What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-04-28 compared with 2023-01-27 · 75 added, 84 removed, 160 unchanged (50% 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 December 31, 2022 and results of operations for the three and six months ended December 31, 2022 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, 2022 filed with the SEC.

This management’s discussion and analysis of financial condition as of March 31, 2023 and results of operations for the three and nine months ended March 31, 2023 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, 2022 filed with the SEC.

Forward-Looking Statements

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our ability to win new business and convert any orders received to sales within the same fiscal year;

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;

contract and regulatory compliance matters, and actions, which if brought, could result in judgments, settlements, fines, injunctions, debarment or penalties;

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.

Many of the referenced risks could be amplified by the magnitude and duration of the COVID-19 pandemic.

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

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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 53% and 55% of our total consolidated revenues for the six months ended December 31, 2021 and 2022, respectively.

Revenues from our Security division accounted for 54% and 57% of our total consolidated revenues for the nine months ended March 31, 2022 and 2023, respectively.

Healthcare Division .

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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 19% and 16% of our total consolidated revenues for the six months ended December 31, 2021 and 2022, respectively.

Revenues from our Healthcare division accounted for 18% and 15% of our total consolidated revenues for the nine months ended March 31, 2022 and 2023, respectively.

Optoelectronics and Manufacturing Division .

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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 28% and 29% of our total consolidated revenues for the six months ended December 31, 2021 and 2022, respectively.

Revenues from external customers in our Optoelectronics and Manufacturing division accounted for 28% of our total consolidated revenues for each of the nine months ended March 31, 2022 and 2023, respectively.

Trends and Uncertainties

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Coronavirus Pandemic.

The coronavirus disease 2019 (“COVID-19”) pandemic, including the emergence of new variants, 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, logistics providers and customers as a result of supply chain disruptions and delays, as well as labor challenges associated with employee absences, travel restrictions, site access, quarantine restrictions, remote work, and adjusted work schedules.

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 including with respect to vaccine administration.

There is substantial uncertainty regarding the duration, scope, and ultimate impact of the COVID-19 pandemic.

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 may continue to cause, significant economic disruptions and has impacted, and may continue to impact, our operations and the operations of our suppliers, logistics providers and customers as a result of supply chain disruptions and delays, as well as labor challenges.

During the early stages of the pandemic, our Healthcare division experienced increased demand for certain products as a result of COVID-19.

In our Security division, throughout the pandemic, receipt of certain orders has been delayed, most notably with respect to our aviation and cargo products, and our revenues have been adversely impacted as a result of the pandemic.

As many customers of our Security division continue to be 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 has impacted, and could further 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.

However in our Security division, throughout and primarily as a result of the pandemic, receipt of certain orders was delayed, most notably with respect to our aviation and cargo products, and our revenues were adversely impacted.

If customers of our Security division continue to be impacted by the pandemic, we could receive further requests to delay deliveries of equipment and modify service arrangements or the scheduling of factory or site acceptance tests, which could further impact timing of revenue recognition.

While we have been able to broadly maintain our operations, we experienced some disruption in our supply chain in certain markets due primarily to materials shortages, longer lead times on deliveries and transportation constraints.

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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.

The ultimate impact of COVID-19 on our operations and financial performance in future periods, including our ability to execute our programs in the expected timeframe, remains uncertain and will depend on future pandemic-related developments, including the duration of the pandemic, potential subsequent waves of COVID-19 infection or potential new variants, the effectiveness and adoption of COVID-19 vaccines and therapeutics, supplier impacts and related government actions to prevent and manage disease spread, including the implementation of any federal, state, local or foreign vaccine mandates, all of which are uncertain and difficult to predict.

The ultimate impact of COVID-19 on our operations and financial performance in future periods remains uncertain and will depend on future pandemic-related developments, including the duration of the pandemic, potential subsequent waves of COVID-19 infection or potential new variants, the effectiveness and adoption of COVID-19 vaccines and therapeutics, impacts on suppliers and related government actions to prevent and manage disease spread such as the implementation of any federal, state, local or foreign vaccine mandates.

The long-term impacts of COVID-19 on government budgets and other funding priorities, including international priorities, that impact demand for our products and services are also difficult to predict, but could negatively affect our future results and performance.

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and globally characterized by the supply chain environment, inflationary pressure, rising interest rates, and labor shortages.

