What changed in this filing

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Item 1. Financial Statements

2021-05-05 compared with 2021-02-05 · 260 added, 166 removed, 547 unchanged (44% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

(In millions, except per share amounts) January 1, 2021 January 3, 2020

Three Months Ended Six Months Ended

(In millions, except per share amounts) April 2, 2021 April 3, 2020 April 2, 2021 April 3, 2020

Revenues, net

1 unchanged sentence

Cost of revenues

138.9 139.4 258.8 278.4

Gross profit 64.6 57.6 121.8 118.7

3 unchanged sentences

Total operating expenses

Operating earnings 6.1 4.6

Interest expense

48.8 56.2 99.9 112.7

Other expense, net

Operating income 15.8 1.4 21.9 6.0

Interest income

Interest expense

( 10.4 ) ( 4.6 ) ( 20.7 ) ( 10.0 )

Other (expense) income, net ( 2.2 ) 2.0 ( 2.7 ) 1.6

Interest and other expense, net

( 12.6 ) ( 2.5 ) ( 23.4 ) ( 8.3 )

Loss before taxes ( 4.7 ) ( 1.2 )

Income (loss) before taxes 3.2 ( 1.1 ) ( 1.5 ) ( 2.3 )

Income tax expense — 0.7 1.6 0.7

Net loss ( 6.3 ) ( 1.2 )

Net earnings attributable to noncontrolling interests

Net loss attributable to Varex $ ( 6.4 ) $ ( 1.3 )

Net loss per common share attributable to Varex

Net income (loss) 3.2 ( 1.8 ) ( 3.1 ) ( 3.0 )

Net income attributable to noncontrolling interests 0.1 0.1 0.2 0.2

Net income (loss) attributable to Varex $ 3.1 $ ( 1.9 ) $ ( 3.3 ) $ ( 3.2 )

Net income (loss) per common share attributable to Varex

Basic $ 0.08 $ ( 0.05 ) $ ( 0.09 ) $ ( 0.08 )

3 unchanged sentences

Diluted 40.0 38.6 39.2 38.5

See accompanying notes to the condensed consolidated financial statements.

See accompanying notes to the unaudited condensed consolidated financial statements.

VAREX IMAGING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Three Months Ended

(In millions) January 1, 2021 January 3, 2020

Net loss $ ( 6.3 ) $ ( 1.2 )

Other comprehensive loss, net of tax:

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended Six Months Ended

(In millions) April 2, 2021 April 3, 2020 April 2, 2021 April 3, 2020

Net income (loss) $ 3.2 $ ( 1.8 ) $ ( 3.1 ) $ ( 3.0 )

Other comprehensive (loss) income, net of tax:

Unrealized loss on interest rate swap contracts — ( 2.3 ) — ( 2.3 )

Foreign currency translation adjustments ( 0.7 ) 5.2 ( 0.6 ) 4.3

Other comprehensive earnings (loss), net of tax 0.1 ( 0.9 )

Comprehensive loss ( 6.2 ) ( 2.1 )

Comprehensive earnings attributable to noncontrolling interests

Comprehensive loss attributable to Varex $ ( 6.3 ) $ ( 2.2 )

See accompanying notes to the condensed consolidated financial statements.

Other comprehensive (loss) income, net of tax ( 0.7 ) 2.9 ( 0.6 ) 2.0

Comprehensive income (loss) 2.5 1.1 ( 3.7 ) ( 1.0 )

Comprehensive income attributable to noncontrolling interests 0.1 0.1 0.2 0.2

Comprehensive income (loss) attributable to Varex $ 2.4 $ 1.0 $ ( 3.9 ) $ ( 1.2 )

See accompanying notes to the unaudited condensed consolidated financial statements.

VAREX IMAGING CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share and per share amounts) January 1, 2021 October 2, 2020

(In millions, except share and per share amounts) April 2, 2021 October 2, 2020

Current assets:

Cash and cash equivalents $ 111.1 $ 100.6

$ 105.5 $ 100.6

Accounts receivable, net of allowance for doubtful accounts of $ 0.7 million and $ 0.3 million at January 1, 2021 and October 2, 2020, respectively

Accounts receivable, net of allowance for credit losses of $ 0.8 million and $ 0.3 million at April 2, 2021 and October 2, 2020, respectively

Prepaid expenses and other current assets

4 unchanged sentences

Deferred tax assets

Operating lease assets

Operating lease right-of-use assets 26.9 27.7

$ 1,132.6 $ 1,139.5

18 unchanged sentences

150,000,000 shares authorized

Shares issued and outstanding - 39,184,538 and 39,059,094 at January 1, 2021 and October 2, 2020, respectively.

Shares issued and outstanding - 39,300,288 and 39,059,094 at April 2, 2021 and October 2, 2020, respectively.

Additional paid-in capital 441.3 434.4

5 unchanged sentences

Total liabilities and stockholders' equity $ 1,132.6 $ 1,139.5

See accompanying notes to the condensed consolidated financial statements.

See accompanying notes to the unaudited condensed consolidated financial statements.

VAREX IMAGING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

(In millions) January 1, 2021 January 3, 2020

Six Months Ended

(In millions) April 2, 2021 April 3, 2020

Cash flows from operating activities:

5 unchanged sentences

Deferred taxes 0.1 0.3

Loss (gain) from equity method investments 1.7 ( 0.7 )

Loss from equity method investments 2.5 0.7

Amortization of debt issuance costs and discounts 4.9 1.2

Inventory write-down 3.5 —

Other, net 1.0 0.2

10 unchanged sentences

Acquisitions of businesses, net of cash acquired — ( 1.2 )

Investments in privately-held companies — ( 1.3 )

Investments and loans to privately-held companies ( 0.6 ) ( 1.9 )

Net cash used in investing activities ( 8.4 ) ( 17.3 )

2 unchanged sentences

Repayments of borrowing under credit agreements ( 1.5 ) ( 36.5 )

Payment of debt issuance costs — ( 0.5 )

Proceeds from exercise of stock options — 1.5

Proceeds from shares issued under employee stock purchase plan 1.2 1.8

Taxes related to net share settlement of equity awards ( 1.5 ) ( 1.8 )

Other financing activities ( 0.7 ) ( 0.1 )

Net cash provided by (used in) financing activities 2.2 ( 12.0 )

Net cash used in financing activities ( 1.0 ) ( 12.1 )

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

Net increase in cash and cash equivalents and restricted cash 4.9 0.1

Net increase (decrease) in cash and cash equivalents and restricted cash 10.5 ( 5.7 )

Cash and cash equivalents and restricted cash at beginning of period

6 unchanged sentences

Purchases of property, plant and equipment financed through accounts payable $ 0.4 $ 0.9

See accompanying notes to the condensed consolidated financial statements.

See accompanying notes to the unaudited condensed consolidated financial statements.

VAREX IMAGING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Three Months Ended January 1, 2021

Three Months Ended April 2, 2021

Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income Retained Earnings Total Varex Equity Noncontrolling Interests Total Equity

(In millions) Shares Amount

October 2, 2020 39.1 $ 0.4 $ 434.4 $ 0.8 $ 16.1 $ 451.7 $ 14.1 $ 465.8

Net loss — — — — ( 6.4 ) ( 6.4 ) 0.1 ( 6.3 )

Common stock issued under employee stock purchase plan

January 1, 2021 39.2 $ 0.4 $ 439.2 $ 0.9 $ 9.7 $ 450.2 $ 14.2 $ 464.4

Net income — — — — 3.1 3.1 0.1 3.2

Common stock issued upon vesting of restricted shares 0.2 — — — — — — —

Shares withheld on vesting of restricted stock

( 0.1 ) — ( 1.5 ) — — ( 1.5 ) — ( 1.5 )

3 unchanged sentences

— — — ( 0.7 ) — ( 0.7 ) — ( 0.7 )

— — — — — — ( 0.1 ) ( 0.1 )

April 2, 2021 39.3 $ 0.4 $ 441.3 $ 0.2 $ 12.8 $ 454.7 $ 14.2 $ 468.9

Three Months Ended April 3, 2020

Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Retained Earnings Total Varex Equity Noncontrolling Interests Total Equity

(In millions) Shares Amount

January 3, 2020 38.5 $ 0.4 $ 377.6 $ ( 2.6 ) $ 72.5 $ 447.9 $ 3.3 $ 451.2

Three Months Ended January 3, 2020

Cumulative effect of accounting changes — — — — 0.3 0.3 — 0.3

Net loss — — — — ( 1.9 ) ( 1.9 ) ( 0.1 ) ( 2.0 )

Exercise of stock options — — 0.3 — — 0.3 — 0.3

Common stock issued upon vesting of restricted shares

0.2 — — — — — — —

Shares withheld on vesting of restricted stock — — ( 1.7 ) — — ( 1.7 ) — ( 1.7 )

Share-based compensation — — 3.3 — — 3.3 — 3.3

Unrealized loss on interest rate swap contracts, net of tax

— — — ( 2.3 ) — ( 2.3 ) — ( 2.3 )

Currency translation adjustments

— — — 5.2 — 5.2 — 5.2

April 3, 2020 38.7 $ 0.4 $ 379.5 $ 0.3 $ 70.9 $ 451.1 $ 3.2 $ 454.3

See accompanying notes to the unaudited condensed consolidated financial statements.

VAREX IMAGING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Six Months Ended April 2, 2021

Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Retained Earnings Total Varex Equity Noncontrolling Interests Total Equity

(In millions) Shares Amount

October 2, 2020 39.1 $ 0.4 $ 434.4 $ 0.8 $ 16.1 $ 451.7 $ 14.1 $ 465.8

Net (loss) income — — — — ( 3.3 ) ( 3.3 ) 0.2 ( 3.1 )

Common stock issued upon vesting of restricted shares 0.2 — — — — — — —

Shares withheld on vesting of restricted stock ( 0.1 ) — ( 1.5 ) — — ( 1.5 ) — ( 1.5 )

Common stock issued under employee stock purchase plan 0.1 — 1.2 — — 1.2 — 1.2

Share-based compensation — — 7.2 — — 7.2 — 7.2

Currency translation adjustments — — — ( 0.6 ) — ( 0.6 ) — ( 0.6 )

Other — — — — — — ( 0.1 ) ( 0.1 )

April 2, 2021 39.3 $ 0.4 $ 441.3 $ 0.2 $ 12.8 $ 454.7 $ 14.2 $ 468.9

Six Months Ended April 3, 2020

Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total Varex Equity Noncontrolling Interests Total Equity

(In millions) Shares Amount

September 27, 2019 38.4 $ 0.4 $ 371.8 $ ( 1.7 ) $ 74.4 $ 444.9 $ 3.3 $ 448.2

Cumulative effect of accounting changes — — — — ( 0.6 ) ( 0.6 ) — ( 0.6 )

Cumulative effect of accounting change — — — — ( 0.3 ) ( 0.3 ) — ( 0.3 )

Net loss — — — — ( 3.2 ) ( 3.2 ) ( 0.1 ) ( 3.3 )

Exercise of stock options 0.1 — 1.5 — — 1.5 — 1.5

Common stock issued upon vesting of restricted shares 0.2 — — — — — — —

Shares withheld on vesting of restricted stock ( 0.1 ) — ( 1.8 ) — — ( 1.8 ) — ( 1.8 )

Common stock issued under employee stock purchase plan 0.1 — 1.8 — — 1.8 — 1.8

Share-based compensation — — 6.5 — — 6.5 — 6.5

Unrealized loss on interest rate swap contracts, net of tax — — — ( 2.3 ) — ( 2.3 ) — ( 2.3 )

Currency translation adjustments — — — 4.3 — 4.3 — 4.3

— — — ( 0.9 ) — ( 0.9 ) — ( 0.9 )

Other — — ( 0.3 ) — — ( 0.3 ) — ( 0.3 )

January 3, 2020 38.5 $ 0.4 $ 377.6 $ ( 2.6 ) $ 72.5 $ 447.9 $ 3.3 $ 451.2

See accompanying notes to the condensed consolidated financial statements.

April 3, 2020 38.7 $ 0.4 $ 379.5 $ 0.3 $ 70.9 $ 451.1 $ 3.2 $ 454.3

See accompanying notes to the unaudited condensed consolidated financial statements.

VAREX IMAGING CORPORATION

1 unchanged sentence

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Bus iness

Description of Business

Varex Imaging Corporation (the “Company,” “Varex” or “Varex Imaging”) designs, manufactures, sells and services a broad range of medical products, which include X-ray tubes, digital detectors and accessories, high voltage connectors, image processing software and workstations, computer-aided diagnostic software, collimators, automatic exposure control devices, generators, ionization chambers and buckys, for use in a range of applications, including radiographic or fluoroscopic imaging, mammography, computed tomography, oncology and computer-aided detection.

3 unchanged sentences

The Company conducts an active research and development program to focus on new technology and applications in both the medical and industrial X-ray imaging markets.

Basis of Presentation and Principle of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

In the opinion of management, these condensed consolidated financial statements include all adjustments necessary for a fair statement of the results for the interim periods.

These condensed consolidated financial statements and the accompanying notes are unaudited and should be read in conjunction with the consolidated financial statements for the fiscal years ended 2020, 2019 and 2018 included in the Company’s Annual Report on Form 10-K, which was filed with the SEC on November 30, 2020.

Basis of Presentation

Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements.

In the opinion of management, these condensed consolidated financial statements include all adjustments necessary for a fair presentation of the results for the interim periods.

These condensed consolidated financial statements and the accompanying notes are unaudited and should be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended 2020 included in the Company’s Annual Report on Form 10-K, which was filed with the SEC on November 30, 2020.

The Company considers events or transactions that occur after the balance sheet date, but before the financial statements are issued, to provide additional evidence relative to certain estimates or to identify matters that require additional disclosures.

7 unchanged sentences

Fiscal year 2020 was the 53-week period that ended on October 2, 2020.

The fiscal quarters ended January 1, 2021 and January 3, 2020 were 13-week and 14-week periods, respectively.

The fiscal quarters ended April 2, 2021 and April 3, 2020 were both 13-week periods.

The two fiscal quarters ended April 2, 2021 and April 3, 2020 were 26 weeks and 27 weeks, respectively.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods.

Such estimates include the valuation of inventories, goodwill and intangible assets, warranties, contract liabilities, long-lived asset valuations, impairment on investments, financial instruments, and taxes on earnings.

Such estimates include the valuation of inventories, valuation of goodwill and intangible assets, warranties, contract liabilities, long-lived asset valuations, impairment on investments, valuation of financial instruments, and taxes on earnings.

Actual results could differ from these estimates.

3 unchanged sentences

the magnitude and duration of COVID-19, the extent to which it will impact worldwide macroeconomic conditions including interest rates and unemployment rates, the speed of the economic recovery, and governmental and business reactions to the pandemic.

As a result of the economic downturn resulting from COVID-19, the Company has experienced reduced demand in its Industrial segment and for certain higher-end medical products that negatively impacted revenues and gross margin.

As a result of the economic downturn resulting from COVID-19, the Company experienced reduced demand in its Industrial segment and for certain higher-end medical products that negatively impacted revenues and gross margin.

The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company, including the estimated future impacts of COVID-19 through the date of filing this report.

The accounting matters assessed included, but were not limited to, the Company’s carrying value of goodwill, intangibles, long-lived assets, equity method investments, inventory and related reserves, and allowance for doubtful accounts.

While there was no direct impairments or adjustments related to COVID-19 recorded in the Company’s consolidated financial statements for the three months ended January 1, 2021, the Company’s future assessment of the magnitude and duration of COVID-19, as well as other factors, could result in material negative impacts to the Company’s condensed consolidated financial statements in future reporting periods.

The Company’s assessment of the magnitude and duration of COVID-19, as well as other factors, could result in material negative impacts to the Company’s condensed consolidated financial statements in future reporting periods.

These future developments are highly uncertain and the outcomes cannot be estimated with certainty.

6 unchanged sentences

Cash and cash equivalents and restricted cash as reported within the condensed consolidated statements of cash flows consisted of the following:

Three Months Ended January 1, 2021 Three Months Ended January 3, 2020

Six Months Ended April 2, 2021 Six Months Ended April 3, 2020

(In millions) Beginning of Period End of Period Beginning of Period End of Period

7 unchanged sentences

The Company performs ongoing credit evaluations of its customers and, except for government tenders, group purchases and orders with a letter of credit, its industrial customers often provide a down payment.

The Company maintains an allowance for doubtful accounts based upon the expected collectability of all accounts receivable.

The Company maintains an allowance for credit losses based upon the expected collectability of all accounts receivable.

The Company obtains some of the components in its products from a limited group of suppliers or from a single-source supplier.

1 unchanged sentence

Credit is extended to customers based on an evaluation of the customer’s financial condition, and collateral is not required.

During the periods presented, one of the Company's Medical segment customers accounted for a significant portion of revenues, which is as follows:

Three Months Ended

January 1, 2021 January 3, 2020

During the periods presented, one of the Company's customers accounted for a significant portion of revenues, which is as follows:

Three Months Ended Six Months Ended

April 2, 2021 April 3, 2020 April 2, 2021 April 3, 2020

Canon Medical Systems Corporation

17.8 % 23.0 % 17.2 % 20.9 %

Canon Medical Systems Corporation accounted for 17.0 % and 12.0 % of the Company’s accounts receivable as of January 1, 2021 and October 2, 2020, respectively.

Canon Medical Systems Corporation accounted for 14.6 % and 12.0 % of the Company’s consolidated accounts receivable as of April 2, 2021 and October 2, 2020, respectively.

The Company accounts for its equity investments in privately-held companies under the equity method of accounting if the Company has the ability to exercise significant influence in these investments.

1 unchanged sentence

The Company reviews its equity investments in privately-held companies for impairment whenever events or changes in business circumstances are other than temporary and indicate that the carrying amount of the investments may not be fully recoverable.

There were no impairments recorded during the three-month periods ended January 1, 2021 and January 3, 2020, respectively.

There were no impairments recorded during the three and six months ended April 2, 2021 and April 3, 2020, respectively.

Loss Contingencies

11 unchanged sentences

The following table reflects the changes in the Company’s accrued product warranty:

Three Months Ended

(In millions) January 1, 2021 January 3, 2020

Six Months Ended

(In millions) April 2, 2021 April 3, 2020

Accrued product warranty, at beginning of period

Charged to cost of revenues

New accruals charged to cost of revenues 6.1 7.2

Product warranty expenditures

51 unchanged sentences

Contract assets are included within the prepaid expenses and other current assets, and other assets balances in the condensed consolidated balance sheets.

Contract liabilities, which also includes refund obligations, are included within the accrued liabilities and other current liabilities, deferred revenues, and other long-term liabilities balances in the condensed consolidated balance sheets.

Contract liabilities, which also include refund obligations, are included within the accrued liabilities and other current liabilities, deferred revenues, and other long-term liabilities balances in the condensed consolidated balance sheets.

Costs to Obtain or Fulfill a Customer Contract

1 unchanged sentence

The Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less.

Incremental costs of obtaining contracts that would be recognized over greater than one year are not material.

Incremental costs of obtaining contracts that would be recognized over more than one year are not material.

The Company accounts for shipping and handling activities related to contracts with customers as costs to fulfill the promise to transfer the associated products.

5 unchanged sentences

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments.

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, Measurement of Credit Losses on Financial Instruments.

This pronouncement changes the impairment model for most financial assets and certain other instruments, including trade and other receivables, held-to-maturity debt securities and loans and replaces the incurred loss methodology with a new, forward-looking “expected loss” model that considers the risk of loss over the asset’s contractual life, even if remote, historical experience, current conditions, and reasonable and supportable forecasts of future relevant events.

10 unchanged sentences

We are currently evaluating the impacts of this ASU on our condensed consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04 to provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate (e.g., LIBOR) reform on financial reporting.

In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting, to provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate (e.g., LIBOR) reform on financial reporting.

Adoption of the guidance is elective and is permitted from March 12, 2020 through December 31, 2022.

The Company will evaluate transactions or contract modifications occurring as a result of reference rate reform and determine whether to apply the optional guidance on an ongoing basis.

The Company does not expect that the new guidance will have a material impact on its financial position, results of operations and cash flows.

In December 2019, the FASB issued ASU 2019-12 which simplifies the accounting for income taxes by removing certain exceptions to the current guidance, and improving the consistent application of and simplification of other areas of the guidance.

The Company does not expect that the new guidance will have a material impact on its financial position, results of operations or cash flows.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the current guidance, and improving the consistent application of and simplification of other areas of the guidance.

The standard is effective for the Company beginning in the first quarter of fiscal year 2022.

4 unchanged sentences

The following table disaggregates the Company’s revenue by geographic region:

Three Months Ended

(In millions) January 1, 2021 January 3, 2020

Three Months Ended Six Months Ended

(In millions) April 2, 2021 April 3, 2020 April 2, 2021 April 3, 2020

Americas $ 70.5 $ 62.5 $ 132.8 $ 132.8

2 unchanged sentences

$ 203.5 $ 197.0 $ 380.6 $ 397.1

Revenue in the United States of America was $ 61.1 million and $ 68.9 million for the three months ended January 1, 2021 and January 3, 2020, respectively.

Revenue in the United States of America was $ 69.2 million and $ 60.2 million for the three months ended April 2, 2021 and April 3, 2020, respectively.

Revenue in the United States of America was $ 130.3 million and $ 128.8 million for the six months ended April 2, 2021 and April 3, 2020, respectively.

Refer to Note 15, Segment Information , for the disaggregation of the Company’s revenue based on reportable operating segments.

2 unchanged sentences

Contract Assets

Three Months Ended

(In millions) January 1, 2021 January 3, 2020

Six Months Ended

(In millions) April 2, 2021 April 3, 2020

Balance at beginning of fiscal year $ 24.6 $ 23.7

1 unchanged sentence

Contract asset from shipments of products, subject to return during the period 2.9 3.4

Change in estimate ( 0.6 ) —

Balance at end of period $ 24.5 $ 24.1

Contract Liabilities

Three Months Ended

(In millions) January 1, 2021 January 3, 2020

Six Months Ended

(In millions) April 2, 2021 April 3, 2020

Balance at beginning of fiscal year $ 27.4 $ 26.4

1 unchanged sentence

Additions to refund liabilities 3.2 3.8

Change in estimate ( 0.7 ) —

Balance at end of period $ 27.2 $ 26.9

During the three months ended January 1, 2021, the Company recognized revenue of $ 5.0 million related to deferred revenues which existed at October 2, 2020.

During the three months ended January 3, 2020, the Company recognized revenue of $ 6.1 million related to deferred revenue which existed at September 27, 2019.

During the three and six months ended April 2, 2021, the Company recognized revenue of $ 0.4 million and $ 5.4 million related to deferred revenues which existed at October 2, 2020.

During the three and six months ended April 3, 2020, the Company recognized revenue of $ 1.3 million and $ 7.4 million related to deferred revenue which existed at September 27, 2019.

The Company has operating and finance leases for office space, warehouse and manufacturing space, vehicles and certain equipment.

The following table presents supplemental balance sheet information related to the Company's operating and finance leases:

(In millions) Balance Sheet Location January 1, 2021 October 2, 2020

Operating lease right-of-use assets Operating lease assets

$ 26.3 $ 27.7

(In millions) Balance Sheet Location April 2, 2021 October 2, 2020

Operating lease right-of-use assets Operating lease right-of-use assets $ 26.9 $ 27.7

Finance lease right-of-use assets Property, plant and equipment, net

2 unchanged sentences

Operating lease liabilities (non-current) Operating lease liabilities $ 22.0 $ 23.1

$ 22.2 $ 23.1

Finance lease liabilities (non-current) Other long-term liabilities

The following table presents the weighted average remaining lease term and discount rate information related to the Company's operating and finance leases:

January 1, 2021 January 3, 2020

April 2, 2021 April 3, 2020

Operating lease weighted average remaining lease term (in years) 6.2 6.8

3 unchanged sentences

The following table provides information related to the Company’s operating and finance leases:

(In millions) Three Months Ended January 1, 2021 Three Months Ended January 3, 2020

(In millions) Three Months Ended April 2, 2021 Three Months Ended April 3, 2020 Six Months Ended April 2, 2021 Six Months Ended April 3, 2020

Total operating lease costs (a) $ 2.0 $ 1.9 $ 3.9 $ 4.0

3 unchanged sentences

Total cash paid for amounts included in the measurement of lease liabilities $ 1.9 $ 2.0 $ 3.8 $ 4.1

(a) Includes variable and short-term lease expense, which were immaterial for the three months ended January 1, 2021 and January 3, 2020.

As of January 1, 2021, maturities of operating lease and finance lease liabilities for each of the following five years and a total thereafter were as follows:

(a) Includes variable and short-term lease expense, which were immaterial for the three and six months ended April 2, 2021 and April 3, 2020.

As of April 2, 2021, the present value of operating lease and finance lease liabilities for each of the following five years and a total thereafter were as follows:

(In millions)

6 unchanged sentences

Present value of lease liabilities $ 28.2 $ 0.6

During the first quarter of fiscal year 2021 the Company entered into a new lease of a manufacturing facility in the Philippines that is not expected to commence until the second quarter of fiscal year 2021.

This lease has a stated term of five years and will result in an initial lease right-of-use asset and liability balance of approximately $ 4 million upon lease commencement.

During the first quarter of fiscal year 2021, the Company entered into a lease agreement for a manufacturing facility in the Philippines that consists of three buildings.

During the second quarter of fiscal year 2021, the Company commenced leasing one of the three buildings.

The leases for the other two buildings are not expected to commence until the third quarter of fiscal year 2021.

These remaining two building leases have a stated term of five years and will result in an initial lease right-of-use asset and liability balance of approximately $ 2.4 million upon lease commencement.

RELATED PARTY TRANSACTIONS

4 unchanged sentences

When the Company recognizes its share of net profits or losses of dpiX Holding, profits or losses in inventory purchased from dpiX are eliminated.

During the three months ended January 1, 2021 and January 3, 2020, the Company recorded (loss)/income on the equity investment in dpiX Holding of $( 1.5 ) million and $ 0.9 million, respectively.

During the three months ended April 2, 2021 and April 3, 2020, the Company recorded a loss on the equity investment in dpiX Holding of $( 0.4 )

million and $( 0.8 ) million, respectively.

During the six months ended April 2, 2021 and April 3, 2020, the Company recorded (loss) income on the equity investment in dpiX Holding of $( 1.9 ) million and $ 0.1 million, respectively.

Income and loss on the equity investment in dpiX Holding is included in other expense, net in the condensed consolidated statements of operations.

The carrying value of the equity investment in dpiX Holding was $ 45.9 million and $ 47.3 million at January 1, 2021 and October 2, 2020, respectively.

During the three months ended January 1, 2021 and January 3, 2020, the Company purchased glass transistor arrays from dpiX totaling $ 4.9 million and $ 5.9 million, respectively.

The carrying value of the equity investment in dpiX Holding was $ 45.6 million and $ 47.3 million at April 2, 2021 and October 2, 2020, respectively.

During the three months ended April 2, 2021 and April 3, 2020, the Company purchased glass transistor arrays from dpiX totaling $ 4.1 million and $ 5.3 million, respectively.

During the six months ended April 2, 2021 and April 3, 2020, the Company purchased glass transistor arrays from dpiX totaling $ 9.0 million and $ 10.9 million, respectively.

These purchases of glass transistor arrays are included as a component of inventories on the condensed consolidated balance sheets or cost of revenues in the condensed consolidated statements of operations.

As of January 1, 2021, and October 2, 2020, the Company had accounts payable to dpiX totaling $ 3.2 million and $ 4.6 million, respectively.

As of April 2, 2021, and October 2, 2020, the Company had accounts payable to dpiX totaling $ 3.9 million and $ 4.6 million, respectively.

In October 2013, the Company entered into an amended agreement with dpiX and other parties that, among other things, provides the Company with the right to 50 % of dpiX’s total manufacturing capacity produced after January 1, 2014.

1 unchanged sentence

In January 2021, the fixed cost commitment was determined and approved by the dpiX board of directors to be $ 11.6 million for calendar year 2021.

As of April 2, 2021, the Company estimated it has fixed cost commitments of $ 8.7 million related to this amended agreement through the remainder of calendar year 2021.

The amended agreement will continue unless the ownership structure of dpiX changes as provided in the amended agreement.

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The Company’s exposure to loss as a result of its involvement with dpiX Holding is limited to the carrying value of the Company’s investment of $ 45.6 million and fixed cost commitments.

In November 2018, the Company and CETTEEN GmbH (“CETTEEN”), formed a German limited liability company that governs the affairs and conduct of the business of VEC Imaging Verwaltungsgesellschaft GmbH (“VEC”), a joint venture formed to develop technology for use in X-ray imaging components.

In November 2018, the Company and CETTEEN GmbH (“CETTEEN”), formed a German limited liability company that governs the affairs and conduct of the business of VEC Imaging GmbH & Co.

KG (“VEC”), a joint venture formed to develop technology for use in X-ray imaging components.

In accordance with the VEC agreement, net profits or losses are allocated to the members in accordance with their ownership interest.

The Company's investment in VEC is accounted for under the equity method.

As of January 1, 2021, the Company has made contributions totaling $ 4.0 million, and has committed to contribute an additional $ 1.2 million as milestones are achieved, and to provide certain full-time employees to support prototyping and manufacturing activities in exchange for a 50 % interest in VEC.

As of April 2, 2021, the Company has made contributions totaling $ 4.0 million, and has committed to contribute an additional $ 1.2 million as milestones are achieved, and to provide certain full-time employees to support prototyping and manufacturing activities in exchange for a 50 % interest in VEC.

CETTEEN made contributions of certain assets including intellectual property in exchange for a 50 % interest in VEC.

During the three months ended January 1, 2021 and January 3, 2020 the Company recorded loss on the equity investment in VEC of $ 0.3 million and $ 0.2 million, respectively.

The Company's investment in VEC was $ 2.4 million and $ 2.5 million at January 1, 2021 and October 2, 2020, respectively.

During the six months ended April 2, 2021, the Company loaned $ 0.6 million to VEC.

During the three months ended April 2, 2021, and April 3, 2020, the Company recorded loss on the equity investment in VEC of $ 0.2 million and $ 0.6 million, respectively.

During the six months ended April 2, 2021 and April 3, 2020, the Company recorded loss on the equity investment in VEC of $ 0.5 million and $ 0.8 million, respectively.

The Company's investment in VEC was $ 2.2 million and $ 2.5 million at April 2, 2021 and October 2, 2020, respectively.

RESTRUCTURING

6 unchanged sentences

Cash outflows associated with these restructuring charges are limited to employee termination expenses, facility closure and equipment sales and disposals.

Below is a detail of restructuring charges incurred during the three months ended January 1, 2021 and January 3, 2020, respectively, which predominantly relate to the Company's Medical segment:

Three Months Ended

(In millions) Location of Restructuring Charges in Condensed Consolidated Statements of Operations January 1, 2021 January 3, 2020

Below is a detail of restructuring charges incurred during the three and six months ended April 2, 2021 and April 3, 2020, respectively, which predominantly relate to the Company's Medical segment:

Three Months Ended Six Months Ended

(In millions) Location of Restructuring Charges in Condensed Consolidated Statements of Operations April 2, 2021 April 3, 2020 April 2, 2021 April 3, 2020

Accelerated depreciation Cost of revenues $ 0.1 $ 0.9 $ 0.2 $ 1.2

5 unchanged sentences

The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting.

A qualitative assessment of hedge effectiveness is performed on a quarterly basis, unless facts and circumstances indicate the hedge may no longer be highly effective.

The changes in fair value for all trades that are not designated for hedge accounting are recognized in current period earnings.

A qualitative assessment of hedge effectiveness is performed on a quarterly basis, unless facts and circumstances indicate the hedge may no longer be highly effective, in which case the Company would test for effectiveness on a more frequent basis.

The changes in fair value for all trades that are not designated for hedge accounting are recognized in current period income.

The Company does not offset fair value amounts recognized for derivative instruments in its condensed consolidated balance sheets for presentation purposes.

2 unchanged sentences

The Company’s policy is to enter into contracts only with financial institutions which meet certain minimum credit ratings to help mitigate counterparty credit risk.

Derivatives Designated as Hedging Instruments - Cash Flow Hedges

The Company previously used interest rate swap contracts as cash flow hedges to manage its exposure to fluctuations in LIBOR interest rates.

Interest rate swap contracts effectively fix the LIBOR component of variable interest rate debt for a specific period of time.

As of April 2, 2021, the Company had no outstanding derivatives designated as hedging instruments.

The following table summarizes the amount of pre-tax income recognized from derivative instruments for the periods indicated:

Amount of Gain (Loss) Recognized in OCI on Derivative

Three months ended Location of Gain or (Loss) Reclassified from Accumulated OCI into Income Amount of Gain (Loss) Reclassified from Accumulated OCI into Income

Three months ended

(In millions) April 2, 2021 April 3, 2020 April 2, 2021 April 3, 2020

Interest Rate Swap Contracts $ — $ ( 3.1 ) Interest expense $ — $ —

Amount of Gain (Loss) Recognized in OCI on Derivative

Six Months Ended Location of Gain or (Loss) Reclassified from Accumulated OCI into Income Amount of Gain (Loss) Reclassified from Accumulated OCI into Income

Six Months Ended

(In millions) April 2, 2021 April 3, 2020 April 2, 2021 April 3, 2020

Interest Rate Swap Contracts $ — $ ( 3.0 ) Interest expense $ — $ 0.1

Derivatives Designated as Hedging Instruments - Net Investment Hedges

1 unchanged sentence

All changes in fair value of the derivatives designated as net investment hedges are reported in accumulated other comprehensive (loss) income along with the foreign currency translation adjustments on those investments.

As of January 1, 2021, the Company had the following outstanding derivatives designated as net investment hedging instruments:

As of April 2, 2021, the Company had the following outstanding derivatives designated as net investment hedging instruments:

(In millions, except number of instruments) Number of Instruments Notional Value

Cross Currency Swap Contracts 3 $ 66.6

The following table summarizes the amount of pre-tax earnings recognized from derivative instruments for the periods indicated and the line items in the accompanying statements of operations where the results are recorded for net investment hedges:

The following table summarizes the amount of pre-tax income recognized from derivative instruments for the periods indicated and the line items in the accompanying statements of operations where the results are recorded for net investment hedges:

Amount of Gain (Loss) Recognized in OCI on Derivative

Three months ended Location of Gain or (Loss) Recognized in Income on Derivative (Amount Excluded from Effectiveness Testing) Amount of Gain or (Loss) Recognized in Income on Derivative (Amount Excluded from Effectiveness Testing)

(In millions) January 1, 2021 January 3, 2020 January 1, 2021 January 3, 2020

(In millions) April 2, 2021 April 3, 2020 April 2, 2021 April 3, 2020

Cross Currency Swap Contracts $ 1.8 $ 5.0 Interest expense $ 0.3 $ 0.4

Amount of Gain (Loss) Recognized in OCI on Derivative

Six Months Ended Location of Gain or (Loss) Recognized in Income on Derivative (Amount Excluded from Effectiveness Testing) Amount of Gain or (Loss) Recognized in Income on Derivative (Amount Excluded from Effectiveness Testing)

(In millions) April 2, 2021 April 3, 2020 April 2, 2021 April 3, 2020

Cross Currency Swap Contracts $ ( 1.2 ) $ 4.3 Interest expense $ 0.7 $ 0.8

These derivative instruments are subject to master netting agreements giving effect to rights of offset with each counterparty.

