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Item 1. Financial Statements

2023-08-01 compared with 2023-05-02 · 154 added, 152 removed, 682 unchanged (31% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

(In millions, except per share amounts) June 30, 2023 July 1, 2022 June 30, 2023 July 1, 2022

Revenues, net $ 232.2 $ 214.5 $ 666.0 $ 628.0

24 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

(In millions) June 30, 2023 July 1, 2022 June 30, 2023 July 1, 2022

Net income $ 9.2 $ 8.4 $ 16.7 $ 17.6

Other comprehensive income (loss)

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

Other comprehensive (loss) income

Unrealized loss on forward contracts — ( 0.6 ) — ( 0.6 )

Unrealized loss on available-for-sale securities ( 0.1 ) — — —

Foreign currency translation adjustments ( 0.4 ) 0.8 ( 0.4 ) ( 0.9 )

5 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

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

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

Current assets:

Cash and cash equivalents $ 118.5 $ 89.4

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

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

Inventories 297.7 303.2

27 unchanged sentences

Shares issued and outstanding:

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

40,387,511 and 40,085,126 at June 30, 2023 and September 30, 2022, respectively

Additional paid-in capital 444.9 469.1

Accumulated other comprehensive income 0.2 0.1

Accumulated other comprehensive (loss) income ( 0.3 ) 0.1

Retained earnings 86.5 63.8

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

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

Three Months Ended June 30, 2023

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

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

Net income — — — — 9.1 9.1 0.1 9.2

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 — — 3.5 — — 3.5 — 3.5

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

Unrealized loss on change in fair value of available-for-sale securities — — — ( 0.1 ) — ( 0.1 ) — ( 0.1 )

Foreign currency translation adjustments — — — ( 0.4 ) — ( 0.4 ) — ( 0.4 )

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

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

June 30, 2023 40.4 $ 0.4 $ 444.9 $ ( 0.3 ) $ 86.5 $ 531.5 $ 13.4 $ 544.9

Three Months Ended July 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

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

Net income — — — — 8.2 8.2 0.2 8.4

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 )

Common stock issued under employee stock purchase plan 0.1 — 1.9 — — 1.9 — 1.9

Share-based compensation — — 3.4 — — 3.4 — 3.4

Unrealized loss on change in fair value of cash flow hedge — — — ( 0.6 ) — ( 0.6 ) — ( 0.6 )

Foreign currency translation adjustments — — — 0.8 — 0.8 — 0.8

Other — — — — — — ( 0.2 ) ( 0.2 )

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

July 1, 2022 39.9 $ 0.4 $ 465.2 $ ( 1.5 ) $ 50.7 $ 514.8 $ 13.3 $ 528.1

See accompanying Notes to the Condensed Consolidated Financial Statements.

1 unchanged sentence

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

Nine Months Ended June 30, 2023

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

(In millions) Shares Amount

6 unchanged sentences

Share-based compensation — — 10.1 — — 10.1 — 10.1

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

Foreign currency translation adjustments — — — ( 0.4 ) — ( 0.4 ) — ( 0.4 )

Other 0.1 — ( 0.3 ) — ( 0.1 ) ( 0.4 ) ( 0.3 ) ( 0.7 )

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

June 30, 2023 40.4 $ 0.4 $ 444.9 $ ( 0.3 ) $ 86.5 $ 531.5 $ 13.4 $ 544.9

Nine Months Ended July 1, 2022

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

7 unchanged sentences

Share-based compensation — — 10.7 — — 10.7 — 10.7

Unrealized loss on change in fair value of cash flow hedge — — — ( 0.6 ) — ( 0.6 ) — ( 0.6 )

Foreign currency translation adjustments — — — ( 0.9 ) — ( 0.9 ) — ( 0.9 )

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

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

July 1, 2022 39.9 $ 0.4 $ 465.2 $ ( 1.5 ) $ 50.7 $ 514.8 $ 13.3 $ 528.1

See accompanying Notes to the Condensed Consolidated Financial Statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

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

Nine Months Ended

(In millions) June 30, 2023 July 1, 2022

Cash flows from operating activities:

Net income $ 16.7 $ 17.6

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

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

Share-based compensation expense 10.1 10.7

2 unchanged sentences

Deferred taxes ( 1.1 ) 1.5

(Income) loss from equity method investments ( 0.7 ) 1.6

Loss from equity method investments 0.1 1.5

Amortization of deferred loan costs 1.9 8.1

9 unchanged sentences

Deferred revenues 3.5 2.4

Net cash provided by operating activities 23.6 2.5

Net cash provided by (used in) operating activities 61.3 ( 0.2 )

Cash flows from investing activities:

9 unchanged sentences

Net cash used in investing activities ( 30.3 ) ( 20.9 )

( 7.5 ) ( 6.6 )

Cash flows from financing activities:

7 unchanged sentences

Net cash used in financing activities ( 1.6 ) ( 24.0 )

( 0.9 ) ( 25.4 )

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

( 0.1 ) ( 0.1 )

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

37 unchanged sentences

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

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.

The fiscal quarters ended June 30, 2023 and July 1, 2022 were both 13-week periods.

The three fiscal quarters ended June 30, 2023 and July 1, 2022 were both 39-week periods.

Use of Estimates

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

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

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

Actual results could differ from these estimates.

5 unchanged sentences

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

Six Months Ended Six Months Ended

March 31, 2023 April 1, 2022

Nine Months Ended Nine Months Ended

June 30, 2023 July 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 Six Months Ended

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

Three Months Ended Nine Months Ended

June 30, 2023 July 1, 2022 June 30, 2023 July 1, 2022

Canon Medical Systems Corporation 14.8 % 16.6 % 16.0 % 18.0 %

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.

Canon Medical Systems Corporation accounted for 12.9 % and 10.3 % of the Company’s accounts receivable as of June 30, 2023 and September 30, 2022, respectively.

Equity Method Investments

1 unchanged sentence

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.

There were no impairments recorded during the three and nine months ended June 30, 2023 and July 1, 2022, respectively.

Marketable Securities

4 unchanged sentences

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.

Any unrealized gains or losses are included in accumulated other comprehensive (loss) 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 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.

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) income, 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 impairments related to marketable debt securities recorded during the three and nine months ended June 30, 2023 and July 1, 2022.

Marketable Equity Securities

14 unchanged sentences

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.

As of June 30, 2023, our estimated environmental liability for these sites is $ 4.2 million, net of expected insurance proceeds.

Product Warranty

6 unchanged sentences

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

Six Months Ended

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

Nine Months Ended

(In millions) June 30, 2023 July 1, 2022

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

22 unchanged sentences

• Recognition of revenue when, or as, a performance obligation is satisfied

Contracts and Performance Obligations

The Company accounts for a contract with a customer when there is an approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance, and collectability of the consideration is probable.

The Company's performance obligations consist mainly of transferring control of products and services identified in the contracts or purchase orders.

For each contract, the Company considers the obligation to transfer products and services to the customer, which are distinct, to be performance obligations.

Transaction Price and Allocation to Performance Obligations

5 unchanged sentences

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.

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

The Company records this estimate based on the historical volume of product returns and adjusts the estimate on a quarterly basis based on the current quarter sales and current quarter returns.

2 unchanged sentences

The Company determines standalone selling prices based on the price at which the performance obligation could be sold separately.

Contracts and Performance Obligations

The Company accounts for a contract with a customer when there is an approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of the consideration is probable.

The Company's performance obligations consist mainly of transferring control of products and services identified in the contracts or purchase orders.

For each contract, the Company considers the obligation to transfer products and services to the customer, which are distinct, to be performance obligations.

Recognition of Revenue

6 unchanged sentences

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

Refer to Note 15, Segment Information, included in this report, for the disaggregation of the Company’s revenue based on reportable operating segments and Note 2, Revenue, for the disaggregation of revenue by geographic region.

Refer to Note 15, Segment Information, included in this report, for the disaggregation of the Company’s revenue based on reportable operating segments and Note 2, Revenue Recognition, for the disaggregation of revenue by geographic region.

Contract Balances

Contract assets are included within the prepaid expenses and other current assets, and other assets balances in the Condensed Consolidated Balance Sheets.

Contract liabilities, which includes refund liabilities and deferred revenue, are included within the accrued liabilities and other current liabilities, deferred revenues, and other long-term liabilities balances in the Condensed Consolidated Balance Sheets.

Contract liabilities are included within the deferred revenues, and other long-term liabilities balances in the Condensed Consolidated Balance Sheets.

The Company does not have any material contract assets.

Deferred revenue represents the Company's obligation to transfer goods and/or services to its customers for which it has already received consideration (or the amount is due) from the customer.

17 unchanged sentences

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.

REVENUE RECOGNITION

Disaggregation of Revenue

1 unchanged sentence

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

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

70.0 69.6 135.3 137.0

90.5 76.7 164.2 147.6

Three Months Ended Nine Months Ended

(In millions) June 30, 2023 July 1, 2022 June 30, 2023 July 1, 2022

Americas $ 73.4 $ 63.9 $ 207.7 $ 192.8

EMEA 77.2 70.2 212.5 207.2

APAC 81.6 80.4 245.8 228.0

$ 232.2 $ 214.5 $ 666.0 $ 628.0

(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.

Revenue in the United States was $ 72.1 million and $ 61.7 million for the three months ended June 30, 2023 and July 1, 2022, respectively.

Revenue in the United States was $ 203.8 million and $ 186.7 million for the nine months ended June 30, 2023 and July 1, 2022, respectively.

Our products are sold in three geographic regions:

5 unchanged sentences

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

Contract Balances

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

Six Months Ended

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

Right of Return Assets and Refund Liabilities

Right of return assets are included within the prepaid expenses and other current assets, and other assets balances in the Condensed Consolidated Balance Sheets.

Refund liabilities are included within the accrued liabilities and other current liabilities and other long-term liabilities balances in the Condensed Consolidated Balance Sheets.

The following table summarizes the changes in the right of return assets and refund liabilities for the nine months ended June 30, 2023 and July 1, 2022:

Right of Return Assets

Nine Months Ended

(In millions) June 30, 2023 July 1, 2022

Balance at beginning of period $ 25.4 $ 24.3

Costs recovered from product returns during the period ( 3.9 ) ( 4.2 )

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

Right of return assets from shipments of products, subject to return during the period 5.0 5.5

Adjustment for actual vs.

2 unchanged sentences

Refund Liabilities

Six Months Ended

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

Nine Months Ended

(In millions) June 30, 2023 July 1, 2022

Balance at beginning of period $ 28.2 $ 27.0

4 unchanged sentences

Balance at end of period $ 28.7 $ 28.0

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 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.

Contract Balances

During the three and nine months ended June 30, 2023, the Company recognized revenue of $ 0.9 million and $ 5.7 million, respectively, related to deferred revenues which existed at September 30, 2022.

During the three and nine months ended July 1, 2022, the Company recognized revenue of $ 0.4 million and $ 6.3 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 equipment.

During the nine months ended July 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 March 31, 2023 September 30, 2022

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

Operating lease right-of-use assets Operating lease assets $ 28.7 $ 23.2

5 unchanged sentences

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

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

(In millions) June 30, 2023 July 1, 2022 June 30, 2023 July 1, 2022

Total operating lease costs (1)

5 unchanged sentences

Noncash operating right-of-use assets obtained in exchange for new lease liabilities $ 6.9 $ 2.3 $ 9.2 $ 5.3

(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.

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

Total right-of-use assets obtained in exchange for new lease liabilities $ 6.9 $ 2.4 $ 9.2 $ 5.4

(1) Includes variable and short-term lease expense, which were immaterial for the three and nine months ended June 30, 2023 and July 1, 2022.

RELATED-PARTY TRANSACTIONS

4 unchanged sentences

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

During the three months ended 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.

During the three months ended June 30, 2023 and July 1, 2022, the Company recorded income on the equity investment in dpiX Holding of $ 0.0 million and $ 0.3 million, respectively.

During the nine months ended June 30, 2023 and July 1, 2022, the Company recorded income (loss) on the equity investment in dpiX Holding of $ 1.6 million and $( 0.8 ) 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 $ 44.0 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.

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

During the three months ended June 30, 2023 and July 1, 2022, the Company purchased glass transistor arrays from dpiX totaling $ 5.1 million and $ 5.3 million, respectively.

During the nine months ended June 30, 2023 and July 1, 2022, the Company purchased glass transistor arrays from dpiX totaling $ 14.6 million and $ 16.0 million, respectively.

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

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

As of June 30, 2023 and September 30, 2022, the Company had accounts payable to dpiX totaling $ 3.2 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.

1 unchanged sentence

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.

As of June 30, 2023, the Company estimated it has fixed cost commitments of $ 6.5 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).

8 unchanged sentences

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

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.

During the three months ended June 30, 2023 and July 1, 2022, the Company recorded a loss on the equity investment in VEC of $ 0.3 million and $ 0.4 million, respectively.

During the nine months ended June 30, 2023, and July 1, 2022, the Company recorded a loss on the equity investment in VEC of $ 0.7 million and $ 1.0 million, respectively.

The Company's investment in VEC was $ 1.8 million and $ 2.5 million at June 30, 2023 and September 30, 2022, respectively.

As of June 30, 2023 and September 30, 2022, the Company had loans and other receivables outstanding from VEC of $ 1.0 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 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

Below is a detail of restructuring charges incurred during the three and nine months ended June 30, 2023 and July 1, 2022, respectively, which predominantly relate to the Company's Medical segment:

Three Months Ended Nine Months Ended

(In millions) Location in Statements of Operations June 30, 2023 July 1, 2022 June 30, 2023 July 1, 2022

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

11 unchanged sentences

The Company uses cross currency swap contracts as net investment hedges to manage its risk of variability in foreign currency-denominated net investments in wholly-owned international operations.

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.

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

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.

The gain on the cross currency swap contracts was recorded in accumulated other comprehensive (loss) 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:

As of June 30, 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) March 31, 2023 April 1, 2022 March 31, 2023 April 1, 2022

(In millions) June 30, 2023 July 1, 2022 June 30, 2023 July 1, 2022

Cross currency swap contracts $ ( 0.6 ) $ 3.9 Interest expense $ 0.3 $ 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

Nine 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)

Nine Months Ended

(In millions) June 30, 2023 July 1, 2022 June 30, 2023 July 1, 2022

Cross currency swap contracts $ ( 5.6 ) $ 5.0 Interest expense $ 0.7 $ 0.9

3 unchanged sentences

(In millions) Derivative Assets and Liabilities

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

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

Cross currency swap contracts Prepaid expenses and other current assets $ 1.1 $ 1.2

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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:

The following table shows the notional amounts of outstanding foreign currency contracts as of June 30, 2023:

Notional Value of Derivatives not Designated as Hedging Instruments:

(In millions of equivalent USD) Sell contracts

Chinese Renminbi $ 9.4

Australian Dollar $ 4.0

Chinese Renminbi 9.8

India Rupee 6.5

1 unchanged sentence

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 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 June 30, 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 $ 253.6 million and $ 242.7 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.

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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 March 31, 2023

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

Fair Value at June 30, 2023

(In millions) Quoted Prices in Active Markets

Significant Other

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Fair Value at September 30, 2022

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

(In millions) Quoted Prices in Active Markets

Significant Other

15 unchanged sentences

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

March 31, 2023

June 30, 2023

(In millions) Amortized Costs Unrealized Losses Fair Value

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

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

The contractual maturities of marketable debt securities as of June 30, 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.

March 31, 2023

June 30, 2023

(In millions) Amortized Costs Fair Value

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Total marketable debt securities $ 39.0 $ 38.9

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.

During the three and nine months ended June 30, 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 (loss) income.

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

March 31, 2023

June 30, 2023

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

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The following table summarizes the Company’s inventories:

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

(In millions) June 30, 2023 September 30, 2022

Raw materials and parts $ 235.0 $ 240.3

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Foreign currency translation adjustments 2.8 1.9 4.7

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

Balance at June 30, 2023 $ 172.2 $ 117.0 $ 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:

March 31, 2023 September 30, 2022

June 30, 2023 September 30, 2022

(In millions)

10 unchanged sentences

$ 135.1 $ ( 109.6 ) $ 25.5 $ 131.9 $ ( 98.3 ) $ 33.6

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.

Amortization expense for intangible assets was $ 3.4 million and $ 3.7 million for the three months ended June 30, 2023 and July 1, 2022, respectively.

Amortization expense for intangible assets was $ 10.2 million and $ 11.2 million for the nine months ended June 30, 2023 and July 1, 2022, respectively.

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

March 31, 2023 September 30, 2022

June 30, 2023 September 30, 2022

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

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The following table summarizes the Company’s interest expense:

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

June 30, 2023 July 1, 2022 June 30, 2023 July 1, 2022

Contractual interest coupon and other $ 6.7 $ 6.7 $ 20.2 $ 21.1

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

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

The number of warrants outstanding as of June 30, 2023 was 9.6 million.

Senior Secured Notes

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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.

As of June 30, 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.

13 unchanged sentences

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

As of June 30, 2023, the amount available under the ABL Facility was $ 87.8 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.

10 unchanged sentences

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

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

At June 30, 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:

Six Months Ended

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

Nine Months Ended

(In millions) June 30, 2023 July 1, 2022

Noncontrolling interests, at beginning of period $ 13.3 $ 13.2

4 unchanged sentences

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

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.

Diluted net income per common share reflects the effects of potentially dilutive securities, which is computed by dividing the sum of net income and any adjustments to 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 per common share is as follows:

Three Months Ended Six Months Ended

Three Months Ended Nine Months Ended

(In millions, except per share amounts)

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

June 30, 2023 July 1, 2022 June 30, 2023 July 1, 2022

Net income per share - basic

5 unchanged sentences

Net income attributable to Varex $ 9.1 $ 8.2 $ 16.3 $ 17.2

Interest expense on Convertible Notes, net of tax 1.4 — — —

Diluted net income $ 10.5 $ 8.2 $ 16.3 $ 17.2

Basic weighted average shares outstanding 40.4 39.9 40.2 39.7

1 unchanged sentence

Dilutive effect of share-based awards and other 0.4 0.4 0.4 0.6

Dilutive effect of warrants — 0.2 — 0.7

Diluted weighted average shares outstanding

11 unchanged sentences

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.

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

See Note 1, Summary of Significant Accounting Policies, "Recently Adopted Accounting Pronouncements" for further details concerning the adoption of ASU 2020-06.

6 unchanged sentences

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

Three Months Ended Nine Months Ended

(In millions) June 30, 2023 July 1, 2022 June 30, 2023 July 1, 2022

Cost of revenues $ 0.5 $ 0.4 $ 1.3 $ 1.2

12 unchanged sentences

Canceled, expired or forfeited ( 442 ) $ 22.13 - $ 37.10

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

Outstanding at June 30, 2023 2,875 $ 13.61 - $ 37.60

$ 28.01 5.1 $ 2,329.4

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

Exercisable at June 30, 2023 2,015 $ 13.61 - $ 37.60

$ 29.49 3.6 $ 1,240.9

(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.

(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 $ 23.57 as of June 30, 2023, the last trading date of the Company's third 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 ( 66 ) 24.03

Outstanding at March 31, 2023 1,292 $ 22.31

Outstanding at June 30, 2023 1,291 $ 22.43

TAXES ON 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.

For the three months ended June 30, 2023, the Company recognized income tax expense of $ 7.9 million on $ 17.1 million of pre-tax income.

For the three months ended July 1, 2022, the Company recognized income tax expense of $ 5.1 million on $ 13.5 million of pre-tax income.

For the nine months ended June 30, 2023, the Company recognized income tax expense of $ 13.6 million on $ 30.3 million of pre-tax income.

For the nine months ended July 1, 2022, the Company recognized income tax expense of $ 12.8 million on $ 30.4 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 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.

The Company's tax expense for the three and nine months ended June 30, 2023 increased, primarily due to increased pre-tax income in certain jurisdictions, valuation allowance positions in the United States on deferred tax attributes, and losses in certain foreign jurisdictions for which no benefit can be recorded.

The Company is maintaining its reinvestment assertion with respect to foreign earnings for the three months ended June 30, 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.

15 unchanged sentences

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

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

(In millions) June 30, 2023 July 1, 2022 June 30, 2023 July 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