What changed in this filing

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Item 1. Financial Statements

2024-02-06 compared with 2023-11-09 · 154 added, 97 removed, 467 unchanged (35% of the section changed)

4 unchanged sentences

(In thousands, except share information)

September 30, 2023 June 30, 2023

December 31, 2023 June 30, 2023

Current assets:

Cash and cash equivalents $ 44,987 $ 36,178

Accounts receivable, less allowance of $ 19,570 at September 30, 2023

Accounts receivable, less allowance of $ 19,243 at December 31, 2023

and $ 15,480 at June 30, 2023

26 unchanged sentences

Common stock, no par value;

45,000,000 shares authorized, 24,960,231 and 24,844,203 shares issued and outstanding at September 30, 2023 and June 30, 2023, respectively

45,000,000 shares authorized, 25,154,469 and 24,844,203 shares issued and outstanding at December 31, 2023 and June 30, 2023, respectively

63,983 58,241

9 unchanged sentences

(In thousands, except per share data)

Quarter ended

September 30,

Quarter ended Six months ended

December 31, December 31,

2023 2022 2023 2022

Net sales $ 884,792 $ 1,011,241 $ 1,761,098 $ 1,955,054

7 unchanged sentences

Interest income ( 2,119 ) ( 2,027 ) ( 3,444 ) ( 3,618 )

Gain on sale of business ( 14,533 ) — ( 14,533 ) —

Other expense, net 73 207 750 955

12 unchanged sentences

(In thousands)

Quarter ended

September 30,

Quarter ended Six months ended

December 31, December 31,

2023 2022 2023 2022

Net income $ 32,726 $ 25,734 $ 48,158 $ 49,776

Unrealized gain on hedged transaction, net of tax 153 1,879

Unrealized (loss) gain on hedged transaction, net of tax ( 1,547 ) 3 ( 1,395 ) 1,882

Realized foreign currency gain on sale of business 3,805 — 3,805 —

Foreign currency translation adjustment ( 1,118 ) 7,401 ( 8,007 ) 184

16 unchanged sentences

Balance at September 30, 2023 24,960,231 $ 59,501 $ 952,110 $ ( 96,358 ) $ 915,253

Net income — — 32,726 — 32,726

Unrealized loss on hedged transaction, net of tax — — — ( 1,547 ) ( 1,547 )

Foreign currency translation adjustment — — — ( 1,118 ) ( 1,118 )

Realized foreign currency translation gain from disposal of a business — — — 3,805 3,805

Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes 230,543 3,162 — — 3,162

Common stock repurchased ( 36,305 ) ( 1,251 ) — — ( 1,251 )

Share-based compensation — 2,571 — — 2,571

Balance at December 31, 2023 25,154,469 $ 63,983 $ 984,836 $ ( 95,218 ) $ 953,601

See accompanying notes to these condensed consolidated financial statements.

14 unchanged sentences

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

Net income — — 25,734 — 25,734

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

Foreign currency translation adjustment — — — 7,401 7,401

Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes 117,112 ( 1,112 ) — — ( 1,112 )

Share-based compensation — 3,356 — — 3,356

Balance at December 31, 2022 25,343,014 $ 68,313 $ 896,645 $ ( 102,572 ) $ 862,386

See accompanying notes to these condensed consolidated financial statements.

3 unchanged sentences

(In thousands)

Quarter ended

September 30,

Six months ended

Cash flows from operating activities:

1 unchanged sentence

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

Gain on sale of business ( 14,533 ) —

Depreciation and amortization 14,475 14,285

15 unchanged sentences

Capital expenditures ( 4,865 ) ( 4,262 )

Net cash used in investing activities ( 2,315 ) ( 684 )

Proceeds from sale of business, net of cash transferred 17,978 —

Net cash provided by (used in) investing activities 13,113 ( 4,262 )

Cash flows from financing activities:

6 unchanged sentences

Taxes paid on settlement of equity awards ( 2,657 ) ( 2,332 )

Common stock repurchased ( 1,251 ) —

Net cash (used in) provided by financing activities ( 161,306 ) 108,029

19 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 September 30, 2023 and June 30, 2023, the results of operations for the quarters ended September 30, 2023 and 2022, the condensed consolidated statements of comprehensive income for the quarters ended September 30, 2023 and 2022, the condensed consolidated statements of shareholders' equity for the quarters ended September 30, 2023 and 2022 and the condensed consolidated statements of cash flows for the quarters ended September 30, 2023 and 2022.

