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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number 000-23125

Graphic

OSI SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Delaware

    

33-0238801

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

12525 Chadron Avenue

Hawthorne, California 90250

(Address of principal executive offices) (Zip Code)

(310) 978-0516

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value

OSIS

The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer 

   

Accelerated filer 

Non-accelerated filer 

Smaller reporting company 

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No 

As of April 22, 2021, there were 17,980,207 shares of the registrant’s common stock outstanding.

Table of Contents

OSI SYSTEMS, INC.

INDEX

PAGE

PART I — FINANCIAL INFORMATION

3

Item 1 —

Financial Statements (Unaudited)

3

Condensed Consolidated Balance Sheets at June 30, 2020 and March 31, 2021

3

Condensed Consolidated Statements of Operations for the three and nine months ended March 31, 2020 and 2021

4

Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended March 31, 2020 and 2021

5

Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended March 31, 2020 and 2021

6

Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2020 and 2021

8

Notes to Condensed Consolidated Financial Statements

9

Item 2 —

Management’s Discussion and Analysis of Financial Condition and Results of Operations

25

Item 3 —

Quantitative and Qualitative Disclosures about Market Risk

32

Item 4 —

Controls and Procedures

32

PART II — OTHER INFORMATION

33

Item 1 —

Legal Proceedings

33

Item 1A —

Risk Factors

33

Item 2 —

Unregistered Sales of Equity Securities and Use of Proceeds

33

Item 3 —

Defaults Upon Senior Securities

33

Item 4 —

Mine Safety Disclosures

33

Item 5 —

Other Information

33

Item 6 —

Exhibits

34

Signatures

35

2

Table of Contents

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

OSI SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(amounts in thousands, except share amounts and par value)

June 30, 

March 31, 

    

2020

    

2021

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

76,102

$

92,465

Accounts receivable, net

 

269,840

 

258,594

Inventories

 

241,226

 

283,523

Prepaid expenses and other current assets

 

30,541

 

26,828

Total current assets

 

617,709

 

661,410

Property and equipment, net

 

127,936

 

125,477

Goodwill

 

310,627

 

319,211

Intangible assets, net

 

128,279

 

130,058

Other assets

 

83,990

 

89,804

Total assets

$

1,268,541

$

1,325,960

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:

Bank lines of credit

$

59,000

$

Current portion of long-term debt

 

926

 

925

Accounts payable

 

84,940

 

122,719

Accrued payroll and related expenses

 

46,127

 

40,860

Advances from customers

 

28,155

 

48,132

Other accrued expenses and current liabilities

 

110,953

 

113,433

Total current liabilities

 

330,101

 

326,069

Long-term debt

 

267,072

 

273,997

Deferred income taxes

 

5,846

 

1,507

Other long-term liabilities

 

93,370

 

108,494

Total liabilities

 

696,389

 

710,067

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, 18,011,982 shares at June 30, 2020 and 17,980,207 shares at March 31, 2021

 

122,553

 

110,744

Retained earnings

 

474,793

 

522,948

Accumulated other comprehensive loss

 

(25,194)

 

(17,799)

Total stockholders’ equity

 

572,152

 

615,893

Total liabilities and stockholders’ equity

$

1,268,541

$

1,325,960

See accompanying notes to condensed consolidated financial statements.

3

Table of Contents

OSI SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(amounts in thousands, except per share data)

Three Months Ended March 31, 

Nine Months Ended March 31, 

    

2020

    

2021

    

2020

2021

Net revenues:

    

    

    

    

Products

$

213,257

$

217,124

$

646,790

$

608,238

Services

 

79,626

 

66,663

 

242,287

 

206,466

Total net revenues

 

292,883

 

283,787

 

889,077

 

814,704

Cost of goods sold:

Products

 

141,069

 

144,958

 

436,120

 

409,692

Services

 

42,707

 

34,810

 

133,866

 

103,161

Total cost of goods sold

 

183,776

 

179,768

 

569,986

 

512,853

Gross profit

 

109,107

 

104,019

 

319,091

 

301,851

Operating expenses:

Selling, general and administrative

 

65,576

 

57,906

 

191,655

 

172,624

Research and development

 

15,358

 

13,932

 

44,485

 

39,798

Impairment, restructuring and other charges (benefit), net

 

4,548

 

(285)

 

1,520

 

7,912

Total operating expenses

 

85,482

 

71,553

 

237,660

 

220,334

Income from operations

 

23,625

 

32,466

 

81,431

 

81,517

Interest and other expense, net

 

(4,706)

 

(4,167)

 

(14,286)

 

(12,589)

Income before income taxes

 

18,919

 

28,299

 

67,145

 

68,928

(Provision) benefit for income taxes

 

639

 

(9,526)

 

(5,858)

 

(20,773)

Net income

$

19,558

$

18,773

$

61,287

$

48,155

Earnings per share:

Basic

$

1.08

$

1.04

$

3.36

$

2.68

Diluted

$

1.06

$

1.03

$

3.28

$

2.63

Shares used in per share calculation:

Basic

 

18,182

 

17,969

 

18,251

 

17,981

Diluted

 

18,513

 

18,298

 

18,693

 

18,278

See accompanying notes to condensed consolidated financial statements.

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OSI SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(amounts in thousands)

    

Three Months Ended March 31, 

Nine Months Ended March 31, 

2020

    

2021

    

2020

    

2021

Net income

$

19,558

$

18,773

$

61,287

$

48,155

Other comprehensive income (loss):

Foreign currency translation adjustment

 

(8,314)

 

(503)

 

(8,726)

 

7,219

Other

10

59

29

176

Other comprehensive income (loss)

(8,304)

(444)

(8,697)

7,395

Comprehensive income

$

11,254

$

18,329

$

52,590

$

55,550

See accompanying notes to condensed consolidated financial statements.

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OSI SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

(amounts in thousands, except share data)

Three Months Ended March 31, 2020

Accumulated

Common Stock

Other

    

Number of

    

    

Retained

    

Comprehensive

    

Shares

Amount

Earnings

Loss

Total

Balance—December 31, 2019

 

18,267,574

$

133,566

$

441,270

$

(17,120)

$

557,716

Exercise of stock options

 

1,041

80

80

Vesting of RSUs

 

1,671

Shares issued under employee stock purchase program

 

36,758

2,221

2,221

Stock-based compensation expense

 

5,837

5,837

Repurchase of common stock

(295,833)

(24,781)

(24,781)

Taxes paid related to net share settlement of equity awards

 

(586)

(51)

(51)

Net income

 

19,558

19,558

Other comprehensive loss

 

(8,304)

(8,304)

Balance—March 31, 2020

18,010,625

$

116,872

$

460,828

$

(25,424)

$

552,276

Three Months Ended March 31, 2021

Accumulated

Common Stock

Other

    

Number of

    

    

Retained

    

Comprehensive

    

Shares

Amount

Earnings

Loss

Total

Balance—December 31, 2020

17,933,256

$

100,816

$

504,175

$

(17,355)

$

587,636

Exercise of stock options

9,703

624

624

Vesting of RSUs

6,519

Shares issued under employee stock purchase program

35,539

2,193

2,193

Stock-based compensation expense

7,565

7,565

Repurchase of common stock

(2,452)

(235)

(235)

Taxes paid related to net share settlement of equity awards

(2,358)

(219)

(219)

Net income

18,773

18,773

Other comprehensive loss

(444)

(444)

Balance—March 31, 2021

 

17,980,207

$

110,744

$

522,948

$

(17,799)

$

615,893

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Nine Months Ended March 31, 2020

Accumulated

Common Stock

Other

    

Number of

    

    

Retained

    

Comprehensive

    

Shares

Amount

Earnings

Loss

Total

Balance—June 30, 2019

 

18,167,020

$

168,913

$

399,541

$

(16,727)

$

551,727

Exercise of stock options

 

201,003

 

4,112

 

 

 

4,112

Vesting of RSUs

 

388,756

 

 

 

 

Shares issued under employee stock purchase program

 

71,595

 

4,286

 

 

 

4,286

Stock-based compensation expense

 

 

18,097

 

 

 

18,097

Repurchase of common stock

(562,707)

(51,775)

(51,775)

Taxes paid related to net share settlement of equity awards

 

(255,042)

 

(26,761)

 

 

 

(26,761)

Net income

 

 

 

61,287

 

 

61,287

Other comprehensive loss

 

 

 

 

(8,697)

 

(8,697)

Balance—March 31, 2020

18,010,625

$

116,872

$

460,828

$

(25,424)

$

552,276

Nine Months Ended March 31, 2021

Accumulated

Common Stock

Other

    

Number of

    

    

Retained

    

Comprehensive

    

Shares

Amount

Earnings

Loss

Total

Balance—June 30, 2020

 

18,011,982

$

122,553

$

474,793

$

(25,194)

$

572,152

Exercise of stock options

 

87,235

1,187

1,187

Vesting of RSUs

 

310,939

Shares issued under employee stock purchase program

 

68,180

4,215

4,215

Stock-based compensation expense

 

19,386

19,386

Repurchase of common stock

(322,588)

(25,051)

(25,051)

Taxes paid related to net share settlement of equity awards

 

(175,541)

(11,546)

(11,546)

Net income

 

48,155

48,155

Other comprehensive income

 

7,395

7,395

Balance—March 31, 2021

17,980,207

$

110,744

$

522,948

$

(17,799)

$

615,893

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OSI SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(amounts in thousands)

Nine Months Ended March 31, 

2020

2021

CASH FLOWS FROM OPERATING ACTIVITIES

    

    

    

Net income

$

61,287

$

48,155

Adjustments to reconcile net income to net cash provided by operating activities, net of effects from acquisitions:

Depreciation and amortization

 

37,807

 

31,433

Stock-based compensation expense

 

18,097

 

19,386

Provision for losses on accounts receivable

2,641

6,176

Deferred income taxes

(50)

 

(1,364)

Amortization of debt discount and issuance costs

 

6,984

7,277

Impairment charges

3,258

552

Other

 

137

 

(217)

Changes in operating assets and liabilities—net of business acquisitions:

Accounts receivable

 

(23,945)

 

6,714

Inventories

 

28,871

 

(43,162)

Prepaid expenses and other assets

 

(18,127)

 

(4,263)

Accounts payable

 

10,243

 

37,113

Accrued payroll and related expenses

(5,655)

363

Advances from customers

 

(9,846)

 

19,468

Other

 

(6,149)

 

3,422

Net cash provided by operating activities

 

105,553

 

131,053

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of property and equipment

 

(16,062)

 

(11,155)

Purchases of certificates of deposit

(4,820)

Proceeds from maturities of certificates of deposit

2,690

Acquisition of business, net of cash acquired

 

(3,521)

 

(3,000)

Payments for intangible and other assets

 

(8,764)

 

(9,878)

Net cash used in investing activities

 

(28,347)

 

(26,163)

CASH FLOWS FROM FINANCING ACTIVITIES

Net borrowings (repayments) on bank lines of credit

 

7,000

 

(59,000)

Proceeds from long-term debt

 

592

 

413

Payments on long-term debt

 

(723)

 

(778)

Proceeds from exercise of stock options and employee stock purchase plan

 

8,398

 

5,402

Payments of contingent consideration

(5,265)

(854)

Repurchases of common stock

 

(51,775)

 

(25,051)

Taxes paid related to net share settlement of equity awards

 

(26,761)

 

(11,546)

Net cash used in financing activities

 

(68,534)

 

(91,414)

Effect of exchange rate changes on cash

 

(3,962)

 

2,887

Net change in cash and cash equivalents

 

4,710

 

16,363

Cash and cash equivalents—beginning of period

 

96,316

 

76,102

Cash and cash equivalents—end of period

$

101,026

$

92,465

Supplemental disclosure of cash flow information:

Cash paid, net during the period for:

Interest

$

6,773

$

5,721

Income taxes

$

16,141

$

8,074

See accompanying notes to condensed consolidated financial statements.

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OSI SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

The condensed consolidated financial statements include the accounts of OSI Systems, Inc. and our subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The condensed consolidated financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in conjunction with the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures required for annual financial statements have been condensed or excluded in accordance with SEC rules and regulations and GAAP applicable to interim unaudited financial statements. Accordingly, the condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for audited annual financial statements. In the opinion of management, the condensed consolidated financial statements reflect all adjustments of a normal and recurring nature that are considered necessary for a fair presentation of the results for the interim periods presented. These unaudited condensed consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2020 filed with the SEC. The results of operations for the three and nine months ended March 31, 2021 are not necessarily indicative of the operating results to be expected for the full 2021 fiscal year or any future periods.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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 liabilities assumed in business combinations, values for inventories reported at lower of cost or net realizable value, stock-based compensation expense, income taxes, accrued 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. Due to the inherent uncertainty involved in making estimates, our actual amounts reported in future periods could differ materially from these estimates.

Earnings Per Share Computations

We compute basic earnings per share by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. We compute diluted earnings per share by dividing net income available to common stockholders by the sum of the weighted average number of common shares and dilutive potential common shares outstanding during the period. Potential common shares consist of the shares issuable upon the exercise of stock options and restricted stock unit awards under the treasury stock method. The underlying equity component of the 1.25% convertible senior notes due 2022 (the “Notes”) discussed in Note 8 to the condensed consolidated financial statements will have a net impact on diluted earnings per share when the average price of our common stock exceeds the conversion price of $107.46 because the principal amount of the Notes is intended to be settled in cash upon conversion. There was no dilutive effect of the Notes for the three and nine months ended March 31, 2020 and 2021.

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The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts):

Three Months Ended March 31, 

Nine Months Ended March 31, 

    

2020

    

2021

    

2020

    

2021

Net income available to common stockholders

$

19,558

$

18,773

$

61,287

$

48,155

Weighted average shares outstanding—basic

 

18,182

 

17,969

 

18,251

 

17,981

Dilutive effect of equity awards

 

331

 

329

 

442

 

297

Weighted average shares outstanding—diluted

 

18,513

 

18,298

 

18,693

 

18,278

Basic earnings per share

$

1.08

$

1.04

$

3.36

$

2.68

Diluted earnings per share

$

1.06

$

1.03

$

3.28

$

2.63

Shares excluded from diluted earnings per share due to their anti-dilutive effect

145

51

100

64

Cash and Cash Equivalents

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

Our cash and cash equivalents totaled $92.5 million at March 31, 2021. Of this amount, approximately 58% was held by our foreign subsidiaries and subject to repatriation tax considerations. These foreign funds were held primarily by our subsidiaries in the United Kingdom, Malaysia, Canada, Singapore and India and to a lesser extent in Puerto Rico and Albania among other countries. We have cash holdings in financial institutions that exceed insured limits for such institutions; however, we mitigate this risk by utilizing international financial institutions of high credit quality.

Fair Value of Financial Instruments

Our financial instruments consist primarily of cash and cash equivalents, insurance company contracts, accounts receivable, accounts payable, debt instruments and foreign currency forward contracts. 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, as the interest rates of these instruments are variable or comparable to current rates for financing available to us. The fair values of our foreign currency forward contracts were not significant as of March 31, 2021.

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. The Level 1 category includes assets and liabilities measured at quoted prices in active markets for identical assets and liabilities. The Level 2 category includes assets and liabilities measured from observable inputs other than quoted market prices. The Level 3 category includes assets and liabilities for which valuation inputs are unobservable and significant to the fair value measurement. Our contingent payment obligations related to acquisitions, which are further discussed in Note 10 to the condensed consolidated financial statements, are in the Level 3 category for valuation purposes.

The fair values of our financial assets and liabilities are categorized as follows (in thousands):

    

June 30, 2020

    

March 31, 2021

    

Level 1

    

Level 2

    

Level 3

    

Total

    

Level 1

    

Level 2

    

Level 3

    

Total

Assets :

Insurance company contracts

$

$

37,155

$

$

37,155

$

$

45,015

$

$

45,015

Liabilities:

Contingent consideration

$

$

$

13,867

$

13,867

$

$

$

19,337

$

19,337

Derivative Instruments and Hedging Activity

Our use of derivatives consists of foreign currency forward contracts. These forward contracts are utilized to partially mitigate certain balance sheet exposures or used as a net investment hedge to protect against potential changes resulting from short-term foreign currency fluctuations. These contracts have original maturities of up to three months.  We do not use hedging instruments for speculative purposes.

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The net investment hedge has been designated as a hedge instrument and accounted for under Accounting Standards Codification ("ASC”) 815 “Derivatives and Hedging”. Hedge effectiveness is assessed using the spot method, consistent with guidance in ASC 815 whereby the change in fair value of the forward contract is recorded in the same manner as the related currency translation adjustments, within other comprehensive income, as the hedging instrument is expected to be fully effective unless the amount hedged exceeds the net investment in the foreign operation, or the foreign operation is liquidated. We settled the net investment hedge in the second quarter of fiscal 2021, and the amount recorded in other comprehensive loss was not significant. There were no net investment hedges outstanding as of March 31, 2021.

The net gains or losses from the foreign currency forward contracts, which are not designated as hedge instruments, are reported in the consolidated income statement. We initiated these forward contracts in the first quarter of fiscal 2021 and the amounts reported in the consolidated income statement for the three and nine months ended March 31, 2021 were not significant.  The fair value of our forward foreign exchange contracts is estimated using a standard valuation model and market-based observable inputs over the contractual term. Unrealized gains are recognized as assets and unrealized losses are recognized as liabilities.  As of March 31, 2021, we held foreign currency forward contracts with notional amounts totaling $23.5 million. Unrealized gains and losses from the forward currency forward contracts as of March 31, 2021 were not significant. There were no derivative instruments as of June 30, 2020.

Recently Adopted Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance under Accounting Standards Update (“ASU”) 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General: Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans. This ASU eliminates requirements for certain disclosures and requires additional disclosures under defined benefit pension plans and other post-retirement plans. We adopted this new guidance in the first quarter of fiscal 2021, and it did not have a significant impact on our disclosures in the consolidated financial statements.

In August 2018, the FASB issued authoritative guidance under ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. This ASU requires implementation costs incurred by customers in cloud computing arrangements (i.e., hosting arrangements) to be capitalized under the same premises of authoritative guidance for internal-use software and deferred over the noncancellable term of the cloud computing arrangements plus any option renewal periods that are reasonably certain to be exercised by the customer or for which the exercise is controlled by the service provider. We adopted this new guidance in the first quarter of fiscal 2021, and it did not have a significant impact on our consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which temporarily simplifies the accounting for contract modifications, including hedging relationships, due to the transition from LIBOR and other interbank offered rates to alternative reference interest rates. For example, entities can elect not to remeasure the contracts at the modification date or reassess a previous accounting determination if certain conditions are met. Additionally, entities can elect to continue applying hedge accounting for hedging relationships affected by reference rate reform if certain conditions are met. Modifications to debt agreements for a change in the reference interest rate will be accounted for by prospectively adjusting the effective interest rate.  The new standard was effective upon issuance and did not have a significant impact on our consolidated financial statements. ASU 2020-04 generally can be applied to applicable contract modifications through December 31, 2022. We are currently evaluating the impact of the transition from LIBOR to alternative reference interest rates; however the adoption of this new guidance for future modifications to contracts, if any, is not expected to have a significant impact on our consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity ("ASU 2020-06"). Under ASU 2020-06, the embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost and a convertible preferred stock will be accounted for as a single equity instrument measured at its historical cost, as long as no other features require bifurcation and recognition as derivatives. By removing those separation models, the interest rate of convertible debt instruments typically will be closer to the coupon interest rate. ASU 2020-06 also provides for certain disclosures with regard to convertible instruments and associated fair values. We are required to adopt this new guidance in the first quarter of fiscal 2023. Early adoption is permitted for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. We are currently evaluating the potential impact of adoption of this guidance on our consolidated financial statements.

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In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"). ASU 2019-12 removes certain exceptions to the general principles of ASC 740 and is intended to improve consistency and simplify GAAP by clarifying and amending existing guidance for income taxes and related topics. We are required to adopt this new guidance in the first quarter of fiscal 2022. Early adoption is permitted in any interim or annual period, with any adjustments reflected as of the beginning of the fiscal year of adoption. We are currently evaluating the potential impact of adoption of this guidance on our consolidated financial statements.

2. Business Combinations

Under ASC 805, Business Combinations, the acquisition method of accounting requires us to record assets acquired less liabilities assumed in an acquisition at their estimated fair values at the date of acquisition. Any excess of the total estimated purchase consideration over the estimated fair value of the assets acquired less liabilities assumed 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. We may record adjustments to the assets acquired and liabilities assumed, with corresponding adjustments to goodwill, during the one-year post-acquisition measurement period as additional information becomes available. Upon the conclusion of the measurement period, any subsequent adjustments are reflected in reported earnings.

Fiscal Year 2021 Business Acquisition

In July 2020, we (through our Healthcare division) acquired a privately-held software development company for $3.0 million, plus up to $12.0 million in potential contingent consideration. The goodwill recognized for this business is deductible for income tax purposes.  This acquisition was financed with available cash on hand.  This business acquisition was not material to our consolidated financial statements. Accordingly, pro-forma historical results of operations and certain other disclosures related to this business have not been presented.

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3. Balance Sheet Details

The following tables provide details of selected balance sheet accounts (in thousands):

June 30, 

March 31, 

Accounts receivable, net

    

2020

    

2021

Accounts receivable

$

287,488

    

$

281,970

Less allowance for doubtful accounts

 

(17,648)

 

(23,376)

Total

$

269,840

$

258,594

June 30, 

March 31, 

Inventories

    

2020

    

2021

Raw materials

$

132,797

    

$

144,043

Work-in-process

 

50,023

 

68,853

Finished goods

 

58,406

 

70,627

Total

$

241,226

$

283,523

June 30, 

March 31, 

Property and equipment, net

2020

2021

Land

    

$

16,516

    

$

16,345

Buildings, civil works and improvements

 

57,709

 

57,645

Leasehold improvements

 

9,052

 

8,654

Equipment, furniture and fixtures

 

149,310

 

156,006

Computer software

 

18,217

 

23,052

Computer software implementation in process

11,817

10,615

Construction in process

 

3,598

 

4,459

Total

 

266,219

 

276,776

Less accumulated depreciation and amortization

 

(138,283)

 

(151,299)

Property and equipment, net

$

127,936

$

125,477

Depreciation and amortization expense for property and equipment was $5.4 million and $5.5 million for the three months ended March 31, 2020 and 2021, respectively, and $15.9 million and $16.3 million for the nine months ended March 31, 2020 and 2021, respectively.

4. Goodwill and Intangible Assets

The changes in the carrying value of goodwill by segment for the nine-month period ended March 31, 2021 were as follows (in thousands):

Optoelectronics

and

Security

Healthcare

Manufacturing

    

Division

    

Division

    

Division

    

Consolidated

Balance as of June 30, 2020

$

203,627

$

39,983

$

67,017

$

310,627

Goodwill acquired or adjusted during the period

 

1,905

 

3,244

 

 

5,149

Foreign currency translation adjustment

 

264

 

333

 

2,838

 

3,435

Balance as of March 31, 2021

$

205,796

$

43,560

$

69,855

$

319,211

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Intangible assets consisted of the following (in thousands):

June 30, 2020

March 31, 2021

Weighted

Gross

Gross

Average

Carrying

Accumulated

Intangibles

Carrying

Accumulated

Intangibles

    

Lives

    

Value

    

Amortization

    

Net

    

Value

    

Amortization

    

Net

Amortizable assets: