What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-08-14 compared with 2020-05-13 · 128 added, 65 removed, 215 unchanged (47% of the section changed)

30 unchanged sentences

Impact of COVID-19

The unprecedented nature of the COVID-19 pandemic and its impact on the global economy has created a disruption to Varex’s business which includes significant uncertainty in demand for certain products for medical and industrial applications, as well as increased variability in its supply chain and manufacturing productivity.

The company expects this uncertainty to continue for at least the remainder of the current fiscal year.

accurately predicted, including the further mitigation efforts taken to contain it or treat its impact and the economic impact on local, regional, national and international markets.

The unprecedented nature of the COVID-19 pandemic and its impact on the global economy has created a disruption to Varex’s business which includes increased uncertainty in demand for certain products for medical and industrial applications, as well as increased variability in our supply chain and manufacturing productivity.

The economic downturn triggered by COVID-19 has led

to significantly lower demand from our customers and delays in equipment installations.

In conjunction with this reduced forecast and uncertainty beyond the forecast horizon, we evaluated our product offering and decided to discontinue certain low margin, low demand products.

As a result, we took approximately $16 million in reserves related to the write-down of the value of all associated inventory and any other associated assets.

The COVID-19 pandemic has had a significant effect on hospitals, clinics and outpatient imaging centers as they have encountered declines in surgeries and other elective procedures.

Subsequently, they have reduced their capital purchases of imaging equipment from OEM’s which has led to lower demand for x-ray imaging components.

Additionally, equipment installations were delayed, due to reduced access to healthcare institutions.

Partially offsetting this has been increased demand for imaging equipment used to diagnose respiratory diseases, such as radiographic x-ray imaging systems and CT imaging systems.

We expect uncertainty related to the COVID-19 pandemic to continue for at least the remainder of the current calendar year.

The Company expects uncertainty in demand to continue for at least the remainder of the current calendar year.

While we have implemented safeguards and procedures to counter the impact of the COVID-19 pandemic, the full extent to which the COVID-19 pandemic has and will directly or indirectly impact us, including our business, financial condition, and results of operations, will depend on future developments that are highly uncertain and cannot be estimated with certainty, including the further mitigation efforts taken to contain it or treat its impact and the economic impact on local, regional, national and international markets.

We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state, or local authorities or that we determine are in the best interests of our employees, customers, suppliers, and stockholders.

Subsequent Measurement of Goodwill

Goodwill is not amortized but is tested annually, or more often if impairment indicators are present, for impairment at a reporting unit level, based on a comparison of the fair value of the reporting unit with its carrying amount.

Goodwill is tested for impairment via a one-step process by comparing the fair value of goodwill with its carrying amount.

We recognize an impairment for the amount by which the carrying amount exceeds the fair value.

We generally use both an income approach utilizing the discounted cash flow method ("DCF") and a market approach utilizing the public company market multiple method, when testing for impairment.

In the third quarter of 2020, changes in facts and circumstances and general market declines from COVID-19 resulted in reduced operating results.

We considered these circumstances and the potential long-term impact on cash flows associated with our reporting units and determined that an indicator of possible impairment existed within our Medical and Industrial reporting units.

Accordingly, we performed a quantitative impairment analysis to determine the fair values of those reporting units.

We used both an income approach utilizing the discounted cash flow method ("DCF") and a market approach utilizing the public company market multiple method.

We developed multiple forecasted future cash flow scenarios for the reporting units with varied recovery timing and sales impact assumptions.

Based on the output of the analysis, we determined that the fair values of both the Medical and Industrial reporting units exceeded their carrying amounts.

Accordingly, no impairment charges were required as of July 3, 2020.

However, an impairment charge was required for the Company's in-process R&D.

The Company's Industrial reporting unit's fair value exceeded its carrying value by more than 20 % and the Company's Medical reporting unit's fair value exceeded its carrying value by more than 30 %.

The carrying amount of goodwill for the Medical and Industrial reporting units was $ 173.0 million and $ 117.8 million, respectively.

Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates, and market factors.

Estimating the fair value of individual reporting units requires us to make assumptions and estimates regarding our future plans, as well as industry, economic, and regulatory conditions.

These assumptions and estimates include estimated future annual net cash flows, income tax rates, discount rates, growth rates, market multiples, terminal value and other market factors.

This fair value measurement was based on significant inputs not observable in the market and thus represents a Level 3 fair value measurement.

If current expectations of future growth rates and margins, both in size and timing, are not met, if market factors outside of our control, such as discount rates, change, if market multiples decline, or if management’s expectations or plans otherwise change, including as a result of the development of our global five-year operating plan, then one or more of our reporting units might become impaired in the future.

The Company will continue to monitor the financial performance of and assumptions for its reporting units.

A future impairment charge for goodwill could have a material effect on the Company's consolidated financial position and results of operations.

Refer to Note 10, Goodwill and Intangible Assets for more information regarding goodwill.

Operating Segments and Products

12 unchanged sentences

To a much lesser extent, we also sell our X-ray imaging components to independent service companies, distributors and directly to end-users for replacement purposes.

The COVID-19 pandemic has had a significant effect on hospitals, clinics and outpatient imaging centers as they have encountered declines in surgeries and other elective procedures.

Subsequently, they have reduced their capital purchases of imaging equipment from OEM’s which has led to lower demand for x-ray imaging components.

Additionally, equipment installations were delayed, due to reduced access to healthcare institutions.

Partially offsetting this has been increased demand for imaging equipment used to diagnose respiratory diseases, such as radiographic x-ray imaging systems and CT imaging systems.

The Company expects uncertainty in demand to continue for at least the remainder of the current calendar year.

In China, the government is broadening the availability of healthcare services throughout the country.

9 unchanged sentences

The-end customers for border protection systems are typically government agencies, many of which are in oil-based economies and war zones where there has been significant year-over-year variation in buying patterns.

The non-destructive testing market utilizes X-ray imaging to scan items for inspection of manufacturing defects and product integrity in a wide range of industries including the aerospace, automotive, oil and gas, food packaging, metal castings and 3D printing

We provide X-ray sources, digital detectors, high voltage connectors and image processing software to OEM customers, system integrators and manufacturers.

In addition, new applications for X-ray sources are being developed, such as sterilization of food and its packaging.

The economic downturn triggered by the COVID-19 pandemic has reduced the demand for x-ray imaging equipment utilized in the non-destructive testing market as manufacturers have focused on cash preservation which includes reduced spending for capital equipment.

Additionally, the unprecedented decrease in passenger air traffic has led to decrease in demand in the security market.

The Company expects uncertainty in demand to continue for at least the remainder of the current calendar year.

Critical Accounting Policies and Estimates

6 unchanged sentences

Such accounting policies require us to use judgments, often as a result of the need to make estimates and assumptions regarding matters that are inherently uncertain, and actual results could differ materially from these estimates.

2016-02, Leases ("Topic 842"), referred to as ASC 842, effective September 28, 2019.

There have been no material changes to our critical accounting policies, estimates and assumptions or the judgments affecting the application of those estimates and assumptions since the filing of our Annual Report on Form 10-K for year ended September 27, 2019, except for the adoption of Accounting Standards Update ("ASU") 2016-02, Leases ("Topic 842"), referred to as ASC 842, effective September 28, 2019, and the adoptions of ASU 2017-04, Intan gibles - Goodwill and Other, which simplifies the test for goodwill impairment, effective April 4, 2020.

Our fiscal year is a 52 or 53-week period ending on the Friday nearest September 30.

1 unchanged sentence

Fiscal year 2019 was a 52-week period that ended on September 27, 2019.

The fiscal quarters ended April 3, 2020 and March 29, 2019 were both 13-week periods.

Discussion of Results of Operations for the Three Months Ended April 3, 2020 Compared to the Three Months Ended March 29, 2019

The fiscal quarters ended July 3, 2020 and June 28, 2019 were both 13-week periods.

