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Item 2. Management’s Discussion and Analysis

2021-01-29 compared with 2020-10-30 · 101 added, 80 removed, 107 unchanged (63% of the section changed)

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together with our wholly-owned subsidiaries.

This management’s discussion and analysis of financial condition as of September 30, 2020 and results of operations for the three months ended September 30, 2020 should be read in conjunction with management’s discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2020 filed with the SEC.

This management’s discussion and analysis of financial condition as of December 31, 2020 and results of operations for the three and six months ended December 31, 2020 should be read in conjunction with management’s discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2020 filed with the SEC.

Forward-Looking Statements

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Words such as “project,” “believe,” “anticipate,” “plan,” “expect,” “intend,” “may,” “should,” “will,” “would,” and similar words and expressions are intended to identify forward-looking statements.

Forward-looking statements are not guarantees of future performance and involve uncertainties, risks, assumptions and contingencies, many which are outside our control.

Forward-looking statements are not guarantees of future performance and involve uncertainties, risks, assumptions and contingencies, many of which are outside our control.

Assumptions upon which our forward-looking statements are based could prove to be inaccurate, and actual results may differ materially from those expressed in or implied by such forward-looking statements.

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enforcement actions in respect of any noncompliance with laws and regulations including export control and environmental regulations and the matters that are the subject of some or all of our investigations and compliance reviews, contract and regulatory compliance matters, and actions, which if brought, could result in judgments, settlements, fines, injunctions, debarment or penalties;

as well as other risks and uncertainties, including but not limited to those detailed herein and from time to time in our other SEC filings, which could have a material and adverse impact on our business, financial condition and results of operation.

and other risks and uncertainties, including but not limited to those detailed herein and from time to time in our other SEC filings, which could have a material and adverse impact on our business, financial condition and results of operation.

All forward-looking statements contained in this report are qualified in their entirety by this statement.

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These products and services are used to inspect baggage, parcels, cargo, people, vehicles and other objects for weapons, explosives, drugs, radioactive and nuclear materials and other contraband.

Revenues from our Security division accounted for 65% and 53% of our total consolidated revenues for the three months ended September 30, 2019 and 2020, respectively.

Revenues from our Security division accounted for 66% and 53% of our total consolidated revenues for the six months ended December 31, 2019 and 2020, respectively.

We were impacted by the COVID-19 pandemic as discussed in the “Trends and Uncertainties-Coronavirus Pandemic” section below.

Healthcare Division .

Through our Healthcare division, we design, manufacture, market and service patient monitoring, diagnostic cardiology, and connected care systems globally for sale primarily to hospitals and medical centers.

Through our Healthcare division, we design, manufacture, market and service patient monitoring, diagnostic cardiology and connected care systems and related supplies and accessories globally for sale primarily to hospitals and medical centers.

Our products monitor patients in critical, emergency and perioperative care areas of the hospital and provide information, through wired and wireless networks, to physicians and nurses who may be at the patient’s bedside, in another area of the hospital or even outside the hospital.

Revenues from our Healthcare division accounted for 14% and 20% of our total consolidated revenues for the three months ended September 30, 2019 and 2020, respectively.

Revenues from our Healthcare division accounted for 14% and 20% of our total consolidated revenues for the six months ended December 31, 2019 and 2020, respectively.

Optoelectronics and Manufacturing Division .

Through our Optoelectronics and Manufacturing division, we design, manufacture and market optoelectronic devices and flex circuits and provide electronics manufacturing services globally for use in a broad range of applications, including aerospace and defense electronics, security and inspection systems, medical imaging and diagnostics, telecommunications, office automation, computer peripherals, industrial automation and consumer products.

We also provide our optoelectronic devices and electronics manufacturing services to OEM customers, and our own Security and Healthcare divisions.

Revenues from external customers in our Optoelectronics and Manufacturing division accounted for 21% and 27% of our total consolidated revenues for the three months ended September 30, 2019 and 2020, respectively.

We provide our optoelectronic devices and electronics manufacturing services to OEM customers and to our own Security and Healthcare divisions.

Revenues from external customers in our Optoelectronics and Manufacturing division accounted for 20% and 27% of our total consolidated revenues for the six months ended December 31, 2019 and 2020, respectively.

Trends and Uncertainties

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The COVID-19 pandemic has caused, and is likely to continue to cause, significant economic disruptions and has impacted, and is expected to continue to impact, our operations and the operations of our suppliers and customers as a result of quarantines, facility closures and travel and logistics restrictions.

While we do not expect these impacts to be long-term, there is substantial uncertainty regarding the duration and ultimate impact of the COVID-19 pandemic.

Our ability to continue to operate without significant negative impacts will in part depend on our ability to protect our employees and our supply chain and to keep our manufacturing facilities open and operating effectively.

We have endeavored to implement government and health authority recommendations to protect our employees worldwide.

While we do not expect these pandemic-related impacts to be long-term, there is substantial uncertainty regarding the duration and ultimate impact of the COVID-19 pandemic.

Our Healthcare division has experienced increased demand for certain products as a result of COVID-19.

In our Security division, toward the end of fiscal 2020 and early fiscal 2021, receipt of certain orders was delayed, most notably with respect to our aviation and cargo products.

In our Security division, toward the end of fiscal 2020 and early in fiscal 2021, receipt of certain orders was delayed, most notably with respect to our aviation and cargo products.

Our service revenues were also adversely impacted as a result of the pandemic.

However, during the second half of our first fiscal 2021 quarter, bookings began to accelerate.

As many of our customers in both our Security and Optoelectronics and Manufacturing divisions are being impacted by the pandemic, we have received and could receive further requests to delay deliveries of equipment and modify service arrangements or the scheduling of factory or site acceptance tests, which could impact timing of revenue recognition.

In addition, as a result of COVID-19 related government regulations, certain of our global manufacturing facilities have had to limit operations and could have to limit operations in the future.

During the first half of fiscal 2021, bookings accelerated, but as many of our customers in our Security division are being impacted by the pandemic we have received and could receive further requests to delay deliveries of equipment and modify service arrangements or the scheduling of factory or site acceptance tests, which could impact timing of revenue recognition.

In addition, as a result of COVID-19 related government regulations, certain of our global manufacturing facilities have had to limit operations and might have to limit operations in the future.

If these business interruptions resulting from COVID-19 were to be prolonged or expanded in scope, our business, financial condition, results of operations and cash flows would be materially and adversely impacted.

We intend to continue to actively monitor the situation and may take actions that alter our business operations as may be required by federal, state or local authorities or that we determine are in our best interests and the best interests of our employees, suppliers and customers.

We intend to continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state or local authorities or that we determine are in our best interests and the best interests of our employees, suppliers and customers.

Global Economic Considerations.

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Healthcare Considerations.

As described above, our Healthcare division has experienced some increased demand for its patient monitoring products as a result of the COVID-19 pandemic.

Increased healthcare capital purchases made in fiscal 2020 may result in fewer capital purchases in fiscal 2021 and subsequent years.

The pandemic may also impact our ability to manufacture products needed to timely fill orders if we need to close any manufacturing facility due to employee COVID-19 cases.

As described above, our Healthcare division has experienced increased demand for its patient monitoring products as a result of the COVID-19 pandemic.

Increased healthcare capital purchases made in prior periods may result in fewer capital purchases during the balance of fiscal 2021 and subsequent periods.

The pandemic may also impact our ability to manufacture products needed to timely fill orders if we need to close any manufacturing facility due to employee COVID-19 cases or local government regulations.

European Union Threat Detection Standards.

The EU has implemented regulations for all airports within the EU that use explosive detection systems to have hold baggage screening systems that are compliant with the European Civil Aviation Conference (ECAC) Standard 3.

The deadline for compliance with this mandate was set for September 2020.

Given the uncertainty surrounding the COVID-19 situation, the EU revised the regulations, and the date whereby airports that use explosive detection systems for hold baggage screening have to meet Standard 3 has been changed to September 2021.

The deadline for compliance with this mandate was initially set for September 2020.

Given the uncertainty surrounding the COVID-19 situation, the EU revised the regulations, and the date whereby airports using explosive detection systems for hold baggage screening must meet Standard 3 has been changed to September 2021.

There is an ongoing discussion around whether this deadline should be further moved and whether a second deadline for previous generation explosive detection systems installed between 2011 and 2014 that need to be replaced with Standard 3 should be moved from 2022 to 2024.

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Government Policies.

Our business, financial condition and results of operations could be affected by changes in U.S.

or foreign government policies.

For example, the LIBOR index will be discontinued by the end of calendar year 2021.

When the LIBOR index is discontinued, the terms of our revolving credit facility allow for a replacement rate to be determined in accordance with the credit agreement.

Results of Operations for the Three Months Ended September 30, 2019 (Q1 2020) Compared to the Three Months Ended September 30, 2020 (Q1 2021) (amounts in millions)

Our results of operations and cash flows could be materially affected by changes in U.S.

or foreign government legislative, regulatory or enforcement policies.

Further, our results of operations and cash flows may be impacted by U.S.

and foreign government policies to manage the COVID-19 pandemic, such as travel restrictions or site closures.

Results of Operations for the Three Months Ended December 31, 2019 (Q2 2020) Compared to the Three Months Ended December 31, 2020 (Q2 2021) (amounts in millions)

The table below and the discussion that follows are based upon the way in which we analyze our business.

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Total net revenues

Revenues for the Security division during the three months ended September 30, 2020 were impacted by the COVID-19 pandemic primarily in our aviation and cargo businesses, as we experienced delays in the timing of delivery and installation of equipment and related services, as well as the timing of receipt of new orders.

Revenues for the Security division during the three months ended December 31, 2020 continued to be impacted by the COVID-19 pandemic primarily in our aviation and cargo businesses, as we experienced delays in the timing of delivery and installation of equipment and related services, as well as the timing of receipt of new orders.

We also experienced a decrease in revenues associated with the expiration of a contract in Mexico in June 2020.

Revenues for the Healthcare division during the three months ended September 30, 2020 increased year-over-year due to higher sales of patient monitoring systems in the North America, Europe and Latin America, as well as higher sales of related supplies and accessories.

Revenues for the Optoelectronics and Manufacturing division during the three months ended September 30, 2020 increased year-over-year as a result of higher revenue from our contract manufacturing business and the inclusion of revenues from a small business acquired in February 2020.

These increases were partially offset by a decrease in revenues from our optoelectronics business.

Gross profit as a percentage of net revenues during the three months ended September 30, 2020 increased due to (i) an improved gross margin in our Healthcare division (which has the highest gross margin among our divisions) as a result of the benefit of economies of scale associated with increased sales, combined with operating efficiencies, and (ii) an increase in service gross margin in our Security division .

Revenues for the Healthcare division during the three months ended December 31, 2020 increased year-over-year due to higher sales of patient monitoring systems as well as higher sales of related supplies and accessories.

Revenues for the Optoelectronics and Manufacturing division during the three months ended December 31, 2020 increased year-over-year as a result of higher revenue from our contract manufacturing business and the inclusion of revenues from a small business acquired in February 2020.

Gross profit as a percentage of net revenues during the three months ended December 31, 2020 increased due to (i) an improved gross margin in our Healthcare division (which has the highest gross margin among our divisions) as a result of economies of scale associated with increased sales, combined with operating efficiencies, (ii) increase in Healthcare revenue as a percentage of total net revenues, and (iii) an increase in service gross margin in our Security division .

Operating Expenses

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Selling, general and administrative (SG&A) expenses consist primarily of compensation paid to sales, marketing and administrative personnel, professional service fees, sales commissions and marketing expenses.

SG&A expense for the three months ended September 30, 2020 was lower than the comparable prior-year period primarily due to reduced compensation expense resulting from implementation of cost containment measures, lower travel expenses due to the COVID-19 pandemic and lower third-party sales commissions, partially offset by an increase in bad debt expense.

SG&A expense for the three months ended December 31, 2020 was lower than the comparable prior-year period primarily due to lower travel expenses resulting from the COVID-19 pandemic, reduced compensation expense resulting from implementation of cost containment measures and lower third-party sales commissions, partially offset by an increase in bad debt expense.

Research and development .

Research and development (R&D) expenses include research related to new product development and product enhancements.

The decrease in R&D expenses during the three months ended September 30, 2020 from the same prior-year period reflected lower compensation expenses.

The decrease in R&D expenses during the three months ended December 31, 2020 from the same prior-year period reflected lower employee compensation expenses.

Impairment, restructuring and other charges.

Impairment, restructuring and other charges generally consist of charges relating to reductions in our workforce, facility consolidation, impairment of assets, costs related to acquisition activity, legal charges and other non-recurring charges.

During the three months ended September 30, 2020, we commenced exit activities associated with a turnkey contract in Mexico whereby we incurred non-recurring charges totaling $6.9 million comprised of exit costs of $2.5 million for employee terminations, facility closure and other exit costs of $1.1 million, direct transaction costs of $2.7 million and impairment of a right-of-use asset of $0.6 million.

We also conducted other operational efficiency activites which resulted in employee termination and other costs of $1.5 million.

During the quarter ended September 30, 2019, we recognized a net benefit of $2.1 million primarily related to reimbursements from our insurance carriers for covered legal charges.

Other Income and Expenses

Impairment, restructuring and other charges generally consist of charges relating to reductions in our workforce, facilities consolidation, impairment of assets, costs related to acquisition activity, legal charges and other non-recurring charges.

During the three months ended December 31, 2020, we recognized a net benefit of $0.5 million for reimbursements from our insurance carriers for covered legal charges, partially offset by additional legal fees related to class action litigation and government investigations.

This was partially offset by charges of $0.1 million for employee terminations from operational efficiency activities and $0.2 million for acquisition-related activities.

During the three months ended December 31, 2019, we recognized a net benefit of $1.4 million primarily related to reimbursements from our insurance carriers for covered legal charges, partially offset by additional legal fees related to class action litigation and government investigations.

This benefit was also partially offset by employee termination costs of $0.5 million for operational efficiency activities during the three months ended December 31, 2019.

Interest and other expense, net .

For the three months ended September 30, 2020, interest and other expense, net was $4.2 million as compared to $4.7 million in the comparable prior-year period.

This decrease was driven primarily by lower average levels of borrowing under our revolving credit facility as well as lower average interest rates during the three months ended September 30, 2020 compared to the same period in the prior year.

Interest expense included $2.2 million of non-cash interest expense in each of the three months ended September 30, 2019 and 2020, primarily related to the Notes (see Note 8 to the condensed consolidated financial statements for further discussion).

For the three months ended December 31, 2020, interest and other expense, net was $4.2 million as compared to $4.8 million in the comparable prior-year period.

This decrease was driven primarily by lower average levels of borrowing under our revolving credit facility as well as lower average interest rates during the three months ended December 31, 2020 compared to the same period in the prior year.

Interest expense included $2.3 million of non-cash interest expense primarily related to the Notes during the three months ended December 31, 2020 as compared to $2.2 million in the comparable prior-year period (see Note 8 to the condensed consolidated financial statements for further discussion).

Income taxes .

The effective tax rate for a particular period varies depending on a number of factors, including (i) the mix of income earned in various tax jurisdictions, each of which applies a unique range of income tax rates and income tax credits, (ii) changes in previously established valuation allowances for deferred tax assets (changes are based upon our current analysis of the likelihood that these deferred tax assets will be realized), (iii) the level of non-deductible expenses, (iv) certain tax elections (v) tax holidays granted to certain of our international subsidiaries and (vi) discrete tax items.

For the three months ended September 30, 2020, we recognized a provision for income taxes of $3.2 million compared to a benefit for income taxes of $0.6 million for the comparable prior-year period.

The effective tax rate for the three months ended September 30, 2019 and 2020 was -2.9% and 25.3%, respectively.

During the three months ended September 30, 2019 and 2020, we recognized discrete tax benefits of $6.2 million and $0.3 million, respectively, primarily for equity-based compensation under ASU 2016-09.

Excluding the impact of these discrete tax benefits, our effective tax rate for the three months ended September 30, 2019 and 2020 was 27.9% and 27.5%, respectively.

For the three months ended December 31, 2020, we recognized a provision for income taxes of $8.1 million compared to $7.1 million for the comparable prior-year period.

The effective tax rates for the three months ended December 31, 2019 and 2020 were 25.3% and 28.8%, respectively.

During the three months ended December 31, 2019, we recognized a discrete tax benefit of $0.7 million primarily for equity-based compensation under ASU 2016-09.

During the three months ended December 31, 2020, we recognized a net discrete tax expense of $0.3 million primarily for return-to-provision adjustments which were partially offset by equity-based compensation under ASU 2016-09.

Excluding the impact of these discrete tax items, our effective tax rates for the three months ended December 31, 2019 and 2020 were 27.7% and 27.5%, respectively.

Results of Operations for the Six Months Ended December 31, 2019 (YTD Q2 2020) Compared to the Six Months Ended December 31, 2020 (YTD Q2 2021) (amounts in millions)

The table below and the discussion that follows are based upon the way in which we analyze our business.

See Note 12 to the condensed consolidated financial statements for additional information about our business segments.

Optoelectronics and Manufacturing

Total net revenues

Revenues for the Security division during the six months ended December 31, 2020 decreased on a year-over-year basis due to the continued impact of the COVID-19 pandemic primarily in our aviation and cargo businesses, as we experienced delays in the timing of delivery and installation of equipment and related services, as well as the timing of receipt of new orders.

We also experienced a decrease in revenues associated with the expiration of a contract in Mexico in June 2020.

Revenues for the Healthcare division during the six months ended December 31, 2020 increased year-over-year due to higher sales of patient monitoring systems and related supplies and accessories.

Revenues for the Optoelectronics and Manufacturing division during the six months ended December 31, 2020 increased year-over year as a result of higher revenue from our contract manufacturing business and the inclusion of revenues from a small business acquired in February 2020.

Gross profit as a percentage of net revenues during the six months ended December 31, 2020 increased on a year-over-year basis due to (i) an improved gross margin in our Healthcare division (which has the highest gross margin among our divisions) as a result of the benefit of economies of scale associated with increased sales, combined with operating efficiencies, (ii) increase in Healthcare revenue as a percentage of total net revenues, and (iii) an increase in service gross margin in our Security division.

These improvements in gross margin were partially offset by a decrease in the gross margin within the Optoelectronics and Manufacturing division due to a less favorable sales mix.

Operating Expenses

Selling, general and administrative

Research and development

Impairment, restructuring and other charges (benefit), net

Total operating expenses

Selling, general and administrative .

SG&A expense for the six months ended December 31, 2020 was lower than the prior comparable period due to lower travel expenses due to the COVID-19 pandemic, lower third-party sales commissions and reduced compensation expense resulting from implementation of cost containment measures, partially offset by an increase in bad debt expense.

Research and development .

The decrease in R&D expense during the six months ended December 31, 2020 from the same prior-year period reflected lower employee compensation expenses and reduced general spending in other areas.

Impairment, restructuring and other charges (benefit).

During the six months ended December 31, 2020, we incurred $7.2 million for exit activities associated with an expired turnkey contract in Mexico.

Such exit costs commenced in the first quarter of the fiscal year and include $2.8 million for employee terminations, $1.1 million for facility closure and other exit costs, direct transaction costs of $2.7 million, and $0.6 million for right-of-use asset impairment.

We also incurred costs of $1.2 million for employee terminations and facility closure costs for operational efficiency activities and $0.3 million for acquisition-related activities, partially offset by a net benefit of $0.5 million for reimbursements from our insurance carriers for covered legal charges.

During the six months ended December 31, 2019, we recognized a net benefit of $3.5 million primarily related to reimbursements from our insurance carriers for covered legal charges, partially offset by additional legal fees related to class action litigation and government investigations.

This benefit was partially offset by employee termination costs of $0.5 million for operational efficiency activities.

Other Income and Expenses

Interest and other expense, net .

For the six months ended December 31, 2020, interest and other expense, net was $8.4 million as compared to $9.6 million in the comparable prior-year period.

This decrease was driven primarily by lower average levels of borrowing under our revolving credit facility as well as lower average interest rates during the six months ended December 31, 2020 compared to the same period in the prior year.

Interest expense included $4.4 million and $4.5 million of non-cash interest expense during the six months ended December 31, 2019 and 2020, respectively, primarily related to the Notes (see Note 8 to the condensed consolidated financial statements for further discussion).

Income taxes .

For the six months ended December 31, 2019 and 2020, we recognized a provision for income taxes of $6.5 million and $11.2 million, respectively.

The effective tax rate for the six months ended December 31, 2019 and 2020 was 13.5% and 27.7%, respectively.

During the six months ended December 31, 2019, we recognized a discrete tax benefit of $6.9 million primarily for equity-based compensation under ASU 2016-09.

During the six months ended December 31, 2020, we recognized a net discrete tax provision of $0.1 million primarily for return-to-provision adjustments which were partially offset by equity-based compensation under ASU 2016-09.

Excluding the impact of these discrete tax items, our effective tax rate for the six months ended December 31, 2019 and 2020 was 27.8% and 27.5%, respectively.

Liquidity and Capital Resources

Our principal sources of liquidity are our cash and cash equivalents, cash generated from operations and our credit facility.

Cash and cash equivalents totaled $76.9 million at September 30, 2020, an increase of $0.8 million, or 1%, from $76.1 million at June 30, 2020.

We currently anticipate that our available funds, credit facilities and cash flow from operations will be sufficient to meet our operational cash needs for the next 12 months and foreseeable future.

In addition, without repatriating earnings from non - U.S.

subsidiaries, we anticipate that cash generated from operations will be able to satisfy our obligations in the U.S., including our outstanding lines of credit.

Cash and cash equivalents totaled $72.6 million at December 31, 2020, a decrease of $3.5 million, or 4.6%, from $76.1 million at June 30, 2020.

We currently anticipate that our available funds, credit facilities and cash flow from operations will be sufficient to meet our operational cash needs for the next 12 months and the foreseeable future.

In addition, we anticipate that cash generated from operations, without repatriating earnings from our non-U.S.

subsidiaries, will be sufficient to satisfy our obligations in the U.S., including our outstanding lines of credit.

We have a five-year revolving credit facility that allows us to borrow up to $535 million.

As of September 30, 2020, there was $51.0 million outstanding under the revolving credit facility and letters - of - credit outstanding totaled $75.4 million.

As of December 31, 2020, there was $18.0 million outstanding under the revolving credit facility and letters of credit outstanding totaled $71.2 million.

Cash Provided by Operating Activities.

Cash flows from operating activities can fluctuate significantly from period to period, as net income, adjusted for non-cash items, and working capital fluctuations impact cash flows.

During the three months ended September 30, 2020, we generated cash from operations of $53.8 million compared to $24.8 million in the same prior-year period.

This increase was driven by favorable changes in net working capital, partially offset by a decrease in profits.

During the six months ended December 31, 2020, we generated cash from operations of $89.5 million compared to $59.6 million in the same prior-year period.

This increase was driven by favorable changes in net working capital, partially offset by cash payments associated with the exit of a contract in Mexico.

Cash Used in Investing Activities .

Net cash used in investing activities was $12.3 million for the three months ended September 30, 2020 as compared to $8.1 million in the same prior-year period.

During the three months ended September 30 2020, we used cash of $3.0 million for the acquisition of a business.

Capital expenditures in the three month period ended September 30, 2020 were $3.8 million compared to $6.0 million in the same prior-year period.

Expenditures for intangible and other assets in the first quarter of fiscal 2021 were $4.4 million compared to $2.1 million in the same prior-year period.

Net cash used in investing activities was $20.5 million for the six months ended December 31, 2020 as compared to $15.6 million in the same prior-year period.

During the six months ended December 31 2020, we used cash of $3.0 million for the acquisition of a business.

Capital expenditures in the six month period ended December 31, 2020 were $8.5 million compared to $11.6 million in the same prior-year period.

Expenditures for intangible and other assets in the six month period ended December 31, 2020 were $7.0 million compared to $3.9 million in the same prior-year period.

Purchases of marketable securities in the six month period ended December 31, 2020 were $2.6 million while there were none in the same prior-year period.

Cash Used in Financing Activities .

Net cash used in financing activities was $41.8 million during the three months ended September 30, 2020, compared to $27.5 million during the same prior-year period.

The changes in cash flows used in financing activities primarily relate to (i) net repayments of borrowings on bank lines of credit and debt totaling $8.0 million in the three month period ended September 30, 2020 compared to net borrowings of $7.0 million in the same prior-year period;

and (ii) $35.7 million used for share repurchases and taxes paid related to the net share settlement of equity awards as of September 30, 2020 compared to $39.2 million for the same prior-year period.

Net cash used in financing activities was $75.4 million during the six months ended December 31, 2020, compared to $45.9 million during the same prior-year period.

The changes in cash used in financing activities primarily relate to (i) net repayments of borrowings on bank lines of credit totaling $41.0 million in the six month period ended December 31, 2020 compared to net borrowings of $3.0 million in the same prior-year period and (ii) $36.1 million used for share repurchases and taxes

paid related to the net share settlement of equity awards in the six month period ended December 31, 2020 compared to $53.7 million for the same prior-year period.

See Note 8 to the condensed consolidated financial statements for a detailed discussion regarding our revolving credit facility and our Notes.

Cash Held by Foreign Subsidiaries

Our cash and cash equivalents totaled $76.9 million at September 30, 2020.

Our cash and cash equivalents totaled $72.6 million at December 31, 2020.

Of this amount, approximately 72% was held by our foreign subsidiaries and subject to repatriation tax considerations.

These foreign funds were held primarily by our subsidiaries in the United Kingdom, Malaysia, Canada, Singapore, India and Australia and to a lesser extent in Mexico, Germany and Albania among other countries.

These foreign funds were held primarily by our subsidiaries in the United Kingdom, Puerto Rico, Malaysia, Canada, Singapore and India and to a lesser extent in Australia and Germany among other countries.

We intend to permanently reinvest certain earnings from foreign operations, and we currently do not anticipate that we will need this cash in foreign countries to fund our U.S.

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Issuer Purchases of Equity Securities

The following table contains information about the shares of common stock we purchased during the quarter ended September 30, 2020:

Maximum number (or

approximate dollar

Total number of

shares (or units)

Total number of

Average price

part of publicly

yet be purchased

shares (or units)

paid per share (or

announced plans or

under the plans or

July 1 to July 31, 2020

August 1 to August 31, 2020

September 1 to September 30, 2020

In April 2020, the Board of Directors authorized a share repurchase program of up to 1,000,000 shares of common stock.

In August 2020, the Board of Directors increased the maximum number of shares to 3,000,000 shares authorized under the stock repurchase program.

Upon repurchase, the shares are restored to the status of authorized but unissued shares, and we record them as a reduction in the number of shares of common stock issued and outstanding in our consolidated financial statements.

We did not repurchase any shares during the quarter ended December 31, 2020.

Contractual Obligations

During the three months ended September 30, 2020, there were no material changes outside the ordinary course of business to the information regarding specified contractual obligations contained in our Annual Report on Form 10-K for the fiscal year ended June 30, 2020.

During the six months ended December 31, 2020, there were no material changes outside the ordinary course of business to the information regarding specified contractual obligations contained in our Annual Report on Form 10-K for the fiscal year ended June 30, 2020.

See Notes 1, 6, 8 and 10 to the condensed consolidated financial statements for additional information regarding our contractual obligations.

Off-Balance Sheet Arrangements

As of September 30, 2020, we did not have any significant off-balance sheet arrangements, as defined in Item 303(a)(4) of Regulation S-K.

As of December 31, 2020, we did not have any significant off-balance sheet arrangements, as defined in Item 303(a)(4) of Regulation S-K.

Recent Accounting Pronouncements

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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-Q

Item 2. Management’s Discussion and Analysis