What changed in this filing

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Item 1. Financial Statements

2021-11-09 compared with 2021-05-10 · 206 added, 360 removed, 475 unchanged (54% of the section changed)

4 unchanged sentences

(In thousands, except share information)

March 31, 2021 June 30, 2020

September 30, 2021 June 30, 2021

Current assets:

Cash and cash equivalents $ 55,491 $ 62,718

Accounts receivable, less allowance of $ 21,180 at March 31, 2021

Accounts receivable, less allowance of $ 17,620 at September 30, 2021

and $ 19,341 at June 30, 2021

2 unchanged sentences

Prepaid expenses and other current assets 117,849 117,860

Current assets held for sale — 181,231

Total current assets 1,256,413 1,219,643

9 unchanged sentences

Accrued expenses and other current liabilities 72,362 87,790

Current portion of contingent consideration — 46,334

Income taxes payable 9,039 2,501

Current portion of long-term debt 8,785 7,843

Current liabilities held for sale — 128,022

Total current liabilities 692,415 732,939

9 unchanged sentences

Common stock, no par value;

45,000,000 shares authorized, 25,466,365 and 25,361,298 shares issued and outstanding at March 31, 2021 and June 30, 2020, respectively

45,000,000 shares authorized, 25,528,551 and 25,499,465 shares issued and outstanding at September 30, 2021 and June 30, 2021, respectively

74,817 71,253

9 unchanged sentences

(In thousands, except per share data)

Quarter ended Nine months ended

March 31, March 31,

2021 2020 2021 2020

Quarter ended

September 30,

Net sales $ 857,311 $ 757,342

9 unchanged sentences

Interest income ( 1,026 ) ( 481 )

Other (income) expense, net ( 302 ) ( 137 ) 183 198

Other expense, net 263 364

Income before income taxes 29,431 ( 162 )

Provision for income taxes 7,358 ( 47 )

Net income from continuing operations 13,786 5,715 24,732 29,633

Net income (loss) from continuing operations 22,073 ( 115 )

Net loss from discontinued operations — ( 11,704 )

1 unchanged sentence

Per share data:

Net income from continuing operations per common share, basic $ 0.54 $ 0.23 $ 0.97 $ 1.17

Net income (loss) from continuing operations per common share, basic $ 0.87 $ ( 0.01 )

Net loss from discontinued operations per common share, basic — ( 0.46 )

1 unchanged sentence

Weighted-average shares outstanding, basic 25,512 25,361

Net income from continuing operations per common share, diluted $ 0.54 $ 0.23 $ 0.97 $ 1.16

Net income (loss) from continuing operations per common share, diluted $ 0.86 $ ( 0.01 )

Net loss from discontinued operations per common share, diluted — ( 0.46 )

6 unchanged sentences

(In thousands)

Quarter ended Nine months ended

March 31, March 31,

2021 2020 2021 2020

Quarter ended

September 30,

Net income (loss) $ 22,073 $ ( 11,819 )

Unrealized gain (loss) on hedged transaction, net of tax 1,582 ( 4,046 ) 2,209 ( 4,217 )

Unrealized foreign currency translation adjustment ( 9,216 ) ( 28,788 ) 6,269 ( 34,869 )

Realized foreign currency loss from discontinued operations — — 11,635 —

Unrealized gain on hedged transaction, net of tax 413 109

Foreign currency translation adjustment ( 11,147 ) 3,511

Comprehensive income (loss) $ 11,339 $ ( 8,199 )

9 unchanged sentences

Balance at June 30, 2021 25,499,465 $ 71,253 $ 758,071 $ ( 98,133 ) $ 731,191

Net loss — — ( 11,819 ) — ( 11,819 )

Unrealized gain on hedged transaction, net of tax — — — 109 109

Unrealized foreign currency translation adjustment — — — 3,511 3,511

Share-based compensation — 1,180 — — 1,180

Balance at September 30, 2020 25,361,298 $ 64,945 $ 735,457 $ ( 129,175 ) $ 671,227

Net loss — — ( 14,194 ) — ( 14,194 )

Unrealized gain on hedged transaction, net of tax — — — 519 519

Unrealized foreign currency translation adjustment — — — 11,974 11,974

Realized foreign currency loss from discontinued operations — — — 11,635 11,635

Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes 90,342 ( 1,036 ) — — ( 1,036 )

Share-based compensation — 2,015 — — 2,015

Balance at December 31, 2020 25,451,640 $ 65,924 $ 721,263 $ ( 105,048 ) $ 682,139

Net income — — 22,073 — 22,073

Unrealized gain on hedged transaction, net of tax — — — 413 413

Unrealized foreign currency translation adjustment — — — ( 9,216 ) ( 9,216 )

Foreign currency translation adjustment — — — ( 11,147 ) ( 11,147 )

Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes 29,086 994 — — 994

Share-based compensation — 2,570 — — 2,570

Balance at March 31, 2021 25,466,365 $ 68,895 $ 734,361 $ ( 112,681 ) $ 690,575

Balance at September 30, 2021 25,528,551 $ 74,817 $ 780,144 $ ( 108,867 ) $ 746,094

See accompanying notes to these condensed consolidated financial statements.

8 unchanged sentences

Balance at June 30, 2020 25,361,298 $ 63,765 $ 747,276 $ ( 132,795 ) $ 678,246

Net income — — 11,530 — 11,530

Unrealized loss on hedged transaction, net of tax — — — ( 1,071 ) ( 1,071 )

Unrealized foreign currency translation adjustment — — — ( 14,639 ) ( 14,639 )

Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes 786 ( 12 ) — — ( 12 )

Common stock repurchased ( 168,068 ) ( 5,432 ) — — ( 5,432 )

Share-based compensation — 1,246 — — 1,246

Balance at September 30, 2019 25,241,115 $ 60,089 $ 951,460 $ ( 105,798 ) $ 905,751

Net income — — 11,366 — 11,366

Net loss — — ( 11,819 ) — ( 11,819 )

Unrealized gain on hedged transaction, net of tax — — — 109 109

Unrealized foreign currency translation adjustment — — — 8,558 8,558

Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes 104,683 ( 621 ) — — ( 621 )

Share-based compensation — 1,627 — — 1,627

Balance at December 31, 2019 25,345,798 $ 61,095 $ 962,825 $ ( 96,340 ) $ 927,580

Net income — — 1,713 — 1,713

Unrealized loss on hedged transaction, net of tax — — — ( 4,046 ) ( 4,046 )

Foreign currency translation adjustment — — — 3,511 3,511

Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes — 34 — — 34

Share-based compensation — 1,180 — — 1,180

Balance at March 31, 2020 25,345,798 $ 62,314 $ 964,538 $ ( 129,174 ) $ 897,678

Balance at September 30, 2020 25,361,298 $ 64,945 $ 735,457 $ ( 129,175 ) $ 671,227

See accompanying notes to these condensed consolidated financial statements.

3 unchanged sentences

(In thousands)

Nine months ended

Three months ended

September 30,

Cash flows from operating activities:

Net (loss) income $ ( 12,915 ) $ 24,608

Net income (loss) $ 22,073 $ ( 11,819 )

Net loss from discontinued operations — ( 11,704 )

Net income from continuing operations 24,732 29,633

Adjustments to reconcile net income to net cash provided by operating activities of continuing operations:

Net income (loss) from continuing operations 22,073 ( 115 )

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities of continuing operations:

Depreciation and amortization 7,650 8,710

4 unchanged sentences

Change in fair value of contingent consideration — 516

Contingent consideration payments excess ( 5,457 ) ( 3,050 )

Finance lease interest 17 37

7 unchanged sentences

Income taxes payable 6,558 ( 4,096 )

Net cash provided by operating activities of continuing operations 55,422 108,083

Net cash (used in) provided by operating activities of continuing operations ( 56,959 ) 71,225

Cash flows from investing activities of continuing operations:

Capital expenditures ( 1,090 ) ( 748 )

Cash paid for business acquisitions, net of cash acquired — ( 48,915 )

Proceeds from the sale of discontinued operations 34,356 —

Net cash provided by (used in) investing activities of continuing operations 32,073 ( 55,490 )

Net cash used in investing activities of continuing operations ( 1,090 ) ( 748 )

Cash flows from financing activities of continuing operations:

3 unchanged sentences

Repayments of finance lease obligations ( 316 ) ( 327 )

Contingent consideration payments ( 41,393 ) ( 35,481 )

Exercise of stock options 994 —

Taxes paid on settlement of equity awards ( 1,036 ) ( 1,354 )

Repurchase of common stock — ( 6,077 )

Net cash used in financing activities of continuing operations ( 62,839 ) ( 88,355 )

Net cash provided by (used in) financing activities of continuing operations 54,860 ( 70,255 )

SCANSOURCE, INC.

