SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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 value	SCSC	NASDAQ 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 x☒ No ¨☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate website, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files). Yes x☒ 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 filer

x☒

Smaller reporting company

☐

Accelerated filer

¨☐

Emerging growth company

☐

Non-accelerated filer

¨☐

~~(Do not check if a smaller reporting company)~~

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 x☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.



Class						Outstanding at February ~~2, 2018~~7, 2022
Common Stock, no par value per share						~~25,571,355~~25,604,030 shares

SCANSOURCE, INC.

INDEX TO FORM 10-Q

December 31, ~~2017~~2021


						Page #
PART I. FINANCIAL INFORMATION

Item 1.						~~Page #~~
~~PART I. FINANCIAL INFORMATION~~ Financial Statements		45

~~Item 1.~~	~~Financial Statements~~			4
	Condensed Consolidated Balance Sheets ~~as of December 31, 2017~~(unaudited) at Dec ember 3 1 , 2021 and June 30, ~~2017~~2021	45
			Condensed Consolidated Income Statements (unaudited) for the ~~Quarter~~Quarters and Six Months Ended December 31 ~~2017~~, 2021 and ~~2016~~2020			56
			Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~(unaudited) for the ~~Quarter~~ Quarters and Six Months Ended December 31 , 2021 and 2020			7
			Condensed Consolidated Statements of Shareholders' Equity (unaudited) for the Quarters and Six Months Ended December 31 ~~2017~~, 2021 and ~~2016~~2020			68
			Condensed Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended December 31 ~~2017~~, 2021 and ~~2016~~2020			710
			Notes to Condensed Consolidated Financial Statements (unaudited)			812
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			2630
Item 3.			Quantitative and Qualitative Disclosures About Market Risk			3948
Item 4.			Controls and Procedures			4049

PART II. OTHER INFORMATION

Item 1.			Legal Proceedings			4150

Item 1	~~Legal Proceedings~~1A.	41Risk Factors			50
Item ~~1A.~~2.			~~Risk Factors~~			41
~~Item 2~~	Unregistered Sales of Equity Securities and Use of Proceeds	4150
Item 6.			Exhibits			4251

SIGNATURES						4352

Table of Contents

FORWARD-LOOKING STATEMENTS

~~We include forward-looking~~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" ~~and "Risk Factors"~~ sections and elsewhere herein. ~~These statements generally can be identified by words~~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.~~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 or to reflect the occurrence of unanticipated events.~~10-Q. Actual results could differ materially from those ~~suggested by~~anticipated in these forward-looking statements as a result of a number of factors including, but not limited to the following factors, which are neither presented in order of importance nor weighted: supply chain challenges, the impact of the COVID-19 pandemic on the Company's operations and financial condition, 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 ~~our overseas~~the Company's international operations, risk to the ~~impact of tax reform laws, the~~Company's business from a cyber-security attack, a failure of ~~acquisitions to meet our expectations,~~ the Company's IT systems, failure to ~~manage~~hire and ~~implement our organic growth strategy, credit risks involving our larger~~retain quality employees, loss of the Company's major customers, ~~and vendors,~~ termination of ~~our~~the Company's relationship with key ~~vendors~~suppliers or a significant modification of the terms under which ~~we operate~~it operates with a key ~~vendor,~~supplier, changes in the ~~decline in demand for the products~~Company's operating strategy, and ~~services that we provide, reduced prices for the products and services that we provide due both to competitor and customer actions, and the~~ other factors set forth in "Risk Factors" contained in our Annual Report on Form 10-K for the year ended June 30, ~~2017.~~2021.

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)


	December 31, 2021		June 30, 2021
Assets
Current assets:
Cash and cash equivalents	$	34,123	$	62,718
Accounts receivable, less allowance of $17,393 at December 31, 2021 and $19,341 at June 30, 2021	613,186		568,984
Inventories	562,397		470,081
Prepaid expenses and other current assets	124,633		117,860

Total current assets	1,334,339		1,219,643
Property and equipment, net	39,239		42,836
Goodwill	216,755		218,877
Identifiable intangible assets, net	95,045		104,860
Deferred income taxes	21,668		21,853
Other non-current assets	63,824		63,615

Total assets	$	1,770,870	$	1,671,684
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	653,190	$	634,805
Accrued expenses and other current liabilities	81,570		87,790

Income taxes payable	2,283		2,501

Current portion of long-term debt	9,723		7,843

Total current liabilities	746,766		732,939
Deferred income taxes	3,862		3,954
Long-term debt, net of current portion	129,358		135,331
Borrowings under revolving credit facility	57,785		—

Other long-term liabilities	64,574		68,269

Total liabilities	1,002,345		940,493
Commitments and contingencies	0		0
Shareholders’ equity:
Preferred stock, no par value; 3,000,000 shares authorized, none issued	—		—
Common stock, no par value; 45,000,000 shares authorized, 25,657,545 and 25,499,465 shares issued and outstanding at December 31, 2021 and June 30, 2021, respectively	75,583		71,253
Retained earnings	803,396		758,071
Accumulated other comprehensive loss	(110,454)		(98,133)
Total shareholders’ equity	768,525		731,191
Total liabilities and shareholders’ equity	$	1,770,870	$	1,671,684

June 30, 2021 amounts are derived from audited consolidated financial statements.
See accompanying notes to these condensed consolidated financial statements.

December 31, 2017 June 30, 2017
Assets
Current assets:
Cash and cash equivalents $ 35,435
$ 56,094
Accounts receivable, less allowance of $47,264 at December 31, 2017 and $44,434 at June 30, 2017 717,336
637,293
Inventories 581,802
531,314
Prepaid expenses and other current assets 76,667
56,322
Total current assets 1,411,240
1,281,023
Property and equipment, net 76,626
56,566
Goodwill 302,912
200,881
Identifiable intangible assets, net 148,443
101,513
Deferred income taxes 11,794
29,491
Other non-current assets 54,267
48,829
Total assets $ 2,005,282
$ 1,718,303
Liabilities and Shareholders’ Equity
Current liabilities:
Current portion of long-term debt $ 104
$ —
Accounts payable 515,302
513,155
Accrued expenses and other current liabilities 97,597
104,715
Current portion of contingent consideration 38,629
30,675
Income taxes payable 5,086
7,730
Total current liabilities 656,718
656,275
Deferred income taxes 11,110
2,008
Long-term debt 5,325
5,429
Borrowings under revolving credit facility 355,503
91,871
Long-term portion of contingent consideration 58,402
83,361
Other long-term liabilities 57,437
42,214
Total liabilities 1,144,495
881,158
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, 25,571,355 and 25,431,845 shares issued and outstanding at December 31, 2017 and June 30, 2017, respectively
64,896
61,169
Retained earnings 861,296
849,180
Accumulated other comprehensive income (loss) (65,405 ) (73,204 )
Total shareholders’ equity 860,787
837,145
Total liabilities and shareholders’ equity $ 2,005,282
$ 1,718,303

June 30, 2017 amounts are derived from audited consolidated financial statements.
See accompanying notes to these condensed consolidated financial statements.

Table of Contents

SCANSOURCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED INCOME STATEMENTS (UNAUDITED)

(In thousands, except per share data)

Quarter ended Six months ended
December 31, December 31,
2017 2016 2017 2016
Net sales $ 1,032,212
$ 904,792
$ 1,956,771
$ 1,837,357
Cost of goods sold 919,241
806,258
1,737,883
1,647,289
Gross profit 112,971
98,534
218,888
190,068
Selling, general and administrative expenses 74,763
66,880
147,950
130,145
Depreciation expense 3,467
2,423
6,707
4,492
Intangible amortization expense 5,487
4,165
10,498
7,320
Change in fair value of contingent consideration 6,913
1,791
23,794
1,961
Operating income 22,341
23,275
29,939
46,150
Interest expense 2,285
912
3,870
1,501
Interest income (580 ) (892 ) (1,462 ) (1,908 )
Other (income) expense, net 326
(12,526 ) 441
(11,948 )
Income before income taxes 20,310
35,781
27,090
58,505
Provision for income taxes 12,341
12,745
14,974
20,653
Net income $ 7,969
$ 23,036
$ 12,116
$ 37,852
Per share data:
Net income per common share, basic $ 0.31
$ 0.92
$ 0.48
$ 1.49
Weighted-average shares outstanding, basic 25,506
25,146
25,470
25,334

Net income per common share, diluted $ 0.31
$ 0.91
$ 0.47
$ 1.48
Weighted-average shares outstanding, diluted 25,648
25,285
25,612
25,490


	Quarter ended				Six months ended
	December 31,				December 31,
	2021		2020		2021		2020
Net sales	$	864,351	$	810,897	$	1,721,662	$	1,568,238
Cost of goods sold	756,426		724,854		1,512,437		1,401,415
Gross profit	107,925		86,043		209,225		166,823
Selling, general and administrative expenses	69,433		60,470		133,016		122,580
Depreciation expense	2,547		3,097		5,427		6,494
Intangible amortization expense	4,447		4,862		8,956		9,716
Restructuring and other charges	—		484		—		8,753
Change in fair value of contingent consideration	—		—		—		516
Operating income	31,498		17,130		61,826		18,764
Interest expense	1,493		1,796		3,153		3,709
Interest income	(947)		(531)		(1,973)		(1,011)
Other expense, net	543		121		807		484
Income before income taxes	30,409		15,744		59,839		15,582
Provision for income taxes	7,257		4,683		14,614		4,636
Net income from continuing operations	23,152		11,061		45,225		10,946
Net income (loss) from discontinued operations	100		(25,255)		100		(36,959)
Net income (loss)	$	23,252	$	(14,194)	$	45,325	$	(26,013)

Per share data:
Net income from continuing operations per common share, basic	$	0.91	$	0.44	$	1.77	$	0.43
Net loss from discontinued operations per common share, basic	—		(1.00)		$	—	$	(1.46)
Net income (loss) per common share, basic	$	0.91	$	(0.56)	$	1.77	$	(1.03)
Weighted-average shares outstanding, basic	25,585		25,395		25,549		25,378

Net income from continuing operations per common share, diluted	$	0.89	$	0.43	$	1.75	$	0.43
Net loss from discontinued operations per common share, diluted	—		(0.99)		$	—	$	(1.45)
Net income (loss) per common share, diluted	$	0.90	$	(0.56)	$	1.76	(1.02)
Weighted-average shares outstanding, diluted	25,895		25,475		25,806		25,458



See accompanying notes to these condensed consolidated financial statements.

Table of Contents

SCANSOURCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(In thousands)

Quarter ended Six months ended
December 31, December 31,
2017 2016 2017 2016
Net income $ 7,969
$ 23,036
$ 12,116
$ 37,852
Unrealized gain on hedged transaction, net of tax 320
—
349
—
Foreign currency translation adjustment (2,435 ) (8,625 ) 7,450
(9,563 )
Comprehensive income $ 5,854
$ 14,411
$ 19,915
$ 28,289


	Quarter ended				Six months ended
	December 31,				December 31,
	2021		2020		2021		2020
Net income (loss)	$	23,252	$	(14,194)	$	45,325	$	(26,013)
Unrealized gain on hedged transaction, net of tax	1,172		519		1,585		628
Foreign currency translation adjustment	(2,759)		11,974		(13,906)		15,484
Realized foreign currency loss from discontinued operations	—		11,635		—		11,635
Comprehensive income	$	21,665	$	9,934	$	33,004	$	1,734



See accompanying notes to these condensed consolidated financial statements.

Table of Contents

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, 2021	25,499,465	$	71,253	$	758,071	$	(98,133)	$	731,191
Net income	—	—		22,073		—		22,073
Unrealized gain on hedged transaction, net of tax	—	—		—		413		413
Foreign currency translation adjustment	—	—		—		(11,147)		(11,147)
Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes	29,086	994		—		—		994

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

Balance at September 30, 2021	25,528,551	$	74,817	$	780,144	$	(108,867)	$	746,094
Net income	—	—		23,252		—		23,252
Unrealized gain on hedged transaction, net of tax	—	—		—		1,172		1,172
Foreign currency translation adjustment	—	—		—		(2,759)		(2,759)
Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes	134,897	(2,513)		—		—		(2,513)
Common stock repurchased	(5,903)	(183)		—		—		(183)
Share-based compensation	—	3,462		—		—		3,462

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








See accompanying notes to these condensed consolidated financial statements.

Table of Contents

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, 2020	25,361,298	$	63,765	$	747,276	$	(132,795)	$	678,246
Net loss	—	—		(11,819)		—		(11,819)
Unrealized gain on hedged transaction, net of tax	—	—		—		109		109
Foreign currency translation adjustment	—	—		—		3,511		3,511


Share-based compensation	—	1,180		—		—		1,180
Balance at September 30, 2020	25,361,298	$	64,945	$	735,457	$	(129,175)	$	671,227
Net loss	—	—		(14,194)		—		(14,194)
Unrealized gain on hedged transaction, net of tax	—	—		—		519		519
Foreign currency translation adjustment	—	—		—		11,974		11,974
Realized foreign currency translation loss from discontinued operations	—	—		—		11,635		11,635
Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes	90,342	(1,036)		—		—		(1,036)

Share-based compensation	—	2,015		—		—		2,015
Balance at December 31, 2020	25,451,640	$	65,924	$	721,263	$	(105,048)	$	682,139








See accompanying notes to these condensed consolidated financial statements.

Table of Contents

SCANSOURCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)


	Six months ended
	December 31,
	2021		2020
Cash flows from operating activities:
Net income (loss)	$	45,325	$	(26,013)
Net income (loss) from discontinued operations	100		(36,959)
Net income from continuing operations	45,225		10,946
Adjustments to reconcile net income to net cash (used in) provided by operating activities of continuing operations:
Depreciation and amortization	14,879		17,059
Amortization of debt issue costs	209		209
Provision for doubtful accounts	921		(180)
Share-based compensation	6,032		3,174

Deferred income taxes	(109)		(694)

Change in fair value of contingent consideration	—		516
Contingent consideration payments excess	—		(5,457)
Finance lease interest	26		70
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable	(54,370)		(86,683)
Inventories	(95,531)		35,124
Prepaid expenses and other assets	(11,236)		2,256
Other non-current assets	(1,561)		1,328
Accounts payable	25,444		132,074
Accrued expenses and other liabilities	(5,130)		11,150
Income taxes payable	(177)		(5,218)
Net cash (used in) provided by operating activities of continuing operations	(75,378)		115,674
Cash flows from investing activities of continuing operations:
Capital expenditures	(2,645)		(1,454)

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

Net cash provided by investing activities of continuing operations	480		32,902
Cash flows from financing activities of continuing operations:

Borrowings on revolving credit, net of expenses	1,115,161		959,848
Repayments on revolving credit, net of expenses	(1,057,376)		(1,022,561)
Repayments on long-term debt, net	(4,093)		(4,089)
Repayments of finance lease obligations	(624)		(652)

Contingent consideration payments	—		(41,393)
Exercise of stock options	1,114		—
Taxes paid on settlement of equity awards	(2,634)		(1,036)
Common stock repurchased	(183)		—

Net cash provided by (used in) financing activities of continuing operations	51,365		(109,883)

Table of Contents

Six months ended
December 31,
2017 2016
Cash flows from operating activities:
Net income $ 12,116
$ 37,852
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization 18,766
11,812
Amortization of debt issuance costs 158
148
Provision for doubtful accounts 5,331
4,007
Share-based compensation 3,233
3,147
Deferred income taxes (1,540 ) (57 )
Excess tax benefits from share-based payment arrangements —
(88 )
Change in fair value of contingent consideration 23,794
1,961
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable (72,975 ) (49,791 )
Inventories (37,749 ) 40,792
Prepaid expenses and other assets (10,081 ) (20,805 )
Other non-current assets (4,775 ) (1,205 )
Accounts payable (11,524 ) (12,863 )
Accrued expenses and other liabilities (5,654 ) 13,892
Income taxes payable (3,283 ) 6,929
Net cash (used in) provided by operating activities (84,183 ) 35,731
Cash flows from investing activities:
Capital expenditures (3,296 ) (3,261 )
Cash paid for business acquisitions, net of cash acquired (143,768 ) (83,804 )
Net cash (used in) investing activities (147,064 ) (87,065 )
Cash flows from financing activities:
Borrowings on revolving credit 1,279,193
829,141
Repayments on revolving credit (1,015,672 ) (764,332 )
Debt issuance costs (296 ) —
Repayments on capital lease obligation (281 ) (123 )
Contingent consideration payments (54,025 ) (10,241 )
Exercise and issuance of equity awards 2,126
4,217
Taxes paid on settlement of equity awards (1,616 ) (1,736 )
Repurchase of common stock —
(20,882 )
Excess tax benefits from share-based payment arrangements —
88
Net cash provided by financing activities 209,429
36,132
Effect of exchange rate changes on cash and cash equivalents 1,159
(1,127 )
Decrease in cash and cash equivalents (20,659 ) (16,329 )
Cash and cash equivalents at beginning of period 56,094
61,400
Cash and cash equivalents at end of period $ 35,435
$ 45,071

See accompanying notes to these condensed consolidated financial statements.


SCANSOURCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED), continued
(In thousands)

Cash flows from discontinued operations:
Net cash flows provided by operating activities of discontinued operations	—		21,704
Net cash flows used in by investing activities of discontinued operations	—		(58)
Net cash flows used in financing activities of discontinued operations	—		(29,494)
Net cash flows used in discontinued operations	—		(7,848)
Effect of exchange rate changes on cash and cash equivalents	(5,062)		1,887
(Decrease) increase in cash and cash equivalents	(28,595)		32,732
Cash and cash equivalents at beginning of period	62,718		34,455
Cash and cash equivalents at end of period	34,123		67,187
Cash and cash equivalents of discontinued operations	—		—
Cash and cash equivalents of continuing operations	$	34,123	$	67,187

See accompanying notes to these condensed consolidated financial statements.

Table of Contents

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 a leading ~~global provider~~hybrid distributor connecting devices to the cloud and accelerating growth for partners across hardware, software, connectivity and cloud. The Company brings technology solutions and services from the world’s leading suppliers of ~~technology products~~mobility and ~~solutions. ScanSource, Inc.~~barcode, point-of-sale (POS), payments, physical security, unified communications and ~~its subsidiaries (the "Company") provide value-added solutions from technology suppliers~~collaboration, telecom and ~~sell~~cloud services to ~~customers in specialty technology markets through its Worldwide Barcode, Networking & Security segment and Worldwide Communications & Services segment.~~

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 2 operating segments, Specialty Technology Solutions and ~~Europe.~~Modern Communications & Cloud, are based on product and customer type.

Segment Changes

During the quarter ended September 30, 2021, the Company made changes to the segments to align technologies with its hybrid distribution strategy across hardware, software, connectivity and cloud. The Company ~~sells products into~~also renamed its operating segments to Specialty Technology Solutions and Modern Communications & Cloud. The Company moved some North American business with communications and collaboration solutions to the ~~United States~~Modern Communications & Cloud segment. With this change, all of the Company's communications and ~~Canada principally~~collaboration business is in the Modern Communications & Cloud segment. This technology alignment better represents the operating and financial performance information provided to the Company's Chief Operating Decision Maker.

The Company has reclassified certain prior year amounts in the segment results to conform with current year presentation. These reclassifications had no effect on the condensed consolidated financial results. See Note 10 - Segment Information for descriptions of the Company's segments.

COVID-19

The spread of COVID-19 has resulted in the implementation of numerous measures to contain the virus worldwide, such as travel bans and restrictions, quarantines, shelter-in-place orders, business shutdowns, and limitations of in-person gatherings. The Company moved quickly to transition its employees, where possible, to a fully remote working environment. The Company also deployed teams to monitor the evolving situation and recommend risk mitigation actions. All of the Company's distribution facilities have remained open and operational throughout the pandemic.

The pandemic and containment measures have had an impact on the Company's suppliers' businesses and sales partners' businesses. The negative impacts to net sales from the pandemic, including declines in customer demand and supply chain disruptions, began to recover throughout fiscal year 2021. While the Company is unable to predict the ultimate impact that COVID-19 will have on its business, certain technologies have benefited from the widespread adoption of work-from-home, as well as the accelerated shift to digitize and automate processes. The Company continues to incur higher employee related healthcare and prevention costs as a ~~facility located~~result of the pandemic. For further discussion on the potential future impacts of COVID-19, see the Risk Factors presented in ~~Mississippi; into Latin America principally from facilities located~~Part I, Item 1A in ~~Florida, Mexico, Brazil and Colombia; and into Europe from facilities located in Belgium, France, Germany and~~ the ~~United Kingdom.~~Company's form 10-K for fiscal year 2021.

Basis of Presentation

Table of Contents

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 ~~as of~~ at December 31, ~~2017~~2021 and June 30, ~~2017~~,2021, the results of operations for the quarters and six months ended December 31, ~~2017~~2021 and ~~2016~~,2020, the statements of comprehensive income for the quarters and six months ended December 31, ~~2017~~2021 and ~~2016~~,2020, the statements of shareholders' equity for the quarters and six months ended December 31, 2021 and 2020 and the statements of cash flows for the six months ended December 31, ~~2017~~2021 and ~~2016~~.2020. The results of operations for the quarters and six months ended December 31, ~~2017~~2021 and ~~2016~~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, ~~2017~~.2021. Unless otherwise indicated, disclosures provided in the Notes pertain to continuing operations only.

Summary of Significant Accounting Policies

~~Except as described below, there~~There have been no material changes to the Company’s significant accounting policies for the six months ended December 31, ~~2017~~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, ~~2017~~.2021. For a discussion of the Company’s significant accounting policies, please see the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, ~~2017~~.2021.

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 ~~$7.5~~$18.5 million and ~~$8.3~~$14.3 million are included in accounts payable ~~as of~~ on the condensed consolidated balance sheets at December 31, ~~2017~~2021 and June 30, ~~2017~~,2021, respectively.

Long-lived Assets

The Company presents depreciation expense and intangible amortization expense ~~individually~~ on the Condensed Consolidated Income Statements. The Company's depreciation expense related to selling, general and administrative costs totaled ~~$3.5~~$2.5 million and ~~$6.7~~$5.4 million for the quarter and six months ended December 31, ~~2017~~2021 and ~~$2.4~~$3.1 million and ~~$4.5~~$6.5 million for the quarter and six months ended December 31, ~~2016, respectively.~~2020. Depreciation expense reported as part of cost of goods sold on the Condensed Consolidated Income Statements totaled ~~$0.9~~$0.2 million and ~~$1.6~~$0.5 million for the quarter and six months ended December 31, ~~2017. There was no depreciation expense reported as part of cost of goods sold prior to~~2021 and $0.4 million and $0.9 million for the ~~acquisition of POS Portal on July~~quarter and six months ended December 31, ~~2017.~~2020. The Company's intangible amortization expense reported on the Condensed Consolidated Income Statements ~~relate~~relates to selling, general and administrative costs, not the cost of selling goods. Intangible amortization expense totaled ~~$5.5~~$4.4 million and ~~$10.5~~$9.0 million for the quarter and six months ended December 31, ~~2017~~2021 and ~~$4.2~~$4.9 million and ~~$7.3~~$9.7 million for the quarter and six months ended December 31, ~~2016, respectively.~~2020.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board ("FASB") issued a comprehensive new revenue recognition standard for contracts with customers that will supersede most current revenue recognition guidance, including industry-specific guidance under Accounting Standards Update ("ASU") 2014-09, ~~Revenue from Contracts with Customers~~ (Topic 606). In March, April, May and December 2016 the FASB issued additional ASUs to provide supplemental adoption guidance and clarification to ASU 2014-09. The core principle of this standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, the standard provides a five-step analysis of transactions to determine when and how revenue is recognized. Other major provisions include the capitalization and amortization of certain contract costs, ensuring the time value of money is considered in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. This guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The new standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. The standard permits the use of either the retrospective or cumulative effect transition method. This guidance will be applicable to the Company for the fiscal year beginning July 1, 2018. The Company is currently in the process of evaluating the impact of this guidance on our consolidated financial results to determine the appropriate transition method for the Company. The Company has engaged a third-party consultant to assist with developing a multi-phase plan to assess the impact of adoption and is currently in the process of finalizing its conclusions on several aspects of the standard including principal versus agent considerations, identification of performance obligations, and the determination of when control of goods and services transfers to the Company’s customers. Additionally, the Company is in the process of evaluating the impact of the expanded disclosure requirements.

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases (Topic 842)~~ requiring lessees to reflect most leases on their balance sheets and recognize expenses on their income statements. Under the new guidance, lessees will be required to recognize a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis, and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The asset will be measured at the lease liability amount, adjusted for lease prepayments, lease incentives received, and the lessee's initial direct costs. For leases with a lease term of 12 months or less, as long as the lease does not include options to purchase the underlying assets, lessees can elect not to recognize a lease liability and right-of-use asset. Under the new guidance, lessor accounting is largely unchanged, and the accounting for sale and leaseback transactions is simplified. The standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. This guidance will be applicable to the Company for the fiscal year beginning July 1, 2019. The guidance must be adopted using a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. The Company is currently evaluating the impact on its consolidated financial statements upon the adoption of this new guidance.

~~In March 2016, the FASB issued ASU 2016-09,~~ ~~Compensation - Stock Compensation (Topic 718)~~ effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. This guidance was adopted by the Company prospectively on July 1, 2017. The new standard simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures and statutory withholding requirements, as well as classification in the statement of cash flows. Under the new guidance, an entity will recognize all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement. This change eliminates the current practice of recognizing excess tax benefits in additional paid-in-capital ("APIC") and tax deficiencies in APIC to the extent that there is a sufficient APIC pool related to previously recognized excess tax benefits. In addition, excess tax benefits and tax deficiencies are considered discrete items in the reporting period they occur and are not included in the estimate of an entity’s annual effective tax rate. As for classification on the statement of cash flows, excess tax benefits will no longer represent a financing activity since they are recognized in the income statement and will appropriately be classified as an operating activity. See the ~~Condensed Consolidated Statements of~~

~~Cash Flows~~ ~~for the six months ended December 31, 2017~~for the prospective presentation of classifying excess tax benefits as an operating activity, not a financing activity as in prior years. The ASU allows an entity to elect as an accounting policy either to continue to estimate the total number of awards for which the requisite service period will not be rendered (as currently required) or to account for forfeitures when they occur. The Company elected to maintain its accounting policy to estimate to the total number of forfeitures for stock awards granted. In regards to statutory withholding requirements, the new guidance stipulates that the net settlement of an award would not result, by itself, in liability classification of the award provided that the amount withheld for taxes does not exceed the maximum statutory tax rate in the employees’ relevant tax jurisdictions.

~~In August 2016, the FASB issued ASU 2016-15,~~ ~~Statement of Cash Flows (Topic 230)~~ intended to reduce diversity in practice of how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The update addresses eight specific cash flow issues, with the treatment of contingent consideration payments made after a business combination being the most directly applicable to the Company. The update requires that cash payments made approximately three months or less after an acquisition's consummation date should be classified as cash outflows for investing activities. Payment made thereafter up to the amount of the original contingent consideration liability should be classified as cash outflows from financing activities. Payments made in excess of the amount of the original contingent consideration liability should be classified as cash outflows from operating activities. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The standard will be applicable to the Company for the fiscal year beginning July 1, 2018. Early adoption is permitted, provided all eight amendments are adopted in the same period. The guidance requires adoption using a retrospective transition method. The Company is currently evaluating the impact on its consolidated financial statements upon the adoption of this new guidance.

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

(2) Trade Accounts and Notes Receivable, Net

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

Table of Contents

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 six months ended December 31, 2021 are set forth in the table below.


	June 30, 2021		Amounts Charged to Expense		Write-offs		Other (1)		December 31, 2021
	(in thousands)
Trade accounts and current notes receivable allowance	$	19,341	$	921	$	(1,340)	$	(1,529)	$	17,393

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

(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. The Intelisys business operates under an agency model.

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

Table of Contents

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:


	Quarter ended December 31, 2021
	Specialty Technology Solutions		Modern Communications & Cloud		Total
			(in thousands)
Revenue by product/service:
Hardware, software and cloud (excluding Intelisys)	$	496,920	$	348,893	$	845,813
Intelisys connectivity and cloud	—		18,538		18,538
	$	496,920	$	367,431	$	864,351


	Six months ended December 31, 2021
	Specialty Technology Solutions		Modern Communications & Cloud		Total
			(in thousands)
Revenue by product/service:
Hardware, software and cloud (excluding Intelisys)	$	998,630	$	687,142	$	1,685,772
Intelisys connectivity and cloud	—		35,890		35,890
	$	998,630	$	723,032	$	1,721,662


	Quarter ended December 31, 2020
	Specialty Technology Solutions		Modern Communications & Cloud		Total
			(in thousands)
Revenue by product/service:
Hardware, software and cloud (excluding Intelisys)	$	455,248	$	339,404	$	794,652
Intelisys connectivity and cloud	—		16,245		16,245
	$	455,248	$	355,649	$	810,897


	Six months ended December 31, 2020
	Specialty Technology Solutions		Modern Communications & Cloud		Total
			(in thousands)
Revenue by product/service:
Hardware, software and cloud (excluding Intelisys)	$	864,026	$	672,709	$	1,536,735
Intelisys connectivity and cloud	—		31,503		31,503
	$	864,026	$	704,212	$	1,568,238

(4) Earnings Per Share

Table of Contents

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 ended				Six months ended					Quarter ended				Six months ended
	December 31,				December 31,					December 31,				December 31,
	2017		2016		2017		2016			2021		2020		2021		2020
	(in thousands, except per share data)									(in thousands, except per share data)
Numerator:									Numerator:
Net Income	$	7,969	$	23,036	$	12,116	$	37,852
Net income from continuing operations									Net income from continuing operations	$	23,152	$	11,061	$	45,225	$	10,946
Net income (loss) from discontinued operations									Net income (loss) from discontinued operations	100		(25,255)		100		(36,959)
Net income (loss)									Net income (loss)	$	23,252	$	(14,194)	$	45,325	$	(26,013)
Denominator:									Denominator:
Weighted-average shares, basic	25,506		25,146		25,470		25,334		Weighted-average shares, basic	25,585		25,395		25,549		25,378
Dilutive effect of share-based payments	142		139		142		156		Dilutive effect of share-based payments	310		80		257		80
Weighted-average shares, diluted	25,648		25,285		25,612		25,490		Weighted-average shares, diluted	25,895		25,475		25,806		25,458

Net income per common share, basic	$	0.31	$	0.92	$	0.48	$	1.49
Net income per common share, diluted	$	0.31	$	0.91	$	0.47	$	1.48
Net income from continuing operations per common share, basic									Net income from continuing operations per common share, basic	$	0.91	$	0.44	$	1.77	$	0.43
Net loss from discontinued operations per common share, basic									Net loss from discontinued operations per common share, basic	—		(1.00)		—		(1.46)
Net income (loss) per common share, basic									Net income (loss) per common share, basic	$	0.91	$	(0.56)	$	1.77	$	(1.03)

Net income from continuing operations per common share, diluted									Net income from continuing operations per common share, diluted	$	0.89	$	0.43	$	1.75	$	0.43
Net loss from discontinued operations per common share, diluted									Net loss from discontinued operations per common share, diluted	—		(0.99)		—		(1.45)
Net income (loss) per common share, diluted									Net income (loss) per common share, diluted	$	0.90	$	(0.56)	$	1.76	$	(1.02)

For the ~~quarter~~quarters and six months ended December 31, ~~2017,~~2021 weighted-average shares outstanding excluded from the computation of diluted earnings per share because their effect would be anti-dilutive were ~~405,159~~359,366 and ~~432,846,~~1,149,352, respectively. For the ~~quarter~~quarters and six months ended December 31, ~~2016, there were 568,955 and 517,845, respectively,~~2020, weighted-average shares outstanding excluded from the computation of diluted earnings per share because their effect would be ~~anti-dilutive.~~anti-dilutive were 1,400,999 and 1,191,985, respectively.

~~(3)~~(5) Accumulated Other Comprehensive ~~Income (Loss)~~Loss

Accumulated other comprehensive ~~income (loss)~~loss consists of the following:


	December 31, 2021		June 30, 2021
	(in thousands)
Foreign currency translation adjustment	$	(107,467)	$	(93,561)
Unrealized loss on hedged transaction, net of tax	(2,987)		(4,572)
Accumulated other comprehensive loss	$	(110,454)	$	(98,133)

December 31, 2017 June 30, 2017
(in thousands)
Foreign currency translation adjustment $ (65,767 ) $ (73,217 )
Unrealized gain (loss) on hedged transaction, net of tax 362
13
Accumulated other comprehensive income (loss) $ (65,405 ) $ (73,204 )

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

Quarter ended December 31, Six months ended December 31,
2017 2016 2017 2016
(in thousands)
Tax expense (benefit) $ 75
$ 144
$ 379
$ 92

~~(4) Acquisitions~~

POS Portal
(in thousands)
Receivables $ 8,914
Inventory 8,352
Other current assets 917
Property and equipment 24,963
Goodwill 101,198
Identifiable intangible assets 57,000
Other non-current assets 100
$ 201,444

Accounts payable $ 10,897
Accrued expenses and other current liabilities 5,130
Contingent consideration 13,098
Other long-term liabilities 102
Long-term deferred taxes payable 28,449
Consideration transferred, net of cash acquired 143,768
$ 201,444

Intelisys
(in thousands)
Receivables $ 21,655
Other current assets 1,547
Property and equipment 5,298
Goodwill 109,005
Identifiable intangible assets 63,110
Other non-current assets 1,839
$ 202,454

Accounts payable $ 21,063
Accrued expenses and other current liabilities 2,587
Contingent consideration 95,000
Consideration transferred, net of cash acquired 83,804
$ 202,454

~~(5)~~(6) Goodwill and Other Identifiable Intangible Assets

The changes in the carrying amount of goodwill for the six months ended December 31, ~~2017~~,2021, by reporting segment, are ~~as follows:~~


	Specialty Technology Solutions		Modern Communications & Cloud		Total
	(in thousands)
Balance at June 30, 2021	$	16,370	$	202,507	$	218,877

Foreign currency translation adjustment	—		(2,122)		(2,122)
Balance at December 31, 2021	$	16,370	$	200,385	$	216,755

The following table shows changes in the amount recognized for net identifiable intangible assets for the six months ended December 31, ~~2017~~.2021.

Net Identifiable Intangible Assets
(in thousands)
Balance as of June 30, 2017 $ 101,513
Additions 57,000
Amortization expense (10,498 )
Foreign currency translation adjustment 428
Balance as of December 31, 2017 $ 148,443

~~(6)~~(7) Short-Term Borrowings and Long-Term Debt

The following table presents the Company’s debt ~~as of~~at December 31, ~~2017~~2021 and June 30, ~~2017.~~2021.

December 31, 2017 June 30, 2017
(in thousands)
Current portion of long-term debt $ 104
$ —
Revolving credit facility 355,503
91,871
Long-term debt 5,325
5,429
Total debt $ 360,932
$ 97,300

~~Revolving~~ Credit Facility

The Company has a multi-currency senior secured ~~revolving~~ credit facility with JPMorgan Chase Bank N.A., as administrative agent, and a syndicate of banks ~~(the~~(as amended, the “Amended Credit Agreement”) ~~that is scheduled to mature on~~. On April ~~3, 2022. On August 8, 2017,~~30, 2019, the Company amended ~~the Amended Credit Agreement to increase the committed~~this credit facility ~~from $300 million~~ to ~~$400 million.~~expand the borrowing capacity and extend its maturity to April 30, 2024. The Amended Credit Agreement ~~allows for~~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 ~~issuance of~~Company may increase its borrowings up to ~~$50~~an additional $250 million, ~~for letters of credit and has a~~ ~~$200 million~~ ~~accordion feature that allows the Company to increase the availability to~~ ~~$600 million~~, subject to obtaining additional credit commitments from the lenders participating in the increase. The ~~Company incurred $0.3~~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 ~~debt issuance costs in connection with~~ the ~~August 8, 2017 amendment.~~

At ~~December 31, 2017,~~ the Company's option, U.S. dollar loans under the Amended Credit Agreement, other than swingline loans, bear interest at a rate equal to a spread ~~in effect was 1.625%~~over LIBOR or the alternate base rate depending upon the Company's net leverage ratio, calculated as

total debt less up to $15 million of unrestricted domestic cash ("Credit Facility Net Debt") to trailing 4-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 ~~0.625%~~0.00% to 0.75% for alternate base rate loans. Additionally, the Company is charged commitment fees ranging from 0.15% to 0.30%, depending upon the Leverage Ratio, on non-utilized borrowing availability, excluding swingline loans. The Amended Credit Agreement provides for the substitution of a new interest rate benchmark upon the transition from LIBOR for U.S. dollar loans, subject to agreement between the Company and the administrative agent. On December 23, 2021, the Company amended its credit facility to replace LIBOR as the benchmark rate for non-U.S. dollar loans, among other things.

During the six months ended December 31, 2021, the Company's borrowings under the credit facility were U.S. dollar loans. The spread in effect as of December 31, 2021 was 1.25% for LIBOR-based loans and 0.25% for alternate base rate loans. The commitment fee rate in effect ~~as of~~at December 31, ~~2017~~2021 was ~~0.250%~~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 ~~as of~~at December 31, ~~2017.~~2021.

The average daily outstanding balance on the revolving credit facility, excluding the term loan facility, during the six month ~~periods~~period ended December 31, ~~2017~~2021 was $57.1 million. Including borrowings for both continuing and ~~2016~~discontinued operations, the average daily outstanding balance on the revolving credit facility, excluding the term loan facility, during the six months ended December 31, 2020 was ~~$261.8~~$70.4 million. There was $292.2 million and ~~$129.7 million, respectively. There was $44.6 million and $208.1~~$350.0 million available for additional borrowings as of December 31, ~~2017~~2021 and June 30, ~~2017,~~2021, respectively. There were no letters of credit issued under the multi-currency revolving credit facility ~~as of~~at December 31, ~~2017 and~~2021 or June 30, ~~2017.~~2021.

~~Long-Term Debt~~Mississippi Revenue Bond

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. ~~As of~~ At December 31, ~~2017~~,2021, the Company was in compliance with all covenants under this bond. The interest ~~rate~~rates at December 31, ~~2017~~2021 and June 30, ~~2017~~ ~~was 2.23%~~2021 were 0.95% and ~~1.93%~~0.94%, respectively.

~~As of~~At December 31, ~~2017,~~2021, net debt issuance costs associated with the credit facility and bond totaled ~~$1.5~~$1.0 million and are being amortized ~~on a straight-line basis~~ through the maturity date of each respective debt instrument.

~~(7)~~(8) 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 ~~foreign currency exchange rates and interest rates,~~these risks, the Company periodically enters into various derivative instruments. The ~~Company’s~~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 ~~and~~or the ineffective portions of cash flow hedges ~~designated as hedging instruments~~ 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. The exposure~~currencies and is exposed to market risk for changes in foreign currency exchange rates arises from foreign currency-denominated assets and liabilities, and transactions arising from non-functional currency financing or trading activities. The Company’s objective is to preserve the economic value of non-functional currency-denominated cash flows.rates. The Company attempts to hedge transaction exposures with natural offsets to the fullest extent possible and once these opportunities have been exhausted ~~through~~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, Mexican peso, Chilean peso, Colombian peso and Peruvian nuevo sol. While the Company utilizes foreign exchange contracts to hedge foreign currency exposure, the Company's foreign exchange policy prohibits the usedollar.

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, ~~the~~ British pound versus the euro and other currencies versus the U.S. dollar.

Interest Rates - The ~~Company's~~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. ~~To manage the~~The Company manages its exposure ~~the~~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 ~~has~~ entered into an interest rate swap agreement, ~~with~~which was subsequently settled, and entered into a new amended agreement on April 30, 2019. The swap agreement has a notional amount of ~~$50.0~~$100.0 million, with a $50.0 million tranche scheduled to mature on April ~~3, 2022~~.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 ~~quarter and six months~~quarters ended December 31, ~~2017.~~2021 and 2020.

The components of the cash flow hedge included in ~~accumulated other comprehensive income (loss), net of income taxes, in~~ the Condensed Consolidated ~~Balance Sheets,~~Statement of Comprehensive Income for the quarters and six months ended December 31, 2021 and 2020, are as follows:

Quarter ended Six months ended
December 31, December 31,
2017 2016 2017 2016
(in thousands)
Net interest expense recognized as a result of interest rate swap $ 64
$ —
$ 133
$ —
Unrealized gain (loss) in fair value of interest rate swap 447
—
424
—
Net increase (decrease) in accumulated other comprehensive income (loss) $ 511
$ —
$ 557
$ —
Income tax effect 191
—
208
—
Net increase (decrease) in accumulated other comprehensive income (loss), net of tax $ 320
$ —
$ 349
$ —

The Company used the following derivative instruments ~~as of~~at December 31, ~~2017~~2021 and June 30, ~~2017,~~2021, reflected in its Condensed Consolidated Balance Sheets, for the risk management purposes detailed above:

as Hedge Instruments

Not Designated as Hedge Instruments

as Hedge Instruments

Not Designated as Hedge Instruments

~~(8)~~(9) 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 classifies certain assets and liabilities based on the fair value hierarchy, which aggregates 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;

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

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

The assets and liabilities maintained by the Company that are required to be measured or disclosed at fair value on a recurring basis include the Company’s various debt instruments, deferred compensation plan investments, outstanding forward foreign currency exchange contracts, interest rate swap agreements and contingent consideration owed to the previous owners of ~~Network1 and~~ Intelisys. The carrying value of debt is considered to approximate fair value, as the Company’s debt instruments are indexed to a variable rate using the market approach (Level ~~2 criteria)~~2).

The following table summarizes the valuation of the Company’s remaining assets and liabilities measured at fair value on a recurring basis ~~as of~~ at December 31, ~~2017~~:2021:

The investments in the deferred compensation plan are held in a ~~rabbi trust~~"rabbi trust" and include mutual funds and cash equivalents for payment of non-qualified benefits for certain retired, terminated and active employees. These investments are recorded to prepaid expenses and other current assets or other non-current assets depending on their corresponding, anticipated distribution dates to recipients, which are reported in accrued expenses and other current liabilities or other long-term ~~non-current~~ liabilities, respectively.

Derivative instruments, such as foreign currency forward contracts, are measured using the market approach on a recurring basis considering foreign currency spot rates and forward rates quoted by banks or foreign currency dealers and interest rates quoted by banks (Level 2)~~. See Note 7 -~~ ~~Derivatives and Hedging Activities~~. Fair values of interest rate swaps are measured using standard valuation models with inputs that can be derived from observable market transactions, including LIBOR spot and forward rates (Level 2). Foreign currency contracts and interest rate swap agreements are classified in the Condensed Consolidated Balance Sheets as prepaid expenses and other ~~current~~non-current assets or accrued expenses and other ~~current~~long-term liabilities, depending on the respective instruments' favorable or unfavorable positions. See Note 8 - Derivatives and Hedging Activities.

The Company recorded a contingent consideration ~~liabilities~~liability at the acquisition date of ~~Network1,~~ Intelisys ~~and POS Portal~~ representing the amounts payable to former shareholders, as outlined under the terms of the purchase agreements, based upon the achievement of a projected earnings measure, net of specific pro forma adjustments. ~~The contingent consideration due to the former shareholders of POS Portal was paid in full during the quarter ended December 31, 2017.~~ The current and non-current portions of these obligations are reported separately on the Condensed Consolidated Balance Sheets. The fair value of the contingent considerations (Level 3) are determined using a form of a probability weighted discounted cash flow model. Subsequent changes in the fair value of the contingent consideration liabilities are recorded to the change in fair value of contingent consideration line item in the Condensed Consolidated Income Statements. ~~Fluctuations due to foreign currency translation are captured in other comprehensive income through the changes in foreign currency translation adjustments line item as seen in Note 3 -~~ ~~Accumulated Other Comprehensive Income (Loss)~~.

The table below provides a summary of the changes in fair value of the ~~Company’s~~Company's contingent considerations ~~(Level 3)~~ for the ~~Network1,~~ Intelisys ~~and POS Portal earnouts~~earnout, which is measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the quarter and six months ended December 31, ~~2017. The contingent consideration due to the former shareholders~~2020.


	Quarter ended December 31, 2020		Six months ended December 31, 2020
	Modern Communications & Cloud
	(in thousands)
Fair value at beginning of period	$	46,850		$	46,334

Payments	(46,850)			(46,850)
Change in fair value of contingent consideration	—			516

Fair value at end of period	$	—		$	—

Table of ~~POS Portal was paid in full during the quarter ended December 31, 2017.~~Contents

Contingent consideration for the quarter ended Contingent consideration for the six months ended
December 31, 2017 December 31, 2017
Barcode, Networking & Security Segment Communications & Services Segment Total Barcode, Networking & Security Segment Communications & Services Segment Total
(in thousands)
Fair value at beginning of period $ 13,167
$ 90,326
$ 103,493
$ —
$ 114,036
$ 114,036
Issuance of contingent consideration —
—
—
13,098
—
13,098
Payments (13,167 ) —
(13,167 ) (13,167 ) (40,858 ) (54,025 )
Change in fair value of contingent consideration —
6,913
6,913
69
23,725
23,794
Foreign currency translation adjustment —
(208 ) (208 ) —
128
128
Fair value at end of period $ —
$ 97,031
$ 97,031
$ —
$ 97,031
$ 97,031

The table below provides a summary of the changes in fair value of the Company’s contingent considerations (Level 3) for the Imago, Network1 and Intelisys earnouts for the quarter and six months ended ~~December 31, 2016. The contingent consideration due to the former shareholders of Imago was paid in full during the quarter ended December 31, 2016.~~

Contingent consideration for the quarter ended Contingent consideration for the six months ended
December 31, 2016 December 31, 2016
Communications & Services Segment Communications & Services Segment
(in thousands)
Fair value at beginning of period $ 110,835
$ 24,652
Issuance of contingent consideration —
95,000
Payments (1,607 ) (10,241 )
Change in fair value of contingent consideration 1,791
1,961
Foreign currency translation adjustment (139 ) (492 )
Fair value at end of period $ 110,880
$ 110,880

The fair values of amounts owed are recorded in current portion of contingent consideration ~~and long-term portion of contingent consideration~~ in the Company’s Condensed Consolidated Balance Sheets. ~~The U.S. dollar amounts of actual disbursements made in connection~~In accordance with ~~future earnout payments are subject to change as~~ASC 805, the ~~liability is denominated in currencies other than the U.S. dollar and subject to foreign exchange fluctuation risk. The~~ Company ~~will revalue~~revalued the contingent consideration ~~liabilities~~liability at each reporting date through the last payment, with changes in the fair value of the contingent consideration reflected in the change in fair value of contingent consideration line item on the Company’s Condensed Consolidated Income Statements that is included in the calculation of operating income. The fair value of the contingent consideration ~~liabilities~~liability associated with future earnout payments iswas based on several factors, including:

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

•the probability of achieving these results; and

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

A change in any of these unobservable inputs can significantly change the fair value of the contingent consideration. Valuation techniques and significant observable inputs used in recurring Level 3 fair value measurements for our contingent consideration liabilities as of December 31, 2017 and June 30, 2017 were as follows.



~~Reporting Period~~	~~Valuation Technique~~	~~Significant Unobservable Inputs~~	~~Weighted Average Rates~~
~~December 31, 2017~~	~~Discounted cash flow~~	~~Weighted average cost of capital~~	~~15.4~~	%
		~~Adjusted EBITDA growth rate~~	~~17.9~~	%

~~June 30, 2017~~	~~Discounted cash flow~~	~~Weighted average cost of capital~~	~~14.2~~	%
		~~Adjusted EBITDA growth rate~~	~~17.0~~	%

~~Worldwide Barcode, Networking & Security~~

~~POS Portal~~

The ~~contingent consideration~~final earnout payment due to the former ~~shareholders~~owners of ~~POS Portal~~Intelisys was paid in ~~full during the quarter ended December 31, 2017. As such, no liability is recorded as of this reporting date and no change~~October 2020. The company recognized $0.5 million in ~~fair value of the contingent consideration is recognized in the Condensed Consolidated Income Statements for the quarter ended December 31, 2017. For the six months ended December 31, 2017,~~expense from the change in fair value of the contingent consideration ~~recognized in the Condensed Consolidated Income Statements contributed a loss of less than $0.1 million.~~

~~Worldwide Communications & Services Segment~~

~~Intelisys~~

The discounted fair value of the liability for the contingent consideration due to the former shareholders of Intelisys recognized at December 31, 2017 was $90.7 million, of which $32.3 million is classified as current. The change in fair value of the contingent consideration recognized in the Condensed Consolidated Income Statement ~~contributed a loss of $5.1 million and $9.2 million, respectively,~~ for the ~~quarter and~~ six months ended December 31, ~~2017.~~2020. The change in fair value ~~for the quarter and six month period is primarily driven by~~was due to the recurring amortization of the unrecognized fair value discount and an adjustment to the probability weights in the discounted cash flow model. Although there is no contractual limit, total future undiscounted contingent consideration payments are anticipated to range up to $115.2 million, based on the Company’s best estimate of the earnout calculated on a multiple of earnings, before interest expense, income taxes, depreciation and amortization.discount.

The discounted fair value of the liability for the contingent consideration related to Intelisys recognized at December 31, 2016 was $98.2 million, of which $25.5 million is classified as current. The change in fair value of the contingent consideration recognized in the Condensed Consolidated Income Statement contributed a loss of $2.3 million and $3.2 million, respectively, for the quarter and six months ended December 31, 2016, primarily driven by the recurring amortization of the unrecognized fair value discount, partially offset by an increase in the discount rate used.

~~Network I~~

The discounted fair value of the liability for the contingent consideration due to the former shareholders of Network1 recognized at December 31, 2017 was $6.3 million, all of which is classified as current. For the quarter and six months ended December 31, 2017, the change in fair value of the contingent consideration recognized in the Condensed Consolidated Income Statements contributed a loss of $1.8 million and $14.5 million, respectively. The change in fair value for the quarter is primarily due to improved actual results. The change in fair value for the six month period is primarily driven by a change in estimate of the current year payment to the former shareholders of Network1, additional agreed upon adjustments to the projected final settlement and improved actual results for the second quarter. In addition, volatility in the foreign exchange between the Brazilian real and the U.S. dollar has driven changes in the translation of this Brazilian real denominated liability. Although there is no contractual limit, total future undiscounted contingent consideration payments are anticipated to range up to $7.1 million, based on the Company’s best estimate of the earnout calculated on a multiple of adjusted earnings, before interest expense, income taxes, depreciation and amortization, plus the effects of foreign exchange.

The discounted fair value of the liability for the contingent consideration related to Network1 recognized at December 31, 2016 was $12.7 million, of which $7.3 million is classified as current. For the quarter ended December 31, 2016, the change in fair value of the contingent consideration recognized in the Condensed Consolidated Income Statements contributed a loss of $0.2 million, primarily driven by the recurring amortization of the unrecognized fair value discount, partially offset by an increase in the discount rate used and less-than-expected results. For the six months ended December 31, 2016, the change in fair value of the contingent consideration contributed a gain of $0.1 million, primarily driven by less-than-expected actual results, partially offset by the recurring amortization of the unrecognized fair value discount. In addition, volatility in the foreign exchange between the Brazilian real and the U.S. dollar has driven changes in the translation of this Brazilian real denominated liability.

~~Imago~~

The contingent consideration due to the former shareholders of Imago was paid in full during the quarter ended December 31, 2016. The change in fair value of the contingent consideration recognized in the Consolidated Income Statements contributed a gain of $0.8 million and $1.1 million, respectively, for the quarter and six months ended December 31, 2016. The change in fair value is primarily driven by actual results that were less-than-expected, including special adjustments as determined by the stock purchase agreement. In addition, volatility in the foreign exchange rate between the British pound and the U.S. dollar drove changes in the translation of this British pound-denominated liability.

~~(9)~~(10) Segment Information

The Company is a leading ~~global~~ provider of technology ~~products~~solutions and ~~solutions~~services to customers in specialty technology markets. The Company has ~~two~~2 reportable segments, based on product and customer ~~and service~~ type.

~~Worldwide Barcode, Networking & Security~~Specialty Technology Solutions Segment

The ~~Worldwide Barcode, Networking & Security~~Specialty Technology Solutions segment ~~focuses on~~includes the Company’s business in automatic identification and data capture ~~("AIDC"~~(“AIDC”), ~~point-of-sale ("POS"~~point of sale (“POS”), payments, ~~networking, electronic physical~~ security, and ~~other specialty~~networking technologies. ~~We have~~AIDC solutions include mobile computing, barcode scanners and imagers, radio frequency identification devices (“RFID”), barcode printing, and services. POS and payments solutions include POS systems, integrated POS software platforms, self-service kiosks including self-checkout, payment terminals, and mobile payment devices. Security solutions include video surveillance and analytics, video management software, and access control. Networking solutions include switching, routing, and wireless products and software. The Company has business ~~units~~operations within this segment in ~~North America, Latin America~~the United States, Canada, and Europe. We see adjacencies among these technologies in helping our customers develop solutions, such as with networking products. AIDC and POS products interface with computer systems used to automate the collection, processing and communication of information for commercial and industrial applications, including retail sales, distribution, shipping, inventory control, materials handling, warehouse management and health care applications. Electronic physical security products include identification, access control, video surveillance, intrusion-related and wireless and networking infrastructure products.Brazil.

~~Worldwide~~Modern Communications & ~~Services~~Cloud Segment

The ~~Worldwide~~Modern Communications & ~~Services~~Cloud segment ~~focuses on~~includes the Company’s business in communications ~~technologies~~ and collaboration, connectivity, and cloud services. ~~We have business units within this segment that offer~~Communications and collaboration solutions, delivered in the cloud, on-premise, or hybrid, include voice, video, ~~conferencing, wireless, data networking,~~integration of communication platforms, and contact center solutions. The Intelisys connectivity and cloud marketplace offers telecom, cable, ~~collaboration, converged communications solutions,~~Unified Communications as a Service (“UCaaS”), Contact Center as a Service (“CCaaS”), Infrastructure as a Service (“IaaS”), Software-Defined Wide-Area Network (“SD-WAN”), and other cloud services. This segment includes SaaS and ~~telecom services. We have~~subscription services, which the Company offers using digital tools and platforms. The Company has business ~~units~~operations within this segment in ~~North America, Latin America~~the United States, Canada, Brazil and Europe. As these solutions come together on IP networks, new opportunities are created for customers to move into adjacent solutions for all vertical markets, such as education, healthcare and government. Our teams deliver value-added support programs and services, including education and training, network assessments, custom configuration, implementation and marketing to help customers develop a new technology practice, or to extend their capability and reach.the UK.

Selected financial information for each business segment is presented below:

Table of Contents

Quarter ended Six months ended
December 31, December 31,
2017 2016 2017 2016
(in thousands)
Sales:
Worldwide Barcode, Networking & Security $ 719,786
$ 593,833
$ 1,340,114
$ 1,221,043
Worldwide Communications & Services 312,426
310,959
616,657
616,314
$ 1,032,212
$ 904,792
$ 1,956,771
$ 1,837,357
Depreciation and amortization:
Worldwide Barcode, Networking & Security $ 4,843
$ 1,718
$ 8,584
$ 3,355
Worldwide Communications & Services 4,173
4,051
8,431
6,820
Corporate 885
819
1,751
1,637
$ 9,901
$ 6,588
$ 18,766
$ 11,812
Change in fair value of contingent consideration:
Worldwide Barcode, Networking & Security $ —
$ —
$ 69
$ —
Worldwide Communications & Services 6,913
$ 1,791
$ 23,725
$ 1,961
$ 6,913
$ 1,791
$ 23,794
$ 1,961
Operating income:
Worldwide Barcode, Networking & Security $ 15,542
$ 12,131
$ 29,578
$ 25,554
Worldwide Communications & Services 6,799
11,479
533
21,429
Corporate —
(335 ) (172 ) (833 )
$ 22,341
$ 23,275
$ 29,939
$ 46,150
Capital expenditures:
Worldwide Barcode, Networking & Security $ 919
$ 523
$ 1,740
$ 1,378
Worldwide Communications & Services 367
476
708
1,091
Corporate 699
286
848
792
$ 1,985
$ 1,285
$ 3,296
$ 3,261
Sales by Geography Category:
United States and Canada $ 764,445
$ 676,600
$ 1,458,824
$ 1,396,971
International⁽¹⁾
276,918
236,977
514,827
459,742
Less intercompany sales (9,151 ) (8,785 ) (16,880 ) (19,356 )
$ 1,032,212
$ 904,792
$ 1,956,771
$ 1,837,357

⁽¹⁾ For the quarters and six months ended December 31, 2017 and 2016, there were no sales in excess of 10% of consolidated net sales to any single international country.


	Quarter ended				Six months ended
	December 31,				December 31,
	2021		2020		2021		2020
	(in thousands)
Sales:
Specialty Technology Solutions	$	496,920	$	455,248	$	998,630	$	864,026
Modern Communications & Cloud	367,431		355,649		723,032		704,212
	$	864,351	$	810,897	$	1,721,662	$	1,568,238
Depreciation and amortization:
Specialty Technology Solutions	$	2,897	$	3,308	$	5,867	$	6,854
Modern Communications & Cloud	3,613		4,246		7,574		8,616
Corporate	719		794		1,438		1,589
	$	7,229	$	8,348	$	14,879	$	17,059
Change in fair value of contingent consideration:

Modern Communications & Cloud	—		—		—		516
	$	—	$	—	$	—	$	516
Operating income (loss):
Specialty Technology Solutions	$	16,551	$	7,161	$	30,655	$	8,845
Modern Communications & Cloud	14,894		11,813		31,201		20,529
Corporate(1)	53		(1,844)		(30)		(10,610)
	$	31,498	$	17,130	$	61,826	$	18,764
Capital expenditures:
Specialty Technology Solutions	$	(318)	$	(281)	$	(435)	$	(564)
Modern Communications & Cloud	(1,236)		(425)		(2,210)		(890)

	$	(1,554)	$	(706)	$	(2,645)	$	(1,454)
Sales by Geography Category:
United States and Canada	$	774,573	$	723,522	$	1,546,215	$	1,414,603
International	90,419		90,893		178,231		164,631
Less intercompany sales	(641)		(3,518)		(2,784)		(10,996)
	$	864,351	$	810,897	$	1,721,662	$	1,568,238

(1) For the quarter and six months ended December 31, 2021, the amounts shown above include divestiture costs. For the quarter and six months ended December 31, 2020, the amounts shown above include restructuring and divestiture costs.


	December 31, 2021		June 30, 2021
	(in thousands)
Assets:
Specialty Technology Solutions	$	867,909	$	775,704
Modern Communications & Cloud	892,086		868,752
Corporate	10,875		27,228

	$	1,770,870	$	1,671,684
Property and equipment, net by Geography Category:
United States and Canada	$	35,480	$	39,930
International	3,759		2,906
	$	39,239	$	42,836

(11) Leases

Table of Contents

December 31, 2017 June 30, 2017
(in thousands)
Assets:
Worldwide Barcode, Networking & Security $ 1,103,863
$ 885,786
Worldwide Communications & Services 832,616
769,342
Corporate 68,803
63,175
$ 2,005,282
$ 1,718,303
Property and equipment, net by Geography Category:
United States and Canada $ 72,336
$ 51,853
International 4,290
4,713
$ 76,626
$ 56,566

In accordance with ASC 842, at contract inception the Company determines if a contract contains a lease by assessing whether the contract contains an identified asset and whether the Company has the ability to control the asset. The Company also determines if the lease meets the classification criteria for an operating lease versus a finance lease under ASC 842. Substantially all of the Company's leases are operating leases for real estate, warehouse and office equipment ranging in duration from 1 year to 10 years. The Company has elected not to record short-term operating leases with an initial term of 12 months or less on the Condensed Consolidated Balance Sheets. Operating leases are recorded as other non-current assets, accrued expenses and other current liabilities and other long-term liabilities on the Condensed Consolidated Balance Sheets. The Company has finance leases for information technology equipment expiring through fiscal year 2024. Finance leases are recorded as property and equipment, net, accrued expenses and other current liabilities and other long-term liabilities on the Condensed Consolidated Balance Sheets. The gross amount of the balances recorded related to finance leases is immaterial to the financial statements at December 31, 2021 and June 30, 2021.

~~(10)~~Operating lease right-of-use assets and lease liabilities are recognized at the commencement date based on the net present value of future minimum lease payments over the lease term. The Company generally is not able to determine the rate implicit in its leases and has elected to apply an incremental borrowing rate as the discount rate for the present value determination, which is based on the Company's cost of borrowings for the relevant terms of each lease and geographical economic factors. Certain operating lease agreements contain options to extend or terminate the lease. The lease term used is adjusted for these options when the Company is reasonably certain it will exercise the option. 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. Further, the Company has elected the practical expedient to recognize all lease and non-lease components as a single lease component, where applicable.

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


		December 31, 2021		June 30, 2021
Operating leases	Balance Sheet location	(in thousands)
Operating lease right-of-use assets	Other non-current assets	$	18,649	$	19,246
Current operating lease liabilities	Accrued expenses and other current liabilities	$	4,448	$	4,284
Long-term operating lease liabilities	Other long-term liabilities	$	15,659	$	16,550

The following table presents amounts recorded in operating lease expense as part of selling general and administrative expenses on the Condensed Consolidated Income Statements during the quarters and six months ended December 31, 2021 and 2020. Operating lease costs contain immaterial amounts of short-term lease costs for leases with an initial term of 12 months or less.


	Quarter ended December 31,				Six months ended December 31,
	2021		2020		2021		2020
	(in thousands)
Operating lease cost	$	1,268	$	1,332	$	2,512	$	2,687
Variable lease cost	328		273		650		583
	$	1,596	$	1,605	$	3,162	$	3,270

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


	Six months ended
	December 31,
		2021		2020
	(in thousands)
Cash paid for amounts in the measurement of lease liabilities		$	2,652	$	2,602
Right-of-use assets obtained in exchange for lease obligations		1,782		—

Table of Contents

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


	December 31, 2021
Weighted-average remaining lease term	4.80 years
Weighted-average discount rate	4.01	%

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


	Operating leases
	(in thousands)
2022	$	2,708
2023	5,094
2024	4,592
2025	3,563
2026	3,029
Thereafter	3,346
Total future payments	22,332
Less: amounts representing interest	2,225
Present value of lease payments	$	20,107

(12) Commitments and Contingencies

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

The spread of COVID-19 since December 2019 has resulted in the implementation of numerous measures to contain the virus worldwide, such as travel bans and restrictions, quarantines, shelter-in-place orders, business shutdowns, and limitations of in-person gatherings. The pandemic and these containment measures have had a substantial impact on businesses around the world and on global, regional and national economies. The Company ~~expects total capital expenditures~~is unable at this time to ~~range from $8 million~~predict the ultimate impact that COVID-19 will have on its business due to ~~$11 million for fiscal year 2018, primarily for IT investments.~~the inability to predict the duration or magnitude of the virus' impact.

During the Company's due diligence for the ~~CDC and~~ Network1 ~~acquisitions,~~acquisition, several pre-acquisition contingencies were identified regarding various Brazilian federal and state tax exposures. The Company ~~is able to record~~recorded indemnification receivables that are reported gross of the pre-acquisition contingency liabilities as ~~sufficient~~the funds ~~to pay those obligations~~ were escrowed as part of the acquisition. The amount available after the impact of foreign currency translation for future pre-acquisition contingency settlements or ~~the Company is entitled~~ to ~~offset those obligations against future earnout payments under the share purchase agreements. However, indemnity claims can~~ be ~~made up~~released to the ~~entire purchase price, which includes the initial payment~~sellers was $3.7 million and ~~all future earnout payments.~~ $4.0 million, at December 31, 2021 and June 30, 2021, respectively.

The table below summarizes the balances and line item presentation of ~~these~~Network1's pre-acquisition contingencies and corresponding indemnification receivables in the Company's Condensed Consolidated Balance Sheets ~~as of~~at December 31, ~~2017~~2021 and June 30, ~~2017:~~2021:


	December 31, 2021		June 30, 2021
	Network1
	(in thousands)
Assets
Prepaid expenses and other current assets	$	14	$	16
Other non-current assets	$	3,584	$	3,998
Liabilities
Accrued expenses and other current liabilities	$	14	$	16
Other long-term liabilities	$	3,584	$	3,998

Table of Contents

CDC Network1
(in thousands)
Assets
Prepaid expenses and other current assets $ 2,212
$ 1,294
Other non-current assets $ —
$ 8,235
Liabilities
Accrued expenses and other current liabilities $ 2,212
$ 1,294
Other long-term liabilities $ —
$ 8,235

~~There have been no changes~~The decrease in pre-acquisition contingencies and corresponding indemnification receivables is due to a slight decrease in the ~~classifications~~foreign exchange rate of the Brazilian real against the US dollar.

(13) Restructuring

In July 2020, as part of a strategic review of its organizational structure and ~~amounts of pre-acquisition contingencies recognized from~~ ~~June 30, 2017.~~

~~(11) Income Taxes~~

On December 22, 2017, the U.S. government enacted the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act reduces the corporate federal tax rate from 35% to 21% effective January 1, 2018 and implements a territorial tax system. Sinceoperations, the Company ~~has~~announced a ~~June 30th fiscal year-end,~~global cost reduction and restructuring program. These actions were designed to better align the ~~lower tax rate will result in a blended U.S. statutory federal rate of approximately 28%~~cost structure for the ~~fiscal year ending June 30, 2018, and 21% for subsequent fiscal years. As part~~wholesale distribution business with lower sales volumes as a result of the ~~Tax Act, U.S. companies are required~~COVID-19 pandemic. The Company also initiated the closure of its Canpango business, its Salesforce implementation and consulting business. There had been limited adoption by the Company's partner community of the services Canpango offers. These actions include entering into severance and termination agreements with employees, legal fees to ~~pay a one-time transition tax on~~execute the ~~deemed repatriation of undistributed foreign earnings~~reduction in force and ~~remeasure deferred tax assets~~costs associated with lease terminations.

There were no restructuring or severance costs incurred during the quarter and ~~liabilities.~~

~~Income taxes~~six months ended December 31, 2021. The following table presents the restructuring and severance costs incurred for the quarter and six months ended December 31, ~~2017~~2020:


	Quarter ended December 31, 2020		Six months ended December 31, 2020
	(in thousands)
Severance and benefit costs	$	374	$	8,499
Other	110		254
Total restructuring and other charges	$	484	$	8,753

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

Accrued restructuring and severance costs are included in accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheets. The following table represents activity for the six months ended December 31, 2021:


	Accrued Expenses
	(in thousands)
Balance at June 30, 2021	$	1,199
Charged to expense	—
Cash payments	(943)
Balance at December 31, 2021	$	256

The remaining balance as of December 31, 2021 of $0.3 million, primarily related to Corporate, is expected to be paid through the third quarter of fiscal year 2022.

(14) Income Taxes

Income taxes for the quarters and six months ended December 31, 2021 and 2020 have been included in the accompanying condensed consolidated financial statements using an estimated annual effective tax rate. In addition to applying the estimated annual effective tax rate to pre-tax income, the Company ~~also~~ includes certain items treated as discrete events to arrive at an estimated overall tax provision. ~~The table below summarizes~~During the ~~effect~~quarters and six months ended December 31, 2021, a discrete net tax benefit of ~~discrete items~~$0.9 million was recorded, which is attributable to excess tax benefits on stock compensation and a notional interest deduction on the ~~income~~net equity of the Company's Brazilian subsidiary.

The Company’s effective tax rate of 23.9% and 24.4% for the quarter and six months ended December 31, ~~2017.~~

Quarter ended Six months ended
December 31, 2017 December 31, 2017
(in thousands)
Income before income taxes $ 20,310
$ 27,090
Accrual income tax rate⁽¹⁾
28.0 % 29.8 %
Accrued income tax expense, before discrete items 5,681
8,074
Discrete tax expense (benefit):
Transition tax on repatriation of foreign earnings 9,300
9,300
Remeasurement of deferred taxes (U.S.) (3,510 ) (3,510 )
Remeasurement of deferred taxes (Belgium) 900
900
Other (30 ) 210
Total net discrete tax expense 6,660
6,900
Provision for income taxes $ 12,341
$ 14,974
Effective income tax rate 60.8 % 55.3 %
Income tax rate effect of discrete items 32.8 % 25.5 %

⁽¹⁾~~The estimated effect of the rate change for the quarter and six months ended December 31, 2017 is a benefit of approximately $1.6 million.~~

~~The Company’s effective tax rate of 55.3% for the six months ended December 31, 2017~~2021, respectively, differs from the current federal statutory rate of 21% primarily as a result of ~~items recorded discretely,~~ income derived from tax jurisdictions with varying income tax rates, nondeductible expenses and ~~the application of a blended U.S. federal~~state income taxes. The Company's effective tax rate was 29.7% and 29.8% for the ~~current fiscal year as a result of tax reform legislation.~~quarter and six months ended December 31, 2020, respectively.

As ~~part~~ of ~~transitioning to the territorial tax system the Tax Act includes a mandatory deemed repatriation of all undistributed foreign earnings that are subject to a U.S. income tax. For~~ the quarter ended December 31, ~~2017,~~2021, the Company ~~recognized a provisional discrete income tax expense of $9.3 million for a one-time transition tax liability on total post-1986~~is not permanently reinvested with respect to all earnings generated by foreign ~~subsidiaries’ earnings and profits (“E&P”) that were previously deferred from U.S. income taxes.~~operations. The Company has not yet completed the calculation of total post-1986 foreign E&P for foreign subsidiaries and the tax expense currently recognized may change as the value of cash and other specified assets changes, whichdetermined that there is part of the basis of the transition tax. No additional income tax expense has been provided for any remaining undistributed foreign earnings not subject to the transition tax and any additional outside basis difference inherent for these entities as such amounts continue to be indefinitely reinvested in foreign operations. Further, the amount of related unrecognizedno material deferred tax liability ~~is under review but not practicable~~related to ~~estimate at this time.~~

~~As part of accounting for the Tax Act, the Company remeasured certain deferred~~federal, state and withholding tax ~~assets and liabilities based on the rates at which such deferred taxes are expected~~related to ~~reverse in the future, which is generally 21%. For~~undistributed earnings. During the quarter ended December 31, 2017, the Company recognized a provisional discrete income tax benefit of $3.5 million for the remeasurement of the Company’s net deferred tax liability balance. However, the Company is still analyzing certain aspects of the Tax Act and refining calculations, which are dependent on final results for fiscal year 2018, which could potentially affect the measurement of these deferred taxes or give rise to new deferred tax amounts.

At December 31, 2017, the Company has not completed accounting for the tax effects of the enactment of the Tax Act. The Securities and Exchange Commission has issued rules that would allow for a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impact. The Company currently anticipates finalizing and recording any resulting adjustments by the end of the current fiscal year 2018. The Company made a reasonable estimate of the one-time transition tax and remeasurement of existing deferred tax balances. The transitional impacts resulted in a provisional income tax expense of $5.8 million as a discrete event for the quarter ended December 31, 2017. The Company has not been able to make a reasonable estimate for any additional outside basis difference inherent for2021, foreign subsidiaries ~~as these amounts continue to be reinvested in foreign operations. The Company continues to account for those items based on existing accounting under ASC 740,~~ ~~Income Taxes. The Company will continue to provide for U.S. income taxes for the current earnings~~repatriated

Table of ~~its Canadian subsidiary. The provisional estimates provided may be impacted by a number~~Contents

cash of ~~additional considerations, including, but not limited~~$17.4 million to the ~~issuance~~United States. There is no certainty to the timing of ~~final regulations,~~any future distributions of such earnings to the ~~Company's ongoing analysis of the new tax law and the Company's actual earnings for the fiscal year ending June 30, 2018.~~U.S. in whole or in part.

The Company had approximately ~~$2.1~~$1.2 million and ~~$2.2~~$1.1 million of total gross unrecognized tax benefits ~~as of~~at December 31, ~~2017~~2021 and June 30, ~~2017,~~2021, respectively. Of this total at December 31, ~~2017,~~2021, approximately ~~$1.4~~$0.9 million represents the amount of unrecognized tax benefits that are permanent in nature and, if recognized, would affect the annual effective tax rate. The Company does not believe that the total amount of unrecognized tax benefits will significantly increase or decrease within twelve months of the reporting date.

The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense. At December 31, 2021 and June 30, 2021, the Company had approximately $1.1 million accrued for interest and penalties.

The Company conducts business globally and one or more of its subsidiaries files income tax returns in the U.S. federal, various state, local and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities in countries and states in which it operates. With certain exceptions, the Company is no longer subject to federal, state and local, or non-U.S. income tax examinations by tax authorities for the years before June 30, ~~2012.~~2016.

(15) 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 ("Divestitures") as these businesses were performing below management's expectations. The ~~Company’s policy is~~Company continues to ~~recognize interest~~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 ~~penalties~~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.

During the quarter ended June 30, 2020, the Company recorded a pre-tax loss on sale classification of $88.9 million to reduce the carrying value of the Divestitures to its estimate of fair value (the net proceeds received at closing), less estimated costs to sell. As this loss was determined not to be attributable to any individual components in the Divestitures' net assets, it was reflected as a valuation allowance against the total assets of the Divestitures. During the quarter ended September 30, 2020, the Company recorded an additional pre-tax loss on disposal group of $10.7 million. This additional loss was attributable primarily to a reduction in the net proceeds expected to be realized at closing for the Divestitures. During the quarter ended December 31, 2021, the Company received the second and final payment for its businesses in Latin America, outside of Brazil, related to ~~income tax matters~~working capital adjustments and in ~~income tax expense. As~~accordance with the Share Purchase Agreement between Intcomex and the Company. The receipt of payment resulted in a gain on disposal group of $0.1 million.

The Company signed an agreement on July 23, 2020 with Intcomex for its businesses located in Latin America, outside of Brazil. 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 business on November 12, 2020. During the quarter ended December 31, ~~2017 and June 30, 2017,~~2021, the Company ~~had approximately $1.2~~received a final $3.1 million ~~and $1.1 million accrued for interest and penalties, respectively.~~

~~Financial results in Belgium~~cash payment for the ~~quarter~~sale of the Latin America business. Total cash received for the sale of divestitures was $37.5 million.

Major components of net (income) loss from discontinued operations for the quarters and six months ended December 31, ~~2017 produced a pre-tax loss~~2021 and 2020 were as follows:

Table of approximately $1.7 million and $0.8 million, respectively. In the judgment of management, the conditions that gave rise to the recent losses are temporary and that it is more likely than not that the deferred tax asset will be realized. If Belgium business does not return to profitabilityContents



	Quarter ended December 31, 2021		Quarter ended December 31, 2020		Six months ended December 31, 2021		Six months ended December 31, 2020
	(in thousands)
Net sales	$	—	$	68,323	$	—	$	213,373
Cost of goods sold	—		63,977		—		198,512
Gross profit	—		4,346		—		14,861
Selling, general and administrative expenses	—		6,378		—		17,291



Operating loss	—		(2,032)		—		(2,430)
Interest expense, net	—		269		—		394
(Gain) loss on disposal group	(100)		23,122		(100)		33,808
Other (income) expense, net	—		(181)		—		310
Income (loss) from discontinued operations before taxes	100		(25,242)		100		(36,942)
Income tax expense	—		13		—		17
Net income (loss) from discontinued operations	$	100	$	(25,255)	$	100	$	(36,959)

There were no assets or liabilities classified as expected, this could affect the valuation of certain deferred tax assets. Belgium enacted a corporate tax reform law on December 25, 2017 which reduces the corporate tax rate from 33% to 25% over a three-year period. The Company remeasured certain deferred tax assets and liabilities based on the rates at which such deferred taxes are expected to reverseheld-for-sale in the ~~future. As a result,~~accompanying consolidated balance sheets at December 31, 2021 and June 30, 2021.

There were no significant non-cash items in the ~~Company recognized income tax expense~~cash flows from discontinued operations for the six months ended December 31, 2021. Significant non-cash operating items and capital expenditures reflected in the cash flows from discontinued operations for the six months ended December 31, 2020 were as follows:



	Six months ended December 31, 2020
	(in thousands)
Loss on disposal group	$	33,808


Capital expenditures	$	(58)

Table of ~~$0.9 million as a discrete event during the current quarter.~~

Contents



Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

ScanSource ~~Inc.~~ is a leading ~~global provider~~hybrid distributor connecting devices to the cloud and accelerating growth for partners across hardware, software, connectivity and cloud. We provide technology solutions and services from more than 500 leading suppliers of ~~technology products~~mobility and solutions. ScanSource, Inc. and its subsidiaries (the "Company") provide value-added solutions from over 500 technology suppliers and sell to over 35,000 customers in the following specialty technology markets:barcode, point-of-sale (POS), payments, ~~barcode,~~ physical security, unified communications and collaboration (UCaaS, CCaaS), telecom and cloud services to our more than 30,000 sales partners located in the United States, Canada, Brazil, the UK and ~~telecom services.~~Europe.

We operate our business under a management structure that enhances our ~~worldwide~~ technology ~~market~~ focus and hybrid distribution growth strategy. ~~As a part of~~During the quarter ended September 30, 2021, we aligned technologies with our hybrid distribution growth strategy and renamed our operating segments. With this ~~structure, ScanSource has two technology segments: Worldwide Barcode, Networking & Security~~change, we moved some North American business with communications and ~~Worldwide~~collaborations solutions to the Modern Communications & ~~Services. We~~Cloud segment. Our segments operate in the United States, Canada, ~~Latin America~~Brazil and ~~Europe.~~the UK:

•Specialty Technology Solutions

•Modern Communications & Cloud

We sell hardware, software, connectivity and cloud solutions and services through channel partners to end-customers. We operate distribution facilities that support our United States and Canada business in Mississippi, California, and Kentucky. Brazil distribution facilities are located in the Brazilian states of Paraná, Espirito Santo and Santa Catarina. We provide some of our digital products, which include Software as a Service (“SaaS”) and subscriptions, through our digital tools and platforms.

Our key ~~vendors~~suppliers include 8x8, ACC Business, AT&T, Aruba/HPE, AudioCodes, Avaya, Axis, Barco, Bematech, ~~CenturyLink,~~ Cisco, Comcast Business, Datalogic, Dell, Elo, Epson, Equinix, Extreme, F5, Five9, Fortinet, Genesys, Hanwha, Honeywell, ~~HP, Ingencio,~~HID, Ingenico, Intrado, Jabra, LogMeIn, Lumen, March Networks, Masergy, Microsoft, Mitel, NCR, ~~Plantronics, Polycom, Ruckus Wireless,~~NICE inContact, Oracle, Palo Alto, Panasonic, Poly, RingCentral, Spectralink, Spectrum, Toshiba Global Commerce Solutions, Ubiquiti, Verifone, Verizon, Windstream, Zebra Technologies and ~~Zebra Technologies.~~Zoom.

~~Recent Developments~~Unless otherwise indicated, the amounts and analysis provided within Management's Discussion and Analysis of Financial Condition and Results of Operations pertain to our continuing operations only.

Impact of COVID-19 on our Business Environment

The ~~Tax Cuts and Jobs Act (the "Tax Act") was enacted~~spread of COVID-19 since December 2019 has resulted in the ~~United States~~implementation of numerous measures to contain the virus worldwide, such as travel bans and restrictions, quarantines, shelter-in-place orders, business shutdowns, and limitations of in-person gatherings. The pandemic and these containment measures have had a substantial impact on ~~December 22, 2017. The Tax Act reduces~~businesses around the ~~U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018, implements~~world and on global, regional and national economies, including labor shortages and heightened supply chain challenges, along with an increase in e-commerce. More scheduled deals in this quarter pushed out as a territorial tax system, and requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, as well as creates new taxes on certain foreign-sourced earnings. See Note 11 - ~~Income Taxes~~ ~~in the Notes to the Consolidated Financial Statements for further discussion.~~

~~On July 31, 2017 we acquired substantially all~~result of the ~~outstanding shares~~supply constrained environment. We cannot predict the continued impact of ~~POS Portal,~~the pandemic, including the impact of the proposed U.S. vaccine mandate, and the degree to which our business and results of operations may be affected.

Our top priority is protecting the health and safety of our employees. We have teams monitoring the evolving situation and recommending risk mitigation actions. All of our distribution facilities have remained open and operational throughout the pandemic. Our employees are committed to providing the high level of customer service our partners have grown to expect from us in order to achieve positive results.

In July 2020, we announced actions to address the business impacts of the COVID-19 pandemic and prepare for our next phase of growth. These actions included a ~~leading provider~~$30 million annualized expense reduction plan. These actions were designed to better align the cost structure for our wholesale distribution business with lower sales volumes as a result of ~~payment devices and services primarily to~~ the ~~SMB market segment in~~COVID-19 pandemic. As part of the ~~United States. POS Portal joined our Worldwide Barcode, Networking & Security operating segment. With the addition of POS Portal, we believe~~plan, we have ~~created~~continued to invest in our higher growth agency business, Intelisys. Strong growth for the ~~industry's leading payments channel, ensuring customers have access to~~Intelisys business has continued, even with the ~~solutions, services and support that can help them be successful.~~COVID-19 pandemic.

Our Strategy

Table of Contents

We rely on a channel sales model using a hybrid distribution strategy to offer hardware, software, connectivity and cloud from leading technology suppliers to sales partners that solve end customers' challenges. ScanSource enables sales partners to deliver solutions for their customers to address changing end-customer buying and consumption patterns. Through our digital tools and platforms, we offer customers SaaS and subscription services from leading technology suppliers. While we do not manufacture products, we provide technology solutions and services from leading technology suppliers. Our solutions may include a combination of offerings from multiple suppliers or give our sales partners access to additional services, such as custom configuration, key injection, integration support, custom development and other services. We also offer the flexibility of on-premise, cloud and hybrid solutions.

As a trusted adviser to our sales partners, we provide more complete solutions through a better understanding of end-customer needs. We drive growth through enhancing our sales partners' capabilities to provide hardware, software, connectivity and cloud solutions. Our teams deliver value-added support programs and services, including education and training, network assessments, implementation, custom development and marketing to help our sales partners extend their capabilities, develop new technology practices or reach new end customers.

Our objective is ~~to continue~~ to grow profitable sales in the technologies we ~~sell~~offer and ~~to focus on growth~~expand in higher margin ~~businesses. We continue~~and adjacent markets to ~~evaluate~~help our sales partners offer more products and services and increase recurring revenue opportunities. As part of our strategic plan, we consider strategic acquisitions and alliances to enhance our ~~technological~~technology offerings and service capabilities. In doing so, we face numerous challenges that require attention and resources. Certain business units and geographies are experiencing increased competition for the products and services we sell. This competition may come in the form

Table of pricing, credit terms, service levels and product availability. As this competition could affect both our market share and pricing of our products, we may change our strategy in order to effectively compete in the marketplace.Contents

Results of Operations

Net Sales

The following tables summarize ~~the Company’s~~our net sales results by technology segment and by geographic location for the quarters and six months ended December 31, ~~2017~~2021 and ~~2016~~.2020:


	Quarter ended December 31,								% Change, Constant Currency, Excluding Divestitures and Acquisitions (a)
Net Sales by Segment:	2021		2020		$ Change		% Change
	(in thousands)
Specialty Technology Solutions	$	496,920	$	455,248	$	41,672	9.2	%	9.4	%
Modern Communications & Cloud	367,431		355,649		11,782		3.3	%	3.9	%
Total net sales	$	864,351	$	810,897	$	53,454	6.6	%	7.0	%

	Six months ended December 31,								% Change, Constant Currency, Excluding Planned Divestitures and Acquisitions (a)
	2021		2020		$ Change		% Change
	(in thousands)
Specialty Technology Solutions	$	998,630	$	864,026	$	134,604	15.6	%	15.6	%
Modern Communications & Cloud	723,032		704,212		18,820		2.7	%	2.7	%
Total net sales	$	1,721,662	$	1,568,238	$	153,424	9.8	%	9.8	%

Quarter ended December 31,
% Change, Constant Currency, Excluding Acquisitions^(a)
Net Sales by Segment: 2017 2016 $ Change % Change
(in thousands)
Worldwide Barcode, Networking & Security $ 719,786
$ 593,833
$ 125,953
21.2 % 16.3 %
Worldwide Communications & Services 312,426
310,959
1,467
0.5 % (0.9 )%
Total net sales $ 1,032,212
$ 904,792
$ 127,420
14.1 % 10.4 %

Six months ended December 31,
% Change, Constant Currency, Excluding Acquisitions ^(a)
2017 2016 $ Change % Change
(in thousands)

Worldwide Barcode, Networking & Security $ 1,340,114
$ 1,221,043
$ 119,071
9.8 % 5.7 %
Worldwide Communications & Services 616,657
616,314
343
0.1 % (2.1 )%
Total net sales $ 1,956,771
$ 1,837,357
$ 119,414
6.5 % 3.1 %

^(a)A reconciliation of non-GAAP net sales in constant currency ~~excluding acquisitions~~ is presented at the end of Results of Operations~~in the non-GAAP section.~~, under Non-GAAP Financial Information.

~~Worldwide Barcode, Networking & Security~~Specialty Technology Solutions

The ~~Barcode, Networking & Security~~Specialty Technology Solutions segment consists of sales to customers in North America ~~Europe~~ and ~~Latin America.~~Brazil. For the quarter and six months ended December 31, ~~2017,~~2021, net sales for the ~~Barcode, Networking & Security~~Specialty Technology Solutions segment increased ~~$126.0~~$41.7 million, or 9.2%, and ~~$119.1~~$134.6 million, or 15.6%, respectively, compared to the prior-year ~~quarter and six month period, respectively.~~periods. Excluding the foreign exchange ~~positive~~negative impact, ~~and net sales from the POS Portal acquisition,~~ adjusted net sales increased ~~$96.6~~$42.7 million, or ~~16.3%~~9.4%, for the quarter ended December 31, ~~2017~~2021 and ~~$69.5~~$135.1 million, or ~~5.7%,~~15.6% for the six months ended December 31, ~~2017.~~2021 compared to the prior-year periods. The increase in net sales and adjusted net sales for the quarter and six ~~month period~~months periods is primarily due to ~~sales~~broad-based demand growth across our technologies in North ~~America and Europe.~~America.

~~Worldwide~~Modern Communications & ~~Services~~Cloud

The Modern Communications & ~~Services~~Cloud segment consists of sales to customers in North America, Brazil, Europe and ~~Latin America.~~the UK. For the quarter ~~and six months~~ ended December 31, ~~2017,~~2021, net sales ~~for the Communications & Services segment~~ increased ~~$1.5~~$11.8 million, ~~and $0.3 million,~~or 3.3% compared to the prior-year ~~quarter and six month period, respectively.~~quarter. Excluding the foreign exchange negative impact, adjusted net sales ~~decreased $2.7 million, or 0.9%,~~ for the quarter ended December 31, ~~2017 as a result of lower sales volume~~2021 increased $13.7 million, or 3.9%, from the prior-year quarter. The increase in ~~our North American business, excluding Intelisys, partially offset by sales growth in Brazil. Intelisys sales increased quarter-over-quarter. Excluding the foreign exchange impact and~~ net sales ~~from the Intelisys acquisition for the three months ended September 30, 2017,~~and adjusted net sales ~~decreased $13.1 million, or 2.1%, for~~reflects the shift to cloud and subscriptions. For the Intelisys business, second quarter 2022 net sales increased 14.1% year-over-year.

For the six months ended December 31, ~~2017,~~2021, net sales and adjusted net sales increased $18.8 million, or 2.7%, primarily ~~due to lower~~from increases in sales volume in ~~our North American business, partially offset by sales growth in~~ Brazil.

Table of Contents


	Quarter ended December 31,								% Change, Constant Currency, Excluding Acquisitions^(a)			Quarter ended December 31,								% Change, Constant Currency, Excluding Divestitures and Acquisitions (a)
Net Sales by Geography:	2017		2016		$ Change		% Change				Net Sales by Geography:	2021		2020		$ Change		% Change
	(in thousands)											(in thousands)
United States and Canada	$	755,312	$	667,818	$	87,494	13.1	%	10.2	%	United States and Canada	$	773,932	$	720,004	$	53,928	7.5	%	7.5	%
International	$	276,900	$	236,974	39,926		16.8	%	11.0	%	International	90,419		90,893		(474)		(0.5)	%	2.7	%
Total net sales	$	1,032,212	$	904,792	$	127,420	14.1	%	10.4	%	Total net sales	$	864,351	$	810,897	$	53,454	6.6	%	7.0	%

	Six months ended December 31,								% Change, Constant Currency, Excluding Acquisitions^(a)			Six months ended December 31,								% Change, Constant Currency, Excluding Planned Divestitures and Acquisitions (a)
	2017		2016		$ Change		% Change					2021		2020		$ Change		% Change
	(in thousands)											(in thousands)
United States and Canada	$	1,441,982	$	1,377,627	$	64,355	4.7	%	1.7	%	United States and Canada	$	1,543,431	$	1,403,607	$	139,824	10.0	%	10.0	%
International	514,789		459,730		55,059		12.0	%	7.2	%	International	178,231		164,631		13,600		8.3	%	8.6	%
Total net sales	$	1,956,771	$	1,837,357	$	119,414	6.5	%	3.1	%	Total net sales	$	1,721,662	$	1,568,238	$	153,424	9.8	%	9.8	%

^(a)A reconciliation of non-GAAP net sales in constant currency ~~excluding acquisitions~~ is presented at the end of Results of Operations in the non-GAAP section.

Gross Profit

The following ~~table summarizes the Company’s~~tables summarize our gross profit for the quarters and six months ended December 31, ~~2017~~2021 and ~~2016~~:2020:

Quarter ended December 31, % of Net Sales December 31,
2017 2016 $ Change % Change 2017 2016
(in thousands)
Worldwide Barcode, Networking & Security $ 61,983
$ 48,956
$ 13,027
26.6 % 8.6 % 8.2 %
Worldwide Communications & Services 50,988
49,578
1,410
2.8 % 16.3 % 15.9 %
Gross profit $ 112,971
$ 98,534
$ 14,437
14.7 % 10.9 % 10.9 %

Six months ended December 31, % of Net Sales December 31,
2017 2016 $ Change % Change 2017 2016
(in thousands)
Worldwide Barcode, Networking & Security $ 119,446
$ 98,207
$ 21,239
21.6 % 8.9 % 8.0 %
Worldwide Communications & Services 99,442
91,861
7,581
8.3 % 16.1 % 14.9 %
Gross profit $ 218,888
$ 190,068
$ 28,820
15.2 % 11.2 % 10.3 %


	Quarter ended December 31,								% of Net Sales December 31,
	2021		2020		$ Change		% Change		2021		2020
	(in thousands)
Specialty Technology Solutions	$	52,048	$	38,612	$	13,436	34.8	%	10.5	%	8.5	%
Modern Communications & Cloud	55,877		47,431		8,446		17.8	%	15.2	%	13.3	%
Gross profit	$	107,925	$	86,043	$	21,882	25.4	%	12.5	%	10.6	%

	Six months ended December 31,								% of Net Sales December 31,
	2021		2020		$ Change		% Change		2021		2020
	(in thousands)
Specialty Technology Solutions	$	97,742	$	73,277	$	24,465	33.4	%	9.8	%	8.5	%
Modern Communications & Cloud	111,483		93,546		17,937		19.2	%	15.4	%	13.3	%
Gross profit	$	209,225	$	166,823	$	42,402	25.4	%	12.2	%	10.6	%

Specialty Technology Solutions

~~Worldwide Barcode, Networking & Security~~

Gross profit dollars and gross profit margin for the ~~Barcode, Networking & Security~~Specialty Technology Solutions segment ~~increased for the~~quarter and six months ended December 31, 2017, compared to the prior-year quarter and six month period. For the quarter, gross profit dollars and margin increased primarily as a result of increased sales volumes, including results contributed by POS Portal. Gross profit dollars and margin increased for the six month period largely due to improved vendor program recognition and the addition of POS Portal.

~~Worldwide Communications & Services~~

~~In the Communications & Services segment, gross profit dollars and gross profit margin~~ increased for the quarter and six months endedDecember 31, ~~2017~~2021, primarily from higher sales volume, sales mix and higher supplier sales incentives, compared to the prior-year ~~quarter and six month period. Results for the quarter increased due to higher sales contributed by Intelisys.~~ periods.

Modern Communications & Cloud

Gross profit dollars and gross profit margin increased for the Modern Communications & Cloud segment for thequarter and six months endedDecember 31, ~~2017 largely due~~2021, primarily from higher sales volume and sales mix, compared to ~~improved sales mix.~~the prior-year periods.

Operating Expenses

Table of Contents

The following ~~table summarizes~~tables summarize our operating expenses for the quarters and six months ended December 31, ~~2017~~2021 and ~~2016~~:2020:


	Quarter ended December 31,								% of Net Sales December 31,
	2021		2020		$ Change		% Change		2021		2020
	(in thousands)
Selling, general and administrative expenses	$	69,433	$	60,470	$	8,963	14.8	%	8.0	%	7.5	%
Depreciation expense	2,547		3,097		(550)		(17.8)	%	0.3	%	0.4	%
Intangible amortization expense	4,447		4,862		(415)		(8.5)	%	0.5	%	0.6	%
Restructuring and other charges	—		484		(484)		(100.0)	%	0.0	%	0.1	%

Operating expenses	$	76,427	$	68,913	$	7,514	10.9	%	8.8	%	8.5	%

	Six months ended December 31,								% of Net Sales December 31,
	2021		2020		$ Change		% Change		2021		2020
	(in thousands)

Selling, general and administrative expenses	$	133,016	$	122,580	$	10,436	8.5	%	7.7	%	7.8	%
Depreciation expense	5,427		6,494		(1,067)		(16.4)	%	0.3	%	0.4	%
Intangible amortization expense	8,956		9,716		(760)		(7.8)	%	0.5	%	0.6	%
Restructuring and other charges	—		8,753		(8,753)		(100.0)	%	0.0	%	0.6	%
Change in fair value of contingent consideration	—		516		(516)		(100.0)	%	0.0	%	0.0	%
Operating expenses	$	147,399	$	148,059	$	(660)	(0.4)	%	8.6	%	9.4	%

Quarter ended December 31, % of Net Sales December 31,
2017 2016 $ Change % Change 2017 2016
(in thousands)
Selling, general and administrative expenses $ 74,763
$ 66,880
$ 7,883
11.8 % 7.2 % 7.4 %
Depreciation expense 3,467
2,423
1,044
43.1 % 0.3 % 0.3 %
Intangible amortization expense 5,487
4,165
1,322
31.7 % 0.5 % 0.5 %
Change in fair value of contingent consideration 6,913
1,791
5,122
286.0 % 0.7 % 0.2 %
Operating expenses $ 90,630
$ 75,259
$ 15,371
20.4 % 8.8 % 8.3 %

Six months ended December 31, % of Net Sales December 31,
2017 2016 $ Change % Change 2017 2016
(in thousands)

Selling, general and administrative expenses $ 147,950
$ 130,145
$ 17,805
13.7 % 7.6 % 7.1 %
Depreciation expense 6,707
4,492
2,215
49.3 % 0.3 % 0.2 %
Intangible amortization expense 10,498
7,320
3,178
43.4 % 0.5 % 0.4 %
Change in fair value of contingent consideration 23,794
1,961
21,833
1,113.4 % 1.2 % 0.1 %
Operating expenses $ 188,949
$ 143,918
$ 45,031
31.3 % 9.7 % 7.8 %

Selling, general and administrative expenses ("SG&A") increased ~~$7.9~~$9.0 million and ~~$17.8~~$10.4 million for the quarter and six months ended December 31, ~~2017,~~2021, respectively, as compared to the ~~prior year.~~prior-year periods. The increase ~~in SG&A for the quarter~~is attributable to higher employee costs and ~~six months is primarily due~~a charge to ~~increased employee-related expenses, largely due to recent acquisitions.~~bad debt expense.

~~The increase in depreciation expense for the quarter~~Restructuring and ~~six months ended December 31, 2017~~other charges incurred of ~~$1.0~~$0.5 million and ~~$2.2 million, respectively, is largely due to the depreciation on assets acquired through recent acquisitions and the investments in IT systems.~~

~~The increase in amortization expense of $1.3 million and $3.2~~$8.8 million for the quarter and six months ended December 31, ~~2017,~~2020, respectively, ~~is largely due~~primarily relate to ~~assets acquired through~~employee severance and benefit costs in connection with our ~~POS Portal acquisition.~~expense reduction plan implemented at the end of July 2020.

We ~~present changes in fair value~~recorded expense of the contingent consideration owed to the former shareholders of businesses that we acquire as a separate line item in operating expenses. We recorded fair value adjustment losses of $6.9 million and $23.8$0.5 million for the ~~quarter and six months ended December 31, 2017, respectively. The loss from~~ change in fair value of contingent consideration for the ~~quarter is largely due~~six months ended December 31, 2020, all of which relates to ~~the recurring amortization of the unrecognized fair value discount as well as an adjustment for the higher probability of achieving estimated future results for~~ Intelisys. The ~~loss for the six months period is primarily driven by changes in the estimate of the current year payment to Network1, additional agreed upon adjustments to the projected~~ final ~~settlement for Network1 and the recurring amortization of the unrecognized fair value discount. An~~Intelisys earnout payment was paid ~~to the former shareholders of POS Portal during the quarter ended December 31, 2017.~~in October 2020.

Operating Income

The following ~~table summarizes~~tables summarize our operating income for the quarters and six months ended December 31, ~~2017~~2021 and ~~2016:~~2020:

Table of Contents


																	Quarter ended December 31,								% of Net Sales December 31,
	Quarter ended December 31,											% of Net Sales December 31,					2021		2020		$ Change		% Change		2021		2020
	2017			2016			$ Change			% Change		2017		2016			(in thousands)
	(in thousands)
Worldwide Barcode, Networking & Security	$	15,542		$	12,131		$	3,411		28.1	%	2.2	%	2.0	%
Worldwide Communications & Services	6,799			11,479			(4,680		)	(40.8	)%	2.2	%	3.7	%
Specialty Technology Solutions																Specialty Technology Solutions	$	16,551	$	7,161	$	9,390	131.1	%	3.3	%	1.6	%
Modern Communications & Cloud																Modern Communications & Cloud	14,894		11,813		3,081		26.1	%	4.1	%	3.3	%
Corporate	—			(335		)	335			nm*		nm*		nm*		Corporate	53		(1,844)		1,897		nm*		nm*		nm*
Operating income	$	22,341		$	23,275		$	(934	)	(4.0	)%	2.2	%	2.6	%	Operating income	$	31,498	$	17,130	$	14,368	83.9	%	3.6	%	2.1	%

	Six months ended December 31,											% of Net Sales December 31,					Six months ended December 31,								% of Net Sales December 31,
	2017			2016			$ Change			% Change		2017		2016			2021		2020		$ Change		% Change		2021		2020
	(in thousands)																(in thousands)
Worldwide Barcode, Networking & Security	$	29,578		$	25,554		$	4,024		15.7	%	2.2	%	2.1	%
Worldwide Communications & Services	533			21,429			(20,896		)	(97.5	)%	0.1	%	3.5	%
Specialty Technology Solutions																Specialty Technology Solutions	$	30,655	$	8,845	$	21,810	246.6	%	3.1	%	1.0	%
Modern Communications & Cloud																Modern Communications & Cloud	31,201		20,529		10,672		52.0	%	4.3	%	2.9	%
Corporate	(172		)	(833		)	661			nm*		nm*		nm*		Corporate	(30)		(10,610)		10,580		nm*		nm*		nm*
Operating income	$	29,939		$	46,150		$	(16,211	)	(35.1	)%	1.5	%	2.5	%	Operating income	$	61,826	$	18,764	$	43,062	229.5	%	3.6	%	1.2	%

*nm - percentages are not meaningful

~~Worldwide Barcode, Networking & Security~~Specialty Technology Solutions

For the ~~Barcode, Networking & Security~~Specialty Technology Solutions segment, operating income increased $9.4 million and operating margin increased for the current quarter and six months ended December 31, 2017 compared to the prior year. The increase for the quarter is largely due to increased sales volume, partially offset by increased employee-related expenses, bad debt expense and intangible amortization expense. The increase for the six month period is largely due to the improved gross profit margin, partially offset by increased employee-related expenses, bad debt expense and intangible amortization expense.

~~Worldwide Communications & Services~~

~~For the Communications & Services segment, operating income and operating margin decreased~~$21.8 million for the quarter and six months ended December 31, ~~2017~~2021, respectively, compared to the prior year largely due to the expense recognized from the change in fair value of contingent consideration. Excluding the change in fair value of contingent consideration, operating income increased $0.4 million and $0.9 million and operatingprior-year period. Operating margin increased to ~~4.4%~~3.3% and ~~3.9%~~3.1% for the quarter and six months ended December 31, ~~2017,~~2021, respectively. The ~~increased~~increase in operating income and margin for both the quarter and six month period is ~~largely~~primarily due to higher gross profits.

Modern Communications & Cloud

For the ~~positive effect of~~Modern Communications & Cloud segment, operating income increased ~~gross profit margin and lower bad debt expense, partially offset by increased employee-related expenses.~~

~~Corporate~~

Corporate did not incur expense relating to acquisition costs for the quarter ended December 31, 2017. Acquisition costs of $0.2 million were incurred for the six months ended December 31, 2017. These costs compared to $0.3$3.1 million and ~~$0.8~~$10.7 million ~~and~~ for the quarter and six months ended December 31, ~~2016,~~2021, respectively, compared to the prior-year periods. Operating margin increased to 4.1% and 4.3% for the quarter and six months ended December 31, 2021, respectively. The increase in operating income and operating margin for the quarter and six months is primarily due to higher gross profits.

Corporate

Corporate recognized a less than $0.1 million gain against divestiture expense for the quarter ended December 31, 2021, compared to $1.4 million divestiture expense incurred in the prior-year quarter. Corporate also incurred $0.5 million in restructuring expense in the prior-year quarter.

Corporate incurred less than $0.1 million in divestiture expenses for the six months ended December 31, 2021, compared to $1.9 million and $8.8 million in restructuring and divestiture expenses, respectively, for the six months ended December 31, 2020.

Total Other (Income) Expense

The following ~~table summarizes~~tables summarize our total other (income) expense for the quarters and six months ended December 31, ~~2017~~2021 and ~~2016~~:

2020:

Table of Contents


	Quarter ended December 31,											% of Net Sales December 31,					Quarter ended December 31,								% of Net Sales December 31,
	2017			2016			$ Change			% Change		2017		2016			2021		2020		$ Change		% Change		2021		2020
	(in thousands)																(in thousands)
Interest expense	$	2,285		$	912		$	1,373		150.5	%	0.2	%	0.1	%	Interest expense	$	1,493	$	1,796	$	(303)	(16.9)	%	0.2	%	0.2	%
Interest income	(580		)	(892		)	312			(35.0	)%	(0.1	)%	(0.1	)%	Interest income	(947)		(531)		(416)		(78.3)	%	(0.1)	%	(0.1)	%
Net foreign exchange (gains) losses	594			308			286			92.9	%	0.1	%	0.0	%
Net foreign exchange losses																Net foreign exchange losses	480		381		99		26.0	%	0.1	%	0.0	%
Other, net	(268		)	(12,834		)	12,566			(97.9	)%	(0.0	)%	(1.4	)%	Other, net	63		(260)		323		124.2	%	0.0	%	(0.0)	%
Total other (income) expense, net	$	2,031		$	(12,506	)	$	14,537		(116.2	)%	0.2	%	(1.4	)%
Total other expense, net																Total other expense, net	$	1,089	$	1,386	$	(297)	(21.4)	%	0.1	%	0.2	%

	Six months ended December 31,											% of Net Sales December 31,					Six months ended December 31,								% of Net Sales December 31,
	2017			2016			$ Change			% Change		2017		2016			2021		2020		$ Change		% Change		2021		2020
	(in thousands)																(in thousands)
Interest expense	$	3,870		$	1,501		$	2,369		157.8	%	0.1	%	0.1	%	Interest expense	$	3,153	$	3,709	$	(556)	(15.0)	%	0.2	%	0.2	%
Interest income	(1,462		)	(1,908		)	446			(23.4	)%	(0.1	)%	(0.1	)%	Interest income	(1,973)		(1,011)		(962)		95.2	%	(0.1)	%	(0.1)	%
Net foreign exchange (gains) losses	782			920			(138		)	(15.0	)%	0.1	%	0.1	%
Net foreign exchange losses																Net foreign exchange losses	966		819		147		17.9	%	0.1	%	0.1	%
Other, net	(341		)	(12,868		)	12,527			(97.4	)%	(0.7	)%	(0.0	)%	Other, net	(159)		(335)		176		(52.5)	%	(0.0)	%	(0.0)	%
Total other (income) expense, net	$	2,849		$	(12,355	)	$	15,204		(123.1	)%	(0.7	)%	0.0	%
Total other expense, net																Total other expense, net	$	1,987	$	3,182	$	(1,195)	(37.6)	%	0.1	%	0.2	%

Interest expense consists primarily of interest incurred on borrowings, non-utilization fees charged on the revolving credit facility and amortization of debt issuance costs. Interest expense decreased for the quarter and six months ended December 31, 2021 compared to the prior-year periods, principally from lower borrowing rates on our multi-currency revolving credit facility due to a more favorable leverage ratio achieved.

Interest income for the quarter and six months ended December 31, 2021 was generated on interest-bearing customer receivables and interest earned on cash and cash equivalents. Interest income increased for the quarter and six months ended December 31, ~~2017~~2021 compared to the prior-year periods, principally ~~due to additional borrowings on our multi-currency revolving credit facility.~~

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. Foreign exchange gains and losses are primarily generated ~~from~~as the result of fluctuations in the value of the U.S. dollar versus the Brazilian real ~~the U.S. dollar versus the euro, the British pound versus the euro,~~and the Canadian dollar versus the U.S. ~~dollar, the U.S. dollar versus the Colombian peso and other currencies versus the U.S.~~ dollar. ~~While we utilize foreign exchange contracts and debt in non-functional currencies to hedge~~We partially offset foreign currency exposure our foreign exchange policy prohibits the use of derivative financial instruments for speculative transactions. The Company's net foreign exchange losses are driven by changes in foreign currency exchange rates, partially offset bywith the use of foreign exchange forward contracts to hedge against ~~currency~~these exposures. The costs associated with foreign exchange forward contracts are included in the net foreign exchange losses.

Provision for Income Taxes

For the quarter and six months ended December 31, ~~2017,~~2021, income tax expense was ~~$12.3~~$7.3 million and ~~$15.0~~$14.6 million, respectively, reflecting an effective tax rate of ~~60.8%~~23.9% and ~~55.3%~~24.4%, respectively. In comparison, for the quarter and six months ended December 31, 2020, income tax expense totaled $4.7 million and $4.6 million, respectively, reflecting an effective tax rate of 29.7% and 29.8%, respectively. The ~~effective tax rate for the quarter and six months ended December 31, 2016 was 35.6% and 35.3%, respectively. The increase~~decrease in the effective tax rate ~~from the prior year quarter~~ is primarily due to ~~the recognition of a net discrete tax expense of $6.7 million~~an increase in forecasted tax-exempt income and, ~~$6.9 million, respectively. There were no discrete items recognized in the prior year. Excluding the recognition of the discrete item, the effective tax rate~~ for the quarter, ~~and six months ended December 31, 2017 would have been 28.0% and 29.8%, respectively.~~the benefit from discrete items. We expect the effective tax rate, excluding discrete items, for fiscal year ~~2018~~2022 to be approximately ~~30%, which reflects the application of the 21% U.S. statutory tax rate effective January 1, 2018.~~24.5% to 25.5%. See Note 11 14 - Income Taxes to the Notes to Consolidated Financial Statements for further discussion.

Non-GAAP Financial Information

Evaluating Financial Condition and Operating Performance

In addition to disclosing results that are determined in accordance with United States generally accepted accounting principles ("~~U.S,~~US GAAP" or "GAAP"), we also disclose certain non-GAAP financial measures. These measures include non-GAAP operating ~~income,~~income; non-GAAP pre-tax ~~income,~~income; non-GAAP net income; non-GAAP EPS; adjusted earnings before interest expense, income ~~non-GAAP EPS,~~taxes, depreciation, and amortization ("adjusted EBITDA"); return on invested capital ("ROIC"); and "constant currency." Constant currency is a measure that excludes the translation exchange impact from changes in foreign

currency exchange rates

These non-GAAP financial measures have limitations as analytical tools, and the non-GAAP financial measures that we report may not be comparable to similarly titled amounts reported by other companies. Analysis of results and outlook on a non-GAAP basis should be considered in addition to, and not in substitution for or as superior to, measurements of financial performance prepared in accordance with ~~U.S.~~US GAAP.

Return on Invested Capital

ROIC assists us in comparing our performance over various reporting periods on a consistent basis because it removes from our operating results the impact of items that do not reflect our core operating performance. We believe the calculation of ROIC provides useful information to investors and is an additional relevant comparison of our performance during the year.

Adjusted EBITDA starts with net income and adds back interest expense, income tax expense, depreciation expense, amortization of intangible assets, changes in fair value of contingent considerations, and other non-GAAP adjustments. Effective with the first quarter of fiscal year 2022, non-cash share-based compensation expense is also added back in calculating adjusted EBITDA. Since adjusted EBITDA excludes some non-cash costs of investing in our business and people, we believe that adjusted EBITDA shows the profitability from our business operations more clearly. The presentation for adjusted EBITDA for all periods presented has been recast to reflect this change to enhance comparability between periods.

We calculate ROIC as adjusted EBITDA, divided by invested capital. Invested capital is defined as average equity plus average daily funded interest-bearing debt for the period. The following table summarizes annualized ROIC for the quarters ended December 31, 2021 and 2020, respectively:


	Quarter ended December 31,
	2021		2020
Return on invested capital ratio, annualized (a)	17.6	%	13.3	%

(a)The annualized EBITDA amount is divided by days in the quarter times 365 days per year, or 366 days for leap year. There were 92 days in the current and prior-year quarter.

The components of this calculation and reconciliation to our financial statements are shown on the following schedule:


	Quarter ended December 31,
	2021		2020
	(in thousands)
Reconciliation of net income to adjusted EBITDA:
Net income from continuing operations (GAAP)	$	23,152	$	11,061
Plus: Interest expense	1,493		1,796
Plus: Income taxes	7,257		4,683
Plus: Depreciation and amortization	7,229		8,349
EBITDA (non-GAAP)	39,131		25,889


Plus: Share-based compensation	3,464		2,006
Plus: Acquisition and divestiture costs (a)	(53)		1,360
Plus: Restructuring costs	—		484

Adjusted EBITDA (numerator for ROIC) (non-GAAP)	$	42,542	$	29,739


	Quarter ended December 31,
	2021		2020
	(in thousands)
Invested capital calculations:
Equity – beginning of the quarter	$	746,094	$	671,227
Equity – end of the quarter	768,525		682,139

Plus: Share-based compensation, net	2,590		1,510
Plus: Acquisition and divestiture costs (a)	(53)		1,360
Plus: Restructuring, net	—		366

Plus: Discontinued operations net (income) loss	(100)		25,255

Average equity	758,528		690,929
Average funded debt (b)	200,708		198,620
Invested capital (denominator for ROIC) (non-GAAP)	$	959,236	$	889,549

(a)Acquisition and divestiture costs are generally nondeductible for tax purposes.

(b)Average funded debt is calculated as the daily average amounts outstanding on our short-term and long-term interest-bearing debt.

Net Sales in Constant Currency, Excluding Acquisitions and Divestitures

We make references to "constant currency," a non-GAAP performance measure that excludes the foreign exchange rate impact from fluctuations in the average foreign exchange rates between reporting periods. Constant currency is calculated by translating current period results from currencies other than the U.S. dollar into U.S. dollars using the comparable average foreign exchange rates from the prior year period. WeIf applicable, we also exclude the impact of acquisitions prior to the first full year of operations from the acquisition date and the impact of Divestitures in order to show net sales results on an organic basis. This information is provided to analyze underlying trends without the translation impact of fluctuations in foreign currency rates and, the impact of ~~acquisitions.~~Divestitures and acquisitions, if applicable. Below we ~~provide~~show organic growth by providing a non-GAAP reconciliation of net sales in constant currency, excluding ~~acquisition (organic growth):~~Divestitures:

Foreign exchange impact (a)

Net Sales by Segment:
Quarter ended December 31,
2017 2016 $ Change % Change
Worldwide Barcode, Networking & Security: (in thousands)
Net sales, as reported $ 719,786
$ 593,833
$ 125,953
21.2 %
Foreign exchange impact^(a)
(9,669 ) —

Net sales, constant currency 710,117
593,833
116,284
19.6 %
Less: Acquisitions (19,706 ) —

Net sales, constant currency excluding acquisitions $ 690,411
$ 593,833
$ 96,578
16.3 %

Worldwide Communications & Services:
Net sales, as reported $ 312,426
$ 310,959
$ 1,467
0.5 %
Foreign exchange impact^(a)
(4,162 ) —

Net sales, constant currency 308,264
310,959
(2,695 ) (0.9 )%
Less: Acquisitions —
—

Net sales, constant currency excluding acquisitions $ 308,264
$ 310,959
$ (2,695 ) (0.9 )%

Consolidated:
Net sales, as reported $ 1,032,212
$ 904,792
$ 127,420
14.1 %
Foreign exchange impact^(a)
(13,831 ) —

Net sales, constant currency 1,018,381
904,792
113,589
12.6 %
Less: Acquisitions (19,706 ) —

Net sales, constant currency excluding acquisitions $ 998,675
$ 904,792
$ 93,883
10.4 %

Foreign exchange impact^(a)

Foreign exchange impact (a)

(a) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates. Calculated by translating the net sales for the six months ended December 31, 2021 into U.S. dollars using the average foreign exchange rates for the six months ended December 31, 2020.

~~(a)~~ ~~Year-over-year net sales growth rate excluding the translation impact~~

Foreign exchange impact (a)

(a) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates. Calculated by translating the net sales for the quarter ended December 31, 2021 into U.S. dollars using the average foreign exchange rates for the quarter ended December 31, 2020.

Foreign exchange impact (a)



Operating Income by Segment:
	Quarter ended December 31,								% of Net Sales December 31,
	2021		2020		$ Change		% Change		2021		2020
Specialty Technology Solutions:	(in thousands)
GAAP operating income	$	16,551	$	7,161	$	9,390	131.1	%	3.3	%	1.6	%
Adjustments:
Amortization of intangible assets	1,491		1,610		(119)




Non-GAAP operating income	$	18,042	$	8,771	$	9,271	105.7	%	3.6	%	1.9	%

Modern Communications & Cloud:
GAAP operating income	$	14,894	$	11,813	$	3,081	26.1	%	4.1	%	3.3	%
Adjustments:
Amortization of intangible assets	2,956		3,252		(296)





Non-GAAP operating income	$	17,850	$	15,065	$	2,785	18.5	%	4.9	%	4.2	%

Corporate:
GAAP operating income (loss)	$	53	$	(1,844)	$	1,897	nm*		nm*		nm*
Adjustments:
Acquisition and divestiture costs	(53)		1,360		(1,413)
Restructuring costs	—		484		(484)

Non-GAAP operating income	$	—	$	—	$	—	nm*		nm*		nm*

Consolidated:
GAAP operating income	$	31,498	$	17,130	$	14,368	83.9	%	3.6	%	2.1	%
Adjustments:
Amortization of intangible assets	4,447		4,862		(415)


Acquisition and divestiture costs	(53)		1,360		(1,413)
Restructuring costs	—		484		(484)


Non-GAAP operating income	$	35,892	$	23,836	$	12,056	50.6	%	4.2	%	2.9	%



Operating Income by Segment:
	Six months ended December 31,								% of Net Sales December 31,
	2021		2020		$ Change		% Change		2021		2020
Specialty Technology Solutions:	(in thousands)
GAAP operating income	$	30,655	$	8,845	$	21,810	246.6	%	3.1	%	1.0	%
Adjustments:
Amortization of intangible assets	3,023		3,220		(197)




Non-GAAP operating income	$	33,678	$	12,065	$	21,613	179.1	%	3.4	%	1.4	%

Modern Communications & Cloud:
GAAP operating income	$	31,201	$	20,529	$	10,672	52.0	%	4.3	%	2.9	%
Adjustments:
Amortization of intangible assets	5,933		6,496		(563)
Change in fair value of contingent consideration	—		516		(516)




Non-GAAP operating income	$	37,134	$	27,541	$	9,593	34.8	%	5.1	%	3.9	%

Corporate:
GAAP operating loss	$	(30)	$	(10,610)	$	10,580	nm*		nm*		nm*
Adjustments:
Acquisition and divestiture costs	30		1,857		(1,827)
Restructuring costs	—		8,753		(8,753)

Non-GAAP operating income	$	—	$	—	$	—	nm*		nm*		nm*

Consolidated:
GAAP operating income	$	61,826	$	18,764	$	43,062	229.5	%	3.6	%	1.2	%
Adjustments:
Amortization of intangible assets	8,956		9,716		(760)
Change in fair value of contingent consideration	—		516		(516)

Acquisition and divestiture costs	30		1,857		(1,827)
Restructuring costs	—		8,753		(8,753)


Non-GAAP operating income	70,812		39,606		$	31,206	78.8	%	4.1	%	2.5	%

Income Statement Non-GAAP ~~Operating Income, Non-GAAP Pre-Tax Income, Non-GAAP Net Income and Non-GAAP EPS~~Metrics

To evaluate current period performance on a more consistent basis with prior periods, we disclose non-GAAP net sales, non-GAAP gross profit, non-GAAP operating income, non-GAAP net other expense, non-GAAP pre-tax income, non-GAAP net income and non-GAAP diluted earnings per share. Non-GAAP results exclude amortization of intangible assets related to acquisitions, changes in fair value of contingent consideration, acquisition and divestiture costs, restructuring costs, impact of Divestitures and other non-GAAP adjustments. ~~Non-GAAP operating income, non-GAAP pre-tax income, non-GAAP net income and non-GAAP diluted EPS~~These year-over-year metrics include the translation impact of changes in foreign currency exchange rates. These metrics are useful in assessing and understanding our operating performance, especially when comparing results with previous periods or forecasting performance for future periods. Below we provide a non-GAAP reconciliation of ~~operating income, pre-tax income, net income and earnings per share~~the aforementioned metrics adjusted for the costs and charges mentioned above:


	Quarter ended December 31, 2021
	GAAP Measure		Intangible amortization expense		Acquisition and divestiture costs		Restructuring costs		Non-GAAP measure
	(in thousands, except per share data)
Net sales	$	864,351	$	—	$	—	$	—	$	864,351
Gross profit	107,925		—		—		—		107,925
Operating income	31,498		4,447		(53)		—		35,892
Other expense, net	1,089		—		—		—		1,089
Pre-tax income	30,409		4,447		(53)		—		34,803
Net income	23,152		3,347		(53)		—		26,446
Diluted EPS	$	0.89	$	0.13	$	—	$	—	$	1.02

	Quarter ended December 31, 2020
	GAAP Measure		Intangible amortization expense		Acquisition and divestiture costs		Restructuring costs		Non-GAAP measure
	(in thousands, except per share data)
Net sales	$	810,897	$	—	$	—	$	—	$	810,897
Gross profit	86,043		—		—		—		86,043
Operating income	17,130		4,862		1,360		484		23,836
Other expense, net	1,386		—		—		—		1,386
Pre-tax income	15,744		4,862		1,360		484		22,450
Net income	11,061		3,682		1,360		366		16,469
Diluted EPS	$	0.43	$	0.15	$	0.06	$	0.01	$	0.65


	Six months ended December 31, 2021
	GAAP Measure		Intangible amortization expense		Change in fair value of contingent consideration		Acquisition and divestiture costs		Restructuring costs		Non-GAAP measure
	(in thousands, except per share data)
Net sales	$	1,721,662	$	—	$	—	$	—	$	—	$	1,721,662
Gross profit	209,225		—		—		—		—		209,225
Operating income	61,826		8,956		—		30		—		70,812
Other expense, net	1,987		—		—		—		—		1,987
Pre-tax income	59,839		8,956		—		30		—		68,825
Net income	45,225		6,740		—		30		—		51,995
Diluted EPS	$	1.75	$	0.26	$	—	$	—	$	—	$	2.01

	Six months ended December 31, 2020
	GAAP Measure		Intangible amortization expense		Change in fair value of contingent consideration		Acquisition and divestiture costs		Restructuring costs		Non-GAAP measure
	(in thousands, except per share data)
Net sales	$	1,568,238	$	—	$	—	$	—	$	—	$	1,568,238
Gross profit	166,823		—		—		—		—		166,823
Operating income	18,764		9,716		516		1,857		8,753		39,606
Other expense, net	3,182		—		—		—		—		3,182
Pre-tax income	15,582		9,716		516		1,857		8,753		36,424
Net income	10,946		7,357		390		1,857		6,617		27,167
Diluted EPS	$	0.43	$	0.29	$	0.02	$	0.07	$	0.26	$	1.07

Quarter ended December 31, 2017 Quarter ended December 31, 2016
Operating Income Pre-Tax Income Net Income Diluted EPS Operating Income Pre-Tax Income Net Income Diluted EPS
(in thousands, except per share data)
GAAP Measures $ 22,341
$ 20,310
$ 7,969
$ 0.31
$ 23,275
$ 35,781
$ 23,036
$ 0.91
Adjustments:
Amortization of intangible assets 5,487
5,487
3,648
0.14
4,165
4,165
2,740
0.11
Change in fair value of contingent consideration 6,913
6,913
4,742
0.18
1,791
1,791
1,000
0.04
Acquisition costs —
—
—
—
335
335
335
0.01
Tax reform charges^(a)
6,689
0.26
—
—
—
—
Legal settlement, net of attorney fees —
—
—
—
—
(12,777 ) (8,047 ) (0.32 )
Non-GAAP measures $ 34,741
$ 32,710
$ 23,048
$ 0.90
$ 29,566
$ 29,295
$ 19,064
$ 0.75

~~(a)As a result~~

Table of tax reform laws enacted in the United States and Belgium, we recognized a one-time charge of $6.7 million in the quarter ended December 31, 2017 from the estimated impact of the inclusion of foreign earnings and revaluation of deferred tax assets and liabilities.Contents

~~Return on Invested Capital~~

Management uses ROIC as a performance measurement to assess efficiency at allocating capital under our control to generate returns. Management believes this metric balances our operating results with asset and liability management, is not impacted by capitalization decisions and correlates with shareholder value creation. In addition, it is easily computed, communicated and understood. ROIC also provides management a measure of our profitability on a basis more comparable to historical or future periods.

We calculate ROIC as earnings before interest expense, income taxes, depreciation and amortization, plus change in fair value of contingent consideration and other non-GAAP adjustments ("adjusted EBITDA"), divided by invested capital. Invested capital is defined as average equity plus average daily funded interest-bearing debt for the period. The following table summarizes annualized ROIC for the quarters ended December 31, 2017 and 2016, respectively:

Quarter ended December 31,
2017 2016
Return on invested capital ratio, annualized^(a)
13.3 % 13.8 %


~~(a)~~	~~The annualized EBITDA amount is divided by days in the quarter times 365 days per year (366 during leap years). There were 92 days in the current and prior-year quarter.~~

~~The components of this calculation and reconciliation to our financial statements are shown on the following schedule:~~

Quarter ended December 31,
2017 2016
(in thousands)
Reconciliation of net income to EBITDA:
Net income (GAAP) $ 7,969
$ 23,036
Plus: interest expense 2,285
912
Plus: income taxes 12,341
12,745
Plus: depreciation and amortization 9,901
6,588
EBITDA (non-GAAP) 32,496
43,281
Plus: Change in fair value of contingent consideration 6,913
1,791
Plus: Acquisition costs —
335
Plus: Legal settlement, net of attorney fees —
(12,777 )
Adjusted EBITDA (numerator for ROIC) (non-GAAP) $ 39,409
$ 32,630

Quarter ended December 31,
2017 2016
(in thousands)
Invested capital calculations:
Equity – beginning of the quarter $ 852,976
$ 773,161
Equity – end of the quarter 860,787
787,536
Plus: Change in fair value of contingent consideration, net of tax 4,742
1,000
Plus: Acquisition costs, net of tax ^(a)
—
335
Plus: Legal settlement, net of attorney fees, net of tax —
(8,047 )
Plus: Tax reform charges 6,689
—
Average equity 862,597
776,993
Average funded debt ^(b)
311,327
162,483
Invested capital (denominator for ROIC) (non-GAAP) $ 1,173,924
$ 939,476


~~(a)~~	~~Acquisition costs are nondeductible for tax purposes.~~


~~(b)~~	~~Average funded debt is calculated as the average daily amounts outstanding on our current and long-term interest-bearing debt.~~

Liquidity and Capital Resources

Our primary sources of liquidity are cash flows from operations and borrowings under our ~~$400~~$350 million revolving credit facility. Our business requires significant investment in working capital, particularly accounts receivable and inventory, partially financed through our accounts payable to vendors, cash generated from operations and revolving lines of credit. In general, as our sales volumes increase, our net investment in working capital increases, which typically results in decreased cash flow from operating activities. Conversely, when sales volumes decrease, our net investment in working capital typically decreases, which typically results in increased cash flow from operating activities.

Our cash and cash equivalents balance totaled ~~$35.4~~$34.1 million at December 31, ~~2017~~,2021, compared to ~~$56.1~~$62.7 million at June 30, ~~2017~~,2021, including ~~$26.8~~$28.7 million and ~~$47.9~~$52.1 million held outside of the United States at December 31, ~~2017~~2021 and June 30, ~~2017,~~2021, respectively. Checks released but not yet cleared in the amounts of ~~$7.5~~$18.5 million and ~~$8.3~~$14.3 million are included in accounts payable ~~as of~~at December 31, ~~2017~~2021 and June 30, ~~2017,~~2021, respectively.

We conduct business in many locations throughout the world where we generate and use cash. We provide for ~~U.S.~~United States income taxes ~~for~~from the earnings of our Canadian subsidiary. Earnings from all other geographies will continue to be considered retained indefinitely for reinvestment. Due to recent tax legislation in the United States, we are required to estimate a one-time transition tax on repatriation of foreign earnings during the quarter ended December 31, 2017.and Brazilian subsidiaries. See Note 1114 - Income Taxesin the Notes to the Consolidated Financial Statements for further discussion.

Our net investment in working capital increased $100.9 million to $587.6 million at December 31, ~~2017 was~~ ~~$754.5~~2021 from $486.7 million ~~compared to~~ ~~$624.7 million~~ at June 30, ~~2017~~2021, primarily from increases in accounts receivable and ~~$621.4 million~~ ~~at December 31, 2016.~~inventory. Our net investment in working capital is affected by several factors such as fluctuations in sales volume, net income, timing of collections from customers, increases and decreases to inventory levels and payments to ~~vendors, as well as cash generated or used by other financing and investing activities.~~vendors. For the six months ended December 31, 2021, our working capital investment increased to support our 9.8% year-over-year net sales growth.


	Six months ended
	December 31,
	2021		2020
	(in thousands)
Cash (used in) provided by:
Operating activities	$	(75,378)	$	115,674
Investing activities	480		32,902
Financing activities	51,365		(109,883)

Six months ended
December 31,
2017 2016
Cash provided by (used in): (in thousands)
Operating activities $ (84,183 ) $ 35,731
Investing activities (147,064 ) (87,065 )
Financing activities 209,429
36,132
Effect of exchange rate change on cash and cash equivalents 1,159
(1,127 )
Increase (decrease) in cash and cash equivalents $ (20,659 ) $ (16,329 )

Net cash used byin operating activities was ~~$84.2~~$75.4 million for the six months ended December 31, ~~2017,~~2021, compared to ~~$35.7~~$115.7 million provided by operating activities in the ~~prior year~~prior-year period. Cash used in operating activities for the six months ended December 31, ~~2017~~2021 is primarily attributable to ~~increased~~increases in inventory and accounts receivable, ~~balances,~~ partially offset by ~~net income. Changes~~increases in ~~working capital balances exclude balances acquired from POS Portal at acquisition for the six months ended December 31, 2017.~~accounts payable. Cash provided by operating activities for the six months ended December 31, ~~2016~~2020 is primarily attributable to increased accounts payable, decreased inventory, and earnings from ~~net income and decreases in inventory purchases,~~operations adjusted for non-cash items, partially offset by ~~increases in~~increased accounts receivable. ~~Changes in working capital balances exclude balances acquired from Intelisys at acquisition for the six months ended December 31, 2016.~~

The number of days sales outstanding ("DSO") was 6064 days at December 31, ~~2017, excluding Intelisys,~~2021, compared to 6160 days at June 30, ~~2017~~2021 and 60 days at December 31, ~~2016.~~2020. Inventory turned ~~6.2~~5.7 times during the ~~second~~ quarter ~~of fiscal year 2018~~ended December 31, 2021, compared to ~~5.8~~6.3 times for ~~the~~ previous quarter ~~excluding POS Portal,~~ended September 30, 2021 and ~~6.0~~6.9 times in the ~~prior year quarter.~~prior-year quarter ended December 31, 2020.

Cash ~~used in~~provided by investing activities for the six months ended December 31, ~~2017~~2021 was ~~$147.1~~$0.5 million, compared to ~~$87.1~~$32.9 million ~~used~~ in the ~~prior year~~prior-year period. Cash ~~used in~~provided by investing activities for the six months ended December 31, ~~2017~~2021 represents proceeds from the sale of our discontinued operations, partially offset by capital expenditures. Cash provided by investing activities for the six months ended December 31, 2020 primarily represents proceeds from the ~~cash used to acquire POS Portal, compared to cash used for the initial payment to acquire Intelisys in the prior year.~~sale of our discontinued operations.

Management expects capital expenditures for fiscal year ~~2018~~2022 to range from $8$5 million to ~~$11~~$8 million, primarily for IT ~~investments.~~investments and facility improvements.

For the six months ended December 31, ~~2017,~~2021, cash provided by financing activities totaled ~~to $209.4~~$51.4 million, compared to ~~$36.1~~$109.9 million ~~provided~~used in financing activities for the ~~prior year~~prior-year period. Cash provided by financing activities for the six months ended December 31, ~~2017 was~~2021 is primarily ~~from~~attributable to net borrowings on the revolving credit ~~facility, partially offset by cash used to pay contingent consideration payments~~

~~to the former shareholders of Network1, Intelisys and POS Portal. Cash provided by financing activities for~~facility. For the six months ended December 31, ~~2016~~2020, cash used in financing activities was primarily ~~from~~for net ~~borrowings~~repayments on the revolving credit facility ~~partially offset by cash used to repurchase common stock~~ and ~~make~~ contingent consideration payments to the former shareholders of ~~Network1 and Imago.~~Intelisys.

Table of Contents

~~The Company has~~

Credit Facility

We have a multi-currency senior secured ~~revolving~~ credit facility with ~~JP Morgan~~JPMorgan Chase Bank N.A., as administrative agent, and a syndicate of ~~banks that matures on~~banks. On April ~~3, 2022. On August 8, 2017,~~30, 2019, we amended this credit facility to expand the ~~Company amended the~~borrowing capacity and extend its maturity to April 30, 2024. The Amended Credit Agreement ~~to increase the maximum~~established (i) a five-year $350 million multi-currency senior secured revolving credit facility ~~from $300~~and (ii) a five-year $150 million senior secured term loan facility. Pursuant to ~~$400~~an “accordion feature,” we may increase borrowings up to an additional $250 million. The Amended Credit Agreement allows for the issuance of up to $50 million for letters of credit, ~~and has a $200 million accordion feature that allows the Company to increase the availability to~~ ~~$600 million~~, subject to obtaining additional credit commitments from the lenders participating in the increase. Borrowings under the Amended Credit Agreement are guaranteed by substantially all of the domestic assets of the Company and a pledge of up to 65% of capital stock or other equity interest in certain foreign subsidiaries determined to be either material or a subsidiary borrower as defined in the Amended Credit Agreement. Under the terms of the revolving credit facility, the payment of cash dividends is restricted.

At ~~the Company's~~our option, ~~loans denominated in~~ U.S. ~~dollars~~dollar loans under the Amended Credit Agreement, other than swingline loans, bear interest at a rate equal to a spread over the London Interbank Offered Rate ("LIBOR") or alternate base rate depending upon ~~the Company's~~our net leverage ratio, ofcalculated as total debt ~~(excluding accounts payable and accrued liabilities)~~less up to ~~EBITDA, measured as~~$15 million of ~~the end of the most recent year or quarter, as applicable, for which financial statements have been delivered~~unrestricted domestic cash to ~~the Lenders (the "Leverage Ratio").~~ trailing four-quarter adjusted EBITDA.

This spread ranges from 1.00% to ~~2.125%~~1.75% for LIBOR-based loans and 0.00% to ~~1.125%~~0.75% for alternate base rate loans. ~~Borrowings under the~~The Amended Credit Agreement ~~are guaranteed by substantially all~~provides for the substitution of a new interest rate benchmark upon the ~~domestic assets of~~transition from LIBOR for U.S. dollar loans, subject to agreement between the Company and the administrative agent. On December 23, 2021, we amended our credit facility to replace LIBOR as ~~well as certain foreign subsidiaries determined to be material under~~ the benchmark rate for non-U.S. dollar loans.

The Amended Credit Agreement contains customary yield protection provisions. Additionally, we are assessed commitment fees ranging from 0.15% to 0.30%, depending upon the Leverage Ratio, on non-utilized borrowing availability, excluding swingline loans. The secured term loan facility will amortize based on the percentage of original principal amount with 2.5% in Year 1, 5.0% in Year 2, 5.0% in Year 3, 7.5% in Year 4 and ~~a pledge of up~~10.0% in Year 5.

The Amended Credit Agreement includes customary representations, warranties, and affirmative and negative covenants, including financial covenants. Specifically, our Leverage Ratio must be less than or equal to ~~65%~~ ~~of capital stock or other equity interest in each Guarantor~~3.50 to 1.00 at all times. In addition, our Interest Coverage Ratio (as such term is defined in the Amended Credit Agreement)~~. The Company was~~ 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. We were in compliance with all covenants under the credit facility ~~as of~~ at December 31, ~~2017~~.

2021. There was ~~$355.5 million and $91.9~~$57.8 million in outstanding borrowings on our ~~$400 million~~ revolving credit facility ~~as of~~ at December 31, ~~2017~~ ~~and~~ ~~June 30, 2017, respectively.~~

~~On a gross basis, we borrowed $1,279.2 million and repaid $1,015.7 million~~2021. There was no outstanding borrowings on our revolving credit facility ~~in the~~ ~~six~~ ~~months ended~~ ~~December 31, 2017. In the prior year period, on a gross basis, we borrowed $829.1 million and repaid $764.3 million.~~ at June 30, 2021.

The average daily balance ~~during~~for the revolving credit facility, excluding the term loan facility, was $57.1 million for the six month ~~periods~~period ended December 31, ~~2017~~2021. Including borrowings for both continuing and ~~2016~~discontinued operations, the average daily balance for the revolving credit facility, excluding the term loan facility, was ~~$261.8~~$70.4 million ~~and $129.7 million, respectively.~~ for the six month period ended December 31, 2020. There were no ~~stand-by~~ letters of credit issued under the multi-currency revolving credit facility ~~as of~~at December 31, ~~2017~~2021 and June 30, ~~2017.~~2021, respectively. There was ~~$44.6~~$292.2 million and ~~$208.1~~$350.0 million available for additional borrowings at December 31, 2021 and June 30, 2021, respectively. Availability to use this borrowing capacity depends upon, among other things, the levels of our Leverage Ratio and Interest Coverage Ratio, which, in turn, will depend upon (1) our Credit Facility Net Debt relative to our Credit Facility EBITDA and (2) Credit Facility EBITDA relative to total interest expense, respectively. As a result, our availability will increase if EBITDA increases (subject to the limit of the facility) and decrease if EBITDA decreases. At December 31, 2021, based upon the calculation of our Credit Facility Net Debt relative to our Credit Facility EBITDA, there was $292.2 million available for borrowing. While we were in compliance with the financial covenants contained in the Credit Facility as of December 31, ~~2017~~2021, and ~~June 30, 2017, respectively.~~currently expect to continue to maintain such compliance, should we encounter difficulties, our historical relationship with our Credit Facility lending group has been strong and we anticipate their continued support of our long-term business.

As of December 31, 2017, the Company was obligated to pay certain earnout payments to the former shareholders of POS Portal, Intelisys and Network1 related to their acquisitions on July 31, 2017, August 29, 2016 and January 13, 2015, respectively. See Note 8 - ~~Fair Value of Financial Instruments~~ for a discussion on the liabilities recorded. The earnout payment due to the former shareholders of POS Portal was paid in full during the December quarter of the current fiscal year and was funded by cash from operations and our existing revolving credit facility. Future earnout payments for Intelisys are expected to be funded by cash from operations and our existing revolving credit facility. Future earnout payments for Network1 are expected to be funded by existing cash balances in Brazil and cash from operations.Summary

We believe that our existing sources of liquidity, including cash resources and cash provided by operating activities, supplemented as necessary with funds under our credit agreements, will provide sufficient resources to meet the present and future working capital and cash requirements for at least the next twelve months.

Off-Balance Sheet Arrangements and Contractual Obligations

Table of Contents

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future ~~affect~~effect or change on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with the company is a party, under which the company has (i) any obligation arising under a guarantee contract, derivative instrument or variable interest; or (ii) a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.

~~As of December 31, 2017, we have made adjustments to our contingent consideration owed to the former shareholders Intelisys and Network 1. See Note 8 -~~ ~~Fair Value of Financial Instruments~~ for a discussion on the liabilities recorded. There have been no other material changes in our contractual obligations and commitments disclosed in our Annual Report on Form 10-K filed on August 29, 2017.

Accounting Standards Recently Issued

See Note 1 of the Notes to Condensed Consolidated Financial Statements for a full description of recent accounting pronouncements, including the anticipated dates of adoption and the effects on our consolidated financial position and results of operations.

Critical Accounting Policies and Estimates

Critical accounting policies are those that are important to our financial condition and require management's most difficult, subjective or complex judgments. Different amounts would be reported under different operating conditions or under alternative assumptions. See Management's Discussion and Analysis of Financial Condition and Results from Operations in our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2017~~2021 for a complete discussion.



Item 3.			Quantitative and Qualitative Disclosures About Market Risk

~~Our principal exposure to changes in financial market conditions in the normal course~~For a description of our ~~business is a result of~~market risks, see Part II, Item 7A. "Quantitative and Qualitative Disclosures About Market Risk" in our ~~selective use of bank debt and transacting business in foreign currencies in connection with our foreign operations.~~

~~Interest Rate Risk~~

~~Foreign Currency Exchange Rate Risk~~

Table of ~~the Company’s currency forward contracts outstanding was a net payable of less than $0.1 million. We do not utilize financial instruments for trading or other speculative purposes.~~

Contents



Item 4.			Controls and Procedures

An evaluation was carried out under the supervision and with the participation of ~~the Company’s~~our management, including ~~its~~our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO") of the effectiveness of ~~the Company’s~~our disclosure controls and procedures ~~as of~~ at December 31, ~~2017~~.2021. Based on that evaluation, ~~the Company’s~~our management, including the CEO and CFO, concluded that ~~the Company’s~~our disclosure controls and procedures are effective ~~as of~~ at December 31, ~~2017~~.2021. During the quarter ended December 31, ~~2017~~,2021, there was no change in ~~the Company’s~~our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, ~~the Company’s~~our internal control over financial reporting.

Table of Contents

PART II. OTHER INFORMATION



Item 1.			Legal Proceedings

The Company and ~~its~~our subsidiaries are, from time to time, parties to lawsuits arising out of operations. Although there can be no assurance, based upon information known to ~~the Company, the Company believes~~us, we believe that any liability resulting from an adverse determination of such lawsuits would not have a material adverse effect on ~~the Company’s~~our financial condition or results of operations. For a description of our material legal proceedings, see Note 12 - Commitments and Contingencies in the notes to the condensed consolidated financial statements, which is incorporated herein by reference.



Item 1A.			Risk Factors

In addition to the risk factors discussed in our other reports and statements that we file with the SEC, you should carefully consider the factors discussed in Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the year ended June 30, ~~2017,~~2021, which could materially affect our business, financial condition and/or future operating results.



Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds

OnShare Repurchases

In August ~~29, 2016, the Company announced a~~2021, our Board of Directors ~~("BOD")~~authorized a $100 million share repurchase program. The authorization ~~to repurchase shares up to $120 million of the Company's common stock over three years.~~does not have any time limit. The following table presents the share-repurchase activity for the quarter ended December 31, ~~2017:~~2021:

Period
Total number of shares purchased^(a)

Average price paid per share^(a)
Total number of shares purchased as part of the publicly announced plan or program Approximate dollar value of shares that may yet be purchased under the plan or program
October 1, 2017 through October 31, 2017

103
$ 43.65
103
$ 99,664,707
November 1, 2017 through November 30, 2017

—
$ —
—
$ 99,664,707
December 1, 2017 through December 31, 2017

45,798
$ 34.35
45,798
$ 99,664,707
Total 45,901
$ 34.37
45,901
$ 99,664,707


Period	Total number of shares purchased(a)	Average price paid per share		Total number of shares purchased as part of the publicly announced plan or program	Approximate dollar value of shares that may yet be purchased under the plan or program
October 1, 2021 through October 31, 2021	—	$	—	—	$	100,000,000
November 1, 2021 through November 30, 2021	814	$	30.99	814	$	99,974,774
December 1, 2021 through December 31, 2021	5,089	$	30.89	5,089	$	99,817,575
Total	5,903	$	30.90	5,903	$	99,817,575

(a) Total number of shares purchased represents shares withheld from employees for stock-based awards in order to satisfy the required tax withholding ~~obligations. The purchases of these shares were not made pursuant to any publicly announced repurchase plan. No share repurchases occurred under the BOD authorization~~obligations for the quarter ended December 31, ~~2017.~~2021.

Dividends

We have never declared or paid a cash dividend. Under the terms of our credit facility, the payment of cash dividends is restricted.

Table of Contents


Item 6.			Exhibits


Exhibit Number			Description

~~Item 6.~~			~~Exhibits~~



~~Exhibit~~ ~~Number~~	~~Description~~

10.1	~~Form of Restricted Stock Unit Award (Performance~~Amendment to Second Amended and ~~Service-Based) under the 2013 Long-Term Incentive Plan (2017 version)~~Restated Credit Agreement (incorporated by reference to Exhibit 10.1 ofto the registrant's ~~Current Report filed with the SEC on~~ Form 8-K filed on December ~~8, 2017).~~23, 2021)

~~10.2~~31.1		Form of Restricted Stock Unit Award (Service-Based) under the 2013 Long-Term Incentive Plan (2017 version) (incorporated by reference to Exhibit 10.2 of the registrant's Current Report filed with the SEC on Form 8-K on December 8, 2017).

~~10.3~~	Form of Non-Qualified Stock Option Agreement under the 2013 Long-Term Incentive Plan (2017 version) (incorporated by reference to Exhibit 10.3 of the registrant's Current Report filed with the SEC on Form 8-K on December 8, 2017).

~~10.4~~	Form of Incentive Stock Option Agreement under the 2013 Long-Term Incentive Plan (2017 version) (incorporated by reference to Exhibit 10.4 of the registrant's Current Report filed with the SEC on Form 8-K on December 8, 2017).

~~31.1~~	Certification of the Chief Executive Officer, Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of the Chief Financial Officer, Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of the Chief Executive Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of the Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		The following materials from our Quarterly Report on Form 10-Q for the quarter ended December 31, ~~2017,~~2021, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets ~~as of~~at December 31, ~~2017~~2021 and June 30, ~~2017;~~2021; (ii) the Condensed Consolidated Income ~~Statement~~Statements for the ~~quarter~~quarters and six months ended December 31, ~~2017~~2021 and ~~2016;~~2020; (iii) the Condensed Consolidated Statements of Comprehensive (Loss) Income ~~(Loss)~~ for the ~~quarter~~quarters and six months ended December 31, ~~2017~~2021 and ~~2016;~~2020; (iv) the Condensed Consolidated Statements of Shareholder's Equity at December 31, 2021 and 2020; (v) the Condensed Consolidated Statements of Cash Flows for the six months ended December 31, ~~2017~~2021 and ~~2016;~~2020; and ~~(v)~~(vi) the Notes to the Condensed Consolidated Financial Statements. The instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL

104		Cover page Inline XBRL File (Included in Exhibit 101)

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			ScanSource, Inc.

Date:		February 8, 2022	~~ScanSource, Inc.~~

	/s/ MICHAEL L. BAUR
			Michael L. Baur
~~Date:~~		~~February 6, 2018~~	Chairman and Chief Executive Officer (Principal Executive Officer)



Date:	February 8, 2022	/s/ ~~GERALD LYONS~~STEVE JONES
		~~Gerald Lyons~~Steve Jones
~~Date:~~	~~February 6, 2018~~	Senior Executive Vice President and Chief Financial Officer (Principal Financial Officer)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	December 31, 2017			June 30, 2017
Assets
Current assets:
Cash and cash equivalents	$	35,435		$	56,094
Accounts receivable, less allowance of $47,264 at December 31, 2017 and $44,434 at June 30, 2017	717,336			637,293
Inventories	581,802			531,314
Prepaid expenses and other current assets	76,667			56,322
Total current assets	1,411,240			1,281,023
Property and equipment, net	76,626			56,566
Goodwill	302,912			200,881
Identifiable intangible assets, net	148,443			101,513
Deferred income taxes	11,794			29,491
Other non-current assets	54,267			48,829
Total assets	$	2,005,282		$	1,718,303
Liabilities and Shareholders’ Equity
Current liabilities:
Current portion of long-term debt	$	104		$	—
Accounts payable	515,302			513,155
Accrued expenses and other current liabilities	97,597			104,715
Current portion of contingent consideration	38,629			30,675
Income taxes payable	5,086			7,730
Total current liabilities	656,718			656,275
Deferred income taxes	11,110			2,008
Long-term debt	5,325			5,429
Borrowings under revolving credit facility	355,503			91,871
Long-term portion of contingent consideration	58,402			83,361
Other long-term liabilities	57,437			42,214
Total liabilities	1,144,495			881,158
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, 25,571,355 and 25,431,845 shares issued and outstanding at December 31, 2017 and June 30, 2017, respectively	64,896			61,169
Retained earnings	861,296			849,180
Accumulated other comprehensive income (loss)	(65,405		)	(73,204		)
Total shareholders’ equity	860,787			837,145
Total liabilities and shareholders’ equity	$	2,005,282		$	1,718,303

June 30, 2017 amounts are derived from audited consolidated financial statements.
See accompanying notes to these condensed consolidated financial statements.



	POS Portal
	(in thousands)
Receivables	$	8,914
Inventory	8,352
Other current assets	917
Property and equipment	24,963
Goodwill	101,198
Identifiable intangible assets	57,000
Other non-current assets	100
	$	201,444

Accounts payable	$	10,897
Accrued expenses and other current liabilities	5,130
Contingent consideration	13,098
Other long-term liabilities	102
Long-term deferred taxes payable	28,449
Consideration transferred, net of cash acquired	143,768
	$	201,444



	Intelisys
	(in thousands)
Receivables	$	21,655
Other current assets	1,547
Property and equipment	5,298
Goodwill	109,005
Identifiable intangible assets	63,110
Other non-current assets	1,839
	$	202,454

Accounts payable	$	21,063
Accrued expenses and other current liabilities	2,587
Contingent consideration	95,000
Consideration transferred, net of cash acquired	83,804
	$	202,454



	Barcode, Networking & Security Segment		Communications & Services Segment		Total
	(in thousands)
Balance as of June 30, 2017	$	36,260	$	164,621	$	200,881
Additions	101,198		—		101,198
Foreign currency translation adjustment	146		687		833
Balance as of December 31, 2017	$	137,604	$	165,308	$	302,912


	Net Identifiable Intangible Assets
	(in thousands)
Balance at June 30, 2021	$	104,860

Reductions	—
Amortization expense	(8,956)
Foreign currency translation adjustment	(859)
Balance at December 31, 2021	$	95,045


	Total		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)			Total		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
	(in thousands)									(in thousands)
Assets:									Assets:
Deferred compensation plan investments, current and non-current portion	$	23,893	$	23,893	$	—	$	—	Deferred compensation plan investments, current and non-current portion	$	31,333	$	31,333	$	—	$	—
Forward foreign currency exchange contracts	71		—		71		—
Interest rate swap agreement	578		—		578		—

Total assets at fair value	$	24,542	$	23,893	$	649	$	—	Total assets at fair value	$	31,333	$	31,333	$	—	$	—
Liabilities:									Liabilities:
Deferred compensation plan investments, current and non-current portion	$	23,893	$	23,893	$	—	$	—	Deferred compensation plan investments, current and non-current portion	$	31,333	$	31,333	$	—	$	—
Forward foreign currency exchange contracts	169		—		169		—		Forward foreign currency exchange contracts	55		—		55		—
Liability for contingent consideration, current and non-current portion	97,031		—		—		97,031
Foreign currency hedge									Foreign currency hedge	283		—		283		—
Interest rate swap agreement									Interest rate swap agreement	4,054		—		4,054		—

Total liabilities at fair value	$	121,093	$	23,893	$	169	$	97,031	Total liabilities at fair value	$	35,725	$	31,333	$	4,392	$	—



	Contingent consideration for the quarter ended									Contingent consideration for the six months ended
	December 31, 2017									December 31, 2017
	Barcode, Networking & Security Segment			Communications & Services Segment			Total			Barcode, Networking & Security Segment			Communications & Services Segment			Total
	(in thousands)
Fair value at beginning of period	$	13,167		$	90,326		$	103,493		$	—		$	114,036		$	114,036
Issuance of contingent consideration	—			—			—			13,098			—			13,098
Payments	(13,167		)	—			(13,167		)	(13,167		)	(40,858		)	(54,025		)
Change in fair value of contingent consideration	—			6,913			6,913			69			23,725			23,794
Foreign currency translation adjustment	—			(208		)	(208		)	—			128			128
Fair value at end of period	$	—		$	97,031		$	97,031		$	—		$	97,031		$	97,031



	Contingent consideration for the quarter ended			Contingent consideration for the six months ended
	December 31, 2016			December 31, 2016
	Communications & Services Segment			Communications & Services Segment
	(in thousands)
Fair value at beginning of period	$	110,835		$	24,652
Issuance of contingent consideration	—			95,000
Payments	(1,607		)	(10,241		)
Change in fair value of contingent consideration	1,791			1,961
Foreign currency translation adjustment	(139		)	(492		)
Fair value at end of period	$	110,880		$	110,880



	Quarter ended December 31, 2017								Quarter ended December 31, 2016
	Operating Income		Pre-Tax Income		Net Income		Diluted EPS		Operating Income		Pre-Tax Income			Net Income			Diluted EPS
	(in thousands, except per share data)
GAAP Measures	$	22,341	$	20,310	$	7,969	$	0.31	$	23,275	$	35,781		$	23,036		$	0.91
Adjustments:
Amortization of intangible assets	5,487		5,487		3,648		0.14		4,165		4,165			2,740			0.11
Change in fair value of contingent consideration	6,913		6,913		4,742		0.18		1,791		1,791			1,000			0.04
Acquisition costs	—		—		—		—		335		335			335			0.01
Tax reform charges^(a)					6,689		0.26		—		—			—			—
Legal settlement, net of attorney fees	—		—		—		—		—		(12,777		)	(8,047		)	(0.32		)
Non-GAAP measures	$	34,741	$	32,710	$	23,048	$	0.90	$	29,566	$	29,295		$	19,064		$	0.75



Period	Total number of shares purchased^(a)	Average price paid per share^(a)		Total number of shares purchased as part of the publicly announced plan or program	Approximate dollar value of shares that may yet be purchased under the plan or program
October 1, 2017 through October 31, 2017	103	$	43.65	103	$	99,664,707
November 1, 2017 through November 30, 2017	—	$	—	—	$	99,664,707
December 1, 2017 through December 31, 2017	45,798	$	34.35	45,798	$	99,664,707
Total	45,901	$	34.37	45,901	$	99,664,707