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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Quarterly period ended March 31, 2021

OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____

Commission File Number: 000-26926
ScanSource, Inc.

South Carolina
(State of Incorporation)

57-0965380
(I.R.S. Employer Identification No.)

6 Logue Court
Greenville, South Carolina 29615
(864) 288-2432
Securities registered pursuant to Section 12(b) of the Act:
Title of each class:Trading Symbol:Name of exchange on which registered:
Common stock, no par valueSCSCNASDAQ Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerSmaller reporting company
Accelerated filer

Emerging growth company
Non-accelerated filer





If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.      

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
ClassOutstanding at May 7, 2021
Common Stock, no par value per share
25,466,365 shares



SCANSOURCE, INC.
INDEX TO FORM 10-Q
March 31, 2021
 
  Page #
Item 1.
Financial Statements
Item 2.
Item 3.
Item 4.
Item 1
Item 1A.
Item 2
Item 6.

3

Table of Contents
FORWARD-LOOKING STATEMENTS

Forward-looking statements are included in the "Risk Factors," "Legal Proceedings," "Management’s Discussion and Analysis of Financial Condition and Results of Operations," and "Quantitative and Qualitative Disclosures About Market Risk" sections and elsewhere herein. Words such as "expects," "anticipates," "believes," "intends," "plans," "hopes," "forecasts," "seeks," "estimates," "goals," "projects," "strategy," "future," "likely," "may," "should," and variations of such words and similar expressions generally identify such forward-looking statements. Any forward-looking statement made by us in this Form 10-Q is based only on information currently available to us and speaks only as of the date on which it is made. Except as may be required by law, we expressly disclaim any obligation to update these forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q, except as required by law. Actual results could differ materially from those anticipated in these forward-looking statements as a result of a number of factors including, but not limited to, the impact of the COVID-19 pandemic on the Company's operations and financial condition and the potential prolonged economic weakness brought on by COVID-19, the failure to manage and implement the Company's organic growth strategy, credit risks involving the Company's larger customers and suppliers, changes in interest and exchange rates and regulatory regimes impacting the Company's international operations, risk to the Company's business from a cyber-security attack, a failure of the Company's IT systems, failure to hire and retain quality employees, loss of the Company's major customers, termination of the Company's relationship with key suppliers or a significant modification of the terms under which it operates with a key supplier, changes in the Company's operating strategy, and other factors set forth in "Risk Factors" contained in our Annual Report on Form 10-K for the year ended June 30, 2020.

4

Table of Contents
PART I. FINANCIAL INFORMATION
Item 1.Financial Statements
SCANSOURCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share information)
March 31, 2021June 30, 2020
Assets
Current assets:
Cash and cash equivalents$49,321 $29,485 
Accounts receivable, less allowance of $21,180 at March 31, 2021
and $21,906 at June 30, 2020
509,404 443,185 
Inventories459,652 454,885 
Prepaid expenses and other current assets99,424 94,681 
Current assets held for sale 181,231 
Total current assets1,117,801 1,203,467 
Property and equipment, net45,316 55,641 
Goodwill217,093 214,288 
Identifiable intangible assets, net109,172 121,547 
Deferred income taxes24,405 24,630 
Other non-current assets68,835 72,521 
Total assets$1,582,622 $1,692,094 
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable$521,552 $454,240 
Accrued expenses and other current liabilities87,969 76,686 
Current portion of contingent consideration 46,334 
Income taxes payable5,333 5,886 
Current portion of long-term debt7,843 7,839 
Current liabilities held for sale 128,022 
Total current liabilities622,697 719,007 
Deferred income taxes4,309 3,884 
Long-term debt, net of current portion137,206 143,175 
Borrowings under revolving credit facility53,802 67,714 
Other long-term liabilities74,033 80,068 
Total liabilities892,047 1,013,848 
Commitments and contingencies
Shareholders’ equity:
Preferred stock, no par value; 3,000,000 shares authorized, none issued
  
Common stock, no par value; 45,000,000 shares authorized, 25,466,365 and 25,361,298 shares issued and outstanding at March 31, 2021 and June 30, 2020, respectively
68,895 63,765 
Retained earnings734,361 747,276 
Accumulated other comprehensive loss(112,681)(132,795)
Total shareholders’ equity690,575 678,246 
Total liabilities and shareholders’ equity$1,582,622 $1,692,094 
June 30, 2020 amounts are derived from audited consolidated financial statements.
See accompanying notes to these condensed consolidated financial statements.
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SCANSOURCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
(In thousands, except per share data)
 
Quarter endedNine months ended
 March 31,March 31,
 2021202020212020
Net sales$729,873 $744,584 $2,298,111 $2,411,285 
Cost of goods sold641,757 660,006 2,043,172 2,129,862 
Gross profit88,116 84,578 254,939 281,423 
Selling, general and administrative expenses60,099 64,971 182,681 201,344 
Depreciation expense3,141 3,268 9,634 9,729 
Intangible amortization expense4,880 5,159 14,595 15,007 
Restructuring and other charges560 169 9,312 604 
Change in fair value of contingent consideration 618 516 6,266 
Operating income19,436 10,393 38,201 48,473 
Interest expense1,576 3,098 5,285 9,727 
Interest income(745)(1,080)(1,756)(2,627)
Other (income) expense, net(302)(137)183 198 
Income before income taxes18,907 8,512 34,489 41,175 
Provision for income taxes5,121 2,797 9,757 11,542 
Net income from continuing operations13,786 5,715 24,732 29,633 
Net loss from discontinued operations(688)(4,002)(37,647)(5,025)
Net income (loss)$13,098 $1,713 $(12,915)$24,608 
Per share data:
Net income from continuing operations per common share, basic$0.54 $0.23 $0.97 $1.17 
Net loss from discontinued operations per common share, basic(0.03)(0.16)$(1.48)$(0.20)
Net income (loss) per common share, basic$0.51 $0.07 $(0.51)$0.97 
Weighted-average shares outstanding, basic25,455 25,346 25,404 25,386 
Net income from continuing operations per common share, diluted$0.54 $0.23 $0.97 $1.16 
Net loss from discontinued operations per common share, diluted(0.03)(0.16)$(1.48)$(0.20)
Net income (loss) per common share, diluted$0.51 $0.07 $(0.51)0.97 
Weighted-average shares outstanding, diluted25,572 25,363 25,484 25,444 
See accompanying notes to these condensed consolidated financial statements.

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SCANSOURCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(In thousands)

Quarter endedNine months ended
March 31,March 31,
 2021202020212020
Net income (loss)$13,098 $1,713 $(12,915)$24,608 
Unrealized gain (loss) on hedged transaction, net of tax1,582 (4,046)2,209 (4,217)
Unrealized foreign currency translation adjustment(9,216)(28,788)6,269 (34,869)
Realized foreign currency loss from discontinued operations  11,635  
Comprehensive income (loss)$5,464 $(31,121)$7,198 $(14,478)
See accompanying notes to these condensed consolidated financial statements.

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SCANSOURCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
(In thousands, except share information)

Common
Stock
(Shares)
Common
Stock
(Amount)
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Balance at June 30, 202025,361,298 $63,765 $747,276 $(132,795)$678,246 
Net loss— — (11,819)— (11,819)
Unrealized gain on hedged transaction, net of tax— — — 109 109 
Unrealized foreign currency translation adjustment— — — 3,511 3,511 
Share-based compensation— 1,180 — — 1,180 
Balance at September 30, 202025,361,298 $64,945 $735,457 $(129,175)$671,227 
Net loss— — (14,194)— (14,194)
Unrealized gain on hedged transaction, net of tax— — — 519 519 
Unrealized foreign currency translation adjustment— — — 11,974 11,974 
Realized foreign currency loss from discontinued operations— — — 11,635 11,635 
Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes90,342 (1,036)— — (1,036)
Share-based compensation— 2,015 — — 2,015 
Balance at December 31, 202025,451,640 $65,924 $721,263 $(105,048)$682,139 
Net income— — 13,098 — 13,098 
Unrealized gain on hedged transaction, net of tax— — — 1,582 1,582 
Unrealized foreign currency translation adjustment— — — (9,216)(9,216)
Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes14,725 439 — — 439 
Share-based compensation— 2,532 — — 2,532 
Balance at March 31, 202125,466,365 $68,895 $734,361 $(112,681)$690,575 
See accompanying notes to these condensed consolidated financial statements.

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SCANSOURCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
(In thousands, except share information)

Common
Stock
(Shares)
Common
Stock
(Amount)
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Balance at June 30, 201925,408,397 $64,287 $939,930 $(90,088)$914,129 
Net income— — 11,530 — 11,530 
Unrealized loss on hedged transaction, net of tax— — — (1,071)(1,071)
Unrealized foreign currency translation adjustment— — — (14,639)(14,639)
Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes786 (12)— — (12)
Common stock repurchased(168,068)(5,432)— — (5,432)
Share-based compensation— 1,246 — — 1,246 
Balance at September 30, 201925,241,115 $60,089 $951,460 $(105,798)$905,751 
Net income— — 11,366 — 11,366 
Unrealized gain on hedged transaction, net of tax— — — 900 900 
Unrealized foreign currency translation adjustment— — — 8,558 8,558 
Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes104,683 (621)— — (621)
Share-based compensation— 1,627 — — 1,627 
Balance at December 31, 201925,345,798 $61,095 $962,825 $(96,340)$927,580 
Net income— — 1,713 — 1,713 
Unrealized loss on hedged transaction, net of tax— — — (4,046)(4,046)
Foreign currency translation adjustment— — — (28,788)(28,788)
Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes 34 — — 34 
Share-based compensation— 1,185 — — 1,185 
Balance at March 31, 202025,345,798 $62,314 $964,538 $(129,174)$897,678 
See accompanying notes to these condensed consolidated financial statements.

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SCANSOURCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
Nine months ended
 March 31,
 20212020
Cash flows from operating activities:
Net (loss) income$(12,915)$24,608 
Net loss from discontinued operations(37,647)(5,025)
Net income from continuing operations24,732 29,633 
Adjustments to reconcile net income to net cash provided by operating activities of continuing operations:
Depreciation and amortization25,417 26,585 
Amortization of debt issue costs313 313 
Provision for doubtful accounts226 1,399 
Share-based compensation5,711 4,053 
Deferred income taxes(26)(1,479)
Change in fair value of contingent consideration516 6,266 
Contingent consideration payments excess(5,457)(3,050)
Finance lease interest96 64 
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable(68,654)(85)
Inventories(5,907)(7,446)
Prepaid expenses and other assets(1,641)(10,977)
Other non-current assets2,846 (1,029)
Accounts payable69,609 55,378 
Accrued expenses and other liabilities8,434 13,233 
Income taxes payable(793)(4,775)
Net cash provided by operating activities of continuing operations55,422 108,083 
Cash flows from investing activities of continuing operations:
Capital expenditures(2,283)(6,575)
Cash paid for business acquisitions, net of cash acquired (48,915)
Proceeds from the sale of discontinued operations34,356  
Net cash provided by (used in) investing activities of continuing operations32,073 (55,490)
Cash flows from financing activities of continuing operations:
Borrowings on revolving credit, net of expenses1,486,464 1,608,472 
Repayments on revolving credit, net of expenses(1,500,375)(1,650,862)
Borrowings on long-term debt, net(5,964)(3,147)
Repayments of finance lease obligations(974)(660)
Contingent consideration payments(41,393)(35,481)
Exercise of stock options439 754 
Taxes paid on settlement of equity awards(1,036)(1,354)
Repurchase of common stock (6,077)
Net cash used in financing activities of continuing operations(62,839)(88,355)
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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 operations21,704 42,000 
Net cash flows used in by investing activities of discontinued operations(58)(48)
Net cash flows (used in) provided by financing activities of discontinued operations(29,494)6,739 
Net cash flows (used in) provided by discontinued operations(7,848)48,691 
Effect of exchange rate changes on cash and cash equivalents(1,942)(2,151)
Increase in cash and cash equivalents14,866 10,778 
Cash and cash equivalents at beginning of period34,455 23,818 
Cash and cash equivalents at end of period49,321 34,596 
Cash and cash equivalents of discontinued operations 4,838 
Cash and cash equivalents of continuing operations$49,321 $29,758 
See accompanying notes to these condensed consolidated financial statements.
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SCANSOURCE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

(1) Business and Summary of Significant Accounting Policies

Business Description

ScanSource, Inc. (together with its subsidiaries referred to as “the Company” or “ScanSource”) is at the center of the solution delivery channel, connecting businesses and providing technology solutions. The Company brings technology solutions and services from the world’s leading suppliers of mobility and barcode, point-of-sale (POS), payments, physical security, unified communications and collaboration, telecom and cloud services to market. 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, Worldwide Barcode, Networking & Security and Worldwide Communications & Services, are based on product, customer and service type.

COVID-19

In early March 2020, the World Health Organization characterized the novel coronavirus ("COVID-19") as a pandemic. The rapid spread of COVID-19 since December 2019 has resulted in the implementation of numerous measures to contain the virus worldwide, such as travel bans and restrictions, quarantines, shelter-in-place orders and business shutdowns. The Company moved quickly to transition its employees, where possible, to a fully remote working environment. The Company took steps to deploy teams to monitor the rapidly evolving situation and recommend risk mitigation actions; implement travel restrictions; and have employees follow physical distancing practices. The Company is following guidance from authorities and health officials including, but not limited to, checking the temperature of associates when entering its facilities, requiring associates to wear masks and other protective clothing as appropriate, and implementing additional cleaning and sanitation routines. All of the Company's distribution facilities have remained open and operational. Most of the Company's office-based employees around the world are working remotely.

The pandemic and these containment measures have had, and are expected to continue to have, a substantial impact on businesses around the world, including the Company, and on global, regional and national economies. The Company is unable to predict the ultimate impact that COVID-19 will have on its business due to the inability to predict the duration or magnitude of the virus' impact. In fiscal year 2020, the Company experienced decreased revenue and increased employee-related healthcare and prevention costs as a result of the COVID-19 pandemic. While the Company has made adjustments, including implementing an annualized expense reduction plan for fiscal year 2021, the Company will continue to monitor and make adjustments to the operating practices that it believes to be in the best interests of its employees, customers, suppliers, and shareholders. For further discussion on the potential future impacts of COVID-19, see the Risk Factors presented in Part I, Item 1A in the Company's form 10-K for fiscal year 2020.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared by the Company’s management in accordance with United States generally accepted accounting principles ("U.S. GAAP") for interim financial information and applicable rules and regulations of the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for annual financial statements. The unaudited condensed consolidated financial statements included herein contain all adjustments (consisting of normal recurring and non-recurring adjustments) that are, in the opinion of management, necessary to present fairly the financial position at March 31, 2021 and June 30, 2020, the results of operations for the quarters and nine months ended March 31, 2021 and 2020, the statements of comprehensive income for the quarters and nine months ended March 31, 2021 and 2020, the statements of shareholders' equity for the quarters and nine months ended March 31, 2021 and 2020 and the statements of cash flows for the nine months ended March 31, 2021 and 2020. The results of operations for the quarters and nine months ended March 31, 2021 and 2020 are not necessarily indicative of the results to be expected for a full year. 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, 2020.

The Company has reclassified certain prior year amounts for the results of discontinued operations to conform to the current year presentation. Unless otherwise indicated, amounts provided in these Notes pertain to continuing operations only.

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Summary of Significant Accounting Policies

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

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

Restructuring Costs

The Company groups exit or disposal cost obligations into two categories: (i) severance and benefit costs and (ii) other. Employee separation costs are recognized upon communication of the restructuring plan to the identified employees. Other associated restructuring costs are expensed as incurred. See Note 14 - Restructuring for further disclosures.

Cash and Cash Equivalents

The Company considers all highly-liquid investments with original maturities of three months or less, when purchased, to be cash equivalents. The Company maintains zero-balance disbursement accounts at various financial institutions at which the Company does not maintain significant depository relationships. Due to the terms of the agreements governing these accounts, the Company generally does not have the right to offset outstanding checks written from these accounts against cash on hand, and the respective institutions are not legally obligated to honor the checks until sufficient funds are transferred to fund the checks. As a result, checks released but not yet cleared from these accounts in the amounts of $17.0 million and $17.1 million are included in accounts payable on the condensed consolidated balance sheets at March 31, 2021 and June 30, 2020, respectively.

Long-lived Assets

The Company presents depreciation expense and intangible amortization expense on the Condensed Consolidated Income Statements. The Company's depreciation expense related to selling, general and administrative costs totaled $3.1 million and $9.6 million for the quarter and nine months ended March 31, 2021, respectively, and $3.3 million and $9.7 million for the quarter and nine months ended March 31, 2020, respectively. Depreciation expense reported as part of cost of goods sold on the Condensed Consolidated Income Statements totaled $0.3 million and $1.2 million for the quarter and nine months ended March 31, 2021, respectively, and $0.6 million and $1.8 million for the quarter and nine months ended March 31, 2020, respectively. The Company's intangible amortization expense reported on the Condensed Consolidated Income Statements relates to selling, general and administrative costs, not the cost of selling goods. Intangible amortization expense totaled $4.9 million and $14.6 million for the quarter and nine months ended March 31, 2021, respectively, and $5.2 million and $15.0 million for the quarter and nine months ended March 31, 2020, respectively.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (ASC Topic 326). In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326: Financial Instruments - Credit Losses, which provides supplemental guidance and clarification to ASU 2016-13 and must be adopted concurrently. The pronouncement revises the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. The Company adopted this standard effective July 1, 2020 and it did not have a material impact on the Company's consolidated financial statements. See Note 2 - Trade Accounts and Notes Receivable for disclosures related to the adoption of ASU 2016-13.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (ASC Topic 820) Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The pronouncement eliminates, modifies and adds disclosure requirements for fair value measurements. The Company adopted this standard effective July 1, 2020 and it had no impact on its consolidated financial statements.

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

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(2) Trade Accounts and Notes Receivable, Net

The Company maintains an allowance for doubtful accounts receivable for estimated future expected credit losses resulting from customers’ failure to make payments on accounts receivable due to the Company. The Company has notes receivable with certain customers, which are included in “Accounts receivable, less allowance” in the Condensed Consolidated Balance Sheets.

Management determines the estimate of the allowance for doubtful accounts receivable by considering a number of factors, including: (i) historical experience, (ii) aging of the accounts receivable, (iii) specific information obtained by the Company on the financial condition and the current creditworthiness of its customers, (iv) the current economic and country-specific environment and (v) reasonable and supportable forecasts about collectability. Expected credit losses are estimated on a pool basis when similar risk characteristics exist using an age-based reserve model. Receivables that do not share risk characteristics are evaluated on an individual basis. Estimates of expected credit losses on trade receivables over the contractual life are recorded at inception.

The changes in the allowance for doubtful accounts for the nine months ended March 31, 2021 are set forth in the table below.
June 30, 2020Amounts Charged to ExpenseWrite-offs
Other (1)
March 31, 2021
(in thousands)
Trade accounts and current notes receivable allowance$21,906 $226 $(1,603)$651 $21,180 
(1)"Other" amounts include recoveries and the effect of foreign currency fluctuations for the nine months ended March 31, 2021.
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(3) Revenue Recognition

The Company provides technology solutions and services from the world's leading suppliers of mobility and barcode, POS, payments, physical security, unified communications and collaboration, and telecom and cloud services. This includes hardware, related accessories and device configuration as well as software licenses, professional services and hardware support programs.

In determining the appropriate amount of revenue to recognize, the Company applies the following five-step model: (i) identify contracts with customers; (ii) identify performance obligations in the contracts; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations per the contracts; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company recognizes revenue as control of products and services are transferred to customers, which is generally at the point of shipment. 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.

Principal versus Agent Considerations

The Company is the principal for sales of all hardware, certain software and services, including self-branded warranty programs. The Company considers itself the principal in these transactions as it has control of the product or service before it is transferred to the customer. When the Company provides self-branded warranty programs, it engages a third party, generally the original equipment manufacturer, to cover the fulfillment of any obligations arising from these contracts. These revenues and associated third-party costs are amortized over the life of the contract on a straight-line basis. The Company recognizes the previously described revenue and cost of goods sold on a gross basis.

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

Related to the Company’s Intelisys business, the Company acts as a master agent connecting independent sales partners with service providers or suppliers who offer telecom and cloud services to end-customers. Intelisys’ sales partners earn commission payments from those service providers or suppliers on end-customer sales. Intelisys provides commission processing services to sales partners, earning a percentage of the commission stream. Because the Company acts as an agent, revenue is recognized on a net basis.

Variable Considerations

For certain transactions, products are sold with a right of return and may also provide other rebates or incentives, which are accounted for as variable consideration. 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. These estimates are reviewed and updated as necessary at the end of each reporting period.

Contract Balances

The Company records contract assets and liabilities for payments received from customers in advance of services performed. These assets and liabilities are the result of the sales of the Company's self-branded warranty programs and other transactions where control has not yet passed to the customer. These amounts are immaterial to the consolidated financial statements for the periods presented.

Disaggregation of Revenue

The following tables represent the Company's disaggregation of revenue:
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Quarter ended March 31, 2021
(in thousands)
Worldwide Barcode, Networking & Security SegmentWorldwide Communications & Services SegmentTotal
Revenue by product/service:
Technology solutions$502,227 $211,369 $713,596 
Intelisys 16,277 16,277 
$502,227 $227,646 $729,873 
Nine months ended March 31, 2021
(in thousands)
Worldwide Barcode, Networking & Security SegmentWorldwide Communications & Services SegmentTotal
Revenue by product/service:
Technology solutions$1,577,197 $673,134 $2,250,331 
Intelisys 47,780 47,780 
$1,577,197 $720,914 $2,298,111 
Quarter ended March 31, 2020
(in thousands)
Worldwide Barcode, Networking & Security SegmentWorldwide Communications & Services SegmentTotal
Revenue by product/service:
Technology solutions$489,218 $240,819 $730,037 
Intelisys 14,547 14,547 
$489,218 $255,366 $744,584 
Nine months ended March 31, 2020
(in thousands)
Worldwide Barcode, Networking & Security SegmentWorldwide Communications & Services SegmentTotal
Revenue by product/service:
Technology solutions$1,645,406 $723,557 $2,368,963 
Intelisys 42,322 42,322 
$1,645,406 $765,879 $2,411,285 


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(4) Earnings Per Share

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

Quarter endedNine months ended
 March 31,March 31,
 2021202020212020
 (in thousands, except per share data)
Numerator:
Net income from continuing operations$13,786 $5,715 $24,732 $29,633 
Net loss from discontinued operations(688)(4,002)(37,647)(5,025)
Net (loss) income$13,098 $1,713 $(12,915)$24,608 
Denominator:
Weighted-average shares, basic25,455 25,346 25,404 25,386 
Dilutive effect of share-based payments117 17 80 58 
Weighted-average shares, diluted25,572 25,363 25,484 25,444 
Net income from continuing operations per common share, basic$0.54 $0.23 $0.97 $1.17 
Net loss from discontinued operations per common share, basic(0.03)(0.16)(1.48)(0.20)
Net (loss) income per common share, basic$0.51 $0.07 $(0.51)$0.97 
Net income from continuing operations per common share, diluted$0.54 $0.23 $0.97 $1.16 
Net loss from discontinued operations per common share, diluted(0.03)(0.16)(1.48)(0.20)
Net (loss) income per common share, diluted$0.51 $0.07 $(0.51)$0.97 

For the quarter and nine months ended March 31, 2021, weighted-average shares outstanding excluded from the computation of diluted earnings per share because their effect would be anti-dilutive were 1,532,961 and 1,285,153, respectively. For the quarter and nine months ended March 31, 2020, weighted-average shares outstanding excluded from the computation of diluted earnings per share because their effect would be anti-dilutive were 1,036,740 and 980,803, respectively.

(5) Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss consists of the following: 
March 31, 2021June 30, 2020
 (in thousands)
Foreign currency translation adjustment$(108,069)$(125,974)
Unrealized loss on hedged transaction, net of tax(4,612)(6,821)
Accumulated other comprehensive loss$(112,681)$(132,795)

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

Quarter ended March 31,Nine months ended March 31,
2021202020212020
(in thousands)
Tax expense (benefit)$1,088 $617 $1,348 $921 
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(6) Acquisitions
intY

On July 1, 2019, the Company acquired all of the outstanding shares of intY and its CASCADE cloud services distribution platform. The purchase price of this acquisition, net of cash acquired, was approximately $48.9 million. The purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values on the transaction date. Intangible assets acquired include trade names, customer relationships, and developed technology. Goodwill recognized on this acquisition is not deductible for tax purposes. The impact of this acquisition was not material to the consolidated financial statements. The Company recognized $0.1 million and $0.5 million for the quarter and nine months ended March 31, 2020, respectively, in acquisition-related costs included in selling, general and administrative expenses on the Condensed Consolidated Income Statements in connection with this acquisition. This acquisition is included in the Worldwide Communications & Services segment.

(7) Goodwill and Other Identifiable Intangible Assets

The changes in the carrying amount of goodwill for the nine months ended March 31, 2021, by reporting segment, are set forth in the table below.
Worldwide Barcode, Networking & Security SegmentWorldwide Communications & Services SegmentTotal
 (in thousands)
Balance at June 30, 2020$16,370 $197,918 $214,288 
Foreign currency translation adjustment 2,805 2,805 
Balance at March 31, 2021$16,370 $200,723 $217,093 

The following table shows changes in the amount recognized for net identifiable intangible assets for the nine months ended March 31, 2021.
Net Identifiable Intangible Assets
(in thousands)
Balance at June 30, 2020$121,547 
Amortization expense(14,595)
Foreign currency translation adjustment2,220 
Balance at March 31, 2021$109,172 


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

The following table presents the Company’s debt for continuing and discontinued operations at March 31, 2021 and June 30, 2020.
March 31, 2021June 30, 2020
(in thousands)
Short-term borrowings(a)
$ $3,524 
Current portion of long-term debt7,843 7,839 
Mississippi revenue bond, net of current portion4,081 4,425 
Senior secured term loan facility, net of current portion133,125 138,750 
Borrowings under revolving credit facility(b)
53,802 92,418 
Total debt$198,851 $246,956 
(a) Short-term borrowings are classified as held for sale in the Consolidated Balance sheets for the Company's discontinued operations at June 30, 2020.
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(b) Borrowings under the revolving credit facility classified as held for sale in the Consolidated Balance Sheets for the Company's discontinued operations totaled $24.7 million at June 30, 2020.

Short-term Borrowings

The Company had a bank overdraft facility with Bank of America used by its products distribution business in the UK and European Union recognized as short-term borrowings. The facility was terminated with the sale of the business in November 2020. The facility allowed the Company to disburse checks in excess of bank balances up to $14.0 million U.S. dollar equivalent for up to seven days. Borrowings under the overdraft facility had an interest rate equal to 1% over the applicable currency's London Interbank Offered Rate ("LIBOR") with a zero percent floor. There were no borrowings outstanding under the overdraft facility at March 31, 2021. At June 30, 2020, there was $3.5 million outstanding under the overdraft facility classified as held for sale in the Consolidated Balance Sheets. The borrowings were denominated in euros, which bore a negative LIBOR rate at June 30, 2020, and as such the interest applicable to the Company was 1.0%.

Credit Facility

The Company has a multi-currency senior secured credit facility with JPMorgan Chase Bank N.A., as administrative agent, and a syndicate of banks (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. The Company incurred debt issuance costs of $1.1 million in connection with the amendments to 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, loans under the Amended Credit Agreement, other than swingline loans, bear interest at a rate equal to a spread over the LIBOR or 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, subject to agreement between the Company and the administrative agent. 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. Under the terms of the revolving credit facility, the payment of cash dividends is restricted.

The spread in effect as of March 31, 2021 was 1.25% for LIBOR-based loans and 0.25% for alternate base rate loans. The commitment fee rate in effect at March 31, 2021 was 0.20%. The 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. In addition, the Company’s Interest Coverage Ratio (as such term is defined in the Amended Credit Agreement) must be at least 3.00 to 1.00 at the end of each fiscal quarter. In the event of a default, customary remedies are available to the lenders, including acceleration and increased interest rates. The Company was in compliance with all covenants under the credit facility at March 31, 2021.

Including borrowings for both continuing and discontinued operations, the average daily outstanding balance on the revolving credit facility, excluding the term loan facility, during the nine month periods ended March 31, 2021 and 2020 was $62.1 million and $252.4 million, respectively. Taking into consideration outstanding borrowings on the multi-currency revolving credit facility for both continuing and discontinued operations, there was $296.2 million and $257.3 million available for additional borrowings as of March 31, 2021 and June 30, 2020, respectively. At March 31, 2021, based upon the Leverage Ratio calculation, there was $172.6 million available for additional borrowings. There were no letters of credit issued under the multi-currency revolving credit facility at March 31, 2021 and $0.3 million at June 30, 2020.

Mississippi Revenue Bond

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On August 1, 2007, the Company entered into an agreement with the State of Mississippi to provide financing for the acquisition and installation of certain equipment to be utilized at the Company’s Southaven, Mississippi warehouse, through the issuance of an industrial development revenue bond. The bond matures on September 1, 2032 and accrues interest at the 30-day LIBOR rate plus a spread of 0.85%. The terms of the bond allow for payment of interest only for the first 10 years of the agreement, and then, starting on September 1, 2018 through 2032, principal and interest payments are due until the maturity date or the redemption of the bond. The agreement also provides the bondholder with a put option, exercisable only within 180 days of each fifth anniversary of the agreement, requiring the Company to pay back the bonds at 100% of the principal amount outstanding. At March 31, 2021, the Company was in compliance with all covenants under this bond. The interest rates at March 31, 2021 and June 30, 2020 were 0.96% and 1.03%, respectively.

Debt Issuance Costs

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

(9) Derivatives and Hedging Activities

The Company's results of operations could be materially impacted by significant changes in foreign currency exchange rates and interest rates. In an effort to manage the exposure to these risks, the Company periodically enters into various derivative instruments. The Company's accounting policies for these instruments are based on whether the instruments are designated as hedge or non-hedge instruments in accordance with U.S. GAAP. The Company records all derivatives on the consolidated balance sheet at fair value. Derivatives that are not designated as hedging instruments or the ineffective portions of cash flow hedges are adjusted to fair value through earnings in other income and expense.

Foreign Currency Derivatives – The Company conducts a portion of its business internationally in a variety of foreign currencies and is exposed to market risk for changes in foreign currency exchange rates. The Company attempts to hedge transaction exposures with natural offsets to the fullest extent possible and once these opportunities have been exhausted the Company uses currency options and forward contracts or other hedging instruments with third parties. These contracts will periodically hedge the exchange of various currencies, including the U.S. dollar, Brazilian real, euro, British pound and Canadian dollar for continuing operations.

The Company had contracts outstanding for purposes of managing cash flows with notional amounts of $25.5 million and $16.6 million for the exchange of foreign currencies at March 31, 2021 and June 30, 2020, respectively. To date, the Company has chosen not to designate these derivatives as hedging instruments, and accordingly, these instruments are adjusted to fair value through earnings in other income and expense. Summarized financial information related to these derivative contracts and changes in the underlying value of the foreign currency exposures included in the Condensed Consolidated Income Statements for the quarters and nine months ended March 31, 2021 and 2020 are as follows:

 Quarter endedNine months ended
March 31,March 31,
 2021202020212020
 (in thousands)
Net foreign exchange derivative contract (gains) losses$(1,061)$(3,264)$852 $(3,749)
Net foreign currency transactional and re-measurement losses (gains)1,020 3,168 (74)3,835 
Net foreign currency exchange (gains) losses$(41)$(96)$778 $86 

Net foreign currency 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 currency 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. dollar versus the euro, British pound versus the euro and other currencies versus the U.S. dollar.

Interest Rates - The Company’s earnings are also affected by changes in interest rates due to the impact those changes have on interest expense from floating rate debt instruments. 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. The swap agreement has a notional amount of $100.0 million, with a $50.0 million tranche scheduled to mature
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on April 30, 2024 and a $50.0 million tranche scheduled to mature April 30, 2026. This swap agreement is designated as a cash flow hedge to hedge the variable rate interest payments on the revolving credit facility. Interest rate differentials paid or received under the swap agreement are recognized as adjustments to interest expense. To the extent the swap is effective in offsetting the variability of the hedged cash flows, changes in the fair value of the swap are not included in current earnings but are reported as other comprehensive income (loss). There was no ineffective portion to be recorded as an adjustment to earnings for the quarters and nine months ended March 31, 2021 and 2020.

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