What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2024-11-19 compared with 2023-11-16 · 323 added, 227 removed, 1252 unchanged (31% of the section changed)

20 unchanged sentences

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 27, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the consolidated financial statements as of and for the year ended September 29, 2023, of the Company and our report dated November 16, 2023, expressed an unqualified opinion on those financial statements and included an explanatory paragraph regarding the Company’s adoption of a new accounting standard.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended September 27, 2024, of the Company and our report dated November 19, 2024, expressed an unqualified opinion on those financial statements.

Basis for Opinion

18 unchanged sentences

Other Information

During the three months ended September 29, 2023, none of our directors or officers informed us of the adoption or termination of a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Regulation S-K, Item 408.

During the three months ended September 27, 2024, none of our directors or officers informed us of the adoption or termination of a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Regulation S-K, Item 408, except as follows:

On August 9, 2024, Sunny Sanyal , our President, CEO, and member of our Board of Directors , modified the Rule 10b5-1 trading arrangement he adopted on March 5, 2024 .

As initially adopted, the 10b5-1 trading arrangement (the “10b5-1 Plan”) provided for (i) the sale of shares of Company common stock owned by Mr.

Sanyal once per quarter in an amount not to exceed $100,000 in any single quarter, and not to exceed $300,000 in the aggregate during the term of the 10b5-1 Plan, with the aggregate number of shares to be sold during such term not to exceed 23,009 shares;

and (ii) the exercise, subject to pricing triggers, of up to 720,585 stock options (which includes options to be withheld by the Company in payment of the exercise prices and applicable taxes), that have vested or may vest to Mr.

Sanyal pursuant to previous awards, some of which expire in February 2025 .

The August 9, 2024 modification removes the sale of shares of Company common stock described above from the 10b5-1 Plan, but continues to include the exercise of 720,585 stock options.

Sanyal does not presently intend to sell the net shares he acquires pursuant to exercise of these options.

The 10b5-1 Plan, as modified, is intended to satisfy the affirmative defense of Rule 10b5-1(c).

Disclosures Regarding Foreign Jurisdictions that Prevent Inspections.

10 unchanged sentences

We will provide disclosure of delinquent Section 16(a) reports, if any, in our Proxy Statement, and such disclosure, if any, is incorporated herein by reference.

Insider Trading Policy

We have an Insider Trading Policy applicable to our directors, officers, employees and certain persons and entities that we believe is reasonably designed to promote compliance with insider trading laws, rules and regulations, and Nasdaq listing standards applicable to our Company.

The foregoing summary of our Insider Trading Policy is not complete and is qualified in its entirety by reference to the full text of our Insider Trading Policy attached hereto as Exhibit 19.1.

Executive Compensation

9 unchanged sentences

Total 3,767 $ 26.79 5,276

(1) Consists of stock options, restricted stock units ("RSUs"), and deferred stock units ("DSUs") granted under the Varex Imaging Corporation 2017 Omnibus Stock Plan and the 2020 Stock Plan.

(1) Consists of stock options, restricted stock units ("RSUs"), and deferred stock units ("DSUs") granted under the Varex Imaging Corporation 2017 Omnibus Stock Plan and the 2020 Omnibus Stock Plan, as Amended and Restated (the "2020 Stock Plan").

Excludes purchase rights under the ESPP.

1 unchanged sentence

(3) Includes 5,017 thousand shares available for future issuance under the 2020 Stock Plan, and also includes 259 thousand shares available for future issuance under the ESPP.

Shares available for issuance under the ESPP, including shares subject to purchase during the current purchase period, which commenced on August 28, 2023 (the exact number of which will not be known until the purchase date on February 23, 2024).

Shares available for issuance under the ESPP, including shares subject to purchase during the current purchase period, which commenced on September 3, 2024 (the exact number of which will not be known until the purchase date on February 28, 2025).

Subject to the number of shares remaining in the share reserve, the maximum number of shares purchasable by any participant on any one purchase date for any purchase period, including the current purchase period, may not exceed 2,000 shares.

4 unchanged sentences

The information required by this Item 14 is incorporated by reference from our Proxy Statement under the caption “Proposal - Ratification of the Appointment of Our Independent Registered Public Accounting Firm.”

Exhibit and Financial Statement Schedules.

Exhibits and Financial Statement Schedules.

Documents filed as part of this annual report include:

Consolidated Financial Statements.

We have filed the consolidated financial statements listed in the I ndex to Consolidated Financial Statements, Schedules and Exhibits on page F-1 as part of this annual report on Form 10 - K.

We have filed the consolidated financial statements listed in the Index to Consolidated Financial Statements, Schedules and Exhibits on page F-1 as part of this annual report on Form 10-K.

Financial Statement Schedules and Other.

14 unchanged sentences

10.6*† Form of Restricted Stock Unit Award Agreement under the 2017 Omnibus Stock Plan (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed February 16, 2017).

10.7*† Varex Imaging Corporation 2017 Employee Stock Purchase Plan (incorporated herein by reference to Exhibit 99.2 to the Company’s Form S-8, filed January 27, 2017).

10.8*† Varex Imaging Corporation Management Incentive Plan (incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K filed January 30, 2017).

10.7*† Varex Imaging Corporation 2017 Employee Stock Purchase Plan (incorporated by reference to Appendix A to the proxy statement filed by the Registrant on December 28, 2021).

10.8*† Varex Imaging Corporation Management Incentive Plan

10.9*† Form of Change in Control Agreement (incorporated by reference to Exhibit 10.11 to the Company’s Annual Report on Form 10-K filed November 19, 2021) .

5 unchanged sentences

10.13*† Form of Grant Agreement for Deferred Stock Units under the 2017 Omnibus Stock Plan (incorporated by reference to Exhibit 10.18 to the Company's Annual Report on Form 10-K filed December 20, 2019).

10.14*† Form of Grant Agreement for Deferred Stock Units under the 2017 Omnibus Stock Plan (incorporated by reference to Exhibit 10.18 to the Company's Annual Report on Form 10-K filed December 20, 2019).

10.15*† Varex Imaging Corporation 2020 Omnibus Stock Plan, including the Form of Nonqualified Stock Option Agreement, the Form of Restricted Stock Unit Agreement and the Form of Grant Agreement – Deferred Stock Units (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 14, 2020).

10.16* Credit Agreement dated as of September 30, 2020, by and among Varex Imaging Corporation, Varex Imaging West, LLC, Varex Imaging Deutschland AG, the Guarantors party thereto and Bank of America N.A., as administrative and collateral agent, and the lenders party thereto (incorporated by reference to Exhibit 10.18 to the Company’s Current Report on Form 10-K filed November 30, 2021).

10.14*† Form of Nonqualified Stock Option Agreement, Form of Restricted Stock Unit Agreement and Form of Grant Agreement – Deferred Stock Units under the Varex Imaging Corporation 2020 Omnibus Stock Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 14, 2020).

10.15* Form of Base Convertible Bond Hedge Confirmation, dated June 4, 2020, between Varex Imaging Corporation and each of the counterparties thereto (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed June 9, 2020).

2 unchanged sentences

10.18* Form of Additional Warrant Confirmation, dated June 5, 2020, between Varex Imaging Corporation and each of the Counterparties (incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed June 9, 2020).

10.21* LIBOR Transition Amendment, dated as of March 9, 2022, among Varex Imaging Corporation, Varex Imaging West, LLC, Varex Imaging Deutschland AG, the other Loan Parties, the Lenders, Issuing Banks and Swing Line Lender, and BANK OF AMERICA, N.A., as administrative agent and collateral agent.

10.22*† Transition and Release Agreement, dated January 10, 2023, by and between Brian Giambattista and Varex Imaging Corporation (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed January 10, 2023).

10.19*† Form of Performance Unit Agreement under the 2020 Omnibus Stock Plan (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed November 17, 2023).

10.20*† Varex Imaging Corporation 2020 Omnibus Stock Plan, as Amended and Restated (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 9, 2024).

10.21* Credit Agreement dated as of March 26, 2024, by and among Varex Imaging Corporation, Varex Imaging West, LLC, Varex Imaging Deutschland AG, the Guarantors party thereto and Zions Bancorporation, N.A.

DBA Zions First National bank, as administrative and collateral agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 27, 2024).

10.22* Equipment Credit Agreement dated as of April 26, 2024, by and among the Company, Varex Imaging West, LLC, certain guarantors party thereto and Zions Bancorporation, N.A.

DBA Zions Credit Corporation (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed May 2, 2024).

10.23 Amendment No.

1 to Revolving Credit and Guarantee Agreement, dated August 30, 2024, made and entered into by and among Varex Imaging Corporation, Varex Imaging West, LLC, Varex Imaging Deutschland AG, the other Loan Parties party thereto and Zions Bancorporation, N.A.

DBA Zions First National Bank, as administrative and collateral agent for the lenders party thereto.

19.1 Varex Imaging Corporation Insider Trading Policy

21.1 List of Subsidiaries as of September 27, 2024

23.1 Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm

31.1 Chief Executive Officer Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act.

31.2 Chief Financial Officer Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act.

32.1 Certification pursuant to 18 U.S.C.

24.1 Power of Attorney (included on signature page)

31.1 Chief Executive Officer Certification Pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act.

31.2 Chief Financial Officer Certification Pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act.

32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.

Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 Certification pursuant to 18 U.S.C.

32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C.

Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

97.1 Varex Imaging Corporation Compensation Recovery Policy

101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

38 unchanged sentences

Consolidated Statements of Operations for the fiscal years ended 2024, 2023, and 2022

Consolidated Statements of Comprehensive Income for the fiscal years ended 2023, 2022 and 2021

Consolidated Statements of Comprehensive (Loss) I ncome for the fiscal years ended 2024, 2023, and 2022

Consolidated Balance Sheets as of the end of fiscal years 2024 and 2023

1 unchanged sentence

Consolidated Statements of Cash Flows for the fiscal years ended 2024, 2023, and 2022

Notes to Consolidated Financial Statements

Notes to the Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

1 unchanged sentence

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Varex Imaging Corporation and subsidiaries (the "Company") as of September 29, 2023 and September 30, 2022, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended September 29, 2023, and the related notes (collectively referred to as the "financial statements").

We have audited the accompanying consolidated balance sheets of Varex Imaging Corporation and subsidiaries (the "Company") as of September 27, 2024 and September 29, 2023, the related consolidated statements of operations, comprehensive (loss) income, stockholders' equity, and cash flows, for each of the three years in the period ended September 27, 2024, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 27, 2024 and September 29, 2023, and the results of its operations and its cash flows for each of the three years in the period ended September 27, 2024, in conformity with accounting principles generally accepted in the United States of America.

1 unchanged sentence

Change in Accounting Principle

As discussed in Note 1 to the financial statements, the Company has changed its method of accounting for Convertible Notes effective October 1, 2022, due to the adoption of Accounting Standards Update, 2020-06, Debt — Debt With Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40):

As discussed in Note 1 to the financial statements, the Company changed its method of accounting for Convertible Notes effective October 1, 2022, due to the adoption of Accounting Standards Update, 2020-06, Debt — Debt With Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity , using the modified retrospective approach.

18 unchanged sentences

The Company adjusts excess and obsolete inventories to net realizable value, and write-downs of excess and obsolete inventories are recorded as a component of cost of revenues.

As of September 29, 2023, the Company’s inventories, net, were $ 277.5 million.

For the year ended September 29, 2023, inventory write-downs were $ 5.6 million.

Estimating the amount of excess and obsolete inventories involves significant judgment and estimates.

8 unchanged sentences

• We tested the accuracy and completeness of the underlying data used in the Company’s calculations of the valuation of excess and obsolete inventories, including historical usage, anticipated future sales, quantities on hand, and pricing.

• We assessed the reasonableness of the assumptions used in estimating the valuation of excess and obsolete inventories, which included consideration of anticipated future sales and information obtained from production planning and supply chain employees, and developing an independent expectation and comparing our independent expectation to the results of the Company’s calculations.

• We assessed the reasonableness of the assumptions used in estimating the valuation of excess and obsolete inventories by considering the anticipated future sales information obtained from production planning and supply chain employees, and developing an independent expectation which was then compared to the results of the Company’s calculations.

• We tested the mathematical accuracy of the Company’s calculations of excess and obsolete inventories.

Investments in Privately-Held Companies – Impairment of Equity Method Investment — Refer to Notes 1, 4, 6, and 10 to the financial statements

Goodwill – Medical Reporting Unit – Refer to Notes 1 and 12 of the financial statements

Critical Audit Matter Description

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, but not control, these investments.

The Company records impairment losses on its equity method investments if an impairment exists and is deemed to be other-than-temporary.

To determine the fair value of the equity method investment, the Company equally weights an income approach based on discounted cash flows and a market approach based on comparable publicly traded companies in similar lines of business.

During the year ended September 29, 2023, the Company assessed its equity method investment in dpiX Holding LLC (“dpiX Holding”) for impairment and concluded that the carrying value of the investment was greater than its fair value and that the loss in value was other than temporary.

The Company recorded an impairment charge totaling $ 16.4 million.

The Company’s estimate of the fair value of the equity method investment included a discounted cash flow technique which included estimates of a discount rate and future revenues of dpiX Holding.

We identified the valuation of dpiX Holding as a critical audit matter because of the significant judgments and estimates management makes to determine the fair value of the equity method investment to record the impairment charge.

This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to selection of the discount rate and forecasts of future revenues used in determining the impairment charge, including the need to involve our valuation specialists.

The Company evaluates goodwill for impairment at least annually or whenever an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

The evaluation includes consideration of qualitative factors including industry and market considerations, overall financial performance, and other relevant events and factors affecting the reporting unit.

In the fourth quarter of 2024, the Company performed a quantitative impairment analysis to determine the fair values of its reporting units.

The Company used both an income approach utilizing the discounted cash flow method and a market approach utilizing the public company market multiple method.

No impairment was recognized for any reporting unit, as the fair value of each reporting unit exceeded its carrying value as of the measurement date.

We identified the valuation of the Medical reporting unit as a critical audit matter because of the significant judgments and estimates management made to determine the fair value of the reporting unit.

This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to selection of the discount rate and forecasts of future revenues used in determining the fair value of the Medical reporting unit, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to management’s estimates and assumptions related to selection of the discount rate and forecasts of future revenues in determining the impairment of dpiX Holding included the following, among others:

• We tested the effectiveness of controls over management’s impairment charge calculation, including those over the determination of the fair value of the equity method investment, such as controls related to management’s estimates and assumptions related to selection of the discount rate and forecasts of future revenues.

• We evaluated the reasonableness of management’s revenue forecast estimates by comparing key assumptions to historical results, communications and contractual agreements between the Company and dpiX Holding, and information obtained from sales and marketing personnel of the Company.

Our audit procedures related to management’s estimates and assumptions for selection of the discount rate and forecasts of future revenues in determining the fair value of the Medical reporting unit included the following, among others:

• We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the determination of the fair value of the Medical reporting unit, such as controls related to management’s estimates and assumptions for the selection of the discount rate and forecasts of future revenues.

• We evaluated the reasonableness of management’s revenue forecast estimates by comparing key assumptions to historical results, current industry and peer trends, and information from sales and marketing personnel of the Company.

• With the assistance of fair value specialists, we evaluated the reasonableness of the discount rate by:

◦ Testing the source information underlying the determination of the discount rate and mathematical accuracy of the calculation.

◦ Developing a range of independent estimates and comparing those to the discount rate selected by management.

◦ Testing the source information underlying the determination of the discount rate and testing the mathematical accuracy of the calculation.

◦ Developing a range of independent estimates for the discount rate and comparing those to the discount rate selected by management.

• We evaluated whether the revenue forecast estimates were consistent with evidence obtained in other areas of the audit.

25 unchanged sentences

Income before taxes 5.0 31.3 44.5

Income tax (benefit) expense ( 17.4 ) 13.7 10.7

Net income 48.7 30.8 17.9

Income tax expense (benefit) 52.2 ( 17.4 ) 13.7

Net (loss) income ( 47.2 ) 48.7 30.8

Net income attributable to noncontrolling interests 0.5 0.5 0.5

Net income attributable to Varex $ 48.2 $ 30.3 $ 17.4

Net income per common share attributable to Varex

Net (loss) income attributable to Varex $ ( 47.7 ) $ 48.2 $ 30.3

Net (loss) income per common share attributable to Varex

Basic $ ( 1.17 ) $ 1.20 $ 0.76

3 unchanged sentences

Diluted 40.8 50.3 41.6

See accompanying Notes to Consolidated Financial Statements.

See accompanying Notes to the Consolidated Financial Statements.

VAREX IMAGING CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(In millions) 2024 2023 2022

Net income $ 48.7 $ 30.8 $ 17.9

Net (loss) income $ ( 47.2 ) $ 48.7 $ 30.8

Other comprehensive (loss) income, net of tax

Unrealized (loss) gain on defined benefit obligations ( 1.0 ) 1.4 ( 0.1 )

Unrealized gain (loss) on defined benefit obligations — ( 1.0 ) 1.4

Income (loss) on forward contracts 0.1 0.1 ( 0.6 )

1 unchanged sentence

Foreign currency translation adjustments ( 1.9 ) ( 0.5 ) ( 0.6 )

Total comprehensive income 47.4 30.9 17.1

Total comprehensive (loss) income ( 48.9 ) 47.4 30.9

Comprehensive income attributable to noncontrolling interests 0.5 0.5 0.5

Comprehensive income attributable to Varex $ 46.9 $ 30.4 $ 16.6

See accompanying Notes to Consolidated Financial Statements.

Comprehensive (loss) income attributable to Varex $ ( 49.4 ) $ 46.9 $ 30.4

See accompanying Notes to the Consolidated Financial Statements.

VAREX IMAGING CORPORATION

5 unchanged sentences

$ 168.7 $ 152.6

Marketable securities 31.8 41.3

Accounts receivable, net of allowance for credit losses of $ 1.0 million and $ 0.6 million at September 27, 2024 and September 29, 2023, respectively

14 unchanged sentences

Current operating lease liabilities

Current maturities of long-term debt

Current maturities of long-term debt, net

Deferred revenues

14 unchanged sentences

Additional paid-in capital

Accumulated other comprehensive (loss) income ( 1.2 ) 0.1

Accumulated other comprehensive loss ( 2.9 ) ( 1.2 )

Retained earnings

4 unchanged sentences

$ 1,217.0 $ 1,249.6

See accompanying Notes to Consolidated Financial Statements.

See accompanying Notes to the Consolidated Financial Statements.

