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Item 1. Financial Statements

2022-05-04 compared with 2022-02-08 · 226 added, 153 removed, 549 unchanged (41% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

(In millions, except per share amounts) December 31, 2021 January 1, 2021

Three Months Ended Six Months Ended

(In millions, except per share amounts) April 1, 2022 April 2, 2021 April 1, 2022 April 2, 2021

Revenues, net $ 214.7 $ 203.5 $ 413.5 $ 380.6

6 unchanged sentences

Operating income 26.6 15.8 40.6 21.9

Interest income 0.1 — 0.1 —

Interest expense ( 11.1 ) ( 10.4 ) ( 21.0 ) ( 20.7 )

( 9.9 ) ( 10.3 )

Other expense, net ( 2.0 ) ( 2.2 ) ( 2.8 ) ( 2.7 )

Interest and other expense, net ( 13.0 ) ( 12.6 ) ( 23.7 ) ( 23.4 )

( 10.7 ) ( 10.8 )

Income (loss) before taxes 13.6 3.2 16.9 ( 1.5 )

12 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended

(In millions) December 31, 2021 January 1, 2021

Three Months Ended Six Months Ended

(In millions) April 1, 2022 April 2, 2021 April 1, 2022 April 2, 2021

Net income (loss) $ 7.6 $ 3.2 $ 9.2 $ ( 3.1 )

Other comprehensive (loss) income, net of tax:

Other comprehensive income (loss):

Foreign currency translation adjustments ( 1.2 ) ( 0.7 ) ( 1.7 ) ( 0.6 )

Other comprehensive (loss) income, net of tax ( 0.5 ) 0.1

Comprehensive income (loss) 1.1 ( 6.2 )

Total comprehensive income (loss) 6.4 2.5 7.5 ( 3.7 )

Comprehensive income attributable to noncontrolling interests — 0.1 0.2 0.2

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CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share and per share amounts) December 31, 2021 October 1, 2021

(In millions, except share and per share amounts) April 1, 2022 October 1, 2021

Current assets:

Cash and cash equivalents $ 115.1 $ 144.6

Accounts receivable, net of allowance for credit losses of $ 0.8 million and $ 1.0 million at December 31, 2021 and October 1, 2021, respectively

Accounts receivable, net of allowance for credit losses of $ 0.7 million and $ 1.0 million at April 1, 2022 and October 1, 2021, respectively

Prepaid expenses and other current assets

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150,000,000 shares authorized

Shares issued and outstanding - 39,645,030 and 39,435,830 at December 31, 2021 and October 1, 2021, respectively.

Shares issued and outstanding - 39,823,331 and 39,435,830 at April 1, 2022 and October 1, 2021, respectively

Additional paid-in capital 459.9 449.4

7 unchanged sentences

VAREX IMAGING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Three Months Ended April 1, 2022

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

(In millions) Shares Amount

December 31, 2021 39.6 $ 0.4 $ 458.0 $ ( 0.5 ) $ 34.9 $ 492.8 $ 13.3 $ 506.1

Net income — — — — 7.6 7.6 — 7.6

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

Common stock issued upon vesting of restricted shares 0.3 — — — — — — —

Shares withheld on vesting of restricted stock ( 0.1 ) — ( 2.1 ) — — ( 2.1 ) — ( 2.1 )

Share-based compensation

— — 3.9 — — 3.9 — 3.9

Foreign currency translation adjustments — — — ( 1.2 ) — ( 1.2 ) — ( 1.2 )

— — ( 0.2 ) — — ( 0.2 ) — ( 0.2 )

April 1, 2022 39.8 $ 0.4 $ 459.9 $ ( 1.7 ) $ 42.5 $ 501.1 $ 13.3 $ 514.4

Three Months Ended April 2, 2021

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

(In millions) Shares Amount

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 )

Share-based compensation — — 3.6 — — 3.6 — 3.6

Foreign currency translation adjustments — — — ( 0.7 ) — ( 0.7 ) — ( 0.7 )

Other — — — — — — ( 0.1 ) ( 0.1 )

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

See accompanying notes to the unaudited condensed consolidated financial statements.

VAREX IMAGING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Six Months Ended April 1, 2022

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

(In millions) Shares Amount

October 1, 2021 39.4 $ 0.4 $ 449.4 $ — $ 33.5 $ 483.3 $ 13.2 $ 496.5

Net income — — — — 9.0 9.0 0.2 9.2

Exercise of stock options 0.1 — 3.8 — — 3.8 — 3.8

Common stock issued upon vesting of restricted shares 0.3 — — — — — — —

Shares withheld on vesting of restricted stock ( 0.1 ) — ( 2.1 ) — — ( 2.1 ) — ( 2.1 )

Common stock issued under employee stock purchase plan 0.1 — 1.7 — — 1.7 — 1.7

Share-based compensation — — 7.3 — — 7.3 — 7.3

Foreign currency translation adjustments — — — ( 1.7 ) — ( 1.7 ) — ( 1.7 )

Other — — ( 0.2 ) — — ( 0.2 ) ( 0.1 ) ( 0.3 )

April 1, 2022 39.8 $ 0.4 $ 459.9 $ ( 1.7 ) $ 42.5 $ 501.1 $ 13.3 $ 514.4

Six Months Ended April 2, 2021

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

Foreign 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

See accompanying notes to the unaudited condensed consolidated financial statements.

VAREX IMAGING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

(In millions) December 31, 2021 January 1, 2021

Six Months Ended

(In millions) April 1, 2022 April 2, 2021

Cash flows from operating activities:

5 unchanged sentences

Deferred taxes 0.5 0.1

Loss from equity method investments, net of dividends received 0.5 1.7

Loss from equity method investments 1.6 2.5

Amortization of deferred loan costs 5.3 4.9

13 unchanged sentences

Proceeds from sales of business and assets 1.7 —

Investments in and loans to privately-held companies ( 0.3 ) ( 0.6 )

Other ( 0.5 ) —

2 unchanged sentences

Cash flows from financing activities:

Taxes related to net share settlement of equity awards

( 2.1 ) ( 1.5 )

Borrowings under credit agreements

Repayments of borrowing under credit agreements

( 28.4 ) ( 1.5 )

Proceeds from exercise of stock options

1 unchanged sentence

Other financing activities

Net cash provided by financing activities

( 0.4 ) ( 0.7 )

Net cash used in financing activities

( 25.4 ) ( 1.0 )

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

Net increase in cash and cash equivalents and restricted cash

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

( 29.6 ) 10.5

Cash and cash equivalents and restricted cash at beginning of period

Cash and cash equivalents and restricted cash at end of period

$ 116.5 $ 112.6

Supplemental cash flow information:

Cash paid for interest $ 15.8 $ 4.0

Cash paid for income tax 0.4 4.4

Income taxes paid, net of (refunds) ( 3.4 ) 12.9

Supplemental non-cash activities:

2 unchanged sentences

VAREX IMAGING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Three Months Ended December 31, 2021

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

(In millions) Shares Amount

October 1, 2021 39.4 $ 0.4 $ 449.4 $ — $ 33.5 $ 483.3 $ 13.2 $ 496.5

Net income — — — — 1.4 1.4 0.2 1.6

Exercise of stock options 0.1 — 3.5 — — 3.5 — 3.5

Common stock issued under employee stock purchase plan

0.1 — 1.7 — — 1.7 — 1.7

Share-based compensation

— — 3.4 — — 3.4 — 3.4

Currency translation adjustments

— — — ( 0.5 ) — ( 0.5 ) — ( 0.5 )

— — — — — — ( 0.1 ) ( 0.1 )

December 31, 2021 39.6 $ 0.4 $ 458.0 $ ( 0.5 ) $ 34.9 $ 492.8 $ 13.3 $ 506.1

Three Months Ended January 1, 2021

Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income Retained Earnings Total Varex Equity Noncontrolling Interests Total Stockholders' 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 income (loss) — — — — ( 6.4 ) ( 6.4 ) 0.1 ( 6.3 )

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

Share-based compensation — — 3.6 — — 3.6 — 3.6

Currency translation adjustments

— — — 0.1 — 0.1 — 0.1

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

See accompanying notes to the unaudited condensed consolidated financial statements.

VAREX IMAGING CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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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.

The Company sells its products to imaging system original equipment manufacturer (“OEM”) customers for incorporation into new medical diagnostic, radiation therapy, dental, and veterinary equipment, to independent service companies, distributors and directly to end-users for replacement purposes.

The Company also designs, manufacturers, sells and services industrial products, which include Linatron® X-ray accelerators, high voltage connectors, imaging processing software and image detection products for security and inspection purposes, such as cargo screening at ports and borders and nondestructive examination in a variety of applications.

The Company sells its products to imaging system original equipment manufacturer (“OEM”) customers for incorporation into new medical diagnostic, radiation therapy, dental, and veterinary equipment, as well as to independent service companies and distributors, and directly to end-users for replacement purposes.

The Company also designs, manufactures, sells and services industrial products, which include Linatron® X-ray accelerators, high voltage connectors, imaging processing software and image detection products for security and inspection purposes, such as cargo screening at ports and borders and nondestructive examination in a variety of applications.

The Company generally sells security and inspection products to OEM customers who incorporate Varex’s products into their inspection systems.

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Fiscal year 2021 was the 52-week period that ended on October 1, 2021.

The fiscal quarters ended December 31, 2021 and January 1, 2021 were both 13-week periods.

The fiscal quarters ended April 1, 2022 and April 2, 2021 were both 13-week periods.

The two fiscal quarters ended April 1, 2022 and April 2, 2021 were both 26-week periods.

Use of Estimates

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

In the past few months, the Company has experienced continuing supply chain disruptions and other issues that are at least partially related to the ongoing COVID-19 pandemic.

The Company has experienced continuing supply chain disruptions and other issues that are at least partially related to the ongoing COVID-19 pandemic.

These supply chain related challenges have been increasing in recent months.

In addition, while we have been taking significant precautions to maintain employee safety, such as continuing a mask requirement, strongly encouraging vaccination, and asking non-production related employees to work from home when possible, the Company has experienced an increase in COVID-19 related employee absences.

In addition, while we have from time to time taken significant precautions to maintain employee safety, such as implementing mask requirements, encouraging vaccination, and periodically asking non-production related employees to work from home when possible, the Company has experienced, and may in the future experience, COVID-19 related employee absences that adversely impact our production or business.

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 credit losses.

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.

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

Three Months Ended Three Months Ended

December 31, 2021 January 1, 2021

Six Months Ended Six Months Ended

April 1, 2022 April 2, 2021

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

5 unchanged sentences

Cash held with financial institutions may exceed the Federal Deposit Insurance Corporation insurance limits or similar limits in foreign jurisdictions.

The Company has not experienced any losses on its deposits of cash and cash equivalents.

To date, the Company has not experienced any losses on its deposits of cash and cash equivalents.

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.

4 unchanged sentences

In certain circumstances, a customer may be required to prepay all or a portion of the contract price prior to transfer of control.

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

Three Months Ended

December 31, 2021 January 1, 2021

During the periods presented, one of the Company's customers accounted for a significant portion of revenues, as set forth below:

Three Months Ended Six Months Ended

April 1, 2022 April 2, 2021 April 1, 2022 April 2, 2021

Canon Medical Systems Corporation 18.2 % 17.8 % 18.7 % 17.2 %

19.2 % 16.6 %

Canon Medical Systems Corporation accounted for 13.9 % and 16.2 % of the Company’s condensed consolidated accounts receivable as of December 31, 2021 and October 1, 2021, respectively.

Canon Medical Systems Corporation accounted for 12.8 % and 16.2 % of the Company’s condensed consolidated accounts receivable as of April 1, 2022 and October 1, 2021, 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 months ended December 31, 2021 and January 1, 2021, respectively.

There were no impairments recorded during the three and six months ended April 1, 2022 and April 2, 2021, respectively.

Loss Contingencies

11 unchanged sentences

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

Three Months Ended

(In millions) December 31, 2021 January 1, 2021

Six Months Ended

(In millions) April 1, 2022 April 2, 2021

Accrued product warranty, at beginning of period $ 8.5 $ 8.1

1 unchanged sentence

Product warranty expenditures ( 5.5 ) ( 6.3 )

( 2.5 ) ( 3.1 )

Accrued product warranty, at end of period $ 7.6 $ 7.9

61 unchanged sentences

The adoption of ASU 2019-12 did not have a material impact on the Company's condensed consolidated financial statements and related disclosures.

Recent Accounting Standards or Updates Not Yet Effective

Recent Accounting Standard Updates Not Yet Effective

In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.

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Further, the ASU made amendments to the earnings per share (“EPS”) guidance in Topic 260 for convertible instruments, the most significant impact of which is requiring the use of the if-converted method for diluted EPS calculation, and no longer allowing the net share settlement method.

The ASU is effective for interim and annual periods beginning after December 15, 2021.

The ASU is effective for annual periods beginning after December 15, 2021, including interim periods within those years.

Adoption of the ASU can either be on a modified retrospective or full retrospective basis.

We expect to adopt this ASU as of the first quarter of fiscal year 2023.

While we are still evaluating the impacts of this ASU on our consolidated financial statements, we expect that the discount on our Convertible Notes will be reclassified from equity to liabilities and that the interest expense from our Convertible Notes will decrease and be closer to the coupon rate of 4.00 %.

While we are still evaluating the impacts of this ASU on our consolidated financial statements, we expect that the unamortized discount on our Convertible Notes (see Note 10.

Borrowings ) will be reclassified from equity to liabilities and that the interest expense from our Convertible Notes will decrease and be closer to the coupon rate of 4.00 %.

The impact that adoption of ASU 2020-06 will have on our net income per diluted share will depend on the amount of earnings in each period and our share price, but could result in additional dilution.

2 unchanged sentences

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 or cash flows.

The Company does not currently expect this ASU will have a material impact on its financial position, results of operations or cash flows.

Disaggregation of Revenue

Revenue is disaggregated from contracts between geography and by reportable operating segment, which the Company believes best depicts how the nature, amount, timing, and uncertainty of revenues and cash flows are affected by economic factors.

Revenue is disaggregated from contracts by geographic region and by reportable operating segment, which the Company believes best depicts how the nature, amount, timing, and uncertainty of revenues and cash flows are affected by economic factors.

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

Three Months Ended

(In millions) December 31, 2021 January 1, 2021

Three Months Ended Six Months Ended

(In millions) April 1, 2022 April 2, 2021 April 1, 2022 April 2, 2021

Americas $ 68.4 $ 70.5 $ 128.9 $ 132.8

2 unchanged sentences

$ 214.7 $ 203.5 $ 413.5 $ 380.6

Revenue in the United States was $ 58.8 million and $ 61.1 million for the three months ended December 31, 2021 and January 1, 2021, respectively.

Revenue in the United States was $ 66.2 million and $ 69.2 million for the three months ended April 1, 2022 and April 2, 2021, respectively.

Revenue in the United States was $ 125.0 and $ 130.3 million for the six months ended April 1, 2022 and April 2, 2021, 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) December 31, 2021 January 1, 2021

Balance at beginning of fiscal year $ 24.3 $ 24.6

Six Months Ended

(In millions) April 1, 2022 April 2, 2021

Balance at beginning of period $ 24.3 $ 24.6

Costs recovered from product returns during the period ( 2.6 ) ( 2.4 )

Contract asset from shipments of products, subject to return during the period 3.6 2.9

Adjustment for actual vs reserved product returns ( 0.4 ) ( 0.6 )

Balance at end of period $ 24.9 $ 24.5

Contract Liabilities

Three Months Ended

(In millions) December 31, 2021 January 1, 2021

Balance at beginning of fiscal year $ 27.0 $ 27.4

Six Months Ended

(In millions) April 1, 2022 April 2, 2021

Balance at beginning of period $ 27.0 $ 27.4

Release of refund liability included in beginning of year refund liability ( 2.9 ) ( 2.7 )

Additions to refund liabilities 3.9 3.2

Adjustment for actual vs reserved product returns ( 0.4 ) ( 0.7 )

Balance at end of period $ 27.6 $ 27.2

During the three months ended December 31, 2021, the Company recognized revenue of $ 4.1 million related to deferred revenues which existed at October 1, 2021.

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

During the three and six months ended April 1, 2022, the Company recognized revenue of $ 1.8 million and $ 5.9 million related to deferred revenues that existed at October 1, 2021.

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 that existed at October 2, 2020.

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

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See Note 5, Restructuring, for further details.

Accordingly, the Company recorded a loss due to abandonment of $ 1.9 million which is included in "Selling, general and administrative" on the Condensed Consolidated Statements of Operations for the three months ended December 31, 2021.

Accordingly during the three months ended December 31, 2021, the Company recorded a loss due to abandonment of $ 1.9 million, which is included in Selling, general and administrative on the Condensed Consolidated Statements of Operations for the six months ended April 1, 2022.

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

(In millions) Balance Sheet Location December 31, 2021 October 1, 2021

(In millions) Balance Sheet Location April 1, 2022 October 1, 2021

Operating lease right-of-use assets Operating lease assets $ 23.0 $ 24.3

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

December 31, 2021 January 1, 2021

April 1, 2022 April 2, 2021

Operating lease weighted average remaining lease term (in years) 6.0 6.2

3 unchanged sentences

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

Three Months Ended

(In millions) December 31, 2021 January 1, 2021

Three Months Ended Six Months Ended

(In millions) April 1, 2022 April 2, 2021 April 1, 2022 April 2, 2021

Total operating lease costs (1)

$ 1.4 $ 2.0 $ 3.4 $ 3.9

Total finance lease costs $ — $ — $ 0.1 $ 0.1

3 unchanged sentences

Noncash operating right-of-use assets obtained in exchange for new lease liabilities $ 2.9 $ 2.3 $ 3.0 $ 2.5

Noncash finance right-of-use assets obtained in exchange for new lease liabilities — — — 0.1

Total right-of-use assets obtained in exchange for new lease liabilities $ 2.9 $ 2.3 $ 3.0 $ 2.6

(1) Includes variable and short-term lease expense, which were immaterial for the three months ended December 31, 2021 and January 1, 2021.

As of December 31, 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:

(1) Includes variable and short-term lease expense, which were immaterial for the three and six months ended April 1, 2022 and April 2, 2021.

As of April 1, 2022, 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)

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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 December 31, 2021 and January 1, 2021, the Company recorded a loss on the equity investment in dpiX Holding of $ 0.7 million and $ 1.5 million, respectively.

During the three months ended April 1, 2022 and April 2, 2021, the Company recorded a loss on the equity investment in dpiX Holding of $ 0.4 million and $ 0.4 million, respectively.

During the six months ended April 1, 2022 and April 2, 2021, the Company recorded a loss on the equity investment in dpiX Holding of $ 1.1 million and $ 1.9 million, respectively.

The 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 $ 44.6 million and $ 45.0 million at December 31, 2021 and October 1, 2021, respectively.

During the three months ended December 31, 2021 and January 1, 2021, the Company purchased glass transistor arrays from dpiX totaling $ 5.2 million and $ 4.9 million, respectively.

The carrying value of the equity investment in dpiX Holding was $ 43.9 million and $ 45.0 million at April 1, 2022 and October 1, 2021, respectively.

During the three months ended April 1, 2022 and April 2, 2021, the Company purchased glass transistor arrays from dpiX totaling $ 5.5 million and $ 4.1 million, respectively.

During the six months ended April 1, 2022 and April 2, 2021, the Company purchased glass transistor arrays from dpiX totaling $ 10.7 million and $ 9.0 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 December 31, 2021, and October 1, 2021, the Company had accounts payable to dpiX totaling $ 3.8 million and $ 2.8 million, respectively.

The Company has the right to 50 % of dpiX’s total manufacturing capacity.

As of April 1, 2022, and October 1, 2021, the Company had accounts payable to dpiX totaling $ 2.4 million and $ 2.8 million, respectively.

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

In addition, the Company is required to pay for 50 % of DpiX's fixed costs, as determined at the beginning of each calendar year.

In January 2022, the Company's fixed cost commitment was determined and approved by the dpiX board of directors to be $ 13.2 million for calendar year 2022.

As of April 1, 2022, the Company estimated it has fixed cost commitments of $ 9.9 million related to this amended agreement through the remainder of calendar year 2022.

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

The Company has determined that dpiX Holding is a variable interest entity because at-risk equity holders, as a group, lack the characteristics of a controlling financial interest.

1 unchanged sentence

The Company does not have majority voting rights and no power to unilaterally direct the activities of dpiX Holding and therefore is not the primary beneficiary of dpiX Holding.

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 $ 44.6 million and fixed cost commitments.

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 $ 43.9 million and fixed cost commitments.

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

2 unchanged sentences

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

As of December 31, 2021, the Company has made equity contributions totaling $ 5.1 million.

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

During the three months ended December 31, 2021, and January 1, 2021, the Company recorded loss on the equity investment in VEC of $ 0.1 million and $ 0.3 million, respectively.

The Company's investment in VEC was $ 3.0 million at December 31, 2021 and October 1, 2021, respectively.

At December 31, 2021, the Company had loans outstanding to VEC totaling $ 0.3 million which is recorded in Prepaid expenses and other current assets in the condensed consolidated balance sheet.

During the three months ended April 1, 2022, and April 2, 2021, the Company recorded a loss on the equity investment in VEC of $ 0.5 million and $ 0.2 million, respectively.

During the six months ended April 1, 2022, and April 2, 2021, the Company recorded a loss on the equity investment in VEC of $ 0.6 million and $ 0.5 million, respectively.

The Company's investment in VEC was $ 2.6 million and $ 3.0 million at April 1, 2022 and October 1, 2021, respectively.

At April 1, 2022, the Company had loans outstanding to VEC totaling $ 0.6 million and other receivables of $ 0.3 million, which are recorded in Prepaid expenses and other current assets in the condensed consolidated balance sheet.

RESTRUCTURING

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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 December 31, 2021 and January 1, 2021, 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 December 31, 2021 January 1, 2021

Below is a detail of restructuring charges incurred during the three and six months ended April 1, 2022 and April 2, 2021, 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 1, 2022 April 2, 2021 April 1, 2022 April 2, 2021

Other assets impairment charges Selling, general and administrative $ — $ — $ 1.8 $ —

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Therefore, the Company’s exposure to the counterparty’s credit risk is generally limited to the amounts, if any, by which the counterparty’s obligations to the Company exceed the Company’s obligations to the counterparty.

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.

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

Derivatives Designated as Hedging Instruments - Net Investment Hedges

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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 December 31, 2021, the Company had the following outstanding derivatives designated as net investment hedging instruments:

As of April 1, 2022, the Company had the following outstanding derivatives designated as net investment hedging instruments:

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

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

(In millions) December 31, 2021 January 1, 2021 December 31, 2021 January 1, 2021

Three Months Ended

(In millions) April 1, 2022 April 2, 2021 April 1, 2022 April 2, 2021

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

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 Recognized in Income on Derivative (Amount Excluded from Effectiveness Testing)

Six Months Ended

(In millions) April 1, 2022 April 2, 2021 April 1, 2022 April 2, 2021

Cross Currency Swap Contracts $ 1.1 $ ( 1.2 ) Interest expense $ 0.6 $ 0.7

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

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(In millions) Derivative Assets and Liabilities

Derivatives designated as net investment hedges Balance sheet location December 31, 2021 October 1, 2021

Derivatives Designated as Net Investment Hedges Balance Sheet Location April 1, 2022 October 1, 2021

Cross Currency Swap Contracts Other current assets $ 1.2 $ 1.2

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$ ( 0.1 ) $ ( 1.2 )

Balance Sheet Hedges

The Company also enters into foreign currency forward contracts to hedge fluctuations associated with foreign currency denominated monetary assets and liabilities, primarily cash, lease contracts, third-party accounts receivable and payable, and intercompany accounts receivable and payables.

