Titan Company Ltd Management Discussions.

ENVIRONMENT

Macroeconomic overview

The Company continued the good growth momentum of the past few years and achieved strong financial growth for the third consecutive financial year. Growth was broad-based across all the Divisions of the Company. In the year 2019-20, the Company will be increasing the pace of the network rollout with a view to increase the market share. Watches Division recorded a handsome growth aided by launch of new products and store expansion. Jewellery Division too continued its impressive growth and the subsidiary, Carat Lane has continued its aggressive expansion. Eyewear Division recorded a growth of 23% in revenue and has performed exceedingly well on its customer experience, boosting the same store growth.

Overview

The year has been one of the best years for the Division. The Watches Division consolidated upon the initiatives that had been taken over the past couple of years to improve the health of the business.

The Divisions brands lead the efforts to drive consumer interest in the category through embedding technology in its products. New age and modern channels like Large Format Stores (LFS) and E-commerce continued to be the growth drivers for the category. These were leveraged well by all the brands. The Divisions portfolio of brands, channels and markets provide the Company with a significant competitive advantage in maintaining and enhancing dominant leadership in the industry.

Global Watch Market Trend

The global watch market over the last 6 years has been growing at a CAGR of 5% with the traditional watches segment declining at -3%, while the smartwatches and bands segment, estimated at around US$ 20 billion, growing at 84% CAGR. This disruption in the market has led to most world watch players to decline in the last year.

The year 2018-19

The Division continued investing in and strengthening its brands, bringing out a slew of new products and significantly enhancing its market presence. The smart play of the Company strengthened with several new impactful launches led to Titan gaining the second position in the wearables market in India.

Technology and smart products

Fastrack launched Reflex 2.0, an upgrade of its first activity tracker which was well accepted in the market, helped the brand became the #2 Smart Band brand in the country. The brand continued to innovate in terms of technology by launching Reflex Wav - the worlds slimmest gesture control band which allows consumers to take pictures, control music and phone calls through wrist gestures. SF Rush, a smart band, was launched at C 999/- which has made fitness bands accessible to youngsters across the country. This launch was supported by a 360 degree campaign. Titan Radar, Indias first ‘Smart wallet which helps consumers find their wallets was also an interesting product introduced during the year and did very well in the market.

Brands

Brand Titan grew by double digits on the back of new outstanding products, specially, innovative collections like Titan Grandmaster, a uniquely crafted collection with use of authentic wood inspired by chess, "Raga I Am", a collection celebrating imperfections, the Kolkata collection which is an ode to the City of Joy, and Purple Stellar, a fashion collection for women inspired by cosmic elements. These were supported by campaigns like Raga "#flaunt your flaw" that brought out a new conversation with todays women and Octane "Be a Sport" which was a new take on masculinity.

Brand Fastrack launched successful collections like EDM, Loopholes and Denim. The Denim Collection uses actual denim fabric on straps and extends the inspiration of denim on all elements of watch design including the case, hands and the dials. In terms of communication, Fastrack watches did a campaign around its "All Nighters" collection which helped the watches sell out from all channels, and also made quirky ad films for both Fastrack Reflex 2.0 and Reflex Wav. The brand also pushed boundaries by breaking a Guinness World Record for the ‘Longest Chain of Watches.

Sonata brought out contemporary designs with Sleek - slim workwear watches, Blush - fashionable rose gold watches, Volt+ and Splash - trendy, bold watches for youth. The brand also undertook initiatives for a regional connect in its priority markets - Sharodia Guide App for Durga Puja in West Bengal, celebrating Ganeshotsav on-ground with a dedicated app in Maharashtra, and by making Special Edition watches, exclusively for the Chennai Super Kings IPL team.

Excellent designs in bags, belts and wallets have led to accessories business having explosive growth. The Division has made big strides in the product, pricing and distribution access in the last year.

Licensed brands

The licensed brands portfolio achieved a strong 37% growth in the year helped by the rejuvenation of Tommy Hilfiger and continuing strong roles played by each of the licensed brands- Police, Anne Klein and Kenneth Cole. A new entrant in the portfolio, Olivia Burton, targeted at millennials, also saw a good response. The continued investment in creating a portfolio of brands which complement the Divisions own brands will continue to be a focus area in order to influence and shape the market with evolving and new customer segments.

Sales Channels

Retail Channels

The World of Titan retail chain with a focus on premium watches from the Divisions brands and Licensed Brands has achieved double digit growth in watches over C 8,000/-. The growth in the channel has been fuelled by new product introductions, Edge Ceramic, Licensed Brands, Nebula, better efficiencies and renovation of stores. The Fastrack store chain has continued to remain exciting by renovating and resizing. Exciting customer engagements have added vibrancy and continued the growth momentum. The Helios store chain which is the premium multi-brand watch destination store has continued its strong growth with significant contribution from Swiss brands. This chain will play a significant role as the Company continues its journey into premiumisation and acquisition of new customers. Going forward, a comprehensive Omni Channel play to leverage the large network of retail stores will be a strong driver of consumers to the Companys brands and stores.

Trade

Recharging and rejuvenation of the largest channel of Multi-Brand Outlets (MBOs) has given significant results in the year with sustained brand and product investments. The relationships with key retailers and different categories of dealers have been strengthened with sound processes leading to mutual benefits and growth. Visual merchandising, enhanced presence, systematic launch of new products, training, introduction of wearables, deeper penetration of premium products, induction of technology enablers, management of stock have been key drivers of growth in this important channel. Expansion of the footprint into new non-traditional high traffic outlets has helped in acquiring new customers.

Titan grew by double digits on the back of new outstanding products, specially, innovative collections like Titan Grandmaster, a uniquely crafted collection with use of authentic wood inspired by chess, "Raga I Am", a collection celebrating imperfections, the Kolkata collection which is an ode to the City of Joy, and Purple Stellar, a fashion collection for women inspired by cosmic elements.

Large Format Stores (LFS)

LFS continued its good run for the watch category with impressive double digit growths and a significantly enhanced market share. In a highly competitive space, Titan was ranked No.1 across the 3 large format stores Shoppers Stop, Lifestyle and Central in the country.

E-Commerce

The E-commerce play has been transformed significantly and the Company has emerged as the largest group for the key players Flipkart, Amazon and Myntra. E-Commerce has been the highest growing channel and will continue the high double digit growth in the coming year.

Manufacturing

The Companys manufacturing competence provides the Division with a significant competitive edge. The manufacturing plants responded swiftly to increased market demand, ramping up capacity leading to full utilization of plants, and scaling up vendor capacity. Flexibility to align to the required product mix helped address the opportunities in the market, enabling growth. The focus remains to build a sustainable and agile integrated supply chain ecosystem in India.

Intense focus on innovation continued with increasing collaboration between internal stakeholders and engagement with technology partners and external consultants as well as SMEs and institutes. Application of various innovation tools & techniques – design thinking approach helped implementation of a slew of innovation across the value chain.

Continuous efforts are underway to enhance cost effectiveness in manufacturing through a mix of productivity improvement, efficient utilization of plants, developing alternate sources, and indigenization.

International business

Business environment in the international markets continued to remain unfavourable during the year 2018-19, as declining trends were witnessed in the category across countries. Middle East markets continued to decline while younger markets made up to an extent, delivering good retail growths

> D 10 lakh price category, aided by exciting product collections.

on the back of several sales and marketing initiatives. Plan is to continue reducing the dependence on markets which are expected to continue with their declining trend while continuing to make investments in newer consumer markets and channels (e-commerce).

Favre Leuba

The Company acquired the second oldest Swiss brand in history, Favre Leuba and launched the brand in October 2016. The brand continued its growth trajectory in the year 2018-19 with increased retail presence across select key markets that the brand is present in.

The consumer retail sales witnessed decent growth for the second year in a row. The year saw the introduction of the much-awaited divers watch- Bathy 120 Memodepth, which was received enthusiastically. Smaller case options of Sea King and Deep Blue collections too were launched. The business is also working towards broadening the relevance and appeal to a wider audience through its products and communication strategy. These efforts are likely to take shape over the next year. The coming year will also see enhanced presence of the brand in India.

Looking ahead

The Division stays on course in executing the strategy that it charted for itself couple of years back. It will continue to consolidate its leadership position in the segments that it operates in. Efforts and investments will continue to enhance capability in the wearables space, to create a winning portfolio of smart products. It will also continue to invest to further strengthen the portfolio of powerful in-house brands and at the same time look for opportunities to strengthen the Licensed Brands portfolio through relevant additions. An aggressive push for volume growth will remain at the core of its strategy.

The year 2018-19

The domestic jewellery industry had a muted performance in financial year 2018- 19 on account of the following factors:

On the demand-side, the macro-economic conditions put pressure on discretionary consumption and jewellery was also affected; and

On the supply-side, the continuing impact of GST as well as reducing bank credit continued the pressure on industry operations, particularly the medium and small players.

The Jewellery Division did exceedingly well in such circumstances, clocking a growth of 20%+ for the second year running.

The six engines of growth continued to fire well, propelling the overall business in the direction of its 2.5X revenue target for FY23, being:

1. The wedding segment continued to grow, aided by deeper reaches into ethnic communities and a sustained national brand-building effort.

2. The high value diamond jewellery segment also did very well, with substantial gains in the > C 10 lakh price category, aided by exciting product collections.

3. The "low-market share cities" continue to pay dividends as the Division broadened and deepened its local connect through multiple initiatives.

4. The "Middle India" programme was at its visible best, with more than 35 new stores added in one year, nearly double the earlier best.

5. The Golden Harvest Scheme continued to enable share of wallet gains and through that helped the overall business grow.

6. The Gold Exchange Programme got more traction as more and more customers started realizing the exceptional value that it offers, on top of the total transparency of the process.

Underpinning these engines of growth were the 3 big pillars of the Division:

1. The exceptional collections and new products that continued to be industry-leading, pushing the adornment story of the brand;

2. The brand-building efforts that are cutting-edge not just in the jewellery industry, but in the entire advertising industry;

3. The superlative customer experience in the stores.

All the 3 brands-of-the-future, Zoya, Mia and Caratlane, also did very well during the year and built a foundation from which bigger leaps will happen in FY 2019-20 and later.

Investments in Digital (Websites, E-commerce, Analytics and Customer Relationship Management) during the year were substantial and the Division expects to reap the benefits in FY 2019-20 and beyond.

Manufacturing & Supply Chain

On the Integrated Supply Chain side, many initiatives were taken up with substantial long-term benefits:

1. Considerable investments in plant and machinery as well as international expertise, to increase capability and through that, in-house share of total output;

2. A focused quality programme intended to lift product quality to "best in the world" levels;

3. Multiple programmes to upgrade all vendor units to the "Standard" level (Cottage, Basic, Standard and World Class, being the 4 increasing levels of evolution) across People, Process, Place and Planet parameters;

4. An integrated 3-year programme for the diamond pipeline to extract maximum value, totally eliminate mixing up of synthetics and be sure about the right labour practices and conditions in the entire supply chain.

Opportunities, Threats and Risks

The near-term (2/3 years) prospects for the Division appear quite good, based on the following reading with:

Despite short-term hiccups, the secular trend in the economy is in favour of discretionary spending categories and a brand like Tanishq is right up there at the top of that list;

Multiple environmental factors are pushing the industry into consolidation, benefiting the organized sector. The Division will again continue to benefit from this;

The 6 engines of growth still have considerable space to fire, given the low share in each of those areas.

Given the traditional nature of the category, the risks to the business are essentially regulatory (as opposed to product substitution through technology or a sudden onslaught by international brand/s).

1. Import controls on account Current Account De_cit

While this is possible anytime, the Division has proved that it could manage this risk quite well when it actually materialized last time. The Gold on Lease scheme is also typically taken away in such a situation, leading to a dropping Return on Capital Employed, but the Return on Assets picture remains more or less the same.

2. The Prevention of Money-Laundering Act, 2002 (PMLA)

The guideline under the PMLA was introduced in August 2017 and withdrawn in October 2017 after industry representation. The understanding from the then Finance Minister was that they were open to keeping the threshold at international levels (10000 Euros in Europe, for instance). If that actually happens, the Company would have no impact at all (customers are already used to a 2 lakh threshold for PAN card).

Operating Environment

The eyewear market in India is largely unorganised, fragmented and estimated to be growing at 7-10%. The growth largely comes from new entrants who have come in at the national and regional level and have rapidly set up new stores in the last few years. Local players have also mushroomed in recent years and it is estimated that there are over 30,000 such local players. Existing national and regional players have been largely experiencing little to no growth.

The eyewear market has transitioned in recent years from being health centric to fashion and style oriented, from family run businesses to corporate retailers and from single store formats to retail chains. Large sums are being invested in advertising and promotion and offers and discounts have become the order of the day.

Over the last ten years, the Companys Eyewear Division has rapidly scaled up its operations and at the end of financial year 2018-19 had 537 retail stores, 3.8 lakh sq. feet of retail space, 3,700 sunglass dealers, 1,550 frame dealers, 5 online platforms, 3.5 million customers a year, an integrated state-of-the-art lens and frame manufacturing facility outside Bengaluru and satellite lens manufacturing facilities in Calcutta, Mumbai, Bengaluru and Delhi. Frame manufacturing has commenced and 1.60 lakh frames were produced during the year.

The year 2018-19

The year 2018-19 was a good year for the Eyewear Division with the Division achieving everything it set out to do at the beginning of the year.

The business had set itself a goal of acquiring 10 million customers a year by 2024 and is well on its way to doing so.

In the year 2018-19, the Division had targeted a steep increase of 46% in its customer base and has achieved the same, growing from 2.4 million customers in the previous year to 3.5 million customers in 2018-19. The Eyewear Division thus achieved a top-line growth of 26% (previous year: 8%).

Vast improvements were made in quality and delivery and the focus on ‘value customers has worked well for the business. Investments made in marketing have paid off handsomely with brand metric scores touching an all-time high.

Frame distribution was launched and very quickly ramped up during the year. Titan frames are now present in 1,550 outlets across the country.

Frame manufacturing also commenced commercial production and 1,60,000 frames were produced at the new plant in the very first year. This manufacturing facility will ramp up very quickly to produce close to half a million frames in the current year.

The Omni channel has worked extremely well. While sales online are growing at a rapid rate, the channel has been very effective in driving a large number of customers to the stores.

Real time Net Promoter Score (NPS) was used effectively to further improve the customer experience at all Titan EyePlus stores. The customer experience program of the Eyewear Division has become a bench-mark within the Tata Group and has won multiple awards nationally and internationally.

Training for all store staff has been enhanced to ensure a consistent and high level of expertise and delivery across all stores.

Titan EyePlus stores now look modern and contemporary with the new retail identity that has been rolled out across most stores. All new stores carry the new retail identity and most old stores have been renovated to carry the new retail identity.

Trust and transparency has been one of the pillars on which the Eyewear business has been built. The "correct selling" initiative to ensure that there is no upselling and that a customer systematically gets the correct eyewear solution at the stores has been implemented across the chain. Customer satisfaction scores are showing an overall marked improvement after implementation of this very important initiative.

In manufacturing, four satellite lens laboratories have been opened in Kolkata, Delhi, Mumbai and Bengaluru with two more opened in Chennai and Patna in the current year.

Optometry continued to be a key focus area with continuous training and re-training of optometrists to deliver zero-error eye testing and error-free spectacle dispensing.

Overall it has been a good and satisfying year for the Eyewear Division.

Opportunities, Threats and Risks

While Titan EyePlus remains the market leader in the eyewear category, the head room for growth is enormous. With the crackdown on the parallel economy and the advent of GST, consumers will increasingly turn to the organised players where trust, transparency, consumer experience and quality of service will prevail over cheap and low quality products.

Given the above, building scale through calibrated expansion and driving same store growth will be the key opportunities to pursue.

Further expansion of the retail footprint across middle India and a focussed e-commerce channel play will continue to be opportunities that the Division will address.

Introducing products at lower price points to address a larger market, making larger investments in advertising and communication, setting up more satellite lens labs, strengthening the omni channel play and expanding reach through distribution of frames are seen as opportunities that the division will pursue in the years ahead.

The sunglass market as well as the contact lens market continues to be under-penetrated and focus on these segments would be looked at as a way forward.

Since there is a high dependence on outsourcing, especially for spectacle frames, frame manufacturing has been set up in addition to the investments made in lens manufacturing.

Risks to the eyewear category could emerge from international players entering the market, smart eyewear in an increasingly connected world which could potentially disrupt traditional business models. In the medical space, the evolution of Lasik techniques as an option for sight correction could pose a risk in the long term.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company during the year has reviewed its Internal Financial Control (IFC) systems and has continually contributed to establishment of more robust and effective IFC framework, prescribed under the ambit of Section 134(5) of Companies Act, 2013. The preparation and presentation of the financial statements is pursuant to the control criteria defined considering the essential components of Internal Control - as stated in the "Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India (ICAI)".

The control criteria ensures the orderly and efficient conduct of the Companys business, including adherence to its policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable financial information.

Based on the assessment carried out by the Management and the evaluation of the results of the assessment, the Board of Directors are of the opinion that the Company has adequate Internal Financial Controls system that is operating effectively as at 31^st March 2019.

Over the last ten years, the Companys Eyewear Division has rapidly scaled up its operations and at the end of financial year 2018-19 had 537 retail stores, 3.8 lakh sq. feet of retail space, 3,700 sunglass dealers, 1,550 frame dealers, 5 online platforms, 3.5 million customers a year, an integrated state-of-the-art lens and frame manufacturing facility outside Bengaluru and satellite lens manufacturing facilities in Calcutta, Mumbai, Bengaluru and Delhi.

The Company has robust internal audit function consisting of professionally qualified chartered accountants and in-house external auditors who cover the business operations as well as support functions and provide quarterly reports to the Audit Committee.

DIGITAL & IT

Digital & IT transformation is a crucial enabler for achieving the Companys FY23 Goals. The Management created the new role of Chief Digital & Information Officer (CDIO) to accelerate the pace of digital transformation, transforming the Company into an incumbent which is comfortable in a world that is continuously redefining the combination of ‘physical and digital. A key objective going forward is to deliver a seamless experience to all stakeholders across physical and digital touchpoints. Several initiatives are underway to help the Company achieve its 2023 ambition.

Key long term initiatives that deliver Scale, Data Integrity, System Reliability, Information Security, Data Privacy, User Experience and the means to execute them with agility have been presented to the Leadership. The Company has created Centres of Excellence that focus on Analytics and Insights, Data Warehousing, Mobility, e-commerce, CRM, AI, Process Automation and Knowledge Management.

Core ERP systems, SAP and Oracle, have been upgraded for scale and capability to support projected FY23 volumes for all divisions. Titan and Fastrack websites on a new e-commerce platform have been developed that delivers an enhanced online brand experience, with other brands websites soon to follow. Omni-channel capabilities that will support all combinations of online and in-store shopping experiences are in the process of being created. With the Salesforce.com platform going live in April 19, and an enhanced Loyalty system later this year, the Company is poised to transform the manner in which customer insights are captured and

360 customer relationships are built. Multi-channel customer engagement capabilities including social media, chatbots and live chat, e-mail and tele-calling to enhance customers lifecycle experience across discovery, purchase, service and loyalty have been established.

The Company is committed to a Mobile – First strategy for delivering cutting edge experiences to customers, business associates and employees. 15 applications have already been launched with several more in the pipeline.

‘Data is the new oil and the Company is rapidly developing technology and people capabilities to deliver significant business value through Data, Analytics & Insights. The Digital and IT initiatives have delivered several hundred crores of direct and attributable profit and cost savings, through analytics – assisted campaigns and other initiatives.

In order to improve internal efficiencies and productivity, Robotic Process Automation initiatives across multiple businesses and functions have been launched. The initial benefits in productivity and even commercial savings are encouraging.

While the Company transforms its technology landscape, the Company is also extremely conscious of the need to ensure the continued resilience and security of the infrastructure, and stakeholders privacy and confidentiality. Multiple Information Security initiatives with committed timelines have been launched, with the Board Risk Management Committees active oversight.

Knowledge Management and Innovation is a mainstay of the Company. The Company is actively preserving the organizations knowledge and enhancing digital quotient through multimedia portals, virtual walk-through and simulation technologies, and active connect with academic institutions, large technology providers and start-up ecosystems. The Digital and IT functions continue to drive Innovation in the Company with established enterprise process, continuously updated tools, and dedicated Innovation Champions.

HUMAN RESOURCES

The Company had 7,213 employees on rolls of which 1,891 were women as on 31^st March 2019 and recruited 768 new employees during the year. The Company also had an attrition of 379 employees resulting in net addition of 389 employees.

Leadership Development: The Companys Leadership Development journey that commenced in 2015 has been strengthened and is now an established process.

Top Management Development: Group/Individual development programs have progressed as planned. The second phase of diagnostics was conducted for continuing leaders. Talent reviews and succession conversations were completed to identify successors for key roles.

Senior Management Development: Customized development initiatives based on Individual Development plan were rolled out. Digital immersions were introduced for this group.

Emerging Leaders Program (ELP): The second batch of Emerging Leaders Program was launched in 2018. Two learning tracks in the ELP journey were introduced – for new entrants into the ELP pool and for the continuing batch.

Young Leaders Program (YLP): YLP 3.0 was launched in Q3 with a focus on building a holistic business understanding through exposure to different aspects of a business. Succession planning process for all senior managers and above positions and critical roles deeper in the organization was rolled out in 2018. The Leadership Development journey has been integrated with the Talent Management & Succession Planning process.

Employee Connect

A big area of impact for HR in the year has been the positive shift created in employee experience.

Customized employee connect frameworks were deployed across regions and manufacturing

TPL 2.0 was held this year; the event saw coverage of 2,000+ Titanians

PLAYFAIR: Store Managers sensitization workshops on creating an inclusive workplace

Mentoring of store employees for leadership roles

Internship for People with Disabilities

Introduction of Crche & Day-care Policy

Business Partnering

The year 2017-18 ended with an intensive visioning exercise and chalked out a 5 year "Collective Ambition". In the year 2018-19, HR partnered with each business to create the way forward on business and people strategies. Below is a snapshot of some key interventions led and supported by HR:

Job Evaluation (JE) – A JE exercise covering all roles is being conducted in partnership with a reputed external agency. The first phase of identifying unique roles and creating job descriptions has been completed.

ISCM Productivity Enhancement.

Business specific Organization Effectiveness interventions

– The HR team partnered with business to design and implement customized interventions. Some examples: Jewellery FY 23-People Strategy, Taneira- Golden Thread & Org Design, SKINN – Project Simplify.

Technology in HR

The Mycompass mobile app was introduced in Q3 of FY19. The app serves as a one-stop shop for all employee related processes including time and attendance management, leave management, document management (payslips, employment related letters etc.), employee discount coupons, employee directory.

Employee Relations

The Management continued to enjoy cordial industrial relations with the Titan Employees Union, resulting in motivation, efficiency and productivity.

HOW THE COMPANY FARED

The Companys sales increased by 21.81%; profit before tax increased by 22.7% while profit after tax increased by18.2% over the previous year. Some of the key financial indicators are as below:

SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

During the year, following are the key financial ratios of the Company where there was a change of 25% or more as compared to the immediate previous financial year:

Debtors Turnover Ratio: Debtors increased in FY 2018-19 (mostly within credit period) due to one-time credit given to franchisee stores in Jewellery Division worth 117 crore in end of FY 2019. Hence, there is reduction in Debtors Turnover Ratio.

Interest Coverage Ratio: Interest expense during FY 2018-19 was in line with previous year due to lower Gold on Lease interest rate and offset by higher Gold on Lease quantity. Further, profit for the period increased by 22.71% from previous year. Hence, interest coverage ratio has gone up by 30.7%.

CHANGE IN RETURN ON NET WORTH

The details of change in Return on Net Worth of the Company as compared to the previous year is given below:

The return on net worth is in line with the previous year.

DISCLOSURE OF ACCOUNTING TREATMENT

The financial statements of the Company have been prepared in accordance with the Indian Accounting Standards (Ind-AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) (Amendment) Rules, 2016 read with Section 133 of the Companies Act, 2013.

CAUTIONARY STATEMENT

Statements in the Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations may be forward-looking statements within the meaning of applicable securities, laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include, among others, economic conditions affecting demand/supply and price conditions in the domestic and overseas markets in which it operates, changes in the Government regulations, tax laws and other statutes and incidental factors.