What changed in this filing

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Item 1. Financial Statements

2021-04-30 compared with 2021-01-29 · 141 added, 126 removed, 504 unchanged (35% of the section changed)

29 unchanged sentences

Common stock, $ 0.001 par value— 100,000,000 shares authorized;

issued and outstanding , 18,011,982 shares at June 30, 2020 and 17,933,256 shares at December 31, 2020

issued and outstanding , 18,011,982 shares at June 30, 2020 and 17,980,207 shares at March 31, 2021

Retained earnings

7 unchanged sentences

(amounts in thousands, except per share data)

Three Months Ended December 31,

Six Months Ended December 31,

Three Months Ended March 31,

Nine Months Ended March 31,

Net revenues:

10 unchanged sentences

Income before income taxes

Provision for income taxes

(Provision) benefit for income taxes

Earnings per share:

5 unchanged sentences

(amounts in thousands)

Three Months Ended December 31,

Six Months Ended December 31,

Three Months Ended March 31,

Nine Months Ended March 31,

Other comprehensive income (loss):

7 unchanged sentences

(amounts in thousands, except share data)

Three Months Ended December 31, 2019

Three Months Ended March 31, 2020

Comprehensive

Balance—September 30, 2019

Balance—December 31, 2019

Exercise of stock options

Vesting of RSUs

Repurchase of common stock

Shares issued under employee stock purchase program

Stock-based compensation expense

Repurchase of common stock

Taxes paid related to net share settlement of equity awards

Other comprehensive income

Balance—December 31, 2019

Three Months Ended December 31, 2020

Other comprehensive loss

Balance—March 31, 2020

Three Months Ended March 31, 2021

Comprehensive

Balance—September 30, 2020

Balance—December 31, 2020

Exercise of stock options

Vesting of RSUs

Shares issued under employee stock purchase program

Stock-based compensation expense

Repurchase of common stock

Taxes paid related to net share settlement of equity awards

Other comprehensive income

Balance—December 31, 2020

Six Months Ended December 31, 2019

Other comprehensive loss

Balance—March 31, 2021

Nine Months Ended March 31, 2020

Comprehensive

7 unchanged sentences

Other comprehensive loss

Balance—December 31, 2019

Six Months Ended December 31, 2020

Balance—March 31, 2020

Nine Months Ended March 31, 2021

Comprehensive

7 unchanged sentences

Other comprehensive income

Balance—December 31, 2020

Balance—March 31, 2021

OSI SYSTEMS, INC.

2 unchanged sentences

(amounts in thousands)

Six Months Ended December 31,

Nine Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES

48 unchanged sentences

These unaudited condensed consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2020 filed with the SEC.

The results of operations for the three and six months ended December 31, 2020 are not necessarily indicative of the operating results to be expected for the full 2021 fiscal year or any future periods.

The results of operations for the three and nine months ended March 31, 2021 are not necessarily indicative of the operating results to be expected for the full 2021 fiscal year or any future periods.

Use of Estimates

7 unchanged sentences

Potential common shares consist of the shares issuable upon the exercise of stock options and restricted stock unit awards under the treasury stock method.

The underlying equity component of the 1.25 % convertible senior notes due 2022 (the “Notes”) discussed in Note 8 to the condensed consolidated financial statements will have a net impact on diluted earnings per share when the average price of our common stock exceeds the conversion price because the principal amount of the Notes is intended to be settled in cash upon conversion.

There was no dilutive effect of the Notes for the three and six months ended December 31, 2019 and 2020.

The underlying equity component of the 1.25 % convertible senior notes due 2022 (the “Notes”) discussed in Note 8 to the condensed consolidated financial statements will have a net impact on diluted earnings per share when the average price of our common stock exceeds the conversion price of $ 107.46 because the principal amount of the Notes is intended to be settled in cash upon conversion.

There was no dilutive effect of the Notes for the three and nine months ended March 31, 2020 and 2021.

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts):

Three Months Ended December 31,

Six Months Ended December 31,

Three Months Ended March 31,

Nine Months Ended March 31,

Net income available to common stockholders

7 unchanged sentences

We consider all highly liquid investments with maturities of three months or less as of the acquisition date to be cash equivalents.

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

Our cash and cash equivalents totaled $ 92.5 million at March 31, 2021.

Of this amount, approximately 58 % 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, Puerto Rico, Malaysia, Canada, Singapore and India and to a lesser extent in Australia and Germany among other countries.

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

We have cash holdings in financial institutions that exceed insured limits for such institutions;

4 unchanged sentences

The carrying values of our long-term debt instruments are considered to approximate their fair values, as the interest rates of these instruments are variable or comparable to current rates for financing available to us.

The fair values of our foreign currency forward contracts were not significant as of December 31, 2020.

The fair values of our foreign currency forward contracts were not significant as of March 31, 2021.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

5 unchanged sentences

June 30, 2020

December 31, 2020

March 31, 2021

Insurance company contracts

2 unchanged sentences

Our use of derivatives consists of foreign currency forward contracts.

These forward contracts are utilized to partially mitigate certain balance sheet exposures and used as a net investment hedge for a foreign subsidiary to protect against potential changes resulting from short-term foreign currency fluctuations.

These forward contracts are utilized to partially mitigate certain balance sheet exposures or used as a net investment hedge to protect against potential changes resulting from short-term foreign currency fluctuations.

These contracts have original maturities of up to three months.

We do not use hedging instruments for speculative purposes.

The net investment hedge has been designated as a hedge instrument and accounted for under ASC 815 “Derivatives and Hedging” (ASC 815).

The net investment hedge has been designated as a hedge instrument and accounted for under Accounting Standards Codification ("ASC”) 815 “Derivatives and Hedging”.

Hedge effectiveness is assessed using the spot method, consistent with guidance in ASC 815 whereby the change in fair value of the forward contract is recorded in the same manner as the related currency translation adjustments, within other comprehensive income, as the hedging instrument is expected to be fully effective unless the amount hedged exceeds the net investment in the foreign operation, or the foreign operation is liquidated.

We settled the net investment hedge during the three months ended December 31, 2020, and the amount recorded in other comprehensive income was not significant.

There were no net investment hedges outstanding as of December 31, 2020.

The net gains or losses from the foreign currency forward contracts for balance sheet exposures, which are not designated as hedge instruments, are reported in the consolidated income statement.

We initiated these forward contracts during the three months ended September 30, 2020 and the amounts reported in the consolidated income statement for the three and six months ended December 31, 2020 were not significant.

We settled the net investment hedge in the second quarter of fiscal 2021, and the amount recorded in other comprehensive loss was not significant.

There were no net investment hedges outstanding as of March 31, 2021.

The net gains or losses from the foreign currency forward contracts, which are not designated as hedge instruments, are reported in the consolidated income statement.

We initiated these forward contracts in the first quarter of fiscal 2021 and the amounts reported in the consolidated income statement for the three and nine months ended March 31, 2021 were not significant.

The fair value of our forward foreign exchange contracts is estimated using a standard valuation model and market-based observable inputs over the contractual term.

Unrealized gains are recognized as assets and unrealized losses are recognized as liabilities.

As of December 31, 2020, we held foreign currency forward contracts with notional amounts totalling $ 24.5 million.

Unrealized gains and losses from the forward currency forward contracts as of December 31, 2020 were not significant.

As of March 31, 2021, we held foreign currency forward contracts with notional amounts totaling $ 23.5 million.

Unrealized gains and losses from the forward currency forward contracts as of March 31, 2021 were not significant.

There were no derivative instruments as of June 30, 2020.

Recently Adopted Accounting Pronouncements

Retirement Benefit Plans

In August 2018, the FASB issued authoritative guidance under Accounting Standards Update (“ASU”) 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General:

In August 2018, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance under Accounting Standards Update (“ASU”) 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General:

Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans.

5 unchanged sentences

We adopted this new guidance in the first quarter of fiscal 2021, and it did not have a significant impact on our consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which temporarily simplifies the accounting for contract modifications, including hedging relationships, due to the transition from LIBOR and other interbank offered rates to alternative reference interest rates.

For example, entities can elect not to remeasure the contracts at the modification date or reassess a previous accounting determination if certain conditions are met.

Additionally, entities can elect to continue applying hedge accounting for hedging relationships affected by reference rate reform if certain conditions are met.