5 unchanged sentences

Net cash flows used in by investing activities of discontinued operations — ( 36 )

Net cash flows (used in) provided by financing activities of discontinued operations ( 29,494 ) 6,739

Net cash flows (used in) provided by discontinued operations ( 7,848 ) 48,691

Net cash flows used in financing activities of discontinued operations — ( 9,488 )

Net cash flows provided by discontinued operations — 22,329

Effect of exchange rate changes on cash and cash equivalents ( 4,038 ) ( 1,439 )

Increase in cash and cash equivalents 14,866 10,778

(Decrease) increase in cash and cash equivalents ( 7,227 ) 21,112

Cash and cash equivalents at beginning of period 62,718 34,455

9 unchanged sentences

ScanSource, Inc.

(together with its subsidiaries referred to as “the Company” or “ScanSource”) is at the center of the solution delivery channel, connecting businesses and providing technology solutions.

(together with its subsidiaries referred to as “the Company” or “ScanSource”) is a leading hybrid distributor accelerating growth for partners across hardware, software, connectivity and cloud.

The Company brings technology solutions and services from the world’s leading suppliers of mobility and barcode, point-of-sale (POS), payments, physical security, unified communications and collaboration, telecom and cloud services to market.

1 unchanged sentence

During the quarter ended December 31, 2020, the Company completed the divestitures of its products distribution business in the UK, Europe and Latin America, outside of Brazil.

The Company's two operating segments, Worldwide Barcode, Networking & Security and Worldwide Communications & Services, are based on product, customer and service type.

In early March 2020, the World Health Organization characterized the novel coronavirus ("COVID-19") as a pandemic.

The rapid spread of COVID-19 since December 2019 has resulted in the implementation of numerous measures to contain the virus worldwide, such as travel bans and restrictions, quarantines, shelter-in-place orders and business shutdowns.

The Company's two operating segments, Specialty Technology Solutions and Modern Communications & Cloud, are based on product and customer type.

Segment Changes

During the quarter ended September 30, 2021, the Company renamed its operating segments to Specialty Technology Solutions, formerly Worldwide Barcode, Networking & Security, and Modern Communications & Cloud, formerly Worldwide Communications & Services.

The Company made changes to the segments to align technologies with its hybrid distribution strategy across hardware, software, connectivity and cloud.

The Company moved some North American business with communications and collaboration solutions to the Modern Communications & Cloud segment.

With this change, all of the Company's communications and collaboration business is in the Modern Communications & Cloud segment.

This technology alignment better represents the operating and financial performance information provided to the Company's Chief Operating Decision Maker.

The Company has reclassified certain prior year amounts in the segment results to conform with current year presentation.

These reclassifications had no effect on the condensed consolidated financial results.

See Note 10 - Segment Information for descriptions of the Company's segments.

The spread of COVID-19 since December 2019 has resulted in the implementation of numerous measures to contain the virus worldwide, such as travel bans and restrictions, quarantines, shelter-in-place orders, business shutdowns, and limitations of in-person gatherings.

The Company moved quickly to transition its employees, where possible, to a fully remote working environment.

The Company took steps to deploy teams to monitor the rapidly evolving situation and recommend risk mitigation actions;

implement travel restrictions;

and have employees follow physical distancing practices.

The Company is following guidance from authorities and health officials including, but not limited to, checking the temperature of associates when entering its facilities, requiring associates to wear masks and other protective clothing as appropriate, and implementing additional cleaning and sanitation routines.

All of the Company's distribution facilities have remained open and operational.

Most of the Company's office-based employees around the world are working remotely.

The pandemic and these containment measures have had, and are expected to continue to have, a substantial impact on businesses around the world, including the Company, and on global, regional and national economies.

The Company is unable to predict the ultimate impact that COVID-19 will have on its business due to the inability to predict the duration or magnitude of the virus' impact.

In fiscal year 2020, the Company experienced decreased revenue and increased employee-related healthcare and prevention costs as a result of the COVID-19 pandemic.

While the Company has made adjustments, including implementing an annualized expense reduction plan for fiscal year 2021, the Company will continue to monitor and make adjustments to the operating practices that it believes to be in the best interests of its employees, customers, suppliers, and shareholders.

The Company also deployed teams to monitor the evolving situation and recommend risk mitigation actions.

All of the Company's distribution facilities have remained open and operational throughout the pandemic.

The pandemic and these containment measures have had an impact on the Company's suppliers' businesses and sales partners' businesses.

The negative impacts to net sales from the pandemic, including declines in customer demand and supply chain disruptions, began to recover throughout fiscal year 2021.

While the Company is unable to predict the ultimate impact that COVID-19 will have on its business, certain technologies have benefited from the widespread adoption of work-from-home, as well as the accelerated shift to digitize and automate processes.

The Company continues to incur higher employee related healthcare and prevention costs as a result of the pandemic.

The Company has made adjustments, including implementing an annualized expense reduction plan in fiscal year 2021.

For further discussion on the potential future impacts of COVID-19, see the Risk Factors presented in Part I, Item 1A in the Company's form 10-K for fiscal year 2021.

4 unchanged sentences

GAAP for annual financial statements.

The unaudited condensed consolidated financial statements included herein contain all adjustments (consisting of normal recurring and non-recurring adjustments) that are, in the opinion of management, necessary to present fairly the financial position at March 31, 2021 and June 30, 2020, the results of operations for the quarters and nine months ended March 31, 2021 and 2020, the statements of comprehensive income for the quarters and nine months ended March 31, 2021 and 2020, the statements of shareholders' equity for the quarters and nine months ended March 31, 2021 and 2020 and the statements of cash flows for the nine months ended March 31, 2021 and 2020.

The results of operations for the quarters and nine months ended March 31, 2021 and 2020 are not necessarily indicative of the results to be expected for a full year.

The unaudited condensed consolidated financial statements included herein contain all adjustments (consisting of normal recurring and non-recurring adjustments) that are, in the opinion of management, necessary to present fairly the financial position at September 30, 2021 and June 30, 2021, the results of operations for the quarters ended September 30, 2021 and 2020, the statements of comprehensive income for the quarters ended September 30, 2021 and 2020, the statements of shareholders' equity for the quarters ended September 30, 2021 and 2020 and the statements of cash flows for the three months ended September 30, 2021 and 2020.

The results of operations for the quarters ended September 30, 2021 and 2020 are not necessarily indicative of the results to be expected for a full year.

These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

The Company has reclassified certain prior year amounts for the results of discontinued operations to conform to the current year presentation.

Unless otherwise indicated, amounts provided in these Notes pertain to continuing operations only.

Unless otherwise indicated, disclosures provided in the Notes pertain to continuing operations only.

Summary of Significant Accounting Policies

Except as described below, there have been no material changes to the Company’s significant accounting policies for the nine months ended March 31, 2021 from the policies described in the notes to the Company’s consolidated financial statements included in the Annual Report on Form 10-K for the fiscal year ended June 30, 2020.

There have been no material changes to the Company’s significant accounting policies for the three months ended September 30, 2021 from the policies described in the notes to the Company’s consolidated financial statements included in the Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

For a discussion of the Company’s significant accounting policies, please see the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

See Note 2 - Trade Accounts and Notes Receivable for a discussion of the current expected credit loss policy established upon adoption of Accounting Standards Update ("ASU") 2016-13, Financial Instruments - Credit Losses (ASC Topic 326) in fiscal year 2021.

Restructuring Costs

The Company groups exit or disposal cost obligations into two categories:

(i) severance and benefit costs and (ii) other.

Employee separation costs are recognized upon communication of the restructuring plan to the identified employees.

Other associated restructuring costs are expensed as incurred.

See Note 14 - Restructuring for further disclosures.

Cash and Cash Equivalents

2 unchanged sentences

Due to the terms of the agreements governing these accounts, the Company generally does not have the right to offset outstanding checks written from these accounts against cash on hand, and the respective institutions are not legally obligated to honor the checks until sufficient funds are transferred to fund the checks.

As a result, checks released but not yet cleared from these accounts in the amounts of $ 17.0 million and $ 17.1 million are included in accounts payable on the condensed consolidated balance sheets at March 31, 2021 and June 30, 2020, respectively.

As a result, checks released but not yet cleared from these accounts in the amounts of $ 19.9 million and $ 14.3 million are included in accounts payable on the condensed consolidated balance sheets at September 30, 2021 and June 30, 2021, respectively.

Long-lived Assets

The Company presents depreciation expense and intangible amortization expense on the Condensed Consolidated Income Statements.

The Company's depreciation expense related to selling, general and administrative costs totaled $ 3.1 million and $ 9.6 million for the quarter and nine months ended March 31, 2021, respectively, and $ 3.3 million and $ 9.7 million for the quarter and nine months ended March 31, 2020, respectively.

Depreciation expense reported as part of cost of goods sold on the Condensed Consolidated Income Statements totaled $ 0.3 million and $ 1.2 million for the quarter and nine months ended March 31, 2021, respectively, and $ 0.6 million and $ 1.8 million for the quarter and nine months ended March 31, 2020, respectively.

The Company's depreciation expense related to selling, general and administrative costs totaled $ 2.9 million for the quarter ended September 30, 2021 and $ 3.4 million for the quarter ended September 30, 2020.

Depreciation expense reported as part of cost of goods sold on the Condensed Consolidated Income Statements totaled $ 0.3 million for the quarter ended September 30, 2021 and $ 0.5 million for the quarter ended September 30, 2020.

The Company's intangible amortization expense reported on the Condensed Consolidated Income Statements relates to selling, general and administrative costs, not the cost of selling goods.

Intangible amortization expense totaled $ 4.9 million and $ 14.6 million for the quarter and nine months ended March 31, 2021, respectively, and $ 5.2 million and $ 15.0 million for the quarter and nine months ended March 31, 2020, respectively.

Intangible amortization expense totaled $ 4.5 million for the quarter ended September 30, 2021 and $ 4.9 million for the quarter ended September 30, 2020.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (ASC Topic 326).

In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326:

Financial Instruments - Credit Losses, which provides supplemental guidance and clarification to ASU 2016-13 and must be adopted concurrently .

The pronouncement revises the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded.

The Company adopted this standard effective July 1, 2020 and it did not have a material impact on the Company's consolidated financial statements.

See Note 2 - Trade Accounts and Notes Receivable for disclosures related to the adoption of ASU 2016-13.

In August 2018, the FASB issued ASU 2018-13 , Fair Value Measurement (ASC Topic 820) Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement .

The pronouncement eliminates, modifies and adds disclosure requirements for fair value measurements.

The Company adopted this standard effective July 1, 2020 and it had no impact on its consolidated financial statements.

The Company has reviewed other newly issued accounting pronouncements and concluded that they are either not applicable to its business or that no material effect is expected on its consolidated financial statements as a result of future adoption.

The Company has reviewed newly issued accounting pronouncements and concluded that they are either not applicable to its business or that no material effect is expected on its consolidated financial statements as a result of future adoption.

(2) Trade Accounts and Notes Receivable, Net

4 unchanged sentences

Expected credit losses are estimated on a pool basis when similar risk characteristics exist using an age-based reserve model.

Receivables that do not share risk characteristics are evaluated on an individual basis.

Receivables that do not share risk characteristics

are evaluated on an individual basis.

Estimates of expected credit losses on trade receivables over the contractual life are recorded at inception.

The changes in the allowance for doubtful accounts for the nine months ended March 31, 2021 are set forth in the table below.

The changes in the allowance for doubtful accounts for the three months ended September 30, 2021 are set forth in the table below.

June 30, 2021 Amounts Charged to Expense Write-offs Other (1)

March 31, 2021

September 30, 2021

(in thousands)

Trade accounts and current notes receivable allowance $ 19,341 $ ( 1,027 ) $ ( 763 ) $ 69 $ 17,620

(1) "Other" amounts include recoveries and the effect of foreign currency fluctuations for the nine months ended March 31, 2021.

(1) "Other" amounts include recoveries and the effect of foreign currency fluctuations for the three months ended September 30, 2021.

(3) Revenue Recognition

20 unchanged sentences

Because the Company acts as an agent, revenue is recognized net of cost at the time of sale.

Related to the Company’s Intelisys business, the Company acts as a master agent connecting independent sales partners with service providers or suppliers who offer telecom and cloud services to end-customers.

Intelisys’ sales partners earn commission payments from those service providers or suppliers on end-customer sales.

Intelisys provides commission processing services to sales partners, earning a percentage of the commission stream.

Because the Company acts as an agent, revenue is recognized on a net basis.

The Intelisys business operates under an agency model.

Variable Considerations

5 unchanged sentences

The Company records contract assets and liabilities for payments received from customers in advance of services performed.

These assets and liabilities are the result of the sales of the Company's self-branded warranty programs and other transactions where control has not yet passed to the customer.

These assets and liabilities are the result of the sales of the Company's self-branded warranty programs and other transactions

where control has not yet passed to the customer.

These amounts are immaterial to the consolidated financial statements for the periods presented.

1 unchanged sentence

The following tables represent the Company's disaggregation of revenue:

Quarter ended March 31, 2021

(in thousands)

Worldwide Barcode, Networking & Security Segment Worldwide Communications & Services Segment Total

Revenue by product/service:

Technology solutions $ 502,227 $ 211,369 $ 713,596

Intelisys — 16,277 16,277

$ 502,227 $ 227,646 $ 729,873

Nine months ended March 31, 2021

(in thousands)

Worldwide Barcode, Networking & Security Segment Worldwide Communications & Services Segment Total

Revenue by product/service:

Technology solutions $ 1,577,197 $ 673,134 $ 2,250,331

Intelisys — 47,780 47,780

$ 1,577,197 $ 720,914 $ 2,298,111

Quarter ended March 31, 2020

Quarter ended September 30, 2021

(in thousands)

Worldwide Barcode, Networking & Security Segment Worldwide Communications & Services Segment Total

Specialty Technology Solutions Modern Communications & Cloud Total

Revenue by product/service:

Technology solutions $ 489,218 $ 240,819 $ 730,037

Intelisys — 14,547 14,547

Hardware, software and cloud (excluding Intelisys) $ 501,711 $ 338,248 $ 839,959

Intelisys connectivity and cloud — 17,352 17,352

$ 501,711 $ 355,600 $ 857,311

Nine months ended March 31, 2020

Quarter ended September 30, 2020

(in thousands)

Worldwide Barcode, Networking & Security Segment Worldwide Communications & Services Segment Total

Specialty Technology Solutions Modern Communications & Cloud Total

Revenue by product/service:

Technology solutions $ 1,645,406 $ 723,557 $ 2,368,963

Intelisys — 42,322 42,322

Hardware, software and cloud (excluding Intelisys) $ 408,777 $ 333,308 $ 742,085

Intelisys connectivity and cloud — 15,257 15,257

$ 408,777 $ 348,565 $ 757,342

2 unchanged sentences

Diluted earnings per share are computed by dividing net income by the weighted-average number of common and potential common shares outstanding.

Quarter ended Nine months ended

March 31, March 31,

2021 2020 2021 2020

Quarter ended

September 30,

(in thousands, except per share data)

Net income from continuing operations $ 13,786 $ 5,715 $ 24,732 $ 29,633

Net income (loss) from continuing operations $ 22,073 $ ( 115 )

Net loss from discontinued operations — ( 11,704 )

Net (loss) income $ 13,098 $ 1,713 $ ( 12,915 ) $ 24,608

Net income (loss) $ 22,073 $ ( 11,819 )

Weighted-average shares, basic 25,512 25,361

3 unchanged sentences

Net loss from discontinued operations per common share, basic — ( 0.46 )

Net (loss) income per common share, basic $ 0.51 $ 0.07 $ ( 0.51 ) $ 0.97

Net income from continuing operations per common share, diluted $ 0.54 $ 0.23 $ 0.97 $ 1.16

Net income (loss) per common share, basic $ 0.87 $ ( 0.47 )

Net income (loss) from continuing operations per common share, diluted $ 0.86 $ ( 0.01 )

Net loss from discontinued operations per common share, diluted — ( 0.46 )

Net (loss) income per common share, diluted $ 0.51 $ 0.07 $ ( 0.51 ) $ 0.97

For the quarter and nine months ended March 31, 2021, weighted-average shares outstanding excluded from the computation of diluted earnings per share because their effect would be anti-dilutive were 1,532,961 and 1,285,153 , respectively.

For the quarter and nine months ended March 31, 2020, weighted-average shares outstanding excluded from the computation of diluted earnings per share because their effect would be anti-dilutive were 1,036,740 and 980,803 , respectively.

Net income (loss) per common share, diluted $ 0.86 $ ( 0.47 )

For the quarters ended September 30, 2021 and September 30, 2020, weighted-average shares outstanding excluded from the computation of diluted earnings per share because their effect would be anti-dilutive were 590,557 and 1,063,840 , respectively.

(5) Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss consists of the following:

March 31, 2021 June 30, 2020

September 30, 2021 June 30, 2021

(in thousands)

2 unchanged sentences

Accumulated other comprehensive loss $ ( 108,867 ) $ ( 98,133 )

The tax effect of amounts in comprehensive (income) loss reflect a tax expense or (benefit) as follows:

Quarter ended March 31, Nine months ended March 31,

2021 2020 2021 2020

The tax effect of amounts in comprehensive loss (income) reflect a tax expense or (benefit) as follows:

Quarter ended September 30,

(in thousands)

Tax expense (benefit) $ 284 $ 184

(6) Acquisitions

On July 1, 2019, the Company acquired all of the outstanding shares of intY and its CASCADE cloud services distribution platform.

The purchase price of this acquisition, net of cash acquired, was approximately $ 48.9 million.

The purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values on the transaction date.

Intangible assets acquired include trade names, customer relationships, and developed technology.

Goodwill recognized on this acquisition is not deductible for tax purposes.

The impact of this acquisition was not material to the consolidated financial statements.

The Company recognized $ 0.1 million and $ 0.5 million for the quarter and nine months ended March 31, 2020, respectively, in acquisition-related costs included in selling, general and administrative expenses on the Condensed Consolidated Income Statements in connection with this acquisition.

This acquisition is included in the Worldwide Communications & Services segment.

(6) Goodwill and Other Identifiable Intangible Assets

The changes in the carrying amount of goodwill for the nine months ended March 31, 2021, by reporting segment, are set forth in the table below.

Worldwide Barcode, Networking & Security Segment Worldwide Communications & Services Segment Total

The changes in the carrying amount of goodwill for the three months ended September 30, 2021, by reporting segment, are set forth in the table below.

Specialty Technology Solutions Modern Communications & Cloud Total

(in thousands)

1 unchanged sentence

Foreign currency translation adjustment — ( 1,929 ) ( 1,929 )

Balance at March 31, 2021 $ 16,370 $ 200,723 $ 217,093

The following table shows changes in the amount recognized for net identifiable intangible assets for the nine months ended March 31, 2021.

Balance at September 30, 2021 $ 16,370 $ 200,578 $ 216,948

The following table shows changes in the amount recognized for net identifiable intangible assets for the three months ended September 30, 2021.

Net Identifiable Intangible Assets

3 unchanged sentences

Foreign currency translation adjustment ( 854 )

Balance at March 31, 2021 $ 109,172

Balance at September 30, 2021 $ 99,496

(7) Short-Term Borrowings and Long-Term Debt

The following table presents the Company’s debt for continuing and discontinued operations at March 31, 2021 and June 30, 2020.

March 31, 2021 June 30, 2020

The following table presents the Company’s debt at September 30, 2021 and June 30, 2021.

September 30, 2021 June 30, 2021

(in thousands)

Short-term borrowings (a)

Current portion of long-term debt $ 8,785 $ 7,843

1 unchanged sentence

Senior secured term loan facility, net of current portion 128,438 131,250

Borrowings under revolving credit facility (b)

53,802 92,418

Borrowings under revolving credit facility 56,400 —

Total debt $ 197,356 $ 143,174

(a) Short-term borrowings are classified as held for sale in the Consolidated Balance sheets for the Company's discontinued operations at June 30, 2020.

(b) Borrowings under the revolving credit facility classified as held for sale in the Consolidated Balance Sheets for the Company's discontinued operations totaled $ 24.7 million at June 30, 2020.

Short-term Borrowings

The Company had a bank overdraft facility with Bank of America used by its products distribution business in the UK and European Union recognized as short-term borrowings.

The facility was terminated with the sale of the business in November 2020.

The facility allowed the Company to disburse checks in excess of bank balances up to $ 14.0 million U.S.

dollar equivalent for up to seven days .

Borrowings under the overdraft facility had an interest rate equal to 1 % over the applicable currency's London Interbank Offered Rate ("LIBOR") with a zero percent floor.

There were no borrowings outstanding under the overdraft facility at March 31, 2021.

At June 30, 2020, there was $ 3.5 million outstanding under the overdraft facility classified as held for sale in the Consolidated Balance Sheets.

The borrowings were denominated in euros, which bore a negative LIBOR rate at June 30, 2020, and as such the interest applicable to the Company was 1.0 %.

Credit Facility

12 unchanged sentences

Under the terms of the revolving credit facility, the payment of cash dividends is restricted.

The spread in effect as of March 31, 2021 was 1.25 % for LIBOR-based loans and 0.25 % for alternate base rate loans.

The commitment fee rate in effect at March 31, 2021 was 0.20 %.

The spread in effect as of September 30, 2021 was 1.25 % for LIBOR-based loans and 0.25 % for alternate base rate loans.

The commitment fee rate in effect at September 30, 2021 was 0.20 %.

The Amended Credit Agreement includes customary representations, warranties, and affirmative and negative covenants, including financial covenants.

2 unchanged sentences

In the event of a default, customary remedies are available to the lenders, including acceleration and increased interest rates.

The Company was in compliance with all covenants under the credit facility at March 31, 2021.

Including borrowings for both continuing and discontinued operations, the average daily outstanding balance on the revolving credit facility, excluding the term loan facility, during the nine month periods ended March 31, 2021 and 2020 was $ 62.1 million and $ 252.4 million, respectively.

Taking into consideration outstanding borrowings on the multi-currency revolving credit facility for both continuing and discontinued operations, there was $ 296.2 million and $ 257.3 million available for additional borrowings as of March 31, 2021 and June 30, 2020, respectively.

At March 31, 2021, based upon the Leverage Ratio calculation, there was $ 172.6 million available for additional borrowings.

There were no letters of credit issued under the multi-currency revolving credit facility at March 31, 2021 and $ 0.3 million at June 30, 2020.

The Company was in compliance with all covenants under the credit facility at September 30, 2021.

The average daily outstanding balance on the revolving credit facility, excluding the term loan facility, during the three month period ended September 30, 2021 was $ 54.4 million.

Including borrowings for both continuing and discontinued operations, the average daily outstanding balance on the revolving credit facility, excluding the term loan facility, during the three months ended September 30, 2020 was $ 91.2 million.

There was $ 293.6 million and $ 350.0 million available for additional borrowings as of September 30, 2021 and June 30, 2021, respectively.

There were no letters of credit issued under the multi-currency revolving credit facility at September 30, 2021 or June 30, 2021.

Mississippi Revenue Bond

3 unchanged sentences

The agreement also provides the bondholder with a put option, exercisable only within 180 days of each fifth anniversary of the agreement, requiring the Company to pay back the bonds at 100 % of the principal amount outstanding.

At March 31, 2021, the Company was in compliance with all covenants under this bond.

The interest rates at March 31, 2021 and June 30, 2020 were 0.96 % and 1.03 %, respectively.

At September 30, 2021, the Company was in compliance with all covenants under this bond.

The interest rates at September 30, 2021 and June 30, 2021 were 0.93 % and 0.94 %, respectively.

Debt Issuance Costs

At March 31, 2021, net debt issuance costs associated with the credit facility and bond totaled $ 1.3 million and are being amortized through the maturity date of each respective debt instrument.

At September 30, 2021, net debt issuance costs associated with the credit facility and bond totaled $ 1.1 million and are being amortized through the maturity date of each respective debt instrument.

(8) Derivatives and Hedging Activities

7 unchanged sentences

These contracts will periodically hedge the exchange of various currencies, including the U.S.

dollar, Brazilian real, euro, British pound and Canadian dollar for continuing operations.

The Company had contracts outstanding for purposes of managing cash flows with notional amounts of $ 25.5 million and $ 16.6 million for the exchange of foreign currencies at March 31, 2021 and June 30, 2020, respectively.

dollar, Brazilian real, euro, British pound and Canadian dollar.

The Company had contracts outstanding for purposes of managing cash flows with notional amounts of $ 33.7 million and $ 27.9 million for the exchange of foreign currencies at September 30, 2021 and June 30, 2021, respectively.

To date, the Company has chosen not to designate these derivatives as hedging instruments, and accordingly, these instruments are adjusted to fair value through earnings in other income and expense.

Summarized financial information related to these derivative contracts and changes in the underlying value of the foreign currency exposures included in the Condensed Consolidated Income Statements for the quarters and nine months ended March 31, 2021 and 2020 are as follows:

Quarter ended Nine months ended

March 31, March 31,

2021 2020 2021 2020

Quarter ended

September 30,

(in thousands)

Net foreign exchange derivative contract (gains) losses $ ( 1,651 ) $ 95

Net foreign currency transactional and re-measurement losses (gains) 1,020 3,168 ( 74 ) 3,835

Net foreign currency exchange (gains) losses $ ( 41 ) $ ( 96 ) $ 778 $ 86

Net foreign currency transactional and re-measurement losses 2,136 343

Net foreign currency exchange losses $ 485 $ 438

Net foreign currency exchange gains and losses consist of foreign currency transactional and functional currency re-measurements, offset by net foreign currency exchange contract gains and losses and are included in other income and expense.

5 unchanged sentences

The Company entered into an interest rate swap agreement, which was subsequently settled, and entered into a new amended agreement on April 30, 2019.

The swap agreement has a notional amount of $ 100.0 million, with a $ 50.0 million tranche scheduled to mature

on April 30, 2024 and a $ 50.0 million tranche scheduled to mature April 30, 2026.

The swap agreement has a notional amount of $ 100.0 million, with a $ 50.0 million tranche scheduled to mature on April 30, 2024 and a $ 50.0 million tranche scheduled to mature April 30, 2026.

This swap agreement is designated as a cash flow hedge to hedge the variable rate interest payments on the revolving credit facility.

1 unchanged sentence

To the extent the swap is effective in offsetting the variability of the hedged cash flows, changes in the fair value of the swap are not included in current earnings but are reported as other comprehensive income (loss).

There was no ineffective portion to be recorded as an adjustment to earnings for the quarters and nine months ended March 31, 2021 and 2020.

The components of the cash flow hedge included in the Condensed Consolidated Statement of Comprehensive Income for the quarters and nine months ended March 31, 2021 and 2020, are as follows:

Quarter ended Nine months ended

March 31, March 31,

2021 2020 2021 2020

There was no ineffective portion to be recorded as an adjustment to earnings for the quarters ended September 30, 2021 and 2020.

The components of the cash flow hedge included in the Condensed Consolidated Statement of Comprehensive Income for the quarters ended September 30, 2021 and 2020, are as follows:

Quarter ended

September 30,

(in thousands)

Net interest expense recognized as a result of interest rate swap $ 580 $ 560

Unrealized gain (loss) in fair value of interest rate swap 1,549 ( 5,518 ) 1,281 ( 5,890 )

Net increase (decrease) in accumulated other comprehensive income 2,106 ( 5,338 ) 2,963 ( 5,547 )

Unrealized loss in fair value of interest rate swap ( 15 ) ( 402 )

Net increase in accumulated other comprehensive income 565 158

Income tax effect 152 49

Net increase (decrease) in accumulated other comprehensive income, net of tax $ 1,582 $ ( 4,046 ) $ 2,209 $ ( 4,217 )

The Company used the following derivative instruments at March 31, 2021 and June 30, 2020, reflected in its Condensed Consolidated Balance Sheets, for the risk management purposes detailed above:

March 31, 2021 June 30, 2020

Net increase in accumulated other comprehensive income, net of tax $ 413 $ 109

The Company used the following derivative instruments at September 30, 2021 and June 30, 2021, reflected in its Condensed Consolidated Balance Sheets, for the risk management purposes detailed above:

September 30, 2021 June 30, 2021

Balance Sheet Location Fair Value of

4 unchanged sentences

(in thousands)

Derivative assets:

Foreign exchange contracts Prepaid expenses and other current assets $ — $ 5 $ — $ —

Foreign currency hedge Prepaid expenses and other current assets $ 268 $ — $ 187 $ —

Derivative liabilities:

Foreign exchange contracts Accrued expenses and other current liabilities $ — $ — $ — $ 5

Foreign currency hedge Accrued expenses and other current liabilities $ 275 $ — $ — $ —

Interest rate swap agreement Other long-term liabilities $ 5,675 $ — $ 6,280 $ —

4 unchanged sentences

• Level 2 – Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability;

• Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e.

supported by little or no market activity).

• Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

The assets and liabilities maintained by the Company that are required to be measured or disclosed at fair value on a recurring basis include the Company’s various debt instruments, deferred compensation plan investments, outstanding forward foreign currency exchange contracts, interest rate swap agreements and contingent consideration owed to the previous owners of Intelisys.

The carrying value of debt is considered to approximate fair value, as the Company’s debt instruments are indexed to a variable rate using the market approach (Level 2 criteria).

The following table summarizes the valuation of the Company’s remaining assets and liabilities measured at fair value on a recurring basis at March 31, 2021:

The carrying value of debt is considered to approximate fair value, as the Company’s debt instruments are indexed to a variable rate using the market approach (Level 2).