Discussion of Results of Operations for the Three Months Ended July 3, 2020 Compared to the Three Months Ended June 28, 2019

Three Months Ended

(In millions) April 3, 2020 March 29, 2019 $ Change % Change

(In millions) July 3, 2020 June 28, 2019 $ Change % Change

$ 137.6 $ 151.6 $ (14.0) (9.2) %

3 unchanged sentences

Industrial as a percentage of total revenues 19.6 % 22.9 %

Medical revenues increased by $6.5 million primarily due to increased sales of CT X-ray tubes, partially offset by decreased sales of X-ray tubes and digital detectors for other medical applications.

Industrial revenues decreased $5.3 million primarily due to decreased sales of X-ray tubes, digital detectors and linear accelerators for non-destructive inspection.

Medical revenues decreased by $14.0 million primarily due to decreased sales of digital detectors for dynamic imaging applications, partially offset by increased sales of CT X-ray tubes and digital detectors for radiographic X-ray imaging applications.

Industrial revenues decreased $11.5 million primarily due to decreased sales of X-ray tubes, digital detectors and linear accelerators for security and non-destructive inspection applications.

Three Months Ended

(In millions) April 3, 2020 March 29, 2019 $ Change % Change

(In millions) July 3, 2020 June 28, 2019 $ Change % Change

$ 18.0 $ 44.2 $ (26.2) (59.3) %

5 unchanged sentences

Total gross margin % 15.4 % 30.9 %

The decrease in total gross margin percentage was due to the decrease in both medical and industrial gross margin percentage.

The decrease in medical gross margin percentage was primarily due to an unfavorable mix of lower margin products, higher material and freight costs and customer price decreases for digital detectors.

The industrial gross margin percentage decreased due to an unfavorable mix of lower margin products and higher material costs.

The decrease in total gross margin percentage was due to the decrease in both medical and industrial gross margin percentages.

The decrease in medical gross margin percentage was primarily due to an unfavorable mix of lower margin products and an approximate $13 million charge for the write-down of inventory associated with discontinued products and restructuring activity.

The industrial gross margin percentage decreased due to an unfavorable mix of lower margin products and an approximate $3 million charge for the write-down of inventory associated with discontinued products and restructuring activity.

Operating Expenses

Three Months Ended

(In millions) April 3, 2020 March 29, 2019 $ Change

(In millions) July 3, 2020 June 28, 2019 $ Change

Research and development $ 19.0 $ 20.9 $ (1.9) (9.1) %

As a percentage of total revenues

11.1 % 10.6 %

Selling, general and administrative $ 31.4 $ 31.2 $ 0.2 0.6 %

9 unchanged sentences

We are committed to investing in the business to support long-term growth and believe long-term research and development expenses of approximately 8% to 10% of annual revenues is the appropriate range that will allow us to innovate and bring new products to market for our global OEM customers.

Research and development costs increased to 10.6% of revenues for the second quarter of 2020 due to the addition of Direct Conversion.

On a dollar basis, research and development costs decreased for the third quarter, but because revenue declined, increased to 11.1% of revenues for the third quarter of 2020.

Selling, General and Administrative

Selling, general and administrative expenses for the second quarter of 2020 increased to 17.9% primarily due to increased consulting costs associated with the implementation of new accounting standards and the addition of Direct Conversion.

Selling, general and administrative expenses for the third quarter of 2020 increased to 18.3% of total revenues primarily due to lower revenues during the three months ended July 3, 2020.

Interest and Other Expense, Net

1 unchanged sentence

Three Months Ended

(In millions) April 3, 2020 March 29, 2019 $ Change

(In millions) July 3, 2020 June 28, 2019 $ Change

Interest income

$ 0.1 $ 0.1 $ —

Interest expense

(6.9) (5.1) (1.8)

Other income (expense), net

Other expense, net

(6.1) (0.1) (6.0)

1 unchanged sentence

$ (13.0) $ (5.2) $ (7.8)

Interest and other expense, net decreased, primarily due to an increase in other income during the three months ended April 3, 2020 due to a decrease in the fair value of the deferred consideration related to the Direct Conversion acquisition and lower interest expense due to lower interest rates.

