Varex Imaging Corp

Previous wording

Statements concerning supply chain and logistics challenges; cost increases and expense management; changes in U.S. and worldwide economic conditions, such as the impact of inflation, and fluctuations in foreign currency exchange rates; geopolitical tensions; industry or market segment outlook; market acceptance of or transition to new products or technologies such as advanced X-ray tube and digital flat panel detector products; growth drivers; future orders, revenues, backlog, earnings or other financial results; and any statements using the terms “believe,” “expect,” “anticipate,” “can,” “should,” “would,” “could,” “estimate,” “may,” “intend,” “potential,” and “possible” or similar statements are forward-looking statements that involve risks and uncertainties that could cause our actual results and the outcome and timing of certain events to differ materially from those projected or management’s current expectations.

Current wording

Statements concerning supply chain and logistics challenges; cost increases and expense management; changes in U.S. and worldwide economic conditions, such as the impact of inflation, and fluctuations in foreign currency exchange rates; geopolitical tensions; including concerns and uncertainty surrounding the outcome of the elections in the United States in 2024 and possible legislative, tariffs, and policy reforms resulting therefrom; industry or market segment outlook; market acceptance of or transition to new products or technologies such as advanced X-ray tube and digital flat panel detector products; growth drivers; future orders, revenues, market share, backlog, earnings or other financial results; and any statements using the terms “believe,” “expect,” “anticipate,” “can,” “should,” “would,” “could,” “estimate,” “may,” “intend,” “potential,” and “possible” or similar statements are forward-looking statements that involve risks and uncertainties that could cause our actual results and the outcome and timing of certain events to differ materially from those projected or management’s current expectations.

Previous wording

The fiscal years of the Company as reported are the 52 or 53-week periods ending on the Friday nearest September 30. Fiscal year 2024 is the 52-week period ending September 27, 2024. Fiscal year 2023 was the 52-week period that ended on September 29, 2023. The fiscal quarters ended March 29, 2024 and March 31, 2023 were both 13-week periods. The two fiscal periods ended March 29, 2024 and March 31, 2023 were both 26-week periods.

Current wording

The fiscal years of the Company as reported are the 52 or 53-week periods ending on the Friday nearest September 30. Fiscal year 2024 is the 52-week period ending September 27, 2024. Fiscal year 2023 was the 52-week period that ended on September 29, 2023. The fiscal quarters ended June 28, 2024 and June 30, 2023 were both 13-week periods. The nine-month fiscal periods ended June 28, 2024 and June 30, 2023 were both 39-week periods.

Previous wording

Medical revenues decreased $45.5 million, primarily due to decreased sales of radiographic, dental, fluoroscopic, and oncology, partially offset by increased sales in mammography.

Current wording

Medical revenues decreased $26.8 million, primarily due to decreased sales of dental, mammography, oncology, and fluoroscopic, partially offset by increased sales in CT and radiographic.

Previous wording

Industrial revenues increased $3.3 million, primarily due to increased sales of security inspection products, partially offset by decreased sales of digital detectors.

Current wording

Industrial revenues increased $3.7 million, primarily due to increased sales of security inspection products, partially offset by decreased sales of digital detectors.

Previous wording

The Industrial segment gross profit remained flat, even though Industrial revenues increased by 6.1%, primarily due to an unfavorable shift in product sales mix.

Current wording

The Industrial segment gross profit decreased, even though Industrial revenues increased by 6.5%, primarily due to an unfavorable shift in product sales mix.

Previous wording

We are committed to investing in the business to support long-term growth and believe long-term research and development expenses of approximately 8% to 10% of annual revenues is the appropriate range that will allow us to innovate and bring new products to market for our global OEM customers. Research and development costs increased to 11.0% of revenues for the second quarter of fiscal year 2024, primarily due to decreased sales.

Current wording

We are committed to investing in the business to support long-term growth and believe long-term research and development expenses of approximately 8% to 10% of annual revenues is the appropriate range that will allow us to innovate and bring new products to market for our global OEM customers. Research and development costs increased to 10.5% of revenues for the third quarter of fiscal year 2024, due to increased costs and decreased sales.

Previous wording

Selling, general, and administrative expenses for the second quarter of fiscal year 2024 increased $1.4 million, primarily due to increased fixed cost commitments to a supplier and increased litigation costs.

Current wording

Selling, general, and administrative expenses for the third quarter of fiscal year 2024 increased $3.5 million, primarily due to increased fixed cost commitments to a supplier, increased litigation costs, and increased environmental remediation costs.

Previous wording

Other income (expense), net increased due to gains in certain investments in privately-held companies and equity investments, partially offset by increased foreign exchange expense.

Current wording

Other expense, net increased due to increased losses in certain investments in privately-held companies and equity investments, partially offset by decreased foreign exchange expense.

Previous wording

For the three months ended March 29, 2024, we recognized income tax expense of $0.7 million on $2.3 million of pre-tax income. For the three months ended March 31, 2023, we recognized income tax expense of $3.5 million on $7.8 million of pre-tax income. Our tax expense for the three months ended March 29, 2024 decreased, primarily due to decreased pre-tax income in certain jurisdictions, partially offset by losses in certain foreign jurisdictions for which no benefit can be recorded.

Current wording

For the three months ended June 28, 2024, we recognized income tax benefit of $0.7 million on $0.8 million of pre-tax income. For the three months ended June 30, 2023, we recognized income tax expense of $7.9 million on $17.1 million of pre-tax income. Our tax expense decreased for the three months ended June 28, 2024, primarily due to decreased pre-tax income in certain jurisdictions and favorable impacts of international tax provisions and tax credits in the U.S., partially offset by losses in certain foreign jurisdictions for which no benefit can be recorded.

Previous wording

Discussion of Results of Operations for the Six Months Ended March 29, 2024 Compared to the Six Months Ended March 31, 2023

Current wording

Discussion of Results of Operations for the Nine Months Ended June 28, 2024 Compared to the Nine Months Ended June 30, 2023

Previous wording

Medical revenues decreased $25.3 million, primarily due to decreased sales of radiographic and dental, partially offset by increased sales in CT.

Current wording

Medical revenues decreased $72.3 million, primarily due to decreased sales of dental, fluoroscopic, oncology, and CT, partially offset by increased sales in mammography.

Previous wording

Industrial revenues increased $7.9 million, primarily due to increased sales of security inspection products, partially offset by decreased sales of digital detectors.

Current wording

Industrial revenues increased $11.6 million, primarily due to increased sales of security inspection products and x-ray tubes, partially offset by decreased sales of digital detectors.

Previous wording

We are committed to investing in the business to support long-term growth and believe long-term research and development expenses of approximately 8% to 10% of annual revenues is the appropriate range that will allow us to innovate and bring new products to market for our global OEM customers. Research and development costs increased to 10.9% of total revenues primarily due to decreased sales.

Current wording

Research and development costs increased to 10.8% of total revenues primarily due to increased costs and decreased sales.

Previous wording

Selling, general, and administrative expenses for the six months ended March 29, 2024 increased to 17.1% of total revenues primarily due to increased fixed cost commitments to a supplier, increased litigation costs, and increased severance costs.

Current wording

Selling, general, and administrative expenses for the nine months ended June 28, 2024 increased to 17.1% of total revenues primarily due to increased fixed cost commitments to a supplier, increased litigation costs, and increased severance costs.

Previous wording

Interest expense increased during the six months ended March 29, 2024 primarily due to the termination of the ABL facility which resulted in the recognition of $0.6 million of the remaining unamortized deferred issuance costs.

Current wording

Interest expense increased during the nine months ended June 28, 2024 primarily due to the termination of the ABL facility which resulted in the recognition of $0.6 million of the remaining unamortized deferred issuance costs.

Previous wording

During the six months ended March 29, 2024, we realized Other income (expense), net of $1.3 million compared to Other income (expense), net of $(1.8) million during the six months ended March 31, 2023, primarily due to a gain on business acquisition and decreased losses in certain investments in privately-held companies and equity investments, partially offset by increased foreign exchange expense.

Current wording

During the nine months ended June 28, 2024, we realized Other expense, net of $1.6 million compared to Other expense, net of $2.5 million during the nine months ended June 30, 2023, primarily due to a gain on business acquisition and decreased losses in certain investments in privately-held companies and equity investments, partially offset by increased foreign exchange expense.

Previous wording

For the six months ended March 29, 2024, we recognized an income tax expense of $0.5 million on $1.7 million of pre-tax income. For the six months ended March 31, 2023, the Company recognized income tax expense of $5.7 million on $13.2 million of pre-tax income. Our tax expense for the six months ended March 29, 2024 decreased, primarily due to decreased pre-tax income in certain jurisdictions, partially offset by losses in certain foreign jurisdictions for which no benefit can be recorded.

Current wording

For the nine months ended June 28, 2024, we recognized an income tax benefit of $0.2 million on $2.5 million of pre-tax income. For the nine months ended June 30, 2023, the Company recognized income tax expense of $13.6 million on $30.3 million of pre-tax income. Our tax expense decreased for the nine months ended June 28, 2024, primarily due to decreased pre-tax income in certain jurisdictions and favorable impacts of international tax provisions and tax credits in the U.S., partially offset by losses in certain foreign jurisdictions for which no benefit can be recorded.

Previous wording

We assess our liquidity in terms of our ability to generate cash to fund our operations, including working capital and investing activities. We believe that our operating cash flow, cash on our balance sheet, availability under our Revolving Credit Facility, and our ability to access the credit and capital markets are sufficient to meet our anticipated operating activities and cash commitments for at least the next 12 months and will be sufficient to allow us to continue to invest in our existing businesses, consummate strategic acquisitions, and manage our capital structure on a short-term and long-term basis. We are currently not aware of any trends or demands, commitments, events, or uncertainties that will result in or that are reasonably likely to result in a material change to our liquidity needs during or beyond the next 12 months, except our Convertible Notes that become due in June 2025 that we currently anticipate refinancing using some combination of future borrowings under our Revolving Credit Facility and cash. The availability under our Revolving Credit Facility is $155.0 million. As of March 29, 2024, our Revolving Credit Facility remains undrawn. At March 29, 2024, we had total debt of $442.9 million, net of deferred issuance costs of $4.4 million.

Current wording

We assess our liquidity in terms of our ability to generate cash to fund our operations, including working capital and investing activities. We believe that our operating cash flow, cash on our balance sheet, availability under our Revolving Credit Facility and Equipment Credit Facility, and our ability to access the credit and capital markets are sufficient to meet our anticipated operating activities and cash commitments for at least the next 12 months and will be sufficient to allow us to continue to invest in our existing businesses, consummate strategic acquisitions, and manage our capital structure on a short-term and long-term basis. We are currently not aware of any trends or demands, commitments, events, or uncertainties that will result in or that are reasonably likely to result in a material change to our liquidity needs during or beyond the next 12 months, except our Convertible Notes that become due in June 2025 that we currently anticipate refinancing using some combination of future borrowings under our Revolving Credit Facility and cash. The availability under our Revolving Credit Facility and Equipment Credit Facility is $155.0 million and $20.0 million, respectively. As of June 28, 2024, our Revolving Credit Facility and Equipment Credit Facility remain undrawn. At June 28, 2024, we had total debt of $443.1 million, net of deferred issuance costs of $3.7 million.

Previous wording

Net cash provided by operating activities. Net cash provided by operating activities was $13.4 million and $23.6 million for the six months ended March 29, 2024 and March 31, 2023, respectively. The decrease in cash provided by operating activities was primarily due to increased cash outflows related to accrued liabilities and other current and long-term liabilities and a decrease in non-cash adjustments to income when compared to the six months ended March 31, 2023, partially offset by reduced cash outflows related to accounts payable.

Current wording

Net cash provided by operating activities. Net cash provided by operating activities was $21.4 million and $61.3 million for the nine months ended June 28, 2024 and June 30, 2023, respectively. The decrease in cash provided by operating activities was primarily due to decreased non-cash adjustments, and increased cash outflows related to inventories and accrued liabilities and other current and long-term liabilities when compared to the nine months ended June 30, 2023, partially offset by reduced cash outflows related to accounts payable.

Previous wording

Net cash used in investing activities. Net cash used in investing activities was $21.2 million and $7.5 million for the six months ended March 29, 2024 and March 31, 2023, respectively. The increase in cash used in investing activities was primarily due to increased purchases of property, plant, and equipment and increased purchases of marketable debt securities, during the six months ended March 29, 2024, partially offset by the settlement of net investment hedges in the prior year.

Current wording

Net cash used in investing activities. Net cash used in investing activities was $13.5 million and $30.3 million for the nine months ended June 28, 2024 and June 30, 2023, respectively. The decrease in cash used in investing activities was primarily due to increased proceeds from maturities of marketable securities, during the nine months ended June 28, 2024, partially offset by decreased purchases of property, plant, and equipment and the settlement of net investment hedges in the prior year.

Previous wording

Net cash used in financing activities. Net cash used in financing activities was $3.0 million and $0.9 million for the six months ended March 29, 2024 and March 31, 2023, respectively. The increase in cash used in financing activities was primarily due to increased cash payments related to debt issuance costs and taxes for net share settlement of equity awards for the six months ended March 31, 2023.

Current wording

Net cash used in financing activities. Net cash used in financing activities was $4.1 million and $1.6 million for the nine months ended June 28, 2024 and June 30, 2023, respectively. The increase in cash used in financing activities was primarily due to increased cash payments related to debt issuance costs and taxes for net share settlement of equity awards for the nine months ended June 30, 2023.

Previous wording

In October 2013, we entered into an amended agreement with dpiX and other parties that, among other things, provides us with the right to 50% of dpiX’s total manufacturing capacity produced after January 1, 2014. The amended agreement requires us to pay for 50% of the fixed costs (as defined in the amended agreement), as determined at the beginning of each calendar year. In January 2024, the Company's fixed cost commitment was determined to be $12.4 million for calendar year 2024. As of March 29, 2024, the Company estimated it has $9.4 million related to this fixed cost commitment remaining for calendar year 2024. The amended agreement will continue unless the ownership structure of dpiX changes (as defined in the amended agreement).

Current wording

In October 2013, we entered into an amended agreement with dpiX and other parties that, among other things, provides us with the right to 50% of dpiX’s total manufacturing capacity produced after January 1, 2014. The amended agreement requires us to pay for 50% of the fixed costs (as defined in the amended agreement), as determined at the beginning of each calendar year. In January 2024, the Company's fixed cost commitment was determined to be $12.4 million for calendar year 2024. As of June 28, 2024, the Company estimated it has $6.2 million related to this fixed cost commitment remaining for calendar year 2024. The amended agreement will continue unless the ownership structure of dpiX changes (as defined in the amended agreement).

Previous wording

The Company enters into purchase agreements with its suppliers in the ordinary course of its business for the purchase of goods and services. Some of these purchase agreements are non-cancellable and thus contractually obligate the Company to future cash payments. As of March 29, 2024, our non-cancellable supplier purchase obligations totaled $7.7 million.

Current wording

The Company enters into purchase agreements with its suppliers in the ordinary course of its business for the purchase of goods and services. Some of these purchase agreements are non-cancellable and thus contractually obligate the Company to future cash payments. As of June 28, 2024, our non-cancellable supplier purchase obligations totaled $7.0 million.

Previous wording

Trade accounts receivable days sales outstanding (“DSO”) was 67 days at March 29, 2024 and 65 days at September 29, 2023. Our accounts receivable and DSO are impacted by a number of factors, including the timing of product shipments, collections performance, payment terms, the mix of revenues from different regions and the effects of economic instability.

Current wording

Trade accounts receivable days sales outstanding (“DSO”) was 66 days at June 28, 2024 and 65 days at September 29, 2023. Our accounts receivable and DSO are impacted by a number of factors, including the timing of product shipments, collections performance, payment terms, the mix of revenues from different regions and the effects of economic instability.

Previous wording

Backlog is the accumulation of all orders for which revenues have not been recognized and are still considered valid. Backlog also includes a small portion of billed service contracts that are included in deferred revenue. Our estimated total backlog at March 29, 2024 was approximately $330 million.

Current wording

Backlog is the accumulation of all orders for which revenues have not been recognized and are still considered valid. Backlog also includes a small portion of billed service contracts that are included in deferred revenue. Our estimated total backlog at June 28, 2024 was approximately $310 million.