Further, global economic conditions continue to be highly volatile due to the COVID-19 pandemic, resulting in market size contractions in certain countries due to economic slowdowns and government restrictions on movement.

In addition to the COVID-19 pandemic, these other global macroeconomic factors, coupled with the U.S.

political climate and political unrest internationally, have created uncertainty and impacted demand for certain of our products and services.

Also, the invasion of Ukraine by Russia and the sanctions imposed in response to this conflict have increased global economic and political uncertainty.

While the impact of these factors remains uncertain, we will continue to evaluate the extent to which these factors will impact our business, financial condition or results of operations.

Also, the continued conflict between Russia and Ukraine and the sanctions imposed in response to this conflict have increased global economic and political uncertainty.

While the impact of these factors remains uncertain, we will continue to evaluate the extent to which these factors will impact our business,

financial condition or results of operations.

We do not know how long this uncertainty will continue.

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Increased healthcare capital purchases made in prior periods may result in fewer capital purchases in subsequent periods.

The pandemic may also impact our ability to manufacture product 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.

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

Given the uncertainty surrounding the COVID-19 pandemic, the EU revised the regulations, and the date by which airports using explosive detection systems for hold baggage screening must meet Standard 3 has been changed to March 2024, with certain larger airports required to meet earlier installation dates.

The EU revised the regulations, and the date by which airports using explosive detection systems for hold baggage screening must meet Standard 3 has been changed to March 2024, with certain larger airports required to meet earlier installation dates.

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

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

or foreign government legislative, regulatory or enforcement policies.

Changes in Costs and Supply Chain Disruptions.

Our costs are subject to fluctuations, particularly due to changes in raw material, component, and logistics costs.

Our manufacturing and supply chain operations, including freight and shipping activities, have been and may continue to be impacted by increased vendor costs as well as the current global supply chain bottleneck.

Our manufacturing and supply chain operations, including freight and shipping activities, have been and may continue to be impacted by increased vendor and labor costs as well as current global supply chain challenges.

Specifically, we are impacted by the global shortage of electronic components and other materials needed for production and freight availability.

We expect continued disruptions in obtaining material and freight availability as the world economies react to and recover from supply chain shortages.

This increased cost environment has been exacerbated by the COVID-19 pandemic.

If we are unable to mitigate the impact of increased costs through pricing or other actions, there could be a negative impact on our business, results of operations, and financial condition.

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Currency Exchange Rates.

On a year-over-year basis, currency exchange rates negatively impacted reported sales by approximately 1.7% for the six months ended December 31, 2022 compared to the six months ended December 31, 2021, primarily due to the strengthening of the U.S.

On a year-over-year basis, currency exchange rates negatively impacted reported sales by approximately 1.5% for the nine months ended March 31, 2023 compared to the nine months ended March 31, 2022, primarily due to the strengthening of the U.S.

dollar against other foreign currencies in 2022.

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dollar against foreign currencies would positively impact our sales for the remainder of the year.

Results of Operations for the Three Months Ended December 31, 2021 (Q2 Fiscal 2022) Compared to the Three Months Ended December 31 , 2022 (Q2 Fiscal 2023) (amounts in millions)

Results of Operations for the Three Months Ended March 31, 2022 (Q3 Fiscal 2022) Compared to the Three Months Ended March 31, 2023 (Q3 Fiscal 2023) (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 December 31, 2022 increased year-over-year due to increases in product and service revenues of approximately $13.8 million and $7.7 million, respectively.

The increase in both product and service revenue was primarily driven by increased sales of cargo and vehicle inspection systems which was partially offset by a decrease in aviation related revenues.

Revenues for the Healthcare division during the three months ended December 31, 2022 decreased year-over-year due to a reduction in patient monitoring sales of $7.3 million due in part to elevated demand related to COVID in the prior year period, a decrease in cardiology sales of $1.4 million and a decrease in service revenue of $0.2 million.

Revenues for the Optoelectronics and Manufacturing division during the three months ended December 31, 2022 increased year-over year as a result of an increase in revenue in our optoelectronics business and contract manufacturing business of approximately $2.5 million and $3.8 million, respectively.

Revenues for the Security division during the three months ended March 31, 2023 increased year-over-year due to increases in product and service revenues of approximately $10.7 million and $9.4 million, respectively.

The increase in both product and service revenue was primarily driven by increased sales of cargo and vehicle inspection systems.

Revenues for the Healthcare division during the three months ended March 31, 2023 decreased year-over-year due to a reduction in patient monitoring sales of $8.4 million and a decrease in cardiology sales of $1.2 million, which was partially offset by an increase in service revenue of $1.3 million.

Revenues for the Optoelectronics and Manufacturing division during the three months ended March 31, 2023 were similar to revenues in the same prior-year period.

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.

Our cost of goods sold increased year-over-year primarily as a result of the increase in revenues and higher raw material costs.

Gross profit as a percentage of net revenues during the quarter ended December 31, 2022 decreased on a year-over-year basis due to (i) a reduction in the Security division gross margins due to a decrease in margin from product sales driven by a less favorable product mix and increased component costs, (ii) a reduction in sales in the Healthcare division, which carries the highest gross margin of our three divisions, and (iii) an increase in sales in the Optoelectronics and Manufacturing division, which carries the lowest gross margin of our three divisions.

Gross profit as a percentage of net revenues during the quarter ended March 31, 2023 decreased on a year-over-year basis due to a reduction in the Security division gross margins due to a decrease in margin from product sales driven by a less favorable product mix and increased component costs and a reduction in sales in the Healthcare division, which carries the highest gross margin of our three divisions.

Operating Expenses

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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 December 31, 2022 was $0.9 million lower than such expenses in the same prior-year period primarily due to reduced compensation costs offset primarily by a provision for bad debts compared to a bad debt recovery in the second quarter of fiscal 2022.

SG&A expense for the three months ended March 31, 2023 was $4.1 million lower than such expenses in the same prior-year period primarily due to bad debt recoveries in the third quarter of fiscal 2023 compared to a provision for bad debts in the comparable quarter of the prior year, a reduction in marketing expense, a change in fair value of certain liabilities, and more favorable foreign exchange rates, partially offset by increased compensation and travel expenses.

Research and development .

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

R&D expense during the three months ended December 31, 2022 was approximately $0.5 million lower than such expenses in the same prior-year period primarily due to a decrease in outside services incurred by our Security and Healthcare divisions partially offset by increases in compensation and professional fees.

R&D expense during the three months ended March 31, 2023 was relatively comparable to the prior year comparable period.

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, 2022, impairment, restructuring and other charges primarily consisted of $1.9 million for legal charges and $0.2 million in charges for employee terminations.

During the three months ended December 31, 2021, impairment, restructuring and other charges primarily consisted of $0.5 million for legal charges and $0.3 million in charges for employee terminations.

During the three months ended March 31, 2023, impairment, restructuring and other charges primarily consisted of $0.5 million for employee terminations, $0.3 million in legal charges primarily related to government investigations and $0.1 million in acquisition-related costs and facility closure costs.

During the three months ended March 31, 2022, impairment, restructuring and other charges primarily consisted of $0.8 million for legal charges, $0.4 million in charges for employee terminations, and $0.3 million in acquisition related costs.

Interest and other expense, net .

For the three months ended December 31, 2022, interest and other expense, net was $5.2 million as compared to $2.2 million in the same prior-year period.

This increase was driven by higher average interest rates and higher average levels of borrowing under our credit facility during the three months ended December 31, 2022 in comparison with the levels of borrowing during the same period in the prior year.

The 1.25% convertible notes that were previously outstanding during the three month period ended December 31, 2021 were retired in September 2022 using borrowings from our credit facility which carries a higher interest rate.

For the three months ended March 31, 2023, interest and other expense, net was $5.7 million as compared to $2.3 million in the same prior-year period.

This increase was driven by higher average interest rates and higher average levels of borrowing under our credit facility during the three months ended March 31, 2023 in comparison with the levels of borrowing during the same period in the prior year.

The 1.25% convertible notes that were previously outstanding during the three month period ended March 31, 2022 were retired in September 2022 using borrowings from our credit facility which carries a higher interest rate.

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, 2022, we recognized a provision for income taxes of $4.0 million compared to $7.1 million for the comparable prior-year period.

The effective tax rates for the three months ended December 31, 2021 and 2022 were 26.3% and 19.5%, respectively.

During the three months ended December 31, 2022, we recognized a net discrete tax benefit of $0.4 million related to equity-based compensation under ASU 2016-09 and a benefit of $0.4 million from changes in prior year estimates.

During the three-month periods ended December 31, 2021, we recognized a net discrete tax provision of $0.3 million for changes in prior year tax estimates and equity-based compensation under ASU 2016-09.

