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Item 1. Financial Statements

2023-05-02 compared with 2023-01-31 · 222 added, 145 removed, 612 unchanged (37% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

(In millions, except per share amounts) December 30, 2022 December 31, 2021

Three Months Ended Six Months Ended

(In millions, except per share amounts) March 31, 2023 April 1, 2022 March 31, 2023 April 1, 2022

Revenues, net $ 228.2 $ 214.7 $ 433.8 $ 413.5

24 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended

(In millions) December 30, 2022 December 31, 2021

Three Months Ended Six Months Ended

(In millions) March 31, 2023 April 1, 2022 March 31, 2023 April 1, 2022

Net income $ 4.3 $ 7.6 $ 7.5 $ 9.2

Other comprehensive loss

Other comprehensive income (loss)

Unrealized gain on available-for-sale securities 0.1 — 0.1 —

Foreign currency translation adjustments — ( 1.2 ) — ( 1.7 )

5 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share and per share amounts) December 30, 2022 September 30, 2022

(In millions, except share and per share amounts) March 31, 2023 September 30, 2022

Current assets:

Cash and cash equivalents $ 104.4 $ 89.4

Accounts receivable, net of allowance for credit losses of $ 0.4 million and $ 0.6 million at December 30, 2022 and September 30, 2022, respectively

Accounts receivable, net of allowance for credit losses of $ 0.6 million and $ 0.6 million at March 31, 2023 and September 30, 2022, respectively

Inventories 310.7 303.2

27 unchanged sentences

Shares issued and outstanding:

40,087,100 and 40,085,126 at December 30, 2022 and September 30, 2022, respectively

40,384,190 and 40,085,126 at March 31, 2023 and September 30, 2022, respectively

Additional paid-in capital 441.6 469.1

8 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Three Months Ended December 30, 2022

Three Months Ended March 31, 2023

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

(In millions) Shares Amount

December 30, 2022 40.1 $ 0.4 $ 437.9 $ 0.1 $ 73.3 $ 511.7 $ 13.3 $ 525.0

Net income — — — — 4.1 4.1 0.2 4.3

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

Shares withheld on vesting of restricted stock ( 0.1 ) — ( 1.4 ) — — ( 1.4 ) — ( 1.4 )

Common stock issued under employee stock purchase plan 0.1 — 2.0 — — 2.0 — 2.0

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

Unrealized gain on change in fair value of available-for-sale securities — — — 0.1 — 0.1 — 0.1

Other 0.1 — ( 0.2 ) — — ( 0.2 ) ( 0.2 ) ( 0.4 )

March 31, 2023 40.4 $ 0.4 $ 441.6 $ 0.2 $ 77.4 $ 519.6 $ 13.3 $ 532.9

Three Months Ended April 1, 2022

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

(In millions) Shares Amount

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

Net income — — — — 7.6 7.6 — 7.6

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

Common stock issued upon vesting of restricted shares

0.3 — — — — — — —

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

Share-based compensation — — 3.9 — — 3.9 — 3.9

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

Other — — ( 0.2 ) — — ( 0.2 ) — ( 0.2 )

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

See accompanying Notes to the Condensed Consolidated Financial Statements.

VAREX IMAGING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Six Months Ended March 31, 2023

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

(In millions) Shares Amount

September 30, 2022 40.1 $ 0.4 $ 469.1 $ 0.1 $ 63.8 $ 533.4 $ 13.3 $ 546.7

1 unchanged sentence

Net income — — — — 7.2 7.2 0.3 7.5

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

Shares withheld on vesting of restricted stock ( 0.1 ) — ( 1.4 ) — — ( 1.4 ) — ( 1.4 )

Common stock issued under employee stock purchase plan 0.1 — 2.0 — — 2.0 — 2.0

Share-based compensation — — 6.6 — — 6.6 — 6.6

Unrealized gain on change in fair value of available-for-sale securities — — — 0.1 — 0.1 — 0.1

Other 0.1 — ( 0.1 ) — ( 0.1 ) ( 0.2 ) ( 0.3 ) ( 0.5 )

December 30, 2022 40.1 $ 0.4 $ 437.9 $ 0.1 $ 73.3 $ 511.7 $ 13.3 $ 525.0

Three Months Ended December 31, 2021

March 31, 2023 40.4 $ 0.4 $ 441.6 $ 0.2 $ 77.4 $ 519.6 $ 13.3 $ 532.9

Six Months Ended April 1, 2022

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

3 unchanged sentences

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

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

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

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

2 unchanged sentences

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

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

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

See accompanying Notes to the Condensed Consolidated Financial Statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

(In millions) December 30, 2022 December 31, 2021

Six Months Ended

(In millions) March 31, 2023 April 1, 2022

Cash flows from operating activities:

Net income $ 7.5 $ 9.2

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Share-based compensation expense 6.5 7.3

14 unchanged sentences

Deferred revenues 2.8 ( 1.5 )

Net cash (used in) provided by operating activities ( 3.7 ) 10.8

Net cash provided by operating activities 23.6 2.5

Cash flows from investing activities:

6 unchanged sentences

Proceeds from sales of business and assets — 1.7

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

Other, net ( 2.1 ) ( 0.5 )

2 unchanged sentences

Cash flows from financing activities:

Taxes related to net share settlement of equity awards

( 1.4 ) ( 2.1 )

Repayments of borrowing under credit agreements

3 unchanged sentences

Other, net ( 0.3 ) ( 0.4 )

Net cash (used in) provided by financing activities

Net cash used in financing activities

( 0.9 ) ( 25.4 )

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

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

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

15.2 ( 29.6 )

Cash and cash equivalents and restricted cash at beginning of period

11 unchanged sentences

Description of Business

Varex Imaging Corporation (the “Company” or “Varex”) designs, manufactures, sells and services a broad range of medical products, which include X-ray imaging components including X-ray tubes, digital detectors and accessories, ionization chambers and buckys, high voltage connectors, image processing software and workstations, 3D reconstruction software, computer-aided diagnostic software, collimators, automatic exposure control devices, generators, and heat exchangers.

Varex Imaging Corporation (the “Company” or “Varex”) designs, manufactures, sells and services a broad range of medical products, which include X-ray imaging components including X-ray tubes, digital detectors and accessories, ionization chambers, high voltage connectors, image processing software and workstations, 3D reconstruction software, computer-aided diagnostic software, collimators, automatic exposure control devices, generators, and heat exchangers.

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

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

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

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

3 unchanged sentences

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

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

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

The Company has consolidated all of its majority owned subsidiaries and entities over which it has control.

All intercompany balances and transactions have been eliminated as part of the consolidation.

These condensed consolidated financial statements and the accompanying notes are unaudited and should be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended 2022 included in the Company’s Annual Report on Form 10-K, which was filed with the SEC on November 18, 2022.

These condensed consolidated financial statements and the accompanying notes are unaudited and should be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended September 30, 2022 included in the Company’s Annual Report on Form 10-K, which was filed with the SEC on November 18, 2022.

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

10 unchanged sentences

Fiscal year 2022 was the 52-week period that ended on September 30, 2022.

The fiscal quarters ended December 30, 2022 and December 31, 2021 were both 13-week periods.

The fiscal quarters ended March 31, 2023 and April 1, 2022 were both 13-week periods.

The two fiscal periods ended March 31, 2023 and April 1, 2022 were both 26-week periods.

Use of Estimates

2 unchanged sentences

Actual results could differ from these estimates.

Impact of COVID-19

The coronavirus (“COVID-19”) pandemic, the COVID-19 variants, uneven vaccination rates across the globe, and the mitigation efforts by governments to control its spread have created uncertainties and disruptions in the economic and financial markets.

While the impacts of COVID-19 on the Company's business have lessened, the extent to which COVID-19 will continue to impact the Company’s business and financial results depends on numerous evolving factors including:

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

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

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

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

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

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

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

Actual results may differ from those estimates, and such differences may be material to the financial statements.

Cash and Cash Equivalents

4 unchanged sentences

Cash and cash equivalents and restricted cash as reported within the Condensed Consolidated Statements of Cash Flows consisted of the following:

Three Months Ended Three Months Ended

December 30, 2022 December 31, 2021

Six Months Ended Six Months Ended

March 31, 2023 April 1, 2022

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

13 unchanged sentences

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

Three Months Ended

December 30, 2022 December 31, 2021

Three Months Ended Six Months Ended

March 31, 2023 April 1, 2022 March 31, 2023 April 1, 2022

Canon Medical Systems Corporation 18.3 % 18.2 % 16.6 % 18.7 %

Canon Medical Systems Corporation accounted for 9.2 % and 10.3 % of the Company’s accounts receivable as of December 30, 2022 and September 30, 2022, respectively.

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

Distributions received from an equity method investment are classified using the cumulative earnings approach, which means that distributions up to the amount of cumulative equity in earnings recognized will be treated as returns on investment and classified as operating cash flows and those in excess of that amount will be treated as returns of investment and classified as investing cash flows.

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

There were no impairments recorded during the three months ended December 30, 2022 and December 31, 2021, respectively.

Canon Medical Systems Corporation accounted for 12.7 % and 10.3 % of the Company’s accounts receivable as of March 31, 2023 and September 30, 2022, respectively.

Equity Method Investments

The Company records impairment losses on its equity method investments if an impairment exists and is deemed to be other-than-temporary, which is based on various factors, including but not limited to, the length of time the fair value of the investment is below the carrying value, the absence of an ability to recover the carrying amount of the investment, and the inability of the investee to sustain an earnings capacity that would justify the carrying amount of the investment.

There were no impairments recorded during the three and six months ended March 31, 2023 and April 1, 2022, respectively.

Marketable Securities

The Company's marketable securities consist primarily of financial instruments such as U.S.

treasury securities, U.S.

agency obligations, corporate bonds, commercial paper, money market funds, and equity securities.

The Company classifies marketable debt securities as available-for-sale at the time of purchase and reevaluates such classifications as of each balance sheet date.

All marketable debt securities are recorded at estimated fair value.

Any unrealized gains or losses for marketable debt securities are included in accumulated other comprehensive income within the Condensed Consolidated Balance Sheets.

Marketable equity securities are stated at fair value as determined by the most recently traded price of each security at the balance sheet date.

All unrealized gains and losses on equity securities are recorded as part of other expense, net in the Company's condensed consolidated financial statements.

See Note 7, Fair Value, for further details.

The Company's marketable securities consist primarily of financial instruments such as United States treasury securities, United States agency obligations, corporate bonds, commercial paper, money market funds, and equity securities.

Marketable Debt Securities

The Company's marketable debt securities are classified as available-for-sale.

Classification of marketable debt securities is determined at the time of purchase, and the Company reevaluates such classification as of each balance sheet date.

Marketable debt securities are recorded at estimated fair value and included in cash and cash equivalents, prepaid expenses and other current assets, and other assets within the Condensed Consolidated Balance Sheets.

Any unrealized gains or losses are included in accumulated other comprehensive income within the Condensed Consolidated Balance Sheets.

When the fair value of a marketable debt security declines below its amortized cost basis, any portion of that decline attributable to credit losses, to the extent expected to be nonrecoverable before the sale of the security, is recognized in the Condensed Consolidated Statements of Operations.

When the fair value of a marketable debt security declines below its amortized cost basis due to changes in interest rates, such amounts are recorded in other comprehensive loss, and are recognized in the Condensed Consolidated Statements of Operations only if the Company sells or intends to sell the security before recovery of its cost basis.

There were no credit losses related to marketable debt securities recorded during the three months ended December 30, 2022.

When the fair value of a marketable debt security declines below its amortized cost basis due to changes in interest rates, such amounts are recorded in other comprehensive income (loss), and are recognized in the Condensed Consolidated Statements of Operations only if the Company sells or intends to sell the security before recovery of its cost basis.

There were no credit losses related to marketable debt securities recorded during the three and six months ended March 31, 2023 and April 1, 2022.

Marketable Equity Securities

Marketable equity securities are stated at fair value as determined by the most recently traded price of each security at the balance sheet date and included in other assets within the Condensed Consolidated Balance Sheets.

All unrealized gains and losses on marketable equity securities are recorded as part of other expense, net in the Company's Condensed Consolidated Statements of Operations.

See Note 7, Fair Value , for further details.

Loss Contingencies

From time to time, the Company is involved in legal proceedings, claims and government inspections or investigations, customs and duties audits, other contingency matters, both inside and outside the United States, arising in the ordinary course of its business or otherwise.

From time to time, the Company is involved in legal proceedings, claims and government inspections or investigations, customs and duties audits, and other contingency matters, both inside and outside the United States, arising in the ordinary course of its business or otherwise.

The Company accrues amounts for probable losses, to the extent they can be reasonably estimated, that it believes are adequate to address any liabilities related to legal proceedings and other loss contingencies that the Company believes will result in a probable loss (including, among other things, probable settlement value).

1 unchanged sentence

When a loss contingency is probable but not reasonably estimable the nature of the contingency and the fact that an estimate cannot be made is disclosed.

Environmental Obligations

Our operations and facilities, past and present, are subject to environmental laws, including laws that regulate the handling, storage, transport and disposal of hazardous substances.

Certain of those laws impose cleanup liabilities under certain circumstances.

In connection with those laws and certain of our past and present operations and facilities, we are obligated to indemnify Varian for the cleanup liabilities related to prior corporate restructuring activities.

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

As of September 30, 2022, our estimated liability for these sites was $ 1.1 million, net of expected insurance proceeds.

During the second quarter of fiscal year 2023, Varian informed us of an adjustment to their estimate of their liability, which resulted in an increase to our liability of approximately $ 2.9 million, net of expected insurance proceeds.

As of March 31, 2023, our estimated environmental liability for these sites is $ 4.0 million, net of expected insurance proceeds.

Product Warranty

6 unchanged sentences

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

Three Months Ended

(In millions) December 30, 2022 December 31, 2021

Six Months Ended

(In millions) March 31, 2023 April 1, 2022

Accrued product warranty, at beginning of period $ 7.9 $ 8.5

28 unchanged sentences

The Company allows customers to return specific parts of purchased X-ray tubes for a partial refund credit, which is identified as variable consideration.

For sales with a right of return, revenue is reduced for expected returns, a liability is recorded for expected returns, and an asset is recorded for the right to recover products from customers on settling the liability.

For sales with a right of return, revenue is reduced and a liability is recorded for expected returns, and an asset is recorded for the right to recover products from customers on settling the liability.

The Company recognizes a reduction to revenue and cost of sales at the time of sale and a corresponding contract liability and contract asset.

36 unchanged sentences

On the date of adoption, the Company recorded an entry to reduce additional paid-in capital by $ 34.6 million, increase long-term debt, net by $ 28.0 million, decrease deferred tax assets by $ 0.1 million, and increase retained earnings by $ 6.5 million for the after-tax impact of previously recognized amortization of the debt discount associated with the Company’s Convertible Notes (as defined herein).

The unamortized discount on the Company's Convertible Notes (see Note 10, Borrowings ) was derecognized in the first quarter of fiscal year 2023 and the interest expense from its Convertible Notes decreased and became closer to the coupon rate of 4.00 %.

The unamortized discount on the Company's Convertible Notes (see Note 10, Borrowings ) was derecognized in the first quarter of fiscal year 2023, which removed the amortization of the debt discount, and brought the effective interest rate closer to the coupon rate of 4.00 %.

The impact that the adoption of ASU 2020-06 has on the Company's net income per diluted share will depend on the amount of earnings in each period and the Company's share price and could result in additional dilution.