Modifications to debt agreements for a change in the reference interest rate will be accounted for by prospectively adjusting the effective interest rate.

The new standard was effective upon issuance and did not have a significant impact on our consolidated financial statements.

ASU 2020-04 generally can be applied to applicable contract modifications through December 31, 2022.

We are currently evaluating the impact of the transition from LIBOR to alternative reference interest rates;

however the adoption of this new guidance for future modifications to contracts, if any, is not expected to have a significant impact on our consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

7 unchanged sentences

We are currently evaluating the potential impact of adoption of this guidance on our consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

For example, entities can elect not to remeasure the contracts at the modification date or reassess a previous accounting determination if certain conditions are met.

Additionally, entities can elect to continue applying hedge accounting for hedging relationships affected by reference rate reform if certain conditions are met.

Modifications to debt agreements for a change in the reference interest rate will be accounted for by prospectively adjusting the effective interest rate.

The new standard was effective upon issuance and generally can be applied to applicable contract modifications through December 31, 2022.

We are currently evaluating the impact of the transition from LIBOR to alternative reference interest rates;

however the adoption of this new guidance for modifications to contracts, if any, is not expected to have a significant impact on our consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

35 unchanged sentences

Property and equipment, net

Depreciation and amortization expense for property and equipment was $ 5.4 million and $ 5.6 million for the three months ended December 31, 2019 and 2020, respectively, and $ 10.5 million and $ 10.8 million for the six months ended December 31, 2019 and 2020, respectively.

Depreciation and amortization expense for property and equipment was $ 5.4 million and $ 5.5 million for the three months ended March 31, 2020 and 2021, respectively, and $ 15.9 million and $ 16.3 million for the nine months ended March 31, 2020 and 2021, respectively.

Goodwill and Intangible Assets

The changes in the carrying value of goodwill by segment for the six-month period ended December 31, 2020 were as follows (in thousands):

The changes in the carrying value of goodwill by segment for the nine-month period ended March 31, 2021 were as follows (in thousands):

Optoelectronics

3 unchanged sentences

Foreign currency translation adjustment

Balance as of December 31, 2020

Balance as of March 31, 2021

Intangible assets consisted of the following (in thousands):

June 30, 2020

December 31, 2020

March 31, 2021

Amortizable assets:

4 unchanged sentences

Non-amortizable assets:

In-process research and development

Total intangible assets

Amortization expense related to intangible assets was $ 4.5 million and $ 5.6 million for the three months ended December 31, 2019 and 2020, respectively.

For the six months ended December 31, 2019 and 2020, amortization expense related to intangible assets was $ 9.4 million and $ 10.3 million, respectively.

At December 31, 2020, the estimated future amortization expense for intangible assets was as follows (in thousands):

Amortization expense related to intangible assets was $ 4.9 million and $ 4.8 million for the three months ended March 31, 2020 and 2021, respectively.

For the nine months ended March 31, 2020 and 2021, amortization expense related to intangible assets was $ 14.3 million and $ 15.1 million, respectively.

At March 31, 2021, the estimated future amortization expense for intangible assets was as follows (in thousands):

2021 (remaining 3 months)

4 unchanged sentences

Amortizable assets that have not yet begun to be amortized are included in Thereafter in the table above.

For the three months ended December 31, 2019 and 2020, we capitalized software development costs in the amounts of $ 1.9 million and $ 2.4 million, respectively.

For the six months ended December 31, 2019 and 2020, we capitalized software development costs in the amounts of $ 3.2 million and $ 6.5 million, respectively.

For the three months ended March 31, 2020 and 2021, we capitalized software development costs in the amounts of $ 4.5 million and $ 2.6 million, respectively.

For the nine months ended March 31, 2020 and 2021, we capitalized software development costs in the amounts of $ 7.7 million and $ 9.1 million, respectively.

Contract Assets and Liabilities

14 unchanged sentences

Deferred revenue—long-term

Contract assets increased during the six months ended December 31, 2020 primarily due to satisfaction of performance obligations for aviation, cargo and vehicle inspection customers in our Security division which have not yet been billed.

Contract assets increased during the nine months ended March 31, 2021 primarily due to satisfaction of performance obligations for aviation, cargo and vehicle inspection customers in our Security division which have not yet been billed.

The increase in contract liabilities was primarily due to receipt of upfront deposits from customers in our Security division.

1 unchanged sentence

Remaining performance obligations related to ASC 606 represent the aggregate transaction price allocated to performance obligations under an original contract with a term greater than one year which are fully or partially unsatisfied at the end of the period.

As of December 31, 2020, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $ 361.1 million.

As of March 31, 2021, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $ 322.8 million.

We expect to recognize revenue on approximately 67 % of the remaining performance obligations over the next 12 months, and the remainder is expected to be recognized thereafter.

During the six months ended December 31, 2020, we recognized revenue of $ 39.3 million from contract liabilities existing at the beginning of the period.

During the nine months ended March 31, 2021, we recognized revenue of $ 45.0 million from contract liabilities existing at the beginning of the period.

Practical Expedients.

3 unchanged sentences

The components of operating lease expense were as follows (in thousands):

Three Months Ended December 31,

Six Months Ended December 31,

Three Months Ended March 31,

Nine Months Ended March 31,

Operating lease cost

4 unchanged sentences

June 30, 2020

December 31, 2020

March 31, 2021

Operating lease ROU assets, net

7 unchanged sentences

Supplemental cash flow information related to operating leases was as follows (in thousands):

Six Months Ended December 31,

Nine Months Ended March 31,

Cash paid for operating lease liabilities

ROU assets obtained in exchange for new lease obligations

Maturities of operating lease liabilities at December 31, 2020 were as follows (in thousands):

December 31, 2020

Maturities of operating lease liabilities at March 31, 2021 were as follows (in thousands):

March 31, 2021

Less than one year

3 unchanged sentences

We endeavor to align our global capacity and infrastructure with demand by our customers as well as fully integrate acquisitions and thereby improve operational efficiency.

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 net benefit 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 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 three and six months ended December 31, 2019, we recognized a net benefit of $ 1.4 and $ 3.5 million, respectively, 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.

These were partially offset by operational efficiency activites during the three and six months ended December 31, 2019, which included employee termination costs of $ 0.4 million and $ 0.5 million, respectively.

During the three months ended March 31, 2021, we recognized a total net benefit of ($ 0.3 ) million which included a net benefit of ($ 0.7 ) million for reimbursements from our insurance carriers for covered legal charges.

We also incurred charges of $ 0.2 million for employee terminations and $ 0.2 million for facility closure and operational efficiency activities.

During the nine months ended March 31, 2021, we incurred a total net expense of $ 7.9 million which included $ 7.2 million for exit activities associated with an expired turnkey contract in Mexico.

Such exit costs 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 for a leased facility.

We also incurred costs of $ 1.6 million for other employee terminations and facility closure costs for operational efficiency activities and $ 0.3 million for acquisition-related activities.

We also recognized a net benefit of ($ 1.2 ) million for reimbursements from our insurance carriers for covered legal charges.

During the three and nine months ended March 31, 2020, we abandoned a non-core product line in our Healthcare division which resulted in the write-off of assets, including intangible and fixed assets, totaling $ 3.3 million as we determined that these assets had no value and were permanently impaired.

In addition, we continued to recover certain legal costs related to class action litigation and government investigations through insurance reimbursement.

We also incurred additional legal fees related to these matters as well as restructuring charges by the divisions as noted in the tables below.

This resulted in a net expense of $ 4.5 million and $ 1.5 million during the three and nine months ended March 31, 2020, respectively.

The following tables summarize impairment, restructuring and other charges (benefit), net for the periods set forth below (in thousands):

Three Months Ended December 31, 2019

Three Months Ended March 31, 2020

Optoelectronics and

1 unchanged sentence

Security Division

Impairment charges

Acquisition-related costs

Employee termination costs

Legal recoveries, net

Total expensed (benefit), net

Three Months Ended December 31, 2020

Facility closures/consolidation

Legal costs (recoveries), net

Total expensed

Three Months Ended March 31, 2021

Optoelectronics and

4 unchanged sentences

Facility closures/consolidation costs (benefit)

Legal recoveries, net

Legal costs (recoveries), net

Total expensed (benefit), net

Six Months Ended December 31, 2019

Nine Months Ended March 31, 2020

Optoelectronics and

1 unchanged sentence

Security Division

Impairment charges

Acquisition-related costs

Employee termination costs

Legal recoveries, net

Total expensed (benefit), net

Six Months Ended December 31, 2020

Facility closures/consolidation

Legal costs (recoveries), net

Total expensed

Nine Months Ended March 31, 2021

Optoelectronics and

6 unchanged sentences

Facility closures/consolidation costs

Legal recoveries, net

Legal costs (recoveries), net

Total expensed (benefit), net

The accrued liability for restructuring and other charges is included in other accrued expenses and current liabilities in the condensed consolidated balance sheet.

