What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-08-27 compared with 2023-08-22 · 232 added, 242 removed, 1134 unchanged (29% of the section changed)

37 unchanged sentences

We have served as the Company’s auditor since 2014.

Columbia, South Carolina

Charlotte, North Carolina

August 27, 2024

25 unchanged sentences

/s/ Grant Thornton, LLP

Columbia, South Carolina

Charlotte, North Carolina

August 27, 2024

57 unchanged sentences

Restructuring and other charges 4,358 — —

Change in fair value of contingent consideration — — 516

Operating income 90,324 135,886 122,167

1 unchanged sentence

Interest income ( 9,381 ) ( 7,414 ) ( 4,333 )

Gain on sale of business ( 14,155 ) — —

Other expense, net 988 1,664 1,354

2 unchanged sentences

Net income from continuing operations 77,060 88,092 88,698

Net income (loss) from discontinued operations 1,717 100 ( 34,594 )

Net income from discontinued operations — 1,717 100

Net income $ 77,060 $ 89,809 $ 88,798

1 unchanged sentence

Net income from continuing operations per common share, basic $ 3.10 $ 3.50 $ 3.48

Net income (loss) from discontinued operations per common share, basic 0.07 — ( 1.36 )

Net income from discontinued operations per common share, basic — 0.07 —

Net income per common share, basic $ 3.10 $ 3.57 $ 3.48

1 unchanged sentence

Net income from continuing operations per common share, diluted $ 3.06 $ 3.47 $ 3.44

Net income (loss) from discontinued operations per common share, diluted 0.07 — ( 1.36 )

Net income from discontinued operations per common share, diluted — 0.07 —

Net income per common share, diluted $ 3.06 $ 3.54 $ 3.45

4 unchanged sentences

and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of Comprehensive Income

Years Ended June 30, 2024, 2023 and 2022

2 unchanged sentences

Net income $ 77,060 $ 89,809 $ 88,798

Unrealized gain on hedged transaction, net of tax 2,254 5,833 2,249

Unrealized (loss) gain on hedged transaction, net of tax ( 1,482 ) 2,254 5,833

Foreign currency translation adjustment ( 20,945 ) 12,763 ( 12,338 )

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

Realized foreign currency translation on sale of business ( 3,805 ) — —

Comprehensive income $ 50,828 $ 104,826 $ 82,293

14 unchanged sentences

Foreign currency translation adjustment — — — ( 12,338 ) ( 12,338 )

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

Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes 238,080 ( 450 ) — — ( 450 )

Common stock repurchased ( 550,194 ) ( 18,203 ) — — ( 18,203 )

Share-based compensation — 11,697 — — 11,697

8 unchanged sentences

Net income — — 77,060 — 77,060

Unrealized gain on hedged transaction, net of tax — — — 2,254 2,254

Unrealized loss on hedged transaction, net of tax — — — ( 1,482 ) ( 1,482 )

Foreign currency translation adjustment — — — ( 20,945 ) ( 20,945 )

Realized foreign currency translation from sale 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 380,184 1,937 — — 1,937

12 unchanged sentences

Net income $ 77,060 $ 89,809 $ 88,798

Net income (loss) from discontinued operations 1,717 100 ( 34,594 )

Net income from discontinued operations — 1,717 100

Net income from continuing operations 77,060 88,092 88,698

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

Gain on sale of a business ( 14,155 ) — —

Depreciation and amortization 28,009 28,614 29,884

3 unchanged sentences

Deferred income taxes ( 2,472 ) ( 1,496 ) 5,737

Change in fair value of contingent consideration — — 516

Contingent consideration payments excess — — ( 5,457 )

Finance lease interest 101 44 34

16 unchanged sentences

Debt issuance costs — ( 1,407 ) —

Borrowings (repayments) on long-term debt, net 15,590 ( 7,843 ) ( 7,839 )

Borrowings (repayments) on long-term debt ( 6,915 ) 15,590 ( 7,843 )

Repayments of finance lease obligations ( 964 ) ( 589 ) ( 1,238 )

Contingent consideration payments — — ( 41,393 )

Exercise of stock options 4,813 910 2,304

2 unchanged sentences

Net cash provided by (used in) financing activities of continuing operations ( 227,767 ) 39,531 108,106

Index to Financial Statements

2023 2022 2021

Cash flows from discontinued operations:

Net cash flows provided by operating activities of discontinued operations — — 24,173

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

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

Net cash flows used in by discontinued operations — — —

Index to Financial Statements

Effect of exchange rate changes on cash and cash equivalents ( 3,643 ) 2,691 ( 4,759 )

18 unchanged sentences

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

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

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

The Company's two operating segments, Specialty Technology Solutions and Modern Communications & Cloud, are based on technology type and are generally related to technology devices and communication, connectivity and cloud services, respectively.

52 unchanged sentences

Achievement-based supplier rebates are earned by achieving certain sales or purchase targets on a periodic basis.

The Company determines whether, among other items, all qualifying sales and purchases are considered in calculating the rebates and cash receipts or credit memos

The Company determines whether, among other

Index to Financial Statements

3 unchanged sentences

June 30, 2024

received are appropriately applied.

items, all qualifying sales and purchases are considered in calculating the rebates and cash receipts or credit memos received are appropriately applied.

The determination of achievement-based rebates requires management to make assumptions about future purchases and sales.

30 unchanged sentences

To manage the exposure, the Company has an interest rate swap agreement and has designated this instrument as a hedge of the cash flows on certain variable rate debt.

To the extent the derivative instrument was effective in offsetting the variability of the hedged cash flows, changes in the fair value of the derivative instrument were not included in

To the extent the derivative instrument was effective

Index to Financial Statements

3 unchanged sentences

June 30, 2024

current earnings, but were reported as other comprehensive income (loss).

in offsetting the variability of the hedged cash flows, changes in the fair value of the derivative instrument were not included in current earnings, but were reported as other comprehensive income (loss).

There was no ineffective portion recorded as an adjustment to earnings for the years ended June 30, 2024, 2023 and 2022.

30 unchanged sentences

The Company’s suppliers generally provide a warranty on the products provided by the Company and allow the Company to return defective products, including those that have been returned to the Company by its customers.

In three of its product lines, the Company offers a self-branded warranty program, in which management has determined that the Company is the primary

In three of its product lines,

Index to Financial Statements

3 unchanged sentences

June 30, 2024

the Company offers a self-branded warranty program, in which management has determined that the Company is the primary obligor.

The Company purchases contracts from unrelated third parties, generally the original equipment manufacturers, to fulfill any obligation to service or replace defective product claimed on these warranty programs.

115 unchanged sentences

June 30, 2024

In July 2023, the Securities and Exchange Commission issued final rules that require new and enhanced disclosures on cybersecurity risk management, strategy, governance, and incident reporting.

Under the final rules, companies must report a material cybersecurity incident on Form 8-K within four business days of determining that such cybersecurity incident is material.

To the extent the nature, scope, timing or the impact of the incident is not determinable at the time such Form 8-K is required to be filed, additional information about the material aspects of the cybersecurity incident must be filed on a Form 8-K/A within four business days after such additional information becomes available.

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.

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 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.

8 unchanged sentences

The changes in the allowance for doubtful accounts for the fiscal years ended June 30, 2024, 2023 and 2022 are set forth in the tables below.

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2024

Description Balance at

19 unchanged sentences

The Company is the agent for third-party service contracts, including product warranties and supplier-hosted software.

These service contracts are sold separately from the products, and the Company often serves as the agent for the

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2023

contract on behalf of the original equipment manufacturer.

These service contracts are sold separately from the products, and the Company often serves as the agent for the contract on behalf of the original equipment manufacturer.

The Company's responsibility is to arrange for the provision of the specified service by the original equipment manufacturer, and the Company does not control the specified service before it is transferred to the customer.

10 unchanged sentences

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

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2024

Practical Expedients & Accounting Policy Elections

13 unchanged sentences

$ 1,998,636 $ 1,261,173 $ 3,259,809

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2023

Fiscal year ended June 30, 2023

13 unchanged sentences

(4) Earnings per Share

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2024

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

4 unchanged sentences

Net income from continuing operations $ 77,060 $ 88,092 $ 88,698

Net income (loss) from discontinued operations 1,717 100 ( 34,594 )

Net income from discontinued operations — 1,717 100

Net income $ 77,060 $ 89,809 $ 88,798

3 unchanged sentences

Net income from continuing operations per common share, basic $ 3.10 $ 3.50 $ 3.48

Net income (loss) from discontinued operations per common share, basic 0.07 — ( 1.36 )

Net income from discontinued operations per common share, basic — 0.07 —

Net income per common share, basic $ 3.10 $ 3.57 $ 3.48

Net income from continuing operations per common share, diluted $ 3.06 $ 3.47 $ 3.44

Net income (loss) from discontinued operations per common share, diluted 0.07 — ( 1.36 )

Net income from discontinued operations per common share, diluted — 0.07 —

Net income per common share, diluted $ 3.06 $ 3.54 $ 3.45

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2023

For the years ended June 30, 2024, 2023 and 2022, weighted-average shares outstanding excluded from the computation of diluted earnings per share because their effect would have been antidilutive were 348,604 , 1,135,984 and 926,286 , respectively.

11 unchanged sentences

$ 33,501 $ 37,379

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2024

Depreciation expense recorded as selling, general and administrative costs in the accompanying Consolidated Income Statements was $ 11.2 million, $ 10.9 million and $ 11.1 million for the fiscal years ended June 30, 2024, 2023 and 2022, respectively.

9 unchanged sentences

The table below details accrued expenses and other current liabilities.

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2023

(in thousands)

7 unchanged sentences

$ 65,616 $ 78,892

The table below details other long-term liabilities.

(in thousands)

Long-term deferred warranty revenue $ 3,137 $ 3,741

Long-term deferred compensation liability 27,592 24,716

Long-term income taxes payable 2,195 3,952

Long-term operating lease liability 6,507 9,329

Other long-term liabilities 9,795 7,530

$ 49,226 $ 49,268

(7) Goodwill and Other Identifiable Intangible Assets

In accordance with ASC 350, Intangibles - Goodwill and Other Intangible Assets , the Company performs its annual goodwill impairment test during the fourth quarter of each fiscal year, or whenever indicators of impairment are present.

The reporting units utilized for goodwill impairment tests align directly with our operating segments, Specialty Technology Solutions and Modern Communications & Cloud.

The reporting

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2024

units utilized for goodwill impairment tests align directly with our operating segments, Specialty Technology Solutions and Modern Communications & Cloud.

The testing includes the determination of each reporting unit's fair value using a discounted cash flows model compared to each reporting unit's carrying value.

1 unchanged sentence

During fiscal years ended June 30, 2024, 2023 and 2022, no impairment charges related to goodwill were recorded .

The fair value of the Specialty Technology Solutions and Modern Communications & Cloud reporting units exceeded its carrying value by 2 % and 13 %, respectively, as of the annual goodwill impairment testing date.

The fair value of the Specialty Technology Solutions and Modern Communications & Cloud reporting units exceeded its carrying value by 11 % and 33 % , re spectively, as of the annual goodwill impairment testing date.

Changes in the carrying amount of goodwill for the years ended June 30, 2024 and 2023, by reportable segment, are set forth in the table below.

7 unchanged sentences

The following table shows the Company’s identifiable intangible assets as of June 30, 2024 and 2023, respectively.

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2023

June 30, 2024 June 30, 2023

14 unchanged sentences

Amortization expense for continuing operations for the years ended June 30, 2024, 2023 and 2022 was $ 15.7 million, $ 16.7 million and $ 17.9 million, respectively, all of which relates to selling, general and administrative costs, not the cost of selling goods, and has been presented as such in the accompanying Consolidated Income Statements.

Certain fully amortized intangible assets have been removed during the current fiscal year.

Estimated future amortization expense is as follows:

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2024

(in thousands)

12 unchanged sentences

Credit Facility

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2023

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

13 unchanged sentences

The adjusted term SOFR and adjusted daily simple SOFR include a fixed credit adjustment of 0.10 % over the applicable SOFR reference rate.

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.

Loans denominated in foreign

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2024

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 fiscal year ended June 30, 2024, the Company's borrowings under the credit facility were U.S.

2 unchanged sentences

The commitment fee rate in effect as of June 30, 2024 was 0.15 %.

The effective interest rates for the term loan were 6.44 % and 6.70 % as of June 30, 2024 and June 30, 2023, respectively.

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

5 unchanged sentences

There was $ 349.9 million and $ 171.0 million available for additional borrowings as of June 30, 2024 and 2023, respectively.

The effective interest rates for the revolving line of credit were 6.44 % and 6.74 % as of June 30, 2024 and June 30, 2023, respectively.

There were no letters of credit issued under the multi-currency revolving credit facility as of June 30, 2024 and 2023.

6 unchanged sentences

The interest rates at June 30, 2024 and 2023 were 6.28 % and 6.11 %, respectively.

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2023

Scheduled maturities of the Company’s short-term borrowings, revolving credit facility and long-term debt at June 30, 2024 are as follows:

5 unchanged sentences

2028 50 115,312 371

2028 178,980 115,312 371

Thereafter — — 1,551

2 unchanged sentences

As of June 30, 2024, net debt issuance costs associated with the credit facility and bonds totaled $ 1.2 million and are being amortized on a straight-line basis through the maturity date of each respective debt instrument.

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2024

(9) Derivatives and Hedging Activities

19 unchanged sentences

Net foreign 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.

Foreign exchange

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2023

gains and losses are generated as the result of fluctuations in the value of the U.S.

Foreign exchange gains and losses are generated as the result of fluctuations in the value of the U.S.

dollar versus the Brazilian real, the U.S.

3 unchanged sentences

On April 30, 2019, the Company entered into an interest rate swap agreement to lock into a fixed LIBOR interest rate, 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.

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

On March 31, 2023, the Company entered into an interest rate swap agreement to lock into a fixed SOFR interest rate with a notional amount of $ 25 million and a maturity date of March 31, 2028.

3 unchanged sentences

There was no ineffective portion to be recorded as an adjustment to earnings for fiscal years ended June 30, 2024, 2023 and 2022.

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2024

The components of the cash flow hedge included in accumulated other comprehensive (loss) income, net of income taxes, in the Consolidated Statements of Shareholders’ Equity, are as follows:

4 unchanged sentences

Unrealized gain in fair value of interest swap rates 1,316 4,554 5,748

Net increase in accumulated other comprehensive income (loss) 3,001 7,836 2,981

Net increase (decrease) in accumulated other comprehensive income (loss) ( 1,989 ) 3,001 7,836

Income tax effect ( 507 ) 747 2,003

Net increase in accumulated other comprehensive income, net of tax $ 2,254 $ 5,833 $ 2,249

Net increase (decrease) in accumulated other comprehensive income, net of tax $ ( 1,482 ) $ 2,254 $ 5,833

The Company has the following derivative instruments for continuing operations located on the Consolidated Balance Sheets as of June 30, 2024, utilized for the risk management purposes detailed above:

6 unchanged sentences

Derivative assets:

Foreign exchange contracts Prepaid expenses and other current assets $ — $ 1

Interest rate swap agreement Other current assets $ 4,687 $ —

Foreign currency hedge Other current assets $ 345 $ —

Interest rate swap agreement Other current assets $ 2,698 $ —

Derivative liabilities:

Foreign exchange contracts Accrued expenses and other current liabilities $ — $ 12

The Company has the following derivative instruments located on the Consolidated Balance Sheets as of June 30, 2023, utilized for the risk management purposes detailed above:

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2023

June 30, 2022

Balance Sheet Location Fair Value of Derivatives

4 unchanged sentences

Derivative assets:

Foreign currency hedge Other current assets $ 100 $ —

Foreign exchange contracts Prepaid expenses and other current assets $ — $ 1

Interest rate swap agreement Other current assets $ 4,687 $ —

Derivative liabilities:

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

Foreign currency hedge Other current liabilities $ 93 $ —

(10) Fair Value of Financial Instruments

Accounting guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Under this guidance, the Company is required to classify certain assets and liabilities based on the fair value hierarchy, which groups fair value-measured assets and liabilities based upon the following levels of inputs:

Under this guidance, the Company is required to

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2024

classify certain assets and liabilities based on the fair value hierarchy, which groups fair value-measured assets and liabilities based upon the following levels of inputs:

• Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

5 unchanged sentences

The following table summarizes the valuation of the Company's remaining assets and liabilities measured at fair value on a recurring basis as of June 30, 2024:

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2023

(Level 1) Significant

1 unchanged sentence

Deferred compensation plan investments, current and non-current portion $ 31,014 $ 31,014 $ —

Forward foreign currency exchange contracts 1 — 1

Interest rate swap agreement 2,698 — 2,698

2 unchanged sentences

Deferred compensation plan investments, current and non-current portion $ 31,014 $ 31,014 $ —

Forward foreign currency exchange contracts 12 — 12

Total liabilities at fair value $ 31,026 $ 31,014 $ 12

The following table presents assets and liabilities measured at fair value on a recurring basis as of June 30, 2023:

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2024

(Level 1) Significant

1 unchanged sentence

Deferred compensation plan investments, current and non-current portion $ 28,209 $ 28,209 $ —

Forward currency exchange contracts 1 — $ 1

Interest rate swap agreement 4,687 — 4,687

Foreign currency hedge 100 — $ 100

Total assets at fair value $ 32,997 $ 28,209 $ 4,788

Deferred compensation plan investments, current and non-current portion $ 28,229 $ 28,229 $ —

Forward foreign currency exchange contracts 5 — 5

Foreign currency hedge 93 — 93

Total liabilities at fair value $ 28,229 $ 28,229 $ —

7 unchanged sentences

Share-Based Compensation Plans

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2023

The Company has awards outstanding from two share-based compensation plans (the 2013 Long-Term Incentive Plan and the 2021 Long-Term Incentive Plan).

16 unchanged sentences

Total share-based compensation included as a component of selling, general and administrative expenses in our Consolidated Income Statements was as follows:

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2024

Fiscal Year Ended June 30,

6 unchanged sentences

Stock Options

The Company did not grant stock options during the fiscal year ended June 30, 2023 or June 30, 2022.

The Company granted stock options for 640,782 shares during the fiscal year ended June 30, 2021 that vest annually over 3 years and have a 10 -year contractual life.

The Company did not grant stock options during the fiscal year ended June 30, 2024, June 30, 2023 or June 30, 2022.

Stock options granted prior to June 30, 2022 vested annually over 3 years and have a 10-year contractual life.

These options were granted with an exercise price that is no less than 100 % of the fair market value of the underlying shares on the date of the grant.

3 unchanged sentences

Changes in the subjective assumptions can materially affect the estimate of the fair value of share-based compensation and, consequently, the related amount recognized in the Consolidated Income Statements.

The Company used the following weighted-average assumptions for the options granted in fiscal year ended June 30, 2021:

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2023

Fiscal Year Ended June 30,

Expected term 5 years

Expected volatility 42.78 %

Risk-free interest rate 0.36 %

Dividend yield 0.00 %

Weighted-average fair value per option $ 9.01

The weighted-average expected term of the options represents the period of time the options are expected to be outstanding based on historical trends and behaviors of certain groups and individuals receiving these awards.

16 unchanged sentences

This amount will change as the market price per share changes.

The aggregate intrinsic value of options exercised during the fiscal years ended June 30, 2023, 2022 and 2021 was $ 0.2 million, $ 0.6 million and less than $ 0.1 million, respectively.

A summary of the status of the Company’s shares subject to unvested options is presented below:

The aggregate intrinsic value of options exercised during the fiscal years ended June 30, 2024, 2023 and 2022 was $ 2.1 million, $ 0.2 million and $ 0.6 million, respectively.

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2024

As of June 30, 2024 there were no unvested options as presented below:

Fiscal Year Ended June 30, 2024

5 unchanged sentences

Unvested, end of year — $ — $ —

As of June 30, 2023, there was approximately $ 0.6 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the plans in the form of stock options.

This cost is expected to be recognized

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2023

over a weighted-average period of 0.38 years.

The total fair value of options vested during the fiscal years ended June 30, 2024, 2023 and 2022 is $ 1.5 million , $ 1.6 million and $ 1.9 million, respectively.

20 unchanged sentences

During the fiscal year ended June 30, 2024, the Company granted 488,208 shares of restricted stock to employees and non-employee directors, all of which were issued in the form of RSUs:

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2024

Fiscal Year Ended June 30, 2024

4 unchanged sentences

Certain employees based on performance 64,527 August 25, 2023 $ 31.52 Annually over 3 years

Certain employees based on performance 815 December 1, 2022 $ 30.70 Annually over 4 years

Certain employees based on performance 1,507 September 1, 2023 $ 33.20 Annually over 4 years

Certain employees based on hire 2,276 March 31, 2024 $ 43.94 Annually over 4 years

Certain employees based on hire 1,563 June 3, 2024 $ 48.01 Annually over 4 years

10 unchanged sentences

Outstanding, end of year 887,310 $ 31.73

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2023

As of June 30, 2024, there was approximately $ 15.6 million of unrecognized compensation cost related to unvested performance units and restricted stock units granted, which is expected to be recognized over a weighted-average period of 1.22 years.

11 unchanged sentences

(13) Income Taxes

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2024

As of the fiscal year ended June 30, 2024, the Company maintains the ability to access the earnings of foreign subsidiaries.

17 unchanged sentences

Federal income tax expense for the fiscal years ended June 30, 2024, June 30, 2023 and June 30, 2022 with the applicable statutory rate of 21%.

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2023

Fiscal Year Ended June 30,

15 unchanged sentences

Nontaxable income ( 927 ) ( 3,189 ) ( 2,050 )

Nondeductible compensation (a)

1,412 1,240 1,166

Notional interest deduction on net equity — ( 733 ) ( 780 )

Other 2,059 1,993 ( 1,451 )

Provision for income taxes $ 22,781 $ 33,758 $ 29,925

(a) Certain amounts in the prior year have been reclassified to the current year presentation in presented table.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are presented below:

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2024

(in thousands)

19 unchanged sentences

The components of pretax earnings are as follows:

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2023

Fiscal Year Ended June 30,

7 unchanged sentences

(ii) gross state net operating loss carryforwards of approximately $ 1.5 million;

(iii) foreign gross net operating loss carryforwards of approximately $ 1.1 million;

(iv) state income tax credit carryforwards of approximately $ 3.0 million that began to expire in the 2022 tax year;

(v) withholding tax credits of approximately $ 5.0 million;

(vi) foreign tax credits of $ 1.0 million, and (vii) gross capital loss carryovers of $ 29.2 million.

(iii) state income tax credit carryforwards of approximately $ 3.3 million that began to expire in the 2023 tax year;

(iv) withholding tax credits of approximately $ 5.0 million;

(v) foreign tax credits of $ 1.2 million, and (vi) gross capital loss carryovers of $ 49.9 million.

The Company maintains a valuation allowance of $ 0.1 million for U.S.

federal net operating losses, $ 7.3 million for capital loss carryforwards, $ 0.2 million for foreign net operating losses, a less than $ 0.1 million valuation allowance for state net operating losses, a $ 5.1 million valuation allowance for withholding tax credits, a $ 1.0 million valuation allowance for foreign tax credits, and a $ 0.6 million valuation allowance for state income tax credits, where it was determined that, in accordance with ASC 740, it is more likely than not that they cannot be utilized.

federal net operating losses, $ 12.3 million for capital loss carryforwards, a less than $ 0.1 million valuation allowance for state net operating losses, a $ 5.0 million valuation allowance for withholding tax credits, a $ 1.2 million valuation allowance for foreign tax credits, and a $ 1.0 million valuation allowance for state income tax credits, where it was determined that, in accordance with ASC 740, it is more likely than not that they cannot be utilized.

The Company recognizes excess tax benefits and tax deficiencies as income tax expense or benefit for stock award settlements in accordance with ASU 2016-09.

The Company recognized net tax benefit of less than $ 0.1 million for the fiscal year ended June 30, 2023, net tax benefit of $ 0.3 million for the fiscal year ended June 30, 2022 and net tax expense of $ 1.1 million for the fiscal year ended June 30, 2021.

The Company recognized net tax expense of less than $ 0.1 million for the fiscal year ended June 30, 2024, net tax benefit of less than $ 0.1 million and $ 0.3 million for the fiscal years ended June 30, 2023 and 2022, respectively.

As of June 30, 2024, the Company had gross unrecognized tax benefits of $ 1.1 million, $ 0.9 million of which, if recognized, would affect the effective tax rate.

This reflects an increase of less than $ 0.1 million on a gross basis over the prior fiscal year.

The Company does not expect that the total amounts of unrecognized tax benefits will significantly increase or decrease within the next twelve months.

This reflects a decrease of less than $ 0.1 million on a gross basis over the prior fiscal year.

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2024

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

The Company recognizes interest and penalties related to unrecognized tax benefits within the income tax expense line in the accompanying Consolidated Income Statement.

8 unchanged sentences

Ending Balance $ 1,141 $ 1,172 $ 1,065

A court ruling issued in Brazil in June 2023 confirmed that Brazilian state-provided tax benefits are not subject to income tax.

The Company recorded, discrete to the June 30, 2023 quarter, an income tax benefit of $ 2.2 million related to the confirmation of the recovery of state-provided tax benefits.

During the June 30, 2024 fiscal year, the Company received a favorable ruling in Brazil regarding an exclusion from taxable income and as a result recognized a $ 1.5 million income tax recovery for prior years.

A court ruling in Brazil in June 2023 confirmed that Brazilian state-provided tax benefits are not subject to income tax and the Company recognized a tax benefit of $ 2.2 million during the June 30, 2023 fiscal year.

Subsequent to the 2023 fiscal year-end, the IRS issued Notice 2023-55 which provides taxpayers with Brazilian subsidiaries temporary relief from the final foreign tax credit regulations.

This Notice will apply to the Company’s fiscal year ended June 30, 2023 and the resulting tax benefit of approximately $ 1.5 million will be recognized as a discrete item in the first quarter of the June 30, 2024 fiscal year.

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2023

As a result, the company recognized a tax benefit of $ 1.5 million during the 2024 fiscal year for creditable foreign taxes for the 2023 fiscal year.

The Company conducts business globally and, as a result, one or more of its subsidiaries files income tax returns in the United States federal, various state, local and foreign jurisdictions.

14 unchanged sentences

Operating lease expense is recognized on a straight-line basis over the lease term.

Variable lease payments not based on a rate or index, such as costs for common area maintenance, are expensed as incurred.

Variable lease payments not based on a rate or index, such as costs for common area maintenance, are

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2024

expensed as incurred.

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

13 unchanged sentences

$ 6,333 $ 6,684 $ 6,447

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2023

Supplemental cash flow information related to the Company's operating leases for the fiscal years ended June 30, 2024, 2023 and 2022 are presented in the table below:

9 unchanged sentences

The following table presents the maturities of the Company's operating lease liabilities at June 30, 2024:

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2024

Operating leases

(in thousands)

Thereafter 300

Total future payments 13,843

8 unchanged sentences

Capital Projects

The Company expects total capital expenditures to range from $ 6.0 million to $ 8.0 million during fiscal year 2024 primarily for IT investments and facility improvements.

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2023

The Company expects total capital expenditures to range from $ 10.0 million to $ 15.0 million during fiscal year 2025 primarily for IT investments.

Pre-Acquisition Contingencies

1 unchanged sentence

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.

There were no deposits into the escrow account and $ 1.2 million was released from the escrow account during the fiscal year ended June 30, 2023.

There were no deposits into, or releases from the escrow account during the fiscal year ended June 30, 2024.

There were no deposits into the escrow account and $ 1.2 million wa s released from the escrow account during the fiscal year ended June 30, 2023.

The amount available after the impact of foreign currency translation, as of June 30, 2024 and 2023, for future pre-acquisition contingency settlements or to be released to the sellers was $ 3.2 million and $ 3.4 million, 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 consolidated balance sheet:

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2024

June 30, 2024 June 30, 2023

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

The Intelisys connectivity and cloud marketplace offers telecom, cable, UCaaS, 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.

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

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

Index to Financial Statements

15 unchanged sentences

$ 28,009 $ 28,614 $ 29,884

Change in fair value of contingent consideration:

Specialty Technology Solutions $ — $ — $ —

Modern Communications & Cloud — — 516

$ — $ — $ 516

Operating income:

7 unchanged sentences

Modern Communications & Cloud ( 6,181 ) ( 6,013 ) ( 5,182 )

Corporate — — ( 14 )

$ ( 8,555 ) $ ( 9,979 ) $ ( 6,849 )

4 unchanged sentences

$ 3,259,809 $ 3,787,721 $ 3,529,935

(1) For the year ended June 30, 2024, the amounts shown above include restructuring expenses, acquisition and divestiture expenses as well as cyberattack restoration costs.

For the year ended June 30, 2023, the amounts shown above include cyberattack restoration costs.

For the year ended June 30, 2022, the amounts shown above include divestiture costs.

For the year ended June 30, 2021, the amounts shown above include acquisition, divestiture, and restructuring.

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2023

June 30, 2024 June 30, 2023

2 unchanged sentences

Modern Communications & Cloud 901,007 964,066

Corporate — —

$ 1,779,032 $ 2,068,169

4 unchanged sentences

(17) Accumulated Other Comprehensive Income

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2024

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

9 unchanged sentences

(in thousands)

Tax expense $ 737 $ 1,741 $ 2,084

(18) Discontinued Operations

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

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

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

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

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

The Company finalized the sale of the Latin America businesses on October 30, 2020.

The Company also finalized the sale of the Europe and UK businesses on November 12, 2020.

Total cash received for the sale of the Divestitures was $ 39.2 million.

During the fiscal year ended June 30, 2021, the Company recorded a 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.

The Company received cash for the sale of Divestitures totaling $ 34.4 million during the fiscal year ended June 30, 2021.

Index to Financial Statements

SCANSOURCE, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

June 30, 2023

During the fiscal year ended June 30, 2022, the Company received a second payment of $ 3.1 million 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.

During the fiscal year ended June 30, 2023, the Company received a third payment related to a tax settlement of $ 1.7 million for its businesses in Latin America, outside of Brazil.

The receipt of payment resulted in a gain on disposal group of $ 1.7 million.

Major components of net loss from discontinued operations for the years ended June 30, 2023, 2022 and 2021 were as follows:

Fiscal Year Ended June 30,

2023 2022 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

(Gain) loss on held for sale classification ( 1,717 ) ( 100 ) 34,597

Other expense, net — — 310

Income (loss) from discontinued operations before taxes 1,717 100 ( 37,731 )

Income tax (benefit) expense — — ( 3,137 )

Net income (loss) from discontinued operations $ 1,717 $ 100 $ ( 34,594 )

Significant non-cash operating items and capital expenditures reflected in the cash flows from discontinued operations for the fiscal years ended June 30, 2023, 2022 and 2021 were as follows:

Tax (benefit) expense $ ( 484 ) $ 737 $ 1,741

(18) Business Sale

On December 19, 2023, the Company completed the sale of its UK-based intY business, which was part of the Modern Communications & Cloud segment.

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 $ 17.6 million in cash for the sale, net of cash transferred.

The business sale resulted in a $ 14.2 million gain on sale after considering the net assets sold.

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

During the fiscal year ended June 30, 2023, the Company received a payment related to a tax settlement of $ 1.7 million for its divested businesses in Latin America, outside of Brazil.

During the fiscal year ended June 30, 2022, the Company received a payment of $ 3.1 million for its divested businesses in Latin America related to working capital adjustments and in accordance with the Share Purchase Agreement between Intcomex and the Company.The receipt of these payments resulted in a gain on disposal group .

(19) Restructuring

During fiscal 2024, as part of a strategic review of organizational structure and operations, the Company executed a cost reduction and restructuring program to align our cost structure with demand expectations in our hardware business.

These actions are expected to result in approximately $ 10.0 million in annualized savings in selling, general and administrative expenses.

The following table presents the restructuring and employee separation costs incurred for the fiscal year ended ended June 30, 2024:

Fiscal Year Ended June 30, 2024

2023 2022 2021

(in thousands)

Loss on held for sale classification $ — $ — $ 34,597

Capital expenditures — — ( 58 )

(19) Restructuring

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

The Company also closed its Canpango business, a Salesforce implementation and consulting business.

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

These actions included 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 fiscal years ended June 30, 2023 or 2022.

The following table presents the restructuring and severance costs incurred for the fiscal year ended June 30, 2021:

Employee separation and benefit costs $ 4,358

For the fiscal year ended June 30, 2024, all restructuring costs are recognized in the Corporate reporting unit and have not been allocated to the Specialty Technology Solutions or Modern Communications & Cloud segments.

Index to Financial Statements

3 unchanged sentences

June 30, 2024

Fiscal year ended June 30, 2021

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

The following table represents activity for the fiscal year ended June 30, 2024:

Accrued Expenses

(in thousands)

Severance and benefit costs $ 8,824

Total restructuring and other charges $ 9,258

For the fiscal year ended June 30, 2021, all restructuring costs are recognized in the Corporate reporting unit and have not been allocated to the Modern Communications & Cloud or Specialty Technology Solutions segment.

There were no accrued restructuring and severance costs as of June 30, 2023.

Balance at June 30, 2023 $ —

Charged to expense 4,358

Cash payments ( 2,729 )

Balance at June 30, 2024 $ 1,629

The remaining balance as of June 30, 2024 of $ 1.6 million is expected to be paid through the third quarter of fiscal year 2025.

(20) Subsequent Events

On August 8, 2024, ScanSource acquired Resourcive, a leading technology advisor.

Resourcive delivers strategic IT sourcing solutions to mid-market and enterprise businesses, advising clients on value creation strategies that are enabled by technology.

On August 15, 2024 , ScanSource acquired Advantix, a VAR-focused, managed connectivity experience provider specializing in wireless enablement solutions.

Index to Financial Statements

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data