income) expense, net is composed primarily of these foreign currency exchange gains and losses, with the remainder being composed of gains and losses on disposals of equipment. The Company experienced a net foreign currency exchange loss of $669 for 2022 compared to a net exchange loss of $536 for 2021.
The provision for income taxes for the years ended December 31, 2022 and 2021 reflects a combined federal, state and foreign tax rate of 21.0% and 25.3%, respectively, which corresponds to a tax provision of $5,386 for 2022 as compared to $5,511 for 2021. Our tax rate in 2022 compares favorably to 2021 primarily due to an increased percentage of income recognized in foreign jurisdictions with higher statutory rates during 2021, which also prohibited the Company from recognizing certain domestic deductions which reward higher levels of domestic earnings in comparison to earnings from foreign jurisdictions during 2021. For more information on the effective tax rate, see Note 6 to our Consolidated Financial Statements.
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Year Ended December 31, 2021 Compared to Year Ended December 31, 2020
For a comparison of the 2021 to 2020 reporting periods, see Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – “Results of Operations – Year Ended December 31, 2021 Compared to Year Ended December 31, 2020” of our Annual Report on Form 10-K filed on March 9, 2022 for the fiscal year ended December 31, 2021.
Liquidity and Capital Resources
Cash used in operating activities during 2022 was $19,155, compared to $15,268 cash provided by operating activities during 2021. Cash provided by operating activities is generally attributable to the receipt of payments from our customers as settlement of their contractual obligation once we have fulfilled all performance obligations related to our contracts with them. These cash receipts are netted with payments for purchases of inventory, payments for materials used in manufacturing, and other payments that are necessary in the ordinary course of our operations, such as those for utilities and taxes. During 2022, we continued to increase purchases of materials, components and chassis to ramp up production to meet our historic demand levels and to mitigate various supply chain disruptions. These factors coupled with the increased costs of inventory and labor caused cash provided by operating activities to be exceeded by cash used in operation activities in 2022. During 2021, we used available cash flow from operations toward similar working capital needs, to pay for capital expenditures, and to pay dividends.
Cash used in investing activities during 2022 was $28,931, compared to $9,059 used during 2021. The cash used in investing activities for 2022 and 2021 was primarily for the purchase of property, plant and equipment, including an aircraft purchased in 2022 which is used to enhance our marketing efforts, establish and maintain our relationships with key suppliers and visit our facilities that are not easily accessible via commercial air travel. We also continued to invest in manufacturing automation, ERP system enhancements and employee safety initiatives during 2022.
Cash provided by financing activities during 2022 was $36,765, compared to $8,238 used during 2021. The cash provided by financing activities in 2022 was attributable to advances on the credit facility of $45,000, offset by dividend payments of $8,220 and an immaterial amount of payments on finance lease obligations. The cash used in financing activities in 2021 was primarily attributable to dividend payments of $8,216 and an immaterial amount of payments on finance lease obligations.
As of December 31, 2022, we had cash and cash equivalents of $40,153. Our primary cash requirements include working capital, capital expenditures, the funding of any declared cash dividends and principal and interest payments on indebtedness. During 2022, supply chain bottlenecks required us to continue allocating cash to working capital at higher than our normal levels in order to allow inventory to be produced to completion as quickly as the supply chain allowed. Accounts payable balances and raw materials and work in process inventory balances at December 31, 2022 increased significantly when compared to the prior year balances. Such constraints also impacted our ability to reduce our backlog, which remain at historically high levels. These supply chain disruptions and bottlenecks improved substantially over the second half of 2022 but are continuing into 2023. However, we are optimistic that our efforts to supplement our supplier network and reengineer our products will improve our ability to finalize deliveries on a timely basis throughout 2023, allowing cash to be allocated consistent with the Company’s past practices and the buildup in backlog to be reduced.
At December 31, 2022, we had commitments of approximately $6,351 for the acquisition of property and equipment. As of December 31, 2022, we also had commitments of $2,565 in software license fees, all of which is expected to be settled over the next three years. In addition, as of December 31, 2022 we had purchase obligations of $94,356 arising from open purchase orders, which increased from $90,494 at December 31, 2021 as a result of materials and component cost increases and ramp up of production to meet customer demand. We expect all such purchase order obligations will be settled during 2023.
We expect our primary sources of cash to be cash flow from operations and cash and temporary investments on hand at December 31, 2022, with borrowings under our credit facility being available as needed. We expect these sources to be sufficient to satisfy our cash needs during 2023 and for the next several years. However, our ability to satisfy our cash needs will substantially depend upon a number of factors including our future operating performance, taking into account the economic, regulatory and other factors discussed above and elsewhere in this Annual Report, as well as financial, business and other factors, many of which are beyond our control.
At December 31, 2022 and 2021, $18,254 and $28,983, respectively, of the Company’s cash and temporary investments were held by foreign subsidiaries based in the local currency. We do not currently have plans to repatriate undistributed foreign earnings to the United States and have not determined any timeline or amount for any such future distributions.
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For a discussion of the 2021 reporting period, see Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - “Liquidity and Capital Resources” of our Annual Report on Form 10-K filed on March 9, 2022 for the fiscal year ended December 31, 2021.
Credit Facility and Other Obligations
Credit Facility
On December 21, 2020, we amended and restated our loan agreement with First Horizon Bank (successor in interest to First Tennessee Bank National Association) (“First Horizon”). The loan agreement provided for a $50 million unsecured revolving credit facility with a maturity date of May 31, 2027. Borrowings under the credit facility bore interest at the LIBOR Rate (as defined in the loan agreement) plus 1.00% or 1.25% per annum, and we are required to pay a quarterly non-usage fee at a rate per annum equal to between 0.15% and 0.35% of the unused amount of the credit facility. The credit facility contains customary representations and warranties, events of default and financial, affirmative and negative covenants for loan agreements of this kind.
Amended and restated covenants under the credit facility restrict payment of cash dividends if we would be in violation of the minimum tangible net worth test or the leverage ratio test as a result of the dividend, among other restrictions.
On October 28, 2022, we entered into a first amendment to the loan agreement with First Horizon. Among other things, the amendment increased availability under the credit facility to a maximum principal amount of $100,000, made certain technical and operational adjustments necessary to implement one month Term SOFR as the primary interest rate index under the facility and added a new asset coverage financial covenant test. All other material terms and conditions of the credit facility remained unchanged.
We were in compliance with all covenants under the credit facility as of December 31, 2022.
Outstanding Borrowings
As of December 31, 2022 and 2021, the Company had $45,000 and $0 borrowings outstanding under the credit facility, respectively, and retains a balance of $45,000 at February 28, 2023.
Changes in interest rates affect the interest paid on indebtedness under our credit facility because the outstanding amounts of indebtedness under our current credit facility are subject to variable interest rates. Under our credit facility, the non-default rate of interest is equal to the one month Term SOFR plus 1.00% or 1.25% per annum, depending on our leverage ratio, for a rate of interest of 5.47% at December 31, 2022. A one percent change in the interest rate on our variable-rate debt would not have materially impacted our financial position, results of operations or cash flows for the year ended December 31, 2022.
Other Long-Term Obligations
Prior to applying a discount rate to our lease liabilities, we had approximately $926 in non-cancellable operating lease obligations and no non-cancellable finance lease obligations at December 31, 2022. Leases with original contractual terms less than one year were excluded from non-cancellable lease obligations.
During 2021, we completed phase one of our enterprise software solution implementation and we continue to implement additional functionality available in the solution during 2022. We expect this software to substantially improve our administrative efficiency and customer service levels. We have $2,565 in remaining contractual payments under our agreement with the software provider, which extends through 2025.
Recent Accounting Pronouncements
Recently Issued Standards
In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-08, Business Combinations (Topic 805). The update provides guidance on how to measure and recognize contract assets and contract liabilities when purchased as part of a business combination. According to the guidance, the acquirer must follow ASC Topic 606 in accounting for
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the contract asset or contract liability being purchased. The amendments in the update will be effective for financial statements beginning after December 15, 2022, including interim periods within those fiscal years. The Company will apply the amendments prospectively. The adoption of this update will not have a material impact on the Company’s consolidated financial statements and related disclosures.
In March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-02, Financial Instruments – Credit Losses (Topic 326). The update will require entities with financing receivables to disclose gross write-offs by year of origination of the receivable. The amendments in the update will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, and will be applied prospectively. The adoption of this update will not have a material impact on the Company’s consolidated financial statements and related disclosures.Recently Adopted Standards.
During the first quarter of 2021, the Company adopted ASU 2019-12 Income Taxes (Topic 740), which among other things requires the Company to recognize franchise tax that is partially based on income as an income-based tax. The Company applied the amendments in the update on a modified retrospective basis, which did not have a material impact on the Company’s consolidated financial statements or related disclosures.
During the first quarter of 2022, the Company adopted ASU 2021-10, Government Assistance (Topic 832), which requires certain disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy. The amendments require disclosure of information about the nature of the transactions and the related accounting policy used to account for the transactions, information regarding the line items within the consolidated financial statements that are affected by the transactions, and significant terms and conditions of the transactions. The adoption of this update did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures.
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