The results of operations for the quarter ended September 30, 2023 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 December 31, 2023 and June 30, 2023, the results of operations for the quarters and six months ended December 31, 2023 and 2022, the condensed consolidated statements of comprehensive income for the quarters and six months ended December 31, 2023 and 2022, the condensed consolidated statements of shareholders' equity for the quarters and six months ended December 31, 2023 and 2022 and the condensed consolidated statements of cash flows for the six months ended December 31, 2023 and 2022.

The results of operations for the quarter and six months ended December 31, 2023 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, 2023.

1 unchanged sentence

Summary of Significant Accounting Policies

There have been no material changes to the Company’s significant accounting policies for the quarter ended September 30, 2023 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, 2023.

There have been no material changes to the Company’s significant accounting policies for the six months ended December 31, 2023 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, 2023.

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, 2023.

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 $ 10.3 million and $ 8.0 million are included in accounts payable on the condensed consolidated balance sheets at September 30, 2023 and June 30, 2023, respectively.

As a result, checks released but not yet cleared from these accounts in the amount of $ 8.0 million are included in accounts payable on the condensed consolidated balance sheets at December 31, 2023 and June 30, 2023.

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 $ 2.8 million for the quarters ended September 30, 2023 and 2022.

Depreciation expense reported as part of cost of goods sold on the condensed consolidated income statements totaled $ 0.2 million for the quarters ended September 30, 2023 and 2022.

The Company's depreciation expense related to selling, general and administrative costs totaled $ 3.0 million and $ 5.8 million for the quarter and six months ended December 31, 2023 and $ 2.7 million and $ 5.4 million for the quarter and six months ended December 31, 2022.

Depreciation expense reported as part of cost of goods sold on the condensed consolidated income statements totaled $ 0.3 million and $ 0.5 million for the quarter and six months ended December 31, 2023 and $ 0.2 million and $ 0.5 million for the quarter and six months ended December 31, 2022.

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 $ 4.2 million for the quarters ended September 30, 2023 and 2022.

Intangible amortization expense totaled $ 4.0 million and $ 8.2 million for the quarter and six months ended December 31, 2023 and $ 4.2 million and $ 8.4 million for the quarter and six months ended December 31, 2022.

Recent Accounting Pronouncements

2 unchanged sentences

As additional information about the material aspects of the previously reported incidents become available, a Form 8-K/A must be filed with the additional disclosures.

These disclosure requirements on Form 8-K are effective beginning December 18, 2023.

These disclosure requirements on Form 8-K were effective beginning December 18, 2023.

For fiscal years ending on or after December 15, 2023, companies must disclose their cybersecurity processes, management's role in cybersecurity governance, and cybersecurity oversight by the Board of Directors on Form 10-K.

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.

In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2023-07 “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.” This ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets.

This ASU is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024.

This ASU is applicable to the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2025, and subsequent interim periods, with early application permitted.

The Company is currently evaluating the impact of the application of this ASU on its consolidated financial statements and disclosures.

In December 2023, the FASB issued ASU No.

2023-09 “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.” This ASU updates income tax disclosure requirements primarily by requiring specific categories and greater disaggregation within the rate reconciliation and disaggregation of income taxes paid by jurisdiction.

This ASU is effective for annual periods beginning after December 15, 2024 and is applicable to the Company’s fiscal year beginning July 1, 2025, with early application permitted.

The Company is currently evaluating the impact of the application of this ASU on its consolidated financial statements and disclosures.

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.

(2) Trade Accounts and Notes Receivable, Net

6 unchanged sentences

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, 2023 are set forth in the table below.

The changes in the allowance for doubtful accounts for the six months ended December 31, 2023 are set forth in the table below.

June 30, 2023 Amounts Charged to Expense Write-offs Other (1)

September 30, 2023

December 31, 2023

(in thousands)

Trade accounts and current notes receivable allowance $ 15,480 $ 4,472 $ ( 1,197 ) $ 488 $ 19,243

(1) "Other" amounts include recoveries and the effect of foreign currency fluctuations for the three months ended September 30, 2023.

(1) "Other" amounts include recoveries and the effect of foreign currency fluctuations for the six months ended December 31, 2023.

(3) Revenue Recognition

30 unchanged sentences

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

Quarter ended September 30, 2023

Quarter ended December 31, 2023

Specialty Technology Solutions Modern Communications & Cloud Total

4 unchanged sentences

$ 520,651 $ 364,141 $ 884,792

Quarter ended September 30, 2022

Six months ended December 31, 2023

Specialty Technology Solutions Modern Communications & Cloud Total

4 unchanged sentences

$ 1,030,222 $ 730,876 $ 1,761,098

Quarter ended December 31, 2022

Specialty Technology Solutions Modern Communications & Cloud Total

(in thousands)

Revenue by product/service

Hardware, software and cloud (excluding Intelisys) $ 627,548 $ 363,743 $ 991,291

Intelisys connectivity and cloud — 19,950 19,950

$ 627,548 $ 383,693 $ 1,011,241

Six months ended December 31, 2022

Specialty Technology Solutions Modern Communications & Cloud Total

(in thousands)

Revenue by product/service:

Hardware, software and cloud (excluding Intelisys) $ 1,203,878 $ 712,373 $ 1,916,251

Intelisys connectivity and cloud — 38,803 38,803

$ 1,203,878 $ 751,176 $ 1,955,054

(4) Earnings Per Share

1 unchanged sentence

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

Quarter ended

September 30,

Quarter ended Six months ended

December 31, December 31,

2023 2022 2023 2022

(in thousands, except per share data)

5 unchanged sentences

Net income per common share, diluted $ 1.29 $ 1.01 $ 1.91 $ 1.96

For the quarters ended September 30, 2023 and 2022, weighted-average shares outstanding excluded from the computation of diluted earnings per share because their effect would be anti-dilutive were 854,893 and 1,128,445 , respectively.

For the quarter and six months ended December 31, 2023, weighted-average shares outstanding excluded from the computation of diluted earnings per share because their effect would be anti-dilutive were 563,690 and 931,367 , respectively.

For the quarter and six months ended December 31, 2022, weighted-average shares outstanding excluded from the computation of diluted earnings per share because their effect would be anti-dilutive were 847,651 and 1,268,455 , respectively.

(5) Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss, net of tax are as follows:

September 30, 2023 June 30, 2023

December 31, 2023 June 30, 2023

(in thousands)

3 unchanged sentences

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

Quarter ended September 30,

Quarter ended December 31, Six months ended December 31,

2023 2022 2023 2022

(in thousands)

1 unchanged sentence

(6) Goodwill and Other Identifiable Intangible Assets

The changes in the carrying amount of goodwill for the quarter ended September 30, 2023, by reporting segment, are set forth in the table below.

The changes in the carrying amount of goodwill for the six months ended December 31, 2023, by reporting segment, are set forth in the table below.

Specialty Technology Solutions Modern Communications & Cloud Total

1 unchanged sentence

Balance at June 30, 2023 $ 16,370 $ 200,336 $ 216,706

Goodwill disposed upon business sale — ( 8,539 ) ( 8,539 )

Foreign currency translation adjustment — 47 47

Balance at September 30, 2023 $ 16,370 $ 198,782 $ 215,152

The following table shows changes in the amount recognized for net identifiable intangible assets for the three months ended September 30, 2023.

Balance at December 31, 2023 $ 16,370 $ 191,844 $ 208,214

The following table shows changes in the amount recognized for net identifiable intangible assets for the six months ended December 31, 2023.

Net Identifiable Intangible Assets

1 unchanged sentence

Balance at June 30, 2023 $ 68,495

Intangibles disposed upon business sale ( 14,927 )

Amortization expense ( 8,230 )

Foreign currency translation adjustment ( 25 )

Balance at September 30, 2023 $ 63,675

Balance at December 31, 2023 $ 45,313

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

The following table presents the Company’s debt at September 30, 2023 and June 30, 2023.

September 30, 2023 June 30, 2023

The following table presents the Company’s debt at December 31, 2023 and June 30, 2023.

December 31, 2023 June 30, 2023

(in thousands)

15 unchanged sentences

Loans denominated in U.S.

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”);

dollars, other than swingline loans, bear interest at a rate per annum equal to, at the Company’s option, (i) the adjusted term Secured Overnight Financing Rate ("SOFR") or adjusted daily simple SOFR 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.

3 unchanged sentences

Loans denominated in foreign currencies bear interest at a rate per annum equal to the applicable benchmark rate set forth in the Amended 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.

During the quarter ended September 30, 2023, the Company's borrowings under the credit facility were U.S.

During the quarter and six months ended December 31, 2023, the Company's borrowings under the credit facility were U.S.

dollar loans.

The spread in effect as of September 30, 2023 was 1.50 %, plus a 0.10 % credit spread adjustment for SOFR-based loans and 0.50 % for alternate base rate loans.

The commitment fee rate in effect at September 30, 2023 was 0.25 %.

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

The spread in effect as of December 31, 2023 was 1.25 %, plus a 0.10 % credit spread adjustment for SOFR-based loans and 0.25 % for alternate base rate loans.

The commitment fee rate in effect at December 31, 2023 was 0.20 %.

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

Specifically, the Company’s Leverage Ratio must be less than or equal to 3.50 to 1.00 at all times.

1 unchanged sentence

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 September 30, 2023.

The average daily outstanding balance on the revolving credit facility, excluding the term loan facility, during the three month periods ended September 30, 2023 and 2022 was $ 200.9 million and $ 200.5 million, respectively.

There was $ 251.9 million and $ 171.0 million available for additional borrowings as of September 30, 2023 and June 30, 2023, respectively.

The effective interest rates for the revolving line of credit were 6.92 % and 6.74 % as of September 30, 2023 and June 30, 2023, respectively.

There were no letters of credit issued under the multi-currency revolving credit facility at September 30, 2023 or June 30, 2023.

The Company was in compliance with all covenants under the credit facility at December 31, 2023.

The average daily outstanding balance on the revolving credit facility, excluding the term loan facility, during the six month periods ended December 31, 2023 and 2022 was $ 138.7 million an d $ 219.5 million, respectively.

There was $ 329.1 million and $ 171.0 million available for additional borrowings as of December 31, 2023 and June 30, 2023, respectively.

The effective interest rates for the revolving line of credit were 6.70 % and 6.74 % as of December 31, 2023 and June 30, 2023, respectively.

There were no letters of credit issued under the multi-currency revolving credit facility at December 31, 2023 or June 30, 2023.

Mississippi Revenue Bond

5 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 September 30, 2023, the Company was in compliance with all covenants under this bond.

The interest rates at September 30, 2023 and June 30, 2023 were 6.28 % and 6.11 %, respectively.

At December 31, 2023, the Company was in compliance with all covenants under this bond.

The interest rates at December 31, 2023 and June 30, 2023 were 6.29 % and 6.11 %, respectively.

Debt Issuance Costs

At September 30, 2023, net debt issuance costs associated with the credit facility and bond totaled $ 1.5 million and are being amortized on a straight-line basis through the maturity date of each respective debt instrument.

At December 31, 2023, net debt issuance costs associated with the credit facility and bond totaled $ 1.4 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 $ 34.4 million and $ 34.3 million for the exchange of foreign currencies at September 30, 2023 and June 30, 2023, respectively.

The Company had contracts outstanding for purposes of managing cash flows with notional amounts of $ 27.3 million and $ 34.3 million for the exchange of foreign currencies at December 31, 2023 and June 30, 2023, 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 quarter ended September 30, 2023 and 2022 are as follows:

Quarter ended

September 30,

Quarter ended Six months ended

December 31, December 31,

2023 2022 2023 2022

(in thousands)

Net foreign exchange derivative contract (gains) losses $ ( 368 ) $ 438

Net foreign currency transactional and re-measurement losses 1,064 484

Net foreign exchange derivative contract losses $ 1,025 $ 871 $ 658 $ 1,309

Net foreign currency transactional and re-measurement (gains) losses ( 596 ) ( 524 ) 466 ( 39 )

Net foreign currency exchange losses $ 429 $ 347 $ 1,124 $ 1,270

11 unchanged sentences

To the extent the swaps are effective in offsetting the variability of the hedged cash flows, changes in the fair value of the swaps 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 quarter ended September 30, 2023 and 2022.

The components of the cash flow hedge included in the Condensed Consolidated Statement of Comprehensive Income for the quarter ended September 30, 2023 and 2022, are as follows:

Quarter ended

September 30,

There was no ineffective portion to be recorded as an adjustment to earnings for the quarters and six months ended December 31, 2023 and 2022.

The components of the cash flow hedge included in the Condensed Consolidated Statement of Comprehensive Income for the quarters and six months ended December 31, 2023 and 2022, are as follows:

Quarter ended Six months ended

December 31, December 31,

2023 2022 2023 2022

(in thousands)

Net interest (income) expense recognized as a result of interest rate swap $ ( 759 ) $ 32

Unrealized gain in fair value of interest rate swap 974 2,500

Net increase in accumulated other comprehensive income 215 2,532

Net interest income recognized as a result of interest rate swap $ ( 903 ) $ ( 345 ) $ ( 1,781 ) $ ( 313 )

Unrealized (loss) gain in fair value of interest rate swap ( 1,165 ) 349 ( 72 ) 2,847

Net (decrease) increase in accumulated other comprehensive income ( 2,068 ) 4 ( 1,853 ) 2,534

Income tax effect ( 521 ) 1 ( 458 ) 652

Net increase in accumulated other comprehensive income, net of tax $ 153 $ 1,879

The Company used the following derivative instruments at September 30, 2023 and June 30, 2023, reflected in its Condensed Consolidated Balance Sheets, for the risk management purposes detailed above:

September 30, 2023 June 30, 2023

Net (decrease) increase in accumulated other comprehensive income, net of tax $ ( 1,547 ) $ 3 $ ( 1,395 ) $ 1,882

The Company used the following derivative instruments at December 31, 2023 and June 30, 2023, reflected in its Condensed Consolidated Balance Sheets, for the risk management purposes detailed above:

December 31, 2023 June 30, 2023

Balance Sheet Location Fair Value of

9 unchanged sentences

Derivative liabilities:

Foreign currency hedge Accrued expenses and other current liabilities $ 108 — — —

Foreign exchange contracts Accrued expenses and other current liabilities — $ 4 — —

(9) Fair Value of Financial Instruments

6 unchanged sentences

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, 2023:

The following table summarizes the valuation of the Company’s remaining assets and liabilities measured at fair value on a recurring basis at December 31, 2023:

(Level 1) Significant

1 unchanged sentence

Deferred compensation plan investments, current and non-current portion $ 31,343 $ 31,343 $ —

Forward foreign currency exchange contracts 27 — 27

Interest rate swap agreement 2,834 — 2,834

Foreign currency hedge 27 — 27

Total assets at fair value $ 34,204 $ 31,343 $ 2,861

Deferred compensation plan investments, current and non-current portion $ 31,343 $ 31,343 $ —

Foreign currency hedge 108 — 108

Forward foreign currency exchange contracts 4 — 4

Total liabilities at fair value $ 31,347 $ 31,343 $ 4

32 unchanged sentences

Selected financial information for each business segment is presented below:

Quarter ended

September 30,

Quarter ended Six months ended

December 31, December 31,

2023 2022 2023 2022

(in thousands)

21 unchanged sentences

$ 884,792 $ 1,011,241 $ 1,761,098 $ 1,955,054

September 30, 2023 June 30, 2023

December 31, 2023 June 30, 2023

(in thousands)

15 unchanged sentences

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 condensed consolidated financial statements at September 30, 2023 and the consolidated financial statements at June 30, 2023.

The gross amount of the balances recorded related to finance leases is immaterial to the condensed consolidated financial statements at December 31, 2023 and the consolidated financial statements at June 30, 2023.

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 Sheets related to operating leases at September 30, 2023 and June 30, 2023:

September 30, 2023 June 30, 2023

The following table presents amounts recorded on the Condensed Consolidated Balance Sheets related to operating leases at December 31, 2023 and June 30, 2023:

December 31, 2023 June 30, 2023

Operating leases Balance Sheet location (in thousands)

2 unchanged sentences

Long-term operating lease liabilities Other long-term liabilities $ 7,703 $ 9,329

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 quarter ended September 30, 2023 and 2022.

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

Quarter ended September 30,

Quarter ended December 31, Six months ended December 31,

2023 2022 2023 2022

(in thousands)

2 unchanged sentences

$ 1,756 $ 1,710 $ 3,348 $ 3,340

Supplemental cash flow information related to the Company's operating leases for the three months ended September 30, 2023 and 2022 are presented in the table below:

Quarter ended

September 30,

Supplemental cash flow information related to the Company's operating leases for the six months ended December 31, 2023 and 2022 are presented in the table below:

Six months ended

(in thousands)

1 unchanged sentence

Right-of-use assets obtained in exchange for lease obligations 232 286

The weighted-average remaining lease term and discount rate at September 30, 2023 are presented in the table below:

September 30, 2023

The weighted-average remaining lease term and discount rate at December 31, 2023 are presented in the table below:

December 31, 2023

Weighted-average remaining lease term 3.28 years

Weighted-average discount rate 4.53 %

The following table presents the maturities of the Company's operating lease liabilities at September 30, 2023:

The following table presents the maturities of the Company's operating lease liabilities at December 31, 2023:

Operating leases

8 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 $ 3.4 million at September 30, 2023 and June 30, 2023.

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 September 30, 2023 and June 30, 2023:

September 30, 2023 June 30, 2023

The amount available after the impact of foreign currency translation for future pre-acquisition contingency settlements or to be released to the sellers was $ 3.6 million and $ 3.4 million at December 31, 2023 and June 30, 2023.

December 31, 2023 June 30, 2023

(in thousands)

4 unchanged sentences

(13) Income Taxes

Income taxes for the quarters ended September 30, 2023 and 2022 have been included in the accompanying condensed consolidated financial statements using an estimated annual effective tax rate.

Income taxes for the quarters and six months ended December 31, 2023 and 2022 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 quarter ended September 30, 2023, a discrete net tax benefit of $ 1.5 million was recorded for additional foreign tax credits permitted for the 2023 fiscal year as a result of the issuance of IRS Notice 2023-55.

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.

The Company’s effective tax rate of 19.4 % for the quarter ended September 30, 2023, 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, state income taxes, and discrete items.

The Company's effective tax rate was 25.5 % for the quarter ended September 30, 2022.

As of September 30, 2023, the Company is not permanently reinvested with respect to all earnings generated by foreign operations.

During the quarter ended December 31, 2023, a discrete net tax benefit of $ 3.8 million was recorded, which is primarily attributable to the sale of UK-based intY.

The Company’s effective tax rate of 18.3 % and 18.6 % for the quarter and six months ended December 31, 2023, differs from the current federal statutory rate of 21% primarily as a result of income derived from tax jurisdictions with varying income tax rates, discrete items, nondeductible expenses and state income taxes.

The Company's effective tax rates were 28.9 % and 27.3 % for the quarter and six months ended December 31, 2022.

As of December 31, 2023, 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 quarter ended September 30, 2023, foreign subsidiaries did not repatriate cash to the United States.

During the six months ended December 31, 2023, foreign subsidiaries did not repatriate cash 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 of total gross unrecognized tax benefits at September 30, 2023 and June 30, 2023.

Of this total at September 30, 2023, 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.

The Company had approximately $ 1.2 million of total gross unrecognized tax benefits at December 31, 2023 and June 30, 2023.

Of this total at December 31, 2023, approximately $ 1.0 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 September 30, 2023 and June 30, 2023, the Company had approximately $ 1.2 million accrued for interest and penalties.

At December 31, 2023 and June 30, 2023, 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.

3 unchanged sentences

income tax examinations by tax authorities for the years before June 30, 2018.

(14) Business Sale

On December 19, 2023, the Company completed the sale of its UK-based intY business.

The Company retained its CASCADE cloud services distribution platform which has been used to grow the Cisco and Microsoft subscription businesses in the United States and Brazil.

Under the stock purchase agreement, the Company received proceeds of $ 18.0 million in cash for the sale, net of cash transferred.

The business sale resulted in a $ 14.5 million gain on sale after considering the net assets sold.

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

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