Interest and other expense, net increased during the three months ended July 3, 2020.

Interest expense increased due to the interest related to our Convertible Notes issued during June 2020 and an increase in our interest rate margin during the three months ended July 3, 2020.

Other expense, net increased during the third quarter of 2020, due to the impairment of certain investments in privately-held companies, an increase in the fair value of the deferred consideration related to the Direct Conversion acquisition and a decrease in our income from investments in privately-held companies.

Taxes on (Loss) Earnings

For the three months ended April 3, 2020, we recognized an income tax expense of $0.7 million on a $1.1 million pre-tax loss primarily due to losses in certain jurisdictions for which no benefit can be recorded due to full valuation allowance positions and overall pre-tax book loss.

For the three months ended March 29, 2019, we recognized an income tax expense of $1.9 million on $7.8 million of pre-tax income.

Discussion of Results of Operations for the Six Months Ended April 3, 2020 Compared to the Six Months Ended March 29, 2019

Six Months Ended

(In millions) April 3, 2020 March 29, 2019 $ Change % Change

For the three months ended July 3, 2020, we recognized an income tax benefit of $11.6 million on a $39.8 million pre-tax loss.

For the three months ended June 28, 2019, we recognized an income tax benefit of $0.7 million on $0.6 million of pre-tax loss.

Discussion of Results of Operations for the Nine Months Ended July 3, 2020 Compared to the Nine Months Ended June 28, 2019

Nine Months Ended

(In millions) July 3, 2020 June 28, 2019 $ Change % Change

$ 448.6 $ 444.4 $ 4.2 0.9 %

5 unchanged sentences

Industrial revenues decreased $14.1 million due to decreased sales of linear accelerators for cargo inspection and other non-destructive inspection applications.

Six Months Ended

(In millions) April 3, 2020 March 29, 2019 $ Change % Change

Nine Months Ended

(In millions) July 3, 2020 June 28, 2019 $ Change % Change

$ 105.2 $ 135.4 $ (30.2) (22.3) %

6 unchanged sentences

The decrease in total gross margin percentage was due to the decrease in both medical and industrial gross margin percentage.

The decrease in medical gross margin percentage was primarily due to an unfavorable mix of lower margin products, additional reserves for the settlement of a German customs audit, higher warranty and slow-moving inventory reserves and customer price decreases for digital detectors.

The industrial gross margin percentage decreased due to an unfavorable mix of lower margin products.

The decrease in medical gross margin percentage was primarily due to an unfavorable mix of lower margin products, additional reserves for the settlement of a German customs audit, higher warranty and slow-moving inventory reserves, the write-down of inventory associated with discontinued products, and customer price decreases for digital detectors.

The industrial gross margin percentage decreased due to an unfavorable mix of lower margin products and the write-down of inventory associated with discontinued products..

Operating Expenses

Six Months Ended

(In millions) April 3, 2020 March 29, 2019 $ Change

Nine Months Ended

(In millions) July 3, 2020 June 28, 2019 $ Change

Research and development

1 unchanged sentence

As a percentage of total revenues

10.8 % 10.1 %

Selling, general and administrative

10 unchanged sentences

Research and development costs increased to 10.7% of revenues due to the addition of Direct Conversion for the six months ended April 3, 2020.

Research and development costs increased to 10.8% of revenues due to the addition of Direct Conversion for the nine months ended July 3, 2020.

Selling, General and Administrative

Selling, general and administrative expenses for the six months ended April 3, 2020, increased to 17.7% primarily due to higher audit and consulting fees, an extra week of expenses in the period and the addition of Direct Conversion.

Selling, general and administrative expenses for the nine months ended July 3, 2020, increased to 17.9% primarily due to higher audit and consulting fees, an extra week of expenses in the period and the addition of Direct Conversion.

Interest and Other Income (Expense), Net

The following table summarizes the Company’s interest and other income (expense), net:

Six Months Ended

(In millions) April 3, 2020 March 29, 2019 $ Change

Nine Months Ended

(In millions) July 3, 2020 June 28, 2019 $ Change

Interest income

2 unchanged sentences

(16.9) (15.7) (1.2)

Other income (expense), net

Other expense, net

(4.5) (2.6) (1.9)

1 unchanged sentence

$ (21.3) $ (18.2) $ (3.1)

Interest and other expense, net decreased, primarily due to an increase in other income during the six months ended April 3, 2020, due to a decrease in the fair value of the deferred consideration related to the Direct Conversion acquisition and a decrease in losses from equity method investments compared to the six months ended March 29, 2019.

Interest and other expense, net increased during the nine months ended July 3, 2020.

Interest expense increased due to the interest related to our Convertible Notes issued during June 2020.

Other expense, net increased during the nine months ended July 3, 2020 due to the impairment of certain investments in privately-held companies and a decrease in the fair value of the deferred consideration related to the Direct Conversion acquisition.

Taxes on (Loss) Earnings

For the six months ended April 3, 2020, we recognized an income tax expense of $0.7 million on $2.3 million of pre-tax loss before tax primarily due to losses in certain jurisdictions for which no benefit can be recorded due to full valuation allowance positions and overall pre-tax book loss.

For the six months ended March 29, 2019, the Company recognized income tax expense of $3.0 million on $11.9 million of pre-tax income.

For the nine months ended July 3, 2020, we recognized an income tax benefit of $(10.9) million on $42.1 million of pre-tax loss before tax.

For the nine months ended June 28, 2019, the Company recognized income tax expense of $3.7 million on $11.3 million of pre-tax income.

Liquidity and Capital Resources

We assess our liquidity in terms of our ability to generate cash to fund our operating and investing activities.

We continue to generate substantial cash from operating activities and believe that our operating cash flow, credit facility, and other sources of liquidity will be sufficient to allow us to continue to operate our business and manage our capital structure on a short and long-term basis.

As part of a series of measures to better enable the Company to weather the extraordinary business challenges associated with the COVID-19 global pandemic, we have taken additional measures to manage our cash.

These measures include temporary reductions to employee compensation and matching retirement contributions, as well as furloughs and mandatory unpaid leave for U.S.

employees that are not directly related to the production of our products.

Further, during April 2020, we drew an additional $65.0 million under our Revolving Credit Facility, primarily as a precautionary measure, to increase liquidity and fund operations.

We continue to evaluate additional cash preserving actions and other sources of capital as needed to secure liquidity in a rapidly changing environment.

These measures include temporary reductions to employee compensation and matching retirement contributions, as well as furloughs, mandatory unpaid leave for U.S.

employees that are not directly related to the production of our products and a reduction of the Company’s workforce by approximately 94 employees.

continue to evaluate additional cash preserving actions and other sources of capital as needed to secure liquidity in a rapidly changing environment.

The Company’s Credit Agreement, as defined in Note 11, Borrowings, contains financial covenants, including certain leverage ratio covenants.

The Company was in compliance with all financial covenants as of July 3, 2020.

However, the adverse effects of the COVID-19 pandemic on the Company’s financial condition and results of operations are expected to be more persistent and have been more severe than previously estimated in the prior quarter forecasted financial results.

Specifically, in conjunction with analyzing the results for the Company’s third quarter, the Company now believes that reduced demand in the Company’s industrial segment and for certain higher end medical products will continue to negatively impact revenues, gross margin and the other items used to calculate the Company’s financial covenants contained in its Credit Agreement.

Based on the Company’s current forecasts, it is probable that the Company will be in violation of certain leverage ratio covenants contained in its Credit Agreement within the twelve-month period following the issuance of these financial statements, including as early as the end of the Company's fiscal year end 2020.

Failure to comply with the covenants, if not amended or waived, would result in an event of default under the Credit Agreement and the acceleration of the outstanding balance of the loans thereunder.

If an event of default under the Credit Agreement occurs, then pursuant to cross default and/or cross acceleration clauses, substantially all of the Company’s other outstanding debt and derivative contract payables would become due, and all debt and derivative contracts could be terminated, which would have a material adverse impact to the Company’s operations and liquidity as the Company currently does not have the financial resources to satisfy such obligations if they were to become due and payable.

These events and conditions raise substantial doubt about the Company’s ability to continue as a going concern within the twelve-month period following the issuance of these financial statements.

The Company is actively pursuing various options to prevent an event of default from occurring under the Credit Agreement.

The Company is implementing actions to improve its financial results and other items used to calculate the financial covenants,, such as accelerating the closure of its Santa Clara facility, the previously announced reduction in force, austerity programs related to outside services, and other appropriate actions.

The Company is also taking actions to improve cash flow such as working capital reductions and reduced spending for property, plant and equipment, as well as pursuing potential additional fundraising to modify, supplement, or replace its Credit Agreement.

While the Company has and continues to take actions to mitigate the risk of an event of default under the Credit Agreement, there is no assurance that it will be successful in doing so.

The Company’s unaudited condensed consolidated financial statements have been prepared on a going concern basis and do not reflect any adjustments that might result if the Company is unable to continue as a going concern.

Cash and Cash Equivalents

The following table summarizes our cash and cash equivalents:

(In millions) April 3, 2020 September 27, 2019 $ Change

(In millions) July 3, 2020 September 27, 2019 $ Change

Cash and cash equivalents

2 unchanged sentences

(In millions)

April 3, 2020 September 27, 2019 $ Change

July 3, 2020 September 27, 2019 $ Change

Current portion of Term Facility

2 unchanged sentences

Revolving Credit Facility

— 59.0 (59.0)

Long-term portion of Term Facility

238.7 308.6 (69.9)

Convertible Notes 200.0 — 200.0

Long-term portion of other debt

1 unchanged sentence

474.5 400.8 73.7

Debt issuance costs

Debt issuance costs - Credit Agreement

(5.0) (5.7) 0.7

Unamortized discount - Convertible Notes (52.4) — (52.4)

Total debt outstanding, net

$ 417.1 $ 395.1 $ 22.0

Six Months Ended

(In millions) April 3, 2020 March 29, 2019

Nine Months Ended

(In millions) July 3, 2020 June 28, 2019

Net cash flow provided by (used in):

2 unchanged sentences

Investing activities

Financing activities

(23.2) (86.4)

Financing activities

Effects of exchange rate changes on cash and cash equivalents and restricted cash

3 unchanged sentences

Cash from operating activities consists primarily of the net (loss) earnings adjusted for certain non-cash items, including share-based compensation, depreciation, amortization of intangible assets, deferred income taxes, income from equity investments and the effect of changes in operating assets and liabilities.

For the six months ended April 3, 2020, compared to the six months ended March 29, 2019, cash provided by operating activities were as follows:

For the nine months ended July 3, 2020, compared to the nine months ended June 28, 2019, cash provided by operating activities were as follows:

• Net (loss) earnings were $(31.2) million compared to $7.6 million

3 unchanged sentences

◦ Inventories increased by $50.1 million compared to $26.2 million,

◦ Prepaid expenses and other assets increased by $5.9 million compared to a decrease of $2.5 million,

◦ Prepaid expenses and other assets decreased by $7.7 million compared to an increase of $4.7 million,

◦ Accounts payable increased by $21.7 million compared to a decrease of $4.3 million, and

1 unchanged sentence

Net Cash Used in Investing Activities.

Net cash used in investing activities was $17.3 million and $7.6 million for the six months ended April 3, 2020 and March 29, 2019, respectively.

The increase in cash used in investing activities was primarily due to higher capital expenditures for property plant and equipment, investments in joint ventures and a business acquisition during the six months ended April 3, 2020.

Net Cash Used in Financing Activities.

Financing activities for the six months ended April 3, 2020 consisted of borrowings under our credit agreement of $23.5 million and repayments of borrowings of $36.5 million.

Financing activities for the six months ended March 29, 2019 consisted of borrowings under our credit agreement of $7.0 million, and repayments of borrowings of $52.0 million.

Net cash used in investing activities was $23.2 million and $86.4 million for the nine months ended July 3, 2020 and June 28, 2019, respectively.

The decrease in cash used in investing activities was primarily due to a business acquisition during the nine months ended June 28, 2019.

Net Cash Provided by Financing Activities.

Financing activities for the nine months ended July 3, 2020 consisted of the issuance of $200.0 million in aggregate principal amount of 4.00% unsecured convertible senior notes due 2025 (“Convertible Notes”).

The net proceeds from the issuance of the Convertible Notes, after deducting transaction fees, were approximately $193.1 million.

In connection with offering the Convertible Notes, we separately entered into privately negotiated convertible note hedge transactions (collectively, the “Hedge Transactions”).

The Hedge Transactions cover, subject to customary anti-dilution adjustments, the number of shares of our common stock that initially underlie the Convertible Notes.

We also entered into warrant transactions (collectively, the “Warrant Transactions” and, together with the Hedge Transactions, the “Call Spread Transactions”), whereby we sold warrants at a higher strike price relating to the same number of shares of our common stock that initially underlie the Convertible Notes, subject to customary anti-dilution adjustments.

We used $11.2 million of the net proceeds from the issuance of the Convertible Notes to pay the cost of the Call Spread Transactions.

Additionally, during the nine months ended July 3, 2020, we had borrowings under our credit agreement of $91.7 million and repayments of borrowings of $218.0 million.

Financing activities for the nine months ended June 28, 2019 consisted of borrowings under our credit agreement of $79.0 million, and repayments of borrowings of $65.7 million.

Days Sales Outstanding

Trade accounts receivable days sales outstanding (“DSO”) was 59 days at April 3, 2020 and 63 days at September 27, 2019.

Trade accounts receivable days sales outstanding (“DSO”) was 58 days at July 3, 2020 and 63 days at September 27, 2019.

Our accounts receivable and DSO are impacted by a number of factors, primarily including the timing of product shipments, collections performance, payment terms, the mix of revenues from different regions and the effects of economic instability.

3 unchanged sentences

In January 2020, the fixed cost commitment was determined and approved by the dpiX board of directors to be $12.7 million for calendar year 2020.

As of April 3, 2020, the Company had $9.5 million fixed cost commitments related to this agreement remaining for calendar year 2020.

As of July 3, 2020, the Company had $6.4 million fixed cost commitments related to this agreement remaining for calendar

The amended agreement will continue unless the ownership structure of dpiX changes (as defined in the amended agreement).

2 unchanged sentences

and (2) a put right for their MeVis shares at €19.77 per MeVis share.

As of April 3, 2020, noncontrolling shareholders together held approximately 0.5 million shares of MeVis, representing 26.5% of the outstanding shares.

As of July 3, 2020, noncontrolling shareholders together held approximately 0.5 million shares of MeVis, representing 26.5% of the outstanding shares.

See Note 12, “Redeemable Noncontrolling Interests” of the notes to the condensed consolidated financial statements for more information.

6 unchanged sentences

Except for losses related to property damages, the maximum potential amount of future payments we could be required to make under these arrangements is unlimited.

As of April 3, 2020, we have not incurred any material costs to defend lawsuits or settle claims related to these indemnification arrangements.

As of July 3, 2020, we have not incurred any material costs to defend lawsuits or settle claims related to these indemnification arrangements.

As a result, we believe the estimated fair value of these arrangements is minimal.

1 unchanged sentence

There is no maximum limit on the indemnification that may be required under these obligations.

As of April 3, 2020, we have not incurred any material costs related to these indemnification obligations.

As of July 3, 2020, we have not incurred any material costs related to these indemnification obligations.

As a result, we believe the estimated fair value of these obligations is minimal.

2 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis