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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 December 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 January 25, 2022, there were 17,679,034  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, 2021 and December 31, 2021

3

Condensed Consolidated Statements of Operations for the three and six months ended December 31, 2020 and 2021

4

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

5

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

6

Condensed Consolidated Statements of Cash Flows for the six months ended December 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

24

Item 3 —

Quantitative and Qualitative Disclosures about Market Risk

31

Item 4 —

Controls and Procedures

31

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, 2021

    

December 31, 2021

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

80,613

$

86,332

Accounts receivable, net

 

290,653

 

288,037

Inventories

 

294,208

 

334,242

Prepaid expenses and other current assets

 

43,930

 

61,179

Total current assets

 

709,404

 

769,790

Property and equipment, net

 

118,004

 

116,115

Goodwill

 

320,304

 

320,319

Intangible assets, net

 

127,608

 

126,643

Other assets

 

109,047

 

110,239

Total assets

$

1,384,367

$

1,443,106

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:

Bank lines of credit

$

$

81,622

Current portion of long-term debt

 

846

 

287,247

Accounts payable

 

141,263

 

128,164

Accrued payroll and related expenses

 

50,816

 

37,518

Advances from customers

 

38,463

 

39,521

Other accrued expenses and current liabilities

 

113,379

 

120,383

Total current liabilities

 

344,767

 

694,455

Long-term debt

 

276,421

 

602

Deferred income taxes

 

7,157

 

4,526

Other long-term liabilities

 

116,202

 

123,375

Total liabilities

 

744,547

 

822,958

Commitments and contingencies (Note 9)

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, 17,854,110 shares at June 30, 2021 and 17,643,903 shares at December 31, 2021

 

105,724

 

30,909

Retained earnings

 

548,842

 

606,647

Accumulated other comprehensive loss

 

(14,746)

 

(17,408)

Total stockholders’ equity

 

639,820

 

620,148

Total liabilities and stockholders’ equity

$

1,384,367

$

1,443,106

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 December 31, 

Six Months Ended December 31, 

    

2020

    

2021

    

2020

    

2021

Net revenues:

    

    

    

Products

$

208,367

$

205,377

$

391,114

$

412,589

Services

 

67,642

 

71,304

 

139,803

 

143,349

Total net revenues

 

276,009

 

276,681

 

530,917

 

555,938

Cost of goods sold:

Products

 

139,893

 

139,060

 

264,734

 

281,966

Services

 

34,035

 

37,848

 

68,351

 

74,869

Total cost of goods sold

 

173,928

 

176,908

 

333,085

 

356,835

Gross profit

 

102,081

 

99,773

 

197,832

 

199,103

Operating expenses:

Selling, general and administrative

 

56,101

 

54,879

 

114,718

 

112,202

Research and development

 

13,784

 

14,977

 

25,866

 

29,794

Impairment, restructuring and other charges (benefit), net

 

(162)

 

831

 

8,197

 

3,341

Total operating expenses

 

69,723

 

70,687

 

148,781

 

145,337

Income from operations

 

32,358

 

29,086

 

49,051

 

53,766

Interest and other expense, net

 

(4,233)

 

(2,217)

 

(8,422)

 

(4,233)

Income before income taxes

 

28,125

 

26,869

 

40,629

 

49,533

Provision for income taxes

 

(8,087)

 

(7,072)

 

(11,247)

 

(10,684)

Net income

$

20,038

$

19,797

$

29,382

$

38,849

Earnings per share:

Basic

$

1.12

$

1.11

$

1.63

$

2.17

Diluted

$

1.10

$

1.09

$

1.61

$

2.13

Shares used in per share calculation:

Basic

 

17,924

 

17,838

 

17,988

 

17,892

Diluted

 

18,196

 

18,106

 

18,266

 

18,203

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 December 31, 

    

Six Months Ended December 31, 

    

2020

    

2021

    

2020

    

2021

    

Net income

$

20,038

$

19,797

$

29,382

$

38,849

Other comprehensive income (loss):

Foreign currency translation adjustment

4,267

(624)

 

7,722

 

(2,926)

Other

59

131

117

264

Other comprehensive income (loss)

4,326

(493)

7,839

(2,662)

Comprehensive income

$

24,364

$

19,304

$

37,221

$

36,187

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 December 31, 2020

Accumulated

Common Stock

Other

    

Number of

    

    

Retained

    

Comprehensive

    

    

Shares

    

Amount

    

Earnings

    

Loss

    

Total

Balance—September 30, 2020

 

17,912,541

$

95,084

$

484,137

$

(21,681)

$

557,540

Exercise of stock options

 

8,337

483

483

Vesting of RSUs

 

17,719

Stock-based compensation expense

 

5,712

5,712

Taxes paid related to net share settlement of equity awards

 

(5,341)

(463)

(463)

Net income

 

20,038

20,038

Other comprehensive income

 

4,326

4,326

Balance—December 31, 2020

17,933,256

$

100,816

$

504,175

$

(17,355)

$

587,636

Three Months Ended December 31, 2021

Accumulated

Common Stock

Other

    

Number of

    

    

Retained

    

Comprehensive

    

    

Shares

    

Amount

    

Earnings

    

Loss

    

Total

Balance—September 30, 2021

17,941,393

$

53,377

$

586,850

$

(16,915)

$

623,312

Exercise of stock options

2,219

156

156

Vesting of RSUs

18,995

Stock-based compensation expense

6,975

6,975

Repurchase of common stock

(312,790)

(29,049)

(29,049)

Taxes paid related to net share settlement of equity awards

(5,914)

(550)

(550)

Net income

19,797

19,797

Other comprehensive loss

(493)

(493)

Balance—December 31, 2021

 

17,643,903

$

30,909

$

606,647

$

(17,408)

$

620,148

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Six Months Ended December 31, 2020

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

 

77,532

 

563

 

 

 

563

Vesting of RSUs

 

304,420

 

 

 

 

Shares issued under employee stock purchase program

 

32,641

 

2,022

 

 

 

2,022

Stock-based compensation expense

 

 

11,821

 

 

 

11,821

Repurchase of common stock

(320,136)

(24,816)

(24,816)

Taxes paid related to net share settlement of equity awards

 

(173,183)

 

(11,327)

 

 

 

(11,327)

Net income

 

 

 

29,382

 

 

29,382

Other comprehensive income

 

 

 

 

7,839

 

7,839

Balance—December 31, 2020

17,933,256

$

100,816

$

504,175

$

(17,355)

$

587,636

Six Months Ended December 31, 2021

Accumulated

Common Stock

Other

    

Number of

    

    

Retained

    

Comprehensive

    

    

Shares

    

Amount

    

Earnings

    

Loss

    

Total

Balance—June 30, 2021

 

17,854,110

$

105,724

$

548,842

$

(14,746)

$

639,820

Exercise of stock options

 

164,612

311

311

Vesting of RSUs

 

329,072

Shares issued under employee stock purchase program

 

27,960

1,990

1,990

Stock-based compensation expense

 

14,088

14,088

Repurchase of common stock

(481,296)

(45,280)

(45,280)

Taxes paid related to net share settlement of equity awards

 

(250,555)

(19,161)

(19,161)

Adoption of ASU 2020-06 for convertible notes

(26,763)

18,956

(7,807)

Net income

 

38,849

38,849

Other comprehensive loss

 

(2,662)

(2,662)

Balance—December 31, 2021

17,643,903

$

30,909

$

606,647

$

(17,408)

$

620,148

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OSI SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(amounts in thousands)

Six Months Ended December 31, 

    

2020

    

2021

CASH FLOWS FROM OPERATING ACTIVITIES

    

    

    

Net income

$

29,382

$

38,849

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

Depreciation and amortization

 

21,162

 

19,190

Stock-based compensation expense

 

11,821

 

14,088

Provision for (recovery of) losses on accounts receivable

5,240

(3,934)

Deferred income taxes

44

 

(9)

Amortization of debt discount and issuance costs

 

4,830

697

Impairment charges

552

Other

 

55

 

111

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

Accounts receivable

 

3,189

 

5,547

Inventories

 

(25,151)

 

(42,247)

Prepaid expenses and other assets

 

(9,622)

 

(8,264)

Accounts payable

 

4,408

 

(12,775)

Accrued payroll and related expenses

(4,328)

(12,899)

Advances from customers

 

45,250

 

1,155

Deferred revenue

394

5,003

Other

 

2,253

 

(1,066)

Net cash provided by operating activities

 

89,479

 

3,446

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of property and equipment

 

(8,508)

 

(7,401)

Proceeds from sale of property and equipment

258

Purchases of certificates of deposit

(2,628)

(126)

Proceeds from maturities of certificates of deposit

700

Acquisition of business, net of cash acquired

 

(3,000)

 

Payments for intangible and other assets

 

(7,047)

 

(8,122)

Net cash used in investing activities

 

(20,483)

 

(15,391)

CASH FLOWS FROM FINANCING ACTIVITIES

Net borrowings (repayments) on bank lines of credit

 

(41,000)

 

81,622

Proceeds from long-term debt

 

315

 

143

Payments on long-term debt

 

(539)

 

(491)

Proceeds from exercise of stock options and employee stock purchase plan

 

2,585

 

2,301

Payments of contingent consideration

(628)

(1,500)

Repurchases of common stock

 

(24,816)

 

(45,280)

Taxes paid related to net share settlement of equity awards

 

(11,327)

 

(19,161)

Net cash provided by (used in) financing activities

 

(75,410)

 

17,634

Effect of exchange rate changes on cash

 

2,887

 

30

Net change in cash and cash equivalents

 

(3,527)

 

5,719

Cash and cash equivalents—beginning of period

 

76,102

 

80,613

Cash and cash equivalents—end of period

$

72,575

$

86,332

Supplemental disclosure of cash flow information:

Cash paid, net during the period for:

Interest

$

3,012

$

3,501

Income taxes

$

5,125

$

7,787

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, 2021 filed with the SEC. The results of operations for the three and six months ended December 31, 2021 are not necessarily indicative of the operating results to be expected for the full 2022 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, 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, legal contingencies and recoveries, 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 7 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 six months ended December 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 December 31, 

Six Months Ended December 31, 

    

2020

    

2021

    

2020

    

2021

Net income available to common stockholders

$

20,038

$

19,797

$

29,382

$

38,849

Weighted average shares outstanding—basic

17,924

17,838

 

17,988

 

17,892

Dilutive effect of equity awards

272

268

 

278

 

311

Weighted average shares outstanding—diluted

18,196

18,106

 

18,266

 

18,203

Basic earnings per share

$

1.12

$

1.11

$

1.63

$

2.17

Diluted earnings per share

$

1.10

$

1.09

$

1.61

$

2.13

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

45

62

89

25

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 $86.3 million at December 31, 2021. Of this amount, approximately 72% 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, Singapore, India, Malaysia, and Canada, and to a lesser extent in Australia, Albania, Indonesia and Mexico among other countries. We have cash holdings in financial institutions that exceed insured limits for such financial 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 because 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 December 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 9 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, 2021

    

December 31, 2021

    

Level 1

    

Level 2

    

Level 3

    

Total

    

Level 1

    

Level 2

    

Level 3

    

Total

Assets—Insurance company contracts

$

$

47,113

$

$

47,113

$

$

48,553

$

$

48,553

Liabilities—Contingent consideration

$

$

$

19,431

$

19,431

$

$

$

14,129

$

14,129

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. There were no net investment hedges outstanding as of December 31, 2021.

The net gains or losses from our 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. The amounts reported in the consolidated income statement for the three and six months ended December 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 June 30, 2021 and December 31, 2021, we held foreign currency forward contracts with notional amounts totaling $26.1 million and $28.0 million, respectively. Unrealized gains and losses from the forward currency forward contracts as of December 31, 2021 were not significant.

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 which are 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. Any adjustments subsequent to the conclusion of such one-year measurement period are reflected in reported earnings.

Recently Adopted Accounting Pronouncements

Convertible Debt

In August 2020, the FASB issued Accounting Standards Update 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, as long as no other features require bifurcation and recognition as derivatives. By removing those separation models, the effective interest rate of convertible debt instruments typically will be closer to the coupon interest rate. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, with early adoption permitted, but only at the beginning of the fiscal year. We early adopted the new guidance on July 1, 2021 using the modified retrospective approach and recorded a $19 million increase to retained earnings and a reduction of $27 million in common stock as if there had been no equity component. Additionally, we recorded an increase to the convertible notes balance of $10 million. Interest expense recognized subsequent to adoption on July 1, 2021 will be reduced as a result of accounting for the convertible debt instrument as a single liability measured at its amortized cost.

Income Taxes

In December 2019, the FASB issued Accounting Standards Update 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 in several other areas of ASC 740 by clarifying and amending existing guidance. The ASU applies to all entities that pay income taxes under GAAP. We adopted this accounting pronouncement on July 1, 2021 using the modified prospective approach. The adoption of ASU 2019-12 did not have a material impact on our consolidated financial statements.

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2. Balance Sheet Details

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

June 30, 

December 31, 

Accounts receivable, net

    

2021

    

2021

Accounts receivable

$

315,926

    

$

309,262

Less allowance for doubtful accounts

 

(25,273)

 

(21,225)

Total

$

290,653

$

288,037

June 30, 

December 31, 

Inventories

    

2021

    

2021

Raw materials

$

160,313

    

$

187,335

Work-in-process

 

59,594

 

68,446

Finished goods

 

74,301

 

78,461

Total

$

294,208

$

334,242

June 30, 

December 31, 

Property and equipment, net

    

2021

2021

Land

$

16,357

    

$

16,287

Buildings, civil works and improvements

 

57,555

 

56,410

Leasehold improvements

 

8,874

 

9,520

Equipment and tooling

 

129,735

 

130,083

Furniture and fixtures

 

3,275

 

3,403

Computer equipment

 

19,349

 

20,871

Computer software

 

23,090

 

23,863

Computer software implementation in process

11,102

10,896

Construction in process

 

4,011

 

4,649

Total

 

273,348

 

275,982

Less accumulated depreciation and amortization

 

(155,344)

 

(159,867)

Property and equipment, net

$

118,004

$

116,115

Depreciation and amortization expense for property and equipment was $5.6 million and $5.3 million for the three months ended December 31, 2020 and 2021, respectively, and $10.8 million and $10.6 million for the six months ended December 31, 2020 and 2021, respectively.

3. Goodwill and Intangible Assets

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

Optoelectronics

And

Security

Healthcare

Manufacturing

    

Division

    

Division

    

Division

    

Consolidated

Balance as of June 30, 2021

$

206,426

$

43,584

$

70,294

$

320,304

Goodwill acquired or adjusted during the period

 

1,270

 

 

 

1,270

Foreign currency translation adjustment

 

(176)

 

(92)

 

(987)

 

(1,255)

Balance as of December 31, 2021

$

207,520

$

43,492

$

69,307

$

320,319

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Intangible assets consisted of the following (in thousands):

June 30, 2021

December 31, 2021

Weighted

Gross

Gross

Average

Carrying

Accumulated

Intangibles

Carrying

Accumulated

Intangibles

    

Lives

    

Value

    

Amortization

    

Net

    

Value

    

Amortization

    

Net

Amortizable assets:

Software development costs

 

8-9 years

$

49,183

$

(15,679)

$

33,504

$

56,653

$

(17,126)

$

39,527

Patents

 

19 years

 

8,753

 

(2,597)

 

6,156

 

8,514

 

(2,789)

 

5,725

Developed technology

 

10 years

 

60,665

 

(25,923)

 

34,742

 

60,604

 

(29,066)