Results of Operations for the Six Months Ended December 31, 2021 (YTD Q2 Fiscal 2022) Compared to the Six Months Ended December 31, 2022 (YTD Q2 Fiscal 2023) (amounts in millions)

For the three months ended March 31, 2023, we recognized a provision for income taxes of $6.8 million compared to $10.8 million for the comparable prior-year period.

The effective tax rates for the three months ended March 31, 2022 and 2023 were 20.1% and 23.8%, respectively.

During the three months ended March 31, 2023, we recognized a net discrete tax expense of $0.2 million related to equity-based compensation under ASU 2016-09 and changes in prior year estimates.

During the three-month periods ended March 31, 2022, we recognized a net discrete tax benefit of $0.2 million related to equity-based compensation under ASU 2016-09 and changes in prior year tax estimates.

Results of Operations for the Nine Months Ended March 31, 2022 (YTD Q3 Fiscal 2022) Compared to the Nine Months Ended March 31, 2023 (YTD Q3 Fiscal 2023) (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 six months ended December 31, 2022 increased year-over-year due to an increase in product and service revenues of approximately $11.1 million and $5.9 million, respectively.

The increase in both product and service revenue was primarily driven by increased sales of cargo and vehicle inspection systems which was partially offset by a decrease in aviation related revenues.

Revenues for the Healthcare division during the six months ended December 31, 2022 decreased year-over-year due to a reduction in patient monitoring sales of $14.1 million due in part to elevated demand related to COVID in the prior year period, and a decrease in cardiology sales of $2.5 million, offset by an increase in service revenues of $0.8 million.

Revenues for the Optoelectronics and Manufacturing division during the six months ended December 31, 2022 increased year-over year as a result of an increase in revenue in our optoelectronics business of approximately $6.6 million.

Revenues for the Security division during the nine months ended March 31, 2023 increased year-over-year due to an increase in product and service revenues of approximately $21.8 million and $15.3 million, respectively.

The increase in both product and service revenue was primarily driven by increased sales of cargo and vehicle inspection systems.

Revenues for the Healthcare division during the nine months ended March 31, 2023 decreased year-over-year due to a reduction in patient monitoring sales of $22.3 million and a decrease in cardiology sales of $3.2 million, partially offset by an increase in service revenues of $1.3 million.

Revenues for the Optoelectronics and Manufacturing division during the nine months ended March 31, 2023 increased year-over year as a result of an increase in revenue in our optoelectronics business of approximately $8.1 million, partially offset by a reduction in revenue in our contract manufacturing business of approximately $0.8 million.

Our cost of goods sold increased year-over-year primarily as a result of the increase in revenues and higher raw material costs.

Gross profit as a percentage of net revenues during the six months ended December 31, 2022 decreased on a year-over-year basis due to (i) a reduction in the Security division gross margins due to a decrease in margin from product sales driven by a less favorable product mix and increased component costs, (ii) a reduction in sales in the Healthcare division, which carries the highest gross margin of our three divisions, and (iii) an increase in sales in the Optoelectronics and Manufacturing division, which carries the lowest gross margin of our three divisions .

Gross profit as a percentage of net revenues during the nine months ended March 31, 2023 decreased on a year-over-year basis due to (i) a reduction in the Security division gross margins due to a decrease in margin from product sales driven by a less favorable product mix and increased component costs, (ii) a reduction in sales in the Healthcare division, which carries the highest gross margin of our three divisions, and (iii) an increase in sales in the Optoelectronics and Manufacturing division, which carries the lowest gross margin of our three divisions .

Operating Expenses

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Selling, general and administrative .

SG&A expense for the six months ended December 31, 2022 was $4.8 million lower than such expenses in the same prior-year period primarily due to a reduction in compensation, professional fees and favorable foreign exchange rates partially offset by a provision for bad debts compared to a bad debt recovery in the prior period.

SG&A expense for the nine months ended March 31, 2023 was $8.9 million lower than such expenses in the same prior-year period primarily due primarily to a reduction in compensation, professional fees, a change in fair value of certain liabilities, favorable foreign exchange rates, and higher bad debt recoveries than in the prior period which were partially offset by increased travel expenses.

Research and development .

R&D expense during the six months ended December 31, 2022 decreased as compared to the same prior-year period primarily due to a decrease in outside services partially offset by increases in compensation and travel in our Security and Healthcare divisions.

R&D expense during the nine months ended March 31, 2023 decreased as compared to the same prior-year period primarily due to a decrease in outside services partially offset by increases in compensation and travel expenses in our Security and Healthcare divisions.

Impairment, restructuring and other charges.

During the six months ended December 31, 2022, impairment, restructuring and other charges primarily consisted of $2.9 million in legal charges primarily relating to government investigations and $0.5 million for employee terminations.

During the six months ended December 31, 2021, impairment, restructuring and other charges consisted of $2.7 million for legal charges and $0.7 million in charges for employee terminations.

During the nine months ended March 31, 2023, impairment, restructuring and other charges primarily consisted of $3.2 million in legal charges primarily related to class action litigation and government investigations, $1.0 million for employee terminations, and $0.2 million in acquisition-related costs and facility closure costs.

During the nine months ended March 31, 2022, impairment, restructuring and other charges consisted of $3.5 million for legal charges, $1.0 million in charges for employee terminations, and $0.3 million in acquisition related costs.

Interest and other expense, net .

For the six months ended December 31, 2022, interest and other expense, net was $8.6 million as compared to $4.2 million in the same prior-year period.

This increase was driven by higher average interest rates and higher average levels of borrowing under our credit facility during the six months ended December 31, 2022 in comparison with the levels of borrowing during the same period in the prior year.

The 1.25% convertible notes that were previously outstanding during the six-month period ended December 31, 2021 were retired in September 2022 using borrowings from our credit facility which carries a higher interest rate.

For the nine months ended March 31, 2023, interest and other expense, net was $14.3 million as compared to $6.5 million in the same prior-year period.

This increase was driven by higher average interest rates and higher average levels of borrowing under our credit facility during the nine months ended March 31, 2023 in comparison with the levels of borrowing during the same period in the prior year.

The 1.25% convertible notes that were previously outstanding during the nine-month period ended March 31, 2022 were retired in September 2022 using borrowings from our credit facility which carries a higher interest rate.

Income taxes .

For the six months ended December 31, 2022, we recognized a provision for income taxes of $7.6 million compared to $10.7 million for the comparable prior-year period.

The effective tax rates for the six months ended December 31, 2021 and 2022 were 21.6% for both periods.

During the six months ended December 31, 2022, we recognized discrete tax benefit of $0.5 million related to equity-based compensation under ASU 2016-09 and $0.4 million from changes in prior year estimates.

During the six months ended December 31, 2021, we recognized a net discrete tax benefit of $1.8 million, which was comprised of $2.0 million related to equity-based compensation under ASU 2016-09 partially offset by a discrete tax expense for prior year tax estimates of $0.2 million.

For the nine months ended March 31, 2023, we recognized a provision for income taxes of $14.4 million compared to $21.4 million for the comparable prior-year period.

The effective tax rates for the nine months ended March 31, 2022 and 2023 was 20.8% and 22.6%, respectively.

During the nine months ended March 31, 2023, we recognized discrete tax benefit of $0.6 million related to equity-based compensation under ASU 2016-09 and changes in prior year estimates.

During the nine months ended March 31, 2022, we recognized a net discrete tax benefit of $2.0 million related to equity-based compensation under ASU 2016-09.

Liquidity and Capital Resources

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

Cash and cash equivalents totaled $45.6 million at December 31, 2022, a decrease of $18.6 million, or 29.0%, from $64.2 million at June 30, 2022.

Cash and cash equivalents totaled $65.6 million at March 31, 2023, an increase of $1.4 million, or 2.2%, from $64.2 million at June 30, 2022.

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.

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We have a $750 million credit facility that is comprised of a $600 million revolving credit facility, which includes a $300 million sub-facility for letters of credit, and a $150 million term loan.

As of December 31, 2022, there was $235.0 million outstanding under our revolving credit facility, $146.9 million outstanding under the term loan and $66.8 million of outstanding letters of credit.

As of December 31, 2022, the total amount available under these credit facilities was $298.2 million.

Cash Provided by (Used in) Operating Activities.

As of March 31, 2023, there was $215 million outstanding under our revolving credit facility, $145 million outstanding under the term loan and $61.3 million of outstanding letters of credit.

As of March 31, 2023, the total amount available under these credit facilities was $323.7 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, 2022, we generated cash from operations of $8.2 million compared to $3.4 million of cash generated in the same prior-year period.

The increase was driven primarily by the positive impact in working capital changes.

During the nine months ended March 31, 2023, we generated cash from operations of $72.7 million compared to $41.8 million in the same prior-year period.

The increase was driven primarily by the positive impact of working capital changes.

Cash Used in Investing Activities .

Net cash used in investing activities was $18.9 million for the six months ended December 31, 2022 as compared to $15.4 million in the same prior-year period.

Cash used to acquire businesses was $3.5 million during the six-month period ended December 31, 2022 compared to nil in the prior year.

Capital expenditures in the six-month period ended December 31, 2022 were $7.0 million compared to $7.4 million in the same prior-year period.

Expenditures for intangible and other assets in the six-month period ended December 31, 2022 were $8.0 million compared to $8.1 million in the same prior-year period.

Cash Provided by (Used in) Financing Activities .

Net cash used in financing activities was $3.7 million during the six months ended December 31, 2022 compared to net cash provided by financing activities of $17.6 million during the same prior-year period.

The increase in cash used in financing activities was due to the increase in net payments on long-term debt by $145 million, of which $242.3 million pertains to the repurchase and cancellation of the 1.25% Convertible Senior Notes utilizing proceeds of the senior secured credit facility, that was partially offset by the increase in net borrowings on bank lines of credit by $93 million.

Cash used to repurchase of common stock and taxes paid related to the net settlement of equity awards was $33.4 million in the six-months ended December 31, 2022 compared to $64.4 in the same prior-year period.

Net cash used in investing activities was $30.4 million for the nine months ended March 31, 2023 as compared to $6.6 million in the same prior-year period.

Cash used to acquire businesses was $4.6 million during the nine-month period ended March 31, 2023 compared to $14.1 million in the prior year.

Capital expenditures in the nine-month period ended March 31, 2023 were $12.7 million compared to $10.3 million in the same prior-year period.

Expenditures for intangible and other assets were $12.3 million in each of the nine-month periods ended March 31, 2023 and 2022.

In fiscal year 2022, the sale of certain corporate owned real estate in a sale and leaseback transaction generated $32.3 million in proceeds.

Cash Used in Financing Activities .

Net cash used in financing activities was $37.1 million during the nine months ended March 31, 2023 compared to $30.9 million during the same prior-year period.

The $6.2 million increase in cash used in financing activities during the nine months ended March 31, 2023 as compared to the comparable prior year period was due primarily to a reduction in net borrowings of $74.6 million, which was partially offset by a reduction in repurchases of common stock and taxes paid related to net settlement of equity awards of $69.6 million.

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

Cash Held by Foreign Subsidiaries

Our cash and cash equivalents totaled $45.6 million at December 31, 2022.

Our cash and cash equivalents totaled $65.6 million at March 31, 2023.

Of this amount, approximately 81% 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, Singapore, Malaysia, Mexico, Canada and India and, to a lesser extent, in Indonesia, Albania and Australia.

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

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.

In the event we repatriate cash from certain foreign operations and if taxes have not previously been withheld on the related earnings, we would provide for withholding taxes at the time we change our intention with regard to the reinvestment of those earnings.

In the event we change our intention regarding the reinvestment of those earnings and we repatriate cash to the U.S.

from certain foreign operations, we would provide at the time for withholding taxes to the extent not previously withheld on such earnings.

Issuer Purchases of Equity Securities

The following table contains information about the shares of common stock we purchased during the quarter ended December 31, 2022:

The following table contains information about the shares of common stock we purchased during the quarter ended March 31, 2023:

Maximum number (or

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under the plans or

October 1 to October 31, 2022

November 1 to November 30, 2022

December 1 to December 31, 2022

(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 to 3,000,000 shares the maximum number of shares authorized under the stock repurchase program.

In September 2022, when there were 1,131,301 shares remaining authorized and yet to be repurchased under the plan, the Board of Directors renewed the authorization and revised the maximum number of shares to 2,000,000 shares authorized under the stock repurchase program.

January 1 to January 31, 2023

February 1 to February 28, 2023

March 1 to March 31, 2023

(1) In September 2022, when there were 1,131,301 shares remaining authorized to repurchase under the then-existing share repurchase program, the Board of Directors renewed the authorization and revised the maximum number of shares to 2,000,000 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, 2022, 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, 2022.

During the nine months ended March 31, 2023, 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, 2022.

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

2 unchanged sentences

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