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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, 2022

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 26, 2022, there were 17,043,935  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 March 31, 2022

3

Condensed Consolidated Statements of Operations for the three and nine months ended March 31, 2021 and 2022

4

Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended March 31, 2021 and 2022

5

Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended March 31, 2021 and 2022

6

Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2021 and 2022

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

33

Item 4 —

Controls and Procedures

33

PART II — OTHER INFORMATION

34

Item 1 —

Legal Proceedings

34

Item 1A —

Risk Factors

34

Item 2 —

Unregistered Sales of Equity Securities and Use of Proceeds

34

Item 3 —

Defaults Upon Senior Securities

34

Item 4 —

Mine Safety Disclosures

34

Item 5 —

Other Information

34

Item 6 —

Exhibits

35

Signatures

36

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

    

March 31, 2022

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

80,613

$

83,279

Accounts receivable, net

 

290,653

 

282,872

Inventories

 

294,208

 

344,643

Prepaid expenses and other current assets

 

43,930

 

47,742

Total current assets

 

709,404

 

758,536

Property and equipment, net

 

118,004

 

112,755

Goodwill

 

320,304

 

336,655

Intangible assets, net

 

127,608

 

139,781

Other assets

 

109,047

 

111,364

Total assets

$

1,384,367

$

1,459,091

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:

Bank lines of credit

$

$

73,000

Current portion of long-term debt

 

846

 

249,315

Accounts payable

 

141,263

 

129,812

Accrued payroll and related expenses

 

50,816

 

40,469

Advances from customers

 

38,463

 

45,914

Other accrued expenses and current liabilities

 

113,379

 

107,326

Total current liabilities

 

344,767

 

645,836

Long-term debt

 

276,421

 

48,708

Deferred income taxes

 

7,157

 

4,658

Other long-term liabilities

 

116,202

 

141,395

Total liabilities

 

744,547

 

840,597

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, 17,854,110 shares at June 30, 2021 and 17,043,853 shares at March 31, 2022

 

105,724

 

17

Retained earnings

 

548,842

 

637,734

Accumulated other comprehensive loss

 

(14,746)

 

(19,257)

Total stockholders’ equity

 

639,820

 

618,494

Total liabilities and stockholders’ equity

$

1,384,367

$

1,459,091

See accompanying notes to condensed consolidated financial statements.

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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, 

    

2021

    

2022

    

2021

    

2022

Net revenues:

    

    

    

Products

$

217,124

$

221,857

$

608,238

$

634,446

Services

 

66,663

 

68,620

 

206,466

 

211,969

Total net revenues

 

283,787

 

290,477

 

814,704

 

846,415

Cost of goods sold:

Products

 

144,958

 

150,311

 

409,692

 

432,277

Services

 

34,810

 

37,308

 

103,161

 

112,177

Total cost of goods sold

 

179,768

 

187,619

 

512,853

 

544,454

Gross profit

 

104,019

 

102,858

 

301,851

 

301,961

Operating expenses:

Selling, general and administrative

 

57,906

 

57,813

 

172,624

 

170,015

Research and development

 

13,932

 

15,150

 

39,798

 

44,944

Impairment, restructuring and other charges (benefit), net

 

(285)

 

1,469

 

7,912

 

4,810

Total operating expenses

 

71,553

 

74,432

 

220,334

 

219,769

Income from operations

 

32,466

 

28,426

 

81,517

 

82,192

Interest and other expense, net

 

(4,167)

 

(2,301)

 

(12,589)

 

(6,534)

Other income, net

27,373

27,373

Income before income taxes

 

28,299

 

53,498

 

68,928

 

103,031

Provision for income taxes

 

(9,526)

 

(10,763)

 

(20,773)

 

(21,447)

Net income

$

18,773

$

42,735

$

48,155

$

81,584

Earnings per share:

Basic

$

1.04

$

2.45

$

2.68

$

4.60

Diluted

$

1.03

$

2.41

$

2.63

$

4.52

Shares used in per share calculation:

Basic

 

17,969

 

17,417

 

17,981

 

17,734

Diluted

 

18,298

 

17,709

 

18,278

 

18,036

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, 

    

2021

    

2022

    

2021

    

2022

Net income

$

18,773

$

42,735

$

48,155

$

81,584

Other comprehensive income (loss):

Foreign currency translation adjustment

(503)

(1,981)

 

7,219

 

(4,907)

Other

59

132

176

396

Other comprehensive income (loss)

(444)

(1,849)

7,395

(4,511)

Comprehensive income

$

18,329

$

40,886

$

55,550

$

77,073

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, 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