VAREX IMAGING CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

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

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

(In millions) Shares Amount

1 unchanged sentence

Net income — — — — 30.3 30.3 0.5 30.8

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

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

Common stock issued under employee stock purchase plan 0.2 — 2.8 — — 2.8 — 2.8

Share-based compensation — — 13.9 — — 13.9 — 13.9

Unrealized loss on defined benefit obligations, net of tax — — — ( 0.1 ) — ( 0.1 ) — ( 0.1 )

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

Other — — ( 0.2 ) — — ( 0.2 ) ( 1.4 ) ( 1.6 )

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

Net income — — — — 30.3 30.3 0.5 30.8

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

Common stock issued upon vesting of restricted shares 0.4 — — — — — — —

Shares withheld on vesting of restricted stock ( 0.1 ) — ( 2.8 ) — — ( 2.8 ) — ( 2.8 )

Shares withheld on vesting of restricted shares ( 0.1 ) — ( 2.8 ) — — ( 2.8 ) — ( 2.8 )

Common stock issued under employee stock purchase plan 0.3 — 4.9 — — 4.9 — 4.9

10 unchanged sentences

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 )

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

Common stock issued under employee stock purchase plan 0.3 — 3.9 — — 3.9 — 3.9

6 unchanged sentences

September 29, 2023 40.5 $ 0.4 $ 450.4 $ ( 1.2 ) $ 118.1 $ 567.7 $ 13.3 $ 581.0

See accompanying Notes to Consolidated Financial Statements.

Net (loss) income — — — — ( 47.7 ) ( 47.7 ) 0.5 ( 47.2 )

Common stock issued upon vesting of restricted shares 0.4 — — — — — — —

Shares withheld on vesting of restricted shares ( 0.1 ) — ( 2.2 ) — — ( 2.2 ) — ( 2.2 )

Common stock issued under employee stock purchase plan 0.3 — 3.8 — — 3.8 — 3.8

Share-based compensation — — 15.2 — — 15.2 — 15.2

Realized gain on forward contracts — — — 0.1 — 0.1 — 0.1

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

Business acquisitions — — — — — — 0.7 0.7

Foreign currency translation adjustments — — — ( 1.9 ) — ( 1.9 ) — ( 1.9 )

Other — — — — — — ( 0.4 ) ( 0.4 )

September 27, 2024 41.1 $ 0.4 $ 467.2 $ ( 2.9 ) $ 70.4 $ 535.1 $ 14.1 $ 549.2

See accompanying Notes to the Consolidated Financial Statements.

VAREX IMAGING CORPORATION

2 unchanged sentences

Cash flows from operating activities:

Net income $ 48.7 $ 30.8 $ 17.9

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

Net (loss) income $ ( 47.2 ) $ 48.7 $ 30.8

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

Share-based compensation expense 15.3 13.5 14.0

5 unchanged sentences

Amortization of deferred loan costs 2.8 2.6 10.9

Other assets impairment charges — — 0.5

Gain on purchase of business ( 2.1 ) — —

Inventory write-down 4.9 5.6 6.4

16 unchanged sentences

Purchase of certificates of deposit ( 4.2 ) ( 1.0 ) ( 7.2 )

Acquisitions of businesses and assets ( 1.0 ) — —

Proceeds from maturities of certificates of deposit 1.8 — —

Acquisitions of businesses, net of cash acquired 0.9 ( 1.0 ) —

Settlement of net investment hedge — 7.0 —

4 unchanged sentences

Cash flows from financing activities:

Proceeds from issuance of debt — — 1.5

Repayments of borrowings ( 1.6 ) ( 2.4 ) ( 29.4 )

Payment of debt issuance costs ( 2.3 ) — —

Proceeds from shares issued under employee stock purchase plan 3.8 3.9 4.9

12 unchanged sentences

Purchases of property, plant and equipment financed through accounts payable $ 1.0 $ 2.7 $ 1.5

See accompanying Notes to Consolidated Financial Statements.

See accompanying Notes to the Consolidated Financial Statements.

VAREX IMAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

4 unchanged sentences

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

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

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

Basis of Presentation

3 unchanged sentences

Reclassification of Prior Period Presentation

Certain prior period amounts in the Notes to the Consolidated Financial Statements have had a change in presentation to conform to current period presentation.

Certain prior period amounts in the Financial Statements and the Notes to the Consolidated Financial Statements have had a change in presentation to conform to current period presentation.

This change does not affect previously reported results.

4 unchanged sentences

The fiscal years of the Company as reported are the 52 or 53-week period ending on the Friday nearest September 30.

Fiscal year 2023 was the 52-week period that ended September 29, 2023, fiscal year 2022 was the 52-week period that ended September 30, 2022, and fiscal year 2021 was the 52-week period that ended October 1, 2021.

Fiscal year 2024 was the 52-week period that ended September 27, 2024, fiscal year 2023 was the 52-week period that ended September 29, 2023, and fiscal year 2022 was the 52-week period that ended September 30, 2022.

Variable Interest Entities

10 unchanged sentences

Restricted Cash

Restricted cash primarily consists of cash collateral related to certain leases and inventory arrangements.

Restricted cash primarily consists of cash collateral related to certain lease and inventory arrangements.

Restricted cash is included in other assets on the Company's Consolidated Balance Sheets.

16 unchanged sentences

The Company records all derivatives on the Consolidated Balance Sheets at fair value as of the reporting date.

For derivative instruments that are designated and qualify as cash flow hedges, the gain or loss on the derivative is reported as a component of other comprehensive income or loss and reclassified from accumulated other comprehensive (loss) income ("OCI") into earnings when the hedged transaction affects earnings.

For derivative instruments that are designated and qualify as cash flow hedges, the gain or loss on the derivative is reported as a component of other comprehensive income or loss and reclassified from accumulated other comprehensive loss ("OCI") into earnings when the hedged transaction affects earnings.

For derivatives that are designated and qualify as net investment hedges, the gain or loss on the derivative is reported as a component of other comprehensive income or loss until the hedged item is sold.

19 unchanged sentences

Costs include materials, labor, external service, and manufacturing overhead and is computed on a first-in-first-out basis.

The Company evaluates the carrying value of its inventories taking into consideration such factors as historical and anticipated future sales compared to quantities on hand and the prices the Company expects to obtain for products in its various markets.

The Company adjusts excess and obsolete inventories to net realizable value and write-downs of excess and obsolete inventories are recorded as a component of cost of revenues.

5 unchanged sentences

Total inventories $ 264.8 $ 277.5

The Company recorded inventory write-downs of $ 5.6 million, $ 6.4 million and $ 3.5 million for the twelve months ended September 29, 2023, September 30, 2022, and October 1, 2021, respectively.

The Company recorded inventory write-downs of $ 4.9 million, $ 5.6 million and $ 6.4 million for the twelve months ended September 27, 2024, September 29, 2023, and September 30, 2022, respectively.

Property, Plant and Equipment, net

23 unchanged sentences

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.

In the fourth quarter of fiscal year 2023, the Company assessed its equity method investment in dpiX Holding LLC (“dpiX Holding”) for impairment and engaged an external service firm to perform a valuation of its ownership interest in dpiX Holding as of July 1, 2023.

The fair value of the Company's equity interest in dpiX Holding as of the valuation date was determined to be $ 27.6 million.

The Company's carrying value of its investment as of July 1, 2023 was $ 44.0 million.

The Company concluded the loss in value of the investment was other than temporary and was primarily due to reductions in forecasted glass purchases by Varex, as the Company is one of dpiX LLC's (“dpiX”) largest customers.

See Note 4, Related-Party Transactions, for details on the Company's investment in dpiX Holding.

As a result, the Company recorded a before-tax impairment charge totaling $ 16.4 million, which is included in other expense, net in the Company's Consolidated Statements of Operations.

There were no impairments recorded during fiscal year 2022 or 2021.

During fiscal year 2023, the Company recorded a before-tax impairment charge totaling $ 16.4 million, which is included in other expense, net in the Company's Consolidated Statements of Operations.

There was no impairment recorded during fiscal years 2024 and 2022.

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 Consolidated Balance Sheets.

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

Any unrealized gains or losses are included in accumulated other comprehensive loss within the 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 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 accumulated other comprehensive (loss) income, and are recognized in the Consolidated Statements of Operations only if the Company sells or intends to sell the security before recovery of its cost basis.

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 accumulated other comprehensive loss, and are recognized in the 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 twelve months ended September 27, 2024.

12 unchanged sentences

The Company evaluates goodwill for impairment at least annually at the beginning of the fourth quarter of each fiscal year or whenever an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

The evaluation includes consideration of qualitative factors including industry and market considerations, overall

financial performance, and other relevant events and factors affecting the reporting unit.

If the Company determines that a quantitative analysis is necessary, the Company performs a step one analysis, which consists of a comparison of the fair value of a reporting unit against its carrying amount, including the goodwill allocated to each reporting unit.

In fiscal years 2023, 2022, and 2021, the Company performed the annual goodwill qualitative impairment test for our two reporting units and determined that, at those dates, it was not more likely than not that the fair values of the reporting units were less than their carrying amount and accordingly recorded no impairment.

In fiscal years 2023 and 2022 the Company

performed the annual goodwill qualitative impairment test for our two reporting units and determined that, at those dates, it was not more likely than not that the fair values of the reporting units were less than their carrying amount and accordingly recorded no impairment.

