Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Management's Discussion and Analysis of Financial Condition and Results of Operations is intended to assist in understanding the consolidated financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the Consolidated Financial Statements and accompanying notes thereto included in Item 8 of this Annual Report on Form 10-K.
Overview
Timberland Bancorp, Inc., a Washington corporation, is the holding company for Timberland Bank. The Bank opened for business in 1915 and serves consumers and businesses across Grays Harbor, Thurston, Pierce, King, Kitsap and Lewis counties, Washington with a full range of lending and deposit services through its 24 branches (including its main office in Hoquiam). At September 30, 2020, the Company had total assets of $1.57 billion, net loans receivable of $1.01 billion, total deposits of $1.36 billion and total shareholders’ equity of $187.63 million. The Company’s business activities generally are limited to passive investment activities and oversight of its investment in the Bank. Accordingly, the information set forth in this report relates primarily to the Bank’s operations.
On October 1, 2018, the Company completed the South Sound Acquisition. The operating results for the years ended September 30, 2019 and 2020 include the operating results produced by the net assets acquired in the South Sound Acquisition. For additional information on the South Sound Acquisition, see Note 2 to the Consolidated Financial Statements contained in "Item 8. Financial Statements and Supplementary Data."
The Bank is a community-oriented bank which has traditionally offered a variety of savings products to its retail and business customers while concentrating its lending activities on real estate secured loans. Lending activities have been focused primarily on the origination of loans secured by real estate, including residential construction loans, one- to four-family residential loans, multi-family loans and commercial real estate loans. The Bank originates adjustable-rate residential mortgage loans, some of which do not qualify for sale in the secondary market. The Bank also originates commercial business loans and other consumer loans.
The profitability of the Company’s operations depends primarily on its net interest income after provision for (recapture of) loan losses. Net interest income is the difference between interest income, which is the income that the Company earns on interest-earning assets, which are primarily loans and investments, and interest expense, the amount the Company pays on its interest-bearing liabilities, which are primarily deposits and borrowings (as needed). Net interest income is affected by changes in the volume and mix of interest-earning assets, the interest earned on those assets, the volume and mix of interest-bearing liabilities and the interest paid on those interest-bearing liabilities. Management attempts to maintain a net interest margin placing it within the top quartile of its Washington State peers. Because of the length of the COVID-19 pandemic and the efficacy of the extraordinary measures being put in place to address its economic consequences are unknown, including the 150 basis point reductions in the targeted federal funds rate (in March 2020), until the pandemic subsides, the Company expects its net interest income and net interest margin will be adversely affected.
The provision for (recapture of) loan losses is dependent on changes in the loan portfolio and management’s assessment of the collectability of the loan portfolio as well as prevailing economic and market conditions. The allowance for loan losses reflects the amount that the Company believes is adequate to cover probable credit losses inh

Explanation: Management Discussion and Analysis section with financial performance data. Source: 1046050_2020.htm (CIK: 1046050, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following sections include a discussion of results for fiscal 2020 compared to fiscal 2019 as well as certain 2018 results. The comparative results for fiscal 2019 with fiscal 2018 generally have not been included in this Form 10-K, but may be found in “Part II - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
Overview
Net Income
In 2020 and 2019, net income was $96.8 million and $63.1 million, respectively. Earnings per diluted common share increased $0.66 to $1.97 or 50.4% from 2019 to 2020. The $33.7 million increase in net income was driven primarily by the adoption of Cal Water’s 2018 GRC which increased operating revenue by $40.9 million and other general rate increases of $11.5 million, $4.5 million of which was related to increased water costs. In addition, net income increased $5.5 million due to an increase in income tax benefits from “repairs” deductions. These positive factors to net income were partially offset by increases in depreciation and amortization expenses of $9.3 million, employee wages of $4.7 million, bad debt reserve expenses of $4.1 million, outside consulting service costs of $2.1 million, and uninsured loss costs of $1.7 million which was partially offset by a decrease in travel costs of $1.6 million.
Additionally, certain factors outside the Company's immediate control decreased net income, including a $2.3 million reduction in accrued unbilled revenue and $0.8 million decrease in unrealized gain on certain benefit plan investments as compared to the prior year. Seasonal weather patterns and the number of unbilled days are the primary influences of the accrued unbilled revenue value.
We plan to continue to seek rate relief to recover our operating cost increases and receive reasonable returns on invested capital. We expect to fund our long-term capital needs through a combination of debt, common stock offerings, and cash flow from operations.
COVID-19
During the course of 2020, as a result of the COVID-19 pandemic, shelter-in-place and social distancing ordinances of varying durations and scope were implemented in all of the states in which we operate. Such governmental orders resulted in temporary closures of non-essential businesses and self-quarantining on non-essential workers. As an “essential business” during times of emergencies pursuant to the U.S. Critical Infrastructures Protection Act of 2001, we are working to continue to provide high quality water and wastewater services to our two million customers. Although the COVID-19 pandemic did not have a significant impact on our business during 2020, we have increased our allowance for credit losses as we have ceased all shutoffs for non-payment during the pandemic and anticipate this situation will continue until further notice. We are expecting segments of our customer base to continue to experience employment layoffs and business closures that negatively impact their ability to pay utility bills. We have also incurred costs to promote the health and safety of our employees and facilities.
If we need to close any of our facilities due to outbreaks of COVID-19 or if a critical number of our employees become too ill to work, our business operations could be materially adversely affected in a rapid manner. The impact of the COVID-19 pandemic is fluid and continues to evolve, and therefore, we cannot predict the extent to which our business, results of operations, financial condition or liquidity will ultimately be impacted.
Critical Accounting Policies and Estimates
We maintain our accounting records in accordance with accounting principles generally accepted in the United States of America and as directed by the Commissions to which our operations are subject. The process of preparing financial statements requires the

Explanation: SEC 10-K filing section containing tax-related disclosures. Tax references found: income tax, tax benefit, irs. Contains regulated financial information subject to SEC disclosure requirements.


Item 1A. Risk Factors
Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors, as well as other information in this Form 10-K, before deciding whether to invest in shares of our common stock. The occurrence of any of the events described below could harm our business, financial condition, results of operations, and growth prospects. In such an event, the trading price of our common stock may decline, and you may lose all or part of your investment.
Business and Market Risks
A number of conditions that affect demand for the homes we sell are outside of our control. Many of these conditions, such as interest rates, inflation, employment levels, wage levels and governmental actions also impact consumer confidence, upon which our business is highly dependent.
Changes in national and regional economic conditions, as well as local economic conditions where we conduct our operations, may result in more caution on the part of homebuyers and, consequently, fewer home purchases. These economic uncertainties involve, among other things, interest rates, inflation, employment levels, wage growth and governmental actions, all of which are out of our control and affect the affordability of, and demand for, the homes we sell. These conditions also impact consumer confidence, upon which our business is highly dependent. Adverse changes in any of these conditions could decrease demand and pricing for our homes or result in customer cancellations of pending contracts, which could adversely affect the number of home sales we make or reduce home prices, either of which could result in a decrease in our revenues and earnings and adversely affect our financial condition.
Our business could be materially and adversely disrupted by an epidemic or pandemic (such as the present outbreak and worldwide spread of COVID-19), or similar public threat, or fear of such an event, and the measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address it.
An epidemic, pandemic or similar serious public health issue, and the measures undertaken by governmental authorities to address it, could significantly disrupt or prevent us from operating our business in the ordinary course for an extended period, and thereby, and/or along with any associated economic and/or social instability or distress, have a material adverse impact on our consolidated financial statements.
On March 11, 2020, the World Health Organization characterized the outbreak of COVID-19 as a global pandemic and recommended containment and mitigation measures. On March 13, 2020, the United States declared a national emergency concerning the outbreak, and many states and municipalities have since declared public health emergencies. Along with these declarations, there have been extraordinary and wide-ranging actions taken by international, federal, state and local public health and governmental authorities to contain and combat the outbreak and spread of COVID-19 in regions across the United States and the world, including quarantines, “stay-at-home” or "shelter in place" orders and similar mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations.
In response to these steps, in mid-March 2020, we temporarily closed our sales centers, model homes and design studios to the general public and shifted to an appointment-only personalized home sales process where permitted, following recommended social distancing and other health and safety protocols when meeting in person with a customer. In addition, we shifted our corporate and division office functions to work remotely. These measures, combined with limiting our construction operations to authorized activities and a reduction in the availability, capacity and efficiency of municipal and private services necessary to the progress of land de

Explanation: SEC filing risk factors section containing investment-relevant disclosures. Source: 915840_2020.htm (CIK: 915840, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 11. Executive Compensation
The sections entitled “Executive Compensation” and “Director Compensation - 2020” in our definitive proxy statement for the 2021 annual meeting of shareholders are incorporated into this Annual Report on Form 10-K by reference.
Item 12.

Explanation: Executive compensation disclosures with financial details. Source: 943034_2020.htm (CIK: 943034, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Our future income, cash flows and fair value relevant to our financial instruments depend upon prevailing market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. Based upon the nature of our operations, we are not subject to foreign exchange rate or commodity price risk. The principal market risk to which we are exposed is the risk related to interest rate fluctuations. Many factors, including governmental monetary and tax policies, domestic and international economic and political considerations, and other factors that are beyond our control contribute to interest rate risk. Our interest rate risk objective is to limit the impact of interest rate fluctuations on earnings and cash flows and to lower our overall borrowing costs. To achieve this objective, we manage our exposure to fluctuations in market interest rates for our borrowings through the use of fixed rate debt instruments to the extent that reasonably favorable rates are obtainable.
All of our financial instruments were entered into for other than trading purposes.
Fixed Interest Rate Debt
As of December 31, 2020, $525.7 million, or approximately 81%, of our outstanding debt was subject to fixed interest rates, which limit the risk of fluctuating interest rates. Though a change in the market interest rates affects the fair market value, it does not impact net income to shareholders or cash flows. Our total outstanding fixed interest rate debt has an average effective interest rate as of December 31, 2020 of approximately 4.1% per annum with expirations ranging from 2020 to 2029 (see Note 9 to our accompanying consolidated financial statements for further detail). Holding other variables constant, a 1% increase in interest rates would cause an $18.5 million decline in the fair value for our fixed rate debt.
Variable Interest Rate Debt
As of December 31, 2020, $119.5 million, or approximately 19%, of our outstanding debt was subject to floating interest rates of LIBOR plus 1.40% to 1.90% and not currently subject to a hedge. The impact of a 1% increase or decrease in interest rates on our floating rate debt would result in a decrease or increase, respectively, of annual net income of approximately $1.2 million.
Credit Risk
Credit risk may be increased as a result of the COVID-19 pandemic. We expect that the actions taken by the U.S. and international governments to decrease the impact of the COVID-19 pandemic will result in a continued decline in global economic activity generally, and may adversely affect the financial condition of our tenants in particular. Although the full extent of the adverse impacts on our tenants cannot be predicted, in future periods we may experience reductions in on-time payments or closures of tenants’ businesses, which could have a material adverse effect on our results of operations, cash flows and financial condition.
Item 8.

Explanation: Quantitative and qualitative market risk disclosures. Source: 1175535_2020.htm (CIK: 1175535, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a financial institution, the Company is exposed to various business risks, including interest rate risk. Interest rate risk is the risk to earnings and value arising from volatility in market interest rates. Interest rate risk arises from timing differences in the re-pricings and maturities of interest-earning assets and interest-bearing liabilities, changes in the expected maturities of assets and liabilities arising from embedded options, such as a borrowers' ability to prepay loans and depositors' ability to redeem certificates of deposit before maturity, changes in the shape of the yield curve where interest rates increase or decrease in a nonparallel fashion, and changes in spread relationships between different yield curves, such as U.S. Treasuries and LIBOR. the Company's goal is to maximize net interest income without incurring excessive interest rate risk. Management of net interest income and interest rate risk must be consistent with the level of capital and liquidity that the Company maintains. The Company manages interest rate risk through an asset and liability committee, or ALCO. ALCO is responsible for managing the Company's interest rate risk in conjunction with liquidity and capital management.
The Company employs an independent consulting firm to model its interest rate sensitivity. The Company uses a net interest income simulation model as its primary tool to measure interest rate sensitivity. Many assumptions are developed based on expected activity in the balance sheet. For maturing assets, assumptions are created for the redeployment of the assets. For maturing liabilities, assumptions are developed for the replacement of these funding sources. Assumptions are also developed for assets and liabilities that could reprice during the modeled time period. These assumptions also cover how the Company expects rates to change on non-maturity deposits such as interest checking, money market checking, savings accounts as well as certificates of deposit. Based on inputs that include the current balance sheet, the current level of interest rates and the developed assumptions, the model then produces an expected level of net interest income assuming that market rates remain unchanged. This is considered the base case. Next, the model determines what net interest income would be based on specific changes in interest rates. The rate simulations are performed for a two year period and include ramped rate changes of down 100 basis points to 400 basis points and up 100 basis points to 400 basis points. In both the up and down scenarios, the model assumes a parallel shift in the yield curve. The results of these simulations are then compared to the base case.
Stress testing the balance sheet and net interest income using instantaneous parallel shock movements in the yield curve of 100 to 400 basis points is a regulatory and banking industry practice. However, these stress tests may not represent a realistic forecast of future interest rate movements in the yield curve. In addition, instantaneous parallel interest rate shock modeling is not a predictor of actual future performance of earnings. It is a financial metric used to manage interest rate risk and track the movement of the Company's interest rate risk position over a historical time frame for comparison purposes. Given that the models assume a static balance sheet, relies on historical betas and assumes immediate parallel rate changes, no assurance can be given that future performance will mirror the models.
At December 31, 2020, the Company's asset/liability position was asset sensitive based on its interest rate sensitivity model. The Company's net interest income would increase by 7.0% in an up 100 basis point scenario and would increase by 31.0% in an up 400 basis point scenario over a one-year timeframe. In the two-year horizon, the Company's net interest income would increase by 13.0% in

Explanation: Quantitative and qualitative market risk disclosures. Source: 832090_2020.htm (CIK: 832090, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 6. SELECTED FINANCIAL DATA
(millions - except per share amounts)
1See Note 15 - Redeemable Noncontrolling Interest in the Annual Report for additional discussion.
- 28 -
ITEM 7.

Explanation: Selected financial data and key metrics. Source: 80661_2020.htm (CIK: 80661, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 1A.
RISK FACTORS
There are various risks and uncertainties that are inherent to our business. Primary among these are (1) interest rate risk, which arises from movements in interest rates; (2) credit risk, which arises from an obligor’s failure to meet the terms of any contract with a bank or to otherwise perform as agreed; (3) risks related to our financial statements; (4) liquidity risk, which arises from a bank’s inability to meet its obligations when they come due without incurring unacceptable losses; (5) legal/compliance risk, which arises from violations of, or non-conformance with, laws, rules, regulations, prescribed practices, or ethical standards; (6) market risk, which arises from changes in the value of portfolios of financial instruments; (7) strategic risk, which is the risk of loss arising from inadequate or failed internal processes, people, and systems; (8) operational risk, which arises from problems with service or product delivery; and (9) reputational risk, which arises from negative public opinion resulting in a significant decline in shareholder value.
Following is a discussion of the material risks and uncertainties that could have a material adverse impact on our financial condition, results of operations, and the value of our shares. The failure to properly identify, monitor, and mitigate any of the below referenced risks, could result in increased regulatory risk and could potentially have an adverse impact on the Company. Additional risks that are not currently known to us, or that
we currently believe to be immaterial, also may have a material effect on our financial condition and results of operations. This report is qualified in its entirety by those risk factors.
COVID-19 Related Risk
The widespread outbreak of COVID-19 has adversely affected, and will likely continue to adversely affect, our business, financial condition, and results of operations. Moreover, the longer the pandemic persists, the more material the ultimate effects are likely to be.
The COVID-19 pandemic is negatively impacting economic activity, the financial markets, and commerce, both globally and within the United States. In our market area, the governor of New York has issued an order that, among other things, required residents to stay in their homes and permitted them to leave only to conduct certain essential activities or to travel to work and close all non-essential businesses to the general public. These stay-at-home orders and travel restrictions - and similar orders imposed across the United States to restrict the spread of COVID-19 - have resulted in significant business and operational disruptions, including business closures, supply chain disruptions, and mass layoffs and furloughs. Although stay-at-home orders have been eased to phased-in reopening of businesses, although capacity restrictions on movement and health and safety recommendations that encourage continued physical distancing and teleworking have limited the ability of businesses to return to pre-pandemic levels of activity. The COVID-19 pandemic has negatively affected the Company’s business and is likely to continue to do so and the Company’s results of operations may be materially impacted if businesses remain closed for an extended period of time or unemployment remains at elevated levels for an extended period of time.
As an essential business, we have implemented business continuity plans and continue to provide financial services to clients, while taking health and safety measures such as transitioning most in-person customer transactions to our drive-thru facilities and limiting access to the interior of our facilities, frequent cleaning of our facilities, and using a remote workforce where possible. Despite these safeguards, we may nonetheless experience business disruptions, and the rapid pace at which these issues are developing could overwhelm our ability to deal with them in a timely manner.
The continued spread of COVID-19 and the e

Explanation: SEC filing risk factors section containing investment-relevant disclosures. Source: 910073_2020.htm (CIK: 910073, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Operational Highlights
Our consolidated results for 2020 reflect our continuing efforts to serve our existing clients throughout the COVID-19 pandemic. In response, we took the following actions:
•launched our COVID-19 Preparedness Center, which provides ongoing and timely webinars, information, resources and offerings to clients and other SMBs to help them navigate the rapidly changing and complicated COVID-19 business landscape,
•helped our clients navigate the various small business relief loan programs through informational webinars and PPP loan application support initiatives,
•hosted the first annual TriNet PeopleForce, our virtual client and prospect conference, where we provided insights, thought leadership and recommendations for the challenges they face,
•enacted new programs in response to the FFCRA and CARES Act to enable new employee paid sick leave and expanded family and medical leave, payroll tax deferral and tax credit programs and other employment and non-employment tax-related incentives for our clients,
•facilitated access to alternative health plan options in addition to COBRA, and
•implemented and extended our remote working and office closures around the country for non-essential activities.
During 2020 we:
•continued to grow our revenues, although at a slower rate than we initially expected due to the impact from COVID-19 on both new sales and our clients,
•created our Recovery Credit program to assist our eligible clients, resulting in a reduction in revenue recognized,
•saw our WSEs increasing their participation, or enrollment, in our insurance offerings,
•experienced lower utilization of health services primarily in the second quarter, although utilization approached more typical levels through the second half of the year,
•completed the acquisition of Little Bird HR, Inc., expanding our footprint in our non-profit vertical,
•launched the extension of our People Matter branding campaign - Humanity Campaign, and
•delivered profitable growth as a result of revenue growth and lower insurance costs.
Performance Highlights
These operational achievements drove the financial performance improvements noted below in 2020 when compared to 2019:
Our results for WSEs in 2020 when compared to the prior year were:
During 2020, our average WSEs remained flat and total WSEs declined primarily as a result of the impact of COVID-19 on our clients and new sales. We experienced significant client and WSE attrition during the second quarter, driving our total WSEs down to 313,104 at June 30, 2020, before increasing due to a return to hiring by our existing clients in the third and fourth quarters. New sales also contributed to the return to growth, albeit at lower volumes than in previous years. Our total revenues grew by 5% primarily due to the change in our mix of WSEs and rate increases, partially offset by the Recovery Credit recognized. During 2020, we recognized a $128 million reduction in total revenues for the Recovery Credit, allocated proportionally to PSR and ISR. The Recovery Credit is a program designed to assist the economic recovery of our existing SMB clients, by providing one-time reductions against fees for future services.
Our total revenue increased at a higher rate than our insurance costs and OE, resulting in year-over-year increases in our Net Service Revenue, net income, and adjusted net income of 14%, 28% and 28%, respectively.
Results of Operations
The following table summarizes our results of operations for the three years ended December 31, 2020, 2019 and 2018. For details of the critical accounting judgments and estimates that could affect the Results of Operations, see the Critical Accounting Judgments and Estimates section within MD&A.
(1) Refer to Non-GAAP measures definitions and reconciliations from GAAP measures below.
A discussion regarding our financial condition and results of operations fo

Explanation: SEC 10-K filing section containing tax-related disclosures. Tax references found: tax credit, irs. Contains regulated financial information subject to SEC disclosure requirements.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
This information appears following Item 15 of this Annual Report on Form 10-K and is incorporated herein by reference.
ITEM 9.

Explanation: Audited financial statements and supplementary data. Source: 1836337_2020.htm (CIK: 1836337, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ArcBest Corporation™ (together with its subsidiaries, the “Company,” “we,” “us,” and “our”) provides a comprehensive suite of freight transportation and integrated logistics services to deliver innovative solutions. Our operations are conducted through our three reportable operating segments:
●Asset-Based, which consists of ABF Freight System, Inc. and certain other subsidiaries (“ABF Freight”);
●ArcBest, our asset-light logistics operation; and
●FleetNet.
The ArcBest and FleetNet reportable segments combined represent our Asset-Light operations. See additional segment descriptions in Part I, Item 1 (Business) and in Note M to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K. References to the Company, including “we,” “us,” and “our,” in this Annual Report on Form 10-K are primarily to the Company and its subsidiaries on a consolidated basis.
ORGANIZATION OF INFORMATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided to assist readers in understanding our financial performance during the periods presented and significant trends which may impact our future performance. This discussion should be read in conjunction with our consolidated financial statements and the related notes thereto included in Part II, Item 8 of this Annual Report on Form 10-K. MD&A includes forward-looking statements that are subject to risks and uncertainties. Actual results may differ materially from the statements made in this section due to a number of factors that are discussed in Part I (Forward-Looking Statements) and Part I, Item 1A (Risk Factors) of this Annual Report on Form 10-K. MD&A is comprised of the following:
●COVID-19 discusses the impact of the novel coronavirus (“COVID-19”) pandemic on our business, our response to the pandemic, and changes in economic measures which may influence our operating results;
●Results of Operations includes:
●an overview of consolidated results with 2020 compared to 2019, and a consolidated Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (“Adjusted EBITDA”) schedule;
●a financial summary and analysis of our Asset-Based segment results of 2020 compared to 2019, including a discussion of key actions and events that impacted the results;
●a financial summary and analysis of the results of our Asset-Light operations for 2020 compared to 2019, including a discussion of key actions and events that impacted the results; and
●a discussion of other matters impacting operating results, including effects of inflation, current economic conditions, environmental and legal matters, and information technology and cybersecurity.
●Liquidity and Capital Resources provides an analysis of key elements of the cash flow statements, borrowing capacity, and contractual cash obligations, including a discussion of financing arrangements and financial commitments.
●Income Taxes provides an analysis of the effective tax rates and deferred tax balances, including deferred tax asset valuation allowances.
●Critical Accounting Policies discusses those accounting policies that are important to understanding certain material judgments and assumptions incorporated in the reported financial results.
●Recent Accounting Pronouncements discusses accounting standards that are not yet effective for our financial statements but are expected to have a material effect on our future results of operations or financial condition.
The Consolidated Results section of Results of Operations generally discusses 2020 and 2019 items and year-to-year comparisons between 2020 and 2019. Discussions of 2018 items and year-to-year comparisons between 2019 and 2018 that are not included in this Form 10-K can be found in the Consolidated Results section within Results of Operations of MD&A in Part II, Item 7 of our Annual Report on Form 10-K fo

Explanation: SEC 10-K filing section containing tax-related disclosures. Tax references found: income tax, deferred tax, tax rate. Contains regulated financial information subject to SEC disclosure requirements.


Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements relate to our expectations for future events and time periods. All statements other than statements of historical fact are statements that could be deemed to be forward-looking statements, including any statements regarding trends in future revenue or results of operations, gross margin, operating margin, expenses, earnings or losses from operations, cash flow; any statements of the plans, strategies and objectives of management for future operations and the anticipated benefits of such plans, strategies and objectives; any statements regarding future economic conditions or performance; any statements regarding pending investigations, claims or disputes; any statements regarding the timing of closing of, future cash outlays for, and benefits of acquisitions; any statements regarding expected restructuring costs and benefits; any statements concerning the adequacy of our current liquidity and the availability of additional sources of liquidity; any statements regarding the potential or expected impact of the COVID-19 pandemic on our business, results of operations and financial condition; any statements regarding the impact of future potential tariffs on our business; any statements regarding the impact of changes in tax laws; any statements relating to the expected impact of accounting pronouncements not yet adopted; any statements regarding future repurchases of our common stock; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. Generally, the words “anticipate,” “believe,” “plan,” “expect,” “future,” “intend,” “may,” “will,” “should,” “estimate,” “predict,” “potential,” “continue” and similar expressions identify forward-looking statements. Our forward-looking statements are based on current expectations, forecasts and assumptions and are subject to risks and uncertainties, including those contained in Part I, Item 1A of this report. As a result, actual results could vary materially from those suggested by the forward looking statements. We undertake no obligation to publicly disclose any revisions to these forward-looking statements to reflect events or circumstances occurring subsequent to filing this report with the Securities and Exchange Commission. Investors and others should note that the Company announces material financial information to its investors using its investor relations website (http://ir.sanmina.com/investor-relations/overview/default.aspx), SEC filings, press releases, public conference calls and webcasts. The Company uses these channels to communicate with its investors and the public about the Company, its products and services and other issues. It is possible that the information the Company posts on its investor relations website could be deemed to be material information. Therefore, the Company encourages investors, the media, and others interested in the Company to review the information it posts on its investor relations website. The contents of our investor relations website are not incorporated by reference into this annual report on Form 10-K or in any other report or document we file with the SEC.
Overview
We are a leading global provider of integrated manufacturing solutions, components, products and repair, logistics and after-market services. Our revenue is generated from sales of our products and services primarily to original equipment manufacturers (OEMs) that serve the industrial, medical, defense and aerospace, automotive, communications networks and cloud solutions industries.
Our operations are managed as two businesses:
1) Integrated Manufacturing Solutions (IMS). Our IMS segment consists of printed circuit board assembly and test, high-level assembly

Explanation: Management Discussion and Analysis section with financial performance data. Source: 897723_2020.htm (CIK: 897723, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion of our financial condition and results of operations in conjunction with the financial statements and the related notes included elsewhere in this Annual Report on Form 10-K. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors.”
Overview
Adverum is a clinical-stage gene therapy company targeting unmet medical needs in ocular and rare diseases. We develop gene therapy product candidates intended to provide durable efficacy by inducing sustained expression of a therapeutic protein. Our core capabilities include novel vector discovery, preclinical and clinical development, and pre-commercial planning. In addition, we have in-house manufacturing expertise, specifically in scalable process development, assay development, and current Good Manufacturing Practices (“GMP”) quality control, and have leased and are building out a GMP commercial manufacturing facility to support our commercial plans for our lead product candidate, ADVM-022. We believe ADVM-022 has the potential to be the first mass marketed gene therapy for wet age-related macular degeneration (“wet AMD”) and diabetic macular edema (“DME”).
ADVM-022 is a single, in-office intravitreal (“IVT”) injection gene therapy designed to deliver long-term durability with robust treatment response, reduce the treatment burden of frequent anti-vascular endothelial growth factor (“anti-VEGF”) injections, and improve real-world vision outcomes for patients. ADVM-022 is being developed for the treatment of patients with chronic retinal diseases who respond to standard-of-care anti-VEGF therapy, including wet AMD and DME. ADVM-022 utilizes a proprietary vector capsid, AAV.7m8, carrying an aflibercept coding sequence under the control of a proprietary expression cassette.
Wet AMD is a leading cause of blindness in patients over 65 years of age, with a prevalence of approximately 1.5 million individuals in the U.S. (with approximately 200,000 new diagnoses per year) and over 5 million individuals worldwide. In recognition of the need for new treatment options for wet AMD, the U.S. Food and Drug Administration (“FDA”) granted Fast Track designation for ADVM-022 for the treatment of wet AMD.
We are conducting the OPTIC trial, designed as a multi-center, open-label, Phase 1, dose-ranging safety trial of ADVM-022 in patients with wet AMD who have demonstrated responsiveness to anti-VEGF treatment. Patients in OPTIC are treatment experienced, and previously required frequent anti-VEGF injections to control their wet AMD and to maintain functional vision. We completed enrollment for OPTIC in July 2020 and have regularly presented updated data from the trial.
Diabetes impacts over 400 million people globally, including 30 million people in the United States, and is increasing in prevalence. Approximately 5% of adults with diabetes are impacted by DME, a vision-threatening complication of diabetic retinopathy (“DR”), the leading cause of vision loss in working-age adults.
We are conducting the INFINITY trial, a multi-center, Phase 2, randomized, double-masked, active comparator-controlled study evaluating a single IVT injection of ADVM-022 in patients with DME. The INFINITY trial is designed to demonstrate superior control of disease activity following a single IVT injection of ADVM-022 compared to a single aflibercept injection, as measured by time to worsening of DME disease activity in the study eye. Additional objectives include assessments of treatment burden, visual acuity, retinal a

Explanation: Management Discussion and Analysis section with financial performance data. Source: 1501756_2020.htm (CIK: 1501756, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 8. Financial Statements and Supplementary Data.
The financial statements required by this Item 8 are included elsewhere in this Transition Report on Form 10-K beginning on page.
Item 9.

Explanation: Audited financial statements and supplementary data. Source: 1418115_2020.htm (CIK: 1418115, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk in that the interest payable on our credit facility is based on variable interest rates and therefore is affected by changes in market rates. We do not use interest rate derivative instruments to manage exposure to changes in market interest rates. We borrowed $20 million under our credit facility in July 2019, which we repaid prior to the end of the second quarter ended August 3, 2019. A 1% change in the weighted average interest rate charged under the credit facility would not have yielded a material fluctuation of interest expense for fiscal 2019.
ITEM 8.

Explanation: Quantitative and qualitative market risk disclosures. Source: 895447_2020.htm (CIK: 895447, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
MANAGEMENT’S STATEMENT OF RESPONSIBILITY FOR FINANCIAL STATEMENTS
Linde’s consolidated financial statements are prepared by management, which is responsible for their fairness, integrity and objectivity. The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America applied on a consistent basis, except for accounting changes as disclosed, and include amounts that are estimates and judgments. All historical financial information in this annual report is consistent with the accompanying financial statements.
Linde maintains accounting systems, including internal accounting controls, monitored by a staff of internal auditors, that are designed to provide reasonable assurance of the reliability of financial records and the protection of assets. The concept of reasonable assurance is based on recognition that the cost of a system should not exceed the related benefits. The effectiveness of those systems depends primarily upon the careful selection of financial and other managers, clear delegation of authority and assignment of accountability, inculcation of high business ethics and conflict-of-interest standards, policies and procedures for coordinating the management of corporate resources, and the leadership and commitment of top management. In compliance with Section 404 of the Sarbanes-Oxley Act of 2002, Linde assessed its internal control over financial reporting and issued a report (see below).
The Audit Committee of the Board of Directors, which consists solely of non-employee directors, is responsible for overseeing the functioning of the accounting system and related controls and the preparation of annual financial statements. The Audit Committee periodically meets with management, internal auditors and the independent accountants to review and evaluate their accounting, auditing and financial reporting activities and responsibilities, including management’s assessment of internal control over financial reporting. The independent registered public accounting firm and internal auditors have full and free access to the Audit Committee and meet with the committee, with and without management present.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Linde’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of management, including the company’s principal executive officer and principal financial officer, the company conducted an evaluation of the effectiveness of its internal control over financial reporting based on the framework in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (often referred to as COSO). Based on this evaluation, management concluded that the company’s internal control over financial reporting was effective as of December 31, 2020.
PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited and issued their opinion on the effectiveness of the company’s internal control over financial reporting as of December 31, 2020 as stated in their report.
/s/ STEPHEN F. ANGEL
/s/ KELCEY E. HOYT
Stephen F. Angel
Chief Executive Officer Kelcey E. Hoyt
Chief Accounting Officer
/s/ MATTHEW J. WHITE
Matthew J. White
Chief Financial Officer
March 1, 2021
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Linde plc
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Linde plc and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of income, of comprehensive incom

Explanation: Audited financial statements and supplementary data. Source: 1707925_2020.htm (CIK: 1707925, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 1A. RISK FACTORS
Our business, financial condition, financial results, and future growth prospects are subject to a number of risks and uncertainties, including those set forth below. The occurrence of any of the following risks could have a material adverse effect on our business, financial condition, financial results, and future growth prospects. Additional risks and uncertainties that are not currently known to us or that we do not currently believe to be material may also negatively affect our business, financial condition, financial results, and future growth prospects.
RISK FACTOR SUMMARY
Our business is subject to numerous risks and uncertainties, including those described in Item 1A “Risk Factors.” These risks include, but are not limited to the following:
●Our gene and cell therapy product candidates are based on proprietary methodologies, which makes it difficult to predict the time and cost of product candidate development and regulatory approval. Additionally, regulatory requirements governing gene and cell therapy products have evolved and may continue to change in the future.
●We may encounter substantial delays in our clinical studies or we may fail to demonstrate safety and efficacy to the satisfaction of applicable regulatory authorities. Additionally, we may find it difficult to enroll patients in our clinical studies, which could delay or prevent clinical studies of our product candidates.
●We have received and may apply for additional designations such as breakthrough therapy designation, RMAT designation, fast track designation, and rare pediatric disease designation from the FDA intended to facilitate or encourage product candidate development. We may not receive any such designations or be able to maintain them. Moreover, any such designations may not lead to faster development or regulatory review or approval and it does not increase the likelihood that our product candidates will receive marketing approval.
●Certain of our product candidates have received orphan drug designation from the FDA, there is no guarantee that we will be able to maintain this designation, receive this designation for any of our other product candidates, or receive or maintain any corresponding benefits, including periods of exclusivity.
●Even if we obtain regulatory approval for a product candidate, our products will remain subject to regulatory scrutiny.
●The COVID-19 pandemic and efforts to reduce its spread has affected our operations and significantly impacted worldwide economic conditions, and could continue to have a material effect on our operations, business, and financial condition.
●We could experience production problems in our manufacturing facilities that result in delays in our development or commercialization programs. We might also experience delays in manufacturing if any of our vendors, contract laboratories or suppliers are found to be out of compliance with current Good Manufacturing Practice.
●If we fail to comply with applicable regulations, the relevant regulatory authority may require remedial measures that may be costly or time-consuming to implement and that may include the suspension of a clinical trial or commercial sales or the closure of a manufacturing facility.
●We expect to rely on third parties, and these third parties may not perform satisfactorily. Additionally, our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated.
●Our drug candidates are subject to the risks of failure inherent in the development of pharmaceutical products based on new technologies, and our failure to develop safe and commercially viable drugs would severely limit our ability to become profitable or to achieve significant revenues.
●We may be unable to successfully develop, market, or commercialize our products or our product candidates without establishing new relationships and main

Explanation: SEC filing risk factors section containing investment-relevant disclosures. Source: 318306_2020.htm (CIK: 318306, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Usio, Inc. and Subsidiaries
San Antonio, Texas
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Usio, Inc. and Subsidiaries (collectively referred to as the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, changes in stockholders’ equity and cash flows, for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019 and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.
Basis of Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As a part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Intangible Assets - Customer Lists
Description of the Matter
As of December 31, 2020, the Company had intangible assets relating to acquired customer lists which are recorded at their cost basis net of accumulated amortization. On at least an annual basis, the company performs an analys

Explanation: Audited financial statements and supplementary data. Source: 1088034_2020.htm (CIK: 1088034, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 8. Financial Statements and Supplementary Data
See the Index to Consolidated Financial Statements on page of this report.
ITEM 9.

Explanation: Audited financial statements and supplementary data. Source: 1590717_2020.htm (CIK: 1590717, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
General
In reviewing Management’s Discussion and Analysis of Financial Condition and Results of Operations, you should refer to our Consolidated Financial Statements and the notes related thereto.
Results of Operations
Fiscal Year ended October 31, 2020 compared with Fiscal Year ended October 31, 2019
Revenue
We did not have any revenue in fiscal year 2020. In fiscal year 2019, we recorded revenue of $250,000 from one license agreement. The license agreement provided for a one-time, non-recurring, lump sum payment in exchange for a non-exclusive retroactive and future license, and covenant not to sue. Pursuant to the terms of the agreement, we have no further obligations with respect to the granted intellectual property rights, including no obligation to maintain or upgrade the technology, or provide future support or services. Accordingly, the performance obligations from the license were satisfied and 100% of the revenue was recognized upon execution of the license agreement. As discussed in Note 1 to our Consolidated Financial Statements, as part of our legacy operations, the Company remains engaged in limited patent licensing activities which we do not expect to be a significant part of our ongoing operations or revenue.
Inventor Royalties, Contingent Legal Fees, Litigation and Licensing Expenses Related to Patent Assertion
We did not have any inventor royalties, contingent legal fees, litigation and licensing expenses related to patent assertion activities in fiscal year 2020. In fiscal year 2019 inventor royalties, contingent legal fees, litigation and licensing expenses related to patent assertion activities were approximately $166,000. Inventor royalties and contingent legal fees are expensed in the period that the related revenues are recognized. Litigation and licensing expenses related to patent assertion, other than contingent legal fees, are expensed in the period incurred.
Amortization of Patents
Amortization of patents was $-0- in fiscal year 2020 compared to approximately $419,000 in fiscal year 2019. We capitalize patent and patent rights acquisition costs and amortize the cost over the estimated economic useful life. The carrying value of capitalized patents was reduced to $-0- as of October 31, 2019. During fiscal year 2020, we did not capitalize any patents or patent rights.
Research and Development Expenses
Research and development expenses are related to the development of our cancer diagnostics and therapeutics programs and our anti-viral drug program, and decreased by approximately $1,092,000 to approximately $4,381,000 in fiscal year 2020, from approximately $5,473,000 in fiscal year 2019. The decrease in research and development expenses was primarily due to a decrease in employee stock award compensation expense of approximately $1,251,000 and a decrease in Certainty’s outside research and development expenses related to development of CAR-T therapeutics of approximately $547,000, offset by an increase in Anixa Diagnostics Corporation’s outside research and development expense to develop the Cchek™ artificial intelligence driven platform of non-invasive blood tests for the early detection of cancer of approximately $561,000 and an increase in outside research and development to develop anti-viral drug candidates against COVID-19 of approximately $141,000.
Research and development expenses incurred in fiscal year 2020 associated with each of our development programs consisted of approximately $2,455,000 for our suspended as of July 2020 cancer diagnostics program, approximately $1,048,000 for CAR-T therapeutics, approximately $510,000 for anti-viral therapeutics, and approximately $368,000 for cancer vaccines.
General and Administrative Expenses
General and administrative expenses decreased by approximately $66,000 to approximately $5,597,000 in fiscal year 2020, from approximately $5,663,000 in fiscal year

Explanation: Management Discussion and Analysis section with financial performance data. Source: 715446_2020.htm (CIK: 715446, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 6 - Selected Financial Data
The historical data in the table below should be read in conjunction with the Consolidated Financial Statements and the related notes thereto in Item 15 and Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 7

Explanation: Selected financial data and key metrics. Source: 1637757_2020.htm (CIK: 1637757, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 11. EXECUTIVE COMPENSATION
The information required by this item will be contained in the Proxy Statement under the caption “Executive Compensation”, and is hereby incorporated herein by reference.
ITEM 12.

Explanation: Executive compensation disclosures with financial details. Source: 66418_2020.htm (CIK: 66418, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion in conjunction with our audited historical consolidated financial statements, including the notes thereto, which are included elsewhere in this Form 10-K. Management's Discussion and Analysis of Financial Condition and Results of Operations contains statements that are forward-looking. These statements are based on current expectations and assumptions that are subject to risk, uncertainties, and other factors. Actual results could differ materially because of the factors discussed in "Risk Factors" included elsewhere in this Form 10-K.
Executive Overview
This executive overview presents summarized information regarding our business and operating trends only. For further information relating to the information summarized herein, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in its entirety.
Recent ON Semiconductor Results
Our revenue for the year ended December 31, 2020 was $5,255.0 million, a decrease of 4.8% from $5,517.9 million for the year ended December 31, 2019. The decrease was attributable to reduced demand for our products across PSG, ASG and ISG primarily due to the negative impact from the COVID-19 pandemic. During 2020, while we reported net income attributable to ON Semiconductor of $234.2 million compared to $211.7 million in 2019, our operating income during 2020 was $348.7 million compared to $432.7 million during 2019. While the decrease in operating income was primarily due to the pervasive macroeconomic impacts of the COVID-19 pandemic, the increase in net income attributable to ON Semiconductor was due to the income tax benefit recorded during the year. Our gross margin decreased by approximately 310 basis points to 32.7% in 2020 from 35.8% in 2019. See discussion under "Results of Operations" for further discussion on the reasons for the fluctuations year over year.
Business and Macroeconomic Environment
The COVID-19 pandemic has had, and is expected to continue to have, a significant adverse impact on global economic activity, including creating supply chain and market disruption. While certain measures enacted in 2020 to contain the spread of the COVID-19 pandemic have since been relaxed in many jurisdictions, the extent to which the pandemic will impact demand for our products depends on future developments, which are highly uncertain and difficult to predict, including new information that may emerge concerning the severity and longevity of the pandemic, and actions to contain and treat its impact.
We historically have pursued, and expect to continue to pursue, cost-saving initiatives to align our overall cost structure, capital investments and other expenditures with our expected revenue, spending and capacity levels based on our current sales and manufacturing projections. We have taken, and continue to take, significant cost containment efforts, including, but not limited to, workforce reductions, reducing discretionary spending, furloughs, and mandatory vacations. While all our global
manufacturing sites are currently operational, our facilities could be required to temporarily curtail production levels or temporarily cease operations based on government mandates. There can be no assurances that we will adequately forecast the impact of adverse economic conditions on our business or that we will effectively align our cost structure, capital investments and other expenditures with our revenue, spending and capacity levels in the future.
See Note 7: ''Restructuring, Asset Impairments and Other Charges, net'' in the notes to our audited consolidated financial statements included elsewhere in this Form 10-K for information relating to our most recent cost-saving initiatives.
The Impact of the COVID-19 Pandemic on our Business
In an effort to protect the health and safety of our employees, we have taken proactive, aggressive

Explanation: SEC 10-K filing section containing tax-related disclosures. Tax references found: income tax, tax benefit. Contains regulated financial information subject to SEC disclosure requirements.


ITEM 11 - EXECUTIVE COMPENSATION
Director Compensation
The following table summarizes all director compensation in the most recent fiscal year ended December 31, 2020. There are no standard compensation arrangements in place for our directors.
Executive Compensation
The executive officers for the most recent fiscal year ended December 31, 2020 are as follows:
John C. Power, CEO, President, CFO, Secretary and director.
Summary Compensation Table
The following table sets forth all compensation recorded by us to Mr. Power during the years ended December 31, 2020 and 2019:
Mr. Power is our only executive officer. We entered into a one-year consulting agreement with Mr. Power at the rate of $30,000 per year for his part-time service as our President. Mr. Power devotes approximately 25% of his time and attention to our business.
Employment Agreements
We do not have any written employment agreements other than the above-referenced consulting agreement with any of our executive officers; nor do we have or maintain key man life insurance on Mr. Power.
Equity Incentive Plan
The Company adopted its 2020 Equity Incentive Plan which became effective in January 2021 (the “Plan”) for our officers, directors and other employees, plus outside consultants and advisors. Under the Plan, our employees, outside consultants and advisors may receive awards of non-qualified options and incentive options, stock appreciation rights or shares of stock. As required by Section 422 of the Internal Revenue Code of 1986, as amended, the aggregate fair market value of our common stock underlying incentive stock options granted to an employee exercisable for the first time in any calendar year may not exceed $100,000. The foregoing limitation does not apply to non-qualified options. The exercise price of an incentive option may not be less than 100% of the fair market value of the shares of our common stock on the date of grant. The same limitation does not apply to non-qualified options. An option is not transferable, except by will or the laws of descent and distribution. If the employment of an optionee terminates for any reason, (other than for cause, or by reason of death, disability or retirement), the optionee may exercise his options within a 90-day period following such termination to the extent he was entitled to exercise such options at the date of termination. A maximum of 10,000,000 shares of our common stock are subject to the Plan. The purpose of the Plan is to provide employees, including our officers, directors, and non-employee consultants and advisors with an increased incentive to make significant and extraordinary contributions to our long-term performance and growth, to join their interests with the interests of our shareholders, and to facilitate attracting and retaining employees of exceptional ability.
The Plan may be administered by the Board or in the Board's sole discretion by the Compensation Committee of the Board or such other committee as may be specified by the Board to perform the functions and duties of the Committee under the Plan. Subject to the provisions of the Plan, the Committee and the Board shall determine, from those eligible to be participants in the Plan, the persons to be granted stock options, stock appreciation rights and restricted stock, the amount of stock or rights to be optioned or granted to each such person, and the terms and conditions of any stock option, stock appreciation rights and restricted stock.
There have been no grants under the Plan to date.
Outstanding Equity Awards at Fiscal Year-End
None
Expense Reimbursement
We will reimburse our officers and directors for reasonable expenses incurred during the course of their performance.
Retirement Plans and Benefits
None.
Indemnification of Directors and Officers
Our bylaws contain provisions that limit the liability of our directors for monetary damages to the fullest extent permitted by Delaware law. Consequently, our directors will not be personally

Explanation: SEC 10-K filing section containing tax-related disclosures. Tax references found: irs, internal revenue. Contains regulated financial information subject to SEC disclosure requirements.


Item 8. Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Hostess Brands, Inc.:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Hostess Brands, Inc. and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020 based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of

Explanation: Audited financial statements and supplementary data. Source: 1644406_2020.htm (CIK: 1644406, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 6. SELECTED FINANCIAL DATA
Five-Year Performance Highlights
1.Diluted Earnings Per Share, Weighted Average Shares Outstanding - Diluted, Book Value Per Share and Shares Outstanding have been adjusted for the impact of the October 12, 2018 fifteen percent Class B stock distribution and the October 11, 2016 fifteen percent Class B stock distribution.
2.Working capital is calculated as the difference between Current Assets and Current Liabilities.
3.Information includes the results of CCC, acquired on April 3, 2017, and CSC, acquired on December 1, 2017, each from the acquisition date forward.
4.The Company recorded goodwill impairment charges during the first and second quarters of 2020 as described in Note 7 in our consolidated financial statements in Item 8. The Company recorded impairment charges in conjunction with restructuring, impairment and other activities during the fourth quarter of 2019, as described in Note 23 in our consolidated financial statements. The Company also recorded a goodwill impairment charge during the fourth quarter of 2017.
5.The Company recorded a gain of $80.1 million upon the sale of the semiconductor business on February 13, 2019, offset by a $1.3 million loss on the sale of the airfield lighting product line on July 12, 2019.
6.Information includes the results of Freedom, acquired on July 1, 2019, and Diagnosys, acquired on October 4, 2019, each from the acquisition date forward. Information reflects the sale of the semiconductor business, divested on February 13, 2019.
7.During 2020, the Company recorded non-cash charges of $21.5 million included within its provision for income taxes related to the Company’s determination that a valuation allowance against its deferred tax assets was necessary. Accounting rules require a reduction of the carrying amounts of deferred tax assets by a valuation allowance if, based on the available and objectively verifiable evidence, it is more likely than not that such assets will not be realized.
ITEM 7.

Explanation: SEC 10-K filing section containing tax-related disclosures. Tax references found: income tax, deferred tax, irs. Contains regulated financial information subject to SEC disclosure requirements.


ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information under this Item.
ITEM 8.

Explanation: Quantitative and qualitative market risk disclosures. Source: 1819663_2020.htm (CIK: 1819663, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 1A. Risk Factors.
Investing in our securities involves a high degree of risk. You should carefully consider the following information about these risks, together with the other information appearing elsewhere in this Annual Report on Form 10-K, including our consolidated financial statements, the notes thereto and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The occurrence of any of these risks could have a material and adverse effect on our business, reputation, financial condition, results of operations and future growth prospects, as well as our ability to accomplish our strategic objectives. Certain statements contained in this section constitute forward-looking statements. See the information included in “Special Note Regarding Forward-Looking Statements” in this Annual Report on Form 10-K. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.
Risks Related to Our Business and Strategy
We have incurred significant operating losses since inception, and we expect to incur operating losses in the future, and we may not be able to achieve or sustain profitability.
We are a medical technology company with a limited commercial operating history. To date, we have invested substantially all of our efforts in the research and development of, seeking regulatory approval for, and commercialization of our r-SNM System. We are not profitable and have incurred losses each year since we began our operations in 2013. We have a limited commercial operating history upon which to evaluate our business and prospects. Consequently, any predictions about our future success, performance or viability may not be as accurate as they could be if we had a longer operating history.
We have not yet derived sufficient revenues to support our operations, as our activities prior to 2020 have consisted primarily of investing in our commercial operations, developing our technology, and conducting clinical studies. As a result, we have recorded net losses of $54.9 million, $79.9 million, and $32.5 million for the years ended December 31, 2020, 2019, and 2018, respectively. As of December 31, 2020, we had an accumulated deficit of $234.5 million. To date, we have financed our operations primarily through equity financings.
We expect that our operating expenses will continue to increase as we (i) continue to build our commercial infrastructure, (ii) develop, enhance, and expand the commercialization of our r-SNM System in the United States, (iii) potentially seek additional FDA regulatory approvals for our r-SNM System or other future product candidates in the United States, (iv) increase our commercialization efforts internationally and (v) incur additional operational costs associated with being a public company. As a result, we expect to continue to incur operating losses for the foreseeable future. Our expected future operating losses, combined with our prior operating losses, may adversely affect the market price of our common stock and our ability to raise capital and continue operations.
We expect that sales of our r-SNM System will account for a majority of our future revenue. If our r-SNM System does not achieve an adequate level of acceptance by physicians, health care payors, and patients and does not receive adequate reimbursement from third-party payors, we may not generate sufficient revenue and we may not be able to achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability in subsequent periods or on an ongoing basis. If we do not achieve or sustain profitability, it will be more difficult for us to finance our business and accomplish our strategic objectives, either of which would have a material and adverse effect on our business, financial condition and results of operations and cause the market price of our common stock to decline.

Explanation: SEC filing risk factors section containing investment-relevant disclosures. Source: 1603756_2020.htm (CIK: 1603756, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 8. Financial Statements and Supplementary Data
The supplementary information required by this item is included in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Socket Mobile, Inc.:
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Socket Mobile, Inc. (“the Company”) as of December 31, 2020 and 2019, the related statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2020 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate audit opinion on the critical audit matters or on the accounts or disclosures to which they relate.
Deferred Tax Asset Valuation Allowance Assessment
Critical Audit Matter Description
As described in notes 1 and 6 to the consolidated financial statements, the Company uses the asset and liability method to account for income taxes. Deferred tax assets and liabilities are measured using enacted tax rates and laws that will be in effect when the differences are expected to rev

Explanation: SEC 10-K filing section containing tax-related disclosures. Tax references found: income tax, deferred tax, tax rate. Contains regulated financial information subject to SEC disclosure requirements.


Item 8. Financial Statements and Supplementary Data.
Our financial statements, together with the report of our independent registered public accounting firm, appear in this Annual Report on Form 10-K beginning on page 104.
Item 9.

Explanation: Audited financial statements and supplementary data. Source: 1674365_2020.htm (CIK: 1674365, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
NW Holdings and NW Natural are exposed to various forms of market risk including commodity supply risk, commodity price risk, interest rate risk, foreign currency risk, credit risk and weather risk. The following describes NW Holdings' and NW Natural's exposure to these risks, as applicable.
Commodity Supply Risk
NW Natural enters into spot, short-term, and long-term natural gas supply contracts, along with associated pipeline transportation contracts, to manage commodity supply risk. Historically, NW Natural has arranged for physical delivery of an adequate supply of gas, including gas in Mist storage and off-system storage facilities, to meet expected requirements of core NGD customers. NW Natural's long-term gas supply contracts are primarily index-based and subject to monthly re-pricing, a strategy that is intended to substantially mitigate credit exposure to physical gas counterparties. Absolute notional amounts under physical gas contracts related to open positions on derivative instruments were 458 million therms and 513 million therms as of December 31, 2020 and 2019, respectively.
Commodity Price Risk
Natural gas commodity prices are subject to market fluctuations due to unpredictable factors including weather, pipeline transportation congestion, drilling technologies, market speculation, and other factors that affect supply and demand. Commodity price risk is managed with financial swaps and physical gas reserves from a long-term investment in working interests in gas leases operated by Jonah Energy. These financial hedge contracts and gas reserves volumes are generally included in NW Natural's annual PGA filing for recovery, subject to a regulatory prudence review. Notional amounts under financial derivative contracts were $168.5 million and $123.3 million as of December 31, 2020 and 2019, respectively. The fair value of financial swaps, based on market prices at December 31, 2020, was an unrealized gain of $12.8 million, which would result in cash inflows of $1.3 million in 2021 and $12.5 million in 2022, and cash outflows of $1.0 million in 2023.
Interest Rate Risk
NW Holdings and NW Natural are exposed to interest rate risk primarily associated with new debt financing needed to fund capital requirements, including future contractual obligations and maturities of long-term and short-term debt. Interest rate risk is primarily managed through the issuance of fixed-rate debt with varying maturities. NW Holdings and NW Natural may also enter into financial derivative instruments, including interest rate swaps, options and other hedging instruments, to manage and mitigate interest rate exposure. NW Holdings and NW Natural did not have any interest rate swaps outstanding as of December 31, 2020 or 2019.
Foreign Currency Risk
The costs of certain pipeline and off-system storage services purchased from Canadian suppliers are subject to changes in the value of the Canadian currency in relation to the U.S. currency. Foreign currency forward contracts are used to hedge against fluctuations in exchange rates for NW Natural's commodity-related demand and reservation charges paid in Canadian dollars. Notional amounts under foreign currency forward contracts were $5.9 million and $6.7 million as of December 31, 2020 and 2019, respectively. If all of the foreign currency forward contracts had been settled on December 31, 2020, a gain of $0.3 million would have been realized. See Note 16.
Credit Risk
Credit Exposure to Natural Gas Suppliers
Certain gas suppliers have either relatively low credit ratings or are not rated by major credit rating agencies. To manage this supply risk, NW Natural purchases gas from a number of different suppliers at liquid exchange points. NW Natural evaluates and monitors suppliers’ creditworthiness and maintains the ability to require additional financial assurances, including deposits, letters of credit, or surety bonds, in case a su

Explanation: Quantitative and qualitative market risk disclosures. Source: 73020_2020.htm (CIK: 73020, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 1A. Risk Factors
Risk Factor Summary
An investment in our securities involves high degree of risk. Below is a summary of the principal risk factors that make an investment in our securities speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this summary of risk factors, and other risk that we face, can be found below and should be carefully considered, together with other information in this Report. In addition to the risks and uncertainties set forth below, we face certain material risks and uncertainties related to the Proposed Transaction with Markforged, Inc., and if the Proposed Transaction is consummated, additional and different risks and uncertainties related to the business of Markforged, Inc. Such material risks will be set forth in the Company’s registration statement on form S- 4, including a proxy statement/ prospectus that we will file with the SEC in connection with the Proposed Transaction.
Our principal risks and uncertainties include, but are not limited to, the following risks, uncertainties and other factors:
We are a recently incorporated company with no operating history and no revenues, and you have no basis on which to evaluate our ability to achieve our business objective.
Because we lack an operating history, you have no basis upon which to evaluate our ability to achieve our business objective of completing our initial business combination with one or more partner businesses. We have no plans, arrangements or understandings with any prospective partner business concerning a business combination and may be unable to complete our initial business combination. If we fail to complete our initial business combination, we will never generate any operating revenues.
Past performance by our founding team or their affiliates may not be indicative of future performance of an investment in us.
Information regarding performance by, or businesses associated with, our founding team or their affiliates is presented for informational purposes only. Any past experience of and performance by our founding team or their affiliates, is not a guarantee either: (1) that we will be able to successfully identify a suitable candidate for our initial business combination; or (2) of any results with respect to any initial business combination we may consummate. You should not rely on the historical record of our founding team or any of their affiliates’ as indicative of the future performance of an investment in us or the returns we will, or are likely to, generate going forward.
Our shareholders may not be afforded an opportunity to vote on our proposed initial business combination, which means we may complete our initial business combination even though a majority of our shareholders do not support such a combination.
We may not hold a shareholder vote to approve our initial business combination unless the business combination would require shareholder approval under applicable Cayman Islands law or stock exchange listing requirements or if we decide to hold a shareholder vote for business or other reasons. For instance, the NYSE rules currently allow us to engage in a tender offer in lieu of a general meeting but would still require us to obtain shareholder approval if we were seeking to issue more than 20% of our issued and outstanding shares to a partner business as consideration in any business combination.
Therefore, if we were structuring a business combination that required us to issue more than 20% of our issued and outstanding ordinary shares, we would seek shareholder approval of such business combination. However, except as required by applicable law or stock exchange rule, the decision as to whether we will seek shareholder approval of a proposed business combination or will allow shareholders to sell their shares to us in a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors, such

Explanation: SEC filing risk factors section containing investment-relevant disclosures. Source: 1816613_2020.htm (CIK: 1816613, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 11. EXECUTIVE COMPENSATION
PPL Corporation
Information for this item will be set forth in the sections entitled "Compensation of Directors," "The Board's Role in Risk Oversight" and "Executive Compensation" in PPL's 2021 Notice of Annual Meeting and Proxy Statement, which will be filed with the SEC not later than 120 days after December 31, 2020, and which information is incorporated herein by reference.
PPL Electric Utilities Corporation, LG&E and KU Energy LLC, Louisville Gas and Electric Company and Kentucky Utilities Company
Item 11 is omitted as PPL Electric, LKE, LG&E and KU meet the conditions set forth in General Instructions (I)(1)(a) and (b) of Form 10-K.
ITEM 12.

Explanation: Executive compensation disclosures with financial details. Source: 1518339_2020.htm (CIK: 1518339, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk
We are exposed to interest rate risk on our variable-rate debt and price risk on our fixed-rate debt. At December 31, 2020, we had $539.0 million of variable-rate debt. Including the effect of the floating-to-fixed interest rate swaps (see Note 13, Derivatives, to the Consolidated Financial Statements), approximately 90.9% of our outstanding debt was comprised of fixed-rate debt as of December 31, 2020.
We assess market risk based on changes in interest rates utilizing a sensitivity analysis that measures the potential loss in earnings, fair values and cash flows based on a hypothetical 10% change in interest rates. Using this sensitivity analysis, such changes would not have a material effect on interest income or expense and cash flows and would change the fair values of fixed-rate debt at December 31, 2020 and 2019 by $23.7 million and $25.8 million, respectively.
We are exposed to the impact of foreign currency fluctuations based on our global operations. Foreign currency fluctuations affect the U.S. dollar value of revenues earned and expenses incurred in foreign currencies. We are also exposed to currency risk to the extent we own assets or incur liabilities, or enter into other transactions that are not in the functional currency of the subsidiary in which we operate. We employ different practices to manage these risks, including where appropriate the use of derivative instruments, such as foreign currency forwards. As of December 31, 2020 and 2019, the aggregate notional amount of outstanding foreign currency contracts was $220.7 million and $179.9 million, respectively (see Note 13, Derivatives, to the Consolidated Financial Statements). The net unrealized gains from these foreign currency contracts were $3.6 million and $0.8 million at December 31, 2020 and 2019, respectively. We do not use derivative financial instruments for trading or speculative purposes.
Credit Risk
We are exposed to credit risk on accounts receivable balances. This risk is mitigated due to our large, diverse client base, dispersed over various geographic regions and industrial sectors. No single client comprised more than 10% of our consolidated net sales in 2020, 2019 or 2018. We maintain provisions for potential credit losses and such losses to date have normally been within our expectations. We evaluate the solvency of our clients on an ongoing basis to determine if additional allowances for credit losses need to be recorded. Significant economic disruptions or a slowdown in the economy could result in significant additional charges.
Commodities
The primary raw materials used by us are paper and ink. To reduce price risk caused by market fluctuations, we have incorporated price adjustment clauses in certain sales contracts. We believe a hypothetical 10% change in the price of paper and other raw materials would not have a significant effect on our consolidated annual results of operations or cash flows because these costs are generally passed through to our clients, although there may be contractual delays in our ability to pass along these increases.
ITEM 8.

Explanation: Quantitative and qualitative market risk disclosures. Source: 29669_2020.htm (CIK: 29669, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.