What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-04-30 compared with 2021-01-29 · 287 added, 252 removed, 745 unchanged (42% of the section changed)

6 unchanged sentences

Accounts receivable, net of allowances of $ 32,811 and $ 28,508

‎ at December 31, 2020 and June 30, 2020, respectively

‎ at March 31, 2021 and June 30, 2020, respectively

Inventories (note 3)

31 unchanged sentences

Common stock, $ 0.004 par value, 350,000,000 shares authorized;

‎ 187,340,332 issued and 145,504,098 outstanding at December 31, 2020 and

‎ 187,352,828 issued and 145,516,594 outstanding at March 31, 2021 and

‎ 186,723,407 issued and 144,887,175 outstanding at June 30, 2020

1 unchanged sentence

Retained earnings

Treasury stock, at cost, 41,836,234 shares at December 31, 2020 and June 30, 2020

Treasury stock, at cost, 41,836,234 shares at March 31, 2021 and June 30, 2020

( 1,623,256 )

6 unchanged sentences

AND SUBSIDIARIES

Condensed Consolidated Statements of Income (Unaudited)

Condensed Consolidated Statements of Operations (Unaudited)

(In US$ and in thousands, except per share data)

Three Months Ended

‎ December 31,

Six Months Ended

‎ December 31,

Nine Months Ended

Net revenue - Sleep and Respiratory Care products

20 unchanged sentences

Income before income taxes

Basic earnings per share (note 9)

Diluted earnings per share (note 9)

Net income (loss)

Basic earnings (loss) per share (note 9)

Diluted earnings (loss) per share (note 9)

Dividend declared per share

7 unchanged sentences

Three Months Ended

‎ December 31,

Six Months Ended

‎ December 31,

Nine Months Ended

Net income (loss)

Other comprehensive income (loss):

Foreign currency translation (loss) gain adjustments

Comprehensive income

Comprehensive income (loss)

See the accompanying notes to the unaudited condensed consolidated financial statements.

24 unchanged sentences

( 1,623,256 )

Common stock issued on exercise of options

Common stock issued on vesting of restricted stock units, net of shares withheld for tax

Common stock issued on employee stock purchase plan

Stock-based compensation costs

Other comprehensive income (loss)

Net income (loss)

Dividends declared

Balance, March 31, 2021

( 1,623,256 )

See the accompanying notes to the unaudited condensed consolidated financial statements.

11 unchanged sentences

Stock-based compensation costs

Other comprehensive income

Other comprehensive income (loss)

Dividends declared

9 unchanged sentences

( 1,623,256 )

Common stock issued on exercise of options

Common stock issued on vesting of restricted stock units, net of shares withheld for tax

Stock-based compensation costs

Other comprehensive income (loss)

Dividends declared

Balance, March 31, 2020

( 1,623,256 )

See the accompanying notes to the unaudited condensed consolidated financial statements.

3 unchanged sentences

(In US$ and in thousands)

Six Months Ended

‎ December 31,

Nine Months Ended

Cash flows from operating activities:

34 unchanged sentences

Interest paid

Fair value of assets acquired, excluding cash

Liabilities assumed

Goodwill on acquisition

Deferred payments

Fair value of contingent consideration

Cash paid for acquisitions

See the accompanying notes to the unaudited condensed consolidated financial statements.

17 unchanged sentences

The results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the year ending June 30, 2021.

The condensed consolidated financial statements for the three and six months ended December 31, 2020 and December 31, 2019 are unaudited and should be read in conjunction with the consolidated financial statements and notes thereto included in our Form 10-K for the year ended June 30, 2020.

The condensed consolidated financial statements for the three and nine months ended March 31, 2021 and March 31, 2020 are unaudited and should be read in conjunction with the consolidated financial statements and notes thereto included in our Form 10-K for the year ended June 30, 2020.

Revenue Recognition

7 unchanged sentences

Three Months Ended

‎ December 31,

Six Months Ended

‎ December 31,

Nine Months Ended

U.S., Canada and Latin America

66 unchanged sentences

Three Months Ended

‎ December 31,

Six Months Ended

‎ December 31,

Nine Months Ended

Sales-type lease revenue

42 unchanged sentences

Certain items are maintained at the corporate level and are not allocated to the segments.

The non-allocated items include corporate headquarters costs, stock-based compensation, amortization expense from acquired intangibles, acquisition related expenses, interest income, interest expense and other, net.

The non-allocated items include corporate headquarters costs, stock-based compensation, amortization expense from acquired intangibles, restructuring expenses, litigation settlement expenses, deferred revenue fair value adjustment, interest income, interest expense and other, net.

We neither discretely allocate assets to our operating segments, nor does our Chief Operating Decision Maker evaluate the operating segments using discrete asset information.

1 unchanged sentence

Three Months Ended

‎ December 31,

Six Months Ended

‎ December 31,

Nine Months Ended

Net revenue by segment

20 unchanged sentences

(1) The deferred revenue fair value adjustment is a purchase price accounting adjustment related to MatrixCare which was acquired on November 13, 2018.

(2) During the three and six months ended December 31, 2020, we recorded $ 0.0 million and $ 2.8 million of impairment for our operating lease right-of-use asset, respectively.

(2) During the three and nine months ended March 31, 2021, we recorded $ 0.0 million and $ 2.8 million of impairment for our operating lease right-of-use asset, respectively.

The impairment related to leases for office space and was recorded within net operating profit.

The impairment for the six months ended December 31, 2020 attributable to Sleep and Respiratory Care was $ 1.6 million and $ 1.2 million for SaaS .

The impairment for the nine months ended March 31, 2021 attributable to Sleep and Respiratory Care was $ 1.6 million and $ 1.2 million for SaaS .

(3) Supplemental Balance Sheet Information

25 unchanged sentences

A reconciliation of changes in our goodwill by reportable segment is as follows (in thousands):

Six Months Ended December 31, 2020

Nine Months Ended March 31, 2021

‎ Respiratory Care

Balance at the beginning of the period

Business acquisitions

Foreign currency translation adjustments

8 unchanged sentences

We estimate the fair value of our non-marketable equity investments using Level 3 inputs to assess whether impairment losses shall be recorded.

All gains and losses on marketable and non-marketable equity securities, realized and unrealized, are recognized in other, net on the condensed consolidated statements of income.

All gains and losses on marketable and non-marketable equity securities, realized and unrealized, are recognized in other, net on the condensed consolidated statements of operations.

Equity investments whereby we have significant influence but not control over the investee, and are not the primary beneficiary of the investee’s activities, are accounted for under the equity method.

Under this method, we record our share of gains or losses attributable to equity method investments as a component of other, net on the condensed consolidated statements of income.

Under this method, we record our share of gains or losses attributable to equity method investments as a component of other, net on the condensed consolidated statements of operations.

Equity investments by measurement category were as follows (in thousands):

5 unchanged sentences

Notes to the Condensed Consolidated Financial Statements

The following table shows a reconciliation of the changes in our non-marketable equity investments (in thousands):

Six Months Ended

‎ December 31,

The following table shows a reconciliation of the changes in our equity investments (in thousands):

Nine Months Ended

‎ March 31, 2021

Non-marketable securities

Marketable securities

Equity method investments

Balance at the beginning of the period

Impairment of investments

Reclassification to marketable securities (1)

Carrying value of non-marketable securities

(1) During the six months ended December 31, 2020, one of our investments, which was previously accounted for under the measurement alternative, completed its initial public offering which resulted in a change of accounting methodology to fair value.

Net unrealized gains and losses recognized for equity investments held as of December 31, 2020 were a loss of $ 3.7 million for three months ended December 31, 2020 and a gain of $ 4.8 million for six months ended December 31, 2020, which related to publicly traded marketable equity securities.

Net unrealized losses recognized for equity investments held as of December 31, 2019 for the three and six months ended December 31, 2019 were $ 2.8 million and $ 5.4 million, respectively, which related to impairments of privately held non-marketable securities.

The following table shows a reconciliation of the changes in our equity securities accounted for under the equity method (in thousands):

Six Months Ended

‎ December 31,

Observable price adjustments on non-marketable equity securities

Ongoing mark-to-market adjustments on marketable equity securities

Reclassifications (1)

Loss attributable to equity method investments

Carrying value at the end of the period

(1) During the nine months ended March 31, 2021, one of our investments, which was previously accounted for under the measurement alternative, completed its initial public offering which resulted in a change of accounting methodology to fair value.

Nine Months Ended

‎ March 31, 2020

Non-marketable securities

Marketable securities

Equity method investments

Balance at the beginning of the period

Impairment of investments

Loss attributable to equity method investments

Carrying value of equity method investments

Carrying value at the end of the period

Net unrealized gains recognized for equity investments held as of March 31, 2021 for the three and nine months ended March 31, 2021 were $ 4.7 million and $ 9.4 million, respectively, which related to publicly traded marketable equity securities and privately held non-marketable securities.

Net unrealized losses recognized for equity investments held as of March 31, 2020 for the three and nine months ended March 31, 2020 were $ 9.1 million and $ 14.5 million, respectively, which related to impairments of privately held non-marketable securities.

(6) Income Taxes

5 unchanged sentences

Any final assessment resulting from tax audits may result in material changes to our past or future taxable income, tax payable or deferred tax assets, and may require us to pay penalties and interest that could materially adversely affect our financial results .

We are under audit by the ATO in three different cycles:

tax years 2009 to 2013, tax years 2014 to 2017 and tax year 2018.

We received Notices of Amended Assessments from the ATO for the tax years 2009 to 2013.

Based on these assessments, the ATO asserted that we owe $ 151.7 million in additional income tax and $ 38.4 million in accrued interest, of which $ 75.9 million was paid in April 2018 under a payment arrangement with the ATO.

In June 2018, we received a notice from the ATO claiming penalties of 50 % of the additional income tax that was assessed, or $ 75.9 million.

As of December 31, 2020, we recorded a receivable in prepaid taxes and other non-current assets for the amount paid in April 2018 as we ultimately expect this will be refunded by the ATO.

We do not agree with the ATO’s assessments and we continue to believe we are more likely than not to be successful in defending our position.

However, if we are not successful, we will not receive a refund of the amount paid in April 2018 and we would be required to pay the remaining additional income tax, accrued interest and penalties, which would be recorded as income tax expense.

Our effective income tax rate for the three and nine months ended March 31, 2021 was 136.0 % and 56.6 %, respectively, as compared to 14.9 % and 14.8 % for the three and nine months ended March 31, 2020, respectively.

The increase in our effective tax rate was primarily due to an increase in unrecognized tax benefits as outlined below.

Additionally, the increase in our effective tax rate was impacted by the geographic mix of earnings and lower windfall tax benefits related to the vesting or settlement of employee share-based awards, which reduced our income tax expense by $ 0.6 million and $ 12.6 million for the three and nine months ended March 31, 2021, respectively, as compared to $ 2.4 million and $ 24.8 million for the three and nine months ended March 31, 2020, respectively.

We are under audit by the Australian Taxation Office (the “ATO”) for the years 2009 to 2018 (the “Audit Period”).

The audits primarily involve a transfer pricing dispute in which the ATO asserts we should have paid additional Australian taxes on income derived from our Singapore operations.

The ATO issued Notices of Amended Assessments for the tax years 2009 to 2013 seeking a total of $ 266.0 million, consisting of $ 151.7 million in additional income tax and $ 114.3 million in penalties and interest.

The 2014 to 2018 periods are still under audit and we have not yet received any Notices of Amended Assessments relative to those periods.

A total of $ 98.8 million in tax has been prepaid in relation to the Audit Period, which is consistent with ATO procedural audit practice.

We do not agree with the ATO’s assessments and continue to believe we are more likely than not to be successful in defending our position if the matter progresses to litigation.

However, if we are not successful, we will be required to pay some or all of the additional income tax, accrued interest and penalties, including potential additional amounts relating to the 2014 to 2018 periods.

To that end, we are engaged in ongoing discussions with the ATO to resolve the dispute for the entire Audit Period.

Given the stage of those discussions, during the three and nine months ended March 31, 2021, we recorded $ 395.9 million of gross unrecognized tax benefits, including $ 53.3 million of accrued

PART I – FINANCIAL INFORMATION

1 unchanged sentence

Notes to the Condensed Consolidated Financial Statements

interest and penalties, associated with the ATO audits for the Audit Period.

This amount reflects our estimate of the potential tax liability and is subject to change.

If recognized, we estimate that approximately $ 254.8 million, of unrecognized tax benefits would affect our effective tax rate, which represents the $ 395.9 million of gross unrecognized tax benefits noted previously, adjusted for tax credits and deductions of $ 141.1 million .

We have elected to recognize interest and penalties related to unrecognized tax benefits as a component of income taxes.

The timing and resolution of the ATO audits are inherently uncertain, and the amounts we might ultimately pay, if any, upon resolution of issues raised by the ATO may differ materially from the amounts accrued.

Although it is expected that the amount of unrecognized tax benefits may change in the next 12 months, an estimate of the range of the possible change cannot be made.

(7) Product Warranties

Changes in the liability for warranty costs, which is included in accrued expenses in our condensed consolidated balance sheets, are as follows (in thousands):

Six Months Ended

‎ December 31,

Nine Months Ended

Balance at the beginning of the period

22 unchanged sentences

Events of default under the Revolving Credit Agreement and the Term Credit Agreement include, in each case, failure to make payments when due, the occurrence of a default in the performance of any covenants in the respective agreements or related documents, or certain changes of control of us, or the respective guarantors of the obligations borrowed under the Revolving Credit Agreement and Term Credit Agreement.

The Revolving Credit Agreement and Term Credit Agreement each terminate on April 17, 2023 , when all unpaid principal and interest under the loans must be repaid.

Amounts borrowed under the Term Credit Agreement will also amortize on a semi-annual basis, with a $ 6.0 million principal payment required on each such semi-annual amortization date.

The outstanding principal amounts will bear interest at a rate equal to LIBOR plus 0.75 % to 1.50 % (depending on the then-applicable leverage ratio) or the Base Rate (as defined in the Revolving Credit Agreement and the Term Credit Agreement, as applicable) plus 0.0 % to 0.50 % (depending on the then-applicable leverage ratio).

At December 31, 2020, the interest rate that was being charged on the outstanding principal amounts was 1.1 %.

An applicable commitment

PART I – FINANCIAL INFORMATION

1 unchanged sentence

Notes to the Condensed Consolidated Financial Statements

fee of 0.100 % to 0.175 % (depending on the then-applicable leverage ratio) applies on the unused portion of the revolving credit facility.

As of December 31, 2020, we had $ 1.4 billion available for draw down under the revolving credit facility.

The Revolving Credit Agreement and Term Credit Agreement each terminate on April 17, 2023 , when all unpaid principal and interest under the loans must be repaid.

Amounts borrowed under the Term Credit Agreement will also amortize on a semi-annual basis, with a $ 6.0 million principal payment required on each such semi-annual amortization date.

At March 31, 2021, the interest rate that was being charged on the outstanding principal amounts was 1.0 %.

An applicable commitment fee of 0.100 % to 0.175 % (depending on the then-applicable leverage ratio) applies on the unused portion of the revolving credit facility.

As of March 31, 2021, we had $ 1.5 billion available for draw down under the revolving credit facility.

We are required to disclose the fair value of financial instruments for which it is practicable to estimate the value, even though these instruments are not recognized at fair value in the consolidated balance sheets.

As the Revolving Credit and Term Credit Agreements’ interest rate is calculated as LIBOR plus the spreads described above, its carrying amount is equivalent to its fair value as at December 31, 2020 and June 30, 2020, which was $ 329.0 million and $ 680.0 million, respectively.

As the Revolving Credit and Term Credit Agreements’ interest rate is calculated as LIBOR plus the spreads described above, its carrying amount is equivalent to its fair value as at March 31, 2021 and June 30, 2020, which was $ 234.0 million and $ 680.0 million, respectively.

Quoted market prices in active markets for identical liabilities based inputs (Level 1) were used to estimate fair value.

4 unchanged sentences

Under the terms of the Note Purchase Agreement, we agreed to customary covenants including with respect to our corporate existence, transactions with affiliates, and mergers and other extraordinary transactions.

We also agreed that, subject to limited exceptions, we will maintain a ratio of consolidated funded debt to consolidated EBITDA of no more than 3.50 to 1.00 as of the last day of any fiscal quarter, and will not at any time permit the amount of all priority secured and unsecured debt of us and our subsidiaries to exceed 10% of our consolidated tangible assets, determined as of the end of our most recently ended fiscal quarter.

We also agreed that, subject to limited exceptions, we will maintain a ratio of consolidated funded debt to consolidated EBITDA (as defined in the Note Purchase Agreement) of no more than 3.50 to 1.00 as of the last day of any fiscal quarter, and will not at any time permit the amount of all priority secured and unsecured debt of us and our subsidiaries to exceed 10% of our consolidated tangible assets, determined as of the end of our most recently ended fiscal quarter.

This ratio is calculated at the end of each reporting period for which the Note Purchase Agreement requires us to deliver financial statements, using the results of the 12 consecutive month period ending with such reporting period.

As of December 31, 2020, the Senior Notes have a carrying amount of $ 500.0 million, excluding deferred borrowing costs, and an estimated fair value of $ 546.1 million.

As of March 31, 2021, the Senior Notes have a carrying amount of $ 500.0 million, excluding deferred borrowing costs, and an estimated fair value of $ 519.3 million.

Quoted market prices in active markets for identical liabilities based inputs (Level 1) were used to estimate fair value.

At December 31, 2020, we were in compliance with our debt covenants and there was $ 829.0 million outstanding under the Revolving Credit Agreement, Term Credit Agreement and Senior Notes.

(9) Earnings Per Share

Basic earnings per share is computed by dividing the net income available to common stockholders by the weighted average number of shares of common stock outstanding.

For purposes of calculating diluted earnings per share, the denominator includes both the weighted average number of shares of common stock outstanding and the number of dilutive common stock equivalents such as stock options and restricted stock units.

The weighted average number of outstanding stock options and restricted stock units not included in the computation of diluted earnings per share were 196,856 and 73,509 for the three months ended December 31, 2020 and 2019 , respectively, and 154,888 and 88,624 for the six months ended December 31, 2020 and 2019, respectively as the effect would have been anti-dilutive.

Basic and diluted earnings per share are calculated as follows (in thousands except per share data):

At March 31, 2021, we were in compliance with our debt covenants and there was $ 734.0 million outstanding under the Revolving Credit Agreement, Term Credit Agreement and Senior Notes.

(9) Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing the net income (loss) available to common stockholders by the weighted average number of shares of common stock outstanding.

For purposes of calculating diluted earnings (loss) per share, the denominator includes both the weighted average number of shares of common stock outstanding and the number of dilutive common stock equivalents such as stock options and restricted stock units.

The calculation of diluted weighted average shares for the three months ended March 31, 2021 excluded 857,799 potentially dilutive common shares because we reported a net loss.

The weighted average number of outstanding stock options and restricted stock units not included in the computation of diluted earnings (loss) per share were 225,580 and 267,556 for the three months ended March 31, 2021 and 2020 , respectively, and 200,341 and 128,789 for the nine months ended March 31, 2021 and 2020, respectively as the effect would have been anti-dilutive.

PART I – FINANCIAL INFORMATION

AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

Basic and diluted earnings (loss) per share are calculated as follows (in thousands except per share data):

Three Months Ended

‎ December 31,

Six Months Ended

‎ December 31,

Nine Months Ended

Net income (loss)

Basic weighted-average common shares outstanding

2 unchanged sentences

Diluted weighted average shares

Basic earnings per share

Diluted earnings per share

PART I – FINANCIAL INFORMATION

AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

Basic earnings (loss) per share

Diluted earnings (loss) per share

(10 ) Legal Actions and Contingencies

2 unchanged sentences

Taxation Matters

As described in note 6 – Income Taxes, we are under audit by the ATO in three different cycles:

We are under audit by the ATO in three different cycles:

tax years 2009 to 2013, tax years 2014 to 2017 and tax year 2018.

We received Notices of Amended Assessments from the ATO for the tax years 2009 to 2013.

In June 2018, we received a notice from the ATO claiming penalties of 50 % of the additional income tax that was assessed, or $ 75.9 million.

As of December 31, 2020, we recorded a receivable in prepaid taxes and other non-current assets for the amount paid in April 2018 as we ultimately expect this will be refunded by the ATO.

We do not agree with the ATO’s assessments and we continue to believe we are more likely than not to be successful in defending our position.

Please refer to note 6 – Income Taxes, where we have provided an update in relation to this tax dispute in accordance with ASC 740 Income Taxes .

Contingent Obligations Under Recourse Provisions

4 unchanged sentences

This is applied to receivables sold with recourse and is recorded in accrued expenses.

During the six months ended December 31, 2020 and December 31, 2019, receivables sold with limited recourse were $ 72.6 million and $ 59.3 million, respectively.

As of December 31, 2020, the maximum exposure on outstanding receivables sold with recourse and contingent provision were $ 27.0 million and $ 7.9 million, respectively.

During the nine months ended March 31, 2021 and March 31, 2020, receivables sold with limited recourse were $ 112.2 million and $ 99.8 million, respectively.

As of March 31, 2021, the maximum exposure on outstanding receivables sold with recourse and contingent provision were $ 26.5 million and $ 7.9 million, respectively.

As of June 30, 2020, the maximum exposure on outstanding receivables sold with recourse and contingent provision were $ 22.8 million and $ 6.6 million, respectively.

1 unchanged sentence

In November 2020, we closed our Portable Oxygen Concentrator business, which was part of the Sleep and Respiratory Care segment.

During the three and six months ended December 31, 2020, we recognized restructuring expenses of $ 13.9 million primarily related to inventory write-downs of $ 5.2 million, accelerated amortization of acquired intangible assets of $ 5.1 million, asset impairments of $ 2.3 million, employee-related costs of $ 0.7 million and contract cancellation costs of $ 0.6 million.

Of the total expense recognized during the three and six months ended December 31, 2020, the inventory write-down of $ 5.2 million is presented within cost of sales and the remaining $ 8.7 million in restructuring costs is separately disclosed as restructuring expenses on the condensed consolidated statements of income.

As of December 31, 2020, an outstanding, unpaid balance of $ 2.6 million had been recorded as a liability in accrued expenses.

We do not expect to incur additional expenses in connection with this activity in the future.

During the nine months ended March 31, 2021, we recognized restructuring expenses of $ 13.9 million primarily related to inventory write-downs of $ 5.2 million, accelerated amortization of acquired intangible assets of $ 5.1 million, asset impairments of $ 2.3 million, employee-related costs of $ 0.7 million and contract cancellation costs of $ 0.6 million.

Of the total expense recognized during nine months ended March 31, 2020, the inventory write-down of $ 5.2 million is presented within cost of sales and the remaining $ 8.7 million in restructuring costs is separately disclosed as restructuring expenses on the condensed consolidated statements of operations.

The restructure was substantially completed as of March 31, 2021 and we do not expect to incur additional material expenses in connection with this activity in the future.

PART I – FINANCIAL INFORMATION

19 unchanged sentences

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is an overview of our results of operations for the three and six months ended December 31, 2020.

The following is an overview of our results of operations for the three and nine months ended March 31, 2021.

Management’s discussion and analysis of financial condition and results of operations (“MD&A”) is intended to help the reader understand our results of operations and financial condition.

7 unchanged sentences

We are committed to ongoing investment in research and development and product enhancements.

During the three months ended December 31, 2020, we invested $54.9 million on research and development activities, which represents 6.9% of net revenues, with a continued focus on the development and commercialization of new, innovative products and solutions that improve patient outcomes, create efficiencies for our customers and help physicians and providers better manage chronic disease and lower healthcare costs.

During the three months ended March 31, 2021, we invested $55.9 million on research and development activities, which represents 7.3% of net revenues, with a continued focus on the development and commercialization of new, innovative products and solutions that improve patient outcomes, create efficiencies for our customers and help physicians and providers better manage chronic disease and lower healthcare costs.

Due to multiple acquisitions, including Brightree in April 2016, HEALTHCAREfirst in July 2018 and MatrixCare in November 2018, our operations now include out-of-hospital software platforms designed to support the professionals and caregivers who help people stay healthy in the home or care setting of their choice.

2 unchanged sentences

We have determined that we have two operating segments, which are the sleep and respiratory disorders sector of the medical device industry (“Sleep and Respiratory Care”) and the supply of business management software as a service to out-of-hospital health providers (“SaaS”).

During the three months ended December 31, 2020, our net revenue increased by 9% compared to the three months ended December 31, 2019.

Gross margin was 57.8% for the three months ended December 31, 2020 compared to 58.0% for the three months ended December 31, 2019.

Diluted earnings per share for the three months ended December 31, 2020 was $1.23 per share, compared to $1.10 per share for the three months ended December 31, 2019 .

At December 31, 2020, our cash and cash equivalents totaled $255.9 million, our total assets were $4.6 billion and our stockholders’ equity was $2.9 billion.

During the three months ended March 31, 2021, our net revenue was consistent with the three months ended March 31, 2020.

Gross margin was 58.2% for the three months ended March 31, 2021 compared to 58.4% for the three months ended March 31, 2020.

Diluted loss per share was $0.54 for the three months ended March 31, 2021 , compared to diluted earnings per share of $1.12 for the three months ended March 31, 2020 .

Unrecognized tax benefits as described at note 6 – Income Taxes impacted our diluted loss per share by $1.74 per share for the three months ended March 31, 2021.

At March 31, 2021, our cash and cash equivalents totaled $230.6 million, our total assets were $4.6 billion and our stockholders’ equity was $2.7 billion.

In order to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency fluctuations, we provide certain financial information on a “constant currency” basis, which is in addition to the actual financial information presented.

1 unchanged sentence

However, constant currency measures should not be considered in isolation or as an alternative to U.S.

dollar measures that reflect current period exchange rates, or to other financial measures calculated and presented in accordance with accounting principles generally accepted in the United States ("GAAP").

PART I – FINANCIAL INFORMATION

5 unchanged sentences

We have prioritized protecting the health and safety of our employees and continuing to use our employees’ talents and our resources to help society meet and overcome the challenges the pandemic poses.

During the three months ended December 31, 2020, we observed minimal incremental demand for our ventilator devices and masks associated with the COVID-19 pandemic.

During the three months ended March 31, 2021, we did not observe material incremental demand for our ventilator devices and masks associated with the COVID-19 pandemic.

Although there is still substantial uncertainty, we believe the global demand for ventilators and other respiratory support devices, used to treat COVID-19 patients, has largely been met.

As such, we expect minimal COVID-19 generated demand for our ventilator products for the second half of the fiscal year ending June 30, 2021.

As such, we do not expect material COVID-19-generated demand for our ventilator products for the remainder of the fiscal year ending June 30, 2021.

Diagnostic pathways for sleep apnea treatment, including HME suppliers and sleep clinics, have been impacted and, in some instances, been required, or in the future may be required, to temporarily close due to governments’ “shelter-in-place” orders, quarantines or similar orders or restrictions enacted to control the spread of COVID-19.

13 unchanged sentences

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Three Months Ended December 31, 2020 Compared to the Three Months Ended December 31, 2019

Net revenue for the three months ended December 31, 2020 increased to $800.0 million from $736.2 million for the three months ended December 31, 2019, an increase of $63.9 million or 9% (a 7% increase on a constant currency basis).

The following table summarizes our net revenue disaggregated by segment, product and region for the three months ended December 31, 2020 compared to December 31, 2019 (in thousands):

Three Months Ended March 31, 2021 Compared to the Three Months Ended March 31, 2020

Net revenue for the three months ended March 31, 2021 decreased to $768.8 million from $769.5 million for the three months ended March 31, 2020, a decrease of $0.7 million or consistent on a percentage basis (a 3% decrease on a constant currency basis).

The following table summarizes our net revenue disaggregated by segment, product and region for the three months ended March 31, 2021 compared to March 31, 2020 (in thousands):

Three Months Ended

‎ December 31,

Constant Currency*

12 unchanged sentences

Sleep and Respiratory Care

Net revenue from our Sleep and Respiratory Care business for the three months ended December 31, 2020 was $708.2 million, an increase of 9% compared to net revenue for the three months ended December 31, 2019.

Net revenue from our Sleep and Respiratory Care business for the three months ended March 31, 2021 was $674.9 million, a decrease of 1% compared to net revenue for the three months ended March 31, 2020.

Movements in international currencies against the U.S.

dollar positively impacted net revenue by approximately $14.9 million for the three months ended December 31, 2020.

Excluding the impact of currency movements, total Sleep and Respiratory Care net revenue for the three months ended December 31, 2020 increased 7% compared to the three months ended December 31, 2019.

The increase in net revenue was primarily attributable to an increase in unit sales of our devices and masks.

Net revenue from our Sleep and Respiratory Care business in the U.S., Canada and Latin America for the three months ended December 31, 2020 increased to $426.8 million from $408.0 million for the three months ended December 31, 2019, an increase of $18.8 million or 5%.

The increase was primarily due to an increase in unit sales of our masks.

Net revenue in combined Europe, Asia and other markets increased for the three months ended December 31, 2020 to $281.4 million from $241.5 million for the three months ended December 31, 2019, an increase of $39.9 million or 17% (a 10% increase on a constant currency basis).

The constant currency increase in sales in combined Europe, Asia and other markets predominantly reflects an increase in unit sales of our devices and masks.

Net revenue from devices for the three months ended December 31, 2020 increased to $393.0 million from $365.8 million for the three months ended December 31, 2019, an increase of $27.2 million or 7%, including an increase of 1% in the U.S., Canada and Latin America and an increase of 16% in combined Europe, Asia and other markets (a 10% increase on a constant currency basis).

Excluding the impact of foreign currency movements, device sales for the three months ended December 31, 2020 increased by 5%.

Net revenue from masks and other for the three months ended December 31, 2020 increased to $315.2 million from $283.7 million for the three months ended December 31, 2019, an increase of $31.5 million or 11%, including an increase of 8% in the U.S., Canada and Latin America and an increase of 18% in combined Europe, Asia and other markets (a 12% increase on a constant currency basis).

Excluding the impact of foreign currency movements, masks and other sales increased by 9%, compared to the three months ended December 31, 2019.

dollar positively impacted net revenue by approximately $23.1 million for the three months ended March 31, 2021.

Excluding the impact of currency movements, total Sleep and Respiratory Care net revenue for the three months ended March 31, 2021 decreased by 4% compared to the three months ended March 31, 2020.

The decrease in net revenue was primarily attributable to a decrease in unit sales of our devices, including as a result of decreased COVID-19-related demand for our ventilators, partially offset by an increase in unit sales of our masks.

Net revenue from our Sleep and Respiratory Care business in the U.S., Canada and Latin America for the three months ended March 31, 2021 increased to $402.9 million from $393.5 million for the three months ended March 31, 2020, an increase of $9.3 million or 2%.

The increase was primarily due to an increase in unit sales of our masks, partially offset by a decrease in unit sales of our devices.

Net revenue in combined Europe, Asia and other markets decreased for the three months ended March 31, 2021 to $272.1 million from $286.3 million for the three months ended March 31, 2020, a decrease of $14.3 million or 5% (a 13% decrease on a constant currency basis).

The constant currency decrease in sales in combined Europe, Asia and other markets predominantly reflects a decrease in unit sales of our devices, including as a result of decreased COVID-19-related demand for our ventilators, partially offset by an increase in unit sales of our masks.

Net revenue from devices for the three months ended March 31, 2021 decreased to $365.7 million from $391.5 million for the three months ended March 31, 2020, a decrease of $25.8 million or 7%, including a decrease of 2% in the U.S., Canada and Latin America and a decrease of 11% in combined Europe, Asia and other markets (a 18% decrease on a constant currency basis).

Excluding the impact of foreign currency movements, device sales for the three months ended March 31, 2021 decreased by 10%.

Net revenue from masks and other for the three months ended March 31, 2021 increased to $309.2 million from $288.4 million for the three months ended March 31, 2020, an increase of $20.8 million or 7%, including an increase of 7% in the U.S., Canada and Latin America and an increase of 9% in combined Europe, Asia and other markets (consistent with the prior year on a constant currency basis).

Excluding the impact of foreign currency movements, masks and other sales increased by 4%, compared to the three months ended March 31, 2020.

Software as a Service

Net revenue from our SaaS business for the three months ended December 31, 2020 was $91.8 million, an increase of 6% compared to the three months ended December 31, 2019.

Net revenue from our SaaS business for the three months ended March 31, 2021 was $93.8 million, an increase of 5% compared to the three months ended March 31, 2020.

The increase was predominantly due to continued growth in resupply service offerings.

2 unchanged sentences

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Six Months Ended December 31, 2020 Compared to the Six Months Ended December 31, 2019

Net revenue for the six months ended December 31, 2020 increased to $1,552.0 million from $1,417.2 million for the six months ended December 31, 2019, an increase of $134.8 million or 10% (an 8% increase on a constant currency basis).

The following table summarizes our net revenue disaggregated by segment, product and region for the six months ended December 31, 2020 compared to December 31, 2019 (in thousands):

Six Months Ended

‎ December 31,

Nine Months Ended March 31, 2021 Compared to the Nine Months Ended March 31, 2020

Net revenue for the nine months ended March 31, 2021 increased to $2,320.7 million from $2,186.7 million for the nine months ended March 31, 2020, an increase of $134.1 million or 6% (a 4% increase on a constant currency basis).

The following table summarizes our net revenue disaggregated by segment, product and region for the nine months ended March 31, 2021 compared to March 31, 2020 (in thousands):

Nine Months Ended

Constant Currency*

12 unchanged sentences

Sleep and Respiratory Care

Net revenue from our Sleep and Respiratory Care business for the six months ended December 31, 2020 was $1,368.0 million, an increase of 10% compared to net revenue for the six months ended December 31, 2019.

Net revenue from our Sleep and Respiratory Care business for the nine months ended March 31, 2021 was $2,042.9 million, an increase of 6% compared to net revenue for the nine months ended March 31, 2020.

Movements in international currencies against the U.S.

dollar positively impacted net revenues by approximately $24.3 million for the six months ended December 31, 2020.

Excluding the impact of currency movements, total Sleep and Respiratory Care net revenue for the six months ended December 31, 2020 increased by 8% compared to the six months ended December 31, 2019.

dollar positively impacted net revenues by approximately $47.7 million for the nine months ended March 31, 2021.

Excluding the impact of currency movements, total Sleep and Respiratory Care net revenue for the nine months ended March 31, 2021 increased by 4% compared to the nine months ended March 31, 2020.

The increase in net revenue was primarily attributable to an increase in unit sales of our devices and masks.

Net revenue from our Sleep and Respiratory Care business in the U.S., Canada and Latin America for the six months ended December 31, 2020 increased to $829.9 million from $778.2 million for the six months ended December 31, 2019, an increase of $51.7 million or 7%.

Net revenue from our Sleep and Respiratory Care business in the U.S., Canada and Latin America for the nine months ended March 31, 2021 increased to $1,232.8 million from $1,171.8 million for the nine months ended March 31, 2020, an increase of $61.0 million or 5%.

The increase was primarily due to an increase in unit sales of our masks.

Net revenue in combined Europe, Asia and other markets increased for the six months ended December 31, 2020 to $538.1 million from $465.4 million for the six months ended December 31, 2019, an increase of $72.7 million or 16% (a 10% increase on a constant currency basis).

The constant currency increase in sales in combined Europe, Asia and other markets predominantly reflects an increase in unit sales of our devices and masks.

Net revenue from devices for the six months ended December 31, 2020 increased to $766.4 million from $704.6 million for the six months ended December 31, 2019, an increase of $61.8 million or 9%, including an increase of 3% in the U.S., Canada and Latin America and an increase of 16% in combined Europe, Asia and other markets (a 11% increase on a constant currency basis).

Excluding the impact of foreign currency movements, device sales for the six months ended December 31, 2020 increased by 6%.

Net revenue from masks and other for the six months ended December 31, 2020 increased to $601.6 million from $539.0 million for the six months ended December 31, 2019, an increase of $62.6 million or 12%, including an increase of 10% in the U.S., Canada and Latin America and an increase of 15% in combined Europe, Asia and other markets (an 10% increase on a constant currency basis).

Excluding the impact of foreign currency movements, masks and other sales increased by 10%, compared to the six months ended December 31, 2019.

Net revenue in combined Europe, Asia and other markets increased for the nine months ended March 31, 2021 to $810.1 million from $751.7 million for the nine months ended March 31, 2020, an increase of $58.4 million or 8% (a 2% increase on a constant currency basis).

The constant currency increase in sales in combined Europe, Asia and other markets predominantly reflects an increase in unit sales of our devices and masks, partially offset by decreased COVID-19-related demand for our ventilators.

Net revenue from devices for the nine months ended March 31, 2021 increased to $1,132.1 million from $1,096.2 million for the nine months ended March 31, 2020, an increase of $36.0 million or 3%, including an increase of 1% in the U.S., Canada and Latin America and an increase of 5% in combined Europe, Asia and other markets (a 1% decrease on a constant currency basis).

Excluding the impact of foreign currency movements, device sales for the nine months ended March 31, 2021 were consistent with the nine months ended March 31, 2020.

Net revenue from masks and other for the nine months ended March 31, 2021 increased to $910.8 million from $827.3 million for the nine months ended March 31, 2020, an increase of $83.4 million or 10%, including an increase of 9% in the U.S., Canada and Latin America and an increase of 13% in combined Europe, Asia and other markets (a 6% increase on a constant currency basis).

Excluding the impact of foreign currency movements, masks and other sales increased by 8%, compared to the nine months ended March 31, 2020.

Software as a Service

Net revenue from our SaaS business for the six months ended December 31, 2020 was $184.0 million, an increase of 6% compared to the six months ended December 31, 2019.

Net revenue from our SaaS business for the nine months ended March 31, 2021 was $277.8 million, an increase of 6% compared to the nine months ended March 31, 2020.

The increase was predominantly due to continued growth in resupply service offerings.

3 unchanged sentences

Gross Profit and Gross Margin

Gross profit increased for the three months ended December 31, 2020 to $462.5 million from $427.1 million for the three months ended December 31, 2019, an increase of $35.4 million or 8%.

Gross margin, which is gross profit as a percentage of net revenue, for the three months ended December 31, 2020 was 57.8% compared to 58.0% for the three months ended December 31, 2019.

The decrease in gross margin for the three months ended December 31, 2020 compared to three months ended December 31, 2019 was due primarily to restructuring expense of $5.2 million associated with inventory write-downs following the closure of the Portable Oxygen Concentrator (“POC”) business, partially offset by favorable product mix, foreign currency movement and lower amortization of acquired intangibles.

Gross profit increased for the six months ended December 31, 2020 to $901.1 million from $818.7 million for the six months ended December 31, 2019, an increase of $82.4 million or 10%.

Gross margin for the six months ended December 31, 2020 was 58.1% compared to 57.8% for the six months ended December 31, 2019.

The increase in gross margin for the six months ended December 31, 2020 compared to the six months ended December 31, 2019 was due primarily to favorable product mix, foreign currency movements and lower amortization of acquired intangibles, partially offset by restructuring expense of $5.2 million associated with inventory write-downs following the closure of the POC business.

Gross profit decreased for the three months ended March 31, 2021 to $447.3 million from $449.7 million for the three months ended March 31, 2020, a decrease of $2.4 million or 1%.

Gross margin, which is gross profit as a percentage of net revenue, for the three months ended March 31, 2021 was 58.2% compared to 58.4% for the three months ended March 31, 2020.

The decrease in gross margin for the three months ended March 31, 2021 compared to three months ended March 31, 2020 was due primarily to additional manufacturing costs associated with our new Singapore site commencing operations during the quarter, higher freight costs and geographic mix changes, partially offset by lower amortization of acquired intangibles.

Gross profit increased for the nine months ended March 31, 2021 to $1,348.4 million from $1,268.4 million for the nine months ended March 31, 2020, an increase of $80.0 million or 6%.

Gross margin for the nine months ended March 31, 2021 was 58.1% compared to 58.0% for the nine months ended March 31, 2020.

The increase in gross margin for the nine months ended March 31, 2021 compared to the nine months ended March 31, 2020 was due primarily to favorable product mix, foreign currency movements and lower amortization of acquired intangibles, partially offset by restructuring expense of $5.2 million associated with inventory write-downs following the closure of the POC business.

Selling, General, and Administrative Expenses

Selling, general and administrative expenses decreased for the three months ended December 31, 2020 to $169.5 million from $171.4 million for the three months ended December 31, 2019, a decrease of $2.0 million or 1%.

Selling, general, and administrative expenses decreased for the three months ended March 31, 2021 to $160.4 million from $172.4 million for the three months ended March 31, 2020, a decrease of $12.0 million or 7%.

Selling, general, and administrative expenses were unfavorably impacted by the movement of international currencies against the U.S.

dollar, which increased our expenses by approximately $7.0 million, as reported in U.S.

Excluding the impact of foreign currency movements, selling, general and administrative expenses for the three months ended December 31, 2020 decreased by 3% compared to the three months ended December 31, 2019.

As a percentage of net revenue, selling, general and administrative expenses were 21.2% for the three months ended December 31, 2020, compared to 23.3% for the three months ended December 31, 2019.

The constant currency decrease in selling, general and administrative expenses was primarily due to decreases in travel, marketing and bad debt expenses during the three months ended December 31, 2020.

Selling, general and administrative expenses decreased for the six months ended December 31, 2020 to $328.5 million from $338.9 million for the six months ended December 31, 2019, a decrease of $10.4 million or 3%.

Excluding the impact of foreign currency movements, selling, general, and administrative expenses for the three months ended March 31, 2021 decreased by 11% compared to the three months ended March 31, 2020.

As a percentage of net revenue, selling, general, and administrative expenses were 20.9% for the three months ended March 31, 2021, compared to 22.4% for the three months ended March 31, 2020.

The constant currency decrease in selling, general, and administrative expenses was primarily due to decreases in travel, marketing and bad debt expenses during the three months ended March 31, 2021 compared to three months ended March 31, 2020.

Selling, general, and administrative expenses decreased for the nine months ended March 31, 2021 to $488.9 million from $511.3 million for the nine months ended March 31, 2020, a decrease of $22.4 million or 4%.

Selling, general, and administrative expenses were unfavorably impacted by the movement of international currencies against the U.S.

dollar, which increased our expenses by approximately $13.5 million, as reported in U.S.

Excluding the impact of foreign currency movements, selling, general and administrative expenses for the six months ended December 31, 2020 decreased by 5% compared to the six months ended December 31, 2019.

As a percentage of net revenue, selling, general and administrative expenses were 21.2% for the six months ended December 31, 2020, compared to 23.9% for the six months ended December 31, 2019.

The constant currency decrease in selling, general and administrative expenses was primarily due to decreases in travel, marketing and bad debt expenses, partially offset by a $2.8 million impairment charge related to our right-of-use asset during the six months ended December 31, 2020.

Excluding the impact of foreign currency movements, selling, general, and administrative expenses for the nine months ended March 31, 2021 decreased by 7% compared to the nine months ended March 31, 2020.

As a percentage of net revenue, selling, general, and administrative expenses were 21.1% for the nine months ended March 31, 2021, compared to 23.4% for the nine months ended March 31, 2020.

The constant currency decrease in selling, general, and administrative expenses was primarily due to decreases in travel, marketing and bad debt expenses during the nine months ended March 31, 2021 compared to nine months ended March 31, 2020.

Research and Development Expenses

Research and development expenses increased for the three months ended December 31, 2020 to $54.9 million from $49.9 million for the three months ended December 31, 2019, an increase of $5.0 million, or 10%.

Research and development expenses increased for the three months ended March 31, 2021 to $55.9 million from $51.4 million for the three months ended March 31, 2020, an increase of $4.5 million, or 9%.

Research and development expenses were unfavorably impacted by the movement of international currencies against the U.S.

dollar, which increased our expenses by approximately $1.4 million for the three months ended December 31, 2020, as reported in U.S.

Excluding the impact of foreign currency movements, research and development expenses increased by 7% compared to the three months ended December 31, 2019.

As a percentage of net revenue, research and development expenses were 6.9% for the three months ended December 31, 2020, compared to 6.8% for the three months ended December 31, 2019.

The increase in research and development expenses in constant currency terms was primarily due to increases in the number of research and development personnel to facilitate development of new products and solutions.

Research and development expenses increased for the six months ended December 31, 2020 to $109.5 million from $98.0 million for the six months ended December 31, 2019, an increase of $11.5 million, or 12%.

dollar, which increased our expenses by approximately $3.0 million for the three months ended March 31, 2021, as reported in U.S.

Excluding the impact of foreign currency movements, research and development expenses increased by 3% compared to the three months ended March 31, 2020.

As a percentage of net revenue, research and development expenses were 7.3% for the three months ended March 31, 2021, compared to 6.7% for the three months ended March 31, 2020.

The increase in research and development expenses in constant currency terms was primarily due to increased investment in our digital health technologies and SaaS solutions.

Research and development expenses increased for the nine months ended March 31, 2021 to $165.4 million from $149.4 million for the nine months ended March 31, 2020, an increase of $16.0 million, or 11%.

Research and development expenses were unfavorably impacted by the movement of international currencies against the U.S.

dollar, which increased our expenses by approximately $2.2 million for the six months ended December 31, 2020, as reported in U.S.

Excluding the impact of foreign currency movements, research and development expenses increased by 9% compared to the six months ended December 31, 2019.

As a percentage of net revenue, research

dollar, which increased our expenses by approximately $5.3 million for the nine months ended March 31, 2021, as reported in U.S.

Excluding the impact of foreign currency movements, research and development expenses increased by 7% compared to the nine months ended March 31, 2020.

As a percentage of net revenue, research and development expenses were 7.1% for the nine months ended March 31, 2021, compared to 6.8% for the nine months ended March 31, 2020.

The increase in research and development expenses in constant currency terms was primarily due to increased investment in our digital health technologies and SaaS solutions.

PART I – FINANCIAL INFORMATION

1 unchanged sentence

Management’s Discussion and Analysis of Financial Condition and Results of Operations

and development expenses were 7.1% for the six months ended December 31, 2020, compared to 6.9% for the six months ended December 31, 2019.

Amortization of Acquired Intangible Assets

Amortization of acquired intangible assets for the three months ended December 31, 2020 totaled $7.7 million compared to $8.6 million for the three months ended December 31, 2019.

Amortization of acquired intangible assets for the six months ended December 31, 2020 totaled $15.9 million compared to $13.6 million for the six months ended December 31, 2019.

The decrease in amortization of acquired intangible assets is due to historical assets becoming fully amortized.

Amortization of acquired intangible assets for the three months ended March 31, 2021 totaled $7.4 million compared to $8.3 million for the three months ended March 31, 2020.

Amortization of acquired intangible assets for the nine months ended March 31, 2021 totaled $23.4 million compared to $21.9 million for the nine months ended March 31, 2020.

Restructuring Expenses

In November 2020, we closed our POC business, which was part of the Sleep and Respiratory Care segment.

During the three and six months ended December 31, 2020, we recognized restructuring expenses of $13.9 million primarily related to inventory write-downs of $5.2 million, accelerated amortization of acquired intangible assets of $5.1 million, asset impairments of $2.3 million, employee-related costs of $0.7 million and contract cancellation costs of $0.6 million.

Of the total expense recognized during the three and six months ended December 31, 2020, the inventory write-down of $5.2 million is presented within cost of sales and the remaining $8.7 million in restructuring costs is separately disclosed as restructuring expenses on the condensed consolidated statements of income.

During the nine months ended March 31, 2021, we recognized restructuring expenses of $13.9 million primarily related to inventory write-downs of $5.2 million, accelerated amortization of acquired intangible assets of $5.1 million, asset impairments of $2.3 million, employee-related costs of $0.7 million and contract cancellation costs of $0.6 million.

Of the total expense recognized during the nine months ended March 31, 2021, the inventory write-down of $5.2 million is presented within cost of sales and the remaining $8.7 million in restructuring costs is separately disclosed as restructuring expenses on the condensed consolidated statements of operations.

We do not expect to incur additional expenses in connection with this activity in the future.

Total Other Income (Loss), Net

Total other income (loss), net for the three months ended December 31, 2020 was a loss of $11.1 million compared to a loss of $19.1 million for the three months ended December 31, 2019.

The decrease was partially due to a decrease in interest expense to $5.9 million for the three months ended December 31, 2020 compared to $10.2 million for the three months ended December 31, 2019.

We also recorded losses attributable to equity method investments for the three months ended December 31, 2020 of $2.6 million compared to $6.9 million for the three months ended December 31, 2019.

Total other income (loss), net for the three months ended March 31, 2021 was a loss of $5.4 million compared to a loss of $25.8 million for the three months ended March 31, 2020.

The decrease was partially due to a decrease in interest expense to $5.9 million for the three months ended March 31, 2021 compared to $10.0 million for the three months ended March 31, 2020.

Additionally, we recognized an unrealized gain of $4.7 million on our marketable and non-marketable equity securities for the three months ended March 31, 2021, whereas during the three months ended March 31, 2020, we recorded an impairment of $9.1 million on our non-marketable equity securities.

We also recorded losses attributable to equity method investments for the three months ended March 31, 2021 of $5.0 million compared to $5.3 million for the three months ended March 31, 2020.

The losses attributable to equity method investments relate to our joint venture with Verily, which is accounted for using the equity method, whereby we recognize our share of the joint venture’s losses.

Total other income (loss), net for the six months ended December 31, 2020 was a loss of $12.2 million compared to a loss of $39.6 million for the six months ended December 31, 2019.

The decrease was partially due to a decrease in interest expense to $12.8 million for the six months ended December 31, 2020 compared to $21.2 million for the six months ended December 31, 2019.

Additionally, we recognized an unrealized gain of $4.8 million on our marketable securities for the six months ended December 31, 2020, whereas during the six months ended December 31, 2019, we recorded an impairment of $5.4 million on our non-marketable equity securities.

We also recorded lower losses attributable to equity method investments for the six months ended December 31, 2020 of $4.9 million compared to $13.8 million for the six months ended December 31, 2019.

Total other income (loss), net for the nine months ended March 31, 2021 was a loss of $17.6 million compared to a loss of $65.4 million for the nine months ended March 31, 2020.

The decrease was partially due to a decrease in interest expense to $18.6 million for the nine months ended March 31, 2021 compared to $31.2 million for the nine months ended March 31, 2020.

Additionally, we recognized an unrealized gain of $9.4 million on our marketable and non-marketable securities for the nine months ended March 31, 2021, whereas during the nine months ended March 31, 2020, we recorded an impairment of $14.5 million on our non-marketable equity securities.

We also recorded lower losses attributable to equity method investments for the nine months ended March 31, 2021 of $9.9 million compared to $19.1 million for the nine months ended March 31, 2020.

Our effective income tax rate for the three and six months ended December 31, 2020 was 14.8% and 16.1%, respectively, as compared to 10.2% and 14.8% for the three and six months ended December 31, 2019.

Our effective tax rate was impacted by windfall tax benefits related to the vesting or settlement of employee share-based awards, which reduced our income tax expenses by $10.9 million and $11.5 million, for the three and six months ended December 31, 2020, respectively, as compared to $20.3 million and $22.1 million for the three and six months ended December 31, 2019, respectively.

Our effective income tax rate for the three and nine months ended March 31, 2021 was 136.0% and 56.6%, respectively, as compared to 14.9% and 14.8% for the three and nine months ended March 31, 2020, respectively.

The increase to our effective tax rate was primarily the result of an increase in unrecognized tax benefits as outlined below.

Excluding the impact of the unrecognized tax benefit, our effective income tax rate for the three and nine months ended March 31, 2021 was 19.1% and 17.1%, respectively.

The increase in our effective tax rate, excluding the impact of the unrecognized tax benefit, was due to the geographic mix of earnings and lower windfall tax benefits related to the vesting or settlement of employee share-based awards, which reduced our income tax expense by $0.6 million and $12.6 million for the three and nine months ended March 31, 2021, respectively, as compared to $2.4 million and $24.8 million for the three and nine months ended March 31, 2020, respectively.

We are under audit by the Australian Taxation Office (the “ATO”) for the years 2009 to 2018 (the “Audit Period”).

The audits primarily involve a transfer pricing dispute in which the ATO asserts we should have paid additional Australian taxes on income derived from our Singapore operations.

The ATO issued Notices of Amended Assessments for the tax years 2009 to 2013 seeking a total of $266.0 million, consisting of $151.7 million in additional income tax and $114.3 million in penalties and interest.

The 2014 to 2018 periods are still under audit and we have not yet received any Notices of Amended Assessments relative to those periods.

A total of $98.8 million in tax has been prepaid in relation to the Audit Period, which is consistent with ATO procedural audit practice.

PART I – FINANCIAL INFORMATION

AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition and Results of Operations

We do not agree with the ATO’s assessments and continue to believe we are more likely than not to be successful in defending our position if the matter progresses to litigation.

To that end, we are engaged in ongoing discussions with the ATO to resolve the dispute for the entire Audit Period.

Given the stage of those discussions, during the three and nine months ended March 31, 2021, we recorded $395.9 million of gross unrecognized tax benefits, including $53.3 million of accrued interest and penalties, associated with the ATO audits for the Audit Period.

This amount reflects our estimate of the potential tax liability and is subject to change.

If recognized, we estimate that approximately $254.8 million of unrecognized tax benefits would affect our effective tax rate, which represents the $395.9 million of gross unrecognized tax benefits noted previously, adjusted for tax credits and deductions of $141.1 million .

We have elected to recognize interest and penalties related to unrecognized tax benefits as a component of income taxes.

Although it is expected that the amount of unrecognized tax benefits may change in the next 12 months, an estimate of the range of the possible change cannot be made.

Our Singapore operations operate under certain tax holidays and tax incentive programs that will expire in whole or in part at various dates through June 30, 2030.

1 unchanged sentence

Tax Act, we treated all non-U.S.

historical earnings as taxable during the year ended June 30, 2018.

historical earnings as taxable, effective as of the year ended June 30, 2018.

Therefore, future repatriation of cash held by our non-U.S.

subsidiaries will generally not be subject to U.S.

federal tax, if repatriated.

PART I – FINANCIAL INFORMATION

AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Finally, we are under audit by the Australian Tax Office (the “ATO”) in three different cycles:

tax years 2009 to 2013, tax years 2014 to 2017 and tax year 2018.

We received Notices of Amended Assessments from the ATO for the tax years 2009 to 2013.

Based on these assessments, the ATO asserted that we owe $151.7 million in additional income tax and $38.4 million in accrued interest, of which $75.9 million was paid in April 2018 under a payment arrangement with the ATO.

In June 2018, we received a notice from the ATO claiming penalties of 50% of the additional income tax that was assessed, or $75.9 million.

As of December 31, 2020, we recorded a receivable in prepaid taxes and other non-current assets for the amount paid in April 2018 as we ultimately expect this will be refunded by the ATO.

We do not agree with the ATO’s assessments and we continue to believe we are more likely than not to be successful in defending our position.