The changes in the accrued liability for restructuring and other charges for the six-month period ended December 31, 2020 were as follows (in thousands):

The changes in the accrued liability for restructuring and other charges for the nine-month period ended March 31, 2021 were as follows (in thousands):

Consolidation

4 unchanged sentences

Payments, adjustments and reimbursements, net

Balance as of December 31, 2020

Balance as of March 31, 2021

Revolving Credit Facility

2 unchanged sentences

Under certain circumstances, we have the ability to increase the facility by the greater of $ 250 million or such amount as would not cause our secured leverage ratio to exceed a specified level.

Borrowings under this facility bear interest at LIBOR plus a margin of 1.0 % as of December 31, 2020 (which margin can range from 1.0 % to 1.75 % based on our consolidated net leverage ratio as defined in the credit facility).

Borrowings under this facility bear interest at LIBOR plus a margin of 1.0 % as of March 31, 2021 (which margin can range from 1.0 % to 1.75 % based on our consolidated net leverage ratio as defined in the credit facility).

The LIBOR index is expected to be discontinued by the end of calendar year 2021.

1 unchanged sentence

Letters of credit reduce the amount available to borrow under the credit facility by their face value amount.

The unused portion of the facility bears a commitment fee of 0.10 % as of December 31, 2020 (which fee can range from 0.10 % to 0.25 % based on our consolidated net leverage ratio as defined in the credit facility).

The unused portion of the facility bears a commitment fee of 0.10 % as of March 31, 2021 (which fee can range from 0.10 % to 0.25 % based on our consolidated net leverage ratio as defined in the credit facility).

Our borrowings under the credit agreement are guaranteed by certain of our U.S.-based subsidiaries and are secured by substantially all of our assets and substantially all the assets of certain of our subsidiaries.

The credit facility contains various representations and warranties, affirmative, negative and financial covenants and events of default.

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

The amount available to borrow under the credit facility as of December 31, 2020 was $ 445.8 million.

As of March 31, 2021, there were no borrowings outstanding under the revolving credit facility and $ 66.7 million outstanding under the letters of credit sub facility.

The amount available to borrow under the credit facility as of March 31, 2021 was $ 468.3 million.

Loan amounts under the revolving credit facility may be borrowed, repaid and re-borrowed during the term.

2 unchanged sentences

It is our practice to routinely borrow and repay several times per year under this revolving facility and therefore, borrowings under the credit facility are included in current liabilities.

As of December 31, 2020, we were in compliance with all covenants under this credit facility.

1.25% Convertible Senior Notes Due 2022

As of March 31, 2021, we were in compliance with all covenants under this credit facility.

1.25% Convertible Senior Notes (“Notes”) Due 2022

In February 2017, we issued $ 287.5 million of the Notes in a private offering.

5 unchanged sentences

The initial $ 45.1 million equity component represents the debt discount and was calculated as the difference between the fair value of the debt and the gross proceeds of the Notes.

Issuance costs of $ 7.7 million were allocated between debt ($ 6.5 million) and equity ($ 1.2 million) components with the portion allocated to the debt presented as an offset against long -term debt in the consolidated balance sheet and being amortized as interest expense over the life of the Notes using the effective interest method.

The total interest expense recognized for the three and six months ended December 31, 2020 related to the Notes was $ 3.3 million and $ 6.6 million, respectively, which consisted of $ 0.9 million and $ 1.8 million of contractual interest expense, $ 2.1 million and $ 4.2 million of debt discount amortization and $ 0.3 million and $ 0.6 million of amortization of debt issuance costs.

For the three and six months ended December 31, 2019, the total interest expense was $ 3.2 million and $ 6.4 million, respectively, which consisted of $ 0.9 million and $ 1.8 million of contractual interest expense, $ 2.0 million and $ 4.0 million of debt discount amortization and $ 0.3 million and $ 0.6 million of amortization of debt issuance costs.

As of June 30, 2020 and December 31, 2020, the respective unamortized debt discounts were $ 19.1 million and $ 14.8 million, which are being amortized over the remaining contractual term to maturity of the Notes using an effective interest rate of 4.5 %.

The unamortized debt issuance cost of $ 2.5 million and $ 2.0 million as of June 30, 2020 and December 31, 2020, respectively, is amortized on a straight-line basis, which approximates the effective interest method, over the life of the Notes.

The debt discount is amortized over the remaining contractual term to maturity of the Notes using an effective interest rate of 4.5 %.

The debt issuance cost is amortized on a straight-line basis, which approximates the effective interest method, over the life of the Notes.

Total interest expense recognized for the three and nine months ended March 31, 2021 related to the Notes was $ 3.3 million and $ 10.0 million, respectively, which consisted of $ 0.9 million and $ 2.7 million of contractual interest expense, $ 2.2 million and $ 6.4 million of debt discount amortization and $ 0.3 million and $ 0.9 million of amortization of debt issuance costs.

For the three and nine months ended March 31, 2020, total interest expense was $ 3.3 million and $ 9.7 million, respectively, which consisted of $ 0.9 million and $ 2.7 million of contractual interest expense, $ 2.1 million and $ 6.1 million of debt discount amortization and $ 0.3 million and $ 0.9 million of amortization of debt issuance costs.

Other Borrowings

1 unchanged sentence

dollars, primarily for the issuance of letters-of-credit.

As of December 31, 2020, $ 62.0 million was outstanding under these letter-of-credit facilities.

As of December 31, 2020, the total amount available under these credit facilities was $ 12.7 million.

As of March 31, 2021, $ 63.0 million was outstanding under these letter-of-credit facilities.

As of March 31, 2021, the total amount available under these credit facilities was $ 12.9 million.

Long-term debt consisted of the following (in thousands):

8 unchanged sentences

Stock-based Compensation

As of December 31, 2020, we maintained the Amended and Restated 2012 Incentive Award Plan (the "2012 Plan ") and the Amended and Restated 2006 Equity Participation Plan ("2006 Plan") as stock-based employee compensation plans.

As of March 31, 2021, we maintained the Amended and Restated 2012 Incentive Award Plan (the "2012 Plan ") and the Amended and Restated 2006 Equity Participation Plan ("2006 Plan") as stock-based employee compensation plans.

No further grants may be made under the 2006 Plan.

1 unchanged sentence

We recorded stock-based compensation expense in the consolidated statements of operations as follows (in thousands):

Three Months Ended December 31,

Six Months Ended December 31,

Three Months Ended March 31,

Nine Months Ended March 31,

Cost of goods sold

2 unchanged sentences

Stock-based compensation expense

As of December 31, 2020, total unrecognized compensation cost related to share-based compensation grants under the OSI Plans were estimated at $ 0.6 million for stock options and $ 24.6 million for RSUs.

As of March 31, 2021, total unrecognized compensation cost related to share-based compensation grants under the OSI Plans were estimated at $ 0.5 million for stock options and $ 20.7 million for restricted stock units (“RSUs”).

We expect to recognize these costs over a weighted average period of 2.1 years with respect to the stock options and 1.9 years for grants of RSUs.

The following summarizes stock option activity during the six months ended December 31, 2020:

The following summarizes stock option activity during the nine months ended March 31, 2021:

Weighted-Average

4 unchanged sentences

Expired or forfeited

Outstanding at December 31, 2020

Exercisable at December 31, 2020

The following summarizes RSU award activity during the six months ended December 31, 2020:

Outstanding at March 31, 2021

Exercisable at March 31, 2021

The following summarizes RSU award activity during the nine months ended March 31, 2021:

Nonvested at June 30, 2020

Nonvested at December 31, 2020

Nonvested at March 31, 2021

In December 2020, our shareholders authorized an increase of 1.65 million shares for the 2012 Plan resulting in a maximum pool of 7.1 million shares.

As of December 31, 2020, there were approximately 2.1 million shares available for grant under the 2012 Plan.

As of March 31, 2021, there were approximately 2.1 million shares available for grant under the 2012 Plan.

Under the terms of the 2012 Plan, RSUs and restricted stock granted from the pool of shares available for grant reduce the pool by 1.87 shares for each award granted.

RSUs and restricted stock forfeited and returned to the pool of shares available for grant increase the pool by 1.87 shares for each award forfeited.

We granted 81,621 and 136,242 performance-based RSUs during the six months ended December 31, 2019 and 2020, respectively.

We granted 81,621 and 136,242 performance-based RSUs during the nine months ended March 31, 2020 and 2021, respectively.

These performance based RSU awards are contingent on the achievement of certain performance metrics.

9 unchanged sentences

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

During the six months ended December 31, 2020, we repurchased 320,136 shares of our common stock, all of which occurred in the first quarter of the fiscal year.

During the nine months ended March 31, 2021, we repurchased 322,588 shares of our common stock.

We have not paid any cash dividends since the consummation of our initial public offering in 1997 and we do not currently intend to pay any cash dividends in the foreseeable future.

4 unchanged sentences

Under the terms and conditions of the purchase agreements associated with certain acquisitions, we may be obligated to make additional payments based on the achievement of certain sales or profitability milestones through the acquired operations.

For agreements that contain contingent consideration caps, the remaining maximum amount of such potential future payments is $ 32.8 million as of December 31, 2020.

For agreements that contain contingent consideration caps, the remaining maximum amount of such potential future payments is $ 30.2 million as of March 31, 2021.

We account for such contingent payments for acquisitions which occurred through the end of fiscal year 2009 as additions to the purchase price of the acquired business.

We made contingent payments relating to such acquisitions of $ 1.1 million and $ 1.2 million, respectively, during the three and six months ended December 31, 2019 and $ 0.5 million and $ 0.6 million, respectively, during the three and six months ended December 31, 2020.

We made contingent payments relating to such acquisitions of $ 0.2 million and $ 1.5 million, respectively, during the three and nine months ended March 31, 2020 and $ 0.2 million and $ 0.9 million, respectively, during the three and nine months ended March 31, 2021.

For acquisitions completed after fiscal 2009, pursuant to Financial Accounting Standard 141R, which was codified into ASC 805, the estimated fair value of these obligations is recorded as a liability at the time of the acquisition with subsequent revisions recorded in Selling, general and administrative expense in the consolidated financial statements.

The estimated fair value measurements of contingent earn-out obligations are primarily based on unobservable inputs, which may include projected revenues, gross margins, operating income and the estimated probability of achieving the earn-outs.

The estimated fair value measurements of contingent earnout obligations are primarily based on unobservable inputs, which may include projected revenues, gross margins, operating income and the estimated probability of achieving the earnouts.

These projections and probabilities are used to estimate future contingent earnout payments, which are discounted back to present value to compute contingent earnout liabilities.

The following table provides a roll-forward from June 30, 2020 to December 31, 2020 of the contingent consideration liability, which is included in other accrued expenses and current liabilities and other long-term liabilities in our consolidated balance sheets (in thousands):

The following table provides a roll-forward from June 30, 2020 to March 31, 2021 of the contingent consideration liability, which is included in other accrued expenses and current liabilities and other long-term liabilities in our consolidated balance sheets (in thousands):

Beginning fair value, June 30, 2020

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Payments on contingent earnout obligations

Ending fair value, December 31, 2020

Ending fair value, March 31, 2021

Environmental Contingencies

We are subject to various environmental laws.

Our practice is to conduct appropriate environmental investigations at our manufacturing facilities in North America, Asia-Pacific and Europe, and, to the extent practicable, on all new properties in order to identify, as of the date of such investigation, potential areas of environmental concern related to past and present activities or from nearby operations.

Our practice is to conduct environmental investigations at our manufacturing facilities in North America, Asia-Pacific and Europe, and, to the extent practicable, on all new properties in order to identify, as of the date of such investigation, potential areas of environmental concern related to past and present activities or from nearby operations.

In certain cases, we have conducted further environmental assessments consisting of soil and groundwater testing and other investigations deemed appropriate by independent environmental consultants.

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We continue to take voluntary actions, in cooperation with the local governing agency, to fully investigate the site and develop appropriate remedial actions.

We have not accrued for loss contingencies relating to the Hawthorne facility or any other environmental matters because we believe that, although unfavorable outcomes may be possible, they are not considered by our management to be probable and reasonably estimable.

We have not accrued for loss contingencies relating to the Hawthorne facility or any other environmental matters because we believe that, although unfavorable outcomes are possible, they are not considered by our management to be probable and reasonably estimable.

If one or more of these environmental matters are resolved in a manner adverse to us, the impact on our business, financial condition, results of operations and cash flow could be material.

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It is not possible to determine the maximum potential liability amount under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement.

We have not recorded any liability for costs related to contingent indemnification obligations as of December 31, 2020.

We have not recorded any liability for costs related to contingent indemnification obligations as of March 31, 2021.

On December 31, 2017, we and Deepak Chopra, our Chief Executive Officer, entered into an amendment to Mr.

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The following table presents changes in warranty provisions (in thousands):

Six Months Ended December 31,

Nine Months Ended March 31,

Balance at beginning of period

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As such, there can be significant volatility in interim tax provisions.

During the three months ended December 31, 2019 and 2020, we recognized discrete tax benefits of $ 0.7 million and discrete tax expenses of $ 0.3 million, respectively, related to equity-based compensation under ASU 2016-09 and changes in prior year tax estimates resulting in an effective tax rate of 25.3 % and 28.6 %, respectively.

Excluding the impact of the discrete tax items noted above, our effective tax rate for the three months ended December 31, 2020 was 27.5 % as compared to 27.7 % in the same prior-year period.

During the six months ended December 31, 2019 and 2020, we recognized discrete tax benefits of $ 6.9 million and discrete tax expenses of $ 0.1 million, respectively, related to equity-based compensation under ASU 2016-09 and changes in prior year estimates resulting in an effective tax rate of 13.5 % and 27.7 %, respectively.

Excluding the impact of the discrete tax items noted above, our effective tax rate for the six months ended December 31, 2020 was 27.5 % as compared to 27.8 % in the same prior-year period.

The effective tax rates for the three months ended March 31, 2021 and 2020 were 33.7 % and ( 3.4 )%, respectively.

During the three months ended March 31, 2021, we recognized a net discrete tax expense of $ 2.2 million for return-to-provision true-up adjustments of $ 2.4 million, offset by a discrete tax benefit of ($ 0.2 ) million for equity-based compensation under ASU 2016-09.

During the three months ended March 31, 2020, we recognized a discrete tax benefit of $ 5.1 million for a return to provision true-up adjustment.

The effective tax rate for the nine months ended March 31, 2021 and 2020 was 30.1 % and 8.7 %, respectively.

During the nine months ended March 31, 2021, we recognized a net discrete tax expense of $ 2.3 million for return-to-provision true-up adjustments of $ 2.8 million, offset by a ($ 0.5 ) million tax benefit from equity-based compensation under ASU 2016-09.

During the nine months ended March 31, 2020, we recognized a discrete tax benefit of $ 12.0 million for equity-based compensation under ASU 2016-09 of $ 6.8 million and a return to provision true-up adjustment of $ 5.2 million.

Segment Information

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The following tables present our results of operations and identifiable assets by industry segment (in thousands):

Three Months Ended December 31,

Six Months Ended December 31,

Three Months Ended March 31,

Nine Months Ended March 31,

Revenues (1) —by Segment:

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Eliminations (3)

(1) For each of the three and six month periods ended December 31, 2019 and December 31, 2020, no customer accounted for greater than 10% of total net revenues.

(1) For each of the three and nine month periods ended March 31, 2020 and March 31, 2021, no customer accounted for greater than 10 % of total net revenues.

(2) One customer accounted for 13 % of accounts receivable, net as of June 30, 2020.

No customer accounted for more than 10% of accounts receivable, net as of December 31, 2020.

A different customer accounted for 10 % of accounts receivable, net as of March 31, 2021.

(3) Eliminations in assets reflect the amount of inter-segment profits in inventory and inter-segment ROU assets under ASC 842 as of the balance sheet date.

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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 1. Financial Statements