In the fourth quarter of 2024, changes in facts and circumstances related to reduced demand of the Company's medical products, coupled with a sustained decrease in the Company's stock price, resulted in the Company determining that an indicator of possible impairment existed within its reporting units.

Accordingly, the Company performed a quantitative impairment analysis to determine the fair values of those reporting units, using both an income approach utilizing the discounted cash flow method and market approach utilizing the public company market multiple method.

Based on the output of the analysis, the Company determined that the fair values of both the Medical and Industrial reporting units exceeded their carrying amounts.

Accordingly, no impairment charges were recorded during the year ended September 27, 2024.

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).

2 unchanged sentences

See Note 13, Commitments and Contingencies, for further information regarding certain of our contractual obligations and contingencies.

Supplier Finance Programs

The Company participates in voluntary supply chain finance programs with a financial intermediary which provide participating suppliers the option to be paid by the intermediary earlier than the original invoice due date.

The Company’s responsibility is limited to making payments on the terms originally negotiated with the suppliers, regardless of whether the intermediary pays the supplier in advance of the original due date.

As part of participating in these arrangements, the Company generally receives more favorable payment terms from its suppliers.

The Company does not receive fees, payments, extended payment terms, or other direct economic benefits from the intermediary.

The following table presents the change in the direct supplier financing obligation:

Fiscal Years Ended

(In millions) September 27, 2024 September 29, 2023

Confirmed obligations outstanding at the beginning of the period $ 4.2 $ 5.1

Invoices confirmed during the period 31.3 42.9

Confirmed invoices paid during the period ( 32.9 ) ( 43.8 )

Confirmed obligations outstanding at the end of the period $ 2.6 $ 4.2

Environmental Obligations

22 unchanged sentences

Lease liabilities and their corresponding ROU assets are recognized based on the present value of lease payments over the lease term, discounted using the Company's incremental borrowing rate.

The Company recognizes operating leases with lease terms of more than twelve months in operating lease assets, current operating lease liabilities, and

operating lease liabilities on its Consolidated Balance Sheets.

The Company recognizes operating leases with lease terms of more than twelve months in operating lease assets, current operating lease liabilities, and operating lease liabilities on its Consolidated Balance Sheets.

The Company recognizes finance leases with lease terms of more than twelve months in property, plant and equipment, net, accrued liabilities and other current liabilities, and other long-term liabilities on its Consolidated Balance Sheets.

55 unchanged sentences

Share-Based Compensation Expense

The Company has an equity-based incentive plan that provides for the grant of nonqualified stock options and restricted stock units to directors, officers, and other employees.

The Company has an equity-based incentive plan that provides for the grant of nonqualified stock options, restricted stock units, and performance stock units to directors, officers, and other employees.

The Company also permits employees to purchase shares under the Varex employee stock purchase plan.

7 unchanged sentences

The Company considers only the direct tax impacts of share-based compensation awards when calculating the amount of tax windfalls or shortfalls.

Vesting of certain performance stock units is linked to the achievement of performance goals based on Adjusted EBITDA margin.

Share-based compensation expense for these performance stock units are recognized over the performance period based on the probability of achieving the performance targets.

Certain performance stock units include a market condition based on our relative total shareholder return over the performance period compared to a predetermined peer group.

The fair value of these awards is determined using a Monte Carlo simulation as of the date of the grant and share-based compensation expense will not be adjusted should the target awards vary from actual awards.

For additional information, see Note 15, Employee Stock Plans , included in this report.

9 unchanged sentences

Future changes in tax regulation can have a material impact, including tax rate changes or the realization of deferred tax assets.

A valuation allowance is provided if it is more likely than not that some or all of the deferred tax assets will not be realized.

Also, net operating loss carryforwards in jurisdictions with current losses provide uncertainty for realization.

In addition, we provide reserves for uncertain tax positions when such tax positions do not meet the recognition thresholds or measurement standards prescribed by the authoritative guidance for accounting for income taxes.

6 unchanged sentences

We regularly evaluate the realizability of our deferred tax assets based on the weight of all available evidence, both positive and negative, including the history of recent earnings and expected future taxable income on a jurisdictional basis and our ability to generate sufficient taxable income in the future to realize the net deferred tax assets.

As of September 29, 2023, based on our assessment of the realizability of our net deferred tax assets, we reached the conclusion that it was more likely than not that the U.S.

federal deferred tax assets are realizable due to cumulative income in recent years and the expectation of sustained profitability in future periods.

As a result, we released the valuation allowance against all of the U.S.

federal deferred tax assets.

We continue to maintain a valuation allowance against U.S.

state R&D credit carryforwards and a partial valuation allowance against state net operating losses that are not expected to be realizable.

We also maintain full valuation allowances against the net deferred tax assets in Sweden, Finland, and Saudi Arabia, due to their recent historical losses and the uncertainty of their future taxable income to realize their net operating losses.

The 2017 Tax Cuts and Jobs Act ("TCJA") included a provision requiring research and development expenditures to be capitalized for tax years beginning after December 31, 2021, which was effective for the Company starting in fiscal year 2023.

7 unchanged sentences

For the foreign subsidiaries where the local currency is the functional currency, translation adjustments of foreign currency financial statements into U.S.

Dollars are recorded to a separate component of accumulated other comprehensive (loss) income.

Dollars are recorded to a separate component of accumulated other comprehensive loss.

Recently Adopted Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board issued Accounting Standard Update ("ASU") 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.

In August 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.

The standard removed certain separation models in ASC 470-20 for convertible instruments, and, as a result, embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under ASC 815.

1 unchanged sentence

This results in the interest expense recognized for convertible debt instruments to be typically closer to the coupon interest rate.

Further, the ASU made amendments to

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

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

The Company adopted this ASU on October 1, 2022, using the modified retrospective method.

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 $ 0.5 million, and increase retained earnings by $ 6.1 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 9, 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 unamortized discount on the Company's Convertible Notes 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 could result in additional dilution.

In September 2022, the FASB issued ASU 2022-04, Liabilities—Supplier Finance Programs, which requires entities to provide qualitative and quantitative disclosures about their supplier finance programs, including a rollforward of related obligations.

The adoption of ASU 2022-04 did not affect the Company’s financial condition, results of operations, or cash flows as the guidance only requires additional disclosures.

We adopted this ASU effective September 30, 2023 on a retrospective basis, except for the amendment on rollforward information, which has been adopted on a prospective basis.

Recent Accounting Standards and Updates Not Yet Effective

In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures.

ASU 2023-07 requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within the segment measure of profit or loss, an amount and description of its composition for other segment items to reconcile to segment profit or loss, and the title and position of the entity’s CODM.

ASU 2023-07 will be applied retrospectively and is effective for annual reporting periods in fiscal years beginning after December 15, 2023, and interim reporting periods in fiscal years beginning after December 31, 2024.

The Company is currently reviewing the impact that the adoption of ASU 2023-07 may have on its consolidated financial statements and disclosures.

In December 2023, the FASB issued ASU 2023-09 Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

ASU 2023-09 requires public companies to annually (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate).

ASU 2023-09 will be effective for the annual reporting periods in fiscal years beginning after December 15, 2024.

The Company is currently evaluating ASU 2023-09 and does not expect it to have a material effect on its consolidated financial statements.

REVENUE RECOGNITION

28 unchanged sentences

During fiscal year 2024, the Company recognized revenue of $ 9.9 million related to deferred revenue which existed at September 29, 2023.

During fiscal year 2022, the Company recognized revenue of $ 6.7 million related to deferred revenue which existed at October 1, 2021.

During fiscal year 2023, the Company recognized revenue of $ 6.7 million related to deferred revenue which existed at September 30, 2022.

Remaining Performance Obligations

5 unchanged sentences

Leases with an initial term of 12 months or less are generally not recorded on the balance sheet and expense for these leases is recognized on a straight-line basis over the lease term.

The Company's leases have remaining lease terms of less than one year to approximately ninety-five years , some of which may include options to extend the leases for up to five years and some include options to terminate early.

The Company's leases have remaining lease terms of less than one year to approximately ninety-four years , some of which may include options to extend the leases for up to six years and some include options to terminate early.

These options have been included in the determination of the lease liability when it is reasonably certain that the option will be exercised.

Right-of-use assets represent the Company's right to use an underlying asset for the lease term, and lease liabilities represent the Company's obligation to make lease payments arising from the lease contract.

Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of fixed lease payments over the expected lease term.

Operating lease liabilities and their corresponding

right-of-use assets are recorded based on the present value of fixed lease payments over the expected lease term.

The interest rate implicit in lease contracts is typically not readily determinable.

23 unchanged sentences

Total cash paid for amounts included in the measurement of lease liabilities $ 6.4 $ 8.1 $ 7.5

Noncash operating right-of-use assets obtained in exchange for new lease liabilities $ 10.6 $ 5.4 $ 5.6

Noncash finance right-of-use assets obtained in exchange for new lease liabilities 0.2 0.1 0.2

Non-cash operating right-of-use assets obtained in exchange for new lease liabilities $ 5.4 $ 10.6 $ 5.4

Non-cash finance right-of-use assets obtained in exchange for new lease liabilities 6.5 0.2 0.1

Total right-of-use assets obtained in exchange for new lease liabilities $ 11.9 $ 10.8 $ 5.5

12 unchanged sentences

Investment in Privately-Held Companies

The Company has a 40 % ownership interest in dpiX Holding, a holding company that has a 100 % ownership interest in dpiX, a supplier of amorphous silicon-based thin film transistor arrays for flat panels used in the Company's digital image detectors.

The Company has a 40 % ownership interest in dpiX Holding Company 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 the Company's digital image detectors.

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.

In fiscal years 2023, 2022, and 2021, the Company recorded loss on the equity investment in dpiX Holding of $ 0.2 million, $ 2.6 million, and $ 2.3 million, respectively.

In fiscal years 2024, 2023, and 2022, the Company recorded a loss on the equity investment in dpiX Holding of $ 1.0 million, $ 0.2 million, and $ 2.6 million, respectively.

The loss on the equity investment in dpiX Holding is included in other expense, net in the Consolidated Statements of Operations.

The carrying value of the equity investment in dpiX Holding was $ 24.8 million and $ 25.8 million at September 27, 2024 and September 29, 2023, respectively.

The Company recorded an impairment of its investment in dpiX Holding of $ 16.4 million in the fourth quarter of 2023.

During fiscal year 2023, the Company recorded an impairment of its investment in dpiX Holding of $ 16.4 million.

See Note 1, Summary of Significant Accounting Policies, for details on the nature of the impairment.

14 unchanged sentences

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

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

In accordance with the VEC agreement,

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

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

11 unchanged sentences

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

Accelerated depreciation Cost of revenues — — 0.2

Severance costs Selling, general and administrative — — 0.6

Facility closure costs Selling, general and administrative — — 0.2

Total restructuring charges $ — $ 1.8 $ 1.0

OTHER FINANCIAL INFORMATION

20 unchanged sentences

Loss from equity method investments $ ( 1.0 ) $ ( 1.4 ) $ ( 3.0 )

Gain on purchase of business 2.1 — —

Impairment of equity method investment — ( 16.4 ) —

2 unchanged sentences

Total other expense, net $ ( 4.2 ) $ ( 20.2 ) $ ( 4.3 )

NET INCOME PER SHARE

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 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:

NET (LOSS) INCOME PER SHARE

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

Diluted net (loss) income per common share reflects the effects of potentially dilutive securities, which is computed by dividing the sum of net (loss) 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 (loss) income per common share is as follows:

(In millions, except per share amounts)

2024 2023 2022

Net income per share - basic

Net income attributable to Varex $ 48.2 $ 30.3 $ 17.4

Net (loss) income per share – basic

Net (loss) income attributable to Varex $ ( 47.7 ) $ 48.2 $ 30.3

Basic weighted average shares outstanding

40.8 40.3 39.8

Basic net income per share attributable to Varex $ 1.20 $ 0.76 $ 0.44

Net income per share - diluted

Net income attributable to Varex $ 48.2 $ 30.3 $ 17.4

Basic net (loss) income per share attributable to Varex $ ( 1.17 ) $ 1.20 $ 0.76

Net (loss) income per share – diluted

Net (loss) income attributable to Varex $ ( 47.7 ) $ 48.2 $ 30.3

Interest expense on Convertible Notes, net of tax — 6.2 —

Diluted net income 54.4 30.3 17.4

Diluted net (loss) income $ ( 47.7 ) $ 54.4 $ 30.3

Basic weighted average shares outstanding 40.8 40.3 39.8

3 unchanged sentences

40.8 50.3 41.6

Diluted net income per share attributable to Varex $ 1.08 $ 0.73 $ 0.43

Diluted net (loss) income per share attributable to Varex $ ( 1.17 ) $ 1.08 $ 0.73

Anti-dilutive share summary

Share-based awards and other

Convertible notes 9.6 — —

Warrants 9.6 9.6 —

Total anti-dilutive shares 22.5 12.3 3.0

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

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

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 would have been converted using only share settlement at the beginning of the period, resulting in an additional 9.6 shares outstanding.

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 0 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.

15 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 majority-owned international operations.

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 (loss) income where it will remain until such time that substantial liquidation of the international operations should occur.

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

During 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 loss 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.

9 unchanged sentences

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

Fiscal Year Ended

(In millions)

11 unchanged sentences

Prepaid expenses and other current assets $ 1.0 $ 0.7

Cross currency swap contracts Other assets — 6.3

Cross currency swap contracts Other long-term liabilities $ 8.6 $ 4.9

7 unchanged sentences

Notional Value of Derivatives not Designated as Hedging Instruments:

(In millions of equivalent USD) Sell contracts

(In millions of equivalent USD) Buy Contracts Sell Contracts

Australian Dollar $ — $ 2.6

1 unchanged sentence

Indian Rupee 1.2 —

Japanese Yen 7.8 —

Mexican Peso — 1.6

Swiss Franc 3.7 —

Philippine Peso 6.8 —

Total notional value $ 19.5 $ 56.7

3 unchanged sentences

Current maturities of long-term debt:

Convertible Senior Unsecured Notes $ 45.0 4.8 % $ — $ 45.0

Other debt 1.5 1.5 —

Total current maturities of long-term debt $ 46.5 $ 1.5 $ 45.0

Non-current maturities of long-term debt:

Convertible Senior Unsecured Notes (1)

$ 155.0 4.8 % $ 200.0 4.8 % $ ( 45.0 )

Senior Secured Notes 243.0 8.2 % 243.0 8.2 % —

1 unchanged sentence

Total non-current maturities of long-term debt $ 400.1 $ 446.5 $ ( 46.4 )

$ 446.5 $ 447.6 $ ( 1.1 )

Unamortized issuance costs and debt discounts:

Unamortized discount - Convertible Notes (1)

$ — $ ( 28.7 ) $ 28.7

Unamortized issuance costs - Convertible Notes $ ( 1.0 ) $ ( 2.5 ) $ 1.5

( 2.5 ) ( 3.1 ) 0.6

Debt issuance costs - Senior Secured Notes ( 2.2 ) ( 2.9 ) 0.7

1 unchanged sentence

Total debt outstanding, net $ 443.4 $ 442.6 $ 0.8

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

$ — $ 49.7 $ ( 49.7 )

(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.

(2) Included in additional paid-in capital on the Consolidated Balance Sheets.

(1) This amount has been excluded from current liabilities as it is supported by the Revolving Credit Facility (as defined below) and is expected to remain outstanding for an uninterrupted period extending beyond one year from the balance sheet date.

Future principal payments of long-term debt outstanding as of September 27, 2024 are as follows:

6 unchanged sentences

Twelve Months Ended

September 29, 2023 September 30, 2022 October 1, 2021

September 27, 2024 September 29, 2023 September 30, 2022

Contractual interest coupon and other $ 26.8 $ 26.7 $ 27.6

2 unchanged sentences

Total interest expense $ 30.2 $ 29.3 $ 39.8

Senior Secured Revolving Credit Facility

On March 26, 2024, the Company entered into a senior secured revolving credit agreement (the "Credit Agreement") providing for a senior secured revolving credit facility of up to $ 155.0 million (the “Revolving Credit Facility”).

Simultaneous with its entry into the Revolving Credit Facility, the Company terminated its $ 100.0 million asset-based loan revolving credit facility (the "ABL Facility"), dated as of September 30, 2020.

As of September 27, 2024, the Revolving Credit Facility remains undrawn.

The maximum availability under the Revolving Credit Facility is $ 155.0 million, which is available to the Company for revolving loans in U.S.

dollars and for the issuance of letters of credit.

The Company may make and repay borrowings from time to time until the maturity of the Revolving Credit Facility.

Borrowings under the Revolving Credit Facility will mature, and lending commitments thereunder will terminate, on September 26, 2027.

The interest rate for Revolving Credit Facility borrowings is the Secured Overnight Financing Rate (“SOFR”) (subject to a floor of 0.00 %) plus a margin of 2.00 % to 2.75 %, depending on the consolidated total net leverage ratio of the Company (as defined in the Credit Agreement).

Alternatively, the Company has the option of selecting a base rate equal to the highest of (a) the prime rate, (b) the Federal Funds Rate plus 0.50 % and (c) the one-month SOFR (subject to a floor of 0.00 %) plus a margin of 1.00 %.

An unused commitment fee of 0.375 % per annum was payable from March 26, 2024 until June 28, 2024, and thereafter an unused commitment fee of between 0.30 % to 0.40 % per annum is payable quarterly on the actual daily unused portion of the Revolving Credit Facility, depending on the consolidated total net leverage ratio of the Company.

Debt issuance costs, including unamortized deferred costs for continuing lenders under the previously existing ABL Facility, of $ 2.3 million were capitalized and are included within other assets on the Consolidated Balance Sheets.

These costs are being amortized over the term of the new agreement and are being recorded within interest expense in the Consolidated Statements of Operations.

The Credit Agreement contains customary covenants restricting the Company’s activities, as well as those of its subsidiaries, including limitations on the ability to sell assets, engage in mergers, or other fundamental changes, enter into capital leases or certain leases not in the ordinary course of business, enter into transactions involving related parties or derivatives, incur or prepay indebtedness, grant liens or negative pledges on its assets, make loans or other investments, pay dividends or repurchase stock or other securities, guarantee third-party obligations, engage in sale leasebacks, and make changes in its corporate structure, though there are certain exceptions and carveouts related to these restrictions.

One such covenant involves maintaining compensating cash balances.

The Company must maintain the lesser of an average quarterly balance of $ 80.0 million and 80 % of the U.S.

cash availability in certain deposit accounts;

provided that the amounts maintained must not be less than $ 80.0 million prior to June 30, 2025.

The compensating balances may be withdrawn but the availability of the Revolving Credit Facility is dependent upon maintenance of such compensating balances.

In addition, the Credit Agreement includes financial covenants related to the Company’s consolidated total net leverage ratio and its consolidated fixed charge coverage ratio.

The Company’s obligations under the Revolving Credit Facility are guaranteed by the Company and a number of Company subsidiaries.

These guarantees are secured on a first lien basis by specified assets, including inventory, accounts receivable, cash, intercompany accounts and loans, and certain real property.

In addition, the Revolving Credit Facility is secured by second liens on certain assets securing the Company’s 7.875 % Senior Secured Notes due 2027.

An intercreditor agreement governs how the collateral securing the respective debt obligations will be treated among the secured parties.

Equipment Credit Agreement

On April 26, 2024, the Company entered into a secured delayed draw term loan credit agreement (the “Equipment Credit Agreement”), providing for a secured equipment credit facility of up to $ 20.0 million (the “Equipment Credit Facility”).

As of September 27, 2024, there was no principal balance outstanding under the Equipment Credit Facility.

The maximum availability under the Equipment Credit Facility is $ 20.0 million, available to the Company for delayed draw term loans drawn on or before June 30, 2025, in U.S.

The Company may make and repay borrowings from time to time until the maturity of the Equipment Credit Facility, but once repaid, loans may not be reborrowed.

The Company may make voluntary prepayments of borrowings at any time.

Borrowings under the Equipment Credit Facility will mature on September 26, 2027.

interest rate for borrowings by the Company under the Equipment Credit Facility is the SOFR (subject to a floor of 0.00 %) plus a margin of 2.00 % to 2.75 %, depending on the consolidated total net leverage ratio of the Company.

Alternatively, Equipment Borrowers have the option of selecting a base rate equal to the highest of (a) the prime rate, (b) the Federal Funds Rate plus 0.50 % and (c) SOFR (subject to a floor of 0.00 %) plus a margin of 1.00 %, in each case plus a margin of 1.00 % to 1.75 %, depending on the consolidated total net leverage ratio of the Company.

A commitment fee of 0.375 % per annum was paid from April 26, 2024 until June 28, 2024, and thereafter a commitment fee of between 0.30 % to 0.40 % per annum is payable quarterly on the actual daily unused portion of the Equipment Credit Facility, depending on the consolidated total net leverage ratio of the Company.

The proceeds of the Equipment Credit Facility will be used for purchases of eligible equipment and associated software costs for the Company and its subsidiaries.

The Company’s obligations under the Equipment Credit Agreement are secured by the equipment and associated software financed by the Equipment Credit Facility and are guaranteed by a number of Company subsidiaries on an unsecured basis.

The Equipment Credit Agreement contains customary covenants restricting the Company’s activities, as well as those of its subsidiaries, including limitations on the ability to sell financed equipment or all or substantially all assets, engage in mergers or other fundamental changes, grant liens or negative pledges on financed equipment, make changes in its corporate structure, though there are certain exceptions and carveouts related to these restrictions.

In addition, the Equipment Credit Agreement includes financial covenants related to the Company’s consolidated total net leverage ratio and its consolidated fixed charge coverage ratio.

Convertible Senior Unsecured Notes

5 unchanged sentences

The maximum number of shares issuable upon conversion of the Convertible Notes is 9.6 million.

In accordance with the applicable accounting standards, a short-term debt obligation should be excluded from current liabilities if the entity has both the intent and ability to refinance the obligation on a long-term basis.

The intent and ability can be demonstrated by the issuance of a long-term obligation to refinance the short-term obligation on a long-term basis after the date of an entity’s balance sheet but before that balance sheet is issued.

Due to the entry into the Revolving Credit Facility, the Company classified $ 155.0 million of debt outstanding as of September 27, 2024 as long-term debt, net of current portion.

The remaining principal amount totaling $ 45.0 million is classified as current portion of long-term debt as of September 27, 2024.

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

11 unchanged sentences

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

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.

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 Revolving Credit Facility, in which the Senior Secured Notes will have a second lien security interest.

The Senior Secured Notes include negative covenants, subject to certain exceptions, restricting or limiting Varex's ability and the ability of its restricted subsidiaries to, among other things, incur liens on collateral;

11 unchanged sentences

Asset-Based Loan

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

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

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

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

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

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

The maximum availability under our ABL Facility is $ 100.0 million;

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

As of September 29, 2023, the amount available under our ABL Facility was $ 88.7 million, and the ABL Facility remains undrawn.

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

The ABL Facility contains a minimum Fixed Charge Coverage Ratio of 1.00 to 1.00 that is tested when excess availability under the ABL is less than the greater of (i) 10.0 % of the Loan Cap (the lesser of (a) the aggregate commitments under the ABL Facility and (b) the aggregate borrowing base) and (ii) $ 7.5 million.

As of September 29, 2023, the Company is compliant with the ABL Facility covenants.

The ABL Facility has a first lien security interest on accounts receivable, cash, and inventory as well as certain real estate and holds second lien security interest on all other assets.

On September 30, 2020, the Company entered into a revolving credit agreement consisting of a $ 100.0 million asset-based loan revolving credit facility.

On March 26, 2024, the Company terminated the ABL Facility and recognized $ 0.6 million of the remaining unamortized issuance costs in interest expense in the Consolidated Statements of Operations, which excludes costs related to lenders that continued under the Revolving Credit Facility.

There was no principal balance outstanding under the ABL Facility when it was terminated.

BUSINESS COMBINATIONS

As of September 29, 2023, the Company, through two of its consolidated subsidiaries, Varex Imaging Deutschland AG and MeVis Medical Solutions AG ("MeVis Medical"), held a combined ownership interest in MeVis BreastCare GmbH and MeVis BreastCare Gmbh & Co KG (referred to in combination as "MeVis Breastcare") of 37.6 %.

Because the Company had the ability to exercise significant influence in, but not control, over MeVis Breastcare, it was historically accounted for as an equity method investment.

During the first quarter of fiscal year 2024, the Company increased its ownership in MeVis Breastcare to 87.1 % for a purchase price of $ 0.9 million, resulting in the Company now holding a controlling interest in MeVis Breastcare.

The purchase of this additional ownership interest was accounted for as a business combination achieved in stages, or step acquisition.

As a result, the previously held equity interest was remeasured to its acquisition-date fair value, with a gain of $ 0.9 million recognized in Other expense, net in the Consolidated Statements of Operations.

The assets and liabilities of MeVis Breastcare were then recorded on the Company's balance sheet at their fair values in accordance with ASC 805, and a gain on bargain purchase of $ 1.2 million was recorded during the first quarter of fiscal year 2024 in Other expense, net in the Consolidated Statements of Operations.

Because the purchase price did not give consideration to the other assets of the business, the fair value of the ownership interest acquired exceeded the price paid to the third party partial owner and this resulted in a gain on bargain purchase.

The following table summarizes the consideration paid for MeVis Breastcare and the amounts of the assets acquired and liabilities assumed recognized at their estimated acquisition date fair values, as well as the estimated fair value at the acquisition date of the noncontrolling interest in MeVis Breastcare.

(in millions)

Consideration paid

Fair value of total consideration transferred 0.9

Remeasurement of previous equity interest

Carrying value of previous equity interest before acquisition 1.1

Fair value of previous equity interest at acquisition date 2.0

Remeasurement gain recorded on previous equity interest 0.9

Total of consideration paid and fair value of previous equity interest $ 2.9

Recognized amounts of identifiable assets acquired and liabilities assumed

Cash and cash equivalents $ 1.8

Accounts receivable, net 1.2

Intangible assets, net 2.6

Accounts payable ( 0.1 )

Accrued liabilities and other current liabilities ( 0.6 )

Other long-term liabilities ( 0.1 )

Total identifiable net assets 4.8

Noncontrolling interest in MeVis Breastcare ( 0.7 )

Bargain purchase gain ( 1.2 )

Assets/Liabilities Measured at Fair Value on a Recurring Basis

11 unchanged sentences

Money market funds $ — $ 24.4 $ — $ 24.4

Commercial paper — 6.0 — 6.0

Corporate notes/bonds — 16.5 — 16.5

1 unchanged sentence

US treasury bills — 6.1 — 6.1

Certificates of deposit — 0.9 — 0.9

Derivative assets

25 unchanged sentences

Nonrecurring Fair Value Measurements

In the fourth quarter of fiscal year 2023, the Company assessed its equity method investment in dpiX Holding for impairment and concluded that the carrying value of the investment was greater than its fair value.

In fiscal year 2023, the Company assessed its equity method investment in dpiX Holding for impairment and concluded that the carrying value of the investment was greater than its fair value.

The nonrecurring fair value measurements used by the Company to impair its equity method investment in dpiX Holding was calculated by equal weighting of the income approach based on estimated discounted future cash flows and the market approach based on comparable publicly traded companies in similar lines of businesses.

4 unchanged sentences

Marketable Debt Securities

The following is a summary of marketable debt securities, which are included within the cash and cash equivalents, prepaid expenses and other current assets, and other assets balances on the Consolidated Balance Sheets.

The following is a summary of marketable debt securities, which are included within the cash and cash equivalents, marketable securities, and other assets balances on the Consolidated Balance Sheets.

September 27, 2024

(In millions) Amortized Costs Unrealized Losses Fair Value

Commercial paper $ 6.0 $ — $ 6.0

(In millions) Amortized Costs Unrealized Gains Fair Value

Corporate notes/bonds $ 16.4 $ 0.1 $ 16.5

1 unchanged sentence

Government agencies 18.3 — 18.3

Certificates of deposit 0.9 — 0.9

Total marketable debt securities $ 41.7 $ 0.1 $ 41.8

1 unchanged sentence

September 29, 2023

(In millions) Amortized Costs Unrealized Losses Fair Value

(In millions) Amortized Costs Fair Value

Commercial paper $ 6.0 $ 6.0

11 unchanged sentences

Total marketable debt securities $ 41.7 $ 41.8

During the twelve months ended September 29, 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.

During the twelve months ended September 27, 2024, 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.

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

September 27, 2024

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

(In millions) Commercial Paper Corporate Notes/Bonds Government Agencies Treasury Bills Certificates of Deposit Total

Cash and cash equivalents $ — $ — $ — $ 1.0 $ — $ 1.0

Prepaid expenses and other current assets — 8.3 6.6 26.4 41.3

Marketable securities — 10.5 16.3 4.1 0.9 31.8

Other assets — 6.0 2.0 1.0 — 9.0

Total marketable debt securities $ — $ 16.5 $ 18.3 $ 6.1 $ 0.9 $ 41.8

2 unchanged sentences

Cash and cash equivalents $ 6.0 $ — $ — $ 2.2 $ 8.2

Prepaid expenses and other current assets 5.9 1.9 0.3 6.4 14.5

Other assets — 1.7 — 0.5 2.2

Marketable securities — 8.3 6.6 26.4 41.3

Total marketable debt securities $ 6.0 $ 8.3 $ 6.6 $ 28.6 $ 49.5

3 unchanged sentences

Balance at September 29, 2023 $ 171.5 $ 117.0 $ 288.5

Business combination

Foreign currency translation adjustments

Balance at September 27, 2024 $ 173.0 $ 118.0 $ 291.0

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 Consolidated Balance Sheets:

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

September 27, 2024 September 29, 2023

23 unchanged sentences

The Company has an environmental liability of approximately $ 3.9 million as of September 27, 2024.

See Note 1, Summary of Significant Accounting Policies, included in the accompanying Notes to Consolidated Financial Statements for additional information.

See Note 1, Summary of Significant Accounting Policies, included in the accompanying Notes to the Consolidated Financial Statements for additional information.

In fiscal year 2022, the Company entered into several agreements with a third-party company, whose stock is publicly traded on a foreign exchange.

Under these agreements, the Company will make certain milestone payments of up to $ 5 million upon achievement of specified milestones.

During fiscal years 2022 and 2023, the Company paid $ 1 million and $ 2 million, respectively, to the third-party company, which was recorded in research and development in the Consolidated Statements of Operations.

The remaining milestones are expected to be achieved in fiscal year 2024.

During fiscal years 2022, 2023 and 2024, the Company paid $ 1 million, $ 2 million, and $ 1 million respectively, to the third-party company, which was recorded in research and development in the Consolidated Statements of Operations.

The remaining milestone was achieved and paid in the first quarter of fiscal year 2025.

The Company enters into purchase agreements with its suppliers in the ordinary course of its business for the purchase of goods and services.

21 unchanged sentences

(In millions) Noncontrolling

Interests Noncontrolling Interest

Interests Noncontrolling Interests

Balance at beginning of period $ 13.3 $ 13.3

Net income attributable to noncontrolling interests 0.5 0.5

Business acquisitions 0.7 —

Other, including foreign currency remeasurement ( 0.4 ) ( 0.5 )

2 unchanged sentences

Employee Stock Plans

Certain of the Company's employees participate in the Varex Imaging Corporation 2020 Omnibus Stock Plan (the “2020 Stock Plan”), the 2017 Omnibus Stock Plan (the “2017 Stock Plan”), and the Varex Imaging Corporation 2017 Employee Stock Purchase Plan (the “2017 ESPP”) which allow the grants of stock options, restricted stock units and performance shares among other types of awards to eligible employees.

Certain of the Company's employees participate in the Varex Imaging Corporation 2020 Omnibus Stock Plan, as Amended and Restated (the “2020 Stock Plan”), the 2017 Omnibus Stock Plan (the “2017 Stock Plan”), and the Varex Imaging Corporation 2017 Employee Stock Purchase Plan (the “2017 ESPP”) which allow the grants of stock options, restricted stock units and performance shares among other types of awards to eligible employees.

In January 2017, Varex stockholders approved the 2017 ESPP, which provides eligible employees with an opportunity to purchase shares of Varex common stock at 85 % of the lower of its fair market value at the start and end of a six-month purchase period.

16 unchanged sentences

The Company utilized the Black-Scholes valuation model for estimating the fair value of stock options granted and the option component of ESPP grants.

The Company calculated the fair value of option grants and option component of ESPP grants on the respective dates of grant using the following weighted average assumptions:

The Company calculated the fair value of option grants and the option component of ESPP grants on the respective dates of grant using the following weighted average assumptions:

Employee Stock Option Plan

16 unchanged sentences

Expected Term

Options granted generally vest over a period of 36 to 48 months and expire 7 to 10 years from date of grant.

Employee stock purchase plan offering periods are typically 6 months and provides eligible employees with an opportunity to purchase shares of Varex common stock at 85 % of the lower of its fair market value at the start or end of a six-month purchase period.

Options granted generally vest over a period of 48 months and expire 7 to 10 years from the date of grant.

Employee stock purchase plan offering periods are typically 6 months and provide eligible employees with an opportunity to purchase shares of Varex common stock at 85 % of the lower of its fair market value at the start or end of a six-month purchase period.

The Company has elected to use the simplified method in calculating the expected term of its options due to a lack of sufficient historical information.

4 unchanged sentences

Authoritative accounting guidance on stock-based compensation indicates that companies should consider volatility over a period generally commensurate with the expected or contractual term of the stock option.

Adequate Company-specific data does not exist for this time period as the Company began trading in January 2017.

The volatility variable used is a blended approach by using the Company's historic data for the years it has been publicly traded and a benchmark of other comparable companies’ volatility rates for the prior years.

The expected volatility is based on the historical volatility of the Company's common stock.

Stock Option Activity

10 unchanged sentences

( 782 ) $ 31.08 - $ 34.13

( 13 ) $ 13.61 - $ 13.61

Outstanding at September 27, 2024 2,097 $ 13.61 - $ 37.60

4 unchanged sentences

The grant-date fair value of options granted during fiscal years 2024, 2023 and 2022 was $ 0.1 million, $ 4.0 million and $ 3.9 million, respectively.

The total intrinsic value of the options exercised during the years ended September 29, 2023, September 30, 2022 and October 1, 2021 was $ 0.1 million, $ 0.5 million and $ 0.0 million , respectively.

Restricted Stock Units, Restricted Stock Awards and Deferred Stock Units

The following table summarizes the activity for restricted stock units, restricted stock awards and deferred stock units under the 2020 Stock Plan:

The total intrinsic value of the options exercised during the years ended September 27, 2024, September 29, 2023 and September 30, 2022 was $ 0.0 million , $ 0.1 million and $ 0.5 million, respectively.

Restricted Stock Units, Performance Stock Units, Restricted Stock Awards and Deferred Stock Units

During the fiscal year 2024, the Company issued performance stock units ("PSUs") to certain officers and key employees in connection with our long-term incentive program.

Each PSU represents the right to receive one share of our common stock, provided that the applicable performance and vesting conditions are satisfied.

The following table summarizes the activity for restricted stock units, performance stock units, restricted stock awards and deferred stock units under the 2020 Stock Plan:

(In thousands, except per share amounts)

7 unchanged sentences

The total grant-date fair value of shares granted was $ 17.2 million, $ 11.3 million and $ 10.8 million for fiscal years 2024, 2023 and 2022, respectively.

Shares outstanding at September 29, 2023, September 30, 2022 and October 1, 2021 had an estimated market value of $ 24.0 million, $ 22.1 million and $ 30.9 million, respectively.

Shares outstanding at September 27, 2024, September 29, 2023 and September 30, 2022 had an estimated market value of $ 20.0 million, $ 24.0 million and $ 22.1 million, respectively.

TAXES ON INCOME

3 unchanged sentences

Valuation allowances are recognized to reduce deferred tax assets to the amount that is more likely than not to be realized.

Income tax (benefit) expense was as follows:

Income tax expense (benefit) was as follows:

(In millions) 2024 2023 2022

12 unchanged sentences

37.3 ( 40.1 ) ( 0.5 )

Income tax (benefit) expense $ ( 17.4 ) $ 13.7 $ 10.7

Income tax expense (benefit) $ 52.2 $ ( 17.4 ) $ 13.7

Income before taxes are generated from the following geographic areas:

13 unchanged sentences

( 41.9 ) ( 8.4 ) ( 0.9 )

Prior year research and development credit — — ( 0.3 )

Foreign rate difference ( 1.6 ) 6.3 6.5

Foreign research innovation box — — ( 3.8 )

Share-based compensation 43.6 3.8 1.0

Change in valuation allowance 1,101.1 ( 65.7 ) 6.3

tax reform - international provisions ( 32.0 ) ( 9.2 ) ( 4.6 )

net operating loss carryback — — 5.2

Other ( 7.5 ) 1.0 3.9

2 unchanged sentences

During fiscal year 2024, the Company's effective tax rate varied from the U.S.

federal statutory rate of 21% primarily due to the unfavorable impact of U.S.

deferred tax attributes and losses in certain foreign jurisdictions for which a valuation allowance is provided, as well as profit in foreign jurisdictions with statutory tax rates greater than 21%.

These unfavorable items were partially offset by the favorable impact of U.S.

tax reform regarding international provision, R&D credits, and return to provision adjustments.

During fiscal year 2023, the Company’s effective tax rate varied from the U.S.

federal statutory rate of 21% primarily due to the favorable impact of the release of the U.S.

7 unchanged sentences

tax reform international provisions, return to provision adjustments, and R&D tax credits.

During fiscal year 2021, the Company’s effective tax rate varied from the U.S.

federal statutory rate of 21% primarily because of the unfavorable impact of U.S.

deferred tax attributes and losses in certain foreign jurisdictions for which a valuation allowance is provided and a reduction in benefit for U.S.

net operating losses carried back to prior years.

These unfavorable items are partially offset by the favorable impact of R&D tax credits and U.S.

tax reform international provisions.

The Company has estimated its fiscal year 2024 GILTI (global intangible low-taxed income), BEAT (base-erosion anti-abuse tax), FDII (foreign-derived intangible income), limitations on interest expense deductions, and other components of U.S.

14 unchanged sentences

Deferred financing fees 2.5 5.7

Interest expense limitation — 3.9

Capitalized interest 1.1 1.1

2 unchanged sentences

Research and experimentation capitalization 30.8 17.6

Other 4.1 2.5

Royalty advance 6.6 —

Other DTA 3.9 4.1

$ 97.5 $ 80.2

4 unchanged sentences

Property, plant and equipment ( 7.1 ) ( 8.0 )

Investments in privately held companies — ( 1.4 )

Operating lease assets ( 7.3 ) ( 6.0 )

Other ( 0.9 ) ( 1.3 )

Other DTL ( 1.2 ) ( 0.9 )

Total deferred tax liabilities ( 19.5 ) ( 20.2 )

3 unchanged sentences

Net deferred tax assets $ 3.3 $ 41.3

The Company is maintaining its reinvestment assertion with respect to foreign earnings for the year ended September 29, 2023, 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.

The Company is maintaining its reinvestment assertion with respect to foreign earnings for the year ended September 27, 2024, which is that all earnings prior to fiscal year 2018 are permanently reinvested for all countries, and that all earnings for Varex Imaging Sweden and Oy Varex Imaging 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.

2 unchanged sentences

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

As of September 29, 2023, the Company had foreign net operating loss carryforwards ("NOL") of approximately $ 19.3 million with $ 0.8 million expiring between 2023 and 2034 and $ 18.5 million carried forward indefinitely.

The valuation allowance relates primarily to net operating losses in certain foreign jurisdictions and other deferred tax attributes where, based on the weight of available evidence, it is more likely than not that the tax benefit will not be realized.

The valuation allowance decreased by $ 13.5 million during fiscal year 2023 and increased by $ 2.0 million during fiscal year 2022.

The decrease during the current year was primarily related to the release of the valuation allowance against U.S.

deferred tax attributes.

As of September 27, 2024, the Company had foreign net operating loss carryforwards ("NOL") of approximately $ 18.9 million carried forward indefinitely.

A valuation allowance is provided if it is more likely than not that some or all of the deferred tax assets will not be realized.

Also, net operating loss carryforwards in jurisdictions with current losses provide uncertainty for realization.

As of September 27, 2024, based on the Company’s assessment of the realizability of net deferred tax assets, it reached the conclusion that it was more likely than not that the U.S.

federal deferred tax assets are not realizable.

As a result, a valuation allowance was placed against all of

federal deferred tax assets.

The Company continues to maintain a valuation allowance against U.S.

state R&D credit carryforwards and increased its valuation allowance against state net operating losses.

The Company also maintains full valuation allowances against the net deferred tax assets in Sweden, the United Kingdom, and Saudi Arabia, due to recent historical losses and the uncertainty of future taxable income to realize those net operating losses.

The valuation allowance increased by $ 56.0 million during fiscal year 2024 and decreased by $ 13.5 million during fiscal year 2023.

Changes in the Company's valuation allowance for deferred tax assets were as follows:

10 unchanged sentences

Unrecognized tax benefits balance–beginning of fiscal year $ 1.4 $ 1.2

Additions based on tax positions related to a prior year — 0.1

Additions based on tax positions related to the current year 0.2 0.2

4 unchanged sentences

For the year ended September 29, 2023, $ 0.2 million interest and penalties have been included for this period.

For the year ended October 1, 2021, $ 0.2 million interest and penalties have been included for this period.

For the year ended September 30, 2022, $ 0.2 million interest and penalties have been included for this period.

The Company files U.S.

4 unchanged sentences

Generally, periods prior to 2014 are no longer subject to examination.

During fiscal year 2021, the New York Department of Finance and Taxation and the Utah State Tax Commission commenced examinations of Varex’s tax returns for the years 2017, 2018, and 2019, which were closed as of September 29, 2023 with no significant adjustments.

SEGMENT INFORMATION

1 unchanged sentence

Medical and Industrial, which aligns with how its CEO, who is the Company's Chief Operating Decision Maker (“CODM”), reviews the Company’s performance.

The segments align the Company’s products and service offerings with customer use in medical and industrial markets and are consistent with how the Company’s CEO evaluates the business for the allocation of resources.

The segments align the Company’s products and service offerings with customer use in medical and industrial and are consistent with how the Company’s CEO evaluates the business for the allocation of resources.

The CODM allocates resources to and evaluates the financial performance of each operating segment primarily based on revenues and gross profit.

3 unchanged sentences

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

The Industrial segment designs, develops, manufactures, sells and services X-ray imaging products for use in a number of markets, including security applications for cargo screening at ports and borders and baggage screening at airports, and nondestructive testing, irradiation, and inspection applications used in a number of other vertical markets.

The Industrial segment designs, develops, manufactures, sells and services X-ray imaging products for use in a number of applications, including security applications for cargo screening at ports and borders, baggage screening at airports, and nondestructive testing, irradiation, and inspection applications used in a number of other verticals.

The Company's industrial products include Linatron® X-ray linear accelerators, X-ray tubes, digital detectors, high voltage connectors, and coolers.

17 unchanged sentences

Income before taxes 5.0 31.3 44.5

Income tax (benefit) expense ( 17.4 ) 13.7 10.7

Net income 48.7 30.8 17.9

Income tax expense (benefit) 52.2 ( 17.4 ) 13.7

Net (loss) income ( 47.2 ) 48.7 30.8

Net income attributable to noncontrolling interests 0.5 0.5 0.5

Net income attributable to Varex $ 48.2 $ 30.3 $ 17.4

Net (loss) income attributable to Varex $ ( 47.7 ) $ 48.2 $ 30.3

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

16 unchanged sentences

Varex’s 401(k) plan is intended to be qualified under Section 401(a) of the Code with the 401(k) plan’s related trust intended to be tax exempt under Section 501(a) of the Code and intended for all full-time employees in the United States.

This plan allows employees to contribute a portion of their pretax salary up to the maximum dollar limitation prescribed by the Internal Revenue Service.

This plan allows employees to contribute a portion of their pretax salary up to the maximum dollar limitation prescribed by the Internal Revenue

The Company made matching contributions to the plan totaling $ 4.6 million, $ 4.9 million and $ 4.4 million in fiscal years 2024, 2023 and 2022, respectively.

2 unchanged sentences

The Company’s net periodic benefit costs for the Company’s defined benefit plans were not material for fiscal years 2024, 2023, and 2022.

ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

ACCUMULATED OTHER COMPREHENSIVE LOSS

The following tables present the changes in the accumulated balances for each component of other comprehensive (loss) income:

(In millions) (Loss) Income on Forward Contracts Unrealized (Loss) Gain on Defined Benefit Obligations CTA, Including Impact of Net Investment Hedge Unrealized (Loss) Income on Available-For-Sale Securities Accumulated Other Comprehensive Income (Loss)

Balance at October 01, 2021 $ — $ ( 0.8 ) $ 0.8 $ — $ —

(In millions) (Loss) Income on Forward Contracts Unrealized Gain (Loss) on Defined Benefit Obligations CTA, Including Impact of Net Investment Hedge Unrealized (Loss) Income on Available-For-Sale Securities Accumulated Other Comprehensive Income (Loss)

Balance at September 30, 2022 $ ( 0.6 ) $ 0.6 $ 0.2 $ ( 0.1 ) $ 0.1

Other comprehensive (loss) income before reclassifications

— ( 1.2 ) ( 4.4 ) — ( 5.6 )

Adjustments reclassified out of accumulated other comprehensive loss 0.1 — — 0.1 0.2

Income tax impact

5 unchanged sentences

— — ( 3.9 ) 0.1 ( 3.8 )

Income tax impact

— 0.2 — — 0.2

Adjustments reclassified out of accumulated other comprehensive loss 0.1 — — — 0.1

Foreign currency translation adjustment

2 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-K

Item 9A. Controls and Procedures