2 unchanged sentences

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

Three Months Ended

(In millions) December 30, 2022 December 31, 2021

Americas $ 74.8 $ 60.5

EMEA 64.0 67.4

APAC 66.8 70.9

Three Months Ended Six Months Ended

(In millions) March 31, 2023 April 1, 2022 March 31, 2023 April 1, 2022

$ 67.7 $ 68.4 $ 134.3 $ 128.9

Revenue in the United States was $ 74.1 million and $ 58.8 million for the three months ended December 30, 2022 and December 31, 2021, respectively.

70.0 69.6 135.3 137.0

90.5 76.7 164.2 147.6

$ 228.2 $ 214.7 $ 433.8 $ 413.5

(1) Amounts for the first quarter of fiscal year 2023 have been corrected to $ 66.6 million for Americas, $ 65.3 million for EMEA, $ 73.7 million for APAC.

In addition, revenue in the United States disclosed below for the first quarter of fiscal year 2023 was corrected to $ 65.4 million.

Revenue in the United States was $ 66.3 million and $ 66.2 million for the three months ended March 31, 2023 and April 1, 2022, respectively.

Revenue in the United States was $ 131.7 million and $ 125.0 million for the six months ended March 31, 2023 and April 1, 2022, respectively.

Our products are sold in three geographic regions:

1 unchanged sentence

The Americas includes North America (primarily the United States) and Latin America.

EMEA includes Europe, Russia, the Middle East, India and Africa.

EMEA includes Europe, the Middle East, India and Africa.

APAC includes Asia (other than India) and Australia.

2 unchanged sentences

Contract Balances

The following table summarizes the changes in the contract assets and refund liabilities for the three months ended December 30, 2022 and December 31, 2021:

The following table summarizes the changes in the contract assets and refund liabilities for the six months ended March 31, 2023 and April 1, 2022:

Contract Assets

Three Months Ended

(In millions) December 30, 2022 December 31, 2021

Six Months Ended

(In millions) March 31, 2023 April 1, 2022

Balance at beginning of period $ 25.4 $ 24.3

1 unchanged sentence

Contract asset from shipments of products, subject to return during the period 3.4 3.6

Adjustment for actual vs.

reserved product returns ( 0.2 ) ( 0.4 )

Balance at end of period $ 25.7 $ 24.9

Refund Liabilities

Three Months Ended

(In millions) December 30, 2022 December 31, 2021

Six Months Ended

(In millions) March 31, 2023 April 1, 2022

Balance at beginning of period $ 28.2 $ 27.0

1 unchanged sentence

Additions to refund liabilities 3.7 3.9

Adjustment for actual vs.

reserved product returns ( 0.2 ) ( 0.4 )

Balance at end of period $ 28.5 $ 27.6

During the three months ended December 30, 2022, the Company recognized revenue of $ 4.2 million related to deferred revenues which existed at September 30, 2022.

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

During the three and six months ended March 31, 2023, the Company recognized revenue of $ 0.6 million and $ 4.8 million, respectively, related to deferred revenues which existed at September 30, 2022.

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

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

During fiscal year 2022, the Company recorded a loss due to abandonment of $ 1.9 million, which is included in selling, general and administrative on the Condensed Consolidated Statements of Operations.

During the six months ended April 1, 2022, the Company recorded a loss due to abandonment of $ 1.9 million, which is included in selling, general and administrative in the Condensed Consolidated Statements of Operations.

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

(In millions) Balance Sheet Location December 30, 2022 September 30, 2022

(In millions) Balance Sheet Location March 31, 2023 September 30, 2022

Operating lease right-of-use assets Operating lease assets $ 23.2 $ 23.2

5 unchanged sentences

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

Three Months Ended

(In millions) December 30, 2022 December 31, 2021

Three Months Ended Six Months Ended

(In millions) March 31, 2023 April 1, 2022 March 31, 2023 April 1, 2022

Total operating lease costs (1)

$ 1.3 $ 1.4 $ 2.8 $ 3.4

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

3 unchanged sentences

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

(1) Includes variable and short-term lease expense, which were immaterial for the three months ended December 30, 2022 and December 31, 2021.

(1) Includes variable and short-term lease expense, which were immaterial for the three and six months ended March 31, 2023 and April 1, 2022.

RELATED-PARTY TRANSACTIONS

Investment in Privately-Held Companies

The Company has a 40 % ownership interest in dpiX Holding LLC (“dpiX Holding”), a holding company that has a 100 % ownership interest in dpiX LLC (“dpiX”), a supplier of amorphous silicon-based thin film transistor arrays for flat panels used in its digital image detectors.

Investments in Privately-Held Companies

In accordance with the dpiX Holding operating agreement, net profits or losses are allocated to the members in accordance with their ownership interests.

1 unchanged sentence

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

During the three months ended December 30, 2022 and December 31, 2021, the Company recorded income (loss) on the equity investment in dpiX Holding of $ 2.0 million and $( 0.7 ) million, respectively.

During the three months ended March 31, 2023 and April 1, 2022, the Company recorded a loss on the equity investment in dpiX Holding of $ 0.4 million and $ 0.4 million, respectively.

During the six months ended March 31, 2023 and April 1, 2022, the Company recorded income (loss) on the equity investment in dpiX Holding of $ 1.6 million and $( 1.1 ) million, respectively.

The income and loss on the equity investment in dpiX Holding are included in other expense, net in the Condensed Consolidated Statements of Operations.

The carrying value of the equity investment in dpiX Holding was $ 44.4 million and $ 42.4 million at December 30, 2022 and September 30, 2022, respectively.

During the three months ended December 30, 2022 and December 31, 2021, the Company purchased glass transistor arrays from dpiX totaling $ 5.0 million and $ 5.2 million, respectively.

The carrying value of the equity investment in dpiX Holding was $ 44.0 million and $ 42.4 million at March 31, 2023 and September 30, 2022, respectively.

During the three months ended March 31, 2023 and April 1, 2022, the Company purchased glass transistor arrays from dpiX totaling $ 4.5 million and $ 5.5 million, respectively.

During the six months ended March 31, 2023 and April 1, 2022, the Company purchased glass transistor arrays from dpiX totaling $ 9.5 million and $ 10.7 million, respectively.

These purchases of glass transistor arrays are included as a component of inventories on the Condensed Consolidated Balance Sheets or cost of revenues in the Condensed Consolidated Statements of Operations.

As of December 30, 2022, and September 30, 2022, the Company had accounts payable to dpiX totaling $ 3.3 million and $ 3.1 million, respectively.

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

As of March 31, 2023 and September 30, 2022, the Company had accounts payable to dpiX totaling $ 3.0 million and $ 3.1 million, respectively.

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

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

In January 2023, the Company's fixed cost commitment was determined and approved by the dpiX board of directors to be $ 13.1 million for calendar year 2023.

As of March 31, 2023, the Company estimated it has fixed cost commitments of $ 9.8 million related to the amended agreement with dpiX through the remainder of calendar year 2023.

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

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

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

Majority votes are required to direct the manufacturing activities, legal operations and other activities that most significantly affect dpiX’s economic performance.

6 unchanged sentences

The Company has determined that VEC is a variable interest entity.

During the three months ended December 30, 2022, and December 31, 2021, the Company recorded a loss on the equity investment in VEC of $ 0.3 million and $ 0.1 million, respectively.

The Company's investment in VEC was $ 2.2 million and $ 2.5 million at December 30, 2022 and September 30, 2022, respectively.

As of December 30, 2022 and September 30, 2022 the Company had loans outstanding to VEC totaling $ 0.6 million, and other receivables from VEC of $ 0.4 million and $ 0.3 million at December 30, 2022 and September 30, 2022, respectively, which are recorded in prepaid expenses and other current assets in the Condensed Consolidated Balance Sheets.

During the three months ended March 31, 2023 and April 1, 2022, the Company recorded a loss on the equity investment in VEC of $ 0.1 million and $ 0.5 million, respectively.

During the six months ended March 31, 2023, and April 1, 2022, the Company recorded a loss on the equity investment in VEC of $ 0.4 million and $ 0.6 million, respectively.

The Company's investment in VEC was $ 2.1 million and $ 2.5 million at March 31, 2023 and September 30, 2022, respectively.

As of March 31, 2023 and September 30, 2022, the Company had loans and other receivables outstanding from VEC of $ 0.9 million, and $ 0.9 million, respectively, which are recorded in prepaid expenses and other current assets in the Condensed Consolidated Balance Sheets.

RESTRUCTURING

3 unchanged sentences

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

Below is a detail of restructuring charges incurred during the three months ended December 30, 2022 and December 31, 2021, respectively, which predominantly relate to the Company's Medical segment:

Three Months Ended

(In millions) Location of Restructuring Charges in Condensed Consolidated Statements of Operations December 30, 2022 December 31, 2021

Below is a detail of restructuring charges incurred during the three and six months ended March 31, 2023 and April 1, 2022, respectively, which predominantly relate to the Company's Medical segment:

Three Months Ended Six Months Ended

(In millions) Location of Restructuring Charges in Condensed Consolidated Statements of Operations March 31, 2023 April 1, 2022 March 31, 2023 April 1, 2022

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

12 unchanged sentences

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

During the three months ended December 30, 2022, the Company terminated all three of its previously outstanding cross currency swap contracts which resulted in cash received upon settlement of $ 7.3 million.

The gain on the swap was recorded in accumulated other comprehensive income where it will remain until such time that substantial liquidation of the international operations should occur.

Concurrent with the termination of the previous cross currency swaps, the Company entered into two new cross currency swaps which have been designated as net investment hedges.

As of December 30, 2022, the Company had the following outstanding derivatives designated as net investment hedging instruments:

During the first quarter of fiscal year 2023, the Company terminated all three of its previously outstanding cross currency swap contracts which resulted in cash received upon settlement of $ 7.3 million.

The gain on the cross currency swap contracts was recorded in accumulated other comprehensive income where it will remain until such time that substantial liquidation of the international operations should occur.

Concurrent with the termination of the previous cross currency swap contracts, the Company entered into two new cross currency swap contracts which have been designated as net investment hedges.

As of March 31, 2023, the Company had the following outstanding derivatives designated as net investment hedging instruments:

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

4 unchanged sentences

Three Months Ended

(In millions) December 30, 2022 December 31, 2021 December 30, 2022 December 31, 2021

(In millions) March 31, 2023 April 1, 2022 March 31, 2023 April 1, 2022

Cross currency swap contracts $ ( 1.0 ) $ 0.3 Interest expense $ 0.2 $ 0.3

Amount of (Loss) Gain Recognized in OCI on Derivative

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

Six Months Ended

(In millions) March 31, 2023 April 1, 2022 March 31, 2023 April 1, 2022

Cross currency swap contracts $ ( 5.0 ) $ 1.1 Interest expense $ 0.4 $ 0.6

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

2 unchanged sentences

(In millions) Derivative Assets and Liabilities

Derivatives Designated as Net Investment Hedges Balance Sheet Location December 30, 2022 September 30, 2022

Derivatives Designated as Net Investment Hedges Balance Sheet Location March 31, 2023 September 30, 2022

Cross currency swap contracts Prepaid expenses and other current assets $ 1.0 $ 1.2

1 unchanged sentence

Cross currency swap contracts Other long-term liabilities $ 5.7 $ —

Balance Sheet Hedges

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

These forward contracts are generally entered into at the end of one fiscal period and expire by the end of the next fiscal period.

These forward contracts are not designated for hedge accounting treatment;

therefore, the change in fair value of these derivatives is recorded as a component of other expense, net in the Condensed Consolidated Statements of Operations and offsets the change in fair value of the foreign currency-denominated assets and liabilities, which are also recorded as a component of other expense, net.

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

The following table shows the notional amounts of outstanding foreign currency contracts as of March 31, 2023:

Notional Value of Derivatives not Designated as Hedging Instruments:

(In millions of equivalent USD) Sell contracts

Chinese Renminbi $ 9.4

Australian Dollar 5.0

India Rupee 8.2

Assets and Liabilities Measured at Fair Value on a Recurring Basis

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

As of December 30, 2022, the fair values of the Company's Convertible Notes and Senior Secured Notes, as defined in Note 10, Borrowings and measured using Level 1 inputs , were $ 229.0 million and $ 239.3 million, respectively.

As of March 31, 2023, the fair values of the Company’s Convertible Notes and Senior Secured Notes, as defined in Note 10, Borrowings and measured using Level 1 inputs , were $ 216.7 million and $ 241.0 million, respectively.

As of September 30, 2022, the fair values of the Company’s Convertible Notes and Senior Secured Notes, measured using Level 1 inputs, were $ 250.2 million and $ 241.3 million, respectively.

1 unchanged sentence

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

Fair Value at December 30, 2022

Fair Value at March 31, 2023

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

14 unchanged sentences

Total liabilities measured at fair value $ — $ 5.7 $ — $ 5.7

(1) The assets held under the Company’s deferred compensation plan are classified in Level 1 as they relate primarily to publicly traded mutual funds for which there are observable market prices in active markets.

Fair Value at September 30, 2022

17 unchanged sentences

The following tables summarize the Company’s marketable debt securities:

December 30, 2022

March 31, 2023

(In millions) Amortized Costs Unrealized Losses Fair Value

11 unchanged sentences

Total marketable debt securities $ 20.1 $ ( 0.1 ) $ 20.0

The contractual maturities of marketable debt securities as of December 30, 2022, are shown in the table below.

The contractual maturities of marketable debt securities as of March 31, 2023, are shown in the table below.

Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations.

December 30, 2022

March 31, 2023

(In millions) Amortized Costs Fair Value

3 unchanged sentences

Total marketable debt securities $ 16.0 $ 15.9

During the three months ended December 30, 2022, there were no gross realized gains or losses from the sale of certain marketable debt securities that were reclassified out of accumulated other comprehensive income.

During the three and six months ended March 31, 2023, there were no gross realized gains or losses from the sale of certain marketable debt securities that were reclassified out of accumulated other comprehensive income.

The following tables summarize the balance sheet locations for marketable debt securities:

December 30, 2022

March 31, 2023

(In millions) Commercial paper Corporate notes/bonds Government agencies Treasury bills Total

Cash and cash equivalents $ — $ — $ 0.5 $ — $ 0.5

Prepaid expenses and other current assets 1.5 2.4 0.2 9.6 13.7

8 unchanged sentences

The following table summarizes the Company’s inventories:

(In millions) December 30, 2022 September 30, 2022

(In millions) March 31, 2023 September 30, 2022

Raw materials and parts $ 238.4 $ 240.3

7 unchanged sentences

Foreign currency translation adjustments 2.7 2.0 4.7

Balance at December 30, 2022 $ 171.6 $ 116.6 $ 288.2

Balance at March 31, 2023 $ 172.1 $ 117.1 $ 289.2

The following table reflects the gross carrying amount and accumulated amortization of the Company’s finite-lived intangible assets included in other assets in the Condensed Consolidated Balance Sheets:

December 30, 2022 September 30, 2022

March 31, 2023 September 30, 2022

(In millions)

10 unchanged sentences

$ 135.1 $ ( 106.2 ) $ 28.9 $ 131.9 $ ( 98.3 ) $ 33.6

Amortization expense for intangible assets was $ 3.4 million and $ 3.8 million for the three months ended December 30, 2022 and December 31, 2021, respectively.

Amortization expense for intangible assets was $ 3.4 million and $ 3.7 million for the three months ended March 31, 2023 and April 1, 2022, respectively.

Amortization expense for intangible assets was $ 6.8 million and $ 7.5 million for the six months ended March 31, 2023 and April 1, 2022, respectively.

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

December 30, 2022 September 30, 2022

March 31, 2023 September 30, 2022

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

16 unchanged sentences

Equity component of Convertible Senior Unsecured Notes (1)(2)

(1) In connection with the adoption of ASU 2020-06, the unamortized discount related to the Convertible Notes was derecognized and the carrying value of the issuance costs was adjusted in the first quarter of fiscal year 2023.

(1) In connection with the adoption of ASU 2020-06, the unamortized discount and equity component related to the Convertible Notes were derecognized and the carrying value of the issuance costs was adjusted in the first quarter of fiscal year 2023.

Refer to Note 1, Summary of Significant Accounting Policies for further details.

1 unchanged sentence

The following table summarizes the Company’s interest expense:

Three Months Ended

December 30, 2022 December 31, 2021

Three Months Ended Six Months Ended

March 31, 2023 April 1, 2022 March 31, 2023 April 1, 2022

Contractual interest coupon and other $ 6.6 $ 7.1 $ 13.5 $ 14.4

18 unchanged sentences

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

The number of warrants outstanding as of December 30, 2022 was 9.6 million.

The number of warrants outstanding as of March 31, 2023 was 9.6 million.

Senior Secured Notes

1 unchanged sentence

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

The Senior Secured Notes will mature on October 15, 2027, unless earlier redeemed or repurchased by Varex.

On July 15, 2021 we redeemed $ 30.0 million and on March 18, 2022, we redeemed $ 27.0 million of the Senior Secured Notes.

As of March 31, 2023, the aggregate principal amount of the outstanding Senior Secured Notes was $ 243.0 million.

The Senior Secured Notes are secured by a first priority lien on substantially all of the assets of Varex and the assets and capital stock of its subsidiary guarantors (subject to exceptions), except for assets for which a first priority security interest is pledged for the ABL Facility (defined below), in which the Senior Secured Notes will have a second lien security interest.

9 unchanged sentences

Borrowings under the Asset-Based Loan bear interest at floating rates based on the Secured Overnight Financing Rate ("SOFR"), or a comparable rate, or a base rate, and an applicable margin based on Average Daily Excess Availability (as defined in the Asset-Based Loan Agreement).

In addition, the Company is required to pay a quarterly commitment fee of 0.25 %, based on the aggregate unused commitments under the Asset-Based Loan.

In addition, the Company is required to pay a quarterly commitment fee of 0.25 % annualized, based on the aggregate unused commitments under the Asset-Based Loan.

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

1 unchanged sentence

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

As of December 30, 2022, the amount available under the ABL Facility was $ 92.0 million and the ABL Facility remains undrawn.

As of March 31, 2023, the amount available under the ABL Facility was $ 89.8 million and the ABL Facility remains undrawn.

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

3 unchanged sentences

Accordingly, the Company has consolidated the operations of the Saudi Arabia partnership in its Condensed Consolidated Financial Statements and recorded the noncontrolling interests.

The noncontrolling interest related to the partner’s 25 % interest in the joint venture is included in noncontrolling interests in the equity section of the Company’s Condensed Consolidated Balance Sheets.

The noncontrolling interest related to the partner’s 25 % interest is included in noncontrolling interests in the equity section of the Company’s Condensed Consolidated Balance Sheets.

Income representing the noncontrolling partner's share of income from operations is included in the Company's Condensed Consolidated Statements of Operations.

4 unchanged sentences

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

At December 30, 2022, noncontrolling shareholders together held approximately 0.5 million shares of MeVis, representing 26.3 % of the outstanding shares.

At March 31, 2023, noncontrolling shareholders together held approximately 0.5 million shares of MeVis, representing 26.3 % of the outstanding shares.

Changes in noncontrolling interests were as follows:

Three Months Ended

(In millions) December 30, 2022 December 31, 2021

Six Months Ended

(In millions) March 31, 2023 April 1, 2022

Noncontrolling interests, at beginning of period $ 13.3 $ 13.2

5 unchanged sentences

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

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

Three Months Ended

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

Three Months Ended Six Months Ended

(In millions, except per share amounts)

December 30, 2022 December 31, 2021

March 31, 2023 April 1, 2022 March 31, 2023 April 1, 2022

Net income per share - basic

1 unchanged sentence

Basic weighted average shares outstanding

40.2 39.7 40.2 39.6

Basic net income per share attributable to Varex $ 0.10 $ 0.19 $ 0.18 $ 0.23

6 unchanged sentences

Diluted weighted average shares outstanding

40.5 42.2 40.5 43.2

Diluted net income per share attributable to Varex $ 0.10 $ 0.18 $ 0.18 $ 0.21

Anti-dilutive share summary

Restricted stock and options

Share-based awards and other

3.7 3.0 3.2 2.8

Convertible notes 9.6 — 9.6 —

3 unchanged sentences

As of October 1, 2022, the Company adopted ASU 2020-06 using the modified retrospective method.

The standard requires the Company to apply the if-converted method in relation to the Convertible Notes, which requires the Company to assume that the Convertible Notes were converted using only share settlement at the beginning of the period, resulting in an additional 9.6 million shares outstanding.

Using this method, the numerator is affected by adding back interest expense and the denominator is affected by including the effect of potential share settlement, if the effect is dilutive.

The standard requires the Company to apply the if-converted method in relation to the Convertible Notes, which requires the Company to assume that the Convertible Notes would have been converted using only share settlement at the beginning of the period, resulting in an additional 9.6 million shares outstanding.

Using this method, the numerator is affected by adding back the after-tax interest expense and the denominator is affected by including the effect of potential share settlement, if the effect is dilutive.

Prior to the adoption of ASU 2020-06, the Convertible Notes were accounted for using the treasury stock method for the purposes of net income per share.

6 unchanged sentences

Share-based compensation expense includes expenses related to the Company’s direct employees.

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

Three Months Ended

(In millions) December 30, 2022 December 31, 2021

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

Three Months Ended Six Months Ended

(In millions) March 31, 2023 April 1, 2022 March 31, 2023 April 1, 2022

Cost of revenues $ 0.4 $ 0.4 $ 0.8 $ 0.8

1 unchanged sentence

Selling, general and administrative

1.9 2.7 4.0 4.9

Total share-based compensation expense $ 3.2 $ 3.9 $ 6.5 $ 7.3

8 unchanged sentences

Canceled, expired or forfeited ( 436 ) $ 22.13 - $ 37.10

Outstanding at December 30, 2022 3,091 $ 13.61 - $ 37.60

Outstanding at March 31, 2023 2,851 $ 13.61 - $ 37.60

$ 28.06 5.2 $ 828.0

Exercisable at December 30, 2022 2,070 $ 13.61 - $ 37.60

Exercisable at March 31, 2023 1,944 $ 13.61 - $ 37.60

$ 29.66 3.7 $ 515.4

(1) The aggregate intrinsic value represents the total pre-tax intrinsic value, which is computed based on the difference between the exercise price and the closing price of Varex common stock of $ 20.30 as of December 30, 2022, the last trading date of the Company's first quarter, and which represents the amount that would have been received by the option holders had all option holders exercised their options and sold the shares received upon exercise as of that date.

(1) The aggregate intrinsic value represents the total pre-tax intrinsic value, which is computed based on the difference between the exercise price and the closing price of Varex common stock of $ 18.19 as of March 31, 2023, the last trading date of the Company's second quarter, and which represents the amount that would have been received by the option holders had all option holders exercised their in-the-money options and sold the shares received upon exercise as of that date.

Restricted Stock Units, Restricted Stock Awards and Deferred Stock Units

5 unchanged sentences

Canceled or expired ( 53 ) 24.48

Outstanding at December 30, 2022 1,506 $ 22.95

Outstanding at March 31, 2023 1,292 $ 22.31

TAXES ON INCOME

For the three months ended December 30, 2022, the Company recognized income tax expense of $ 2.2 million on $ 5.4 million of pre-tax income.

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

For the three months ended March 31, 2023, the Company recognized income tax expense of $ 3.5 million on $ 7.8 million of pre-tax income.

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

For the six months ended March 31, 2023, the Company recognized income tax expense of $ 5.7 million on $ 13.2 million of pre-tax income.

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

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

The Company's tax expense for the three months ended December 30, 2022 increased, primarily due to increased pre-tax income in certain jurisdictions, valuation allowance positions in the U.S.

on deferred tax attributes, and losses in certain foreign jurisdictions for which no benefit can be recorded.

The Company is maintaining its reinvestment assertion with respect to foreign earnings for the three months ended December 30, 2022, which is that all earnings prior to fiscal year 2018 are permanently reinvested for all countries, and that all earnings for Direct Conversion, located primarily in Sweden and Finland, are also indefinitely reinvested in those countries, but post fiscal year 2017 earnings in all other countries are not permanently reinvested.

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

tax treatment of repatriated foreign earnings, the amount of deferred tax liability recorded related to the potential repatriation is approximately $ 0.1 million.

This estimated liability is for U.S.

state income taxes and foreign withholding taxes that would apply if the foreign earnings were repatriated in the form of a dividend.

The Company's tax expense for the three and six months ended March 31, 2023 decreased, primarily due to lower pre-tax income in certain jurisdictions, partially offset by valuation allowance positions in the United States on deferred tax attributes, and losses in certain foreign jurisdictions for which no benefit can be recorded.

The Company is maintaining its reinvestment assertion with respect to foreign earnings for the three months ended March 31, 2023, which is that all earnings prior to fiscal year 2018 are permanently reinvested for all countries, and that all earnings for Direct Conversion, one of our consolidated entities, which is located primarily in Sweden and Finland, are also indefinitely reinvested in those countries, but post fiscal year 2017 earnings in all other countries are not permanently reinvested.

Due to the level of earnings available for repatriation, the treaty benefits applicable to jurisdictions in which those earnings are located, and the now favorable United States tax treatment of repatriated foreign earnings, the amount of deferred tax liability recorded related to the potential repatriation is approximately $ 0.1 million.

This estimated liability is for United States state income taxes and foreign withholding taxes that would apply if the foreign earnings were repatriated in the form of a dividend.

SEGMENT INFORMATION

5 unchanged sentences

Description of Segments

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

The Medical segment designs, manufactures, sells and services X-ray imaging components, including X-ray tubes, digital detectors and accessories, ionization chambers, high voltage connectors, image-processing software and workstations, 3D reconstruction software, computer-aided diagnostic software, collimators, automatic exposure control devices, generators, and heat exchangers.

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

5 unchanged sentences

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

Three Months Ended

(In millions) December 30, 2022 December 31, 2021

Three Months Ended Six Months Ended

(In millions) March 31, 2023 April 1, 2022 March 31, 2023 April 1, 2022

Revenues, net

14 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements