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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2021-11-24 compared with 2020-11-25 · 41 added, 21 removed, 200 unchanged (24% of the section changed)

7 unchanged sentences

We are exposed to market risks related to fluctuations in interest rates on amounts borrowed under the Credit Facility.

As of September 30, 2020, we had $48.1 million outstanding under our Term Loan and $15.0 million outstanding under our Revolving Loan.

As of September 30, 2021, we had no amounts outstanding under our Term Loan and $48.1 million outstanding under our Revolving Loan.

Prior to May 4, 2020, borrowings under the Credit Facility bore interest rates based on an underlying variable benchmark plus applicable margin based on our total leverage ("ABR");

6 unchanged sentences

FOREIGN CURRENCY RISK

We are exposed to foreign currency transaction risk associated with certain sales being denominated in Euros, British Pounds, Japanese Yen or Canadian Dollars and in certain cases, transactions in U.S.

We are exposed to foreign currency transaction risk associated with certain sales being denominated in Canadian Dollars and in certain cases, transactions in U.S.

Dollars in our foreign entities.

14 unchanged sentences

A 10.0% change from the 2021 average exchange rate for the Euro, British Pound, Yen and Canadian Dollar to the U.S.

Dollar would have resulted in a 0.1% increase or decrease in fiscal 2020 annual revenue and a 0.9% increase or decrease in stockholders' equity at September 30, 2020.

Dollar would have resulted in an immaterial increase or decrease in fiscal 2021 annual revenue and a 0.9% increase or decrease in stockholders' equity at September 30, 2021.

The above analysis does not take into consideration any pricing adjustments we may make in response to changes in the exchange rates.

3 unchanged sentences

Report of Independent Registered Public Accounting Firm

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Income

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

Consolidated Statements of Stockholders' Equity

Notes to the Consolidated Financial Statements

Summary of Significant Accounting Policies

Goodwill and Other Identifiable Intangible Assets, Net

Segment Information and Major Customers

Selected Balance Sheet Data

Fair Value Measurements

Product Warranty Obligation

Restructuring

Stockholder's Equity

Stock-Based Compensation

Employee Benefit Plans

Commitments and Contingencies

Subsequent Events

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

2 unchanged sentences

We have audited the accompanying consolidated balance sheets of Digi International Inc.

(a Delaware corporation) and subsidiaries (the “Company”) as of September 30, 2020 and 2019,the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended September 30, 2020, and the related notes and consolidated financial statement schedule included under Item 15 (collectively referred to as the “financial statements”).

(a Delaware corporation) and subsidiaries (the “Company”) as of September 30, 2021 and 2020, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended September 30, 2021, and the related notes and consolidated financial statement schedule included under Item 15a (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2021, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of September 30, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated November 24, 2021 expressed an unqualified opinion.

Change in accounting principle

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for leases in fiscal year 2020 due to the adoption of ASC Topic 842, Leases.

Basis for opinion

6 unchanged sentences

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.

Such procedures included examining, on a test basis, evidence supporting 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

Critical audit matters 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.

We determined that there are no critical matters.

/s/ GRANT THORNTON LLP

5 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS

Fiscal year ended September 30,

Year ended September 30,

2021 2020 2019

34 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Fiscal year ended September 30,

Year ended September 30,

2021 2020 2019

5 unchanged sentences

Less income tax (expense) benefit — — ( 5 )

Reclassification of realized loss on investments included in net income (1) — — 31

Less income tax benefit (2) — — ( 8 )

Other comprehensive income (loss), net of tax 1,071 1,698 ( 1,989 )

Comprehensive income $ 11,437 $ 10,109 $ 7,969

(1) Recorded in Other (expense) income, net in our Consolidated Statements of Operations.

(2) Recorded in Income tax (benefit) expense in our Consolidated Statements of Operations.

The accompanying notes are an integral part of the consolidated financial statements.

45 unchanged sentences

Treasury stock, at cost, 6,390,645 and 6,353,094 shares

( 56,535 ) ( 55,109 )

Total stockholders’ equity 472,517 371,500

4 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Fiscal year ended September 30,

Year ended September 30,

2021 2020 2019

2 unchanged sentences

Net income $ 10,366 $ 8,411 $ 9,958

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation of property, equipment and improvements 4,343 4,545 4,578

1 unchanged sentence

Stock-based compensation 8,135 7,237 5,655

Deferred income tax benefit ( 3,357 ) ( 799 ) ( 376 )

Gain on sale of property, equipment and improvements — ( 4,392 ) ( 622 )

Deferred income tax provision ( 4,598 ) ( 3,357 ) ( 799 )

Loss (gain) on sale of property, equipment and improvements 89 — ( 4,392 )

Change in fair value of contingent consideration 5,772 ( 128 ) 1,190

9 unchanged sentences

Accrued expenses 4,474 2,078 1,991

Net cash provided by (used in) operating activities 34,478 28,964 ( 2,778 )

Net cash provided by operating activities 57,723 34,478 28,964

Investing activities:

Proceeds from maturities of marketable securities — — 4,750

Proceeds from sale of business — — 2,000

Acquisition of businesses, net of cash acquired ( 19,108 ) ( 136,098 ) —

Proceeds from sale of property and equipment — 10,096 731

Proceeds from sale of property, equipment and improvements — — 10,096

Purchase of property, equipment, improvements and certain other intangible assets ( 2,257 ) ( 899 ) ( 9,335 )

4 unchanged sentences

Payments for contingent consideration ( 4,200 ) ( 4,698 ) ( 3,748 )

Proceeds from issuances of stock, net of offering expenses 73,830 — —

Proceeds from stock option plan transactions 8,525 5,902 4,874

3 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents ( 297 ) 253 ( 810 )

Net (decrease) increase in cash and cash equivalents ( 38,663 ) 34,778 ( 20,208 )

Net increase (decrease) in cash and cash equivalents 98,303 ( 38,663 ) 34,778

Cash and cash equivalents, beginning of period 54,129 92,792 58,014

5 unchanged sentences

Accrual for property, equipment, improvements and certain other intangibles assets $ ( 98 ) $ ( 26 ) $ —

Tenant improvement allowance $ 1,000 $ — $ —

Transfer of inventory to property, equipment and improvements $ ( 1,838 ) $ ( 1,363 ) $ ( 1,064 )

Liability related to acquisition of business $ ( 6,200 ) $ ( 5,100 ) $ —

Term debt refinanced as credit facility $ 50,000 $ — $ —

The accompanying notes are an integral part of the consolidated financial statements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk