What changed in this filing

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Item 1. Business

2021-08-23 compared with 2020-08-21 · 58 added, 204 removed, 419 unchanged (38% of the section changed)

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We sell our products and provide related services in diversified markets, including homeland security, healthcare, defense and aerospace.

Our company was originally incorporated in 1987 in California.

In March 2010, we reincorporated our company in the State of Delaware.

Our principal office is located at 12525 Chadron Avenue, Hawthorne, California 90250.

Our company is incorporated in the State of Delaware and our principal office is located at 12525 Chadron Avenue, Hawthorne, California 90250.

We have three operating divisions:

(a) Security, providing security and inspection systems, turnkey security screening solutions and related services;

(a) Security, providing security and inspection systems and turnkey security screening solutions;

(b) Healthcare, providing patient monitoring, diagnostic cardiology, and connected care systems and associated accessories;

and (c) Optoelectronics and Manufacturing, providing specialized electronic components and electronic manufacturing services for the Security and Healthcare divisions, as well as to external original equipment manufacturer (“OEM”) customers and end users for applications in the defense, aerospace, medical and industrial markets, among others.

Through our Security division, we provide security screening products and services globally under the “Rapiscan ® Systems” and “AS&E ® ” trade names.

Our Security products fall into the following categories:

baggage and parcel inspection;

cargo and vehicle inspection;

hold (checked) baggage screening;

people screening;

radiation detection;

and explosive and narcotics trace detection.

In addition to these products, we provide site design, installation, training and technical support services to our customers.

We also provide turnkey security screening solutions under the “S2 ® ” trade name, which can include the construction, staffing and long-term operation of security screening checkpoints, including ports and borders, for our customers.

Through our Healthcare division, we design, manufacture, market and service patient monitoring, diagnostic cardiology, and connected care systems globally to healthcare providers and provide related supplies and accessories under the “Spacelabs ® ” and “Statcorp ® ” trade names.

These products are used by care providers in critical care, emergency and perioperative areas within hospitals as well as physicians’ offices, medical clinics and ambulatory surgery centers.

Through our Optoelectronics and Manufacturing division, we design, manufacture and market optoelectronic devices and flex circuits and provide electronics manufacturing services globally for use in a broad range of applications, including defense and aerospace, X-ray security inspection systems and medical imaging, chemistry analysis and diagnostics instruments, telecommunications, scanners and industrial automation, IoT and wearable consumer products.

We sell our optoelectronic devices primarily under “OSI Optoelectronics,” “OSI LaserDiode,” “OSI Laserscan,” “Semicoa,” and “Advanced Photonix” trade names and perform our electronics manufacturing and design services primarily under the “OSI Electronics,” “APlus Products,” “Altaflex,” and “PFC” trade names.

We provide our optoelectronic devices and electronics manufacturing services to OEM customers and end users, as well as to our own Security and Healthcare divisions.

In March 2020, the World Health Organization characterized the outbreak of COVID-19 as a global pandemic and President Trump declared a national emergency concerning the pandemic.

and (c) Optoelectronics and Manufacturing, providing specialized electronic components and electronic manufacturing services for the Security and Healthcare divisions, as well as to third parties for applications in the defense and aerospace markets, among others.

The COVID-19 pandemic has dramatically impacted the global health and economic environment, with millions of confirmed cases, business slowdowns and shutdowns, and market volatility.

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The COVID-19 pandemic has impacted, and is expected to continue to impact, our business operations and the operations of our suppliers and customers as a result of quarantines, facility closures and travel and logistics restrictions.There is substantial uncertainty regarding the duration and degree of COVID-19’s continued effects over time.

The extent to which the COVID-19 pandemic impacts our business going forward will depend on numerous evolving factors we cannot reliably predict, including the duration and scope of the pandemic or recurrence thereof, timing of development and deployment of an effective vaccine, governmental, business and individuals' actions in response to the pandemic and the impact on economic activity including the possibility of recession or financial market instability.

The extent to which the COVID-19 pandemic impacts our business going forward will depend on numerous evolving factors we cannot reliably predict, including the duration and scope of the pandemic or recurrence thereof, deployment and administration of vaccines, governmental, business and individuals’ actions in response to the pandemic and the impact on economic activity including the possibility of recession or financial market instability.

Refer to Risk Factors (Part I, Item 1A of this Form 10-K) and Management’s Discussion and Analysis of Financial Condition and Results of Operations (Part II, Item 7 of this Form 10-K) for further discussion regarding potential risks to our business from the COVID-19 pandemic.

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Customs and Border Protection Container Security Initiative, have resulted in an increased demand for security and inspection products.

Most recently, these efforts have received increased funding from Congress to further combat the flow of increased threats from narcotics entering the United States.

Certain of these government sponsored initiatives in the United States have also stimulated security programs in other areas of the world in part because the U.S.

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The international market for non-intrusive inspection equipment and related services, therefore, continues to expand as countries that ship goods directly to the United States participate in such programs and as they choose to procure and operate equipment in order to secure their own borders, transportation networks, facilities and other venues.

Congress has passed legislation and continues to fund and support provisions that call for the increased inspection of international cargo destined for the United States.These include domestic civil aviation cargo, rail conveyances, and radiological and nuclear threats in cargo entering the United States.

Certain of our cargo and vehicle inspection systems are currently being used both domestically and internationally and by multiple agencies within the U.S.

Government to comply with these standards.

Additionally, the U.S.

Department of Homeland Security requires the screening of all cargo carried on passenger airlines in the United States.

Several of our hold (checked) baggage and cargo screening systems have been approved by the U.S.

Department of Homeland Security’s Transportation Security Administration for this purpose and are being procured and used by freight forwarders, airlines, transportation companies and other businesses to fulfill their compliance requirements.

Furthermore, the U.S.

Department of Homeland Security’s Science and Technology Directorate, Transportation Security Administration and Domestic Nuclear Detection Office have supported the development of new security inspection technologies and products.

Our Security division participates in a number of such research and development efforts, including projects to develop new technologies for radiation detection, nuclear materials detection, border security, and aviation screening.

Our Security division is an industrial partner in the DHS Center of Excellence ALERT (Awareness and Localization of Explosives-Related Threats) and works with academia, national laboratories, and other vendors on research and development through this and other agreements.

The Science and Technology Directorate has also initiated programs for the development of technologies capable of protecting highways, railways and waterways from terrorist attack.

In addition, the U.S.

Department of Defense has invested heavily in technologies and services that screen would-be attackers before they are able to harm U.S.

and allied forces.

These technologies include products that can screen personnel, vehicles and other containers for the presence of explosives, improvised explosive devices (IEDs), weapons and other contraband.

Department of Energy (DOE) and other U.S.

federal agencies continue to support the Nuclear Smuggling and Detection Deterrence (NSDD) Program and Megaports programs to help prevent the proliferation and trafficking of radioactive and nuclear materials.

Similar initiatives and new regulations promulgated by international organizations have resulted in a growing global demand for airline, cargo, port and border security and inspection technologies.

For example, the European Commission has issued uniform performance standards for systems that screen baggage and people at aviation checkpoints and air cargo, as well as new directives related to maritime security.

Department of Homeland Security and international air transportation security regulators around the world require the screening of cargo carried on passenger airlines.

Several of our screening systems have been approved by the U.S.

Department of Homeland Security’s Transportation Security Administration, as well as various international regulatory bodies, for this purpose and are being procured and used by freight forwarders, airlines, international airports, transportation companies and other businesses to fulfill their compliance requirements.

These and other regulations promulgated by international organizations have resulted in a growing global demand for airline, cargo, port and border security and inspection technologies.

Healthcare has been, and we believe will continue to be, a growing economic sector throughout much of the world.

Developing countries in Latin America and the Asia-Pacific region are expected to continue to build healthcare infrastructure to serve expanding middle class populations.

In developed areas, especially the United States and Europe, aging populations and extended life expectancy are projected to fuel growth in healthcare for the foreseeable future.

In developed areas, especially the United States, Europe, and mature Asian countries, aging populations and extended life expectancy are projected to fuel growth in healthcare for the foreseeable future.

While we believe that the healthcare industry will continue to grow throughout much of the world, many factors are forcing healthcare providers to do more with less, including stricter government requirements affecting staffing and accountability and uncertainty around potential U.S.

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We believe that our vertical integration differentiates us from many of our competitors and provides value to our customers who can rely on us to be an integrated supplier.

We intend to continue to leverage our vertical integration to create greater value for our customers in the design and manufacture of our products.

Capitalizing on the Market for Security and Inspection Systems.

Attentiveness to terrorist and other security threats may continue to drive the market for security and inspection systems in transportation security and also at ports and border crossings, government installations, military facilities and public event venues.

The trend toward increased screening of goods entering and departing from ports and borders has resulted, and may continue to result in, the growth in the market for cargo inspection systems and turnkey security screening services that are capable of screening shipping containers for contraband and assisting customs officials in the verification of shipping manifests.

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We develop and market patient monitoring systems, diagnostic cardiology products, and connected care systems and associated supplies and accessories.

We are able to market and sell many of our product offerings through shared sales channels and distribution networks.

Our efforts to develop new products and improve our existing medical technologies are focused on the needs of healthcare organizations, caregivers, and their patients.

Our efforts to improve existing medical technologies concentrate on providing products that are flexible and intuitive to use so that clinicians can deliver accurate, precise, reliable and cost-effective care.

We focus on enabling hospitals to leverage their IT infrastructure to improve data capture and access, workflows and security at a financial savings, providing actionable alarms at the bedside monitor and the central station.

Selectively Entering New Markets.

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and explosive and narcotics trace detection.

We also offer turnkey security screening services, including the staffing and operation of security screening checkpoints under the “S2” trade name.

We also offer turnkey security screening services, as well as related software integration platforms, operator training, and the staffing and operation of security screening checkpoints under the “S2” trade name.

From time to time we form joint ventures to carry out our operations in certain geographies, including, for example, Albania.

As a result of terrorist attacks worldwide, security and inspection products have increasingly been used at a wide range of facilities other than airports, such as border crossings, railways, seaports, cruise line terminals, freight forwarding operations, government and military installations and nuclear facilities.

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Many of our security and inspection systems include dual-energy X-ray technology with computer software enhanced imaging methods to facilitate the detection of materials such as explosives, weapons, narcotics, bulk currency or other contraband.

While all X-ray systems produce a two-dimensional image of the contents of the inspected object, the dual-energy X-ray systems also measure the X-ray absorption of the inspected object’s contents at two different X-ray energies to estimate the atomic number of the object’s contents.

The various organic and inorganic substances in the inspected object appear to operators of the inspection systems in various colors, and this visual information can be used to identify and differentiate the inspected materials.

In addition, we offer dual-view X-ray screening systems, now available on many of our systems that allow operators to examine objects from two directions simultaneously, thereby reducing the need for re-scanning of objects and improving the operator’s ability to detect threats quickly and effectively.

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These products are primarily used to verify the contents of cars, trucks or cargo containers and to detect the presence of contraband, including narcotics, weapons, explosives, radioactive and nuclear materials and other smuggled items.

They offer significant improvements over alternative methods of cargo screening, such as manual searches, as our cargo scanning systems are faster, more thorough and do not subject the cargo to pilferage.

Entire shipping containers or trucks containing densely packed goods can be screened rapidly.

Most of our cargo and vehicle inspection systems employ X-ray imaging to non-intrusively inspect objects and present images to an inspector, showing shapes, sizes, locations and relative densities of the contents.

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We believe that we offer one of the broadest technology platforms in the baggage and parcel and cargo and vehicle inspection systems industry.

Our broad platform permits us to offer customers solutions, which optimize flexibility, performance and cost to meet the customer’s unique application requirements.

Our broad platform permits us to offer customers solutions, which optimize flexibility, performance and cost to meet the customers’ unique application requirements.

Our Security division also offers hold (checked) baggage screening systems that are utilized by airports, freight forwarders and other parties responsible for screening baggage and cargo before it is placed in the cargo hold of airplanes.

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These systems are designed to meet the high-speed screening and analysis demands of regulators in the United States and European Union (“EU”).

They can be operated in stand-alone mode, where a single operator views the images produced by a single system, or can be networked, allowing operators stationed at a remote computer terminal to monitor multiple systems.

Our Security division also offers trace detection systems that are designed to detect trace amounts of explosives as well as narcotics.

We also offer people screening products, such as a line of “Metor®” brand walk-through metal detector (WTMD) products for use at security checkpoints at airports, amusement parks, banks, courthouses, government buildings, sports arenas and other venues.

These systems are designed to be used in screening people, cargo, baggage and other items for illicit materials and weapons.

The following table sets forth certain information related to the standard security and inspection products that we currently offer.

We do, however, also customize our standard products to suit specific applications and customer requirements.

PRODUCT NAME /

PRODUCT FAMILY

MARKET SEGMENT

Baggage and Parcel Inspection

Rapiscan ® 600 series

X-ray systems

Rapiscan ® 900 series

Orion TM X-ray systems

Dual-energy X-ray

Single and multi-view configuration

Checkpoint and customs inspection at airports, prisons, border crossings, government buildings, and postal facilities, critical infrastructure protection at power and chemical plants, water resource sites as well as air cargo screening

AS&E ® Gemini ®

Combined dual energy transmission and backscatter

Checkpoint and air cargo screening at prisons, government buildings and other critical infrastructure protection applications

Tray Return System, TRS TM

Tray handling system

Checkpoint inspection, used in conjunction with baggage and parcel inspection systems

Cargo and Vehicle Inspection

Rapiscan ® Eagle ®

AS&E ® OmniView ®

AS&E ® Sentry ®

High energy transmission X-ray

High energy transmission and backscatter X-ray

Inspection of passenger vehicles, cargo, trucks, and rail cars at airports, border crossings, sea ports and high threat facilities

AS&E ® Z Portal ®

AS&E ® CarView

AS&E ® MINI Z ®

Flying spot backscatter X-ray and transmission X-ray

Hold (Checked) Baggage Screening

Rapiscan ® RTT ®

High-speed, stationary gantry computed tomography explosive detection system (EDS)

Hold baggage and parcel inspection with automatic explosive detection at airports and freight forwarding facilities

People Screening

Metor ® series metal detectors

Electromagnetic induction

Checkpoint inspection at airports, border crossings, military checkpoints, stadiums, prisons and government facilities

Radiation Detection

Rapiscan ® Radiation Monitors

Gamma and neutron detection of radioactive and nuclear material

Cargo, vehicle, rail car and people screening at airports, border crossings, military checkpoints, stadiums, prisons and government facilities

Trace Detection

Itemiser ® DX

Itemiser ® 4DX

Itemiser ® 3e

MobileTrace ®

Hardened MobileTrace ®

EntryScan ® 4

Syntech ONE TM

IMS based technology desktop, hand-held and walk-though portal explosives and narcotics detection

Artificial intelligence software platform

Checkpoint, hold baggage and cargo inspection at airports, nuclear plants, border crossings, military checkpoints, stadiums, prisons and government facilities

We also offer people screening products, such as walk-through metal detector (WTMD) products for use at security checkpoints at airports, government buildings, sports arenas and other venues.

These systems are designed to be used in screening people, baggage and other items for illicit materials and weapons.

Patient Monitoring and Diagnostic Cardiology.

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Additionally, our Healthcare division manufactures multivendor-compatible accessories for use with third-party devices.

The following table sets forth a description of the more significant healthcare products that we currently offer:

PRODUCT NAME /

PRODUCT FAMILY

MARKET SEGMENT

Patient Monitoring and

DM4 Dual-mode Monitor

Command Module

Intesys ® Clinical Suite (ICS)

Xhibit ® Telemetry Receiver (XTR)

Spacelabs ® SafeNSound TM

Hospital care areas, outpatient surgery centers and physician offices

Diagnostic Cardiology

Sentinel ® Cardiology Data Management OnTrak

Ambulatory Blood Pressure Monitors

Pathfinder ® SL Holter Analyzer

Lifecard ® Holter Recorder

EVO TM Holter Recorder

CardioExpress ® ECG machines

Sentinel-Integrated

Hospital cardiology care areas and physician offices

Supplies and Accessories

UltraCheck ® , SoftCheck ® and Curve

Blood Pressure Cuffs

Patient Cables and Accessories

Fluid Delivery Unifusor ® Infusion Bags

All hospital care areas, outpatient surgery centers and physician offices

Optoelectronic Devices and Manufacturing Services.

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Active components sense light of varying wavelengths and convert the light detected into electrical signals, whereas passive components amplify, separate or reflect light.

The active components we manufacture consist of silicon, gallium arsenide and indium gallium arsenide photodetectors and light sources.

These products are manufactured in standard and customized configurations for specific applications and are offered either as components or as subsystems.

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We offer electronics manufacturing services to OEM customers and end users for medical, automotive, defense, aerospace, industrial and consumer applications that do not utilize optoelectronic devices.

We also manufacture LCD displays for medical, industrial and consumer electronics applications, and flex circuits for OEM customers fromthe prototype stage to mass production.

Our electronics manufacturing services are provided primarily under the “OSI Electronics,” “APlus Products,” “Altaflex,” and “PFC” trade names.

We also manufacture LCD displays for medical, industrial and consumer electronics applications, and flex circuits for OEM customers from the prototype stage to mass production.

Our electronics manufacturing services are provided primarily under the “OSI Electronics,” “APlus Products,” “Altaflex,” and “PFC Flexible Circuits” trade names.

We develop, manufacture and sell laser-based remote sensing devices that are used to detect and classify vehicles in toll and traffic management systems under the “OSI Laserscan” and “Autosense” trade names.

We offer solid-state laser products for aerospace, defense, telecommunication and medical applications under the “OSI LaserDiode” trade name.

The following table sets forth a description of the more significant standard optoelectronics products that we currently offer.

We also customize our standard products to suit specific applications and customer requirements.

PRODUCT NAME /

PRODUCT FAMILY

MARKET SEGMENT

Optoelectronic Products

Si and InGaAs Photodiodes and Avalanche Diodes

UV and XUV Detector

Linear and 2-D Position Sensitive Devices

Line and 2D X-Ray Photodectors

Optical Switches

Solid State Laser Diodes

Medical diagnostics instrumentation and analytical chemistry, oximetry and blood chemistry, security scanners and inspection systems, lidar and laser range finder, OTDR and test and measurement instruments, telecommunication products, laser guided munitions, weapon simulation systems, aircraft gyro navigation sensors, and satellite sun acquisition sensors

Medical Devices and Accessories

Oximetry Sensors and Accessories

Patient monitoring, animal health, and diagnostic medical products

Laser Scanners

Laser Scanners (AS9390, AS615 and AS800 Series)

Laser based scanners for vehicle detections and classifications for electronic toll collection (ETC) and toll and traffic management systems

Markets, Customers and Applications

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House of Parliament, Buckingham Palace, and the Vatican and for high-profile events such as the Olympic Games, and other sporting events.

Furthermore, as terrorist attacks continue to occur, overall transportation and travel industry demands have increased, resulting in heightened attention for our security and inspection products.

We also provide turnkey security screening solutions, which can include the construction, staffing and long-term operation of security screening locations for our customers.

Our customers include, among many others, the U.S.

Customs and Border Protection, U.S.

Department of Homeland Security, U.S.

Department of Defense, U.S.

Department of State, U.S.

Department of Agriculture, U.S.

Department of Commerce, U.S.

Transportation Security Administration and Federal Bureau of Prisons in the United States, as well as Her Majesty’s Revenue and Customs and Manchester Airport Group in the United Kingdom, Aeroporto De Paris, Aeroporto De Roma, Chek Lap Kok Airport in Hong Kong, DHL, and United Parcel Service.

Department of Commerce, and Federal Bureau of Prisons in the United States, as well as many premier international government agencies, including airports and other critical infrastructure agencies, DHL, and United Parcel Service.

Our contracts with the U.S.

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We also provide wired and wireless networks, clinical information access solutions and ambulatory blood pressure monitors.

We sell products mainly through integrated delivery networks and group purchasing networks in the U.S., the NHS Supplies Organisation in the United Kingdom, UGAP in France, and to various government funded hospitals in the Middle East and several parts of Asia.

We sell products directly to end customers as well as through integrated delivery networks and group purchasing organizations in the U.S., the NHS Supplies Organisation in the United Kingdom, UGAP in France, and to various government funded hospitals in the Middle East and several parts of Asia.

Optoelectronic Devices and Electronics Manufacturing Services.

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toll and traffic management;

and automotive diagnostic systems.

Major customers in these segments include Raytheon, Honeywell, Northrop Grumman, Medtronic, Beckman Coulter, United Technologies, Assa Abloy, Trakka, Amphenol, and Apple, among others.

and automotive.

Marketing, Sales and Service

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This sales staff is supported by a service organization located in the same regions, as well as a global network of independent, authorized service providers.

We market and sell our healthcare products globally through a direct sales and marketing staff located in North America, Latin America, Europe and Asia, in addition to a global network of independent distributors.

We market and sell our healthcare products globally through a direct sales and marketing staff located in North America, South America, Europe and Asia, in addition to a global network of independent distributors.

We also support these sales and customer service efforts by providing operator in-service training, comprehensive interactive eLearning for all monitoring products, software updates and upgrades and service training for customer biomedical staff and distributors.

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After the expiration of our standard product warranty periods, we are often engaged by customers, either directly or through our network of authorized service providers, to provide maintenance services for our security and inspection products.

In addition, we believe that our expertise in installing, maintaining and operating our security inspection products is an important factor for customers that are considering engaging us to provide turnkey security screening solutions.

We provide a variety of service and support options for our healthcare customers, including hospital on-site repair and maintenance service and telephone support, parts exchange programs for customers with the internal expertise to perform a portion of their own service needs and a depot repair center at our division headquarters.

In addition, we provide a variety of service and support options for our healthcare customers, including hospital on-site repair and maintenance service and telephone support, parts exchange programs for customers with the internal expertise to perform a portion of their own service needs and a depot repair center at our division headquarters.

We believe that our international maintenance service capabilities allow us to be competitive in selling our security and inspection systems as well as our patient monitoring, diagnostic cardiology, and connected care systems.

Furthermore, we believe that as the installed base of both our security and inspection systems and healthcare products increases, revenues generated from such annual maintenance service contracts and from the sale of replacement parts will increase.

Research and Development

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We seek to further enhance our research and development program and consider such program to be an important element of our business and operations.

As of June 30, 2020, we engaged approximately 488 full-time engineers, technicians and support staff.

We intend to continue to invest in our research and development efforts in the future.

Manufacturing and Materials

We currently manufacture our security and inspection systems domestically in California, Colorado, Kentucky, Massachusetts, and Tennessee, and internationally in Malaysia and the United Kingdom.

We currently manufacture our security and inspection systems domestically in California, Kentucky, Massachusetts, and Tennessee, and internationally in Malaysia and the United Kingdom.

We currently manufacture our patient monitoring and diagnostic cardiology systems in Washington state.

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Although to date none of our divisions has experienced any significant shortages or material delays in obtaining any of its materials, parts, or components, it is possible that we may face longer lead times, shortages, or price increases in one or more items in the future.

Information Technology and Cybersecurity Risk Management

We rely on digital technology to conduct our business operations and engage with our business partners.

The technology used by us and our business partners grows more complex over time and there are growing threats to our business operations from cyber intrusions, denial of service attacks, manipulation and other cyber misconduct.

Through a risk management approach that continually assesses and improves our information technology (IT) and cybersecurity risk deterrence capabilities, our information security and risk management teams provide oversight when managing IT and cybersecurity risks.

Through a combination of governance, risk and compliance (GRC) resources, we (i) proactively monitor IT controls to better ensure compliance with legal and regulatory requirements, (ii) assess adherence by third parties with which we partner to appropriate risk management standards, (iii) ensure essential business functions remain available during a business disruption and (iv) develop and update response plans to address potential weaknesses and IT or cyber incidents should they occur.

Our GRC resources are designed to prioritize IT and cybersecurity risk areas, identify solutions that minimize such risks, pursue optimal outcomes and maintain compliance with contractual obligations.

We also maintain an operational security function that has a real-time response capability that triages incident management and triggers impact mitigation protocols.

These capabilities allow us to reduce exposure in the case of a security incident.

For more information regarding the risks associated with these matters, see Item 1A.

“Risk Factors.”

Trademarks and Tradenames and Patents

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We have used, registered and applied to register certain trademarks and service marks to distinguish our products, technologies and services from those of our competitors in the United States and in foreign countries.

We enforce our trademark, service mark and trade name rights in the United States and abroad.

We monitor and, when necessary, enforce our trademark, service mark and trade name rights in the United States and abroad.

We possess rights to a number of U.S.

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Our current patents will expire at various times between 2021 and 2039.

However, it remains possible that pending patent applications or other applications that may be filed may not result in issued patents.

While we continue to file new applications and pursue new patents, it remains possible that pending patent applications or other applications that may be filed may not result in issued patents.

In addition, issued patents may not survive challenges to their validity or enforceability, or may be found to not be infringed by any third parties.

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The loss of some of our trademarks or patents might have a negative impact on our financial results and operations.

Nevertheless, with the exception of the loss of either the Spacelabs ® , Rapiscan ® , or AS&E ® trademarks, the impact of the loss of any single trademark or patent would not likely have a material adverse effect on our business.

Regulation of Medical Devices

Nevertheless, with the exception of the loss of the Spacelabs ® , Rapiscan ® , or AS&E ® trademarks, the impact of the loss of any single trademark or patent would not likely have a material adverse effect on our business.

Government Regulation of Medical Devices

The patient monitoring, diagnostic cardiology, and connected care systems we manufacture and market are subject to regulation by numerous government agencies, principally the U.S.

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By statute, the FDA is required to complete its review of, and clear or deny, a 510(k) notification within 90 days of receiving the 510(k) notification.

As a practical matter, clearance often takes longer, and clearance is never assured.

As a practical matter, clearance often takes longer and sometimes is not granted at all.

Although many 510(k) premarket notifications are cleared without clinical data, the FDA may require further information, including clinical data, to make a determination regarding substantial equivalence, which may significantly prolong the review process.

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Ongoing uncertainty regarding implementation of certain aspects of the Affordable Care Act makes it difficult to predict the impact the Affordable Care Act or state law proposals may have on our business.

The Trump administration and Congress have taken steps to modify many of the Affordable Care Act’s provisions.

Effective for the 2019 calendar year, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) repealed an Affordable Care Act tax imposed on individuals who do not maintain insurance coverage throughout the year.

The Trump administration has also taken steps to approve state requests to modify Medicaid eligibility standards, including by imposition of work and community engagement requirements.

In addition, the Trump administration has revised federal regulations to create more opportunities for individuals to purchase insurance outside of the individual and small group insurance markets through short-term, limited duration health insurance policies and association health plans.

This has created uncertainty in the market, which could result in reduced demand for our products, additional pricing pressure, and increased demand for new and more flexible payment structures.

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They particularly impact how we structure our sales offerings, including discount practices, customer support, education and training programs, physician consulting, research grants and other service arrangements.

If our operations are found to be in violation of any of the health regulatory laws described above or any other laws that apply to us, we may be subject to penalties, including potentially significant criminal and civil and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from participation in government healthcare programs, contractual damages, reputational harm, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.

If our operations are found to be in violation of any of the health regulatory laws described above or any other laws that apply to us, we may be subject to material penalties, including potentially significant criminal and civil and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from participation in government healthcare programs, contractual damages, reputational harm, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.

Additionally, there has been a trend towards increased federal and state regulation of payments and other transfers of value provided to healthcare professionals or entities.

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We have a dedicated team updating and revising key systems and processes to meet the new MDR requirements and timeline.

General Data Protection Regulation

The implementation on May 25, 2018 of the General Data Protection Regulation (“GDPR”), a regulation in the EU on data protection and privacy for all individuals in the EU and the European Economic Area (“EEA”), applies to all enterprises, regardless of location, that are doing business in the EU or that collect and analyze data tied to EU and EEA residents.

GDPR creates a range of new compliance obligations, including stringent technical and security controls surrounding the storage, use, and disclosure of personal information, and significantly increases financial penalties for noncompliance (including possible fines of up to 4% of global annual turnover for the preceding financial year or €20 million (whichever is higher) for the most serious infringements).

In July 2020, the European Commission invalidated the EU.-U.S.

Privacy Shield framework, of which we were registrants.

This has resulted in some uncertainty related to continuing obligations and future data transfer compliance obligations.

California Consumer Privacy Act

The California Consumer Privacy Act (“CCPA”) became effective on January 1, 2020 along with a number of complex privacy regulations affecting the processing of personal information of California residents.

If we fail to comply with the CCPA, we may be subject to significant financial penalties or adverse regulatory actions.

In addition to the CCPA, the California legislature is exploring additional regulations to expand the scope and depth of the state’s data protection controls.

Environmental Regulations

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In the security and inspection market, competition is based primarily on factors such as product performance, functionality and quality, government regulatory approvals and qualifications, the overall cost effectiveness of the system, prior customer relationships, technological capabilities of the products, price, local market presence, program execution capability, and breadth of sales and service organization.

We believe that our principal competitors in the market for security and inspection products are Smiths Detection, Leidos, CEIA, Nuctech, Gilardoni, VOTI Detection, Garrett Technologies, and Astrophysics.

Competition could result in price reductions, reduced margins and loss of market share.

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In the patient monitoring, diagnostic cardiology, and connected care markets, competition is also based on a variety of factors including product performance, functionality, value and breadth of sales and service organization.

We believe that our principal competitors in the market for patient monitoring and diagnostic cardiology systems and related supplies are Philips Healthcare, GE Healthcare, Nihon Kohden, Mindray Medical, Hill-Rom, and Dräger Medical.

Competition could result in price reductions, reduced margins and loss of our market share.

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We also believe that the capability of our monitoring systems to connect together, and to the hospital IT infrastructure, is a key competitive advantage.

Further, while some of our competitors are also beginning to introduce portal technology, which allows remote access to data from the bedside monitor, central station or other point of care, we believe that our competing technologies bring valuable, instant access to labs, radiology and charting at the point of care.

Further, while some of our competitors are also beginning to introduce portal technology, which allows remote access to data from the

bedside monitor, central station or other point of care, we believe that our competing technologies bring valuable, instant access to labs, radiology and charting at the point of care.

In the markets in which we compete to provide optoelectronic devices and electronics manufacturing services, competition is based primarily on factors such as expertise in the design and development of optoelectronic devices, product quality, timeliness of delivery, price, technical support and the ability to provide fully integrated services from application development and design through production.

We believe that our major competitors in the optoelectronic device markets are Hamamatsu Photonics, First Sensor and Excelitas Technologies.

Because we specialize in custom subsystems requiring a high degree of engineering expertise, we believe that we generally do not compete to any significant degree with any other large United States, European or Asian manufacturers of standard optoelectronic components.

Competition in the extensive electronic manufacturing services market ranges from multinational corporations with sales in excess of several billions of dollars, to large regional competitors and to small local assembly companies.

Competition in the extensive electronic manufacturing services market ranges from multinational corporations with sales in excess of several billion dollars, to large regional competitors and to small local assembly companies.

In our experience, the OEM customers to whom we provide such services prefer to engage companies that offer both local and lower-cost off-shore facilities.

We believe that our primary domestic competitors for these services are Flextronics, Benchmark Electronics, Plexus, Jabil, Qual Pro, ESC and Express Manufacturing Inc.

In addition, our high-volume, low-cost contract manufacturing locations in Southeast Asia compete with other manufacturers in the same region.

Along with a number of domestic competitors for these services, our high-volume, low-cost contract manufacturing locations in Southeast Asia compete with other manufacturers in the same region.

We currently measure our backlog as quantifiable purchase orders or contracts that have been signed, for which revenues are expected to be recognized within the next five years.

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and (vi) delays originating from other contractors on the project.

As of June 30, 2020, our consolidated backlog totaled approximately $861 million, compared to approximately $911 million as of June 30, 2019.

The COVID-19 pandemic exacerbated these challenges and may continue to do so until associated international travel restrictions and other protective measures subside.

As of June 30, 2021, our consolidated backlog totaled $1,076 million, compared to $861 million as of June 30, 2020.

Approximately $377 million of our backlog as of June 30, 2021 is not reasonably expected to be fulfilled in fiscal year 2022.

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Backlog as of any particular date should not be relied upon as indicative of our revenues for any future period and should not be considered a meaningful indicator of our performance on an annual or quarterly basis.

Human Capital

The strength and talent of our workforce are critical to the success of our businesses, and we continually strive to attract, develop and retain personnel commensurate with the needs of our businesses.

Our human capital management priorities are designed to support the execution of our business strategy and improve organizational effectiveness.

We support our employees’ financial, health, and social well-being through competitive compensation structures, including a robust employee stock purchase program and retirement benefits, as well as innovative health and well-being programs focused on promoting the physical and mental health of our workforce.

In addition, in response to COVID-19, we implemented changes to protect our employees and to support health and safety protocols.

We also strive to create opportunities for career development and growth.

We provide training and development programs to foster connections, leadership competency, and team and individual development, and we have a tuition reimbursement program to encourage ongoing education.

We understand the importance of a diverse workforce, and we are committed to upholding a culture of diversity, equity, and inclusion.

We value the unique contributions of every person, and we hold firm to the ideals of fairness, equal opportunity, and mutual respect for all forms of diversity and differing abilities.

We are committed to pay equity and protecting the rights of underrepresented groups within our organization, including women, racial and ethnic minorities, and members of the LGBTQ+ community.

Our broader diversity strategies include focus at all levels of our organization, including with senior management and our Board of Directors.

As of June 30, 2021, 49% of our global workforce was female and 54% of our U.S.

workforce was ethnically diverse.

As of June 30, 2021, we employed 6,778 people, of whom 4,158 were employed in manufacturing, 501 were employed in engineering or research and development, 626 were employed in administration, 366 were employed in sales and marketing and 1,127 were employed in service capacities.

Of the total employees, 2,182 were employed in the Americas, 3,763 were employed in Asia and 833 were employed in Europe.

Some of our employees in Europe have statutory collective bargaining rights.

We have never experienced a general work stoppage or strike, and management believes that our relations with our employees are good.

Available Information

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

What changed 10-K

Item 1. Business