What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-11-08 compared with 2022-05-10 · 137 added, 298 removed, 433 unchanged (50% of the section changed)

4 unchanged sentences

(In thousands, except share information)

March 31, 2022 June 30, 2021

September 30, 2022 June 30, 2022

Current assets:

Cash and cash equivalents $ 40,472 $ 37,987

Accounts receivable, less allowance of $ 16,935 at March 31, 2022

Accounts receivable, less allowance of $ 13,942 at September 30, 2022

and $ 16,806 at June 30, 2022

26 unchanged sentences

Common stock, no par value;

45,000,000 shares authorized, 25,429,242 and 25,499,465 shares issued and outstanding at March 31, 2022 and June 30, 2021, respectively

45,000,000 shares authorized, 25,225,902 and 25,187,351 shares issued and outstanding at September 30, 2022 and June 30, 2022, respectively

66,069 64,297

9 unchanged sentences

(In thousands, except per share data)

Quarter ended Nine months ended

March 31, March 31,

2022 2021 2022 2021

Quarter ended

September 30,

Net sales $ 943,813 $ 857,583

4 unchanged sentences

Intangible amortization expense 4,241 4,510

Restructuring and other charges — 560 — 9,312

Change in fair value of contingent consideration — — — 516

Operating income 34,888 30,328

1 unchanged sentence

Interest income ( 1,589 ) ( 1,026 )

Other (income) expense, net ( 136 ) ( 302 ) 668 183

Other expense, net 746 263

Income before income taxes 32,283 29,431

Provision for income taxes 8,241 7,358

Net income from continuing operations 23,526 13,786 68,751 24,732

Net (loss) income from discontinued operations — ( 688 ) 100 ( 37,647 )

Net income (loss) $ 23,526 $ 13,098 $ 68,851 $ ( 12,915 )

Net income $ 24,042 $ 22,073

Per share data:

Net income from continuing operations per common share, basic $ 0.92 $ 0.54 $ 2.69 $ 0.97

Net loss from discontinued operations per common share, basic — ( 0.03 ) $ — $ ( 1.48 )

Net income (loss) per common share, basic $ 0.92 $ 0.51 $ 2.69 $ ( 0.51 )

Net income per common share, basic $ 0.95 $ 0.87

Weighted-average shares outstanding, basic 25,201 25,512

Net income from continuing operations per common share, diluted $ 0.91 $ 0.54 $ 2.66 $ 0.97

Net loss from discontinued operations per common share, diluted — ( 0.03 ) $ — $ ( 1.48 )

Net income (loss) per common share, diluted $ 0.91 $ 0.51 $ 2.67 ( 0.51 )

Net income per common share, diluted $ 0.94 $ 0.86

Weighted-average shares outstanding, diluted 25,451 25,696

4 unchanged sentences

(In thousands)

Quarter ended Nine months ended

March 31, March 31,

2022 2021 2022 2021

Net income (loss) $ 23,526 $ 13,098 $ 68,851 $ ( 12,915 )

Quarter ended

September 30,

Net income $ 24,042 $ 22,073

Unrealized gain on hedged transaction, net of tax 1,879 413

Foreign currency translation adjustment ( 7,217 ) ( 11,147 )

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

Comprehensive income $ 18,704 $ 11,339

15 unchanged sentences

Balance at September 30, 2022 25,225,902 $ 66,069 $ 870,911 $ ( 109,976 ) $ 827,004

Net income — — 23,252 — 23,252

Unrealized gain on hedged transaction, net of tax — — — 1,172 1,172

Foreign currency translation adjustment — — — ( 2,759 ) ( 2,759 )

Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes 134,897 ( 2,513 ) — — ( 2,513 )

Common stock repurchased ( 5,903 ) ( 183 ) — — ( 183 )

Share-based compensation — 3,462 — — 3,462

Balance at December 31, 2021 25,657,545 $ 75,583 $ 803,396 $ ( 110,454 ) $ 768,525

Net income — — 23,526 — 23,526

Unrealized gain on hedged transaction, net of tax — — — 3,144 3,144

Foreign currency translation adjustment — — — 17,186 17,186

Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes 46,549 383 — — 383

Common stock repurchased ( 274,852 ) ( 8,886 ) — — ( 8,886 )

Share-based compensation — 2,776 — — 2,776

Balance at March 31, 2022 25,429,242 $ 69,856 $ 826,922 $ ( 90,124 ) $ 806,654

See accompanying notes to these condensed consolidated financial statements.

8 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

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

Foreign currency translation adjustment — — — 11,974 11,974

Realized foreign currency translation 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

3 unchanged sentences

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.

3 unchanged sentences

(In thousands)

Nine months ended

Three months ended

September 30,

Cash flows from operating activities:

Net income (loss) $ 68,851 $ ( 12,915 )

Net income (loss) from discontinued operations 100 ( 37,647 )

Net income from continuing operations 68,751 24,732

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

Net income $ 24,042 $ 22,073

Adjustments to reconcile net income to net cash used in operating activities:

Depreciation and amortization 7,228 7,650

3 unchanged sentences

Deferred income taxes 2,274 ( 183 )

Change in fair value of contingent consideration — 516

Contingent consideration payments excess — ( 5,457 )

Finance lease interest 2 17

7 unchanged sentences

Income taxes payable 5,256 6,558

Net cash (used in) provided by operating activities of continuing operations ( 45,671 ) 55,422

Cash flows from investing activities of continuing operations:

Net cash used in operating activities ( 48,459 ) ( 56,959 )

Cash flows from investing activities:

Capital expenditures ( 1,758 ) ( 1,090 )

Proceeds from the sale of discontinued operations 3,125 34,356

Net cash (used in) provided by investing activities of continuing operations ( 201 ) 32,073

Cash flows from financing activities of continuing operations:

Net cash used in investing activities ( 1,758 ) ( 1,090 )

Cash flows from financing activities:

Borrowings on revolving credit, net of expenses 579,011 526,637

Repayments on revolving credit, net of expenses ( 542,147 ) ( 470,237 )

Repayments on long-term debt, net ( 5,968 ) ( 5,964 )

Repayments of finance lease obligations ( 932 ) ( 974 )

Contingent consideration payments — ( 41,393 )

Borrowings (repayments) on long-term debt, net 18,402 ( 2,218 )

Finance lease obligations 771 ( 316 )

Debt issuance costs ( 1,407 ) —

Exercise of stock options 10 994

Taxes paid on settlement of equity awards ( 596 ) —

Common stock repurchased ( 8,527 ) —

Net cash provided by (used in) financing activities of continuing operations 27,730 ( 62,839 )

SCANSOURCE, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED), continued

(In thousands)

Cash flows from discontinued operations:

Net cash flows provided by operating activities of discontinued operations — 21,704

Net cash flows used in by investing activities of discontinued operations — ( 58 )

Net cash flows used in financing activities of discontinued operations — ( 29,494 )

Net cash flows used in discontinued operations — ( 7,848 )

Net cash provided by financing activities 54,044 54,860

Effect of exchange rate changes on cash and cash equivalents ( 1,342 ) ( 4,038 )

(Decrease) increase in cash and cash equivalents ( 19,179 ) 14,866

Increase (decrease) in cash and cash equivalents 2,485 ( 7,227 )

Cash and cash equivalents at beginning of period 37,987 62,718

Cash and cash equivalents at end of period $ 40,472 $ 55,491

Cash and cash equivalents of discontinued operations — —

Cash and cash equivalents of continuing operations $ 43,539 $ 49,321

See accompanying notes to these condensed consolidated financial statements.

8 unchanged sentences

The Company operates in the United States, Canada, Brazil and the UK.

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, Specialty Technology Solutions and Modern Communications & Cloud, are based on product and customer type.

Segment Changes

The Company has moved all of its communications and collaboration business to 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 Company's two operating segments, Specialty Technology Solutions and Modern Communications & Cloud, are based on technology.

Basis of Presentation

3 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, 2022 and June 30, 2021, the results of operations for the quarters and nine months ended March 31, 2022 and 2021, the statements of comprehensive income for the quarters and nine months ended March 31, 2022 and 2021, the statements of shareholders' equity for the quarters and nine months ended March 31, 2022 and 2021 and the statements of cash flows for the nine months ended March 31, 2022 and 2021.

The results of operations for the quarters and nine months ended March 31, 2022 and 2021 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, 2022 and June 30, 2022, the results of operations for the quarters ended September 30, 2022 and 2021, the statements of comprehensive income for the quarters ended September 30, 2022 and 2021, the statements of shareholders' equity for the quarters ended September 30, 2022 and 2021 and the statements of cash flows for the three months ended September 30, 2022 and 2021.

The results of operations for the quarters ended September 30, 2022 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, 2022.

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

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

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

Summary of Significant Accounting Policies

There have been no material changes to the Company’s significant accounting policies for the nine months ended March 31, 2022 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.

There have been no material changes to the Company’s significant accounting policies for the three months ended September 30, 2022 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, 2022.

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, 2022.

3 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 $ 20.0 million and $ 14.3 million are included in accounts payable on the condensed consolidated balance sheets at March 31, 2022 and June 30, 2021, respectively.

As a result, checks released but not yet cleared from these accounts in the amounts of $ 11.5 million and $ 18.0 million are included in accounts payable on the condensed consolidated balance sheets at September 30, 2022 and June 30, 2022, 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 $ 2.6 million and $ 8.0 million for the quarter and nine months ended March 31, 2022 and $ 3.1 million and $ 9.6 million for the quarter and nine months ended March 31, 2021.

Depreciation expense reported as part of cost of goods sold on the Condensed Consolidated Income Statements totaled $ 0.2 million and $ 0.7 million for the quarter and nine months ended March 31, 2022 and $ 0.3 million and $ 1.2 million for the quarter and nine months ended March 31, 2021.

The Company's depreciation expense related to selling, general and administrative costs totaled $ 2.8 million for the quarter ended September 30, 2022 and $ 2.9 million for the quarter ended September 30, 2021.

Depreciation expense reported as part of cost of goods sold on the Condensed Consolidated Income Statements totaled $ 0.2 million for the quarter ended September 30, 2022 and $ 0.3 million for the quarter ended September 30, 2021.

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 $ 4.5 million and $ 13.4 million for the quarter and nine months ended March 31, 2022 and $ 4.9 million and $ 14.6 million for the quarter and nine months ended March 31, 2021.

Intangible amortization expense totaled $ 4.2 million for the quarter ended September 30, 2022 and $ 4.5 million for the quarter ended September 30, 2021.

Recent Accounting Pronouncements

7 unchanged sentences

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, 2022 are set forth in the table below.

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

The changes in the allowance for doubtful accounts for the three months ended September 30, 2022 are set forth in the table below.

June 30, 2022 Amounts Charged to Expense Write-offs Other (1)

March 31, 2022

September 30, 2022

(in thousands)

Trade accounts and current notes receivable allowance $ 16,806 $ 125 $ ( 2,721 ) $ ( 268 ) $ 13,942

(1) "Other" amounts include recoveries and the effect of foreign currency fluctuations for the nine months ended March 31, 2022.

(1) "Other" amounts include recoveries and the effect of foreign currency fluctuations for the three months ended September 30, 2022.

(3) Revenue Recognition

9 unchanged sentences

The Company delivers products to customers in several ways, including:

(i) shipment from the Company's warehouse, (ii) drop-shipment directly from the supplier or (iii) electronic delivery for non-physical products.

(i) shipment from a Company warehouse, (ii) drop-shipment directly from the supplier or (iii) electronic delivery for non-physical products.

Principal versus Agent Considerations

10 unchanged sentences

The Company estimates returns allowance based on historical experience and reduces revenue accordingly.

The Company estimates the amount of variable consideration for rebates and incentives by using the expected value or the most likely amount to be given to the customer and reduces the revenue by those estimated amounts.

The Company estimates the amount of variable consideration for rebates and incentives by using the expected value to be given to the customer and reduces the revenue by those estimated amounts.

These estimates are reviewed and updated as necessary at the end of each reporting period.

5 unchanged sentences

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

Quarter ended March 31, 2022

Specialty Technology Solutions Modern Communications & Cloud Total

(in thousands)

Revenue by product/service:

Hardware, software and cloud (excluding Intelisys) $ 503,072 $ 323,684 $ 826,756

Intelisys connectivity and cloud — 19,234 19,234

$ 503,072 $ 342,918 $ 845,990

Nine months ended March 31, 2022

Specialty Technology Solutions Modern Communications & Cloud Total

(in thousands)

Revenue by product/service:

Hardware, software and cloud (excluding Intelisys) $ 1,501,702 $ 1,010,825 $ 2,512,527

Intelisys connectivity and cloud — 55,125 55,125

$ 1,501,702 $ 1,065,950 $ 2,567,652

Quarter ended March 31, 2021

Quarter ended September 30, 2022

Specialty Technology Solutions Modern Communications & Cloud Total

4 unchanged sentences

$ 576,329 $ 367,484 $ 943,813

Nine months ended March 31, 2021

Quarter ended September 30, 2021

Specialty Technology Solutions Modern Communications & Cloud Total

7 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,

2022 2021 2022 2021

Quarter ended

September 30,

(in thousands, except per share data)

Net income from continuing operations $ 23,526 $ 13,786 $ 68,751 $ 24,732

Net (loss) income from discontinued operations — ( 688 ) 100 ( 37,647 )

Net income (loss) $ 23,526 $ 13,098 $ 68,851 $ ( 12,915 )

Net income $ 24,042 $ 22,073

Weighted-average shares, basic 25,201 25,512

1 unchanged sentence

Weighted-average shares, diluted 25,451 25,696

Net income from continuing operations per common share, basic $ 0.92 $ 0.54 $ 2.69 $ 0.97

Net loss from discontinued operations per common share, basic — ( 0.03 ) — ( 1.48 )

Net income (loss) per common share, basic $ 0.92 $ 0.51 $ 2.69 $ ( 0.51 )

Net income from continuing operations per common share, diluted $ 0.91 $ 0.54 $ 2.66 $ 0.97

Net loss from discontinued operations per common share, diluted — ( 0.03 ) — ( 1.48 )

Net income (loss) per common share, diluted $ 0.91 $ 0.51 $ 2.67 $ ( 0.51 )

For the quarter and nine months ended March 31, 2022 weighted-average shares outstanding excluded from the computation of diluted earnings per share because their effect would be anti-dilutive were 429,605 and 969,871 , respectively.

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.

Net income per common share, basic $ 0.95 $ 0.87

Net income per common share, diluted $ 0.94 $ 0.86

For the quarters ended September 30, 2022 and 2021, weighted-average shares outstanding excluded from the computation of diluted earnings per share because their effect would be anti-dilutive were 1,128,445 and 1,213,398 , respectively.

(5) Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss consists of the following:

March 31, 2022 June 30, 2021

September 30, 2022 June 30, 2022

(in thousands)

Foreign currency translation adjustment $ ( 113,116 ) $ ( 105,899 )

Unrealized gain (loss) on hedged transaction, net of tax 157 ( 4,572 )

Unrealized gain on hedged transaction, net of tax 3,140 1,261

Accumulated other comprehensive loss $ ( 109,976 ) $ ( 104,638 )

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

Quarter ended March 31, Nine months ended March 31,

2022 2021 2022 2021

Quarter ended September 30,

(in thousands)

1 unchanged sentence

(6) Goodwill and Other Identifiable Intangible Assets

The changes in the carrying amount of goodwill for the nine months ended March 31, 2022, by reporting segment, are set forth in the table below.

The changes in the carrying amount of goodwill for the three months ended September 30, 2022, by reporting segment, are set forth in the table below.

Specialty Technology Solutions Modern Communications & Cloud Total

2 unchanged sentences

Foreign currency translation adjustment — ( 2,699 ) ( 2,699 )

Balance at March 31, 2022 $ 16,370 $ 201,655 $ 218,025

The following table shows changes in the amount recognized for net identifiable intangible assets for the nine months ended March 31, 2022.

Balance at September 30, 2022 $ 16,370 $ 195,366 $ 211,736

The following table shows changes in the amount recognized for net identifiable intangible assets for the three months ended September 30, 2022.

Net Identifiable Intangible Assets

3 unchanged sentences

Foreign currency translation adjustment ( 1,462 )

Balance at March 31, 2022 $ 90,554

Balance at September 30, 2022 $ 78,724

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

The following table presents the Company’s debt at March 31, 2022 and June 30, 2021.

March 31, 2022 June 30, 2021

The following table presents the Company’s debt at September 30, 2022 and June 30, 2022.

September 30, 2022 June 30, 2022

(in thousands)

6 unchanged sentences

The Company has a multi-currency senior secured credit facility with JPMorgan Chase Bank N.A., as administrative agent, and a syndicate of banks (as amended, the “Amended Credit Agreement”).

On April 30, 2019, the Company amended this credit facility to expand the borrowing capacity and extend its maturity to April 30, 2024.

The Amended Credit Agreement includes (i) a five-year $ 350 million multi-currency senior secured revolving credit facility and (ii) a five-year $ 150 million senior secured term loan facility.

Pursuant to an “accordion feature,” the Company may increase its borrowings up to an additional $ 250 million, subject to obtaining additional credit commitments from the lenders participating in the increase.

The Amended Credit Agreement allows for the issuance of up to $ 50 million for letters of credit, subject to obtaining additional credit commitments from the lenders participating in the increase.

Borrowings under the Amended Credit Agreement are guaranteed by substantially all of the domestic assets of the Company and a pledge of up to 65 % of capital stock or other equity interest in certain foreign subsidiaries determined to be either material or a subsidiary borrower as defined in the Amended Credit Agreement.

On September 28, 2022, ScanSource, Inc.

amended and restated the Amended Credit Agreement, which includes (i) a five-year , $ 350 million multicurrency senior secured revolving credit facility and (ii) a five-year $ 150 million senior secured term loan facility.

The Amended Credit Agreement extends the credit facility maturity date to September 28, 2027.

In addition, pursuant to an “accordion feature,” the Company may increase its borrowings up to an additional $ 250 million, subject to obtaining additional credit commitments from the lenders participating in the increase.

The Amended Credit Agreement allows for the issuance of up to $ 50 million for letters of credit.

Borrowings under the Amended Credit Agreement are guaranteed by substantially all of the domestic assets of the Company and its domestic subsidiaries.

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

The Company incurred debt issuance costs of $ 1.1 million in connection with the amendments to the Amended Credit Agreement.

The Company incurred debt issuance costs of $ 1.5 million in connection with the amendment and restatement of the Amended Credit Agreement.

These costs were capitalized to other non-current assets on the Condensed Consolidated Balance Sheets and added to the unamortized debt issuance costs from the previous credit facility.

At the Company's option, U.S.

dollar loans under the Amended Credit Agreement, other than swingline loans, bear interest at a rate equal to a spread over LIBOR or the alternate base rate depending upon the Company's net leverage ratio, calculated as total debt less up to $ 15 million of unrestricted domestic cash ("Credit Facility Net Debt") to trailing four -quarter adjusted earnings before interest expense, taxes, depreciation and amortization ("Credit Facility EBITDA") (the "Leverage Ratio").

This spread ranges from 1.00 % to 1.75 % for LIBOR-based loans and 0.00 % to 0.75 % for alternate base rate loans.

Additionally, the Company is charged commitment fees ranging from 0.15 % to 0.30 %, depending upon the Leverage Ratio, on non-utilized borrowing availability, excluding swingline loans.

The Amended Credit Agreement provides for the substitution of a new

interest rate benchmark upon the transition from LIBOR for U.S.

dollar loans, subject to agreement between the Company and the administrative agent.

On December 23, 2021, the Company amended its credit facility to replace LIBOR as the benchmark rate for non-U.S.

dollar loans, among other things.

During the nine months ended March 31, 2022, the Company's borrowings under the credit facility were U.S.

Loans denominated in U.S.

dollars, other than swingline loans, shall bear interest at a rate per annum equal to, at the Company’s option, (i) the adjusted Term SOFR or daily simple SOFR rate plus a fixed credit spread adjustment of 0.10 %, plus an additional margin ranging from 1.00 % to 1.75 %, depending upon the Company’s ratio of (A) total consolidated debt less up to $ 30 million of unrestricted domestic cash to (B) trailing four-quarter consolidated EBITDA measured as of the end of the most recent year or quarter, as applicable, for which financial statements have been delivered to the Lenders (the “leverage ratio”);

or (ii) the alternate base rate plus an additional margin ranging from 0 % to 0.75 %, depending upon the Company’s leverage ratio, plus, if applicable, certain mandatory costs.

Loans denominated in foreign currencies shall bear interest at a rate per annum equal to the applicable benchmark rate set forth in the New Credit Agreement plus an additional margin ranging from 1.00 % to 1.75 %, depending upon the Company’s leverage ratio, plus, if applicable, certain mandatory costs.

All swingline loans denominated in U.S.

dollars shall bear interest based upon the adjusted daily simple SOFR, floating daily, plus an additional margin ranging from 1.00 % to 1.75 %, depending upon the Company’s leverage ratio, or such other rate as the Company and the applicable swingline lender may agree.

During the quarter ended September 30, 2022, the Company's borrowings under the credit facility were U.S.

dollar loans.

The spread in effect as of March 31, 2022 was 1.25 % for LIBOR-based loans and 0.25 % for alternate base rate loans.

The commitment fee rate in effect at March 31, 2022 was 0.20 %.

The spread in effect as of September 30, 2022 was 1.50 % for LIBOR and SOFR-based loans and 0.50 % for alternate base rate loans.

The commitment fee rate in effect at September 30, 2022 was 0.25 %.

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, 2022.

The average daily outstanding balance on the revolving credit facility, excluding the term loan facility, during the nine month period ended March 31, 2022 was $ 60.0 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 nine months ended March 31, 2021 was $ 62.1 million.

There was $ 305.7 million and $ 350.0 million available for additional borrowings as of March 31, 2022 and June 30, 2021, respectively.

There were no letters of credit issued under the multi-currency revolving credit facility at March 31, 2022 or June 30, 2021.

The Company was in compliance with all covenants under the credit facility at September 30, 2022.

The average daily outstanding balance on the revolving credit facility, excluding the term loan facility, during the three month periods ended September 30, 2022 and 2021 was $ 200.5 million and $ 54.4 million, respectively.

There was $ 177.3 million and $ 214.2 million available for additional borrowings as of September 30, 2022 and June 30, 2022, respectively.

There were no letters of credit issued under the multi-currency revolving credit facility at September 30, 2022 or June 30, 2022.

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, 2022, the Company was in compliance with all covenants under this bond.

The interest rates at March 31, 2022 and June 30, 2021 were 1.08 % and 0.94 %, respectively.

At September 30, 2022, the Company was in compliance with all covenants under this bond.

The interest rates at September 30, 2022 and June 30, 2022 were 3.21 % and 1.97 %, respectively.

Debt Issuance Costs

At March 31, 2022, net debt issuance costs associated with the credit facility and bond totaled $ 0.9 million and are being amortized through the maturity date of each respective debt instrument.

At September 30, 2022, net debt issuance costs associated with the credit facility and bond totaled $ 2.0 million and are being amortized on a straight-line basis through the maturity date of each respective debt instrument.

(8) Derivatives and Hedging Activities

8 unchanged sentences

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

The Company had contracts outstanding for purposes of managing cash flows with notional amounts of $ 35.8 million and $ 27.9 million for the exchange of foreign currencies at March 31, 2022 and June 30, 2021, respectively.

The Company had contracts outstanding for purposes of managing cash flows with notional amounts of $ 35.9 million and $ 34.5 million for the exchange of foreign currencies at September 30, 2022 and June 30, 2022, 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, 2022 and 2021 are as follows:

Quarter ended Nine months ended

March 31, March 31,

2022 2021 2022 2021

Quarter ended

September 30,

(in thousands)

Net foreign exchange derivative contract losses (gains) $ 438 $ ( 1,651 )

Net foreign currency transactional and re-measurement (gains) losses ( 3,206 ) 1,020 ( 66 ) ( 74 )

Net foreign currency exchange losses (gains) $ 258 $ ( 41 ) $ 1,223 $ 778

Net foreign currency transactional and re-measurement losses 484 2,136

Net foreign currency exchange losses $ 922 $ 485

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.

4 unchanged sentences

The Company manages its exposure to changes in interest rates by using interest rate swaps to hedge this exposure and to achieve a desired proportion of fixed versus floating rate debt.

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

On April 30, 2019, the Company entered into an interest rate swap agreement, which was amended on September 28, 2022 to change the reference rate from LIBOR to SOFR.

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.

2 unchanged sentences

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 ended March 31, 2022 and 2021.

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, 2022 and 2021, are as follows:

Quarter ended Nine months ended

March 31, March 31,

2022 2021 2022 2021

There was no ineffective portion to be recorded as an adjustment to earnings for the quarters ended September 30, 2022 and 2021.

The components of the cash flow hedge included in the Condensed Consolidated Statement of Comprehensive Income for the quarters ended September 30, 2022 and 2021, are as follows:

Quarter ended

September 30,

(in thousands)

Net interest expense recognized as a result of interest rate swap $ 32 $ 580

Unrealized gain in fair value of interest rate swap 3,675 1,549 4,658 1,281

Unrealized gain (loss) in fair value of interest rate swap 2,500 ( 15 )

Net increase in accumulated other comprehensive income 2,532 565

1 unchanged sentence

Net increase in accumulated other comprehensive income, net of tax $ 1,879 $ 413

The Company used the following derivative instruments at March 31, 2022 and June 30, 2021, reflected in its Condensed Consolidated Balance Sheets, for the risk management purposes detailed above:

March 31, 2022 June 30, 2021

The Company used the following derivative instruments at September 30, 2022 and June 30, 2022, reflected in its Condensed Consolidated Balance Sheets, for the risk management purposes detailed above:

September 30, 2022 June 30, 2022

Balance Sheet Location Fair Value of

11 unchanged sentences

Foreign currency hedge Accrued expenses and other current liabilities $ — $ — $ 93 $ —

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

(9) Fair Value of Financial Instruments

4 unchanged sentences

• 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 assets and liabilities maintained by the Company that are required to be measured at fair value on a recurring basis include deferred compensation plan investments, forward foreign currency exchange contracts, foreign currency hedge agreements and interest rate swap agreements.

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 March 31, 2022:

(Level 1) Significant

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, 2022:

(Level 1) Significant

3 unchanged sentences

Interest rate swap agreement 4,218 — 4,218

Foreign currency hedge 8 — 8

Total assets at fair value $ 29,904 $ 25,674 $ 4,230

Deferred compensation plan investments, current and non-current portion $ 25,674 $ 25,674 $ —

Foreign currency hedge 185 — 185 —

Total liabilities at fair value $ 25,674 $ 25,674 $ —

1 unchanged sentence

(Level 1) Significant

(Level 2) Significant

(in thousands)

Deferred compensation plan investments, current and non-current portion $ 25,178 $ 25,178 $ —

Foreign currency hedge 187 — 187 —

Interest rate swap agreement 1,686 — 1,686

Total assets at fair value $ 26,864 $ 25,178 $ 1,686

1 unchanged sentence

Forward foreign currency exchange contracts 5 — 5

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

Foreign currency hedge 93 — 93

Total liabilities at fair value $ 25,276 $ 25,178 $ 98

5 unchanged sentences

See Note 8 - Derivatives and Hedging Activities .

The Company recorded a contingent consideration liability at the acquisition date of Intelisys representing the amounts payable to former shareholders, as outlined under the terms of the purchase agreements, based upon the achievement of a projected earnings measure, net of specific pro forma adjustments.

The current and non-current portions of these obligations are reported separately on the Condensed Consolidated Balance Sheets.

The fair value of the contingent considerations (Level 3) are determined using a form of a probability weighted discounted cash flow model.

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.

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.

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

Modern Communications & Cloud

(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 fair values of amounts owed are recorded in current portion of contingent consideration in the Company’s Condensed Consolidated Balance Sheets.

In accordance with ASC 805, the Company revalued the contingent consideration liability at each reporting date through the last payment, with changes in the fair value of the contingent consideration reflected in the change in fair value of contingent consideration line item on the Company’s Condensed Consolidated Income Statements that is included in the calculation of operating income.

The fair value of the contingent consideration liability associated with future earnout payments was based on several factors, including:

• estimated future results, net of pro forma adjustments set forth in the purchase agreements;

• the probability of achieving these results;

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

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 nine months ended March 31, 2021.

The change in fair value was 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 and customer type.

The Company has two reportable segments, based on technology.

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.

The Specialty Technology Solutions segment includes the Company’s business in mobility and barcode, POS, payments, security and networking technologies.

Mobility and barcode solutions include mobile computing, barcode scanners and imagers, radio frequency identification devices, 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.

5 unchanged sentences

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.

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, Software-Defined Wide-Area Network and other cloud services.

This segment includes SaaS and subscription services, which the Company offers using digital tools and platforms.

1 unchanged sentence

Selected financial information for each business segment is presented below:

Quarter ended Nine months ended

March 31, March 31,

2022 2021 2022 2021

Quarter ended

September 30,

(in thousands)

7 unchanged sentences

$ 7,228 $ 7,650

Change in fair value of contingent consideration:

Modern Communications & Cloud — — — 516

$ — $ — $ — $ 516

Operating income (loss):

12 unchanged sentences

$ 943,813 $ 857,583

March 31, 2022 June 30, 2021

September 30, 2022 June 30, 2022

(in thousands)

10 unchanged sentences

Substantially all of the Company's leases are operating leases for real estate, warehouse and office equipment ranging in duration from 1 year to 10 years.

The Company has elected not to record short-term operating leases with an initial term of 12 months or less on the Condensed Consolidated Balance Sheets.

The Company has elected not to record short-term operating leases with an initial term of 12

months or less on the Condensed Consolidated Balance Sheets.

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.

1 unchanged sentence

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, 2022 and June 30, 2021.

The gross amount of the balances recorded related to finance leases is immaterial to the financial statements at September 30, 2022 and June 30, 2022.

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, 2022 and June 30, 2021:

March 31, 2022 June 30, 2021

The following table presents amounts recorded on the Condensed Consolidated Balance Sheet related to operating leases at September 30, 2022 and June 30, 2022:

September 30, 2022 June 30, 2022

Operating leases Balance Sheet location (in thousands)

2 unchanged sentences

Long-term operating lease liabilities Other long-term liabilities $ 11,962 $ 13,085

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, 2022 and 2021.

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,

2022 2021 2022 2021

Quarter ended September 30,

(in thousands)

2 unchanged sentences

$ 1,630 $ 1,565

Supplemental cash flow information related to the Company's operating leases for the nine months ended March 31, 2022 and 2021 are presented in the table below:

Nine months ended

Supplemental cash flow information related to the Company's operating leases for the quarters ended September 30, 2022 and 2021 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 111 362

The weighted-average remaining lease term and discount rate at March 31, 2022 are presented in the table below:

March 31, 2022

The weighted-average remaining lease term and discount rate at September 30, 2022 are presented in the table below:

September 30, 2022

Weighted-average remaining lease term 4.17 years

Weighted-average discount rate 3.99 %

The following table presents the maturities of the Company's operating lease liabilities at March 31, 2022:

The following table presents the maturities of the Company's operating lease liabilities at September 30, 2022:

Operating leases

9 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 $ 4.4 million and $ 4.0 million, at March 31, 2022 and June 30, 2021, 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, 2022 and June 30, 2021:

March 31, 2022 June 30, 2021

The amount available after the impact of foreign currency translation for future pre-acquisition contingency settlements or to be released to the sellers was $ 4.1 million at September 30, 2022 and June 30, 2022.

September 30, 2022 June 30, 2022

(in thousands)

3 unchanged sentences

Other long-term liabilities $ 3,699 $ 3,818

(13) Restructuring

In July 2020, as part of a strategic review of its organizational structure and operations, the Company announced a global cost reduction and restructuring program.

These actions were designed to better align the cost structure for the wholesale distribution business with lower sales volumes as a result of the COVID-19 pandemic.

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

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.

There were no restructuring or severance costs incurred during the quarter and nine months ended March 31, 2022.

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

(in thousands)

Severance and benefit costs $ 326 $ 8,825

Other 234 487

Total restructuring and other charges $ 560 $ 9,312

All restructuring costs were recognized in the Corporate reporting unit and were not allocated to the Specialty Technology Solutions or Modern Communications & Cloud segments.

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, 2022:

Accrued Expenses

(in thousands)

Balance at June 30, 2021 $ 1,199

Charged to expense —

Cash payments ( 1,146 )

Balance at March 31, 2022

The remaining balance as of March 31, 2022 of less than $ 0.1 million is expected to be paid through the fourth quarter of fiscal year 2022.

(13) Income Taxes

Income taxes for the quarters and nine months ended March 31, 2022 and 2021 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, 2022 and 2021 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.

There were no material discrete items during the quarter ended March 31, 2022.

During the nine months ended March 31, 2022, a discrete net tax benefit of $ 0.9 million was recorded, which is attributable to excess tax benefits on stock compensation and a notional interest deduction on the net equity of the Company's Brazilian subsidiary.

The Company’s effective tax rate of 27.8 % and 25.6 % for the quarter and nine months ended March 31, 2022, 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 27.1 % and 28.3 % for the quarter and nine months ended March 31, 2021, respectively.

As of the quarter ended March 31, 2022, the Company is not permanently reinvested with respect to all earnings generated by foreign operations.

During the quarter ended September 30, 2022, a discrete net tax benefit of $ 0.5 million was recorded, which is primarily attributable to a notional interest deduction on the net equity of the Company's Brazilian subsidiary.

There were no material discrete items during the quarter ended September 30, 2021.

The Company’s effective tax rate of 25.5 % for the quarter ended September 30, 2022, 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 25.0 % for the quarter ended September 30, 2021.

As of September 30, 2022, 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 for federal, state and withholding tax related to undistributed earnings.

During the nine months ended March 31, 2022, foreign subsidiaries repatriated cash of $ 17.4 million to the United States.

During the quarter ended September 30, 2022, foreign subsidiaries repatriated cash of $ 2.9 million to the United States.

There is no certainty to the timing of any future distributions of such earnings to the U.S.

in whole or in part.

The Company had approximately $ 1.2 million and $ 1.1 million of total gross unrecognized tax benefits at March 31, 2022 and June 30, 2021, respectively.

Of this total at March 31, 2022, 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 had approximately $ 1.1 million of total gross unrecognized tax benefits at September 30, 2022 and June 30, 2022.

Of this total at September 30, 2022, 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, 2022 and June 30, 2021, the Company had approximately $ 1.2 million and $ 1.1 million, respectively, accrued for interest and penalties.

At September 30, 2022 and June 30, 2022, the Company had approximately $ 1.2 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.

8 unchanged sentences

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 nine months ended March 31, 2021, the Company recorded an additional pre-tax loss on disposal group of $ 34.5 million, which was primarily attributable to a reduction in the net proceeds realized at closing for the Divestitures.

During the quarter ended December 31, 2021, the Company received the second and final payment for its businesses in Latin America, outside of Brazil, related to working capital adjustments and in accordance with the Share Purchase Agreement between Intcomex and the Company.

The receipt of payment resulted in a gain on disposal group of $ 0.1 million.

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

1 unchanged sentence

Th e Company also finalized the sale of the Europe and UK business on November 12, 2020.

During the quarter ended December 31, 2021, the Company received a final $ 3.1 million cash payment for the sale of the Latin America business.

Total cash received for the sale of divestitures was $ 37.5 million.

Major components of net loss (income) from discontinued operations for the quarters and nine months ended March 31, 2022 and 2021 were as follows:

Quarter ended March 31, 2022 Quarter ended March 31, 2021 Nine months ended March 31, 2022 Nine months ended March 31, 2021

(in thousands)

Net sales $ — $ — $ — $ 213,373

Cost of goods sold — — — 198,512

Gross profit — — — 14,861

Selling, general and administrative expenses — — — 17,291

Operating loss — — — ( 2,430 )

Interest expense, net — — — 394

Loss (gain) on disposal group — 688 ( 100 ) 34,496

Other expense, net — — — 310

(Loss) income from discontinued operations before taxes — ( 688 ) 100 ( 37,630 )

Income tax expense — — — 17

Net (loss) income from discontinued operations $ — $ ( 688 ) $ 100 $ ( 37,647 )

There were no assets or liabilities classified as held-for-sale in the accompanying consolidated balance sheets at March 31, 2022 and June 30, 2021.

There were no cash flows from discontinued operations for the nine months ended March 31, 2022.

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

Nine months ended March 31, 2021

(in thousands)

Loss on disposal group $ 34,496

Capital expenditures $ ( 58 )

There were no components of net income or loss from discontinued operations for the quarters ended September 30, 2022 and 2021.

There were no assets or liabilities classified as held-for-sale in the accompanying consolidated balance sheets at September 30, 2022 and June 30, 2022.

There were no cash flows from discontinued operations for the three months ended September 30, 2022 and 2021.

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