The following table summarizes the valuation of the Company’s remaining assets and liabilities measured at fair value on a recurring basis at September 30, 2021:

(Level 1) Significant

2 unchanged sentences

Deferred compensation plan investments, current and non-current portion $ 29,883 $ 29,883 $ — $ —

Total assets at fair value $ 30,145 $ 30,145 $ — $ —

Deferred compensation plan investments, current and non-current portion $ 30,145 $ 30,145 $ — $ —

Forward foreign currency exchange contracts 5 — 5 —

Foreign currency hedge 268 — 268 —

Total assets at fair value $ 30,156 $ 29,883 $ 273 $ —

Deferred compensation plan investments, current and non-current portion $ 29,883 $ 29,883 $ — $ —

Interest rate swap agreement 5,675 — 5,675 —

5 unchanged sentences

Deferred compensation plan investments, current and non-current portion $ 31,168 $ 31,168 $ — $ —

Foreign currency hedge 187 — 187 —

Total assets at fair value $ 31,355 $ 31,168 $ 187 $ —

2 unchanged sentences

Interest rate swap agreement 6,280 — 6,280 —

Liability for contingent consideration 46,334 — — 46,334

Total liabilities at fair value $ 37,453 $ 31,168 $ 6,285 $ —

9 unchanged sentences

Subsequent changes in the fair value of the contingent consideration liabilities are recorded to the change in fair value of contingent consideration line item in the Condensed Consolidated Income Statements.

Intelisys is part of the Company's Worldwide Communications & Services segment.

The table below provides a summary of the changes in fair value of the Company's contingent considerations for the Intelisys earnout, which is measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the quarter and nine months ended March 31, 2021.

The final earnout payment due to the former owners of Intelisys was paid in October 2020.

Quarter ended March 31, 2021 Nine months ended March 31, 2021

Worldwide Communications & Services Segment

(in thousands)

Fair value at beginning of period $ — $ 46,334

Payments — ( 46,850 )

Change in fair value of contingent consideration — 516

Fair value at end of period $ — $ —

The table below provides a summary of the changes in fair value of the Company’s contingent considerations (Level 3) for the Intelisys earnout for the quarter and nine months ended March 31, 2020.

Quarter ended March 31, 2020 Nine months ended March 31, 2020

Worldwide Communications & Services Segment

Quarter ended September 30, 2020

Modern Communications & Cloud

(in thousands)

Fair value at beginning of period $ 46,334

Payments — ( 38,531 )

Change in fair value of contingent consideration 516

6 unchanged sentences

• a discount rate reflective of the Company’s creditworthiness and market risk premium associated with the United States markets.

A change in any of these unobservable inputs can significantly change the fair value of the contingent consideration.

Valuation techniques and significant observable inputs used in recurring Level 3 fair value measurements for the Company's contingent consideration liability related to Intelisys at June 30, 2020 were as follows.

The measurement period for the Intelisys earnout ended on June 30, 2020.

Reporting Period Valuation Technique Significant Unobservable Inputs Weighted Average Rates (a)

June 30, 2020 Discounted cash flow Weighted average cost of capital 3.0 %

(a) Weighted average rates identified for this significant unobservable input relate to the valuation of the Intelisys contingent consideration.

Since the earnout period for Intelisys closed on June 30, 2020, the weighted average cost of capital represents the cost of debt.

There is no EBITDA growth or weighted average cost of capital to report in the current period.

The final contingent consideration payment related to Intelisys was paid during the quarter ended December 31, 2020.

The expense from the change in fair value of the contingent consideration recognized in the Condensed Consolidated Income Statement totaled $ 0.5 million for the nine months ended March 31, 2021.

The change in fair value for the current nine month period is due to the recurring amortization of the unrecognized fair value discount.

The fair value of the liability for the contingent consideration related to Intelisys recognized at March 31, 2020 was $ 45.7 million, all of which was classified as current.

The expense from the change in fair value of the contingent consideration recognized in the Condensed Consolidated Income Statement totaled $ 0.6 million and $ 6.3 million for the quarter and nine months ended March 31, 2020, respectively.

The change in fair value for the prior-year quarter and nine month period is primarily driven by the recurring amortization of the unrecognized fair value discount and better than expected actual results.

The final earnout payment due to the former owners of Intelisys was paid in October 2020.

The Company recognized $ 0.5 million in expense from the change in fair value of the contingent consideration in the Condensed Consolidated Income Statement for the quarter ended September 30, 2020.

The change in fair value for the prior-year quarter is due to the recurring amortization of the unrecognized fair value discount.

(10) Segment Information

The Company is a leading provider of technology solutions and services to customers in specialty technology markets.

The Company has two reportable segments, based on product, customer and service type.

Worldwide Barcode, Networking & Security Segment

The Worldwide Barcode, Networking & Security segment includes a portfolio of solutions primarily for enterprise mobile computing, data capture, barcode printing, POS, payments, networking, electronic physical security, cyber security and other technologies.

The Company has two reportable segments, based on product and customer type.

Specialty Technology Solutions Segment

The Specialty Technology Solutions segment includes the Company’s business in automatic identification and data capture (“AIDC”), point of sale (“POS”), payments, security, and networking technologies.

AIDC solutions include mobile computing, barcode scanners and imagers, radio frequency identification devices (“RFID”), barcode printing, and services.

POS and payments solutions include POS systems, integrated POS software platforms, self-service kiosks including self-checkout, payment terminals, and mobile payment devices.

Security solutions include video surveillance and analytics, video management software, and access control.

Networking solutions include switching, routing, and wireless products and software.

The Company has business operations within this segment in the United States, Canada, and Brazil.

The Company sees adjacencies among these technologies in helping its customers develop solutions.

Data capture and POS solutions interface with computer systems used to automate the collection, processing and communication of information for commercial and industrial applications, including retail sales, distribution, shipping, inventory control, materials handling, warehouse management and health care applications.

Electronic physical security products include identification, access control, video surveillance, intrusion-related and wireless and networking infrastructure products.

Worldwide Communications & Services Segment

The Worldwide Communications & Services segment includes a portfolio of solutions primarily for communications technologies and services and includes the Company's acquisition of intY.

Modern Communications & Cloud Segment

The Modern Communications & Cloud segment includes the Company’s business in communications and collaboration, connectivity, and cloud services.

Communications and collaboration solutions, delivered in the cloud, on-premise, or hybrid, include voice, video, integration of communication platforms, and contact center solutions.

The Intelisys connectivity and cloud marketplace offers telecom, cable, Unified Communications as a Service (“UCaaS”), Contact Center as a Service (“CCaaS”), Infrastructure as a Service (“IaaS”), Software-Defined Wide-Area Network (“SD-WAN”), and other cloud services.This segment includes SaaS and subscription services, which the Company offers using digital tools and platforms.

The Company has business operations within this segment in the United States, Canada, Brazil and the UK.

These offerings include voice, video conferencing, wireless, data networking, cable, unified communications and collaboration, cloud and technology services.

As these solutions come together on IP networks, new opportunities are created to move into adjacent solutions for all vertical markets, such as education, healthcare and government.

Selected financial information for each business segment is presented below:

Quarter ended Nine months ended

March 31, March 31,

2021 2020 2021 2020

Quarter ended

September 30,

(in thousands)

Worldwide Barcode, Networking & Security $ 502,227 $ 489,218 $ 1,577,197 $ 1,645,406

Worldwide Communications & Services 227,646 255,366 720,914 765,879

Specialty Technology Solutions $ 501,711 $ 408,777

Modern Communications & Cloud 355,600 348,565

$ 857,311 $ 757,342

Depreciation and amortization:

Worldwide Barcode, Networking & Security $ 3,772 $ 4,210 $ 11,852 $ 12,765

Worldwide Communications & Services 3,867 3,981 11,257 11,436

Specialty Technology Solutions $ 2,969 $ 3,545

Modern Communications & Cloud 3,962 4,370

Corporate 719 795

1 unchanged sentence

Change in fair value of contingent consideration:

Worldwide Communications & Services $ — $ 618 $ 516 $ 6,266

$ — $ 618 $ 516 $ 6,266

Modern Communications & Cloud — 516

Operating income:

Worldwide Barcode, Networking & Security $ 8,054 $ 4,779 $ 16,088 $ 29,153

Worldwide Communications & Services 12,214 6,394 33,555 22,009

Specialty Technology Solutions $ 14,104 $ 1,684

Modern Communications & Cloud 16,307 8,716

Corporate (1)

2 unchanged sentences

Capital expenditures:

Worldwide Barcode, Networking & Security $ ( 532 ) $ ( 1,855 ) $ ( 1,173 ) $ ( 3,294 )

Worldwide Communications & Services ( 297 ) ( 1,988 ) ( 1,110 ) ( 3,281 )

Specialty Technology Solutions $ ( 117 ) $ ( 283 )

Modern Communications & Cloud ( 973 ) ( 465 )

$ ( 1,090 ) $ ( 748 )

4 unchanged sentences

$ 857,311 $ 757,342

(1) Includes restructuring costs of $ 0.6 million and $ 9.3 million for the quarter and nine months ended March 31, 2021.

March 31, 2021 June 30, 2020

(1) For the quarter ended September 30, 2021, the amounts shown above include divestiture costs.

For the quarter ended September 30, 2020, the amounts shown above include restructuring and divestiture costs.

September 30, 2021 June 30, 2021

(in thousands)

Worldwide Barcode, Networking & Security $ 786,123 $ 766,746

Worldwide Communications & Services 775,359 685,053

Specialty Technology Solutions $ 798,750 $ 775,704

Modern Communications & Cloud 876,893 868,752

Corporate 21,708 27,228

Assets held for sale — 181,231

$ 1,697,351 $ 1,671,684

8 unchanged sentences

Operating leases are recorded as other non-current assets, accrued expenses and other current liabilities and other long-term liabilities on the Condensed Consolidated Balance Sheets.

The Company has finance leases for information technology equipment expiring in fiscal year 2022.

The Company has finance leases for information technology equipment expiring through fiscal year 2024.

Finance leases are recorded as property and equipment, net , accrued expenses and other current liabilities and other long-term liabilities on the Condensed Consolidated Balance Sheets.

The gross amount of the balances recorded related to finance leases is immaterial to the financial statements at March 31, 2021 and June 30, 2020.

The gross amount of the balances recorded related to finance leases is immaterial to the financial statements at September 30, 2021 and June 30, 2021.

Operating lease right-of-use assets and lease liabilities are recognized at the commencement date based on the net present value of future minimum lease payments over the lease term.

5 unchanged sentences

Further, the Company has elected the practical expedient to recognize all lease and non-lease components as a single lease component, where applicable.

The following table presents amounts recorded on the Condensed Consolidated Balance Sheet related to operating leases at March 31, 2021 and June 30, 2020:

Operating leases Balance Sheet location March 31, 2021 June 30, 2020

The following table presents amounts recorded on the Condensed Consolidated Balance Sheet related to operating leases at September 30, 2021 and June 30, 2021:

Operating leases Balance Sheet location September 30, 2021 June 30, 2021

(in thousands)

2 unchanged sentences

Long-term operating lease liabilities Other long-term liabilities 15,589 16,550

The following table presents amounts recorded in operating lease expense as part of selling general and administrative expenses on the Condensed Consolidated Income Statements during the quarters and nine months ended March 31, 2021 and 2020.

Operating lease costs contain immaterial amounts of short-term lease costs for leases with an initial term of 12 months or less.

Quarter ended March 31, Nine months ended March 31,

2021 2020 2021 2020

(in thousands) (in thousands)

Quarter ended September 30,

(in thousands)

Operating lease cost $ 1,243 $ 1,356

1 unchanged sentence

$ 1,565 $ 1,666

Supplemental cash flow information related to the Company's operating leases for the quarter and nine months ended March 31, 2021 and 2020 are presented in the table below:

Nine months ended

Supplemental cash flow information related to the Company's operating leases for the quarter ended September 30, 2021 and 2020 are presented in the table below:

Quarter ended

September 30,

(in thousands)

1 unchanged sentence

Right-of-use assets obtained in exchange for lease obligations 362 —

The weighted-average remaining lease term and discount rate at March 31, 2021 are presented in the table below:

March 31, 2021

The weighted-average remaining lease term and discount rate at September 30, 2021 are presented in the table below:

September 30, 2021

Weighted-average remaining lease term 5.00 years

Weighted-average discount rate 4.07 %

The following table presents the maturities of the Company's operating lease liabilities at March 31, 2021:

The following table presents the maturities of the Company's operating lease liabilities at September 30, 2021:

Operating leases

(in thousands)

Remainder of 2021 $ 1,329

Thereafter 3,269

5 unchanged sentences

Although there can be no assurance, based upon information known to the Company, the Company believes that any liability resulting from an adverse determination of such lawsuits would not have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

In early March 2020, the World Health Organization characterized COVID-19 as a pandemic.

3 unchanged sentences

The Company recorded indemnification receivables that are reported gross of the pre-acquisition contingency liabilities as the funds were escrowed as part of the acquisition.

The amount available after the impact of foreign currency translation for future pre-acquisition contingency settlements or to be released to the sellers was $ 3.5 million and $ 4.8 million, at March 31, 2021 and June 30, 2020, respectively.

The table below summarizes the balances and line item presentation of Network1's pre-acquisition contingencies and corresponding indemnification receivables in the Company's Condensed Consolidated Balance Sheets at March 31, 2021 and June 30, 2020:

March 31, 2021 June 30, 2020

The amount available after the impact of foreign currency translation for future pre-acquisition contingency settlements or to be released to the sellers was $ 3.7 million and $ 4.0 million, at September 30, 2021 and June 30, 2021, respectively.

September 30, 2021 June 30, 2021

(in thousands)

8 unchanged sentences

The Company also initiated the closure of its Canpango business, its Salesforce implementation and consulting business.

There has been limited adoption by the Company's partner community of the services Canpango offers.

There had been limited adoption by the Company's partner community of the services Canpango offers.

These actions include entering into severance and termination agreements with employees, legal fees to execute the reduction in force and costs associated with lease terminations.

The following table presents the restructuring and severance costs incurred for the quarter and nine months ended March 31, 2021:

Quarter ended March 31, 2021 Nine months ended March 31, 2021

The following table presents the restructuring and severance costs incurred for the quarters ended September 30, 2021 and 2020:

Quarter ended September 30, 2021 Quarter ended September 30, 2020

(in thousands)

Severance and benefit costs $ — $ 8,111

Other 234 487

Total restructuring and other charges $ — $ 8,268

For the quarter and nine months ended March 31, 2021, all restructuring costs are recognized in the Corporate reporting unit and have not been allocated to the Worldwide Communications & Services or Worldwide Barcode, Networking & Security segment.

The Company incurred restructuring charges in the prior year that were immaterial to the condensed consolidated financial statements and unrelated to the program described above.

For the quarter ended September 30, 2020, all restructuring costs were recognized in the Corporate reporting unit and were not allocated to the Modern Communications & Cloud or Specialty Technology Solutions segment.

Accrued restructuring and severance costs are included in accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheets.

The following table represents activity for the nine months ended March 31, 2021:

The following table represents activity for the three months ended September 30, 2021:

Accrued Expenses

(in thousands)

Balance at July 1, 2020 $ —

Balance at June 30, 2021 $ 1,199

Charged to expense —

Cash payments ( 633 )

Balance at March 31, 2021

The remaining balance as of March 31, 2021 of $ 2.5 million , primarily related to Corporate, is expected to be paid through the first quarter of fiscal year 2022.

Balance at September 30, 2021

The remaining balance as of September 30, 2021 of $ 0.6 million , primarily related to Corporate, is expected to be paid through the third quarter of fiscal year 2022.

(14) Income Taxes

Income taxes for the quarters and nine months ended March 31, 2021 and 2020 have been included in the accompanying condensed consolidated financial statements using an estimated annual effective tax rate.

Income taxes for the quarters ended September 30, 2021 and 2020 have been included in the accompanying condensed consolidated financial statements using an estimated annual effective tax rate.

In addition to applying the estimated annual effective tax rate to pre-tax income, the Company includes certain items treated as discrete events to arrive at an estimated overall tax provision.

During the current period, a discrete net tax benefit of $ 0.5 million was recorded, which is primarily attributable to exempt foreign income.

The Company’s effective tax rate of 27.1 % and 28.3 % for the quarter and nine months ended March 31, 2021, respectively, differs from the current federal statutory rate of 21% primarily as a result of income derived from tax jurisdictions with varying income tax rates, nondeductible expenses and state income taxes.

The Company's effective tax rate was 32.9 % and 28.0 % for the quarter and nine months ended March 31, 2020, respectively.

The Company has provided for U.S.

income taxes for the current earnings of its Canadian subsidiary and will continue to distribute the earnings of its Canadian subsidiary.

Earnings from Brazil will continue to be considered retained indefinitely for reinvestment and all other foreign geographies are immaterial.

It has been the practice of the Company to reinvest those earnings in the businesses outside the United States.

As a result of the sale of the Latin American and European entities, the Company repatriated the proceeds to the United States with minimal tax consequences.

The Tax Cuts and Jobs Act (TCJA), passed in December 2017, created a provision known as global intangible low-tax income ("GILTI") that imposes a tax on certain earnings of foreign subsidiaries.

The GILTI tax became effective for the Company during fiscal year 2019 and an accounting policy election was made to treat the tax as a current period expense.

The Company had approximately $ 1.2 million of total gross unrecognized tax benefits at March 31, 2021 and June 30, 2020.

Of this total at March 31, 2021, approximately $ 1 million represents the amount of unrecognized tax benefits that are permanent in nature and, if recognized, would affect the annual effective tax rate.

There were no material discrete items recognized during the quarters ended September 30, 2021 and September 30, 2020.

The Company’s effective tax rate of 25.0 % for the quarter ended September 30, 2021 differs from the current federal statutory rate of 21% primarily as a result of income derived from tax jurisdictions with varying income tax rates, nondeductible expenses and state income taxes.

The Company's effective tax rate was 29.0 % for the quarter ended September 30, 2020.

As of the quarter ended September 30, 2021, the Company is not permanently reinvested with respect to all earnings generated by foreign operations.

The Company has determined that there is no material deferred tax liability related to federal, state and withholding tax related to undistributed earnings.

There is no certainty to the timing of the distribution of such earnings to the U.S.

in whole or in part.

The Company had approximately $ 1.1 million of total gross unrecognized tax benefits at September 30, 2021 and June 30, 2021.

Of this total at September 30, 2021, approximately $ 0.9 million represents the amount of unrecognized tax benefits that are permanent in nature and, if recognized, would affect the annual effective tax rate.

The Company does not believe that the total amount of unrecognized tax benefits will significantly increase or decrease within twelve months of the reporting date.

The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense.

At March 31, 2021 and June 30, 2020, the Company had approximately $ 1.2 million and $ 1.1 million, respectively, accrued for interest and penalties.

At September 30, 2021 and June 30, 2021, the Company had approximately $ 1.1 million accrued for interest and penalties.

The Company conducts business globally and one or more of its subsidiaries files income tax returns in the U.S.

5 unchanged sentences

On August 20, 2019, the Company announced plans to divest the product distribution businesses in Europe, the UK, Mexico, Colombia, Chile, Peru and the Miami-based export operations ("Divestitures") as these businesses had been performing below management's expectations.

The Company will continue to operate its digital business in these countries.

The Company continues to operate its digital business in these countries.

Management determined that the Company did not have sufficient scale in these markets to maximize the value-added model for product distribution, leading the Company to focus and invest in its higher-growth, higher-margin businesses.

Results from the Divestitures were included within each reportable segment, which includes the Worldwide Barcode, Networking & Security and Worldwide Communications & Services segments.

Results from the Divestitures were included within each reportable segment, which includes the Specialty Technology Solutions and Modern Communications & Cloud segments.

During the quarter ended June 30, 2020, the Company recorded a pre-tax loss on sale classification of $ 88.9 million to reduce the carrying value of the Divestitures to its estimate of fair value (the net proceeds received at closing), less estimated costs to sell.

As this loss was determined not to be attributable to any individual components in the Divestitures' net assets, it was reflected as a valuation allowance against the total assets of the Divestitures.

During the quarter and nine months ended March 31, 2021, the Company recorded an additional pre-tax loss on disposal group of $ 0.7 million and $ 34.5 million, respectively.

This loss includes the realization of cumulative translation adjustments of $ 0.0 million and $ 11.6 million for the quarter and nine months ended March 31, 2021, respectively.

Additional losses during the quarter and nine months ended March 31, 2021 are primarily attributable to a reduction in the net proceeds received for the Divestitures.

During the quarter ended September 30, 2020, the Company recorded an additional pre-tax loss on disposal group of $ 10.7 million.

This additional loss was attributable primarily to a reduction in the net proceeds expected to be realized at closing for the Divestitures.

The Company signed an agreement on July 23, 2020 with Intcomex for its businesses located in Latin America, outside of Brazil.

2 unchanged sentences

Total cash received for the sale of divestitures was $ 34.4 million.

Major components of net loss from discontinued operations for the quarters and nine months ended March 31, 2021 and 2020 were as follows:

Quarter ended March 31, Nine months ended March 31,

2021 2020 2021 2020

(in thousands) (in thousands)

Major components of net loss from discontinued operations for the quarter ended September 30, 2020 were as follows:

Quarter ended September 30, 2020

(in thousands)

Net sales $ 145,049

2 unchanged sentences

Selling, general and administrative expenses 10,913

Depreciation expense — 225 — 771

Intangible amortization expense — 327 — 1,073

Operating loss ( 398 )

3 unchanged sentences

Loss from discontinued operations before taxes ( 11,701 )

Income tax expense (benefit) — ( 858 ) 17 ( 1,197 )

Income tax expense 3

Net loss from discontinued operations $ ( 11,704 )

The major classes of assets and liabilities classified as held-for-sale in the accompanying consolidated balance sheets, were as follows as of March 31, 2021 and June 30, 2020:

March 31, 2021 June 30, 2020

(in thousands)

Current assets:

Cash and cash equivalents $ — $ 4,970

Accounts receivable, net — 117,200

Inventories, net — 106,779

Prepaid expenses and other current assets — 23,808

Total current assets — 252,757

Property and equipment, net — 1,833

Deferred income taxes — 9,349

Other non-current assets — 6,215

Total assets, before valuation allowance — 270,154

valuation allowance — ( 88,923 )

Total assets, net of valuation allowance (1)

$ — $ 181,231

Current liabilities:

Accounts payable $ — $ 56,098

Accrued expenses and other current liabilities — 14,815

Other taxes payable — 20,378

Short-term borrowings — 3,524

Income tax payable — 1,085

Total current liabilities — 95,900

Borrowings under revolving credit facility — 24,704

Other long-term liabilities — 7,418

Total liabilities (1)

$ — $ 128,022

(1) Total assets and liabilities of discontinued operations are classified in current assets and liabilities, respectively, in the Company's consolidated balance sheet as of June 30, 2020.

The discontinued operations were disposed of during the quarter ended December 31, 2020.

Significant non-cash operating items and capital expenditures reflected in the cash flows from discontinued operations for the nine months ended March 31, 2021 and 2020 were as follows:

Nine months ended March 31,

There were no assets or liabilities classified as held-for-sale in the accompanying consolidated balance sheets at September 30, 2021 and June 30, 2021.

Significant non-cash operating items and capital expenditures reflected in the cash flows from discontinued operations for the three months ended September 30, 2020 were as follows:

Three months ended September 30, 2020

(in thousands)

Loss on disposal group $ 10,686

Depreciation and amortization — 1,844

Capital expenditures ( 36 )

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