Net Income and Earnings per Share

As a result of the factors above, our net income for the three months ended December 31, 2020 was $179.5 million compared to net income of $160.6 million for the three months ended December 31, 2019, an increase of 12% over the three months ended December 31, 2019.

Our net income for the six months ended December 31, 2020 was $357.9 million compared to net income of $280.7 million for the six months ended December 31, 2019, an increase of 27% over the six months ended December 31, 2019.

Our diluted earnings per share for the three months ended December 31, 2020 were $1.23 per diluted share compared to $1.10 for the three months ended December 31, 2019, an increase of 12% .

Our diluted earnings per share for the six months ended December 31, 2020 were $2.45 per diluted share compared to $1.93 for the six months ended December 31, 2019, an increase of 27%.

subsidiaries, if any, will generally not be subject to U.S.

Net Income (Loss) and Earnings (Loss) per Share

As a result of the factors above, our net loss for the three months ended March 31, 2021 was $78.5 million compared to net income of $163.1 million for the three months ended March 31, 2020, a decrease of 148%.

Our net income for the nine months ended March 31, 2021 was $279.4 million compared to net income of $443.8 million for the nine months ended March 31, 2020, a decrease of 37%.

Our diluted loss per share for the three months ended March 31, 2021 was $0.54 per diluted share compared to diluted earnings per share of $1.12 for the three months ended March 31, 2020, a decrease of 148% .

Our diluted earnings per share for the nine months ended March 31, 2021 was $1.91 per diluted share compared to $3.05 for the nine months ended March 31, 2020, a decrease of 37%.

Unrecognized tax benefits as described at note 6 – Income Taxes impacted our diluted loss per share for the three months ended March 31, 2021 and diluted earnings per share for the nine months ended March 31, 2021 by $1.74 per share.

Summary of Non-GAAP Financial Measures

8 unchanged sentences

The measure “non-GAAP gross profit” is the difference between non-GAAP revenue and non-GAAP cost of sales, and “non-GAAP gross margin” is the ratio of non-GAAP gross profit to non-GAAP revenue.

PART I – FINANCIAL INFORMATION

AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition and Results of Operations

These non-GAAP measures are reconciled to their most directly comparable GAAP financial measures below (in thousands, except percentages):

Three Months Ended

Six Months Ended

Nine Months Ended

GAAP Net revenue

9 unchanged sentences

Non-GAAP gross margin

PART I – FINANCIAL INFORMATION

AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The measure “non-GAAP income from operations” is equal to GAAP income from operations once adjusted for amortization of acquired intangibles, restructuring expense associated with the closure of the POC business, deferred revenue fair value adjustments applied in the purchase accounting for previous business combinations and litigation settlement expenses.

Non-GAAP income from operations reconciled with GAAP income from operations below (in thousands):

Non-GAAP income from operations is reconciled with GAAP income from operations below (in thousands):

Three Months Ended

Six Months Ended

Nine Months Ended

GAAP income from operations

6 unchanged sentences

Non-GAAP income from operations

The measure “non-GAAP net income” is equal to GAAP net income once adjusted for amortization of acquired intangibles (net of tax), restructuring expense associated with the closure of the POC (net of tax), deferred revenue fair value adjustments applied in the purchase accounting for previous business combinations (net of tax), restructuring expenses (net of tax), litigation settlement expenses (net of tax) and fair value adjustments recognized on publicly traded marketable equity securities.

The measure “non-GAAP net income” is equal to GAAP net income (loss) once adjusted for amortization of acquired intangibles (net of tax), reserve for disputed tax positions, restructuring expense associated with the closure of the POC (net of tax), (gain) loss on marketable equity securities, fair value adjustments recognized on non-marketable equity securities, deferred revenue fair value adjustments applied in the purchase accounting for previous business combinations (net of tax) and litigation settlement expenses (net of tax).

The measure “non-GAAP diluted earnings per share” is the ratio of non-GAAP net income to diluted shares outstanding.

1 unchanged sentence

Three Months Ended

Six Months Ended

GAAP net income

Nine Months Ended

GAAP net income (loss)

Amortization of acquired intangibles - cost of sales, net of tax

Amortization of acquired intangibles - operating expenses, net of tax

Reserve for disputed tax positions

Restructuring - cost of sales, net of tax

Restructuring - operating expenses, net of tax

(Gain) loss on equity investments

Fair value impairment of investment

Deferred revenue fair value adjustment, net of tax

Litigation settlement expenses, net of tax

Fair value adjustment of investment

Non-GAAP net income

Diluted shares outstanding

GAAP diluted earnings per share

GAAP diluted shares outstanding

Anti-dilutive shares excluded from GAAP

Non-GAAP diluted shares outstanding

GAAP diluted earnings (loss) per share

Non-GAAP diluted earnings per share

PART I – FINANCIAL INFORMATION

AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Liquidity and Capital Resources

As of December 31, 2020 and June 30, 2020, we had cash and cash equivalents of $255.9 million and $463.2 million, respectively.

As of March 31, 2021 and June 30, 2020, we had cash and cash equivalents of $230.6 million and $463.2 million, respectively.

In response to the uncertainty associated with the COVID-19 pandemic, we had previously increased our cash and cash equivalents position by drawing down from our Revolving Credit Agreement.

As we have not observed a significant impact to our cash flows due the pandemic, we have reduced our cash and cash equivalents and accordingly repaid our Revolving Credit Agreement.

Working capital was $874.2 million and $920.7 million at December 31, 2020 and June 30, 2020, respectively.

As of December 31, 2020, we had $0.8 billion of borrowings compared to $1.2 billion of borrowings at June 30, 2020.

As of December 31, 2020, we had $1.4 billion available for draw down under the revolver credit facility and a combined total of $1.7 billion in cash and available liquidity under the revolving credit facility.

Working capital was $589.6 million and $920.7 million at March 31, 2021 and June 30, 2020, respectively.

As of March 31, 2021, we had $0.7 billion of borrowings compared to $1.2 billion of borrowings at June 30, 2020.

As of March 31, 2021, we had $1.5 billion available for draw down under the revolver credit facility and a combined total of $1.7 billion in cash and available liquidity under the revolving credit facility.

We believe that cash generated from operations and available borrowings under our credit facility will be sufficient to fund our operations, including expected capital expenditures, for the next 12 months and beyond.

As of December 31, 2020 and June 30, 2020, our cash and cash equivalent balances held within the United States amounted to $54.2 million and $158.8 million, respectively.

Our remaining cash and cash equivalent balances at December 31, 2020 and June 30, 2020, were $201.7 million and $304.4 million, respectively.

As of March 31, 2021 and June 30, 2020, our cash and cash equivalent balances held within the United States amounted to $42.6 million and $158.8 million, respectively.

Our remaining cash and cash equivalent balances at March 31, 2021 and June 30, 2020, were $188.0 million and $304.4 million, respectively.

Our cash and cash equivalent balances are held at highly rated financial institutions .

5 unchanged sentences

federal tax if repatriated.

Inventories at December 31, 2020 were $474.8 million, an increase of $57.9 million or 14% from the June 30, 2020 balance of $416.9 million.

The increase in inventories was required to support our revenue growth and respond to additional complexity and elongation of our supply chain resulting from ongoing COVID-19 impacts.

Inventories at March 31, 2021 were $484.1 million, an increase of $67.1 million or 16% from the June 30, 2020 balance of $416.9 million.

The increase in inventories was required to respond to additional complexity and elongation of our supply chain resulting from ongoing COVID-19 impacts.

Accounts receivable at March 31, 2021 were $525.0 million, an increase of $50.4 million or 11% compared to the June 30, 2020, balance of $474.6 million.

Accounts receivable days outstanding of 60 days at March 31, 2021, were lower than days outstanding of 65 days at June 30, 2020.

Our allowance for doubtful accounts as a percentage of total accounts receivable at March 31, 2021, was 5.9%, compared to 5.7% at June 30, 2020.

We recognize right-of-use assets and lease liabilities on the balance sheet for all operating leases except those that meet the definition of a short-term lease.

As of March 31, 2021 and June 30, 2020, our right-of-use assets were $128.8 million and $118.3 million, respectively and our lease liabilities were $137.8 million and $123.1 million, respectively.

During the nine months ended March 31, 2021, we generated cash of $510.2 million from operations compared to $472.0 million for the nine months ended March 31, 2020.

The increase in cash generated from operations during the nine months ended March 31, 2021, as compared to the nine months ended March 31, 2020 was primarily due to the increase in operating profit, partially offset by the increase in working capital driven by higher inventory levels.

Movements in foreign currency exchange rates during the nine months ended March 31, 2021, had the effect of increasing our cash and cash equivalents by $18.3 million, as reported in U.S.

We have temporarily suspended our share repurchase program due to acquisitions, and more recently, as a response to the COVID-19 pandemic.

Accordingly, we did not repurchase any shares during the three and nine months ended March 31, 2021 and 2020.

In addition, during the nine months ended March 31, 2021 and 2020, we paid dividends to holders of our common stock totaling $169.9 million and $168.6 million, respectively.

Capital expenditures for the nine months ended March 31, 2021 and 2020, amounted to $74.8 million and $77.4 million, respectively.

The capital expenditures for the nine months ended March 31, 2021, primarily reflected investment in production tooling, equipment and machinery, and computer hardware and software.

At March 31, 2021, our balance sheet reflects net property, plant and equipment of $455.1 million compared to $417.3 million at June 30, 2020.

PART I – FINANCIAL INFORMATION

1 unchanged sentence

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Accounts receivable at December 31, 2020 were $509.4 million, an increase of $34.8 million or 7% compared to the June 30, 2020, balance of $474.6 million.

Accounts receivable days outstanding of 56 days at December 31, 2020, were lower than days outstanding of 65 days at June 30, 2020.

Our allowance for doubtful accounts as a percentage of total accounts receivable at December 31, 2020, was 6.2%, compared to 5.7% at June 30, 2020.

As of December 31, 2020, we have recognized a right-of-use asset (“ROU”) of $131.3 million and a lease liability of $140.1 million on the balance sheet for all operating leases, other than those that meet the definition of a short-term lease.

During the six months ended December 31, 2020, we generated cash of $313.9 million from operations compared to $232.3 million for the six months ended December 31, 2019.

The increase in cash generated from operations during the six months ended December 31, 2020, as compared to the six months ended December 31, 2019 was primarily due to the increase in operating profit, partially offset by the increase in working capital driven by higher inventory levels.

Movements in foreign currency exchange rates during the six months ended December 31, 2020, had the effect of increasing our cash and cash equivalents by $22.6 million, as reported in U.S.

We have temporarily suspended our share repurchase program due to acquisitions, and more recently, as a response to the COVID-19 pandemic.

Accordingly, we did not repurchase any shares during the three and six months ended December 31, 2020 and 2019.

In addition, during the six months ended December 31, 2020 and 2019, we paid dividends to holders of our common stock totaling $113.2 million and $112.2 million, respectively.

Capital expenditures for the six months ended December 31, 2020 and 2019, amounted to $48.4 million and $47.8 million, respectively.

The capital expenditures for the six months ended December 31, 2020, primarily reflected investment in production tooling, leasehold improvements, equipment and machinery, and computer hardware and software.

At December 31, 2020, our balance sheet reflects net property, plant and equipment of $459.5 million compared to $417.3 million at June 30, 2020.

Contractual Obligations

Details of contractual obligations at December 31, 2020, are as follows (in thousands):

Payments Due by December 31,

Details of contractual obligations at March 31, 2021, are as follows (in thousands):

Payments Due by March 31,

Interest on debt

1 unchanged sentence

Purchase obligations

Details of other commercial commitments at December 31, 2020, are as follows (in thousands) :

Details of other commercial commitments at March 31, 2021, are as follows (in thousands) :

Amount of Commitment Expiration Per Period

10 unchanged sentences

subsidiaries.

PART I – FINANCIAL INFORMATION

AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Revolving Credit Agreement and Term Credit Agreement contain customary covenants, including, in each case, a financial covenant that requires that we maintain a maximum leverage ratio of funded debt to EBITDA (as defined in the Revolving Credit Agreement and Term Credit Agreement, as applicable).

The Revolving Credit Agreement and Term Credit Agreement contain customary covenants, including, in each case, a financial covenant that requires that we maintain a maximum leverage ratio of funded debt to EBITDA (as defined in the Revolving Credit Agreement and Term Credit Agreement, as applicable).

The entire principal amounts of the revolving credit facility and term credit facility, and, in each case, any accrued but unpaid interest may be declared immediately due and payable if an event of default occurs, as defined in the Revolving Credit Agreement and the Term Credit Agreement, as applicable.

3 unchanged sentences

The outstanding principal amounts will bear interest at a rate equal to LIBOR plus 0.75% to 1.50% (depending on the then-applicable leverage ratio) or the Base Rate (as defined in the Revolving Credit Agreement and the Term Credit Agreement, as applicable) plus 0.0% to 0.50% (depending on the then-applicable leverage ratio).

On December 31, 2020, the interest rate that was being charged on the outstanding principal amounts was 1.1%.

On March 31, 2021, the interest rate that was being charged on the outstanding principal amounts was 1.0%.

An applicable commitment fee of 0.100% to 0.175% (depending on the then-applicable leverage ratio) applies on the unused portion of the revolving credit facility.

As of December 31, 2020, we had $1.4 billion available for draw down under the revolving credit facility.

As of March 31, 2021, we had $1.5 billion available for draw down under the revolving credit facility.

PART I – FINANCIAL INFORMATION

AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition and Results of Operations

On July 10, 2019, we entered into a Note Purchase Agreement with the purchasers to that agreement, in connection with the issuance and sale of $250.0 million principal amount of our 3.24% senior notes due July 10, 2026, and $250.0 million principal amount of our 3.45% senior notes due July 10, 2029 (“Senior Notes”).

3 unchanged sentences

On December 31, 2020, we were in compliance with our debt covenants and there was a total of $829.0 million outstanding under the Revolving Credit Agreement, Term Credit Agreement and Senior Notes.

On March 31, 2021, we were in compliance with our debt covenants and there was a total of $734.0 million outstanding under the Revolving Credit Agreement, Term Credit Agreement and Senior Notes.

We expect to satisfy all of our liquidity and long-term debt requirements through a combination of cash on hand, cash generated from operations and debt facilities.

Since the inception of our share repurchase programs and through December 31, 2020, we have repurchased a total of 41.8 million shares for an aggregate of $1.6 billion.

Since the inception of our share repurchase programs and through March 31, 2021, we have repurchased a total of 41.8 million shares for an aggregate of $1.6 billion.

We have temporarily suspended our share repurchase program due to recent acquisitions, and more recently, as a response to the COVID-19 pandemic.

Accordingly, we did not repurchase any shares during the three and six months ended December 31, 2020 and 2019.

Shares that are repurchased are classified as treasury stock pending future use and reduce the number of shares outstanding used in calculating earnings per share.

Accordingly, we did not repurchase any shares during the three and nine months ended March 31, 2021 and 2020.

Shares that are repurchased are classified as treasury stock pending future use and reduce the number of shares outstanding used in calculating earnings (loss) per share.

There is no expiration date for this program, and the program may be accelerated, suspended, delayed or discontinued at any time at the discretion of our board of directors.

At December 31, 2020, 12.9 million additional shares can be repurchased under the approved share repurchase program.

At March 31, 2021, 12.9 million additional shares can be repurchased under the approved share repurchase program.

Critical Accounting Principles and Estimates

5 unchanged sentences

Actual results could vary from those estimates under different assumptions or conditions.

PART I – FINANCIAL INFORMATION

AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition and Results of Operations

For a full discussion of our critical accounting policies, see our Annual Report on Form 10-K for the year ended June 30, 2020.

2 unchanged sentences

Off-Balance Sheet Arrangements

As of December 31, 2020, we are not involved in any significant off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated by the SEC .

As of March 31, 2021, we are not involved in any significant off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated by the SEC .

PART I – FINANCIAL INFORMATION

5 unchanged sentences

subsidiaries are maintained in their respective local currencies.

We transact business in various foreign currencies, including a number of major European currencies as well as the Australian and Singapore dollar.

We transact business in various foreign currencies, including a number of major European currencies as well as the Australian and Singapore dollars.

We have significant foreign currency exposure through our Australian and Singapore manufacturing activities and our international sales operations.

4 unchanged sentences

The foreign currency derivatives portfolio is recorded in the condensed consolidated balance sheets at fair value and included in other assets or other liabilities.

All movements in the fair value of the foreign currency derivatives are recorded within other income, net, on our condensed consolidated statements of income.

All movements in the fair value of the foreign currency derivatives are recorded within other income, net, on our condensed consolidated statements of operations.

The table below provides information (in U.S.

dollars) on our foreign currency denominated operating assets and liabilities and after considering our foreign currency hedging activities as of December 31, 2020 (in thousands):

dollars) on our foreign currency denominated operating assets and liabilities and after considering our foreign currency hedging activities as of March 31, 2021 (in thousands):

AUD Functional:

9 unchanged sentences

dollar equivalents.

The table summarizes information on instruments and transactions that are sensitive to foreign currency exchange rates, including foreign currency call options, collars and forward contracts held at December 31, 2020.

The table presents the notional amounts and weighted average exchange rates by contractual maturity dates for our foreign currency derivative financial instruments, including the forward contracts used to hedge our foreign currency denominated assets and liabilities.

21 unchanged sentences

We are exposed to risk associated with changes in interest rates affecting the return on our cash and cash equivalents and debt.

At December 31, 2020, we held cash and cash equivalents of $255.9 million principally comprised of bank term deposits and at-call accounts and are invested at both short-term fixed interest rates and variable interest rates.

At December 31, 2020, there was $329.0 million outstanding under the Revolving Credit Agreement and Term Credit Agreement, which are subject to variable interest rates.

A hypothetical 10% change in interest rates during the three and six months ended December 31, 2020, would not have had a material impact on pretax income.

At March 31, 2021, we held cash and cash equivalents of $230.6 million principally comprised of bank term deposits and at-call accounts and are invested at both short-term fixed interest rates and variable interest rates.

At March 31, 2021, there was $234.0 million outstanding under the Revolving Credit Agreement and Term Credit Agreement, which are subject to variable interest rates.

A hypothetical 10% change in interest rates during the three and nine months ended March 31, 2021, would not have had a material impact on pretax income.

We have no interest rate hedging agreements.

5 unchanged sentences

As required by Rule 13a-15(b) of the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report.

Based on the foregoing, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2020.

There has been no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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 1. Financial Statements