What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-04-30 compared with 2021-01-29 · 96 added, 77 removed, 131 unchanged (57% of the section changed)

2 unchanged sentences

together with our wholly-owned subsidiaries.

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.

This management’s discussion and analysis of financial condition as of March 31, 2021 and results of operations for the three and nine months ended March 31, 2021 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

This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Forward-looking statements relate to current expectations, beliefs, and projections concerning matters that are not historical facts.

Forward-looking statements relate to our current expectations, beliefs, and projections concerning matters that are not historical facts.

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.

30 unchanged sentences

(a) Security, providing security and inspection systems and turnkey security screening solutions;

(b) Healthcare, providing patient monitoring, diagnostic cardiology, connected care systems and related supplies and accessories;

(b) Healthcare, providing patient monitoring, diagnostic cardiology and connected care systems and related supplies and accessories;

and (c) Optoelectronics and Manufacturing, providing specialized electronic components for our Security and Healthcare divisions, as well as to third parties for applications in the defense and aerospace markets, among others.

2 unchanged sentences

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

Revenues from our Security division accounted for 65% and 53% of our total consolidated revenues for the nine months ended March 31, 2020 and 2021, respectively.

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

2 unchanged sentences

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 six months ended December 31, 2019 and 2020, respectively.

Revenues from our Healthcare division accounted for 14% and 20% of our total consolidated revenues for the nine months ended March 31, 2020 and 2021, respectively.

Optoelectronics and Manufacturing Division .

1 unchanged sentence

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.

Revenues from external customers in our Optoelectronics and Manufacturing division accounted for 21% and 27% of our total consolidated revenues for the nine months ended March 31, 2020 and 2021, respectively.

Trends and Uncertainties

2 unchanged sentences

The coronavirus disease 2019 (“COVID-19”) pandemic has dramatically impacted the global health and economic environment, with millions of confirmed cases, business slowdowns and shutdowns, and market volatility.

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.

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, logistics providers and customers as a result of quarantines, facility closures and travel and logistics restrictions.

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.

2 unchanged sentences

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 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.

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 our Security division, during the latter part of fiscal 2020 and in fiscal 2021, receipt of certain orders was delayed, most notably with respect to our aviation and cargo products, and our service revenues were adversely impacted as a result of the pandemic.

During the first nine months 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.

15 unchanged sentences

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.

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

European Union Threat Detection Standards.

1 unchanged sentence

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.

Our Security division’s real time tomography (RTT) product has passed the ECAC explosive detection system Standard 3 threat detection requirement.

1 unchanged sentence

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.

or foreign government legislative, regulatory or enforcement policies, including 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)

Results of Operations for the Three Months Ended March 31, 2020 (Q3 2020) Compared to the Three Months Ended March 31, 2021 (Q3 2021) (amounts in millions)

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

2 unchanged sentences

Total net revenues

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 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 .

Revenues for the Security division during the three months ended March 31, 2021 continued to be impacted by the COVID-19 pandemic most notably 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.

Our cargo business revenues decreased by $17.4 million.

We also experienced a decrease in revenues of $15.8 million associated with the expiration of a contract in Mexico in June 2020.

Revenues for the Healthcare division during the three months ended March 31, 2021 increased year-over-year due to higher sales of $8.3 million attributable to patient monitoring systems and cardiology equipment and related service revenue.

Revenues for the Optoelectronics and Manufacturing division during the three months ended March 31, 2021 increased year-over-year as a result of higher revenue of $14.6 million from our contract manufacturing business and $3.6 million from our optoelectronics business.

Gross profit is impacted by sales volume, productivity, and changes in overall manufacturing-related costs, such as raw materials and component costs, warranty expense, provision for inventory, freight, and logistics.

The overall decrease in gross profit resulted from decreased revenues in the Security division, mitigated by higher sales in our Healthcare and Optoelectronics and Manufacturing divisions.

There were no significant changes in overall manufacturing-related costs.

Gross profit as a percentage of net revenues during the three months ended March 31, 2021 decreased on a year-over-year basis due to (i) a reduced gross margin within the Optoelectronics and Manufacturing division due to a less favorable sales mix, and (ii) an increase in Optoelectronics and Manufacturing revenues as a percentage of total net revenues, which inherently carries the lowest gross margin of each of the divisions.

This was somewhat offset by an improved gross margin in our Healthcare division as a result of the benefit of economies of scale associated with increased sales, combined with operating efficiencies.

Operating Expenses

4 unchanged sentences

Selling, general and administrative .

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 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.

Our significant selling, general and administrative (SG&A) expenses include employee compensation, sales commissions, travel, professional services, marketing expenses, and depreciation and amortization expense.

SG&A expense for the three months ended March 31, 2021 decreased as compared to the same prior-year period due to reduced travel and entertainment and marketing expenses of $2.0 million and $2.1 million, respectively, resulting from the COVID-19 pandemic, lower employee compensation of $1.3 million, decreased third-party sales commissions of $1.5 million, and a reduction in the provision for bad debt of $1.0 million.

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 December 31, 2020 from the same prior-year period reflected lower employee compensation expenses.

The decrease in R&D expenses during the three months ended March 31, 2021 from the same prior-year period reflected lower materials and supplies consumed in research activities of $1.0 million and a decrease in travel expenses of $0.3 million resulting from the COVID-19 pandemic.

Impairment, restructuring and other charges.

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.

The net benefit in the three months ended March 31, 2021 consisted of ($0.7) million benefit for net reimbursements from our insurance carriers for covered legal charges, a $0.2 million charge for employee terminations from operational efficiency activities, and a $0.2 million charge for facility closure and operational efficiency activities.

The net expense in the three months ended March 31, 2020 included $3.3 million from impairment of assets in our Healthcare division for the exit of a product line, $1.1 million of employee termination and facility closure costs, and $0.1 million of other net costs.

Interest and other expense, net .

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).

For the three months ended March 31, 2021, 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 most significantly by lower average levels of borrowing under our revolving credit facility as well as lower average interest rates during the three months ended March 31, 2021 compared to the same period in the prior year.

Interest expense included $2.2 million of non-cash interest expense primarily related to the Notes during each of the three months ended March 31, 2021 and 2020 (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 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)

For the three months ended March 31, 2021, we recognized a provision for income taxes of $9.5 million compared to a benefit for income taxes of $(0.6) million for the comparable 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.

Results of Operations for the Nine Months Ended March 31, 2020 (YTD Q3 2020) Compared to the Nine Months Ended March 31, 2021 (YTD Q3 2021) (amounts in millions)

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

2 unchanged sentences

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.

Revenues for the Security division during the nine months ended March 31, 2021 decreased on a year-over-year basis due to the continued impact of the COVID-19 pandemic, most notably 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.

Our cargo business revenues decreased by $67 million and advanced security screening business revenues decreased by $34 million.

We also experienced a decrease in revenues of approximately $50 million associated with the expiration of a contract in Mexico in June 2020.

Revenues for the Healthcare division during the nine months ended March 31, 2021 increased year-over-year due to increased sales of patient monitoring systems, cardiology equipment and related supplies and accessories totaling approximately $32 million.

Revenues for the Optoelectronics and Manufacturing division during the nine months ended March 31, 2021 increased year-over year as a result of an increase in revenue in our contract manufacturing business of approximately $32 million coupled with an increase in sales of approximately $8 million in our optoelectronics business, which includes a $7 million increase in revenues from a small business acquired in February 2020.

The overall decrease in gross profit was driven by the decrease in revenues for the Security division which was somewhat mitigated by higher sales in our Healthcare and Optoelectronics and Manufacturing divisions.

There were no significant changes in manufacturing-related costs.

Gross profit as a percentage of net revenues during the nine months ended March 31, 2021 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.

Our gross margin decreased within the Optoelectronics and Manufacturing division due to a less favorable sales mix.

Operating Expenses

4 unchanged sentences

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.

SG&A expense for the nine months ended March 31, 2021 decreased as compared to the same prior-year period due to reduced travel and entertainment and marketing expenses of $6.8 million and $3.4 million, respectively, due to the COVID-19 pandemic, decreased third-party sales commissions of $6.5 million, and reduced employee compensation expense of $4.8 million resulting from implementation of cost containment measures.

These decreases were offset by an increase in the provision for loss on accounts receivable of $3.5 million.

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.

The decrease in R&D expense during the nine months ended March 31, 2021 from the same prior-year period reflected lower employee compensation expenses of $1.9 million, a decrease in materials and supplies consumed in research activities of $1.8 million, and reduced travel expenses of $1.0 million due to the COVID-19 pandemic.

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.

During the nine months ended March 31, 2021, we incurred $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.

This was offset by a net benefit of ($1.2) million for reimbursements from our insurance carriers for covered legal charges.

During the nine months ended March 31, 2020, we incurred impairment, restructuring and other charges, net of $3.3 million related to the exit of a product line in our Healthcare division, $1.6 million of employee termination and facility closure costs, and $0.3 million of acquisition costs, which were offset by a net recovery of $3.7 million for certain legal costs through insurance reimbursements.

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).

For the nine months ended March 31, 2021, interest and other expense, net was $12.6 million as compared to $14.3 million in the comparable prior-year period.

This decrease was driven by lower average levels of borrowing under our revolving credit facility as well as lower average interest rates during the nine months ended March 31, 2021 compared to the same period in the prior year.

Interest expense included $6.7 million and $6.6 million of non-cash interest expense during the nine months ended March 31, 2021 and 2020, respectively, mainly 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.

For the nine months ended March 31, 2021 and 2020, we recognized a provision for income taxes of $20.8 million and $5.9 million, respectively.

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.

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

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

Cash and cash equivalents totaled $92.5 million at March 31, 2021, an increase of $16.4 million, or 21.5%, 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.

subsidiaries, will be sufficient to satisfy our obligations in the U.S.

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

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

During the nine months ended March 31, 2021, we generated cash from operations of $131.1 million compared to $105.6 million in the same prior-year period.

This increase was driven by favorable changes in net working capital.

Cash Used in Investing Activities .

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.

Net cash used in investing activities was $26.2 million for the nine months ended March 31, 2021 as compared to $28.3 million in the same prior-year period.

During the nine months ended March 31 2021, we used cash of $3.0 million for the acquisition of a business.

Capital expenditures in the nine month period ended March 31, 2021 were $11.2 million compared to $16.1 million in the same prior-year period.

Expenditures for intangible and other assets in the nine month period ended March 31, 2021 were $9.9 million compared to $8.8 million in the same prior-year period.

Purchases of certificates of deposit in the nine month period ended March 31, 2021 were $4.8 million while there were none in the same prior-year period.

Cash Used in Financing Activities .

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.

Net cash used in financing activities was $91.4 million during the nine months ended March 31, 2021, compared to $68.5 million during the same prior-year period.

The significant changes in cash used in financing activities relate to (i) net repayments of borrowings on bank lines of credit totaling $59.0 million in the nine month period ended March 31, 2021 compared to net borrowings of $7.0 million in the same prior-year period and (ii) $36.6 million used for share repurchases and taxes paid related to the net share settlement of equity awards in the nine month period ended March 31, 2021 compared to $78.5 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 $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 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.

1 unchanged sentence

Issuer Purchases of Equity Securities

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

The following table contains information about the shares of common stock we purchased during the quarter ended March 31, 2021:

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

January 1 to January 31, 2021

February 1 to February 28, 2021

March 1 to March 31, 2021

(1) 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.

Contractual Obligations

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.

During the nine months ended March 31, 2021, 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 December 31, 2020, we did not have any significant off-balance sheet arrangements, as defined in Item 303(a)(4) of Regulation S-K.

As of March 31, 2021, we did not have any significant off-balance sheet arrangements, as defined in Item 303(a)(4) of Regulation S-K.

Recent Accounting Pronouncements

1 unchanged sentence

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