Varex Imaging Corp
For the period ended Jul 3, 2026. Filed Aug 10, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jul 3, 2026 · Filed Aug 10, 2026
VREX$18.440.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-04-03; filed 2026-05-07.
0001681622-26-000052
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-07-03; filed 2026-08-10.
0001681622-26-000063
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 125 previous paragraphs and 140 current paragraphs.
73 unchanged; 34 reworded; 31 added; 17 removed; 1 previous and 2 current paragraphs rearranged.
Tables are not compared: 13 previous and 13 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (31)
Current report
•the occurrence of any event, change or other circumstances that could give rise to the right of Teledyne or Varex or both to terminate the Merger Agreement;
Current report
•the outcome of any legal proceedings that may be instituted against us in connection with the Merger Agreement;
Current report
•the failure to satisfy any of the conditions to the proposed acquisition, including regulatory approvals, on a timely basis or at all; and
Current report
Proposed Acquisition by Teledyne Technologies Incorporated
Current report
On August 10, 2026, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, Teledyne Technologies Incorporated (“Teledyne”), and Detect Merger Sub, Inc., a wholly owned subsidiary of Teledyne (“Merger Sub”), pursuant to which Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly owned subsidiary of Teledyne. Under the terms of the Merger Agreement, at the effective time of the Merger, each issued and outstanding share of our common stock (subject to certain exceptions set forth in the Merger Agreement) will be canceled and converted into the right to receive $18.90 in cash, without interest and subject to applicable withholding taxes.
Current report
The Merger Agreement generally requires us to use commercially reasonable efforts to operate our business in the ordinary course, subject to certain exceptions including as required by applicable law, pending consummation of the Merger, and subjects us to customary interim operating covenants that restrict us from taking certain specified actions without Teledyne’s approval (such approval not to be unreasonably withheld, conditioned, or delayed) until the Merger is completed or the Merger Agreement is terminated in accordance with its terms.
Current report
The completion of the Merger, which is currently expected to close in early calendar year 2027, is subject to the receipt of regulatory approvals and other customary closing conditions, including the adoption of the Merger Agreement by our stockholders. If the transaction is consummated, our common stock will be delisted from Nasdaq and deregistered under the Exchange Act. See the section entitled “Risk Factors” in Part II, Item 1A of this Quarterly Report for further discussion about the risks related to the Merger.
Current report
IEEPA Tariffs and Refunds
Current report
As of July 3, 2026, we had received approximately $17.0 million of IEEPA tariff refunds, which reduced cost of revenues by $16.7 million and inventories, net by $0.3 million. We received $0.7 million of interest income related to IEEPA tariff refunds. Following our decision to refund IEEPA tariff surcharges previously collected from customers, we recorded a liability of $6.6 million within accrued liabilities and other current liabilities (the "IEEPA Customer Reimbursement Liability") and a corresponding reduction of revenues, net. See note 14, Other Financial Information. Together these items increased gross profit and operating income by approximately $10.1 million and income before taxes by approximately $10.8 million for the third fiscal quarter of fiscal year 2026. Excluding them, gross margin for the third quarter would have been approximately 31%, compared with reported gross margin of 36.4% and 33.3% in the prior-year quarter. We do not exclude the effects of tariffs or tariff refunds from our non-GAAP financial measures, and cash provided by operating activities for the quarter includes the refunds received. These amounts represent recovery of duties paid in prior periods and are not indicative of future results.
Current report
We have submitted all refund claims currently eligible under the phases of the refund process that have been implemented, representing approximately $18.0 million of additional duties paid. Because the availability, timing, and amount of any further refunds depend on continuing regulatory, administrative, and judicial developments, including pending appellate proceedings concerning CBP's authority to refund duties on finally liquidated entries, we have not recognized a receivable for unrecovered amounts. To the extent we recover additional amounts previously passed through to customers, certain customer arrangements may require us to remit some or all of those amounts, which would reduce revenues, net rather than cost of revenues, and we may face customer claims regarding the amount or timing of reimbursement.
Current report
Tariffs Imposed Under Other Authorities
Current report
The Supreme Court's decision did not invalidate tariffs imposed under other authorities or prevent new tariffs. A 10% global surcharge imposed under Section 122 of the Trade Act of 1974 applied to our imports for substantially all of the third quarter and expired on July 24, 2026. Effective the same date, the U.S. Trade Representative imposed tariffs under Section 301 of the Trade Act of 1974 of 12.5% on imports from China and certain other economies and 10% on others, with no statutory expiration date. A further Section 301 investigation remains pending. In addition, on July 20, 2026, the President issued three proclamations under Section 338 of the Tariff Act of 1930, the first use of that authority, imposing an additional 50% duty on specified products of Canada effective August 19, 2026; we do not currently expect these measures to have a material direct impact on our results. Separately, the U.S. Department of Commerce is conducting an investigation under Section 232 of the Trade Expansion Act of 1962 into imports of medical equipment, the scope of which includes X-ray and imaging equipment. We cannot predict the outcome of that investigation or whether it will result in tariffs applicable to our products or components.
Current report
Industrial revenues increased $15.6 million, primarily due to increased sales of inspection products, digital detectors, and other products of $16.9 million, partially offset by decreased sales of X-ray tubes of $1.3 million. Overall Industrial revenue for the period was impacted by a $1.2 million reduction of revenues, net, recorded in connection with the IEEPA Customer Reimbursement Liability.
Current report
The Medical segment gross profit increased $1.6 million, primarily due to decreased material costs and the recovery of IEEPA tariffs of $8.8 million, partially offset by an unfavorable shift in product sales mix and reduced productivity of $7.2 million. The IEEPA tariff refunds reduced Medical cost of revenue by $15.9 million and the related IEEPA Customer Reimbursement Liability reduced Medical revenues by $5.3 million, for a net favorable effect of $10.6 million.
Current report
Total gross margin increased to 36.4% from 33.3% in the prior-year quarter. The IEEPA tariff refunds and the IEEPA Customer Reimbursement Liability recognized in the third quarter increased nine-month gross margin by approximately 580 basis points. Excluding those items, gross margin for the three months would have been approximately 30.6%, a decline of approximately 300 basis points from the prior-year period.
Current report
Selling, general, and administrative expenses decreased $2.3 million, primarily due to decreased legal costs of $1.2 million and compensation costs of $1.6 million, partially offset by increased marketing and other costs of $0.5 million.
Current report
Impairment of Goodwill
Current report
During the third quarter of fiscal year 2025, we recognized a goodwill impairment charge of $93.9 million, following a determination that the fair value of the Medical reporting unit was below its carrying value.
Current report
(1 )Interest income for the three months ended July 3, 2026 includes $0.7 million recognized on IEEPA refunds. See Current Economic and Trade Environment.
Current report
Other (expense) income, net for the third quarter of fiscal year 2026 decreased $2.7 million compared to the third quarter of fiscal year 2025 primarily due to increased foreign exchange expense of $2.1 million and a gain on sale of fixed assets of $0.6 million which occurred in fiscal year 2025.
Current report
Taxes on Income (Loss)
Current report
Medical revenues decreased $5.5 million, primarily due to decreased sales of dental, fluoroscopic, oncology, and veterinary of $12.6 million, partially offset by increased sales in radiographic, CT, and other modalities of $7.1 million. Overall Medical revenue for the period was impacted by a $5.3 million reduction of revenues, net, recorded in connection with the IEEPA Customer Reimbursement Liability.
Current report
Overall revenue during the nine months ended July 3, 2026 increased as compared to the nine months ended July 4, 2025. During the nine months ended July 3, 2026, Americas revenues increased $24.1 million due to increased sales of security inspection products of $18.6 million, X-ray tubes of $4.2 million, digital detectors of $1.3 million, and other product sales of $0.8 million, partially offset by decreased sales of veterinary of $0.5 million, and software of $0.3 million. EMEA revenues decreased $10.5 million primarily due to decreased sales of digital detectors of $7.2 million, security inspection products of $3.6 million, and veterinary of $1.1 million, partially offset by increased sales of other product sales of $1.0 million, and X-ray tubes of $0.4 million. APAC revenues increased $6.8 million primarily due to increased sales of other product sales of $3.9 million, digital detectors of $2.0 million, X-ray tubes of $1.3 million, and security inspection products of $0.2 million, partially offset by decreased sales of software of $0.6 million. Revenue in the Americas, EMEA, and APAC for the period were impacted by revenue reductions of $4.8 million, $1.1 million, and $0.6 million, respectively, recorded in connection with the IEEPA Customer Reimbursement Liability.
Current report
Medical segment gross profit decreased $7.2 million, primarily due to increased material costs of $5.3 million, which include the recovery of IEEPA tariffs, and both decreased sales volume and unfavorable shift in product sales mix of $2.6 million, partially offset by improved productivity of $0.7 million. The IEEPA tariff refunds reduced Medical cost of revenue by $15.9 million and the related IEEPA Customer Reimbursement Liability reduced Medical revenues by $5.3 million, for a net favorable effect of $10.6 million.
Current report
Gross margin was 34.4% for the nine months ended July 3, 2026, compared with 34.5% for the nine months ended July 4, 2025. The comparison reflects materially offsetting factors. The IEEPA tariff refunds and the IEEPA Customer Reimbursement Liability recognized in the third quarter increased nine-month gross margin by approximately 190 basis points. Excluding those items, gross margin for the nine months would have been approximately 32.5%, a decline of approximately 200 basis points from the prior-year period.
Current report
Selling, general, and administrative expenses remained relatively flat when compared to the nine months ended July 4, 2025.
Current report
Impairment of Goodwill
Current report
During the third quarter of fiscal year 2025, we recognized a goodwill impairment charge of $93.9 million, following a determination that the fair value of the Medical reporting unit was below its carrying value.
Current report
(1 )Interest income for the nine months ended July 3, 2026 includes $0.7 million recognized on IEEPA refunds. See Current Economic and Trade Environment.
Current report
Taxes on Income (Loss)
Current report
•Cash provided by accounts receivable was $9.2 million lower in the nine months ended July 3, 2026, compared to the nine months ended July 4, 2025, primarily due to an increase in timing of collections from customers.
Removed paragraphs (17)
Previous report
Debt Refinance
Previous report
During the quarter, we entered into a new $490 million secured credit facility, consisting of a $350 million term loan facility, a $100 million revolving credit facility and a $40 million delayed draw term loan facility, collectively the “Credit Facility.” We borrowed the full $350 million term loan facility and used the proceeds, together with cash on hand, to redeem all $368 million aggregate principal amount of our outstanding 7.875% Senior Secured Notes due 2027. We also terminated our prior $155 million senior secured revolving credit facility.
Previous report
Borrowings under the Credit Facility generally bear interest, at our option, at a variable rate based on Term SOFR or a base rate, plus an applicable margin. See Note 6 Borrowings to the accompanying Notes to the Condensed Consolidated Financial Statements for additional information regarding the terms of the Credit Facility. We expect the refinancing to reduce annual interest expense by more than $7 million, lower total outstanding debt, improve financial flexibility, and support continued investment in the business.
Previous report
We continue to monitor tariff-related actions, investigations, and policy developments, as well as changes in customer procurement decisions resulting from the current trade environment. We also continue to take actions intended to reduce the impact of tariffs and trade-related uncertainty on our business, including working with customers and evaluating operational, supply chain, and pricing measures, as well as pursuing commonly utilized mitigation practices and localizing more in region manufacturing. At this time, however, we do not anticipate these efforts will allow us to fully offset the additional costs or other negative impacts resulting from such tariffs. Furthermore, if international customers’ negative perceptions of United States’ trade policy or other actions by the United States Administration influence their purchasing decisions, our business and results of operations could be negatively impacted.
Previous report
As a result of the Supreme Court ruling on IEEPA tariffs, we may be eligible for refunds of tariffs previously paid on imported goods. Because the timing of any such refunds remains uncertain, we have not recognized a receivable or corresponding offset to expense or assets as of April 3, 2026. We continue to evaluate these developments and their potential impact on our results of operations. To the extent we recover amounts previously passed through to customers, we may be required under certain customer arrangements to remit some or all of those recovered amounts to customers to the extent they were initially passed through to our customers.
Previous report
Industrial revenues increased $0.7 million, primarily due to increased sales of digital detectors of $4.5 million, partially offset by decreased sales of inspection products and other components of $3.8 million.
Previous report
The Medical segment gross profit decreased $5.3 million, primarily due to increased material costs of $7.4 million, partially offset by increased sales volume, favorable shift in product sales mix, and increased productivity of $2.1 million.
Previous report
Selling, general, and administrative expenses increased $3.4 million, primarily due to increased legal costs of $2.0 million, other administrative costs of $1.5 million and marketing cost of $1.2 million, partially offset by decreased compensation costs and fixed commitment costs to a supplier of $1.5 million. The remaining variance was attributable to other changes in selling, general, and administrative expenses, each of which was individually insignificant.
Previous report
Other expense, net was flat in the second quarter of fiscal year 2026 compared to the second quarter of fiscal year 2025.
Previous report
Taxes on (Loss) Income
Previous report
Medical revenues increased $2.6 million, primarily due to increased sales of radiography, CT, mammography and other modalities of $15.3 million, partially offset by decreased sales in fluoroscopic, dental, oncology, and veterinary modalities of $12.7 million.
Previous report
Overall revenue during the six months ended April 3, 2026 increased as compared to the six months ended April 4, 2025. During the six months ended April 3, 2026, Americas revenues increased $20.2 million due to increased security inspection products sales of $12.9 million, increased X-ray tubes sales of $5.0 million, and increased digital detectors sales of $2.3 million. EMEA revenues decreased $7.8 million primarily due to decreased inspection product sales of $7.4 million, digital detectors sales of $4.4 million, partially offset by increased X-ray tubes sales of $4.0 million. APAC revenues increased $0.5 million primarily due to increased other product sales.
Previous report
Medical segment gross profit decreased $8.8 million, primarily due to increased material costs $14.2 million, partially offset by increased sales volume, favorable product mix, and improved productivity of $5.4 million.
Previous report
Research and development costs decreased to 10.3% of total revenue, primarily due to the final Micro-X technology transfer payment made during the first quarter of fiscal year 2025.
Previous report
Selling, general, and administrative expenses increased $2.3 million, primarily due to increased legal costs of $2.6 million, other administrative costs of $3.4 million and marketing costs of $2.3 million, partially offset by decreased compensation costs and fixed commitment costs to a supplier of $6.0 million.
Previous report
Taxes on (Loss) Income
Previous report
•Cash provided by accounts payables was $16.7 million higher in the six months ended April 3, 2026, compared to the six months ended April 4, 2025, primarily due to increased balances related to purchases of inventory.
Reworded paragraphs (34)
Previous wording
This Quarterly Report contains “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995, which provides a “safe harbor” for statements about future events, and financial performance that are based on the beliefs of, estimates made by, and information currently available to the management of Varex. Actual results and the outcome or timing of certain events described in these forward-looking statements are subject to risk and uncertainties and may differ significantly from those described. Important factors that could cause our actual results and financial condition to differ significantly from those projections or expectations include, among other things, the following:
Current wording
This Quarterly Report contains “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995, which provides a “safe harbor” for statements about future events, and financial performance that are based on the beliefs of, estimates made by, and information currently available to the management of Varex. These forward-looking statements include, but are not limited to, statements concerning our proposed acquisition by Teledyne Technologies Incorporated (“Teledyne”) pursuant to an Agreement and Plan of Merger, dated as of August 10, 2026 (the “Merger Agreement”), by and among Varex, Teledyne, and Detect Merger Sub, Inc., a wholly owned subsidiary of Teledyne (“Merger Sub”), pursuant to which Merger Sub will merge with and into Varex (the “Merger”), with Varex surviving the Merger as a wholly owned subsidiary of Teledyne, including our expectations regarding the timing and completion of the proposed acquisition as well as general business uncertainty relating to the proposed acquisition and the anticipated benefits of the proposed acquisition. Actual results and the outcome or timing of certain events described in these forward-looking statements are subject to risk and uncertainties and may differ significantly from those described. Important factors that could cause our actual results and financial condition to differ significantly from those projections or expectations include, among other things, the following:
Previous wording
•inflation and supply chain disruptions resulting in increased costs and delayed product delivery;
Current wording
•inflation and supply chain disruptions resulting in increased costs and delays in product manufacturing and delivery;
Previous wording
•limitations imposed by operating and financial restrictions of our debt financing; and
Current wording
•limitations imposed by operating and financial restrictions of our debt financing;
Previous wording
Varex Imaging Corporation is a leading innovator, designer and manufacturer of X-ray imaging components including X-ray tubes, flat panel and photon counting detectors and accessories, linear accelerators, image software processing solutions, and stand-alone X-ray based systems in select application areas. Our components are used in medical diagnostic imaging, security inspection systems, and industrial quality inspection systems, as well as for analysis and measurement applications in industrial manufacturing applications. Global OEMs incorporate our X-ray imaging components into their systems to detect, diagnose, protect, irradiate, and inspect. Varex has approximately 2,450 full-time equivalent employees, located at engineering, manufacturing, and service center sites in North America, Europe, and Asia.
Current wording
Varex Imaging Corporation is a leading innovator, designer and manufacturer of X-ray imaging components including X-ray tubes, flat panel and photon counting detectors and accessories, linear accelerators, image software processing solutions, and stand-alone X-ray based systems for Industrial applications. Our components are used in medical diagnostic imaging, security inspection systems, and industrial quality inspection systems, as well as for analysis and measurement applications in industrial manufacturing applications. Global OEMs incorporate our X-ray imaging components into their systems to detect, diagnose, protect, irradiate, and inspect. Varex has approximately 2,500 full-time equivalent employees, located at engineering, manufacturing, and service center sites in North America, Europe, and Asia.
Previous wording
The economic and trade environment remains dynamic and unpredictable. Changes to tariff policies in 2025 by the United States and other countries, particularly the bilateral United States and Chinese tariffs, impacted our results of operations and profitability in fiscal year 2025 and the first half of fiscal year 2026. In February 2026, the U.S. Supreme Court held that the International Emergency Economic Powers Act, or IEEPA, does not authorize the President to impose tariffs. The decision invalidated certain IEEPA-based tariffs, but did not resolve all questions about refund timing, refund mechanics, or the potential use of other tariff authorities.
Current wording
Tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”), particularly bilateral United States and Chinese tariffs, increased our costs and adversely affected our results of operations and profitability in fiscal year 2025 and the first half of fiscal year 2026. In February 2026, the U.S. Supreme Court held that IEEPA does not authorize the President to impose tariffs, and the U.S. Court of International Trade subsequently ordered U.S. Customs and Border Protection ("CBP") to refund IEEPA duties, with interest, through a phased administrative process.
Previous wording
Although certain IEEPA-based tariffs have been invalidated, the broader trade environment remains uncertain. Tariffs, trade restrictions, retaliatory actions, and related uncertainty have contributed to, and may continue to contribute to, delayed customer purchasing decisions, increased costs, supply chain and logistics disruption, exchange rate volatility, increased shipping and transportation costs, and disputes with customers regarding potential IEEPA tariff refunds.
Current wording
Tariffs, trade restrictions, retaliatory actions, and related uncertainty have contributed to, and may continue to contribute to, delayed customer purchasing decisions, increased costs, supply chain and logistics disruption, exchange rate volatility, increased shipping and transportation costs, and disputes with customers regarding IEEPA tariff refunds. Tariffs targeting X-ray imaging products or products shipped from the United States could make our products less competitive and negatively impact our business, financial condition, and results of operations, as could international customers' perceptions of United States trade policy. We continue to monitor these developments and to take actions intended to reduce their impact, including qualifying alternative suppliers, shifting production within our manufacturing footprint, localizing additional manufacturing in affected regions, adjusting pricing, and other duty mitigation practices. We do not expect these efforts to fully offset the additional costs or other negative impacts resulting from tariffs.
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 2026 is the 52-week period ending October 2, 2026. Fiscal year 2025 was the 53-week period that ended on October 3, 2025. The fiscal quarters ended April 3, 2026 and April 4, 2025 were both 13-week periods. The six-month fiscal periods ended April 3, 2026 and April 4, 2025 were a 26-week period and a 27-week period, respectively.
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 2026 is the 52-week period ending October 2, 2026. Fiscal year 2025 was the 53-week period that ended on October 3, 2025. The fiscal quarters ended July 3, 2026 and July 4, 2025 were both 13-week periods. The nine-month fiscal periods ended July 3, 2026 and July 4, 2025 were a 39-week period and a 40-week period, respectively.
Previous wording
Medical revenues increased $2.4 million, primarily due to increased sales of radiography, CT, mammography, and other modalities of $12.0 million, partially offset by decreased sales in fluoroscopic, dental, veterinary, and oncology modalities of $9.6 million.
Current wording
Medical revenues decreased $8.1 million, primarily due to decreased sales of radiography, mammography, CT, Dental and other modalities of $9.5 million, partially offset by increased sales in fluoroscopic and veterinary of $1.4 million. Overall Medical revenue for the period was impacted by a $5.3 million reduction of revenues, net, recorded in connection with the IEEPA Customer Reimbursement Liability.
Previous wording
Overall revenue during the three months ended April 3, 2026 increased as compared to the three months ended April 4, 2025. Americas revenue increased by $9.3 million due to increased sales of security inspection products of $4.4 million, X-ray tubes of $4.0 million, and other product sales of $0.8 million. EMEA revenues decreased $11.8 million due to decreased sales of security inspection products of $8.5 million, digital detectors of $4.4 million, and other products of $0.5 million, partially offset by increased sales of X-ray tubes of $1.6 million. APAC revenues increased $5.6 million primarily due to increased sales of X-ray tubes of $2.8 million, security inspection products of $0.9 million, digital detectors of $0.7 million, and other products of $1.2 million.
Current wording
Overall revenue during the three months ended July 3, 2026 increased as compared to the three months ended July 4, 2025. Americas revenue increased by $3.9 million due to increased sales of security inspection products of $5.7 million, veterinary of $0.3 million, and other product sales of $0.2 million, partially offset by decreased sales of digital detectors of $1.0 million, X-ray tubes of $0.7 million, and software of $0.6 million. EMEA revenues decreased $2.7 million due to decreased sales of X-ray tubes of $3.7 million, digital detectors of $2.8 million, and veterinary of $0.9 million, partially offset by increased sales of security inspection products of $3.8 million, and other product sales of $0.9 million. APAC revenues increased $6.3 million primarily due to increased sales of digital detectors of $3.4 million, other product sales of $1.4 million, security inspection products of $0.8 million, and X-ray tubes of $0.7 million. Revenue in the Americas, EMEA, and APAC for the period were impacted by revenue reductions of $4.8 million, $1.1 million, and $0.6 million, respectively, recorded in connection with the IEEPA Customer Reimbursement Liability.
Previous wording
The Industrial segment gross profit increased $1.2 million, primarily due to both increased sales volume and a favorable shift in product sales mix of $3.2 million, partially offset by increased material costs and decreased productivity of $2.0 million.
Current wording
The Industrial segment gross profit increased $7.6 million, primarily due to both increased sales volume and a favorable shift in product sales mix of $8.7 million, partially offset by increased material costs and decreased productivity of $1.1 million. The IEEPA tariff refunds reduced Industrial cost of revenue by $0.7 million and the related IEEPA Customer Reimbursement Liability reduced Industrial revenues by $1.2 million, for a net unfavorable effect of $0.5 million.
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 were 10.3% of revenues, in-line with research and development costs in the prior year period.
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 increased to 11.1% of revenues, mainly due to increased material costs.
Previous wording
Interest income for the six months ended April 3, 2026 decreased when compared to the six months ended April 4, 2025 primarily due to a decline of our cash, cash equivalents, and marketable securities balances being held in interest bearing deposit accounts when comparing the second quarter of fiscal year 2026 to the second quarter of fiscal year 2025. This was due to an accumulation of cash in the prior period for the repayment of our convertible notes maturing in June 2025.
Current wording
Interest income for the three months ended July 3, 2026 includes $0.7 million recognized on IEEPA tariff refunds, which we do not expect to recur. Excluding this amount, interest income was approximately $0.2 million, compared with $2.5 million in the prior-year quarter, a decrease of approximately 92%, primarily due to lower average cash, cash equivalents, and marketable securities balances being held in interest bearing deposit accounts when comparing the third quarter of fiscal year 2026 to the third quarter of fiscal year 2025. This was due to an accumulation of cash in the prior period for the repayment of our convertible notes maturing in June 2025.
Previous wording
Interest expense for the second quarter of fiscal year 2026 increased $7.0 million compared to the second quarter of fiscal year 2025 primarily due to debt extinguishment costs of $9.4 million related to the repayment of our senior secured notes and the closing of our senior secured revolving credit facility, partially offset by reduced interest payments related to a lower debt balance and more favorable rates in fiscal year 2026 compared to fiscal year 2025.
Current wording
Interest expense for the third quarter of fiscal year 2026 decreased $3.6 million compared to the third quarter of fiscal year 2025 primarily due to the debt refinancing which occurred during the second quarter of fiscal year 2026 which reduced the Company's overall debt balance and provided more favorable rates in fiscal year 2026 compared to fiscal year 2025.
Previous wording
For the three months ended April 3, 2026, we recognized income tax expense of $1.6 million on $6.4 million of pre-tax loss. For the three months ended April 4, 2025, we recognized income tax expense of $3.7 million on $10.8 million of pre-tax income. Our tax expense for the three months ended April 3, 2026 was primarily due to increased pre-tax income in profitable jurisdictions.
Current wording
For the three months ended July 3, 2026, we recognized income tax expense of $0.3 million on $16.2 million of pre-tax income. For the three months ended July 4, 2025, we recognized income tax expense of $2.5 million on $86.6 million of pre-tax loss. Our tax expense for the three months ended July 3, 2026 was primarily due to increased pre-tax income in profitable jurisdictions.
Previous wording
Discussion of Results of Operations for the Six Months Ended April 3, 2026 Compared to the Six Months Ended April 4, 2025
Current wording
Discussion of Results of Operations for the Nine Months Ended July 3, 2026 Compared to the Nine Months Ended July 4, 2025
Previous wording
Industrial revenues increased $10.3 million, primarily due to increased digital detectors, sales of security inspection products, and other components of $11.9 million, partially offset by decreased sales of X-ray tubes of $1.6 million.
Current wording
Industrial revenues increased $25.9 million, primarily due to increased sales of security inspection products, digital detectors, and other components of $28.8 million, partially offset by decreased sales of X-ray tubes of $2.9 million. Overall Industrial revenue for the period was impacted by a $1.2 million reduction of revenues, net, recorded in connection with the IEEPA Customer Reimbursement Liability.
Previous wording
Industrial segment gross profit increased $6.0 million, primarily due to improved sales volume and favorable product mix of $12.3 million, partially offset by decreased productivity and increased material costs of $6.3 million.
Current wording
Industrial segment gross profit increased $13.6 million, primarily due to improved sales volume and favorable product mix of $21.0 million, partially offset by decreased productivity and increased material costs of $7.4 million. The IEEPA tariff refunds reduced Industrial cost of revenue by $0.7 million and the related IEEPA Customer Reimbursement Liability reduced Industrial revenues by $1.2 million, for a net unfavorable effect of $0.5 million.
Previous wording
Interest income decreased primarily due to a decline of our cash, cash equivalents, and marketable securities balances being held in interest bearing deposit accounts when comparing the second quarter of fiscal year 2026 to the second quarter of fiscal year 2025. This was due to an accumulation of cash in the prior period for the repayment of our convertible notes maturing in June 2025.
Current wording
Interest income for the nine months ended July 3, 2026 includes $0.7 million recognized on IEEPA tariff refunds, which we do not expect to recur. Excluding this amount, interest income was approximately $1.2 million, compared with $7.5 million for the nine months ended July 3, 2026. The decrease when compared to the nine months ended July 4, 2025 was primarily due to lower average cash, cash equivalents, and marketable securities balances being held in interest bearing deposit accounts when comparing the third quarter of fiscal year 2026 to the third quarter of fiscal year 2025. This was due to an accumulation of cash in the prior period for the repayment of our convertible notes maturing in June 2025.
Previous wording
Interest expense for the six months ended April 3, 2026 increased when compared to the six months ended April 4, 2025 primarily due to debt extinguishment costs of $9.4 million related to the repayment of our senior secured notes and the closing of our prior senior secured revolving credit facility, partially offset by reduced interest payments related to a lower debt balance and more favorable interest rates in fiscal year 2026 compared to fiscal year 2025.
Current wording
Interest expense for the nine months ended July 3, 2026 increased when compared to the nine months ended July 4, 2025 primarily due to debt extinguishment costs of $9.4 million related to the repayment of our senior secured notes and the closing of our prior senior secured revolving credit facility, partially offset by reduced interest payments related to a lower debt balance and more favorable interest rates in fiscal year 2026 compared to fiscal year 2025.
Previous wording
Other expense, net for the six months ended April 3, 2026 increased $1.5 million when compared to the six months ended April 4, 2025 primarily due to increased losses in certain investments in privately-held companies and equity investments of $2.9 million and other expenses of $0.3 million, partially offset by decreased foreign exchange expense of $1.7 million.
Current wording
Other (expense) income, net for the nine months ended July 3, 2026 increased $4.2 million when compared to the nine months ended July 4, 2025 primarily due to increased losses in certain investments in privately-held companies and equity investments of $2.9 million, a gain on sale of fixed assets of $0.6 million which occurred in fiscal year 2025, and increased foreign exchange expense and other costs of $0.7 million.
Previous wording
For the six months ended April 3, 2026, we recognized an income tax expense of $3.0 million on $2.6 million of pre-tax loss. For the six months ended April 4, 2025, the Company recognized income tax expense of $6.3 million on $13.3 million of pre-tax income. Our tax expense for the six months ended April 3, 2026, was primarily due to increased pre-tax income in profitable jurisdictions.
Current wording
For the nine months ended July 3, 2026, we recognized an income tax expense of $3.3 million on $13.6 million of pre-tax income. For the nine months ended July 4, 2025, the Company recognized income tax expense of $8.8 million on $73.3 million of pre-tax loss. Our tax expense for the nine months ended July 3, 2026, was primarily due to increased pre-tax income in profitable jurisdictions.
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 the next 12 months. As of April 3, 2026, the availability under our Revolving Credit Facility was $95.6 million, and we had total debt of $347.6 million, net of deferred issuance costs of $3.5 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 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. Other than the effects of tariffs and tariff refunds described above, including the timing of any further refunds we may receive and of payments to customers under the reimbursement liability recorded as of July 3, 2026, 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 the next 12 months. As of July 3, 2026, the availability under our Revolving Credit Facility was $91.3 million, and we had total debt of $347.1 million, net of deferred issuance costs of $3.6 million.
Previous wording
Net cash (used in) provided by operating activities. Cash (used in) provided by operating activities was $(17.6) million and $26.1 million for the six months ended April 3, 2026 and April 4, 2025, respectively. Significant changes in operating assets and liabilities affecting cash flows during these periods included:
Current wording
Net cash provided by operating activities. Cash provided by operating activities was $3.4 million and $33.8 million for the nine months ended July 3, 2026 and July 4, 2025, respectively. The nine months ended July 3, 2026 includes $17.7 million of IEEPA tariff refunds received during the third fiscal quarter 2026. Excluding these refunds, cash provided by operating activities would have been a use of cash of approximately $14 million. We expect cash flows in future periods to be reduced by payment to customers under the $6.6 million reimbursement liability recorded as of July 3, 2026. Significant changes in operating assets and liabilities affecting cash flows during these periods included:
Previous wording
•Net loss was $5.6 million for the six months ended April 3, 2026 compared to a net income of $7.0 million for the six months ended April 4, 2025. The change from net income to net loss was primarily due to a $9.4 million loss on extinguishment of debt in the six months ended April 3, 2026.
Current wording
•Net income was $10.3 million for the nine months ended July 3, 2026 compared to a net loss of $82.1 million for the nine months ended July 4, 2025. The change from net income to net loss was primarily due to a goodwill impairment charge of $93.9 million in the nine months ended July 4, 2025, partially offset by a $9.4 million loss on extinguishment of debt and in the nine months ended July 3, 2026.
Previous wording
•Cash used for inventories was $30.8 million higher in the six months ended April 3, 2026, compared to the six months ended April 4, 2025, primarily due to an increase in quantity of inventory for anticipated future demand.
Current wording
•Cash used for inventories was $15.8 million higher in the nine months ended July 3, 2026, compared to the nine months ended July 4, 2025, primarily due to an increase in quantity of inventory for anticipated future demand.
Previous wording
•Cash used in accrued liabilities and other current and long-term liabilities increased by $18.5 million in the six months ended April 3, 2026, compared to the six months ended April 4, 2025, primarily due to payments of accrued interest in excess of current‑period accruals of $21.4 million resulting from the refinancing of our senior secured note. This increase was partially offset by $1.0 million in decreased tax accruals. The remaining variance was attributable to other changes in accrued liabilities and other current and long‑term liabilities, each of which was individually insignificant.
Current wording
•Cash used in accrued liabilities and other current and long-term liabilities increased by $9.3 million in the nine months ended July 3, 2026, compared to the nine months ended July 4, 2025, primarily due to the timing of monthly interest payments under the new Term Loan Facility. The remaining variance was attributable to other changes in accrued liabilities and other current and long‑term liabilities, each of which was individually insignificant.
Previous wording
Net cash (used in) provided by investing activities. Cash (used in) provided by investing activities was $(10.8) million and $11.7 million for the six months ended April 3, 2026 and April 4, 2025, respectively. This change was primarily due to net cash decreases related to marketable debt securities and certificates of deposits activity of $16.7 million and an increase in purchases of property, plant, and equipment of $5.9 million in the six months ended April 3, 2026, compared to the six months ended April 4, 2025.
Current wording
Net cash (used in) provided by investing activities. Cash (used in) provided by investing activities was $(17.1) million and $11.0 million for the nine months ended July 3, 2026 and July 4, 2025, respectively. This change was primarily due to net cash decreases related to marketable debt securities and certificates of deposits activity of $18.5 million and an increase in purchases of property, plant, and equipment of $8.6 million in the nine months ended July 3, 2026, compared to the nine months ended July 4, 2025.
Previous wording
Net cash (used in) provided by financing activities. Net cash (used in) provided by financing activities was $(30.9) million and $124.2 million for the six months ended April 3, 2026 and April 4, 2025, respectively. This change was primarily due to the repayment of the senior secured notes and related fees of $375.2 million during the second quarter of fiscal year 2026, partially offset with proceeds from the issuance of the term loan of $345.5 million during the second quarter of fiscal year 2026, compared to the issuance of $126.9 million of the Senior Secured Notes Add On during the first quarter of fiscal year 2025.
Current wording
Net cash used in financing activities. Net cash used in financing activities was $32.1 million and $77.0 million for the nine months ended July 3, 2026 and July 4, 2025, respectively. This change was primarily due to the repayment of the senior secured notes and related fees of $375.2 million during the second quarter of fiscal year 2026, partially offset with proceeds from the issuance of the term loan of $345.5 million during the second quarter of fiscal year 2026, compared to the repayment in full of the Convertible Notes of $200.0 million, partially offset by the issuance of $126.9 million of the Senior Secured Notes Add On during the nine months ended July 4, 2025.
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 and approved by the dpiX board of directors at the beginning of each calendar year. In January 2026, the Company's fixed cost commitment was determined to be $13.7 million for calendar year 2026. For the remainder of calendar year 2026, we estimate that we have fixed cost commitments of $10.2 million related to this amended agreement. 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 and approved by the dpiX board of directors at the beginning of each calendar year. In January 2026, the Company's fixed cost commitment was determined to be $13.7 million for calendar year 2026. For the remainder of calendar year 2026, we estimate that we have fixed cost commitments of $6.8 million related to this amended agreement. 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 April 3, 2026, our non-cancellable supplier purchase obligations totaled $2.7 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 July 3, 2026, our non-cancellable supplier purchase obligations totaled $2.6 million.
Previous wording
From time to time, we are a party to or otherwise involved in legal proceedings, government inspections, investigations, customs and duty audits, and other claims and contingency matters, both inside and outside the United States, arising in the ordinary course of our business or otherwise. We accrue amounts for probable losses, to the extent they can be reasonably estimated, that we believe are adequate to address any liabilities related to legal proceedings as well as other loss contingencies that we believe will result in a probable loss (including, among other things, probable settlement value). A loss or a range of loss is disclosed when it is reasonably possible that a material loss will be incurred and can be estimated or when it is reasonably possible that the amount of a loss, when material, will exceed the recorded provision. We did not have any material contingent liabilities as of April 3, 2026 and October 3, 2025. Legal expenses are expensed as incurred.
Current wording
From time to time, we are a party to or otherwise involved in legal proceedings, government inspections, investigations, customs and duty audits, and other claims and contingency matters, both inside and outside the United States, arising in the ordinary course of our business or otherwise. We accrue amounts for probable losses, to the extent they can be reasonably estimated, that we believe are adequate to address any liabilities related to legal proceedings as well as other loss contingencies that we believe will result in a probable loss (including, among other things, probable settlement value). A loss or a range of loss is disclosed when it is reasonably possible that a material loss will be incurred and can be estimated or when it is reasonably possible that the amount of a loss, when material, will exceed the recorded provision. Other than as described under Current Economic and Trade Environment, we did not have any material contingent liabilities as of July 3, 2026 and October 3, 2025. Legal expenses are expensed as incurred.
Previous wording
Trade accounts receivable days sales outstanding (“DSO”) was 62 days at April 3, 2026 and October 3, 2025. 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 63 days at July 3, 2026 and October 3, 2025. 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
The Company uses standby letters of credit as a form of credit support in the ordinary course of business. Outstanding standby letters of credit reduce the borrowing capacity available under the Company’s Revolving Credit Facility and therefore impact available liquidity; however, they do not represent current cash obligations. Management does not expect these standby letters of credit to be drawn. As of April 3, 2026, $2.3 million of standby letters of credit were outstanding.
Current wording
The Company uses standby letters of credit as a form of credit support in the ordinary course of business. Outstanding standby letters of credit issued under its credit facilities reduce the borrowing capacity available under the Company’s Revolving Credit Facility and therefore impact available liquidity under our Revolving Credit Facility; however, they do not represent current cash obligations. Management does not expect these standby letters of credit to be drawn. As of July 3, 2026, $11.9 million of standby letters of credit were outstanding.
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 April 3, 2026 was approximately $266 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 July 3, 2026 was approximately $246 million.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
The economic and trade environment remains dynamic and unpredictable, and tariffs continue to affect our results of operations and profitability.
Current report — wording carried from elsewhere
Research and development costs decreased to 10.6% of total revenue, in-line with research and development costs in the prior year period.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Tariffs and trade restrictions that remain in effect or are imposed under other legal authorities, including any tariffs targeting X-ray imaging products, or products shipped from the United States could make our products less competitive and negatively impact our business, financial condition and results of operations.