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 expense, net and offsets the change in fair value of the foreign currency denominated assets and liabilities, which are also recorded in Other expense, net.

The Company has 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 April 1, 2022:

Notional Value of Derivatives not Designated as Hedging Instruments:

(In millions of equivalent USD) Buy contracts Sell contract

Chinese renminbi $ — $ 7.2

Total Notional Value $ — $ 16.0

Assets and 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 approximate their fair values due to their short maturities.

As of December 31, 2021, the fair values of the Company's Convertible Notes and Senior Secured Notes, as defined in Note 10.

As of April 1, 2022, the fair values of the Company's Convertible Notes and Senior Secured Notes, as defined in Note 10.

Borrowings and measured using Level 1 inputs , were $ 269.6 million and $ 260.6 million, respectively.

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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 December 31, 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 at December 31, 2021

Fair Value at April 1, 2022

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

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The following table summarizes the Company’s inventories:

(In millions) December 31, 2021 October 1, 2021

(In millions) April 1, 2022 October 1, 2021

Raw materials and parts $ 213.2 $ 168.0

$ 191.7 $ 168.0

Work-in-process 21.5 20.4

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Total inventories $ 269.2 $ 224.8

$ 247.6 $ 224.8

GOODWILL AND INTANGIBLE ASSETS

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Foreign currency translation adjustments ( 1.3 ) ( 1.0 ) ( 2.3 )

Balance at December 31, 2021 $ 173.3 $ 117.9 $ 291.2

Balance at April 1, 2022 $ 172.6 $ 117.3 $ 289.9

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

December 31, 2021 October 1, 2021

April 1, 2022 October 1, 2021

(In millions)

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$ 136.5 $ ( 94.4 ) $ 42.1 $ 138.1 $ ( 87.4 ) $ 50.7

Amortization expense for intangible assets was $ 3.8 million and $ 4.2 million for the three months ended December 31, 2021 and January 1, 2021, respectively.

Amortization expense for intangible assets was $ 3.7 million and $ 4.3 million for the three months ended April 1, 2022 and April 2, 2021, respectively, and $ 7.5 million and $ 8.5 million for the six months ended April 1, 2022 and April 2, 2021, respectively.

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

December 31, 2021 October 1, 2021

April 1, 2022 October 1, 2021

(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

December 31, 2021 January 1, 2021

Three Months Ended Six Months Ended

April 1, 2022 April 2, 2021 April 1, 2022 April 2, 2021

Contractual interest coupon and other $ 7.1 $ 8.0 $ 14.4 $ 15.9

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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”).

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

The Hedge Transactions are expected generally to reduce the potential dilution and/or offset any cash payments Varex is required to make in excess of the principal amount due upon conversion of the Convertible Notes in the event that the market price of Varex common stock is greater than the strike price of the Hedge Transactions, which was initially $ 20.81 per share (subject to adjustment under the

terms of the Hedge Transactions).

The Hedge Transactions cover, subject to customary anti-dilution adjustments, the number of shares of Varex common stock that was initially covered by the Convertible Notes.

The strike price of $ 20.81 corresponds to the initial conversion price of the Convertible Notes.

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

On June 4, 2020 and June 5, 2020, Varex also entered into privately negotiated warrant transactions (collectively, the “Warrant Transactions” and, together with the Hedge Transactions, the “Call Spread Transactions”), whereby the Company sold warrants at a higher strike price relating to the same number of shares of Varex common stock that initially underlie the Convertible Notes, subject to customary anti-dilution adjustments.

The initial strike price of the warrants is $ 24.975 per share (subject to adjustment under the terms of the Warrant Transactions), which is 50 % above the last reported sale price of Varex common stock on June 4, 2020.

On June 4, 2020 and June 5, 2020, Varex also entered into privately negotiated warrant transactions (collectively, the “Warrant Transactions” and, together with the Hedge Transactions, the “Call Spread Transactions”), whereby the Company sold warrants at a higher strike price relating to the same number of shares of Varex common stock that was initially covered by the Convertible Notes, subject to customary anti-dilution adjustments.

The initial strike price of the warrants is $ 24.975 per share (subject to adjustment under the terms of the Warrant Transactions), which was 50 % above the last reported sale price of Varex common stock on June 4, 2020.

The Warrant Transactions could have a dilutive effect to the Company's stockholders to the extent that the market price per share of Varex common stock, as measured under the terms of the Warrant Transactions, exceeds the applicable strike price of the warrants.

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

The number of warrants outstanding as of December 31, 2021, was 9.6 million.

The number of warrants outstanding as of April 1, 2022 was 9.6 million.

Senior Secured Notes

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and enter into certain transactions with their affiliates.

On March 18, 2022, the Company redeemed $ 27 million of Senior Secured Notes, in accordance with the terms and conditions of the governing indenture, by paying cash of $ 28.7 million, inclusive of the redemption premium and accrued interest, and recognized a $ 1.2 million loss related to the redemption premium and the write-off of previously recorded debt issuance costs.

The redemption price of the redeemed notes was 103 % of the principal amount, plus accrued and unpaid interest from, and including, October 15, 2021 to, but excluding, the redemption date of March 18, 2022.

As of April 1, 2022, the aggregate principal amount of the outstanding Senior Secured Notes was $ 243.0 million.

Asset-Based Loan

On September 30, 2020, the Company entered into a revolving credit agreement consisting of a $ 100.0 million asset-based loan revolving credit facility (the “Asset-Based Loan”, or "ABL Facility").

Borrowings under the Asset-Based Loan will be expected to bear interest at floating rates based on LIBOR, or a comparable rate, or a base rate, and an applicable margin based on Average Daily Excess Availability (as defined in the Asset-Based Loan Agreement).

In addition, the Company is required to pay a quarterly commitment fee of 0.375 % to 0.5 %, based on the aggregate unused commitments under the Asset-Based Loan.

From September 30, 2020 through March 9, 2022, borrowings under the Asset-Based Loan bore interest at floating rates based on LIBOR, or a comparable rate, or a base rate, and an applicable margin based on Average Daily Excess Availability (as defined in the Asset-Based Loan Agreement).

In addition, the Company was required to pay a quarterly commitment fee of 0.375 % to 0.5 %, based on the aggregate unused commitments under the Asset-Based Loan.

On March 9, 2022, the ABL Facility was amended to transition the reference rate for certain dollar denominated advances to the Secured Overnight Financing Rate ("SOFR") from the London Interbank Offered Rate ("LIBOR") and the quarterly commitment fee was amended to 0.25 %, based on the aggregate unused commitments under the Asset-Based Loan.

Additionally, the applicable margin rates were reduced by 75 basis points and the interest rate floor was reduced from 50 basis points to 0 basis points.

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.

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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 December 31, 2021, the amount available under our ABL Facility was $ 67 million and the ABL Facility remains undrawn.

As of April 1, 2022, the amount available under our ABL Facility was $ 96 million and the ABL Facility remains undrawn.

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.

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The Company has majority voting rights with an approximate 75 % interest.

Accordingly, the Company has consolidated the operations of the Saudi Arabia partnership in our condensed consolidated financial statements and recorded the noncontrolling interests.

Accordingly, the Company has consolidated the operations of the Saudi Arabia partnership in its condensed consolidated financial statements and recorded the noncontrolling interests.

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

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

At December 31, 2021, noncontrolling shareholders together held approximately 0.5 million shares of MeVis, representing 26.3 % of the outstanding shares.

At April 1, 2022, 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:

(In millions) Noncontrolling Interest

Balance at October 1, 2021 $ 13.2

Six Months Ended

(In millions) April 1, 2022 April 2, 2021

Noncontrolling interests, at beginning of period $ 13.2 $ 14.1

Net income attributable to noncontrolling interests 0.2 0.2

Other, including foreign currency remeasurement

Balance at December 31, 2021 $ 13.3

Other ( 0.1 ) ( 0.1 )

Noncontrolling interests, at end of period $ 13.3 $ 14.2

NET INCOME (LOSS) PER SHARE

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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)

December 31, 2021 January 1, 2021

April 1, 2022 April 2, 2021 April 1, 2022 April 2, 2021

Net income (loss) attributable to Varex $ 7.6 $ 3.1 $ 9.0 $ ( 3.3 )

Weighted average shares outstanding - basic

39.7 39.2 39.6 39.2

Dilutive effect of Convertible Notes 1.7 — 2.2 —

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Weighted average shares outstanding - diluted

42.2 40.0 43.2 39.2

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

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Anti-dilutive share-based awards, excluded

3.0 3.0 2.8 3.1

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 income (loss) per share attributable to Varex when their effect is dilutive.

As we intend to settle in cash the principal outstanding under our Convertible Notes, we apply the treasury stock method using our average share price during the period when calculating their potential dilutive effect, if any.

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

Furthermore, in connection with the offering of our Convertible 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.

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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) December 31, 2021 January 1, 2021

Three Months Ended Six Months Ended

(In millions) April 1, 2022 April 2, 2021 April 1, 2022 April 2, 2021

Cost of revenues $ 0.4 $ 0.3 $ 0.8 $ 0.6

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Selling, general and administrative

2.7 2.5 4.9 5.2

Total share-based compensation expense $ 3.9 $ 3.6 $ 7.3 $ 7.2

Stock Option Activity

The following table summarizes the activity for stock options under Varex’s 2020 Omnibus Stock Plan, 2017 Omnibus Stock Plan, and for participation in the 2017 Employee Stock Purchase Plan for the Company’s employees:

The following table summarizes the activity for stock options under Varex’s 2020 Omnibus Stock Plan, 2017 Omnibus Stock Plan, and 2017 Employee Stock Purchase Plan:

Options Outstanding

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$ 28.69 4.7 $ 5,161

319 $ 30.95 - $ 30.95

( 124 ) $ 25.17 - $ 30.74

Outstanding at December 31, 2021 3,006 $ 13.61 - $ 37.60

Granted 319 $ 30.95 - $ 30.95

Canceled, expired or forfeited ( 77 ) $ 30.74 - $ 30.74

Exercised ( 139 ) $ 13.61 - $ 30.74

Outstanding at April 1, 2022 2,914 $ 13.61 - $ 37.60

$ 28.96 5.1 $ 1,396

Exercisable at December 31, 2021 1,856 $ 13.61 - $ 37.60

Exercisable at April 1, 2022 1,931 $ 13.61 - $ 37.60

$ 30.13 3.4 $ 497

(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 $ 31.55 as of December 31, 2021, 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.

(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 $ 21.33 as of April 1, 2022, 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

The following table summarizes the activity for restricted stock units under Varex’s 2020 Omnibus Stock Plan and 2017 Omnibus Stock Plan for the Company’s employees:

The following table summarizes the activity for restricted stock units under Varex’s 2020 Omnibus Stock Plan and 2017 Omnibus Stock Plan:

(In thousands, except per share amounts) Number of Shares Weighted Average Grant-Date Fair Value

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Canceled or expired ( 21 ) 23.22

Outstanding at December 31, 2021 1,402 $ 24.40

Outstanding at April 1, 2022 1,181 $ 23.29

TAXES ON INCOME

For the three months ended December 31, 2021, the Company recognized income tax expense of $ 1.7 million on $ 3.3 million of pre-tax income.

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.

For the three months ended April 1, 2022, the Company recognized income tax expense of $ 6.0 million on $ 13.6 million of pre-tax 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 six months ended April 1, 2022, the Company recognized income tax expense of $ 7.7 million on $ 16.9 million of pre-tax income.

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.

The Company is unable to recognize a tax benefit for pre-tax book losses in certain foreign jurisdictions but has recognized tax expense for profitable foreign jurisdictions.

The Company's tax expense for the three months ended December 31, 2021 increased, primarily due to increased pre-tax income in certain jurisdictions, valuation allowance positions in the United States on deferred tax attributes, and losses in certain foreign jurisdictions for which no benefit can be recorded.

The Company is maintaining its reinvestment assertion with respect to foreign earnings for the quarter ended December 31, 2021, which is that earnings prior to fiscal year 2018 are permanently reinvested, but post fiscal year 2017 earnings are not permanently reinvested.

Furthermore, all earnings with respect to Direct Conversion subsidiaries, located primarily in Sweden and Finland, are indefinitely reinvested in those countries.

The Company's tax expense for the three and six months ended April 1, 2022 increased, primarily due to increased pre-tax income in certain jurisdictions, valuation allowance positions in the United States on deferred tax attributes, and losses in certain foreign jurisdictions for which no benefit can be recorded.

The Company is maintaining its reinvestment assertion with respect to foreign earnings for the quarter ended April 1, 2022, which is that earnings prior to fiscal year 2018 are permanently reinvested, but post fiscal year 2017 earnings are not permanently reinvested.

Furthermore, all earnings with respect to certain foreign subsidiaries, located primarily in Sweden and Finland, are indefinitely reinvested in those countries.

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.

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This estimated liability is for U.S.

State income taxes and foreign withholding taxes expected to apply when the foreign earnings are repatriated.

State income taxes and foreign withholding taxes that are expected to apply when the foreign earnings are repatriated.

SEGMENT INFORMATION

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

Three Months Ended

(In millions) December 31, 2021 January 1, 2021

$ 155.7 $ 139.2

Three Months Ended Six Months Ended

(In millions) April 1, 2022 April 2, 2021 April 1, 2022 April 2, 2021

Medical $ 170.4 $ 156.6 $ 326.1 $ 295.8

Industrial 44.3 46.9 87.4 84.8

Total revenues 214.7 203.5 413.5 380.6

Medical 53.4 45.7 99.4 89.8

Industrial 17.4 18.9 36.2 32.0

Total gross profit 70.8 64.6 135.6 121.8

Total operating expenses

44.2 48.8 95.0 99.9

Interest and other expenses, net

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

What changed 10-Q

Item 1. Financial Statements