Three Months Ended March 31, 2022

Accumulated

Common Stock

Other

    

Number of

    

    

Retained

    

Comprehensive

    

    

Shares

    

Amount

    

Earnings

    

Loss

    

Total

Balance—December 31, 2021

17,643,903

$

30,909

$

606,647

$

(17,408)

$

620,148

Vesting of RSUs

6,027

Shares issued under employee stock purchase program

32,105

2,307

2,307

Stock-based compensation expense

6,898

6,898

Repurchase of common stock

(635,962)

(39,904)

(11,648)

(51,552)

Taxes paid related to net share settlement of equity awards

(2,220)

(193)

(193)

Net income

42,735

42,735

Other comprehensive loss

(1,849)

(1,849)

Balance—March 31, 2022

 

17,043,853

$

17

$

637,734

$

(19,257)

$

618,494

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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

Nine Months Ended March 31, 2022

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

 

335,099

Shares issued under employee stock purchase program

 

60,065

4,297

4,297

Stock-based compensation expense

 

20,986

20,986

Repurchase of common stock

(1,117,258)

(85,184)

(11,648)

(96,832)

Taxes paid related to net share settlement of equity awards

 

(252,775)

(19,354)

(19,354)

Adoption of ASU 2020-06 for convertible notes

(26,763)

18,956

(7,807)

Net income

 

81,584

81,584

Other comprehensive loss

 

(4,511)

(4,511)

Balance—March 31, 2022

17,043,853

$

17

$

637,734

$

(19,257)

$

618,494

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OSI SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(amounts in thousands)

Nine Months Ended March 31, 

    

2021

    

2022

CASH FLOWS FROM OPERATING ACTIVITIES

    

    

    

Net income

$

48,155

$

81,584

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

Depreciation and amortization

 

31,433

 

28,980

Stock-based compensation expense

 

19,386

 

20,986

Provision for (recovery of) losses on accounts receivable

6,176

(3,836)

Deferred income taxes

(1,364)

 

1,448

Amortization of debt discount and issuance costs

 

7,277

1,045

Impairment charges

552

Gain on sale of property and equipment

(27,373)

Other

 

(217)

 

(1,074)

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

Accounts receivable

 

6,714

 

10,613

Inventories

 

(43,162)

 

(53,766)

Prepaid expenses and other assets

 

(4,263)

 

8,010

Accounts payable

 

37,113

 

(11,000)

Accrued payroll and related expenses

363

(9,837)

Advances from customers

 

19,468

 

7,523

Other

 

3,422

 

(11,490)

Net cash provided by operating activities

 

131,053

 

41,813

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of property and equipment

 

(12,149)

 

(10,293)

Proceeds from sale of property and equipment

994

32,304

Purchases of certificates of deposit

(4,820)

(2,201)

Proceeds from certificates of deposit

2,690

55

Acquisition of businesses, net of cash acquired

 

(3,000)

 

(14,132)

Payments for intangible and other assets

 

(9,878)

 

(12,320)

Net cash used in investing activities

 

(26,163)

 

(6,587)

CASH FLOWS FROM FINANCING ACTIVITIES

Net borrowings (repayments) on bank lines of credit

 

(59,000)

 

73,000

Proceeds from long-term debt

 

413

 

50,285

Payments on long-term debt

 

(778)

 

(40,893)

Proceeds from exercise of stock options and employee stock purchase plan

 

5,402

 

4,608

Payments of contingent consideration

(854)

(1,671)

Repurchases of common stock

 

(25,051)

 

(96,832)

Taxes paid related to net share settlement of equity awards

 

(11,546)

 

(19,354)

Net cash used in financing activities

 

(91,414)

 

(30,857)

Effect of exchange rate changes on cash

 

2,887

 

(1,703)

Net change in cash and cash equivalents

 

16,363

 

2,666

Cash and cash equivalents—beginning of period

 

76,102

 

80,613

Cash and cash equivalents—end of period

$

92,465

$

83,279

Supplemental disclosure of cash flow information:

Cash paid, net during the period for:

Interest

$

5,721

$

5,851

Income taxes

$

8,074

$

9,964

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 nine months ended March 31, 2022 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 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, 2021 and 2022.

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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, 

    

2021

    

2022

    

2021

    

2022

Net income available to common stockholders

$

18,773

$

42,735

$

48,155

$

81,584

Weighted average shares outstanding—basic

17,969

17,417

 

17,981

 

17,734

Dilutive effect of equity awards

329

292

 

297

 

302

Weighted average shares outstanding—diluted

18,298

17,709

 

18,278

 

18,036

Basic earnings per share

$

1.04

$

2.45

$

2.68

$

4.60

Diluted earnings per share

$

1.03

$

2.41

$

2.63

$

4.52

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

51

211

64

62

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 $83.3 million at March 31, 2022. Of this amount, approximately 79% 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 June 30, 2021 and March 31, 2022.

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, 2021

    

March 31, 2022

    

Level 1

    

Level 2

    

Level 3

    

Total

    

Level 1

    

Level 2

    

Level 3

    

Total

Assets—Insurance company contracts

$

$

47,113

$

$

47,113

$

$

47,162

$

$

47,162

Liabilities—Contingent consideration

$

$

$

19,431

$

19,431

$

$

$

28,266

$

28,266

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 June 30, 2021 and March 31, 2022.

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. The amounts reported in the consolidated income statement for the three and nine months ended March 31, 2021 and 2022 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 March 31, 2022, we held foreign currency forward contracts with notional amounts totaling $26.1 million and $21.0 million, respectively. Unrealized gains and losses from our forward currency forward contracts as of March 31, 2021 and 2022 were not significant.

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 is 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.

Contract Assets and Contract Liabilities from Revenue Contracts with Customers in a Business Combination

In October 2021, the FASB issued Accounting Standards Update 2021-08, an accounting standard update to improve the accounting for contract assets and contract liabilities from revenue contracts with customers in a business combination (Topic 805). This amendment improves comparability for both the recognition and measurement of acquired revenue contracts with customers at the date of and after a business combination. This authoritative guidance is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years, with early adoption permitted. We early adopted the new guidance effective January 1, 2022 using the prospective approach and applied the amendments to both business combinations that occurred during the three months ended March 31, 2022. The adoption of ASU 2021-08 did not have a material impact on our consolidated financial statements.

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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 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.

Fiscal Year 2022 Business Acquisitions

In February 2022, we (through our Security division) acquired a privately held provider of intelligent inspection, sensory, and recognition solutions for approximately $14 million, plus up to $25 million in potential contingent consideration. The acquisition was financed with cash on hand and borrowings under our revolving bank line of credit. The goodwill recognized for this business is not deductible for income tax purposes.

In February 2022, we (through our Security division) acquired a privately held sales and services company for approximately $1.1 million, plus an immaterial amount of potential contingent consideration. The acquisition was financed with cash on hand. The goodwill recognized for this transaction is deductible for income tax purposes.

These business acquisitions, individually and in the aggregate, were not material to our consolidated financial statements. Accordingly, pro-forma historical results of operations and other disclosures related to these businesses have not been presented.

3. Balance Sheet Details

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

June 30, 

March 31, 

Accounts receivable, net

    

2021

    

2022

Accounts receivable

$

315,926

    

$

304,042

Less allowance for doubtful accounts

 

(25,273)

 

(21,170)

Total

$

290,653

$

282,872

June 30, 

March 31, 

Inventories

    

2021

    

2022

Raw materials

$

160,313

    

$

194,643

Work-in-process

 

59,594

 

72,135

Finished goods

 

74,301

 

77,865

Total

$

294,208

$

344,643

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June 30, 

March 31, 

Property and equipment, net

    

2021

2022

Land

$

16,357

    

$

15,029

Buildings, civil works and improvements

 

57,555

 

47,438

Leasehold improvements

 

8,874

 

11,643

Equipment and tooling

 

129,735

 

131,222

Furniture and fixtures

 

3,275

 

3,726

Computer equipment

 

19,349

 

20,713

Computer software

 

23,090

 

24,506

Computer software implementation in process

11,102

10,550

Construction in process

 

4,011

 

4,771

Total

 

273,348

 

269,598

Less accumulated depreciation and amortization

 

(155,344)

 

(156,843)

Property and equipment, net

$

118,004

$

112,755

Depreciation and amortization expense for property and equipment was $5.5 million and $5.4 million for the three months ended March 31, 2021 and 2022, respectively, and $16.3 million and $16.0 million for the nine months ended March 31, 2021 and 2022, respectively.

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4. Goodwill and Intangible Assets

The changes in the carrying value of goodwill by segment for the nine-month period ended March 31, 2022 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

 

17,703

 

 

 

17,703

Foreign currency translation adjustment

 

(20)

 

(181)

 

(1,151)

 

(1,352)

Balance as of March 31, 2022

$

224,109

$

43,403

$

69,143

$

336,655

Intangible assets consisted of the following (in thousands):

June 30, 2021

March 31, 2022

Weighted

Gross