Document and Entity Information - USD ($)	12 Months Ended
Document and Entity Information - USD ($)	Jun. 30, 2018	Aug. 24, 2018	Dec. 31, 2017
Document and Entity Information
Entity Registrant Name	OSI SYSTEMS INC
Entity Central Index Key	0001039065
Document Type	10-K
Document Period End Date	Jun. 30, 2018
Amendment Flag	false
Current Fiscal Year End Date	--06-30
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float			$ 1,163,504,202
Entity Common Stock, Shares Outstanding		18,093,373
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	FY

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2018	Jun. 30, 2017
CURRENT ASSETS:
Cash and cash equivalents	$ 84,814	$ 169,650
Accounts receivable, net	210,744	206,526
Inventories	313,552	248,510
Prepaid expenses and other current assets	41,587	28,314
Total current assets	650,697	653,000
Property and equipment, net	115,524	141,539
Goodwill	292,213	242,129
Intangible assets, net	142,001	118,450
Other assets	55,256	74,969
Total assets	1,255,691	1,230,087
CURRENT LIABILITIES:
Bank lines of credit	113,000	103,000
Current portion of long-term debt	2,262	2,396
Accounts payable	106,892	76,121
Accrued payroll and related expenses	40,171	34,621
Advances from customers	55,761	37,934
Other accrued expenses and current liabilities	125,236	92,062
Total current liabilities	443,322	346,134
Long-term debt	248,980	241,750
Deferred income taxes	15,002	20,681
Other long-term liabilities	58,951	52,309
Total liabilities	766,255	660,874
Commitments and contingencies (Note 10)
Stockholders' Equity:
Preferred stock, $0.001 par value -10,000,000 shares authorized; no shares issued or outstanding
Common stock, $0.001 par value-100,000,000 shares authorized; issued and outstanding, 18,689,568 and 18,032,374 shares at June 30, 2017 and 2018, respectively	169,475	222,529
Retained earnings	334,745	363,872
Accumulated other comprehensive loss	(14,784)	(17,188)
Total stockholders' equity	489,436	569,213
Total liabilities and stockholders' equity	$ 1,255,691	$ 1,230,087

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Jun. 30, 2018	Jun. 30, 2017
CONSOLIDATED BALANCE SHEETS
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, authorized shares	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, authorized shares	100,000,000	100,000,000
Common stock, shares issued	18,032,374	18,689,568
Common stock, shares outstanding	18,032,374	18,689,568

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2016
Net revenues:
Products	$ 732,927	$ 655,840	$ 579,345
Services	356,359	305,111	250,315
Total net revenues	1,089,286	960,951	829,660
Cost of goods sold:
Products	504,483	466,293	407,880
Services	193,151	171,157	144,921
Total cost of goods sold	697,634	637,450	552,801
Gross profit	391,652	323,501	276,859
Operating expenses:
Selling, general and administrative	239,592	192,560	166,655
Research and development	61,189	50,951	49,816
Impairment, restructuring and other charges	34,963	46,698	22,014
Total operating expenses	335,744	290,209	238,485
Income from operations	55,908	33,292	38,374
Interest expense, net	(19,293)	(9,629)	(2,852)
Other income (expense), net	239	2,088	(27)
Income before income taxes	36,854	25,751	35,495
Provision for income taxes	65,981	4,675	9,338
Net income (loss)	$ (29,127)	$ 21,076	$ 26,157
Earnings (loss) per share:
Basic (in dollars per share)	$ (1.57)	$ 1.12	$ 1.35
Diluted (in dollars per share)	$ (1.57)	$ 1.07	$ 1.30
Shares used in per share calculation:
Basic (in shares)	18,592	18,894	19,427
Diluted (in shares)	18,592	19,689	20,076

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2016
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net income (loss)	$ (29,127)	$ 21,076	$ 26,157
Other comprehensive income (loss):
Foreign currency translation adjustment	1,904	(433)	(6,850)
Other	500	501	(142)
Other comprehensive income (loss)	2,404	68	(6,992)
Comprehensive income (loss)	$ (26,723)	$ 21,144	$ 19,165

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Common	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Total
Balance at Jun. 30, 2015	$ 279,212	$ 312,831	$ (10,264)	$ 581,779
Balance (in shares) at Jun. 30, 2015	19,716,507
Increase (Decrease) in Shareholders' Equity
Exercise of stock options	$ 3,004			3,004
Exercise of stock options (in shares)	107,059
Vesting of restricted stock/RSUs (in shares)	417,896
Net tax benefit of stock options exercised/forfeited	$ 89			89
Shares issued under employee stock purchase program	$ 3,133			3,133
Shares issued under employee stock purchase program (in shares)	58,709
Stock compensation expense	$ 20,759			20,759
Repurchase of common stock	$ (73,368)			$ (73,368)
Repurchase of common stock (in shares)	(1,201,402)			(1,201,402)
Taxes paid related to net share settlement of equity awards	$ (13,715)			$ (13,715)
Taxes paid related to net share settlement of equity awards (in shares)	(186,612)
Net income (loss)		26,157		26,157
Other comprehensive income			(6,992)	(6,992)
Balance at Jun. 30, 2016	$ 219,114	338,988	(17,256)	540,846
Balance (in shares) at Jun. 30, 2016	18,912,157
Increase (Decrease) in Shareholders' Equity
Exercise of stock options	$ 4,498			4,498
Exercise of stock options (in shares)	168,564
Vesting of restricted stock/RSUs (in shares)	338,100
Shares issued under employee stock purchase program	$ 3,159			3,159
Shares issued under employee stock purchase program (in shares)	63,864
Stock compensation expense	$ 26,132			26,132
RSU obligation under business combination	1,400			1,400
Repurchase of common stock	$ (48,453)			$ (48,453)
Repurchase of common stock (in shares)	(642,277)			(642,277)
Taxes paid related to net share settlement of equity awards	$ (10,084)			$ (10,084)
Taxes paid related to net share settlement of equity awards (in shares)	(150,840)
Equity component of convertible debt	$ 26,763			26,763
Accounting change for stock based compensation		3,808		3,808
Net income (loss)		21,076		21,076
Other comprehensive income			68	68
Balance at Jun. 30, 2017	$ 222,529	363,872	(17,188)	$ 569,213
Balance (in shares) at Jun. 30, 2017	18,689,568			18,689,568
Increase (Decrease) in Shareholders' Equity
Exercise of stock options	$ 2,863			$ 2,863
Exercise of stock options (in shares)	121,651
Vesting of restricted stock/RSUs (in shares)	413,639
Shares issued under employee stock purchase program	$ 4,033			4,033
Shares issued under employee stock purchase program (in shares)	78,310
Stock compensation expense	$ 23,846			23,846
Repurchase of common stock	$ (62,932)			$ (62,932)
Repurchase of common stock (in shares)	(1,021,458)			(1,021,458)
Taxes paid related to net share settlement of equity awards	$ (20,864)			$ (20,864)
Taxes paid related to net share settlement of equity awards (in shares)	(249,336)
Net income (loss)		(29,127)		(29,127)
Other comprehensive income			2,404	2,404
Balance at Jun. 30, 2018	$ 169,475	$ 334,745	$ (14,784)	$ 489,436
Balance (in shares) at Jun. 30, 2018	18,032,374			18,032,374

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$ (29,127)	$ 21,076	$ 26,157
Adjustments to reconcile net income (loss) to net cash provided by operating activities, net of effects from acquisitions:
Depreciation and amortization	69,754	68,235	57,922
Stock based compensation	23,846	26,132	20,759
Provision for losses on accounts receivable	3,270	2,086	2,079
Deferred income taxes	26,113	(24,222)	(13,224)
Amortization of debt discount and issuance costs	8,632	2,844
Impairment charges	7,795	27,047	9,674
Gain on sale of business		(2,110)
Other	1,668	(1,346)	434
Changes in operating assets and liabilities-net of business acquisitions:
Accounts receivable	11,340	(44,462)	36,881
Inventories	(59,221)	30,808	(37,696)
Prepaid expenses and other assets	(836)	5,609	(1,701)
Accounts payable	25,145	2,657	6,831
Advances from customers	17,183	(33,552)	(10,955)
Other	27,547	(18,023)	(37,943)
Net cash provided by operating activities	133,109	62,779	59,218
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment	(43,198)	(17,096)	(17,688)
Acquisition of businesses, net of cash acquired	(103,793)	(191,238)	(19,921)
Net proceeds from sale of business		12,793
Acquisition of intangible and other assets	(2,453)	(5,147)	(5,870)
Net cash used in investing activities	(149,444)	(200,688)	(43,479)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (payments) on bank lines of credit	10,000	(22,000)	125,000
Proceeds from long-term debt	1,044	280,541	691
Payments on long-term debt	(2,592)	(4,077)	(2,917)
Proceeds from exercise of stock options and employee stock purchase plan	6,896	7,657	6,137
Repurchase of common stock	(62,932)	(48,453)	(73,368)
Taxes paid related to net share settlement of equity awards	(20,864)	(10,084)	(13,715)
Net cash provided by (used in) financing activities	(68,448)	203,584	41,828
Effect of exchange rate changes on cash	(53)	(395)	(790)
Net increase (decrease) in cash and cash equivalents	(84,836)	65,280	56,777
Cash and cash equivalents-beginning of year	169,650	104,370	47,593
Cash and cash equivalents-end of year	84,814	169,650	104,370
Supplemental disclosure of cash flow information:
Interest	9,249	5,185	2,378
Income taxes	$ 29,445	$ 25,066	$ 26,671

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Jun. 30, 2018

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business—OSI Systems, Inc., together with our subsidiaries, is a vertically integrated designer and manufacturer of specialized electronic systems and components for critical applications. We sell our products in diversified markets, including homeland security, healthcare, defense and aerospace.

We have three reporting segments: (i) Security, providing security inspection systems, turnkey security screening solutions and related services; (ii) Healthcare, providing patient monitoring, diagnostic cardiology, and anesthesia systems, and related services and (iii) Optoelectronics and Manufacturing, providing specialized electronic components and electronic manufacturing services for the Security and Healthcare divisions as well as to external OEM customers and end users for applications in the defense, aerospace, medical and industrial markets, among others.

Through our Security segment, we provide security screening products and related services globally. These products fall into the following categories: baggage and parcel inspection; cargo and vehicle inspection; hold (checked) baggage screening; people screening; radiation detection; and explosive and narcotics trace detection. In addition to these products, we also provide site design, installation, training and technical support services to our customers. We also provide turnkey security screening solutions, which can include the construction, staffing and long-term operation of security screening checkpoints for our customers.

Through our Healthcare segment, we design, manufacture, market and service patient monitoring, diagnostic cardiology, and anesthesia delivery and ventilation systems, and related supplies and accessories worldwide. These products are used by care providers in critical care, emergency and perioperative areas within hospitals as well as physicians' offices, medical clinics and ambulatory surgery centers amongst others.

Through our Optoelectronics and Manufacturing segment, we design, manufacture and market optoelectronic devices and flex circuits and provide electronics manufacturing services worldwide for use in a broad range of applications, including aerospace and defense electronics, X-ray security and inspection systems and medical imaging, chemistry analysis and diagnostics instruments, telecommunications, scanners and industrial automations, automotive diagnostic systems, IoT and consumer wearable products. This division provides products and services to OEM customers and end users as well as to our Security and Healthcare divisions.

Consolidation—The consolidated financial statements include the accounts of OSI Systems, Inc. and our wholly-owned and majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Investments in joint ventures over which we have significant influence but do not have voting control are accounted for using the equity method. Investments over which we do not have significant influence are accounted for using the cost method.

Use of Estimates—The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and costs of sales during the reporting period. The most significant of these estimates and assumptions for our company relate to contract revenue, profit and loss recognition, fair values of assets acquired and assumed in business combinations, market values for inventories reported at lower of cost or market, stock-based employee compensation expense, income taxes, accrued product warranty costs, and the recoverability, useful lives and valuation of recorded amounts of long-lived assets, identifiable intangible assets and goodwill. Changes in estimates are reflected in the periods during which they become known. Actual amounts will differ from these estimates and could differ materially.

Cash Equivalents—We consider all highly liquid investments with maturities of approximately three months or less as of the acquisition date to be cash equivalents.

Our cash and cash equivalents totaled $84.8 million at June 30, 2018. The majority of this amount was held by our subsidiaries primarily in Mexico, United Kingdom, Malaysia, and Singapore, and to a lesser extent in India, Canada, Germany and China among others. We have cash holdings that exceed insured limits for financial institutions; however, we mitigate this risk by utilizing high credit quality financial institutions throughout the world.

Accounts Receivable—We monitor collections and payments from our customers and we maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We also assess current economic trends that might impact the level of credit losses in the future. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances could be required.

Components of accounts receivable consisted of (in thousands):

	June 30,
	2017			2018
Accounts receivables	$	216,089		$	221,240
Less allowance for doubtful accounts		(9,563	)		(10,496	)

Total	$	206,526		$	210,744

Inventories—Inventories are generally stated at the lower of cost (first-in, first-out) or net realizable value. We write down inventory for slow-moving and obsolete inventory based on assessments of future demands, market conditions among other items. If these factors are less favorable than those projected, additional inventory write-downs may be required.

Property and Equipment—Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are charged while assets are used in service and are computed using the straight-line method over the estimated useful lives of the assets taking into consideration any estimated salvage value. Amortization of leasehold improvements is calculated on the straight-line method over the shorter of the useful life of the asset or the lease term. Leased capital assets are included in property and equipment. Amortization of property and equipment under capital leases is included with depreciation expense. In the event that property and equipment are idle, as a result of excess capacity or the early termination, non-renewal or reduction in scope of a turnkey screening operation, such assets are assessed for impairment on a periodic basis or if any indicators of impairment exist. As more fully described in note 6, during the fourth quarter of fiscal 2017, we determined that certain fixed assets related to our turnkey security screening program in Mexico that are not in use were permanently impaired.

Goodwill and Other Intangible Assets and Valuation of Long-Lived Assets—Goodwill represents the excess purchase price over the fair value of the net assets acquired in business combinations. Goodwill is allocated to our segments based on the nature of the product line of the acquired business. The carrying value of goodwill is not amortized, but is annually tested for impairment during our second quarter and more often if there is an indicator of impairment. We assess qualitative factors of each our three reporting units to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. The assessments conducted as of December 31, 2017 indicated that it is not more likely than not that the fair values are less than their carrying amounts, including goodwill. Thus, we have determined that it is not necessary to proceed with the two-step goodwill impairment test and that there is no goodwill impairment for any of our reporting units.

We evaluate long-lived assets with finite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are less than the carrying amount of the assets. If impairment does exist, we measure the impairment loss and record it based on the discounted estimate of future cash flows. In estimating future cash flows, we group assets at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows from other asset groups. Our estimate of future cash flows is based upon, among other things, certain assumptions about expected future operating performance, growth rates and other factors.

Income Taxes—Deferred income taxes are provided for temporary differences between the financial statement and income tax basis of our assets and liabilities, based on enacted tax rates. A valuation allowance is provided when it is more likely than not that some portion or all of the deferred income tax assets will not be realized. Income tax accounting standards prescribe a two-step process for the financial statement measurement and recognition of a tax position taken or expected to be taken in a tax return. The first step involves the determination of whether it is more likely than not (greater than 50 percent likelihood) that a tax position will be sustained upon examination, based on the technical merits of the position. The second step requires that any tax position that meets the more-likely-than-not recognition threshold be measured and recognized in the financial statements at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. See note 9 for additional information.

U.S. Tax Reform—On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Act. In connection with the enactment of the Tax Act, we recognized a charge of $55 million for the fiscal year ended June 30, 2018. The charge included our current estimate of the tax on accumulated overseas profits and the revaluation of deferred tax assets and liabilities. As we have a June 30 fiscal year end, the Tax Act's lower corporate tax rate will be phased in, and resulted in a U.S. statutory federal tax rate of approximately 28% for the fiscal year ending June 30, 2018. The provisional estimates are based on our initial analysis of the Tax Act. The changes included in the Tax Act are broad and complex. The final impacts of the Tax Act may differ materially from the amounts estimated due to, among other things, changes in interpretation of the Tax Act, any legislative action that may be taken to address questions arising due to the Tax Act, any changes in accounting standards for income taxes or related interpretations in response to the Tax Act or any updates or changes to estimates we have utilized to calculate the impacts, including impacts from changes to current year earnings estimates and foreign exchange rates. The SEC has issued rules, including Staff Accounting Bulletin 118, that allow for a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impacts. We anticipate finalizing and recording any resulting adjustments during the quarter ending December 31, 2018.

Fair Value of Financial Instruments—Our financial instruments consist primarily of cash and cash equivalents, marketable securities, derivative instruments, accounts receivable, accounts payable and debt instruments. The carrying values of financial instruments, other than long term debt instruments, are representative of their fair values due to their short term maturities. The carrying values of our long term debt instruments are considered to approximate their fair values because the interest rates of these instruments are variable or comparable to current rates available to us.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. "Level 1" category includes assets and liabilities at quoted prices in active markets for identical assets and liabilities. "Level 2" category includes assets and liabilities from observable inputs other than quoted market prices. "Level 3" category includes assets and liabilities for which valuation techniques are unobservable and significant to the fair value measurement. As of June 30, 2017 and 2018, there were no assets where "Level 3" valuation techniques were used. As further discussed in Note 10 to the condensed consolidated financial statements, our contingent payment obligations related to acquisitions are valued using "Level 3" valuation techniques on a recurring basis. The fair values of our financial assets and liabilities as of June 30, 2017 and 2018 are categorized as follows (in thousands):

	June 30, 2017								June 30, 2018
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Equity securities	$	254	$	—		—	$	254	$	—	$	—		—	$	—
Insurance company contracts		—		26,940		—		26,940		—		31,897		—		31,897
Interest rate contract		—		20		—		20		—		18		—		18

Total assets	$	254	$	26,960	$	—	$	27,214	$	—	$	31,915	$	—	$	31,915


Liabilities—Contingent payment obligations	$	—	$	—	$	11,840	$	11,840	$	—	$	—	$	15,713	$	15,713

Derivative Instruments and Hedging Activity—Our use of derivatives consists of an interest rate swap agreement. The interest rate swap agreement was entered into to improve the predictability of cash flows from interest payments related to variable, LIBOR based debt for the duration of the term loan. The interest rate swap matures in October 2019. The interest rate swap is considered an effective cash flow hedge, and, as a result, the net gains or losses on such instrument were reported as a component of Other comprehensive income in the consolidated financial statements and are reclassified as net income when the hedge transaction settles.

Revenue Recognition—Product Sales. We recognize revenue from sales of products upon shipment when title and risk of loss passes and when terms are fixed and collection is probable. In an instance where terms of a product sale include subjective customer acceptance criteria, revenue is deferred until we have achieved the acceptance criteria unless customer acceptance terms are perfunctory or inconsequential.

Service Revenue. Revenue from services includes after-market services, installation and implementation of products and turnkey security screening services. Generally, revenue from services is recognized when the services are performed. Revenues from out-of-warranty service maintenance contracts are recognized ratably over the respective terms of such contracts. Deferred revenue for such services arises from payments received from customers for services not yet performed.

Multiple-Deliverable Arrangements. We enter into certain agreements with customers for the sale of capital equipment involving multiple elements that may include civil works to prepare a site for the installation of equipment, manufacture and delivery of equipment, installation and integration of equipment, training of customer personnel to operate the equipment and after-market service of the equipment. The timetable for fulfilment of each of these deliverables can range from completion in a short amount of time and entirely within a single reporting period to completion over several reporting periods. The general timing of revenue recognition for each deliverable may be dependent upon several milestones, including physical delivery of equipment, completion of factory acceptance test, completion of site acceptance test, installation and connectivity of equipment, certification of training of personnel and, in the case of after-market service deliverables, the passage of time (typically evenly over the post-warranty period of the service deliverable).

Multiple-deliverable arrangements require that consideration be allocated to each deliverable based on its relative selling price and recognized as revenue when the revenue recognition criteria for each deliverable has been met. The arrangement is separated into more than one unit of accounting if the delivered item has value to the customer on a stand-alone basis; and with respect to an arrangement including a general right of return relative to the delivered item, delivery or performance of the undelivered item is considered probable and substantially within our control. If these criteria are not met, the arrangement is accounted for as one unit of accounting and the recognition of revenue is deferred until delivery is complete or is recognized ratably over the contract period as appropriate. If these criteria are met, consideration is allocated at inception of the arrangement to all deliverables on the basis of the relative selling price. We have generally met these criteria for multiple-deliverable arrangements as all of the deliverables in our arrangements have stand-alone value in that either the customer can resell that item or another vendor sells that item separately. We typically do not offer a general right of return in our multiple-deliverable arrangements.

The selling price of each deliverable is determined by establishing vendor-specific objective evidence ("VSOE"), third party evidence ("TPE") or best estimate of selling price ("BESP") for each delivered item. Generally, either VSOE or TPE is determinable; however, in the few instances where neither VSOE nor TPE is determinable, we utilize our BESP in order to allocate consideration to those deliverables. BESP for our product deliverables is determined by utilizing a weighted average price approach. BESP for our service deliverables is determined primarily by utilizing a cost-plus margin approach, though in some instances average price per hour is used.

We often provide a guarantee to support our performance under multiple-deliverable arrangements. In the event that customers are permitted to terminate such arrangements, the underlying contract typically requires payment for deliverables and reimbursement of costs incurred through the date of termination.

Proportional Performance. In connection with our previous agreement with the Servicio de Administración Tributaria ("SAT") in Mexico, in effect through January 13, 2018, revenue had been recognized based upon proportional performance, measured by the actual number of labor hours incurred divided by the total estimated number of labor hours for the project. The impact of changes in the estimated labor hours to service the agreement was reflected in the period during which the change became known. In the SAT agreement, customer billings were submitted for several separate deliverables, including monthly services, activation of services, training of customer personnel and consultation on the design and location of security scanning operations, among others. In the event that payments received from the customer exceeded revenue recognition, deferred revenue was recorded. In January 2018, we entered into a new, two-year contract with SAT to provide security screening services. Revenue under the new contract is recognized as Service revenues as services are performed. Critical judgments made by management related to revenue recognition include the determination of whether or not customer acceptance criteria are perfunctory or inconsequential. The determination of whether or not customer acceptance terms are perfunctory or inconsequential impacts the amount and timing of revenue recognition. Critical judgments also include estimates of warranty reserves, which are established based on historical experience and knowledge of the product under warranty.

Freight—We record shipping and handling fees that we charge to our customers as revenue and related costs as cost of goods sold.

Research and Development Costs—Research and development costs are those costs related to the development of a new product, process or service, or significant improvement to an existing product, process or service. Such costs are charged to operations as incurred.

Stock-Based Compensation—Stock-based compensation cost is measured at the grant date based on the estimated fair value of the award and is recognized as expense over the employee's requisite service period for all stock-based awards granted or modified. Certain restricted stock unit awards vest based on the achievement of pre-established performance criteria. The fair value of performance-based awards is estimated at the date of grant based upon the probability that the specified performance criteria will be met, adjusted for estimated forfeitures. Each quarter we update our assessment of the probability that the specified performance criteria will be achieved and adjust the estimate of the fair value of the performance-based awards if necessary. We amortize the fair value of performance-based awards over the requisite service period for each separately vesting tranche of the award. See note 8 to the consolidated financial statements.

Impairment, Restructuring and Other Charges—We account for certain charges related to restructuring activities, litigation, acquisition-related costs and other non-routine charges as Impairment, restructuring and other charges in the consolidated financial statements. See note 6 for additional information about these charges.

Credit Risk and Concentration—Financial instruments that are potentially subject to concentrations of credit risk consist primarily of cash, cash equivalents, marketable securities and accounts receivable. We restrict investments in cash equivalents to financial institutions with high credit standing. Credit risk on accounts receivable is minimized as a result of the large and diverse nature of our company's worldwide customer base. As of June 30, 2017 and 2018, no customer accounted for greater than 10% of accounts receivable. SAT accounted for 14% and 12% of revenues for the fiscal years ended June 30, 2016 and 2017, respectively. No customer accounted for greater than 10% of revenues for the fiscal year ended June 30, 2018. We perform ongoing credit evaluations of our customers' financial condition and maintain allowances for potential credit losses.

Our cash and cash equivalents totaled $169.7 and $84.8 million at June 30, 2017 and 2018, respectively. Of these amounts, approximately 99% and 86% was held by our foreign subsidiaries at June 30, 2017 and 2018, respectively.

We rely primarily on one vendor that provides key components to the Optoelectronics and Manufacturing division. While management believes that relying on key vendors improves the efficiency and reliability of business operations, relying on any one vendor for a significant aspect of business can have a significant negative impact on revenue and profitability if that vendor fails to perform at acceptable service levels for any reason, including financial difficulties of the vendor.

Foreign Currency Translation and Transactions—We transact business in various foreign currencies. In countries where the functional currency of the underlying operations has been determined to be the local country's currency, revenues and expenses of operations outside the United States are translated into United States dollars using average exchange rates while assets and liabilities of operations outside the United States are translated into United States dollars using period-end exchange rates. The effects of foreign currency translation adjustments are included in stockholders' equity as a component of accumulated other comprehensive income (loss) in the accompanying consolidated balance sheets. Transaction gains and losses, which were included in our consolidated statement of operations, amounted to a gain (loss) of approximately $(0.8) million, $2.0 million and $(1.3) million for the fiscal years ended June 30, 2016, 2017 and 2018, respectively.

Business Combinations—Under ASC 805, the acquisition method of accounting requires us to record assets acquired and liabilities assumed from an acquisition at their estimated fair values at the date of acquisition. Any excess of the total estimated purchase price over the estimated fair value of the net assets acquired should be recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired customers, acquired technology, trade names, useful lives and discount rates. Management's estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is one year from the acquisition date, as additional information becomes available for preliminary estimates, we may record adjustments to the preliminary assets acquired and liabilities assumed. Upon the conclusion of the measurement period, any subsequent adjustments are included in earnings.

Earnings per Share—Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income available to common stockholders by the sum of the weighted average number of common and dilutive potential common shares outstanding. Potential common shares consist of the shares issuable upon the exercise of stock options and restricted stock or units awards under the treasury stock method. For each period presented where we reported a net loss, the effect of all potentially dilutive securities would be antidilutive, and, as a result, diluted net loss per common share is the same as basic net loss per common share. Potentially dilutive shares associated with stock option and stock awards of 0.1 million shares, 0.1 million shares, and 1.3 million shares for the fiscal years ending June 30, 2016, 2017, and 2018, respectively, were excluded for the calculation because to do so would have been antidilutive.

The following table sets forth the computation of basic and diluted earnings per share for the fiscal years ended June 30 (in thousands, except earnings per share data):

	2016		2017		2018
Net income (loss) available to common stockholders	$	26,157	$	21,076	$	(29,127	)


Weighted average shares outstanding—basic		19,427		18,894		18,592
Dilutive effect of equity awards		649		795		—

Weighted average shares outstanding—diluted		20,076		19,689		18,592


Basic earnings (loss) per share	$	1.35	$	1.12	$	(1.57	)


Diluted earnings (loss) per share	$	1.30	$	1.07	$	(1.57	)

Warranty Provision—We offer our customers warranties on many of the products that we sell. These warranties typically provide for repairs and maintenance of the products if problems arise during a specified time period after original shipment. Concurrent with the sale of products, we record a provision for estimated warranty expenses with a corresponding increase in cost of goods sold. We periodically adjust this provision based on historical experience and anticipated expenses. We charge actual expenses of repairs under warranty, including parts and labor, to this provision when incurred. The warranty provision is included in Other accrued expenses and current liabilities in the consolidated balance sheets, whose activity for each of the three fiscal years ended June 30, 2018 is summarized in the following table (in thousands)

Warranty provision as of June 30, 2015	$	12,738
Warranty claims provided for/assumed in acquisition		12,296
Settlements made		(9,086	)

Warranty provision as of June 30, 2016	$	15,948
Warranty claims provided for/assumed in acquisition		5,793
Settlements made		(6,563	)

Warranty provision as of June 30, 2017	$	15,178
Warranty claims provided for/assumed in acquisition		14,156
Settlements made		(7,515	)

Warranty provision as of June 30, 2018	$	21,819

Recent Accounting Guidance

Recently Adopted Accounting Pronouncements

Goodwill

In January 2017, FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which eliminates Step 2, the computation of the implied fair value of goodwill to determine the amount of impairment, from the goodwill impairment test. In computing the implied fair value of goodwill for Step 2 under current accounting standards, we calculate the fair value of our assets and liabilities as if acquired or assumed in a business combination. Under the amendments in this update, we will determine the amount of goodwill impairment by comparing the Step 1 fair value of a reporting unit with its carrying amount. To the extent the carrying value of a reporting unit exceeds its Step 1 fair value, a goodwill impairment charge is recognized. We elected to early adopt the new standard effective October 1, 2017, because the ASU significantly simplifies the evaluation of goodwill for impairment. The adoption of this standard did not have an impact on our financial condition and results of operations.

Recently Issued Accounting Pronouncements Not Yet Adopted

ASC Topic 606 Discussion.

New revenue recognition guidance, which was issued in May 2014 and amended thereafter, is effective for public companies for annual reporting periods beginning after December 15, 2017, including interim periods within those reporting periods. The new revenue standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. In addition, the new standard provides guidance on accounting for certain revenue-related costs including costs associated with obtaining and fulfilling a contract and requires additional disclosures about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts.

The new revenue recognition standard is effective for us for the fiscal year beginning July 1, 2018. We adopted the standard using the modified retrospective transition method, whereby the cumulative impact of all prior periods will be recorded in retained earnings or other impacted balance sheet line items as of July 1, 2018. Under this method, financial positions and results for previous fiscal years would not be adjusted, but certain disclosures will be required for comparative purposes.

We have preliminiarily identified the changes in reporting of sales commissions and other third party fees and timing of software revenue, in each case as set forth in further detail below.

While we are still in the process of quantifying the impact of the new standard on our financial statements, we have not thus far found there to be a material impact. We continue to evaluate potential impacts of the new standard. The preliminary assessment completed thus far is subject to change.

Sales Commissions and Other Third Party Fees

In the normal course of business, we pay sales commissions and other fees to employees and third parties. Under the new guidance, sales commissions and fees are reported as operating expense unless the consideration is paid to the customer directly or through the distribution chain in which case they are reported as a net reduction to revenue. We have performed an analysis of the new accounting guidance as compared to our current accounting policies for sales commissions and have determined that adoption of the new guidance will result in presenting certain commissions and fees as operating expenses. This reclassification is not expected to have a significant effect on margins and will have no effect on operating income.

Timing of Software Revenue

Our Healthcare division sells stand-alone software for use with certain of our equipment. Through the end of fiscal 2018, we recognized revenue on the stand-alone software when the software was shipped. ASC 606 requires revenue recognition when the customer has access to the software. Upon adoption of the new standard, we anticipate there will be a timing difference when software revenue can be recognized. These software sales are not material to our overall business.

Leases

In February 2016, the FASB issued an ASU which affects the accounting for leases. The guidance requires lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months. The amendment also will require qualitative and quantitative disclosures designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases. This ASU is effective for us in the first quarter of fiscal 2020 with early adoption permitted. We have not yet adopted this ASU and are currently evaluating the impact it may have on our financial condition and results of operations.

Cash flow statement

In August 2016, the FASB issued an ASU to address the diverse classifications being applied to cash receipts and payments in reporting companies' cash flow statements. This ASU addresses eight specific cash flow issues to reduce divergence in practice. This ASU is effective for fiscal years beginning after December 15, 2017, including interim reporting periods within such fiscal years. We have not yet adopted this ASU and are currently evaluating the impact it may have on our financial condition and results of operations.

Subsequent Events

On July 31, 2018, we (through our Optoelectronics and Manufacturing division) acquired an optoelectronics solutions business for $17.5 million, plus up to $1 million in potential earnout consideration. The acquisition was financed with cash on hand and borrowings under our existing revolving bank line of credit.

ACQUISITION ACTIVITY

12 Months Ended

Jun. 30, 2018

ACQUISITION ACTIVITY

ACQUISITION ACTIVITY

2. ACQUISITION ACTIVITY

Acquisition of Explosive Trace Detection Business

On July 7, 2017, we acquired the global explosive trace detection business ("ETD") from Smiths Group plc. This acquisition was a carve out from a larger entity. We financed the total purchase price of $80.5 million with a combination of cash on hand and borrowings under our existing revolving bank line of credit.

The valuation of certain assets and liabilities of ETD were performed by a third party valuation specialist. Changes in the fair values of assets and liabilities from what was previously reported in our condensed consolidated financial statements are primarily a result of additional information that impacted our estimates of fair value and conformance to our accounting policies.

The major classes of assets and liabilities to which we allocated the purchase price as of June 30, 2018 were as follows (in thousands):

Cash and cash equivalents	$	4
Accounts receivable, net		15,517
Inventories		11,678
Property and equipment		1,599
Intangible assets		30,370
Deferred tax asset		2,738
Other long-term assets		297
Accounts payable		(4,784	)
Accrued payroll and related expenses		(2,116	)
Deferred revenues—current		(924	)
Accrued warranties		(2,068	)
Advances from customers		(670	)
Other accrued expenses and current liabilities		(1,074	)
Deferred revenues—long term		(232	)

Net assets acquired		50,335
Goodwill		30,132

Total consideration	$	80,467

The goodwill is largely attributable to expected growth, intellectual capital and the assembled workforce of the ETD business. Intangible assets are recorded at estimated fair value, as determined by management based on available information, with assistance from a third party. The fair value attributed to the intangible assets acquired was based on estimates, assumptions and other information compiled by management, and valuations that utilized established valuation techniques. The value attributed to goodwill and intangible assets is partially non-deductible for income tax purposes. The following table summarizes the fair value of acquired identifiable intangible assets as of the acquisition date (amounts in thousands):

	Weighted Average Lives	Fair Value
Amortizable assets:
Developed technology	10 years	$	14,210
Customer relationships/backlog	7 years		16,070
In-process research and development (“IPR&D”)			90

Total intangible assets		$	30,370

Our condensed consolidated statements of operations include $76.5 million of revenue and $10.7 million of income from operations from ETD for the period from July 7, 2017 to June 30, 2018.

The following unaudited pro forma results of operations assume the ETD acquisition had occurred on July 1, 2016 (in thousands):

	2016		2017
Revenues	$	909,171	$	1,036,814
Income from operations	$	60,550	$	46,725

Significant pro forma adjustments incorporated into the pro forma results above include the recognition of additional amortization expense related to acquired intangible assets. The pro forma results for the years ended June 30, 2016 and June 30, 2017 were carved out from the operations of the business when it was owned by its former parent. These carve-out results have been prepared from the historical accounts of its former parent, and include revenues and expenses specifically identified to ETD, and allocations of certain overhead expenses. These pro forma results were based on estimates and assumptions, which we believe are reasonable. They are prepared for comparative purposes only and do not necessarily reflect the results that would have been realized had the ETD acquisition occurred at the beginning of the periods presented and are not necessarily indicative of our consolidated results of operations in future periods.

Acquisition of American Science and Engineering

On September 9, 2016, we acquired by merger 100% ownership of American Science and Engineering, Inc. ("AS&E"), a leading provider of detection solutions for advanced cargo, parcel, and personnel inspection. AS&E's operations are included in our Security division. We financed the total cash merger consideration of $266 million with a combination of cash on hand and borrowings under our existing revolving bank line of credit, and also issued restricted stock units ("RSUs") of the Company to replace RSUs previously issued by AS&E. Immediately following the close of the acquisition, we used $69 million of AS&E's existing cash on hand to pay down the revolving bank line of credit. The valuation of the estimated fair value of the assets acquired and liabilities assumed as a result of this business combination has been finalized.

The major classes of assets and liabilities, reconciled to total purchase consideration (in thousands):

Cash and cash equivalents	$	79,195
Accounts receivable		24,607
Inventories		27,495
Other current assets		7,450
Property and equipment		5,337
Intangible assets		74,800
Other long-term assets		201
Accounts payable		(5,044	)
Accrued payroll and related expenses		(4,723	)
Deferred revenues—current		(11,281	)
Advances from customers		(13,784	)
Other accrued expenses and current liabilities		(7,279	)
Deferred revenues—long term		(3,225	)
Deferred income tax liability		(9,580	)
Other long-term liabilities		(14,004	)

Net assets acquired		150,165
Goodwill		115,838

Total consideration	$	266,003

The goodwill is largely attributable to expected synergies between us and AS&E and the assembled workforce of AS&E.

Intangible assets are recorded at estimated fair value, as determined by management based on available information, which includes a valuation prepared by an independent third party. The fair value attributed to the intangible assets acquired was based on estimates, assumptions and other information compiled by management, including independent valuations that utilized established valuation techniques. The value attributed to goodwill and intangible assets is not deductible for income tax purposes. The following table summarizes the fair value of acquired identifiable intangible assets as of the acquisition date (amounts in thousands):

	Weighted Lives Average	Gross Carrying Value
Amortizable assets:
Developed technology	10 years	$	31,750
Customer relationships/backlog	7 years		27,550
In-process research and development ("IPR&D")	5 years		3,200

Total amortizable assets			62,500
Non-amortizable assets:
Trademarks and trade names			12,300

Total intangible assets		$	74,800

The condensed consolidated statements of operations include $94.0 million of revenue and $8.7 million of pre-tax income from AS&E® for the period from September 10, 2016 to June 30, 2017.

The following unaudited pro forma results of operations are prepared for comparative purposes only and do not necessarily reflect the results that would have occurred had the acquisition occurred at the beginning of the earliest period presented or the results which may occur in the future. The following unaudited pro forma results of operations assume the AS&E® acquisition had occurred on July 1, 2015 (in thousands):

	2016		2017
Revenues	$	928,679	$	978,706
Income before taxes	$	2,223	$	5,856

Significant pro forma adjustments incorporated into the unaudited pro forma results above include the recognition of additional amortization expense related to acquired intangible assets and additional interest expense related to debt incurred to finance the acquisition. In addition, significant non-recurring adjustments include the elimination and shift to the comparable periods in the prior year of non-recurring acquisition-related expenses and employee termination costs related to the integration of AS&E® into the operations of our Security division. Total eliminations for these items during fiscal year ending 2016 and 2017, were $28.6 million and $13.9 million, respectively, and these have been added to the comparable periods in the prior year.

Other Acquisitions

In July 2017, we (through our Security division) completed an acquisition of a privately held technology company. The acquisition purchase price was financed with cash on hand and was in an amount including potential earnout consideration determined to be insignificant by management.

On January 12, 2018, we (through our Optoelectronics and Manufacturing division) acquired an electronics component designer and manufacturer for approximately $22 million, plus up to $6 million in potential earnout consideration. In aggregate, $12.6 million was attributed to intangible assets, $14.0 million was attributed to goodwill, and $3.3 million was attributed to net assets acquired. The acquisition was financed with cash on hand and borrowings under our existing revolving bank line of credit.

INVENTORIES

12 Months Ended

Jun. 30, 2018

INVENTORIES

INVENTORIES

3. INVENTORIES

Inventory consisted of the following (in thousands):

	June 30,
	2017		2018
Raw materials	$	129,645	$	156,612
Work-in-process		65,454		89,468
Finished goods		53,411		67,472

Total	$	248,510	$	313,552

PROPERTY AND EQUIPMENT

12 Months Ended

Jun. 30, 2018

PROPERTY AND EQUIPMENT

PROPERTY AND EQUIPMENT

4. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following (in thousands):

		June 30,
	Estimated Useful Lives	June 30,
	Estimated Useful Lives	2017			2018
Land	N/A	$	14,212		$	16,569
Buildings, civil works and improvements	5-40 years		157,123			56,585
Leasehold improvements	1-13 years		9,025			9,681
Equipment and tooling	3-10 years		166,991			117,294
Furniture and fixtures	3-10 years		3,371			3,331
Computer equipment	3-5 years		17,991			18,759
Computer software	3-10 years		17,303			19,509
Computer software implementation in process	N/A		2,590			4,318
Construction in process	N/A		1,049			790

Total			389,655			246,836
Less accumulated depreciation and amortization			(248,116	)		(131,312	)

Property and equipment, net		$	141,539		$	115,524

During fiscal 2016, 2017 and 2018, depreciation expense was approximately $52.2 million, $56.0 million and $43.3 million, respectvely. In September 2017, we purchased the AS&E facility in Billerica, MA for $19.8 million.

In January 2018, we entered into a new two-year agreement with the Mexican government to provide security screening services. Upon inception of the new contract, we transferred certain fixed assets with a net book value of $29.5 million to the customer, and this remaining cost to obtain the contract is amortized on a straightline basis over the term of the contract as corresponding revenues are recognized. During fiscal 2018, we recognized $6.9 million of amortization expense related to such assets. As of June 30, 2018, $14.7 million and $7.9 million are recorded within Prepaid expenses and other current assets and Other assets, respectively.

GOODWILL AND INTANGIBLE ASSETS

12 Months Ended

Jun. 30, 2018

GOODWILL AND INTANGIBLE ASSETS

GOODWILL AND INTANGIBLE ASSETS

5. GOODWILL AND INTANGIBLE ASSETS

The changes in the carrying amount of goodwill for fiscal 2017 and 2018 are as follows (in thousands):

	Security Division			Healthcare Division			Optoelectronics and Manufacturing Division			Consolidated
Balance as of June 30, 2016	$	32,922		$	42,574		$	47,323		$	122,819
Goodwill acquired or adjusted during the period		122,022			—			—			122,022
Goodwill reduced as part of a divestiture		—			(2,200	)		—			(2,200	)
Foreign currency translation adjustment		139			(245	)		(406	)		(512	)

Balance as of June 30, 2017	$	155,083		$	40,129		$	46,917		$	242,129
Goodwill acquired or adjusted during the period		36,889			—			13,986			50,875
Foreign currency translation adjustment		(162	)		28			(657	)		(791	)

Balance as of June 30, 2018	$	191,810		$	40,157		$	60,246		$	292,213

The measurement periods for the valuation of assets and liabilities acquired may extend up to one year. Adjustments in purchase price allocations may require a change in the amounts allocated to goodwill during the periods in which the adjustments are determined.

Intangible assets subject to amortization consisted of the following (in thousands):