BRADY CORP (BRC) FY 2021 MD&A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We are a global manufacturer and supplier of identification solutions and workplace safety products that identify and protect premises, products and people. The IDS segment is primarily involved in the design, manufacture, and distribution of high-performance and innovative identification and healthcare products. The WPS segment provides workplace safety, identification and compliance products, approximately 40% of which are internally manufactured and approximately 60% of which are externally sourced. Approximately 50% of our total sales are derived outside of the United States. Foreign sales within the IDS and WPS segments are approximately 40% and 75%, respectively.

The ability to provide customers with a broad range of proprietary, customized and diverse products for use in various applications across multiple industries and geographies, along with a commitment to quality and service, have made Brady a leader in many of its markets. The long-term sales growth and profitability of our segments will depend not only on improved demand in end markets and the overall economic environment, but also on our ability to continuously improve the efficiency of our global operations, deliver a high level of customer service, develop and market innovative new products, and to advance our digital capabilities. In our IDS business, our strategy for growth includes an increased focus on certain industries and products, a focus on improving the customer buying experience, and the development of technologically advanced, innovative and proprietary products. In our WPS business, our strategy for growth includes a focus on workplace safety critical industries, innovative new product offerings, compliance expertise, customization expertise, and improving our digital capabilities.

Impact of the COVID-19 Pandemic on Our Business

Brady Corporation is deemed an essential business under the majority of government orders. Our products support first responders, healthcare workers, food processing companies, and many other critical industries. For the fiscal year ended July 31, 2021, our facilities were operating globally with enhanced safety protocols designed to protect the health and safety of our employees.

We have taken actions throughout our business to reduce controllable costs, including actions to reduce labor costs, eliminate non-essential travel, and reduce discretionary spend. We believe we have the financial strength to continue to invest in organic sales growth opportunities, inorganic sales opportunities, and research and development ("R&D"), while continuing to drive sustainable efficiencies and automation in our operations and selling, general and administrative ("SG&A") functions. At July 31, 2021, we had cash of $147.3 million, a credit facility with $159.1 million available for future borrowing, which the revolving loan agreement can be increased up to $359.1 million at the Company's option and subject to certain conditions for total available liquidity of approximately $506 million.

We believe that our financial resources including the remaining undrawn amount of the credit facility and our ability to increase that credit line as necessary and liquidity levels are sufficient to manage the continuing impact of the COVID-19 pandemic, including the spread of variants that could result in additional government actions around the world to contain the virus or prevent further spread which may result in reduced sales, reduced net income, and reduced cash provided by operating activities. Refer to Risk Factors, included in Part I, Item 1A of this Annual Report on Form 10-K for the year ended July 31, 2021, for further discussion of the possible impact of the COVID-19 pandemic on our business.

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Results of Operations

A comparison of results of operating income for the fiscal years ended July 31, 2021, 2020, and 2019 is as follows:

A discussion regarding our financial condition and results of operations for fiscal 2020 compared to fiscal 2019 can be found under Item 7 in our Annual Report on Form 10-K for the fiscal year ended July 31, 2020, filed with the SEC on September 16, 2020, which is available free of charge on the SEC's website at www.sec.gov and our corporate website at www.bradyid.com/corporate/investors. References in this Annual Report on Form 10-K to “organic sales” refer to net sales calculated in accordance with U.S. GAAP, excluding the impact of foreign currency translation and acquisitions. The Company’s organic sales disclosures exclude the effects of foreign currency translation as foreign currency translation is subject to volatility that can obscure underlying business trends. Management believes that the non-GAAP financial measure of organic sales is meaningful to investors as it provides them with useful information to aid in identifying underlying sales trends in our businesses and facilitating comparisons of our sales performance with prior periods. All analytical commentary within the Results of Operations section regarding the change in sales when compared to prior periods are in reference to organic sales unless otherwise noted.

Net sales increased 5.9% to $1,144.7 million in fiscal 2021, compared to $1,081.3 million in fiscal 2020, which consisted of organic sales growth of 1.6%, an increase from foreign currency translation of 3.2%, and growth from acquisitions of 1.1%. Organic sales grew 3.7% in the IDS segment and declined 3.8% in the WPS segment.

The COVID-19 pandemic had a significant impact on organic sales during the second half of 2020, with the impact varying between the IDS and WPS segments. The IDS segment realized reduced demand across all major product lines beginning in the third quarter which continued throughout the fourth quarter, while the WPS segment realized essentially flat organic sales in the third quarter, which improved to 10.8% organic sales growth in the fourth quarter primarily due to increased sales of personal protective equipment and other pandemic-related products. In total, the rate of decline in organic sales decreased through the fourth quarter of fiscal 2020 and the first half of fiscal 2021 before turning to organic sales growth in the second half of fiscal 2021.

Gross margin increased 6.2% to $561.4 million in fiscal 2021, compared to $528.6 million in fiscal 2020. As a percentage of net sales, gross margin increased to 49.0% in fiscal 2021, compared to 48.9% in fiscal 2020. The slight increase in gross margin as a percentage of net sales was primarily due to an increase in sales volumes during the second half of 2021 as our businesses continue to recover following the economic slowdown caused by the COVID-19 pandemic in fiscal 2020. This was mostly offset by an increase in the cost of materials and freight due to supply chain constraints and the rising cost of labor in many geographies.

R&D expenses increased to $44.6 million in fiscal 2021, compared to $40.7 million in fiscal 2020. R&D expenses as a percentage of net sales increased to 3.9% in fiscal 2021, compared to 3.8% in fiscal 2020. The increase in R&D expense in fiscal 2021 compared to the prior year was primarily due to an increase in incentive-based compensation, which was partially offset by a decrease in headcount, improved efficiency, and the timing of expenditures related to ongoing new product development costs. The Company remains committed to investing in new product development to increase sales within our IDS and WPS businesses. Investments in new printers and materials were the primary focus of R&D expenditures in fiscal 2020 and fiscal 2021.

SG&A expenses include selling and administrative costs directly attributed to the IDS and WPS segments, as well as certain other corporate administrative expenses including finance, information technology, human resources, and other administrative expenses. SG&A expenses increased 4.1% to $349.8 million in fiscal 2021 compared to $336.1 million in fiscal 2020. SG&A expense as a percentage of net sales decreased to 30.6% in fiscal 2021 from 31.1% in fiscal 2020. The increase in SG&A expenses from fiscal 2020 to fiscal 2021 was primarily due to foreign currency translation and the acquisitions of Code,

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Magicard, and Nordic ID. The decrease in SG&A expenses as a percentage of net sales from the prior year was due to ongoing efficiency gains and continued efforts to reduce selling, general and administrative costs throughout the organization, including reduced headcount and a decrease in discretionary spending.

Impairment charges of $13.8 million were recorded in fiscal 2020 resulting from the global economic slowdown that began mid-year due to the COVID-19 pandemic. The impairment charges related to other intangible and long-lived assets primarily in the WPS segment.

Operating income increased 21.1% to $167.1 million in fiscal 2021, compared to $138.0 million in fiscal 2020. The increase in operating income in fiscal 2021 compared to the prior year was primarily due to the increase in segment profit in the IDS segment and the impairment charge recognized during fiscal 2020.

OPERATING INCOME TO NET INCOME

Investment and other income was $4.3 million in fiscal 2021 compared to $5.1 million in fiscal 2020. Reduced interest income in fiscal 2021 was partially offset by an increase in the market value of securities held in deferred compensation plans compared to fiscal 2020.

Interest expense decreased to $0.4 million in fiscal 2021 compared to $2.2 million in fiscal 2020. The decrease in interest expense was due to the repayment of the Company's remaining principal balance under its private placement debt agreement during the quarter ended July 31, 2020.

The Company's income tax rate was 20.8% in fiscal 2021. Refer to Note 11, "Income Taxes" for additional information on the Company's income tax rates.

Equity in losses of unconsolidated affiliate represented the Company's 23% equity interest in React Mobile, Inc. ("React Mobile"), an employee safety software and hardware company based in the United States. During fiscal 2021, React Mobile's financial position deteriorated due to a decline in the hospitality industry from the COVID-19 pandemic, which represents its entire customer base, and increased competitive pressures from new entrants in the marketplace. As a result, management performed an analysis to determine whether the loss in value of the investment was other than temporary and recognized an other-than-temporary impairment charge of $5.0 million. The Company's equity interest in React Mobile's losses was $0.8 million in fiscal 2021 and $0.2 million in fiscal 2020.

Business Segment Operating Results

The Company evaluates short-term segment performance based on segment profit and customer sales. Impairment charges, interest expense, investment and other income, income tax expense, equity in losses of unconsolidated affiliate, and certain corporate administrative expenses are excluded when evaluating segment performance.

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Following is a summary of segment information for the fiscal years ended July 31:

ID Solutions

IDS net sales increased 7.2% to $841.5 million in fiscal 2021, compared to $784.7 million in fiscal 2020. The net sales increase consisted of organic sales growth of 3.7%, an increase from foreign currency translation of 2.0% and growth from acquisitions of 1.5%. Organic sales declined 7.6% during the first half of fiscal 2021 and grew 16.7% during the second half of fiscal 2021 as the business continued its recovery from the economic slowdown caused by the COVID-19 pandemic. The fourth quarter acquisitions of Code, Magicard and Nordic ID combined to add 1.5% growth to total sales in fiscal 2021.

Organic sales in the Americas region increased in the low-single digits, organic sales in Europe increase in the mid-single digits and organic sales in Asia increased in the high-single digits in fiscal 2021 compared to fiscal 2020. Organic sales grew in all major product lines and in all geographies as our businesses continue to recover following the economic slowdown caused by the COVID-19 pandemic in fiscal 2020.

Segment profit increased to $169.2 million in fiscal 2021 from $150.6 million in fiscal 2020, an increase of $18.6 million or 12.3%. As a percent of net sales, segment profit increased to 20.1% in fiscal 2021 compared to 19.2% in fiscal 2020. The increase in segment profit as a percentage of sales was due to the increase in sales volumes, cost actions taken in the prior year in response to the decline in revenue from the impact of the COVID-19 pandemic and efficiency gains throughout SG&A during fiscal 2021, which was partially offset by certain acquisition-related costs and purchase accounting adjustments related to the three companies acquired in the fourth quarter.

Workplace Safety

WPS sales increased 2.2% to $303.2 million in fiscal 2021, compared to $296.6 million in fiscal 2020. The increase in net sales consisted of an organic sales decline of 3.8% and an increase from foreign currency translation of 6.0%. The economic effect of the COVID-19 pandemic had a significant impact on organic sales trends during both fiscal 2020 and 2021. There was a significant increase in demand for personal protective equipment and other social distancing signage and floor markings due to the COVID-19 pandemic during the second half of fiscal 2020 and the first half of fiscal 2021, and the WPS business increased organic sales substantially during this period of time. The demand for pandemic-related products started to decline during the second half of fiscal 2021, which resulted in a decline in organic sales of 3.8% in fiscal 2021 compared to fiscal 2020. Sales of core safety and identification products continued to recover from the decline realized during the peak of the COVID-19 pandemic, but the increased demand for these products did not fully replace the decline in demand for pandemic-

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related products. The organic sales decline consisted of a low-single digit decline in digital sales and a mid-single digit decline in catalog channel sales in fiscal 2021 compared to fiscal 2020.

Organic sales in Europe decreased slightly, organic sales in North America decreased in the high-single digits and organic sales in Australia decreased in the mid-single digits in fiscal 2021 compared to fiscal 2020. The trend noted above was applicable to each region within the WPS business with strong organic sales during the second half of fiscal 2020 and the first half of fiscal 2021 followed by a decline in demand for pandemic-related products resulting in a decline in organic sales in fiscal 2021. Organic digital sales decreased in the low-single digits in Europe and North America and decreased in the high-single digits in Australia. Organic catalog channel sales decreased slightly in Europe, decreased in the high-single digits in North America and decreased in the mid-single digits in Australia in fiscal 2021 compared to fiscal 2020.

Segment profit increased to $22.8 million in fiscal 2021 compared to $21.0 million in fiscal 2020, an increase of $1.7 million or 8.3%. As a percentage of net sales, segment profit increased to 7.5% in fiscal 2021 compared to 7.1% in fiscal 2020. The increase in segment profit was primarily due to reduced catalog advertising spending and foreign currency translation.

Liquidity & Capital Resources

The Company's cash balances are generated and held in numerous locations throughout the world. At July 31, 2021, approximately 95% of the Company's cash and cash equivalents were held outside the United States. The Company's organic and inorganic growth has historically been funded by a combination of cash provided by operating activities and debt financing. The Company believes that its cash flow from operating activities and its borrowing capacity are sufficient to fund its anticipated requirements for working capital, capital expenditures, research and development, and dividend payments for the next 12 months. Although the Company believes these sources of cash are currently sufficient to fund domestic operations, annual cash needs could require repatriation of cash to the U.S. from foreign jurisdictions, which may result in additional tax payments.

Cash Flows

Cash and cash equivalents were $147.3 million at July 31, 2021, a reduction of $70.3 million from July 31, 2020. The following summarizes the cash flow statement for the fiscal years ended July 31:

Net cash provided by operating activities was $205.7 million during fiscal 2021, compared to $141.0 million in fiscal 2020. The increase was primarily due to a reduction in the annual cash incentive-based compensation paid in fiscal 2021 compared to fiscal 2020, reduced inventory levels following a period of increased inventory levels to reduce the risk of supply chain disruption resulting from the COVID-19 pandemic and the timing of accounts payable. These increases were partially offset by a decrease in cash provided by accounts receivable due to increased sales compared to the prior year.

Net cash used in investing activities was $268.6 million during fiscal 2021, compared to $36.1 million in the prior year. The increase in cash used in investing activities was primarily due to the acquisitions of Code, Magicard and Nordic ID which were closed during the fourth quarter of fiscal 2021.

Net cash used in financing activities was $12.3 million during fiscal 2021, which primarily consisted of dividend payments of $45.7 million, which was partially offset by $38.0 million of net borrowing on the credit facility to finance a portion of the purchase price of Code in the fourth quarter of fiscal 2021. Net cash used in financing activities of $163.5 million during fiscal 2020 primarily consisted of share repurchases of $64.5 million, principal payments on private placement debt of $48.7 million and dividend payments of $45.8 million.

Credit Facilities

On August 1, 2019, the Company and certain of its subsidiaries entered into an unsecured $200 million multi-currency revolving loan agreement with a group of five banks. Under this revolving loan agreement, the Company has the option to select either a Eurocurrency rate loan that bears interest at the London Inter-bank Offered Rate ("LIBOR") plus a margin based

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on the Company's consolidated net leverage ratio or a base interest rate (based upon the higher of the federal funds rate plus 0.5%, the prime rate of the Bank of Montreal plus a margin based on the Company’s consolidated net leverage ratio, or the Eurocurrency base rate at the LIBOR rate plus a margin based on the Company’s consolidated net leverage ratio plus 1%). At the Company's option, and subject to certain conditions, the available amount under the revolving loan agreement may be increased from $200 million to $400 million.

In June 2021, the Company drew down $75.0 million from its revolving loan agreement to fund a portion of the purchase price of Code. The borrowings bear interest at 0.84%. Prior to July 31, 2021, the Company repaid $37.0 million of the borrowing with cash on hand. During fiscal 2021, the maximum amount outstanding on the Company's revolving loan agreement was $75.0 million. As of July 31, 2021, the outstanding balance on the credit facility was $38.0 million. The Company had letters of credit outstanding under the loan agreement of $2.9 million as of July 31, 2021 and there was $159.1 million available for future borrowing, which can be increased to $359.1 million at the Company's option, subject to certain conditions. The revolving loan agreement has a final maturity date of August 1, 2024. As such, borrowings were classified as long-term on the consolidated balance sheets.

Covenant Compliance

The Company’s revolving loan agreement requires it to maintain certain financial covenants, including a ratio of debt to the trailing twelve months EBITDA, as defined in the agreement, of not more than a 3.5 to 1.0 ratio (leverage ratio) and the trailing twelve months EBITDA to interest expense of not less than a 3.0 to 1.0 ratio (interest expense coverage ratio). As of July 31, 2021, the Company was in compliance with these financial covenants, with a ratio of debt to EBITDA, as defined by the agreements, equal to 0.2 to 1.0 and the interest expense coverage ratio equal to 480.6 to 1.0.

Subsequent Events Affecting Financial Condition

Refer to Item 8, Note 17, "Subsequent Events" for information regarding the Company's subsequent events affecting financial condition.

Off-Balance Sheet Arrangements

The Company does not have material off-balance sheet arrangements. The Company is not aware of factors that are reasonably likely to adversely affect liquidity trends, other than the risk factors described in this and other Company filings. However, the following additional information is provided to assist those reviewing the Company’s financial statements.

Purchase Commitments — The Company has purchase commitments for materials, supplies, services, and property, plant and equipment as part of the ordinary conduct of its business. In the aggregate, such commitments are not in excess of current market prices and are not material to the financial position of the Company. Due to the proprietary nature of many of the Company’s materials and processes, certain supply contracts contain penalty provisions for early termination. The Company does not believe a material amount of penalties will be incurred under these contracts based upon historical experience and current expectations.

Other Contractual Obligations — The Company does not have material financial guarantees or other contractual commitments that are reasonably likely to adversely affect liquidity.

Payments Due Under Contractual Obligations

The Company’s future commitments at July 31, 2021, for operating lease obligations, purchase obligations, and tax obligations are as follows (dollars in thousands):

(1)Purchase obligations include all open purchase orders as of July 31, 2021.

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Inflation and Changing Prices

Essentially all of the Company’s revenue is derived from the sale of its products and services in competitive markets. Because prices are influenced by market conditions, it is not always possible to fully recover cost increases through pricing. Changes in product mix from year to year, timing differences in instituting price changes, and the large amount of part numbers make it impracticable to accurately define the impact of inflation on profit margins.

Critical Accounting Estimates

Management’s discussion and analysis of the Company’s financial condition and results of operations are based upon the Company’s Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The Company bases these estimates and judgments on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates and judgments.

The Company believes the following accounting estimates are most critical to an understanding of its financial statements. Estimates are considered to be critical if they meet both of the following criteria: (1) the estimate requires assumptions about material matters that are uncertain at the time the accounting estimates are made, and (2) material changes in the estimates are reasonably likely from period to period. For a detailed discussion on the application of these and other accounting estimates, refer to Note 1 to the Company’s Consolidated Financial Statements.

Income Taxes

The Company operates in numerous taxing jurisdictions and is subject to regular examinations by U.S. federal, state and non-U.S. taxing authorities. Its income tax positions are based on research and interpretations of the income tax laws and rulings in each of the jurisdictions in which the Company does business. Due to the ambiguity of laws and rulings in each jurisdiction, the differences and interplay in tax laws between those jurisdictions, the uncertainty of how underlying facts may be construed and the inherent uncertainty in estimating the final resolution of complex tax audit matters, the Company's estimates of income tax liabilities may differ from actual payments or assessments.

While the Company has support for the positions it takes on tax returns, taxing authorities may assert different interpretations of laws and facts and may challenge cross-jurisdictional transactions. The Company generally re-evaluates the technical merits of its tax positions and recognizes an uncertain tax benefit when (i) there is completion of a tax audit; (ii) there is a change in applicable tax laws including a tax case ruling or legislative guidance; or (iii) there is an expiration of the statute of limitations. The liability for unrecognized tax benefits, excluding interest and penalties, was $21.9 million and $13.6 million as of July 31, 2021 and 2020, respectively. If recognized, $18.7 million and $10.6 million of unrecognized tax benefits as of July 31, 2021 and 2020, respectively, would reduce the Company's income tax rate. Accrued interest and penalties related to unrecognized tax benefits were $4.4 million and $2.0 million as of July 31, 2021 and 2020, respectively. The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense on the Consolidated Statements of Income. The Company believes it is reasonably possible that the amount of gross unrecognized tax benefits could be reduced by up to $3.3 million in the next 12 months as a result of the resolution of worldwide tax matters, tax audit settlements, amended tax filings, and/or statute expirations, which would be the maximum amount that would be recognized as an income tax benefit in the Consolidated Statements of Income.

The Company recognizes deferred tax assets and liabilities for differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. The Company establishes valuation allowances for its deferred tax assets if it is more likely than not that some or all of the deferred tax asset will not be realized. This requires management to make judgments regarding: (i) the timing and amount of the reversal of taxable temporary differences, (ii) expected future taxable income or loss, and (iii) the impact of tax planning strategies. The Company recognized valuation allowances for its deferred tax assets of $51.1 million and $58.8 million as of July 31, 2021 and 2020, respectively, which were primarily related to foreign tax credit carryforwards and net operating loss carryforwards in its various tax jurisdictions.

Goodwill and Other Indefinite-lived Intangible Assets

The allocation of purchase price for business combinations requires management estimates and judgment as to expectations for future cash flows of the acquired business and the allocation of those cash flows to identifiable intangible assets in determining the estimated fair value. If the actual results differ from these estimates, it could result in an impairment of

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intangible assets and goodwill or require acceleration of the amortization expense of finite-lived intangible assets. In addition, accounting guidance requires that goodwill and other indefinite-lived intangible assets be tested at least annually for impairment. If circumstances or events prior to the date of the required annual assessment indicate that, in management's judgment, it is more likely than not that there has been a reduction of fair value of a reporting unit below its carrying value, the Company performs an impairment analysis at the time of such circumstance or event. Changes in management's estimates or judgments could result in an impairment charge, and such a charge could have an adverse effect on the Company's financial condition and results of operations.

The Company has identified six reporting units within its two reportable segments, IDS and WPS, with the following goodwill balances as of July 31, 2021: IDS Americas & Europe, $443.1 million; PDC, $136.8 million; and WPS Europe, $35.2 million. The IDS APAC, WPS Americas, and WPS APAC reporting units each have a goodwill balance of zero. The Company believes that the discounted cash flow model and the market approach provide a reasonable and meaningful fair value estimate based upon the reporting units' projections of future operating results and cash flows and replicates how market participants would value the Company's reporting units. The projections of future operating results, which are based on both past performance and the projections and assumptions used in the Company's current and long-range operating plans, are subject to change as a result of changing economic and competitive conditions. Significant estimates used by management in the discounted cash flows methodology include estimates of future cash flows based on expected growth rates, price increases, fluctuations in gross profit margins and SG&A expense as a percentage of sales, capital expenditures, working capital levels, income tax rates, and a weighted-average cost of capital reflecting the specific risk profile of the reporting unit being tested. Significant negative industry or economic trends, disruptions to the Company's business, loss of significant customers, inability to effectively integrate acquired businesses, unexpected significant changes or planned changes in use of the assets or in entity structure, and divestitures may adversely impact the assumptions used in the valuations.

The Company completes its annual goodwill impairment analysis on May 1 of each fiscal year and evaluates its reporting units for potential triggering events on a quarterly basis in accordance with ASC 350, "Intangibles - Goodwill and Other." In addition to the metrics listed above, the Company considers multiple internal and external factors when evaluating its reporting units for potential impairment, including (i) U.S. GDP growth, (ii) industry and market factors such as competition and changes in the market for the reporting unit's products, (iii) new product development, (iv) hospital admission rates, (v) competing technologies, (vi) overall financial performance such as cash flows, actual and planned revenue and profitability, and (vii) changes in the strategy of the reporting unit. In the event the fair value of a reporting unit is less than the carrying value, the Company would recognize an impairment charge for the amount by which the carrying amount of the reporting unit exceeds the fair value. If necessary, the Company may consult valuation specialists to assist with the assessment of the estimated fair value of the reporting unit.

The Company considers a reporting unit’s fair value to be substantially in excess of its carrying value at 20% or greater. The annual impairment testing performed on May 1, 2021, in accordance with ASC 350, “Intangibles - Goodwill and Other” indicated that each of the reporting units had a fair value substantially in excess of its carrying value.

Other Indefinite-Lived Intangible Assets

Other indefinite-lived intangible assets in accordance with the Company's policy outlined above using the income approach. Fair value is estimated using the income approach based upon current sales projections applying the relief from royalty method. If the carrying value of the indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. As a result of the analysis performed on May 1, 2021, all indefinite-lived tradenames had fair value in excess of carrying value.

New Accounting Standards

The information required by this Item is provided in Note 1 of the Notes to Consolidated Financial Statements contained in Item 8 — Financial Statements and Supplementary Data.

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