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Item 1A. Risk Factors

2023-01-31 compared with 2022-08-03 · 230 added, 210 removed, 539 unchanged (45% of the section changed)

Summary of Principal Risk Factors

Investing in our common stock involves risks.

Investing in Varex Imaging Corporation ("we," "our," "us," the "Company," "Varex," or "Varex Imaging") common stock involves risks.

See below and Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures about Market Risks for a discussion of the following principal risks and other risks that make an investment in Varex speculative or risky:

• Supply chain disruptions and logistical challenges, including increased difficulty in obtaining supplies of important components, and increasing costs, as well as uncertainty caused by the military conflict between Russia and Ukraine, have increased our costs, impacted our ability to obtain materials needed to manufacture products, and caused product delivery delays.

These challenges and disruptions are likely to continue throughout our 2022 fiscal year.

• Our business and financial results may be adversely affected by the effects of inflation.

• It has become more difficult to attract and retain employees, which has impacted, and is likely to continue to impact, our ability to manufacture products.

• We sell products and services to a limited number of original equipment manufacturer (“OEM”) customers, many of which are also competitors, and a reduction in or loss of business of one or more of these customers may materially reduce our sales.

• We may not be able to accurately predict customer demand for our products, which is subject to matters beyond our control.

• We compete in highly competitive markets, and we may lose business to our customers or other companies with greater resources or the ability to develop more effective technologies, or we could be forced to reduce our prices.

• Our success depends on the successful development, introduction, and commercialization of new generations of products and enhancements to or simplifications of existing product lines.

• Changes in import/export regulatory regimes and tariffs could continue to negatively impact our business.

• A disruption at our manufacturing facilities, as well as fluctuating manufacturing costs, could materially and adversely affect our business.

• Our operations, cash flow, and financial position, and the demand for our security, industrial and inspection products, have been adversely impacted, and in the future could continue to be adversely impacted by the COVID-19 pandemic and associated economic disruptions.

• Our international manufacturing operations subject us to volatility and other risks, including high security risks, which could result in harm to our employees and contractors or substantial costs.

• The global economy has been adversely impacted by economic instability and geopolitical tensions that have in the past adversely affected, and could in the future continue to adversely affect, our business, financial condition, operating results, cash flows and stock price.

• We sell our products and services to a limited number of original equipment manufacturer (“OEM”) customers, many of which are also our competitors, and a reduction in or loss of business of one or more of these customers may materially reduce our sales.

• We may not be able to accurately predict customer demand or delivery schedules for our products.

• We compete in highly competitive markets, and we may lose business to our customers or other companies with greater resources or with greater abilities to develop more effective technologies, or we could be forced to reduce our prices.

• Our success depends on the successful acquisition, development, introduction, and commercialization of new lines of business, new technologies, new generations of products and enhancements to or simplifications of existing product lines.

• More than half our revenue is generated from customers located outside the United States and is subject to global, regional, and country-specific economic instability, shifting political environments, changing tax treatment, and other risks associated with international operations and sales that could materially and adversely impact our business and financial results.

• COVID-19 has adversely impacted our operations, cash flow, and financial position, and in the future we could continue to be adversely impacted by the COVID-19 pandemic and continuing economic disruptions.

• It has become more difficult to attract and retain employees, which has impacted, and is likely to continue to impact, our ability to develop and manufacture products and operate our business.

• We may be unable to complete future acquisitions or realize expected benefits from acquisitions of or investments in new business, products, or technologies, which could harm our business.

• Warranty claims may materially and adversely affect our business.

• Product defects or misuse may result in material product liability or professional errors and omissions claims, litigation, investigation by regulatory authorities, or product recalls that could harm our future revenues and require us to pay material uninsured claims.

• Our competitive position would be harmed if we are not able to maintain our intellectual property rights and protecting our intellectual property can be costly.

• We are exposed to credit risk and fluctuations in the values of our investment portfolio.

• Our business is subject to evolving Environmental, Social, and Governance (“ESG”) requirements and stakeholder expectations that could expose us to numerous risks.

• A disruption at our manufacturing facilities, as well as fluctuating manufacturing costs, could materially and adversely affect our business.

• Our competitive position would be harmed if we are not able to maintain our intellectual property rights and protecting our intellectual property and defending against infringement claims can be costly.

• Disruption of critical information systems or material breaches in the security of our systems may materially and adversely affect our business and customer relations.

• Compliance with laws and regulations across the globe applicable to the marketing, manufacture, and distribution of our products may be costly, and failure to comply may result in significant penalties and other harm to our business.

• Conversion of our Convertible Notes may dilute the ownership interest of our stockholders or may otherwise depress the market price of our common stock.

• We have significant debt obligations that could adversely affect our business, profitability and ability to meet our obligations.

• Our Asset-Based Loan credit facility and our indentures impose significant operating and financial restrictions that may limit current and future operating flexibility, and make it difficult to respond to economic or industry changes or to take certain actions, which could harm our long-term interest.

• Potential indemnification liabilities to Varian, a Siemens Healthineers Company ("Varian"), could materially and adversely affect our business, financial condition, results of operations, and cash flows.

The following risk factors and other information included in this quarterly report on Form 10-Q should be carefully considered.

Although the risk factors described below are the ones management deems significant, additional risks and uncertainties not presently known to us or that we presently deem less significant may also adversely affect our business operations.

• Changes in import/export regulatory regimes, tariffs, and national policies could continue to negatively impact our business.

• Compliance with laws, regulations, certifications and registrations across the globe applicable to the marketing, manufacturing, sale, and distribution of our products and to our operations generally, may be costly, and failure to comply may result in our inability to sell products, unfavorable legal proceedings, significant penalties and other harm to our business.

• Initiation of legal proceedings, defense against legal proceedings and unfavorable results of legal proceedings could materially and adversely affect our financial results.

• We have significant debt obligations and could incur additional debt that could adversely affect our business, profitability, liquidity, credit rating, and ability to meet our obligations.

• Conversion of the Convertible Notes may dilute the ownership interest of our stockholders or may otherwise depress the market price of our common stock or may adversely affect our financial condition and operating results, and certain hedging positions we entered may affect the value of the Convertible Notes and the volatility and value of our common stock.

• Our Asset-Based Loan credit facility and the indenture governing our Senior Secured Notes impose significant operating and financial restrictions that may limit current and future operating flexibility, and make it difficult to respond to economic or industry changes or to take certain actions, which could harm our long-term interest.

• Liabilities related to our operations when we were part of Varian Medical Systems, Inc., a Siemens Healthineers Company ("Varian"), or liabilities associated with the spin-off from Varian, could materially and adversely affect our business, financial condition, results of operations, and cash flows.

The following risk factors and other information included in this Quarterly Report on Form 10-Q (this "Quarterly Report") should be carefully considered.

Although the risk factors described below are the ones management deems significant, additional risks and uncertainties not presently known to us or that we presently deem not material may also adversely affect our business operations.

If any of the following risks or additional risks and uncertainties actually occur, our business, operating results, and financial condition could be adversely affected.

Risks Relating to Our Business

Current economic conditions, including supply chain disruptions and logistical challenges, as well as the military conflict between Russia and Ukraine, have increased our costs, and have impacted and may in the future impact our ability to obtain materials needed to manufacture our products, to deliver those products to our customers, and otherwise adversely impact our financial condition and results of operations.

Current economic conditions have had, and we believe will continue to have, an adverse impact on our manufacturing capacity, supply chain and distribution systems.

We have experienced, and continue to experience, difficulties in obtaining materials used to build our products and these difficulties have impacted our ability to deliver finished products to our customers.

The global economy has been adversely impacted by economic instability and geopolitical tensions that have in the past adversely affected, and could in the future continue to adversely affect, our business, financial condition, operating results, cash flows and stock price.

In many markets where we operate, global economic instability and geopolitical tensions have contributed to volatility in commodity prices, and in the credit and capital markets;

market, supply chain, and inventory disruptions;

sustained inflation;

exchange rate volatility;

the imposition of sanctions and countermeasures;

an energy crisis in Europe;

and increased likelihood of new and unfavorable trade regulations.

These conditions have shrunk capital equipment budgets, slowed decision-making and made it difficult for our customers and vendors to accurately forecast and plan future business activities.

This, in turn, has caused our customers to be more cautious with, and sometimes freeze, delay, or dramatically reduce purchases and capital project expenditures.

Some countries have adopted and may in the future adopt austerity or stimulus programs that could negatively affect our results from period to period.

We have experienced, and continue to experience, difficulties in obtaining materials used to build our products and these difficulties have in the past impacted, and could in the future impact, our ability to deliver finished products to our customers.

We believe that it will continue to be difficult to obtain certain materials throughout fiscal year 2023.

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In some cases, raw material shortages and delivery delays from our suppliers are communicated to us with very little advanced warning, which has caused operational and customer order fulfillment challenges.

During fiscal year 2021, inventory levels decreased due to our strong growth and, despite a concerted effort, it has continued to be difficult to replenish that inventory.

While we are dedicating significant resources to manage, mitigate, and resolve these issues, we currently expect supply chain challenges to continue to impact our ability to deliver products to our customers over the next several quarters.

If our actions to mitigate such challenges are not successful, material shortages could cause us to temporarily stop production of certain products.

During fiscal year 2022 and the first quarter of fiscal year 2023, inventory levels increased, however, uneven component flow and delayed deliveries impacted our ability to finish products resulting in higher inventory count.

If our actions to mitigate such challenges are not successful, material shortages could slow or cause us to temporarily stop production of certain products.

Production delays have had and could continue to have a material adverse effect on our business and results of operations.

For example, if we are unable to deliver products to our customers without unreasonable delay, those customers may seek alternative suppliers or decide to in-source certain products.

Further, our competitors with greater financial resources may be better able to restructure their manufacturing and supply chains in response to geopolitical and economic trends and thereby have a competitive advantage over us.

In addition to material shortages, supply chain logistics have become more challenging, could remain challenging, and result in higher costs and efforts.

Our ability to move unfinished goods and finished products around the world has been impacted by the decreased availability of global transportation networks.

We have been subject to price increases on both the components used to make our products, and for moving unfinished goods and finished products across the globe.

Our ability to move unfinished goods and finished products around the world has been and continues to be impacted by the decreased availability of global transportation networks.

We have been and continue to be subject to price increases on both the components used to make our products, and for moving unfinished goods and finished products across the globe.

Increased freight charges and shipping delays have also become more common during the pandemic and are expected to continue into the foreseeable future.

If we are not able to mitigate these price increases and/or raise prices for our products, our operations, cash flow, and financial position could be adversely impacted.

In addition, regulatory approvals for certain of our products may continue to be delayed due to COVID-19 related closures.

If we are not able to mitigate these price increases and/or raise prices for our products, our operations, cash flow, and financial position could continue to be adversely impacted.

See Management’s Discussion and Analysis of Financial Condition and Results of Operations for more information regarding the risks related to supply chain disruptions and logistical challenges on our business.

The escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine have introduced further uncertainty into the economic environment, which could impact our business.

Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions.

Poor relations between the United States and Russia;

sanctions by the United States, European Union, and other countries against Russia;

the response by Russia and other countries to these sanctions;

and any escalation of political tensions or economic instability in the area could have an adverse impact on our business, our customers, and our suppliers.

Further, our customers, suppliers, and other third parties with whom we do business may have staff, operations, materials or equipment located in Ukraine or Russia, which could impact our supply chain, the services being provided to us, or our financial condition or results of operations.

COVID-19 has adversely impacted our operations, cash flow, and financial position, and in the future we could continue to be adversely impacted, by the COVID-19 pandemic and associated economic disruptions.

The pandemic caused by the spread of COVID-19 adversely impacted our operations, cash flow, and financial position.

For example, increases in COVID-19 related employee absences have made it more difficult from time to time, and may in the future make it more difficult from time to time to manufacture our products.

The pandemic has also created significant volatility, uncertainty and economic disruption.

Emerging variants and uneven vaccination rates across the globe could lead to additional volatility, uncertainty, and economic disruption.

New or continuing outbreaks of COVID-19 could lead to future decreases in demand for our products.

The actions taken to combat COVID-19 could have a negative impact on future operating results, cash flows and financial condition.

Local government lockdowns or prohibitions on travel could adversely affect our ability to manufacture or sell our

For example, the Chinese government has closed, and may in the future close, our factory in China for extended periods of time to combat COVID-19 infection rates in the region.

This could impact our ability to manufacture our products and provide service to our customers in the region.

We believe that COVID-19’s adverse impact on our operating results, cash flows and financial condition will be primarily driven by:

the severity and duration of the COVID-19 pandemic;

the COVID-19 pandemic’s impact on the United States and international healthcare systems, the U.S.

economy and worldwide economy;

and the timing, scope and effectiveness of U.S.

and international governmental responses to the COVID-19 pandemic and associated economic disruptions.

In addition, government action related to the COVID-19 pandemic, such as potential vaccine mandates or testing requirements, could have an adverse impact on our business and operating results by, among other things, increasing costs to verify compliance and making it more difficult to retain existing employees or hire new workers.

See Management’s Discussion and Analysis of Financial Condition and Results of Operations for more information regarding the risks related to COVID-19 on our business.

Our business and financial results may be adversely affected by the effects of inflation

Inflation has the potential to adversely affect our liquidity, business, financial condition and results of operations by increasing our overall cost structure, particularly if we are unable to achieve commensurate increases in the prices we charge our customers.

The existence of inflation in the economy has resulted in, and may continue to result in, higher interest rates and capital costs, shipping costs, supply shortages, increased costs of labor, weakening exchange rates and other similar effects.

As a result of inflation, we have experienced and may continue to experience, cost increases.

Although we may take measures to mitigate the impact of this inflation, if these measures are not effective, our business, financial condition, results of operations and liquidity could be materially adversely affected.

Inflation has the potential to increase our overall cost structure, particularly if we are unable to achieve commensurate increases in the prices we charge our customers.

The existence of sustained inflation in the economy has resulted in, and may continue to result in, higher interest rates and capital costs, increased shipping costs, supply shortages, increased costs of labor, weakening exchange rates and other similar effects.

As interest rates rise to address inflation or otherwise, we may experience further increases in capital and other costs.

Changes in monetary or other policies in the United States and abroad, including efforts to combat inflation, economic and/or political instability, or in reaction thereto, could affect foreign currency exchange rates.

Furthermore, if one or more European countries were to replace the Euro with another currency, our sales in these countries, or in Europe generally, would likely be materially and adversely affected until stable exchange rates are established.

Our products are generally priced in U.S.

Because our business is global and some payments may be made in local currency, fluctuations in foreign currency exchange rates can impact our results by affecting product demand and purchasing decisions, revenues and expenses, and/or the profitability in U.S.

Dollars of products and services that we provide in foreign markets.

Although we may take measures to mitigate the impact of inflation and exchange rate fluctuation, if these measures are not effective, our business, financial condition, results of operations and liquidity could be materially adversely affected.

Even if such measures are effective, the benefits of such measures may not be realized until after the costs of inflation have been incurred.

We sell our products and services to a limited number of OEM customers, many of which are also its competitors, and a reduction in or loss of business of one or more of these customers may materially reduce our sales.

We had one customer during the three months ended July 1, 2022 that accounted for 17% of our revenue.

Our ten largest customers as a group accounted for approximately 51% and 52% of our revenue for the three months ended July 1, 2022 and July 2, 2021, respectively.

Our ten largest customers as a group accounted for approximately 50% and 51% of our revenue for the nine months ended July 1, 2022 and July 2, 2021, respectively.

Additionally, fluctuations in commodities prices could materially and adversely affect our performance.

Rising commodities prices have in the past increased, and may in the future increase, our costs and those of our medical OEM customers, which could in turn result in reduced demand for our products or impact our financial results.

Further, our security product revenues from oil-producing countries, in which we have a significant customer base, have in the past suffered as a result of volatility in oil prices and remain sensitive to fluctuations in the future.

The uncertain economic environment has also impacted, and may in the future continue to impact, our service business, as customers’ constrained budgets may result in pricing pressure, extended warranty provisions, and even cancellation of service contracts.

In addition, concerns over continued economic instability could make it more difficult for us to collect outstanding receivables.

A weak or deteriorating healthcare market would inevitably materially and adversely affect our business, financial conditions, and results of operations.

We sell our products and services to a limited number of OEM customers, many of which are also our competitors, and a reduction in or loss of business of one or more of these customers may materially reduce our sales.

We sell our products to a limited number of OEM customers, many of which are also our competitors with in-house X-ray component manufacturing operations.

We had one customer during the three months ended December 30, 2022 that accounted for 20% of our revenue.

Our ten largest customers as a group accounted for approximately 55% and 50% of our revenue for the three months ended December 30, 2022 and December 31, 2021, respectively.

Although we seek to broaden our customer base, we will continue to depend on sales to a relatively small number of major customers.

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Furthermore, we generate significant accounts receivables from the sale of our products and the provision of services directly to our major customers.

If one or more of these customers were to cancel a product order or service contract (whether in accordance with its terms or otherwise), become insolvent or otherwise be unable or fail to pay for our products and services, our operating results and financial condition could be materially and adversely affected.

We may not be able to accurately predict the demand for our products by our customers.

End-user product demand, economic uncertainties, the COVID-19 pandemic, natural disasters, and other matters beyond our control make it difficult for our customers to accurately forecast and plan future business activities;

We had one customer during the three months ended December 30, 2022 that accounted for 9.2% of our accounts receivable.

If one or more of these customers were to cancel a product order or service contract (whether in accordance with its terms or otherwise), become insolvent or otherwise be unable or fail to pay for our products and/or services, our operating results and financial condition could be materially and adversely affected.

We may not be able to accurately predict the demand or delivery schedules for our products.

End-user product demand, economic uncertainties, the COVID-19 pandemic, natural disasters, armed conflict, geopolitical tensions, and other matters beyond our control make it difficult for our customers to accurately forecast and plan future business activities;

which makes it difficult for us to accurately predict the demand for our products.

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The market and regulatory risks faced by our customers also ultimately impact our ability to forecast future business.

Our agreements for imaging components, such as our three-year pricing agreement with Canon Medical Systems, may contain purchasing estimates that are based on our customers’ historical purchasing patterns rather than firm commitments, and actual purchasing volumes under the agreements may vary significantly from these estimates.

Our agreements for imaging components contain purchasing estimates that are typically based on our customers’ forward-looking forecasts rather than firm commitments, and actual purchasing volumes under the agreements may vary significantly from these estimates.

The variation from forecasted purchasing volume may be due, in part, to the increasing life of X-ray tubes, which can result in reduced demand for replacement X-ray tubes in ways we may not be able to accurately forecast.

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In the past, decreased economic activity associated with the COVID-19 pandemic had a significant negative impact on the demand for our industrial products and a similar impact could occur again.

We compete in highly competitive markets, and we may lose business to our customers or other companies with greater resources or the ability to develop more effective technologies, or we could be forced to reduce our prices.

We compete in a market characterized by rapidly-evolving technology, intense competition and pricing pressure.

We compete in highly competitive markets, and we may lose business to our customers or other companies with greater resources or with greater abilities to develop more effective technologies, or we could be forced to reduce our prices.

We compete in markets characterized by rapidly-evolving technology, intense competition and pricing pressure.

We often compete with companies that have greater financial, marketing and other resources than us.

Some of the major diagnostic imaging systems companies, which are the primary OEM customers for our X-ray components, also manufacture X-ray components, including X-ray tubes, for use in their own imaging systems products.

Some of the major diagnostic imaging systems companies, which are the primary OEM customers for our X-ray imaging components, also manufacture X-ray imaging components, including X-ray tubes, for use in their own imaging systems products.

We must compete with these in-house manufacturing operations for business.

If these customers manufacture a greater percentage of their components in-house or otherwise decrease purchases from external sources, which may occur for a number of reasons, including a strong U.S.

Dollar, or a general economic slowdown, we could experience reductions in purchasing volume by, or loss of, one or more of these customers.

Dollar, rising interest rates or a general economic slowdown, we could experience reductions in purchasing volume by, or loss of, one or more of these customers.

Such a reduction or loss may have a material and adverse effect on our business.

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Our failure to do so has in the past resulted, and may in the future result, in the loss of customers and an adverse impact to our financial performance.

With a relatively strong U.S.

Dollar, our ability to meet our customers’ pricing expectations is particularly challenging and may result in erosion of product margin and market share.

When the U.S.

Dollar is strong compared to the operating currencies of our international customers, our ability to meet such customers’ pricing expectations is particularly challenging and may result in erosion of product margin and market share.

We have in the past spent, and in the future may need to spend, more time and money than we expect to develop, market and introduce new products or enhancements, and, even if we succeed, we may not be able to recover all or a meaningful part of our investment.

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If we are unable to lower these costs over time, our operating results could be materially and adversely affected.

Some of the electronic components and integrated circuits used in our flat panel detectors are susceptible to discontinuance and obsolescence risks, which may force us to incorporate newer generations of these components, resulting in unplanned additional R&D expenses, delays in the launch of new products, supply disruption, or inventory write downs.

Our ability to successfully develop and introduce new products and product enhancements and simplifications, and the revenues and costs associated with these efforts, are affected by our ability to, among other things:

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• prove the feasibility of new products;

• identify complementary technologies or intellectual property and, where appropriate, negotiate and maintain related licensing agreements or other arrangements to facilitate development of new products and product enhancements and simplifications;

• properly manage and control research and development costs;

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• limit the timing and cost of regulatory approvals;

• adequately protect the underlying intellectual property and, where licensed or jointly developed, ensure the continuity of our use of such intellectual property for the manufacture, sale and distribution of new products and product enhancements or simplifications;

• accurately predict and control costs associated with inventory overruns caused by the phase-in of new products and the phase-out of old products;

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Failure to complete these processes timely and efficiently could result in delays that could affect our ability to attract and retain customers or cause customers to delay or cancel orders, which would materially and adversely affect our revenues and operating results.

More than half of our revenues are generated from customers located outside the United States, and economic, political, and other risks associated with international sales and operations could materially and adversely affect our sales or make them less predictable.

More than half of our revenue is generated from customers located outside the United States, and is subject to global, regional, and country-specific economic instability, shifting political environments, changing tax treatment, and other risks associated with international operations and sales that could materially and adversely affect our business and financial results.

We conduct business globally.

Revenues generated from customers located outside the United States accounted for approximately 71% and 70% of our total revenues for the three months ended July 1, 2022 and July 2, 2021, respectively.

Revenues generated from customers located outside the United States accounted for approximately 70% and 67% of our total revenues for the nine months ended July 1, 2022 and July 2, 2021, respectively.

Revenues generated from customers located outside the United States accounted for approximately 64% and 70% of our total revenues for the three months ended December 30, 2022 and December 31, 2021, respectively.

As a result, we must provide significant service and support globally.

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• currency fluctuations, and in particular the strength of the U.S.

Dollar (which is our functional and reporting currency) relative to many currencies, which have and may in the future adversely affect our financial results and cause some customers to delay purchasing decisions or move to in-sourcing supply or migrate to lower cost alternatives or ask for additional discounts;

Dollar (which is our functional and reporting currency) relative to many currencies, which have adversely affected, and may in the future adversely affect our financial results and cause some customers to delay purchasing decisions, move to in-sourcing supply, migrate to lower cost alternatives, or ask for discounts;

• the longer payment cycles associated with many customers located outside the United States;

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• changes in the political, regulatory, safety or economic conditions in a country or region;

• the imposition by governments of additional taxes, tariffs, global economic sanctions programs, or other restrictions on foreign trade such as the tariffs recently put into place by both China and the United States;

• the imposition by governments of additional taxes, tariffs, global economic sanctions programs, or other restrictions on foreign trade such as the tariffs put into place by both China and the United States;

• conflicts between countries, including the current military conflict between Russia and Ukraine, and related sanctions;

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The more we depend on international sales, the more vulnerable we become to these factors.

Our business may suffer if we are not able to hire and retain qualified personnel.

Our future success depends, to a great degree, on our ability to retain, attract, expand, integrate, and train our management team and other key personnel, such as qualified engineering, service, sales, marketing, and other staff.

COVID-19 has adversely impacted our operations, cash flow, and financial position, and in the future we could continue to be adversely impacted by the COVID-19 pandemic and continuing economic disruptions.

The pandemic caused by the spread of COVID-19 adversely impacted our operations, cash flow, and financial position.

The pandemic created significant volatility, uncertainty and economic disruption that could continue into the future.

In addition, in part due to the COVID-19 pandemic, we have observed an overall tightening and increasingly competitive labor market, which has resulted in increased wages offered by other employers and voluntary attrition of employees in the industry, making it more difficult to recruit, hire, and retain talent.

New or continuing outbreaks of COVID-19 could have a negative impact on our business, future operating results, cash flows and financial condition.

Local government lockdowns or prohibitions on travel could adversely affect our ability to manufacture or sell our products or to provide service to our customers or to meet and build relationships with customers, suppliers, or other third parties.

For example, the Chinese government has in the past closed, and, in light of surging infection and morbidity rates in China from the easing of China’s zero COVID-19 policy, may in the future close, our factory in China for extended periods of time to combat COVID-19 infection rates in the region.

Even though the effects of COVID-19 have been lessening worldwide, a resurgence of COVID-19 or other infections variants could have an adverse impact on our operating results, cash flows and financial condition.

See Management’s Discussion and Analysis of Financial Condition and Results of Operations for more information regarding the risks related to COVID-19 on our business.

It has become more difficult to attract and retain employees, which has impacted, and is likely to continue to impact, our ability to develop and manufacture products and operate our business.

We compete for key personnel with other medical equipment and software manufacturers and technology companies, as well as universities and research institutions.

Competition for qualified personnel has increased over the past year.

Because this competition is intense, particularly in Utah, where unemployment rates are relatively low, compensation-related costs could increase significantly if the supply of qualified personnel decreases or demand increases.

Competition for qualified personnel has increased over the past years.

As a result of the COVID-19 pandemic, we have observed an overall tightening and increasingly competitive labor market, which has resulted in increased wages offered by other employers and voluntary attrition of employees in the industry, making it more difficult to recruit, hire, and retain talent.

Because competition is intense, particularly in Utah, where unemployment rates are relatively low, compensation-related costs have and could continue to increase significantly.

If we are unable to hire and train qualified personnel, we may not be able to maintain or expand our business.

Additionally, if we are unable to retain key personnel, we may not be able to replace them readily or on terms that are reasonable, which also could hurt our business.

A change in the percentage of our total earnings from international sales or additional changes in tax laws could increase our effective tax rate.

Our effective tax rate is impacted by tax laws in both the United States and in foreign countries.

Earnings from our international subsidiaries are generally taxed at rates that differ from U.S.

A change in the percentage of our total earnings from the international subsidiaries, a change in the mix of particular tax jurisdictions between the international subsidiaries, or a change in currency exchange rates could cause our effective tax rate to increase.

Furthermore, while U.S.

Tax Reform imposed a current tax on cumulative undistributed earnings, these earnings could also become subject to incremental foreign withholding or U.S.

state taxes should they be actually remitted to the United States, in which case our financial results could be materially and adversely affected.

Statutory changes included in proposed US legislation, if passed, including interpretive guidance, could have a material impact on income tax expense, the effective rate, or the value of deferred tax assets and liabilities.

Changes in the valuation of our deferred tax assets or liabilities, additional changes in tax laws or rates, changes in the interpretation of tax laws in other jurisdictions, or other changes beyond our control could materially and adversely affect our financial position and results of operations.

We have entities in certain jurisdictions with cumulative net operating losses for which no income tax benefit can be recorded due to full valuation allowance positions.

There could be additional future losses in these and other jurisdictions that would negatively impact our effective tax rate.

Additionally, our U.S.-based employees, including our senior management team, work for us on an at-will basis and there is no assurance that any such employee will remain with us.

Replacing key employees, including our Chief Executive Officer, and management personnel may be difficult or costly and may take an extended period of time because of the limited number of individuals in our industry and where we are located with the breadth of skills and experience that we require.

Further, in 2021 and into 2022, the labor market in the U.S.

experienced significant increases in workers leaving their positions (often referred to as the "Great Resignation"), which made the market to replace these individuals competitive and resulted in significant wage inflation in response to labor shortages.

During the Great Resignation, we have faced and may continue to face increased challenges of employee attraction and retention.

To the extent we hire employees from competitors, we also may be subject to allegations that they have been improperly solicited or divulged proprietary or other confidential information.

We may face additional risks from the acquisition or development of new lines of business.

From time to time, we may acquire or develop new lines of business.

There are substantial risks and uncertainties associated with new lines of business, particularly in instances where the markets are not fully developed.

Risks include developing knowledge of and experience in the new business, recruiting market professionals, increasing research and development expenditures, and developing and capitalizing on new relationships with experienced market participants.

There are substantial risks and uncertainties associated with new lines of business, particularly in instances where the markets are not fully developed or are ones we have not operated in before.

Risks include developing knowledge of and experience in the new business, recruiting market professionals, new types or greater levels of liability exposure, increasing research and development expenditures, and developing and capitalizing on new relationships with experienced market participants.

This may mean significant investment and involvement of our senior management to acquire or develop, then integrate, the business into our operations.

Timelines for integration of new businesses may not be achieved, and price and profitability targets may not prove feasible, as new products can carry lower gross margins than existing products.

External factors, such as compliance with regulations, competitive alternatives, and shifting market preferences may also impact whether implementation of a new business will be successful.

External factors, such as compliance with regulations (including in the case of some evolving end-markets, fast-changing regulatory developments and legal uncertainties), competitive alternatives, and shifting market preferences may also impact whether implementation of a new business will be successful.

Failure to manage these risks could have a material and adverse effect on our business, results of operations, and/or financial condition.

In addition, some of our products are multi-purpose products designed and intended to be used by OEMs and end users for a wide range of imaging and irradiation purposes including for use in new and emerging industries.

Certain of these industries may be subject to varying, inconsistent, and rapidly changing laws, regulations, administrative practices, enforcement approaches, judicial interpretations, and consumer perceptions.

The demand for our products may be negatively impacted depending on how laws, regulations, administrative practices, enforcement approaches, judicial interpretations, and consumer perceptions develop, and we cannot reasonably predict the nature of these developments or the effect, if any, that these developments could have on our business.

We may be unable to complete future acquisitions or realize expected benefits from acquisitions of or investments in new businesses, products, or technologies, which could harm our business.

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We may be required to dispose of a business at a lower price or on less advantageous terms, or to recognize greater losses than we had anticipated.

If we acquire a business, we allocate the total purchase price to the acquired business’ tangible assets and liabilities, identifiable intangible assets, and liabilities based on their fair values as of the date of the acquisition and records the excess of the purchase price over those values as goodwill.

If we acquire a business, we allocate the total purchase price to the acquired business’ tangible assets and liabilities, identifiable intangible assets, and liabilities based on their fair values as of the date of the acquisition and record the excess of the purchase price over those values as goodwill.

If we fail to achieve the anticipated growth from an acquisition, or if we decide to sell assets or a business, we may be required to recognize an impairment loss on the write down of our assets and goodwill, which could materially and adversely affect our financial results.

In addition, acquisitions can result in potentially dilutive issuances of equity securities or the incurrence of debt, contingent liabilities or expenses, or other charges, any of which could harm our business and affect our financial results.

Additionally, we participate in joint ventures and have investments in privately-held companies, for example, our 40% ownership in dpiX LLC, our major supplier of our amorphous silicon-based thin film transistor arrays (flat panels used in our digital detectors) and VEC Imaging GmbH & Co.

KG, a joint venture to develop nanotube based x-ray sources.

These investments and joint ventures are subject to risk of loss of investment capital as well as other risks.

These investments are inherently risky, in some instances because the markets for the technologies or products these companies have under development may never materialize.

We participate in joint ventures and other investments in privately-held and publicly traded companies.

For example, we hold a 40% ownership interest in dpiX LLC, our major supplier of our amorphous silicon-based thin film transistor arrays for flat panels used in our digital image detectors, and a 50% interest in VEC Imaging GmbH & Co.

KG, a joint venture formed to develop technology for use in X-ray imaging components and we recently invested in another X-ray imaging components technology company.

These and other investments are subject to risk of loss of investment capital as well as losses associated with contributed or jointly developed intellectual property.

These types of investments are inherently risky, in some instances because the markets for the technologies or products these companies have under development may never materialize or may underperform relative to our expectations.

If these companies do not succeed, we could lose some or all of our investment in these companies.

There is no guarantee that the time and money invested by us in these projects will yield the expected returns.

In addition, we may incur significant costs and management resources to enforce our rights, protect our intellectual property and other assets, address disputes that have arisen or may arise, and/or unwind, dispose of or terminate our arrangements with respect to these investments.

There is no guarantee that the time and money invested by us in these projects, or jointly developed intellectual property or product or product enhancements will yield the expected returns.

Warranty claims may materially and adversely affect our business.

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Such an occurrence may damage our market reputation, cause sales to decline, or require repairs or voluntary remedial measures to enhance customer satisfaction, which could materially and adversely impact our financial results.

Increased warranty claims on any given product could cause us to halt production on that product and significantly impair our liquidity and profitability, and cause reputational harm to us.

Increased warranty claims on any given product could cause us to halt production on that product and significantly impair our liquidity and profitability, and could cause reputational harm to us.

Because some categories of products tend to experience higher numbers of warranty claims than others, a shift in the types of products that our customers purchase could lead to an increase in warranty claims.

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Our business exposes us to potential product liability claims that are inherent in the manufacture, sale, installation, servicing, and support of components that are used in medical devices and other devices that deliver radiation.

Because our products, through incorporation in OEMs’ systems, are involved in the intentional delivery of radiation to the human body and other situations where people may come into contact with radiation (for example, when our security and inspection products are being used to scan cargo or in the diagnosis of medical problems), the possibility for significant personal injury or loss of life exists.

Because our products, through incorporation into OEMs’ systems, are involved in the intentional delivery of radiation to the human body and other situations where people may come into contact with radiation (for example, when our security and inspection products are being used to scan cargo or in the diagnosis of medical problems), the possibility for significant personal injury or loss of life exists.

Although our products are incorporated into OEMs’ systems, and thus only perform pursuant to the design and operating systems of OEMs, we may also be subject to claims for property damage, personal injury, or economic loss related to or resulting from any errors or defects in our products or the installation, servicing, or support of our products.

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If a material claim is not insured or is in excess of our insurance coverage, we could have to pay substantial damages, which could have a material and adverse effect on our financial position and/or results of operations.

We are exposed to credit risk and fluctuations in the values of our investment portfolio.

Our investments can be negatively affected by liquidity, credit deterioration, financial results, market and economic conditions, political risk, sovereign risk, interest rate fluctuations or other factors.

As a result, the value and liquidity of our cash, cash equivalents and marketable securities may fluctuate substantially.

Therefore, although we have not realized any significant losses on our cash, cash equivalents and marketable securities, future fluctuations in their value could result in significant losses and could have a material adverse impact on our financial condition and operating results.

See Quantitative and Qualitative Disclosures about Market Risks for more information regarding the risks related to credit risks and fluctuations on our business.

Our business is subject to evolving ESG requirements and stakeholder expectations that could expose us to numerous risks.

Regulators, customers, consumers, investors, and other stakeholders are increasingly focusing on ESG issues and related disclosures.

Changing ESG requirements and stakeholder expectations, including ESG requirements set forth in customer procurement policies, have resulted in, and are likely to continue to result in, increased general and administrative expenses and increased management time and attention spent complying with or meeting such regulations and expectations.

For example, developing and acting on ESG initiatives, and collecting, measuring, and reporting ESG information and metrics can be costly, difficult and time consuming and is subject to evolving reporting standards, including the SEC’s proposed climate-related reporting requirements.

We may also communicate certain ESG initiatives and goals in our SEC filings or in other public disclosures.

These initiatives and goals could be difficult and expensive to implement, the technologies needed to implement them may not be cost effective and may not advance at a sufficient pace, and we could be criticized for the accuracy, adequacy, or completeness of the disclosure of our ESG initiatives.

Further, statements about our ESG initiatives and goals, and progress against those goals, may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future.

In addition, we could be criticized for the scope or nature of such initiatives or goals, or for any revisions to these goals.

If our ESG-related data, processes and reporting are incomplete or inaccurate, or if we fail to achieve progress with respect to our ESG goals on a timely basis, or at all, our reputation, business, financial performance and growth could be adversely affected.

In addition, our customers have adopted, and may continue to adopt, procurement policies that require us to comply with social, and environmental responsibility provisions.

An increasing number of investors have adopted, and may continue to adopt, ESG policies for their portfolio companies, and various voluntarily sustainability initiatives and organizations have promulgated different social and environmental responsibility and sustainability guidelines.

These practices, policies, provisions, and initiatives are under active development, subject to change, can be unpredictable and conflicting, and may prove difficult and expensive for us to comply with and could negatively affect our reputation, business, or financial condition.

Risks Relating to the Manufacture of our Products

Supply chain disruptions, including the loss of a supplier, and any inability to obtain supplies of important components have impacted our ability to manufacture products, have caused delays in our ability to deliver products, and have increased our costs and may continue to do so.

As discussed under the heading "Risks Related to our Business" above, supply chain disruptions have had, and will likely continue to have, an impact on our ability to manufacture our products.

As discussed under the heading " Risks Relating to Our Business " above, supply chain disruptions have had, and will likely continue to have, an impact on our ability to manufacture our products.

We have experienced delays in receiving materials used to make our products due both to material shortages and shipping delays.

These delays are likely to continue.

In addition, poor relations between the United States and Russia;

sanctions by the United States, European Union, and other countries against Russia;

the response by Russia and other countries to these sanctions;

and any escalation of political tensions or economic instability in the area could have an adverse impact on our business, our customers, and our suppliers.

During fiscal year 2022, material shortages have increased and have caused, and if not timely remedied could continue to cause, us to temporarily stop production of certain products.

If we are unable to obtain the materials necessary to make our products or must pay more for those materials, it could have a material adverse effect on our business and financial results.

Material shortages have caused, and could continue to cause, us to temporarily stop production of certain products or miss opportunities to pursue additional product sales.

If we are unable to obtain the materials necessary to make our products or if we must pay more for those materials, it could have a material adverse effect on our business and financial results.

We obtain some of the components included in our products from a limited group of suppliers or from sole-source suppliers, such as wave guides for industrial linear accelerators, transistor arrays, cesium iodide coatings and specialized integrated circuits for flat panel detectors, X-ray tube targets, housings, glass frames, high-voltage cable, bearings and various other components.

For example, our major supplier of our amorphous silicon-based thin film transistor arrays (flat panels) used in our digital image detectors is dpiX LLC.

Although we hold a 40% ownership interest in dpiX, we do not have majority voting rights and do not have the power to direct the activities of dpiX.

For example, our major supplier of our amorphous silicon-based thin film transistor arrays for flat panels used in our digital image detectors is dpiX LLC.

Although we hold a 40% ownership interest in dpiX, we do not have majority voting rights or the power to direct the activities of dpiX.

In addition, Varian is our sole source supplier for a key component in linear accelerators used in our security and inspection products subsystems, which are specially made for us.

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In addition, manufacturing capacity limitations of any of our suppliers or other inability of these suppliers to meet increasing demand or delivery deadlines could limit growth opportunities for the affected product lines and damage customer relationships.

Shortage of, and greater demand for, components and

subassemblies could also increase manufacturing costs if the supply/demand imbalance increases the price of the components and subassemblies.

Shortage of, and greater demand for, components and subassemblies could also increase manufacturing costs if the supply/demand imbalance increases the price of the components and subassemblies.

Any of these events could materially and adversely affect our business and financial results.

If we decide to manufacturer a component that was previously purchased from an external supplier, we may not be able to manufacture the component as efficiently as the external supplier and may experience delays or problems in successfully manufacturing the component, which could materially and adversely affect our ability to manufacture and supply products to customers.

Shortages, changes in source of, and increased in prices for, raw materials have negatively impacted our ability to manufacture products, have caused delays, and have increased our cost of goods.

If we decide to manufacture a component that was previously purchased from an external supplier, we may not be able to manufacture the component as efficiently as the external supplier and may experience delays or problems in successfully manufacturing the component, which could materially and adversely affect our ability to manufacture and supply products to customers.

Shortages, changes in source of, and increases in prices for, raw materials have negatively impacted our ability to manufacture products, have caused delays, and have increased our cost of goods.

We rely on the supplies of certain raw materials such as tungsten, lead, iridium, and copper for security and inspection products and copper, lead, tungsten, rhenium, molybdenum zirconium, and various high grades of steel alloy for X-ray tubes.

Worldwide demand, availability, and pricing of these raw materials have been volatile.

We have experienced and expect that we will continue to experience increases in raw material costs due to inflation and other market constraints.

We expect that availability and pricing will continue to fluctuate in the future.

If supplies are restricted or become unavailable or if prices increase further, this could constrain our manufacturing of affected products, reduce our profit margins, or otherwise materially and adversely affect our business.

We are required to disclose (1) the presence in a company’s products of certain metals known as “conflict minerals,” which are metals mined from the Democratic Republic of the Congo and adjoining countries, and (2) procedures regarding a manufacturer’s efforts to identify the sourcing of those minerals from this region.

We are required to disclose (1) the presence in our products of certain metals known as “conflict minerals,” which are metals mined from the Democratic Republic of the Congo and adjoining countries, and (2) procedures regarding our efforts to identify the sourcing of those minerals from this region.

Our complex supply chain may inhibit our ability to sufficiently verify the origins of the relevant minerals used in our products through the due diligence procedures that we implement, which may harm our reputation.

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Loss or damage to our manufacturing facility due to any of these factors or otherwise could materially and adversely affect our ability to manufacture sufficient quantities of our products or otherwise deliver products to meet customer demand or contractual requirements, which may result in a loss of revenue and other adverse business consequences.

Because of the time required to obtain regulatory approval and licensing of a manufacturing facility, we may not be available on a timely basis to replace any lost manufacturing capacity.

Because of the time required to obtain regulatory approval and licensing of a manufacturing facility, we may not be able to replace any lost manufacturing capacity on a timely basis.

The occurrence of these or any other operational issues at our manufacturing facilities could have a material and adverse effect on our business, financial condition, and results of operations.

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In addition, our costs associated with manufacturing our products can vary significantly from quarter to quarter, and fluctuations thereof may adversely affect our business, operating results, and/or financial condition.

Our results have been and may continue to be affected by continuing worldwide economic instability, including changes in foreign currency exchange rates and fluctuations in the price of crude oil and other commodities.

The global economy has been impacted by a number of economic and political factors, including the political conflict between Russia and Ukraine and the growing concern over inflation.

In many markets, these conditions have shrunk capital equipment budgets, slowed decision-making and made it difficult for our customers and vendors to accurately forecast and plan future business activities.

This, in turn, has caused our customers to be more cautious with, and sometimes freeze, delay, or dramatically reduce purchases and capital project expenditures.

Some countries have adopted and may in the future adopt austerity or stimulus programs that could negatively affect our results from period to period.

In addition, actions taken by the current U.S.

administration may also create global economic uncertainty, which may cause our customers to reduce their spending, which, in turn, could adversely affect our business, financial condition, operating results, and cash flows.

An uncertain economic environment may also disrupt supply or affect our service business, as customers’ constrained budgets may result in pricing pressure, extended warranty provisions, and even cancellation of service contracts.

In addition, concerns over continued economic instability could make it more difficult for us to collect outstanding receivables.

A weak or deteriorating healthcare market would inevitably materially and adversely affect our business, financial conditions, and results of operations.

Because our products are generally priced in U.S.

Dollars, the strengthening of the U.S.

Dollar in the last several years has caused, and could continue to cause, some customers to ask for discounts, delay purchasing decisions, or consider moving to in-sourcing such components or migrating to lower cost alternatives.

Further, because our business is global and some payments may be made in local currency, fluctuations in foreign currency exchange rates can impact our results by affecting product demand, revenues and expenses, and/or the profitability in U.S.

Dollars of products and services that we provide in foreign markets.

Changes in monetary or other policies here and abroad, including efforts to combat inflation, economic and/or political instability, or in reaction thereto, would also likely affect foreign currency exchange rates.

Additionally, fluctuations in commodities prices could materially and adversely affect our performance.

Rising commodities prices have increased our costs and those of our medical OEM customers, which could in turn result in reduced demand for our products or impact our financial results.

Delivery schedules for our security, industrial, and inspection products tend to be unpredictable.

We design, manufacture, sell, and service Linatron® X-ray accelerators, image-processing software, and image detection products for security and inspection, such as cargo screening at ports and borders and nondestructive examination for a variety of applications, as well as industrial applications.

We generally sell security and inspection products to OEMs who incorporate our products into their inspection systems, which are then sold to customs and other government agencies, as well as to commercial organizations in the casting, power, aerospace, chemical, petro-chemical, and automotive industries.

We design, manufacture, sell, and service Linatron® X-ray linear accelerators, image-processing software, and image detection products for security and inspection, such as cargo screening at ports and borders and nondestructive examination for a variety of applications, as well as industrial applications.

We generally sell security and inspection products to OEMs who incorporate our products into their inspection or irradiation systems and processes, which are then sold to customs and other government agencies, as well as to commercial organizations in the casting, power, aerospace, chemical, petrochemical, and automotive industries.

We believe growth in our security and inspection products will be driven by security cargo screening and border protection needs, as well as by the needs of customs agencies to verify shipments for assessing duties and taxes.

This business is heavily influenced by domestic and international government policies on border and port security, political change, and government budgets.

In addition, we believe growth in this product line may be driven in part by industrial customers engaged in 3-D printing, which, as a developing market, may be difficult to predict.

Orders for our security and inspection products have been and may continue to be unpredictable, as governmental agencies may place large orders with us or our OEM customers in a short time period and then may not place any orders for a long time period thereafter.

Because it is difficult to predict our OEM customer delivery, the actual timing of sales and revenue recognition varies significantly.

The market for border protection systems has slowed significantly, and end customers, particularly in oil-based economies and war zones in which we have a significant customer base, are delaying system deployments or tenders and considering moving to alternative sources, resulting in a decline in the demand for security and inspection products.

The demand for our security and inspection products is heavily influenced by U.S.

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As economic growth remains sluggish in various jurisdictions and appears to be deteriorating in others, and as concerns about levels of government employment and government debt continue, we expect that these effects will also continue.

Bid awards in this business may be subject to challenge by third parties, as we have previously encountered with a large government project.

Bid awards in this business may be subject to challenge by third parties.

These factors make this business more unpredictable and could cause volatility in our revenues and earnings.

Our international manufacturing operations subject it to volatility and other risks, including high security risks, which could result in harm to our employees and contractors or substantial costs.

Our international manufacturing operations subject us to volatility and other risks, including high security risks, which could result in harm to our employees and contractors or substantial costs.

We conduct certain manufacturing operations internationally to reduce costs and streamline our manufacturing operations.

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• difficulties in coordinating our operations globally and in maintaining uniform standards, controls, procedures, and policies across our operations;

• difficulties in enforcing contracts and protecting intellectual property;

• difficulties in enforcing contracts and protecting intellectual property, including in connection with our joint ventures;

• diversion of management attention;

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Despite these precautions, the safety of our personnel in these locations may continue to be at risk, and we may in the future suffer the loss of employees and contractors, which could harm our business reputation and operating results.

Our operations are vulnerable to interruption or loss due to natural or other disasters, power loss, strikes, and other events beyond our control.

Our operations are vulnerable to interruption or loss due to natural or other disasters, the effects of climate change, power loss, strikes, and other events beyond our control.

We conduct some of our activities, including manufacturing, research and development, administration, and data processing at facilities located in areas that have in the past experienced or may in the future experience natural disasters.

Our insurance coverage for such disasters may not be adequate or continue to be available at commercially-reasonable terms, or at all.

A major disaster (such as a major fire, hurricane, earthquake, flood, tsunami, volcanic eruption or terrorist attack) affecting our facilities, or those of our suppliers, could significantly disrupt our operations and delay or prevent product manufacture and shipment during the time required to repair, rebuild, or replace our or our suppliers’ damaged manufacturing facilities.

A major disaster (such as a major fire, hurricane, earthquake, flood, tsunami, volcanic eruption or terrorist attack) or a climate change-related event affecting our facilities, or those of our suppliers, could significantly disrupt our operations and delay or prevent product manufacture and shipment during the time required to repair, rebuild, or replace our or our suppliers’ damaged manufacturing facilities.

These delays could be lengthy and costly.

If any of our customers’ facilities are adversely affected by a disaster, shipments of our products could be delayed.

If any of our customers’ facilities are adversely affected by such a disaster or event, shipments of our products could be delayed.

Additionally, customers may delay purchases of our products until our operations return to normal.

For example, following the earthquake and tsunami disasters in Japan in 2011, the operations of Canon Medical Systems, our largest customer, were impacted, and, as a consequence, orders to and product shipment from our business were delayed for several months.

Even if our suppliers or customers are able to quickly respond to a disaster, the ongoing effects of the disaster could create some uncertainty in the operations of our business.

For example, following the earthquake and tsunami disasters in Japan in 2011, the operations of Canon Medical Systems Corporation, our largest customer, were impacted, and, as a consequence, orders to and product shipment from our business were delayed for several months.

Even if our suppliers or customers are able to quickly respond to such a disaster or event, the ongoing effects of such a disaster or event could create some uncertainty in the operations of our business.

In addition, our facilities may be subject to a shortage of available electrical power and other energy supplies.

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Risks Relating to our Intellectual Property and Information Systems

Our competitive position would be harmed if we are not able to maintain our intellectual property rights and protecting our intellectual property can be costly.

Our competitive position would be harmed if we are not able to maintain our intellectual property rights and protecting our intellectual property and defending against infringement claims can be costly.

We file applications as appropriate for patents covering new products and manufacturing processes.

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We also cannot be sure that our current patents, the claims allowed under our current patents, or patents for technologies licensed to us will be sufficiently broad to protect our technology position against competitors.

Issued patents owned by, or licensed to, us may be challenged, invalidated, or circumvented, or the rights granted under the patents may not provide us with competitive advantages.

We also jointly develop intellectual property with third parties and seek to protect our rights to such intellectual property through licenses and other contractual arrangements.

Issued patents owned by, or licensed to, us may be challenged, invalidated, or circumvented, and the rights granted under the patents, licenses or other contractual arrangements may not provide us with competitive advantages or otherwise protect our interests.

Asserting our patent rights against others in litigation or other legal proceedings is costly and diverts managerial resources.

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Determining whether a product infringes on a party’s intellectual property rights involves complex legal and factual issues, and the outcome of this type of litigation is often uncertain.

Parties may claim that we are infringing upon their intellectual property rights.

Parties may claim that we are infringing upon their intellectual property rights or that we are in breach of related licensing agreements or other contractual arrangements.

We may not be aware of intellectual property rights of others that relate to our products, services, or technologies.

From time to time, we have received notices from parties asserting infringement, and we have been subject to lawsuits alleging infringement of patent or other intellectual property rights.

Any dispute regarding patents or other intellectual property could be costly and time consuming and could divert our management and key personnel from our business operations.

Any dispute regarding patents or other intellectual property, including with respect to breaches of licensing agreements or other contractual arrangements, could be costly and time consuming and could divert our management and key personnel from our business operations.

We may not prevail in a dispute.

We do not maintain insurance for intellectual property infringement, so costs of defense, whether or not we are successful in defending an infringement claim, will be borne by us and could be significant.

If we are unsuccessful in defending or appealing an infringement claim, We may be subject to significant damages, and our combined financial position, results of operations, or cash flows could be materially and adversely affected.

If we are unsuccessful in defending or appealing an infringement claim or claims alleging other contractual breaches, we may be subject to significant damages, and our combined financial position, results of operations, or cash flows could be materially and adversely affected.

We may also be subject to injunctions against development and sale of our products, the effect of which could be to materially reduce our revenues.

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Information technology (including technology from third party providers) helps us operate efficiently, interface with and support our customers, maintain financial accuracy and efficiency, and produce our financial statements.

In the ordinary course of our business, we collect, process and store sensitive data, including intellectual property, proprietary business information and that of customers, suppliers and business partners, third parties accessing our website, patient data and personally identifiable information of customers and employees, in our data centers, and on our networks, as well as third party off-site infrastructure.

In the ordinary course of our business, we collect, process and store sensitive data, including intellectual property, proprietary business information and that of customers, suppliers and business partners, third parties accessing our website, patient data and personally identifiable information of customers and employees, in our data centers and on our networks, as well as in third party off-site data centers.

Despite security measures, there is an increasing threat of information security attacks, including from computer viruses or other malicious codes, unauthorized access attempts, and cyber-attacks that pose risks to companies, including us.

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Risks Relating to Our Legal and Regulatory Environment

Changes in import/export regulatory regimes and tariffs could continue to negatively impact our business.

Tariffs and changes in international trade agreements or trade-related laws and regulations may have an indirect adverse impact on our business.

Changes in import/export regulatory regimes, tariffs, and national policies could continue to negatively impact our business.

Tariffs and changes in international trade agreements or trade-related laws and regulations may have an adverse impact on our business.

As a component manufacturer, our products are integrated into the systems and products of our OEM customers.

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Uncertainty over tariffs and trade wars could also cause our customers to delay or cancel orders for our products.

In recent years, the United States has imposed tariffs on items imported from China that are incorporated into our products.

Tariffs on items imported by us from China and other countries have increased our costs and has increased prices and lowered gross margins on some of our products.

These tariffs have had a direct adverse impact on our business and results of operations, and future tariffs could have a more significant impact on our business.

In the past, the United States has imposed tariffs on items imported from China and other countries that are incorporated into our products.

Tariffs on items imported by us from China and other countries have increased our costs and have increased prices and lowered gross margins on some of our products, thereby having a direct adverse impact on our business and results of operations.

China has imposed retaliatory tariffs that impact a number of our products, including U.S.

origin X-ray tubes, heat exchange units, and certain flat panel detectors.

The tariffs levied by China have increased our customers’ costs for products imported into China, which has caused us to make price concessions on some products and has caused some customers to stop purchasing products from us.

We expect that tariffs will continue to have a negative effect on our business and results of operations, including the possibility of continued price concessions or loss of business.

Tariffs could limit our ability to compete for increased market share in China, which could cause our long-term prospects in China to suffer.

In addition, future tariffs could have a more significant impact on our business.

The imposition of additional tariffs by the United States could result in the adoption of additional tariffs by China and other countries, as well as further retaliatory actions by any affected country, which could negatively impact the global market for imaging equipment and could have a significant adverse effect on our business.

Compliance with foreign laws and regulations applicable to the marketing, manufacture, and distribution of our products may be costly, and failure to comply may result in significant penalties and other harm to our business.

In addition to tariffs, China’s stated policy of reducing its dependence on foreign manufacturers and technology companies may result in reduced demand for our products in China.

Both the United States and China could pursue policies to reduce their dependence on foreign goods, which could have a material adverse impact on our business, results of operations and financial position.

In addition, as a consequence of such policies, there are risks that the Chinese government may, among other things, require the use of local suppliers, compel companies that do business in China to partner with local companies to conduct business, or provide incentives to government-backed local customers to buy from local suppliers rather than companies like ours, all of which could adversely impact our business, results of operations and financial position.

Increasing tensions between China and Taiwan may cause the United States and/or China to impose higher tariffs, commence trade wars, move more quickly to reduce their dependence on each other’s goods, or enact boycotts against each other’s goods, this could cause significant disruptions in the markets and industries we serve, our supply chain, decrease demand from customers for the ultimate products using our solutions, and would materially harm our business, financial condition and results of operations.

A change in the percentage of our total earnings from international sales or additional changes in tax laws could increase our effective tax rate.

Our effective tax rate is impacted by tax laws in both the United States and in foreign countries.

Earnings from our international subsidiaries are generally taxed at rates that differ from U.S.

A change in the percentage of our total earnings from our international subsidiaries, a change in the mix of particular tax jurisdictions between our international subsidiaries, or a change in currency exchange rates could cause our effective tax rate to increase.

Furthermore, while U.S.

tax reform imposed a current tax on cumulative undistributed earnings, these earnings could also become subject to incremental foreign withholding or U.S.

state taxes should they actually be remitted to the United States, in which case our financial results could be materially and adversely affected.

Statutory changes included in proposed U.S.

legislation, if passed, including interpretive guidance, could have a material impact on income tax expense, the effective tax rate, or the value of deferred tax assets and liabilities.

We have entities in certain jurisdictions with cumulative net operating losses for which no income tax benefit can be recorded due to full valuation allowance positions.

There could be additional future losses in these and other jurisdictions that would negatively impact our effective tax rate.

Compliance with foreign laws and regulations applicable to the marketing, manufacturing, and distribution of our products may be costly, and failure to comply may result unfavorable legal proceedings, in significant penalties and other harm to our business.

Regulatory requirements affecting our operations and sales outside the United States vary from country to country, often differing significantly from those in the United States.

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In addition, compliance with changing regulatory schemes may add additional complexity, cost and delays in marketing or selling our products.

Within the EU/EEA, we must obtain, and in turn affix, a CE mark certification, which is a European marking of conformity that indicates that a product meets the essential requirements of the European Union's Medical Device Directive.

Compliance with the Medical Device Directive is done through a self-certification process that is then verified by an independent certification body called a “Notified Body,” which is an organization empowered by the legislature to conduct this verification.

Once the CE mark is affixed, the Notified Body will regularly audit us to ensure that we remain in compliance with the applicable European laws and Medical Device Directive.

Compliance with the MDD is done through a self-certification process that is then verified by an independent certification body called a “Notified Body,” which is an organization empowered by the legislature to conduct this verification.

Once the CE mark is affixed, the Notified Body will regularly audit us to ensure that we remain in compliance with the applicable European laws and MDD.

By affixing the CE mark to our product, we are certifying that our products comply with the laws and regulations required by the EU/EEA countries, thereby allowing the free movement of our products within these countries and others that accept CE mark standards.

If we cannot support our performance claims and demonstrate compliance with the applicable European laws and the Medical Device Directive, we would lose our right to affix the CE mark to our products, which would prevent us from selling our products within the EU/EEA/Switzerland territory and in other countries that recognize the CE mark.

If we cannot support our performance claims and demonstrate compliance with the applicable European laws and the MDD, we would lose our right to affix the CE mark to our products, which would prevent us from selling our products within the EU/EEA/Switzerland territory and in other countries that recognize the CE mark.

In April 2017, the European Commission adopted two regulations on medical devices that impose stricter requirements for placing medical devices in the EU market, as well as for Notified Bodies.

These regulations have resulted in the limited availability of recognized Notified Bodies, which could delay our ability to obtaining CE marks.

These regulations have resulted in the limited availability of recognized Notified Bodies, which could delay our ability to obtain CE marks.

We may be subject to risks associated with additional testing, modification, certification, or amendment of our existing market authorizations, or we may be required to modify products already installed at our customers’ facilities to comply with the official interpretations of these revised regulations.

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Compliance with U.S.

laws and regulations applicable to the marketing, manufacture, and distribution of our products may be costly, and failure or delays in obtaining regulatory clearances or approvals or failure to comply with applicable laws and regulations could prevent us from distributing our products, require us to recall our products, or result in significant penalties or other harm to our business.

laws and regulations applicable to the marketing, manufacturing, and distribution of our products may be costly, and failure or delays in obtaining regulatory clearances or approvals or failure to comply with applicable laws and regulations could prevent us from distributing our products, require us to recall our products, or result in unfavorable legal proceedings, significant penalties or other harm to our business.

Some of our products and those of OEMs that incorporate our products are subject to extensive and rigorous government regulation in the United States.

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Foreign Corrupt Practices Act and anti-corruption laws, as well as similar laws in foreign countries, such as the U.K.

Bribery Act and the Law On the Fundamentals of Health Protection in the Russian Federation.

In general, there is a worldwide trend to strengthen anti-corruption laws and their enforcement, and the healthcare industry and medical equipment manufacturers have been particular targets of these investigation and enforcement efforts.

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Guidance related to compliance with the UFLPA has not yet been issued, and we cannot yet evaluate the impact that compliance with the UFLPA will have on our business or financial condition.

We are subject to similar laws in foreign countries where we conduct business.

We are subject to other laws in foreign countries where we conduct business.

For example, within the EU, the control of unlawful marketing activities is a matter of national law in each of the member states.

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As a manufacturer and seller of medical devices and devices emitting radiation or utilizing radioactive by-product material, we and some of our suppliers and distributors are subject to extensive regulation by United States governmental authorities, such as the FDA, the Nuclear Regulatory Commission (“NRC”), and state and local regulatory agencies, which is intended to ensure the devices are safe and effective and comply with laws governing products which emit, produce, or control radiation.

These regulations govern, among other things, the design, development, testing, manufacturing, packaging, labeling, distribution, import/export, sale, and marketing and disposal of our products.

These regulations govern, among other things, the design, development, testing, manufacturing, packaging, labeling, distribution, import/export, sale, marketing, and disposal of our products.

We are also subject to international laws and regulations that apply to manufacturers of radiation-emitting devices and products utilizing radioactive materials.

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Our manufacture, distribution, installation, service, and removal of industrial devices utilizing radioactive material or emitting radiation also requires us to obtain a number of licenses and certifications for these devices and materials.

Service of these products must also be in accordance with a specific radioactive materials licenses.

Service of these products must also be performed in accordance with a specific radioactive materials licenses.

Obtaining licenses and certifications may be time consuming, expensive, and uncertain.

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Furthermore, even if we are granted regulatory clearances or approvals, they may include significant limitations on the indicated uses of the product, which may limit the market for the product.

If we are unable to obtain required FDA clearance or approval for a product or is unduly delayed in doing so, or the uses of that product were limited, our business could suffer.

Unfavorable results of legal proceedings could materially and adversely affect our financial results.

If we are unable to obtain required FDA clearance or approval for a product or are unduly delayed in doing so, or the uses of that product were limited, our business could suffer.

Initiation of legal proceedings, defense against legal proceedings, and unfavorable results of legal proceedings could materially and adversely affect our financial results.

From time to time, we are a party to or otherwise involved in legal proceedings, claims, government inspections, audits or investigations, and other legal matters, both inside and outside the United States, arising in the ordinary course of our business or otherwise.

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For these and other reasons, we may choose to settle legal proceedings and claims, regardless of their actual merit.

If our existing insurance does not cover the amount or types of damages awarded, or if other resolution or actions taken as a result of such legal proceeding were to restrain our ability to market one or more of our material products or services, our combined financial position, results of operations, or cash flows could be materially and adversely affected.

If a legal proceeding were ultimately resolved against us, it could result in significant compensatory damages, and, in certain circumstances, punitive damages, disgorgement of revenue or profits, remedial corporate measures, or injunctive relief imposed on us and, in certain cases, potential civil or criminal action, including against our employees, officers or directors, for which we may be required to, or we may elect to, provide indemnification.

If our existing insurance does not cover the amount or types of damages awarded, or if other resolution or actions taken as a result of such legal proceeding were to restrain our ability to market one or more of our material products or services, or if we were required to, or elected to, indemnify an employee, officer or director, our combined financial position, results of operations, or cash flows could be materially and adversely affected.

In addition, legal proceedings, and any adverse resolution thereof, can result in adverse publicity and damage to our reputation, which could materially and adversely impact our business.

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Insurance has provided coverage for portions of cleanup costs resulting from historical occurrences, but we do not expect to maintain insurance coverage for costs or claims that might result from any future contamination.

Pursuant to the Separation and Distribution Agreement we entered into with Varian when we spun off from Varian, we are obligated to indemnify Varian for 20% of the cleanup liabilities related to prior corporate restructuring activities while a division of Varian.

This includes facilities sold as part of Varian’s electron devices business in 1995 and thin film systems business in 1997.

Environmental Protection Agency (“EPA”) or third parties have named Varian as a potentially responsible party under the amended Comprehensive Environmental Response Compensation and Liability Act of 1980 (“CERCLA”), at sites to which Varian or the facilities of the businesses sold in 1995 and 1997 were alleged to have shipped waste for recycling or disposal (the “CERCLA sites”).

We anticipate that we will be obligated to reimburse Varian for 20% of the liabilities of Varian related to these CERCLA sites (after adjusting for any insurance proceeds or tax benefits received by Varian).

In connection with the CERCLA sites, to date Varian has been required to pay only a small portion of the total cleanup costs and we currently anticipate that any reimbursement to Varian in the future will not be material.

Future changes in environmental laws could also increase our costs of doing business, perhaps significantly.

Several countries, including some in the EU, now require medical equipment manufacturers to bear certain disposal costs of products at the end of the product’s useful life, increasing its costs.

Several countries, including some in the EU, now require medical equipment manufacturers to bear certain disposal costs of products at the end of the product’s useful life, thereby increasing its costs.

The EU has also adopted directives that may lead to restrictions on the use of certain hazardous substances or other regulated substances in some of our products sold there.

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Internal control over financial reporting is complex and may be revised over time to adapt to changes in our business or changes in applicable accounting rules.

We cannot assure that our internal control over financial reporting will be effective in the future or that material weaknesses will not be discovered with respect to a prior period for which it had previously believed that internal controls were effective.

We cannot assure that our internal control over financial reporting will be effective in the future or that material weaknesses will not be discovered with respect to a prior period for which we had previously believed that internal controls were effective.

If our internal controls and procedures are not effective, our financial statements may not accurately reflect the results of our business and operations.

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Risks Relating to Our Indebtedness

We have significant debt obligations that could adversely affect our business, profitability and ability to meet our obligations.

As of July 1, 2022, our total combined indebtedness was approximately $450.6 million.

The borrowings under our unsecured convertible senior notes due 2025 (the “Convertible Notes”) bear interest at a fixed rate of 4.00% and borrowings under our senior secured notes due 2027 (the “Senior Secured Notes”) bear interest at a fixed rate of 7.875%.

We have significant debt obligations that could adversely affect our business, profitability, liquidity, and ability to meet our obligations.

As of December 30, 2022, our total combined indebtedness was approximately $449.7 million.

The borrowings under our Convertible Senior Unsecured Notes due 2025 (the “Convertible Notes”) bear interest at a fixed rate of 4.00% and borrowings under our Senior Secured Notes due 2027 (the “Senior Secured Notes”) bear interest at a fixed rate of 7.875%.

For more information regarding our borrowings, see Note 10, Borrowings of the Notes to the Condensed Consolidated Financial Statements of this report.

Our debt could potentially have important consequences to us and our investors, including:

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• limiting our ability to borrow additional funds as needed or increasing the costs of any such borrowing;

• make it more difficult for us to satisfy our obligations, including our debt obligations;

• increase our vulnerability to adverse economic and general industry conditions, including interest rate fluctuations, because a portion of our borrowings are and will continue to be at variable rates of interest;

• require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, which would reduce the availability of our cash flow from operations to fund working capital, capital expenditures or other general corporate purposes;

• place us at a disadvantage compared to competitors that may have proportionately less debt;

• limit our ability to obtain additional debt or equity financing due to applicable financial and restrictive covenants in our debt agreements.

• making it more difficult for us to satisfy our obligations, including our debt obligations;

• increasing our vulnerability to adverse economic and general industry conditions, including interest rate fluctuations, because a portion of our borrowings are and will continue to be at variable rates of interest;

• requiring us to dedicate a substantial portion of our cash flow from operations to payments on our debt, which would reduce the availability of our cash flow from operations to fund working capital, capital expenditures or other general corporate purposes;

• placing us at a disadvantage compared to competitors that may have proportionately less debt;

• limiting our ability to obtain additional debt or equity financing due to applicable financial and restrictive covenants in our debt agreements.

If our cash requirements in the future are greater than expected, our cash flow from operations may not be sufficient to repay all of the outstanding debt as it becomes due, and we may not be able to borrow money, sell assets, or otherwise raise funds on acceptable terms, or at all, to refinance our debt.

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Further, if a make-whole fundamental change as defined in the indenture governing the Convertible Notes occurs prior to the maturity date of the Convertible Notes, we will in some cases be required to increase the conversion rate for a holder that elects to convert its Convertible Notes in connection with such make-whole fundamental change.

On the conversion of the Convertible Notes, unless we elect to deliver solely shares of common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments for the Convertible Notes being converted.

Unless we elect to deliver solely shares of common stock to settle a conversion of the Convertible Notes (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments for those Convertible Notes being converted.

However, we may not have enough available cash or be able to obtain financing at the time we are required to make such repurchases of the Convertible Notes surrendered or pay cash with respect to the Convertible Notes being converted.

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We and our subsidiaries may be able to incur substantial indebtedness in the future.

As of July 1, 2022, we had approximately $100 million of additional available borrowing capacity (subject to borrowing base availability) under the revolving credit agreement that we entered into on September 30, 2020 (the “Asset-Based Loan,” or "ABL Facility").

As of December 30, 2022, we had approximately $100 million of additional available borrowing capacity (subject to borrowing base availability) under the revolving credit agreement that we entered into on September 30, 2020 (the “Asset-Based Loan,” or "ABL Facility").

In addition to any amounts that might be available to us for borrowing under the ABL Facility, subject to certain conditions, we will have the right to request an increase of aggregate commitments under the ABL Facility by an aggregate amount of up to $75 million by obtaining additional commitments either from one or more of the lenders under the ABL Facility or other lending institutions.

Although the ABL Facility and the indenture governing our Senior Secured Notes contain restrictions on our and our subsidiaries’ ability to incur additional indebtedness, these restrictions are subject to a number of important qualifications and exceptions, and the indebtedness incurred in compliance with these restrictions could be substantial.

Furthermore, the covenants in the indenture governing our Convertible Notes do not restrict the incurrence of indebtedness by the company or any of its subsidiaries, and the covenants that may be contained in any future debt instruments could allow us to incur a significant amount of additional indebtedness.

The more leveraged we become, the more we, and in turn holders of our notes, will be exposed to certain risks described above under “— we have significant debt obligations that could adversely affect our business, profitability and ability to meet our obligations.”

Furthermore, the covenants in the indenture governing our Convertible Notes do not restrict the incurrence of indebtedness by us or any of our subsidiaries, and the covenants that may be contained in any future debt instruments could allow us to incur a significant amount of additional indebtedness.

The more leveraged we become, the more we, and in turn holders of our notes, will be exposed to certain risks described above under “ Risks Relating to Our Indebtedness—We have significant debt obligations that could adversely affect our business, profitability and ability to meet our obligations .”

The ABL Facility and the indenture governing our Senior Secured Notes impose significant operating and financial restrictions that may limit our current and future operating flexibility, particularly our ability to respond to changes in the economy or our industry or to take certain actions, which could harm our long-term interests and may limit our ability to make payments on the notes.

Our ABL Facility and the indenture governing our Senior Secured Notes impose significant operating and financial restrictions on us limit our ability, among other things, to:

Our ABL Facility and the indenture governing our Senior Secured Notes impose significant operational and financial restrictions on us that include, but are not limited to our ability to:

• incur, assume or permit to exist additional indebtedness (including guarantees thereof);

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Furthermore, if we were unable to repay the amounts due and payable under the ABL Facility, those lenders could proceed against the collateral securing such indebtedness.

In the event our lenders or holders of the notes offered hereby accelerate the repayment of our borrowings, we and our subsidiaries may not have sufficient assets to repay that indebtedness.

In the event our lenders or holders of the notes accelerate the repayment of our borrowings, we and our subsidiaries may not have sufficient assets to repay that indebtedness.

Our ability to continue to have the necessary liquidity to operate our business may be adversely impacted by a number of factors, including uncertain conditions in the credit and financial markets, which could limit the availability and increase the cost of financing.

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the level of our cash flows, which will be impacted by customer demand for our products;

compliance with a fixed charge coverage ratio that is included in our ABL Facility, interest rate fluctuations and the adverse impact of the COVID-19 outbreak on the U.S.

compliance with a fixed charge coverage ratio that is included in our ABL Facility;

interest rate fluctuations and the adverse impact of the COVID-19 outbreak on the U.S.

and world-wide economies and on our business.

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Compliance with the fixed charge coverage ratio is dependent on the results of our operations, which are subject to a number of factors including current economic conditions.

Adverse developments in the economy, including as a result of the COVID-19 outbreak, could lead to reduced spending by our customers and end-users which could adversely impact our net sales and cash flow, which could affect our ability to comply with the fixed charge coverage ratio.

Adverse developments in the economy, including as a result of a number of events described in these Risk Factors, in the past have led and in the future could lead to reduced spending by our customers and end-users which could adversely impact our net sales and cash flow, which could affect our ability to comply with the fixed charge coverage ratio.

In addition, the ABL Facility contains other affirmative and negative covenants that restrict our operating and financing activities.

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Any future refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants which could further restrict our business operations.

Additionally, the indenture relating to our notes will limit the use of the proceeds from any disposition of our assets.

As a result, the indenture may prevent us from using the proceeds from such dispositions to satisfy our debt service obligations.

Additionally, the indentures relating to our notes limit the use of the proceeds from any disposition of our assets.

As a result, the indentures may prevent us from using the proceeds from such dispositions to satisfy our debt service obligations.

Our credit rating and ability to access well-functioning capital markets are important to our ability to secure future debt financing on acceptable terms.

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The trading price of our common stock may decline or fluctuate significantly and fluctuations in our operating results, including quarterly revenues, and margins, may cause our stock price to be volatile, which could cause losses for our stockholders.

In the past year, our stock price has ranged from a low of $18.90 to a high of $32.65.

During the year ended December 30, 2022, our stock price has ranged from a low of $18.90 to a high of $32.41.

We cannot guarantee that an active trading market will be sustained for our common stock.

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• disruptions in our operations, including our ability to manufacture products, caused by events such as earthquakes, fires, floods, terrorist attacks or the outbreak of epidemic diseases;

• the unfavorable outcome of any litigation or administrative proceeding or inquiry, including governmental audits, as well as ongoing costs associated with legal proceedings and governmental audits;

• developments relating to any litigation or administrative proceeding or inquiry, including governmental audits, as well as ongoing costs associated with legal proceedings and governmental audits;

• accounting changes and adoption of new accounting pronouncements.

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In addition, even if holders do not elect to convert their Convertible Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Convertible Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital and may seriously harm our business.

Certain provisions in our Amended and Restated Certificate of Incorporation, our Amended and Restated Bylaws, our Indenture, and of Delaware law, may prevent or delay an acquisition of our, which could decrease the trading price of our common stock.

Our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws contain, and Delaware law contains, provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids unacceptably expensive to the bidder and to encourage prospective acquirers to negotiate with our board of directors rather than to attempt a hostile takeover.

Certain provisions in our Amended and Restated Certificate of Incorporation, our Amended and Restated Bylaws, our Indenture, and of Delaware law, may prevent or delay an acquisition of our Company, which could decrease the trading price of our common stock.

Our Amended and Restated Certificate of Incorporation, our Amended and Restated Bylaws, and Delaware law contain, provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids unacceptably expensive to the bidder and to encourage prospective acquirers to negotiate with our board of directors rather than to attempt a hostile takeover.

These provisions include, among others:

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These and other provisions in our indenture could deter or prevent a third party from acquiring us even when the acquisition may be favorable to holders of the Convertible Notes or our stockholders.

Liabilities related to our operations when it was part of Varian, or liabilities associated with our spin-off from Varian, could materially and adversely affect our business, financial condition, results of operations, and cash flows.

Liabilities related to our operations when we were part of Varian, or liabilities associated with our spin-off from Varian, could materially and adversely affect our business, financial condition, results of operations, and cash flows.

We entered into a Separation and Distribution Agreement when we spun off from Varian.

The agreement provides for, among other things, indemnification obligations designed to make Varian financially responsible for liabilities allocable to Varian before the spin-off, and to make us financially responsible for liabilities allocable to us before the spin-off and for information contained in our registration statement that describes the separation, we, and the transactions contemplated by the Separation and Distribution Agreement.

We may be subject to substantial liabilities if it is required to indemnify Varian or if Varian is required, but unable, to indemnify us.

The agreement provides for, among other things, indemnification obligations designed to make Varex financially responsible for liabilities allocable to Varex before the spin-off;

and for information contained in our registration statement that describes Varex, our separation from Varian, and the transactions contemplated by the Separation and Distribution Agreement.

The Separation and Distribution Agreement also provides for indemnification obligations designed to make Varian financially responsible for liabilities allocable to Varian before the spin-off.

We may be subject to substantial liabilities if we were required to indemnify Varian or if Varian were required, but unable, to indemnify us.

Either of these could negatively affect our business, financial position, results of operations, and/or cash flows.

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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 1A. Risk Factors