2 unchanged sentences

(In millions) Derivative Assets and Liabilities

Derivatives designated as net investment hedges Balance sheet location January 1, 2021 October 2, 2020

Derivatives designated as net investment hedges Balance sheet location April 2, 2021 October 2, 2020

Cross Currency Swap Contracts Other current assets $ 1.2 $ 1.3

4 unchanged sentences

These forward contracts expire within 30 to 90 days.

These forward contracts are not designated for hedge accounting treatment, therefore, the change in fair value of these derivatives is recorded as a component of other income (expense) and offsets the change in fair value of the foreign currency denominated assets and liabilities, which are also recorded in other income (expense).

These forward contracts are not designated for hedge accounting treatment, therefore, the change in fair value of these derivatives is recorded as a component of other income (expense), net and offsets the change in fair value of the foreign currency denominated assets and liabilities, which are also recorded in other income (expense), net.

The Company does not and does not intend to use derivative financial instruments for speculative or trading purposes.

The following table shows the notional amounts of outstanding foreign currency contracts as of January 1, 2021:

The following table shows the notional amounts of outstanding foreign currency contracts as of April 2, 2021:

Notional Value of Derivatives not Designated as Hedging Instruments:

1 unchanged sentence

Japanese yen $ — $ 1.4

Philippine peso 4.5 —

Swiss franc 0.9 —

Chinese renminbi 1.4 4.7

Total Notional Value $ 22.0 $ 6.1

Assets/Liabilities Measured at Fair Value on a Recurring Basis

The fair values of certain of the Company’s financial instruments, including bank deposits included in cash and cash equivalents, accounts receivable and accounts payable, also approximate their fair values due to their short maturities.

As of January 1, 2021, the fair values of the Company's Convertible Notes and Senior Secured Notes, as defined in Note 10.

The fair values of certain of the Company’s financial instruments, including bank deposits included in cash and cash equivalents, accounts receivable and accounts payable, approximate their fair values due to their short maturities.

As of April 2, 2021, the fair values of the Company's Convertible Notes and Senior Secured Notes, as defined in Note 10.

Borrowings, were $ 246.5 million and $ 333.0 million, respectively.

1 unchanged sentence

The Company has elected to use the income approach to value its derivative instruments using standard valuation techniques and Level 2 inputs, such as currency spot rates, forward points and credit default swap spreads.

There were no financial assets or liabilities measured on a recurring basis using significant unobservable inputs (Level 3) and there were no transfers in or out of Level 1, 2 or 3 during the three months ended January 1, 2021.

In the tables below, the Company has segregated all assets and liabilities that are measured at fair value on a recurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date.

Fair Value Measurements at January 1, 2021

Fair Value Measurements at April 2, 2021

(In millions) Quoted Prices in Active Markets for Identical Assets and Liabilities

7 unchanged sentences

Derivative liabilities

$ — $ 3.3 $ — $ 3.3

Total liabilities measured at fair value $ — $ 3.3 $ — $ 3.3

11 unchanged sentences

The following table summarizes the Company’s inventories:

(In millions) January 1, 2021 October 2, 2020

(In millions) April 2, 2021 October 2, 2020

Raw materials and parts

4 unchanged sentences

$ 248.2 $ 271.9

As a result of the economic downturn resulting from COVID-19, during the three months ended April 2, 2021, the Company discontinued certain products and wrote-down approximately $ 3.5 million of inventory associated with these discontinued products.

GOODWILL AND INTANGIBLE ASSETS

3 unchanged sentences

Foreign currency translation adjustments 0.1 0.1 0.2

Balance at January 1, 2021 $ 175.7 $ 119.6 $ 295.3

Balance at April 2, 2021 $ 174.5 $ 118.8 $ 293.3

The following table reflects the gross carrying amount and accumulated amortization of the Company’s intangible assets:

January 1, 2021 October 2, 2020

April 2, 2021 October 2, 2020

(In millions)

10 unchanged sentences

$ 139.1 $ ( 79.9 ) $ 59.2 $ 138.9 $ ( 71.4 ) $ 67.5

Amortization expense for intangible assets was $ 4.2 million and $ 4.5 million for the three months ended January 1, 2021 and January 3, 2020, respectively.

Amortization expense for intangible assets was $ 4.3 million and $ 4.4 million for the three months ended April 2, 2021 and April 3, 2020, respectively and $ 8.5 million and $ 8.9 million for the six months ended April 2, 2021 and April 3, 2020, respectively.

The following table summarizes the Company's short-term and long-term debt:

January 1, 2021 October 2, 2020

April 2, 2021 October 2, 2020

(In millions, except for percentages) Amount Amount Contractual Interest Rate Effective Interest Rate

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The following table summarizes the Company's interest expense:

Three Months Ended

January 1, 2021 January 3, 2020

Contractual interest coupon 7.9 4.5

Three Months Ended Six Months Ended

April 2, 2021 April 3, 2020 April 2, 2021 April 3, 2020

Contractual interest coupon and other $ 8.0 $ 4.0 $ 15.9 $ 8.6

Amortization of debt issuance costs 0.5 0.6 1.0 1.4

5 unchanged sentences

The Convertible Notes bear interest at the annual rate of 4.00 %, payable semiannually on June 01 and December 01 of each year, beginning on December 01, 2020, and will mature on June 01, 2025, unless earlier converted or repurchased by us.

Total interest expense related to the Convertible Notes for the three months ended January 1, 2021 was $ 4.1 million and was comprised of $ 2.0 million related to the contractual interest coupon and $ 2.1 million related to the amortization of the discount and issuance costs on the liability component.

Total interest expense related to the Convertible Notes for the three months ended April 2, 2021 was $ 4.2 million and was comprised of $ 2.0 million related to the contractual interest coupon and $ 2.2 million related to the amortization of the issuance costs and discount on the liability component.

Total interest expense related to the Convertible Notes for the six months ended April 2, 2021 was $ 8.3 million and was comprised of $ 4.0 million related to the contractual interest coupon and $ 4.3 million related to the amortization of the issuance costs and discount on the liability component.

On June 4, 2020 and June 5, 2020, in connection with the offering of the Convertible Notes, Varex entered into privately negotiated convertible note hedge transactions (collectively, the “Hedge Transactions”).

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The number of shares underlying the Warrant Transactions is 9.6 million.

The number of warrants outstanding as of January 1, 2021, was 9.6 million.

The number of warrants outstanding as of April 2, 2021, was 9.6 million.

Senior Secured Notes

1 unchanged sentence

Interest payments are paid semiannually on April 15 and October 15 of each year, beginning on April 15, 2021.

Interest expense related to the Senior Secured Notes for the three months ended January 1, 2021 was $ 6.1 million.

Total interest expense related to the Senior Secured Notes for the three months ended April 2, 2021 was $ 6.1 million and was comprised of $ 5.9 million related to the contractual interest coupon and $ 0.2 million related to the amortization of issuance costs.

Total interest expense related to the Senior Secured Notes for the six months ended April 2, 2021 was $ 12.1 million and was comprised of $ 11.8 million related to the contractual interest coupon and $ 0.3 million related to the amortization of issuance costs.

Asset-Based Loan

3 unchanged sentences

The ABL Facility matures on the earlier of September 30, 2025 or 91 days prior to the maturity of the Convertible Notes, at which time all outstanding amounts under the ABL Facility will be due and payable.

The maximum availability under our ABL Facility was $ 100.0 million as of January 1, 2021, however, the borrowing base under the ABL Facility fluctuates from month-to-month depending on the amount of eligible accounts receivable and inventory.

The aggregate commitment under our ABL Facility is $ 100.0 million;

however, the borrowing base under the ABL Facility fluctuates from month-to-month depending on the amount of eligible accounts receivable, inventory, and real estate.

As of April 2, 2021, no draws had been made on the ABL Facility.

The ABL Facility includes various restrictive covenants that limit our ability to engage in certain transactions, including the incurrence of debt, payment of dividends and other restrictive payments, existence of restrictions affecting subsidiaries, sales of stock and assets, certain affiliate transactions, modifications of debt documents and organizational documents, changes to line of business and fiscal year, incurrence of liens, making fundamental changes, prepayments of junior indebtedness, and certain other transactions.

3 unchanged sentences

As the Company has majority voting rights it has consolidated Direct Conversion's operations in its condensed consolidated financial statements and records the noncontrolling interest in the equity section of the Company's condensed consolidated balance sheet.

Earnings representing the noncontrolling interest's portion of Direct Conversion's income from operations is included in the Company's condensed consolidated statements of operations.

Income representing the noncontrolling interest's portion of Direct

Conversion's income from operations is included in the Company's condensed consolidated statements of operations.

In April 2021, the Company acquired the remaining 1.3 % of noncontrolling interest for approximately $ 1 million.

In September 2018, the Company entered into a partnership in Saudi Arabia.

2 unchanged sentences

The noncontrolling interest related to the partner’s 25 % interest in the joint venture is included in noncontrolling interest in the equity section of the Company’s condensed consolidated balance sheet.

Earnings representing the noncontrolling partner's share of income from operations is included in the Company's condensed consolidated statements of operations.

Income representing the noncontrolling partner's share of income from operations is included in the Company's condensed consolidated statements of operations.

In April 2015, the Company acquired 73.5 % of the then outstanding shares of MeVis, a publicly traded company based in Bremen, Germany that provides image processing software and services for cancer screening.

2 unchanged sentences

In return, the DPLTA grants the noncontrolling shareholders of MeVis an annual recurring net compensation of € 0.95 per MeVis share.

At January 1, 2021, noncontrolling shareholders together held approximately 0.5 million shares of MeVis, representing 26.3 % of the outstanding shares.

At April 2, 2021, noncontrolling shareholders together held approximately 0.5 million shares of MeVis, representing 26.3 % of the outstanding shares.

Changes in noncontrolling interests were as follows:

1 unchanged sentence

Balance at October 2, 2020 $ 14.1

Net earnings attributable to noncontrolling interests

Other, including foreign currency remeasurement

Balance at January 1, 2021 $ 14.2

NET LOSS PER SHARE

Basic loss per common share is computed by dividing the net loss for the period by the weighted average number of shares of common stock outstanding during the reporting period.

Diluted earnings per common share reflects the effects of potentially dilutive securities, which is computed by dividing net loss by the sum of the weighted average number of common shares outstanding and dilutive common shares.

Net income attributable to noncontrolling interests 0.1

Balance at April 2, 2021 $ 14.2

NET INCOME (LOSS) PER SHARE

Basic income (loss) per common share is computed by dividing the net income (loss) for the period by the weighted average number of shares of common stock outstanding during the reporting period.

Diluted income (loss) per common share reflects the effects of potentially dilutive securities, which is computed by dividing net income (loss) by the sum of the weighted average number of common shares outstanding and dilutive common shares.

A reconciliation of the numerator and denominator used in the calculation of basic and diluted net loss per common share is as follows:

Three Months Ended

Three Months Ended Six Months Ended

(In millions, except per share amounts)

January 1, 2021 January 3, 2020

Net loss attributable to Varex $ ( 6.4 ) $ ( 1.3 )

April 2, 2021 April 3, 2020 April 2, 2021 April 3, 2020

Net income (loss) attributable to Varex $ 3.1 $ ( 1.9 ) $ ( 3.3 ) $ ( 3.2 )

Weighted average shares outstanding - basic

39.2 38.6 39.2 38.5

Dilutive effect of potential common shares

Weighted average shares outstanding - diluted

Net loss per share attributable to Varex - basic

40.0 38.6 39.2 38.5

Net loss per share attributable to Varex - diluted

Net income (loss) per share attributable to Varex - basic

$ 0.08 $ ( 0.05 ) $ ( 0.09 ) $ ( 0.08 )

Net income (loss) per share attributable to Varex - diluted

$ 0.08 $ ( 0.05 ) $ ( 0.09 ) $ ( 0.08 )

Anti-dilutive share based awards, excluded

Potentially dilutive shares, which are based on the weighted-average shares of common stock underlying stock options, unvested stock awards, purchase rights granted under the employee stock purchase plan, warrants and convertible notes using the treasury stock method or the if-converted method, as applicable, are included when calculating diluted net loss per share attributable to Varex when their effect is dilutive.

Because the Company incurred a net loss for the three months ended January 1, 2021 and January 3, 2020, none of the potentially dilutive common shares were included in the diluted share calculations for those periods as they would have been anti-dilutive.

3.0 3.0 3.1 2.8

Potentially dilutive shares, which are based on the weighted-average shares of common stock underlying stock options, unvested stock awards, purchase rights granted under the employee stock purchase plan, warrants and convertible notes using the treasury stock method or the if-converted method, as applicable, are included when calculating diluted net (loss) income per share attributable to Varex when their effect is dilutive.

Since we intend to settle in cash the principal outstanding under our 4.00 % Convertible Senior Notes due in 2025, we use the treasury stock method applied using our average share price during the period when calculating their potential dilutive effect, if any.

Furthermore, in connection with the offerings of our notes, we entered into convertible note hedges and warrants (see Note 10, Borrowings).

However, our convertible note hedges are not included when calculating potentially dilutive shares since their effect is always anti-dilutive.

Warrants which have a strike price above our average share price during the period were out of the money and were not included in the tables above.

Because the Company incurred a net loss for the six months ended April 2, 2021 and the three and six months ended April 3, 2020, none of the potentially dilutive common shares were included in the diluted share calculations for those periods as they would have been anti-dilutive.

EMPLOYEE STOCK PLANS

3 unchanged sentences

The table below summarizes the effect of recording share-based compensation expense and the option component of the employee stock purchase plan shares:

Three Months Ended

(In millions) January 1, 2021 January 3, 2020

Three Months Ended Six Months Ended

(In millions) April 2, 2021 April 3, 2020 April 2, 2021 April 3, 2020

Cost of revenues

$ 0.3 $ 0.3 $ 0.6 $ 0.6

Research and development

0.8 0.6 1.4 1.2

Selling, general and administrative

2.5 2.4 5.2 4.7

Total share-based compensation expense

$ 3.6 $ 3.3 $ 7.2 $ 6.5

Stock Option Activity

6 unchanged sentences

$ 29.23 4.5 $ —

381 $ 25.06 - $ 25.06

Canceled, expired or forfeited

( 258 ) $ 27.77 - $ 37.10

Outstanding at January 1, 2021 2,696 $ 13.61 - $ 37.60

— $ 0.00 - $ 0.00

Exercisable at January 1, 2021 1,844 $ 25.17 - $ 37.60

Outstanding at April 2, 2021 2,858 $ 13.61 - $ 37.60

$ 28.74 5.1 $ 1,401

(1) The aggregate intrinsic value represents the total pre-tax intrinsic value, which is computed based on the difference between the exercise price and the closing price of Varex common stock of $ 16.68 as of December 31, 2020, the last trading date of the Company's first quarter, and which represents the amount that would have been received by the option holders had all option holders exercised their options and sold the shares received upon exercise as of that date.

Exercisable at April 2, 2021 1,809 $ 25.17 - $ 37.60

$ 30.78 3.1 $ —

(1) The aggregate intrinsic value represents the total pre-tax intrinsic value, which is computed based on the difference between the exercise price and the closing price of Varex common stock of $ 20.88 as of April 1, 2021, the last trading date of the Company's second quarter, and which represents the amount that would have been received by the option holders had all option holders exercised their options and sold the shares received upon exercise as of that date.

Restricted Stock Units

2 unchanged sentences

Outstanding at October 2, 2020 955 $ 25.54

( 193 ) 33.67

Canceled or expired

Outstanding at January 1, 2021 923 $ 25.48

TAXES ON EARNINGS

For the three months ended January 1, 2021, the Company recognized income tax expense of $ 1.6 million on $ 4.7 million of pre-tax loss.

Outstanding at April 2, 2021 1,105 $ 23.29

TAXES ON INCOME

For the three months ended April 2, 2021, the Company recognized income tax expense of $ 0.0 million on $ 3.2 million of pre-tax income.

For the three months ended April 3, 2020, the Company recognized income tax expense of $ 0.7 million on $ 1.1 million of pre-tax loss.

For the six months ended April 2, 2021, the Company recognized income tax expense of $ 1.6 million on $ 1.5 million of pre-tax loss.

For the six months ended April 3, 2020, the Company recognized income tax expense of $ 0.7 million on $ 2.3 million of pre-tax loss.

The Company is unable to recognize a tax benefit for pre-tax book losses in the U.S.

and certain foreign jurisdictions but has recognized tax expense for profitable foreign jurisdictions.

For the three months ended January 3, 2020, the Company recognized income tax expense of zero on $ 1.2 million of pre-tax loss.

The Company's tax expense for the three months ended January 1, 2021 increased, compared to the prior year, primarily due to valuation allowance positions in the U.S.

The Company's tax expense for the three months ended April 2, 2021 decreased, primarily due to tax credits and benefits recorded in certain foreign jurisdiction.

The Company's tax expense for the six months ended April 2, 2021 increased, compared to the prior year periods, primarily due to valuation allowances in the U.S.

on disallowed interest expense deductions and losses in the U.S.

and certain foreign jurisdictions for which no benefit can be recorded.

As a result of the changes to the U.S.

taxation of foreign earnings included in U.S.

Tax Reform, the Company reevaluated its previous indefinite reinvestment assertion with respect to these earnings during fiscal year 2018, which resulted in the Company revoking its assertion for current and future earnings for all countries, while maintaining the assertion that historic earnings are indefinitely reinvested outside the U.S.

The Company modified its prior assertion in fiscal year 2019 with respect to the acquisition of Direct Conversion.

The modification was to assert that all earnings for Direct Conversion, located primarily in Sweden and Finland, are indefinitely reinvested in those countries.

The Company is maintaining this prior assertion for the quarter ended January 1, 2021.

The Company is maintaining its reinvestment assertion with respect to foreign earnings for the quarter ended April 2, 2021, which is that all earnings prior to fiscal year 2018 are permanently reinvested for all countries, and that all earnings for Direct Conversion, located primarily in Sweden and Finland, are also indefinitely reinvested in those countries, but post fiscal year 2017 earnings in all other countries are not permanently reinvested.

Due to the level of earnings available for repatriation, the treaty benefits applicable to jurisdictions in which those earnings are located, and the now favorable U.S.

14 unchanged sentences

Description of Segments

The Medical segment designs, manufactures, sells and services X-ray imaging components, including X-ray tubes, digital detectors, high voltage connectors, image-processing software and workstations, 3D reconstruction software, computer-aided diagnostic software, collimators, automatic exposure control devices, generators, heat exchangers, ionization chambers and buckys (a component of X-ray units that holds X-ray film cassettes).

component of X-ray units that holds X-ray film cassettes).

These components are used in a range of medical imaging applications including CT, mammography, oncology, cardiac, surgery, dental, and other diagnostic radiography uses.

5 unchanged sentences

Information related to the Company’s segments is as follows:

Three Months Ended

(In millions) January 1, 2021 January 3, 2020

Three Months Ended Six Months Ended

(In millions) April 2, 2021 April 3, 2020 April 2, 2021 April 3, 2020

$ 156.6 $ 155.4 $ 295.8 $ 311.0

46.9 41.6 84.8 86.1

Total revenues 203.5 197.0 380.6 397.1

45.7 43.2 89.8 87.2

18.9 14.4 32.0 31.5

Total gross profit 64.6 57.6 121.8 118.7

Total operating expenses

Interest and other expenses, net

48.8 56.2 99.9 112.7

(Loss) earnings before taxes

( 4.7 ) ( 1.2 )

Income taxes (benefit) expense 1.6 —

Net (loss) earnings

( 6.3 ) ( 1.2 )

Net earnings attributable to noncontrolling interests

Net (loss) earnings attributable to Varex

Interest and other expenses, net

( 12.6 ) ( 2.5 ) ( 23.4 ) ( 8.3 )

Income (loss) before taxes 3.2 ( 1.1 ) ( 1.5 ) ( 2.3 )

Income tax expense — 0.7 1.6 0.7

Net income (loss) 3.2 ( 1.8 ) ( 3.1 ) ( 3.0 )

Net income attributable to noncontrolling interests 0.1 0.1 0.2 0.2

Net income (loss) attributable to Varex $ 3.1 $ ( 1.9 ) $ ( 3.3 ) $ ( 3.2 )

The Company does not disclose total assets by segment as this information is not provided to the CODM.

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 1. Financial Statements