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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, 2023

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 22, 2024, there were 17,046,247 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, 2023 and December 31, 2023

3

Condensed Consolidated Statements of Operations for the three and six months ended December 31, 2022 and 2023

4

Condensed Consolidated Statements of Comprehensive Income for the three and six months ended December 31, 2022 and 2023

5

Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended December 31, 2022 and 2023

6

Condensed Consolidated Statements of Cash Flows for the six months ended December 31, 2022 and 2023

8

Notes to Condensed Consolidated Financial Statements

9

Item 2 —

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

23

Item 3 —

Quantitative and Qualitative Disclosures about Market Risk

30

Item 4 —

Controls and Procedures

30

PART II — OTHER INFORMATION

31

Item 1 —

Legal Proceedings

31

Item 1A —

Risk Factors

31

Item 2 —

Unregistered Sales of Equity Securities and Use of Proceeds

31

Item 3 —

Defaults Upon Senior Securities

31

Item 4 —

Mine Safety Disclosures

31

Item 5 —

Other Information

31

Item 6 —

Exhibits

32

Signatures

33

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, 

December 31, 

    

2023

    

2023

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

76,750

$

127,258

Accounts receivable, net

 

380,845

370,168

Inventories

 

338,008

445,818

Prepaid expenses and other current assets

 

44,300

59,839

Total current assets

 

839,903

1,003,083

Property and equipment, net

 

108,933

110,188

Goodwill

 

349,505

352,911

Intangible assets, net

 

140,857

143,288

Other assets

 

116,488

117,007

Total assets

$

1,555,686

$

1,726,477

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:

Bank lines of credit

$

215,000

$

316,000

Current portion of long-term debt

 

8,076

8,120

Accounts payable

 

139,011

163,661

Accrued payroll and related expenses

 

51,243

50,455

Advances from customers

 

21,250

40,263

Other accrued expenses and current liabilities

 

137,114

121,892

Total current liabilities

 

571,694

700,391

Long-term debt

 

136,491

132,792

Deferred income taxes

 

6,571

7,125

Other long-term liabilities

 

114,765

115,726

Total liabilities

 

829,521

956,034

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, 16,755,772 shares at June 30, 2023 and 17,011,639 shares at December 31, 2023

 

9,835

7,308

Retained earnings

 

735,957

782,508

Accumulated other comprehensive loss

 

(19,627)

(19,373)

Total stockholders’ equity

 

726,165

770,443

Total liabilities and stockholders’ equity

$

1,555,686

$

1,726,477

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, 

    

2022

    

2023

    

2022

    

2023

Net revenues:

Products

$

216,885

$

290,179

$

413,839

$

489,888

Services

 

78,712

83,056

 

149,829

 

162,557

Total net revenues

 

295,597

373,235

 

563,668

 

652,445

Cost of goods sold:

Products

 

158,294

187,385

 

301,663

 

324,368

Services

 

41,096

44,549

 

78,301

 

88,031

Total cost of goods sold

 

199,390

231,934

 

379,964

 

412,399

Gross profit

 

96,207

141,301

 

183,704

 

240,046

Operating expenses:

Selling, general and administrative

 

54,003

71,604

 

107,441

 

131,402

Research and development

 

14,456

16,350

 

28,996

 

32,272

Restructuring and other charges, net

 

2,257

1,026

 

3,476

 

1,492

Total operating expenses

 

70,716

88,980

 

139,913

 

165,166

Income from operations

 

25,491

52,321

 

43,791

 

74,880

Interest and other expense, net

 

(5,180)

(6,534)

 

(8,612)

 

(12,282)

Income before income taxes

 

20,311

45,787

 

35,179

 

62,598

Provision for income taxes

 

(3,957)

(9,234)

 

(7,590)

 

(13,166)

Net income

$

16,354

$

36,553

$

27,589

$

49,432

Earnings per share:

Basic

$

0.97

$

2.15

$

1.63

$

2.92

Diluted

$

0.96

$

2.11

$

1.61

$

2.87

Shares used in per share calculation:

Basic

 

16,841

16,995

 

16,882

 

16,910

Diluted

 

17,103

17,302

 

17,140

 

17,238

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, 

    

2022

    

2023

    

2022

    

2023

Net income

$

16,354

$

36,553

$

27,589

$

49,432

Other comprehensive income (loss):

Foreign currency translation adjustment, net of tax

 

4,914

5,395

 

(4,878)

 

2,223

Net unrealized gain (loss) on investments and derivatives, net of tax

(1,012)

(3,390)

2,528

(2,243)

Other, net of tax

332

137

665

274

Other comprehensive income (loss)

4,234

2,142

(1,685)

254

Comprehensive income

$

20,588

$

38,695

$

25,904

$

49,686

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, 2022

Accumulated

Common Stock

Other

    

Number of

    

    

Retained

    

Comprehensive

    

    

Shares

    

Amount

    

Earnings

    

Loss

    

Total

Balance—September 30, 2022

 

16,854,153

$

17

$

656,017

$

(31,381)

$

624,653

Exercise of stock options

 

4,847

 

245

 

 

 

245

Vesting of RSUs

 

20,409

 

 

 

 

Stock-based compensation expense

 

 

7,239

 

 

 

7,239

Repurchase of common stock

(53,334)

(4,497)

(4,497)

Taxes paid related to net share settlement of equity awards

 

(6,466)

 

(474)

 

 

 

(474)

Net income

 

 

 

16,354

 

 

16,354

Other comprehensive income

 

 

 

 

4,234

 

4,234

Balance—December 31, 2022

16,819,609

$

2,530

$

672,371

$

(27,147)

$

647,754

Three Months Ended December 31, 2023

Accumulated

Common Stock

Other

    

Number of

    

    

Retained

    

Comprehensive

    

    

Shares

    

Amount

    

Earnings

    

Loss

    

Total

Balance—September 30, 2023

 

16,987,842

$

17

$

745,955

$

(21,515)

$

724,457

Exercise of stock options

 

9,737

764

764

Vesting of RSUs

 

20,794

Stock-based compensation expense

 

7,328

7,328

Taxes paid related to net share settlement of equity awards

 

(6,734)

(801)

(801)

Net income

 

36,553

36,553

Other comprehensive income

 

2,142

2,142

Balance—December 31, 2023

17,011,639

$

7,308

$

782,508

$

(19,373)

$

770,443

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OSI SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

(amounts in thousands, except share data)

Six Months Ended December 31, 2022

Accumulated

Common Stock

Other

    

Number of

    

    

Retained

    

Comprehensive

    

    

Shares

    

Amount

    

Earnings

    

Loss

    

Total

Balance—June 30, 2022

 

16,870,050

$

17

$

663,869

$

(25,462)

$

638,424

Exercise of stock options

 

7,766

439

439

Vesting of RSUs

 

306,528

Shares issued under employee stock purchase program

 

28,603

1,969

1,969

Stock-based compensation expense

 

14,416

14,416

Repurchase of common stock

(261,761)

(4,705)

(17,079)

(21,784)

Taxes paid related to net share settlement of equity awards

 

(131,577)

(9,606)

(2,008)

(11,614)

Net income

 

27,589

27,589

Other comprehensive loss

 

(1,685)

(1,685)

Balance—December 31, 2022

16,819,609

$

2,530

$

672,371

$

(27,147)

$

647,754

Six Months Ended December 31, 2023

Accumulated

Common Stock

Other

    

Number of

    

    

Retained

    

Comprehensive

    

    

Shares

    

Amount

    

Earnings

    

Loss

    

Total

Balance—June 30, 2023

16,755,772

$

9,835

$

735,957

$

(19,627)

$

726,165

Exercise of stock options

14,489

1,184

1,184

Vesting of RSUs

384,614

Shares issued under employee stock purchase program

29,813

2,031

2,031

Stock-based compensation expense

14,417

14,417

Taxes paid related to net share settlement of equity awards

(173,049)

(20,159)

(2,881)

(23,040)

Net income

49,432

49,432

Other comprehensive income

254

254

Balance—December 31, 2023

 

17,011,639

$

7,308

$

782,508

$

(19,373)

$

770,443

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OSI SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(amounts in thousands)

Six Months Ended December 31, 

    

2022

    

2023

CASH FLOWS FROM OPERATING ACTIVITIES

    

Net income

$

27,589

$

49,432

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

Depreciation and amortization

 

19,143

19,856

Stock-based compensation expense

 

14,416

14,417

Provision for (recovery of) losses on accounts receivable

(1,353)

2,352

Deferred income taxes

1,205

(805)

Amortization of debt discount and issuance costs

 

196

Other

 

(64)

99

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

Accounts receivable

 

(13,348)

11,458

Inventories

 

(27,317)

(103,309)

Prepaid expenses and other assets

 

(10,076)

(30,458)

Accounts payable

 

4,429

24,365

Accrued payroll and related expenses

(16,526)

(870)

Advances from customers

 

2,828

18,227

Deferred revenue

12,714

(8,312)

Other

 

(5,672)

(2,836)

Net cash provided by (used in) operating activities

 

8,164

(6,384)

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of property and equipment

 

(6,982)

(8,689)

Proceeds from sale of property and equipment

235

167

Purchases of certificates of deposit

(674)

Proceeds from maturities of certificates of deposit

4,137

Acquisition of businesses, net of cash acquired

 

(3,477)

(9,046)

Payments for intangible and other assets

 

(8,002)

(8,376)

Net cash used in investing activities

 

(18,900)

(21,807)

CASH FLOWS FROM FINANCING ACTIVITIES

Net borrowings on bank lines of credit

 

175,000

101,000

Proceeds from long-term debt

 

100,502

516

Payments on long-term debt

 

(245,777)

(4,172)

Proceeds from exercise of stock options and employee stock purchase plan

 

2,408

3,215

Payments of contingent consideration

(2,466)

(464)

Repurchases of common stock

 

(21,784)

Taxes paid related to net share settlement of equity awards

 

(11,614)

(23,040)

Net cash (used in) provided by financing activities

 

(3,731)

77,055

Effect of exchange rate changes on cash

 

(4,135)

1,644

Net change in cash and cash equivalents

 

(18,602)

50,508

Cash and cash equivalents—beginning of period

 

64,202

76,750

Cash and cash equivalents—end of period

$

45,600

$

127,258

Supplemental disclosure of cash flow information:

Cash paid, net during the period for:

Interest

$

8,978

$

11,567

Income taxes

$

11,935

$

21,761

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, 2023 filed with the SEC. The results of operations for the three and six months ended December 31, 2023 are not necessarily indicative of the operating results to be expected for the full 2024 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, costs of sales and expenses 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, contingent consideration, allowance for doubtful accounts, 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 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, 

2022

    

2023

    

2022

    

2023

Net income available to common stockholders

$

16,354

$

36,553

$

27,589

$

49,432

Weighted average shares outstanding—basic

 

16,841

16,995

 

16,882

 

16,910

Dilutive effect of equity awards

 

262

307

 

258

 

328

Weighted average shares outstanding—diluted

 

17,103

17,302

 

17,140

 

17,238

Basic earnings per share

$

0.97

$

2.15

$

1.63

$

2.92

Diluted earnings per share

$

0.96

$

2.11

$

1.61

$

2.87

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

101

10

79

5

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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 $127.3 million at December 31, 2023. Of this amount, approximately 92% was held by our foreign subsidiaries and subject to repatriation tax considerations.  These foreign funds were held primarily by our subsidiaries in Mexico, the United Kingdom, India, Malaysia, and Singapore, and to a lesser extent in Puerto Rico, Canada, Egypt, Indonesia, and Australia, 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, an interest rate swap contract and foreign currency forward contracts. The carrying values of financial instruments, other than long-term debt instruments and the interest rate swap contract, 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, 2023 and December 31, 2023.

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, 2023

    

December 31, 2023

    

Level 1

    

Level 2

    

Level 3

    

Total

    

Level 1

    

Level 2

    

Level 3

    

Total

Assets—Insurance company contracts

$

$

47,181

$

$

47,181

$

$

51,020

$

$

51,020

Assets – Interest rate swap contract

$

$

5,369

$

$

5,369

$

$

2,422

$

$

2,422

Liabilities—Contingent consideration

$

$

$

21,181

$

21,181

$

$

$

19,656

$

19,656

Derivative Instruments and Hedging Activity

Our use of derivatives consists of foreign currency forward contracts and an interest rate swap agreement. The foreign currency 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 also manage our risk to changes in interest rates using derivative instruments. We use fixed interest rate swaps to effectively convert a portion of the variable interest rate payments to fixed interest rate payments. We do not use hedging instruments for speculative purposes.

The net gains or losses from our foreign currency forward contracts, which are not designated as hedge instruments, are reported in our consolidated statements of operations. The amounts reported in the consolidated statements of operations for the three and six months ended December 31, 2022 and 2023 were not significant. The fair value of our foreign currency forward 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, 2023 and December 31, 2023, we held foreign currency forward contracts with notional amounts totaling $21.6 million and $84.5 million, respectively. Unrealized gains and losses from our foreign currency forward contracts as of June 30, 2023 and December 31, 2023 were not significant.

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The interest rate swap agreement was entered into to improve the predictability of cash flows from interest payments related to our variable, Secured Overnight Financing Rate (“SOFR”) based debt. The interest rate swap matures in December 2026. The interest rate swap is considered an effective cash flow hedge, and as a result, the net gains or losses on such instrument are reported as a component of other comprehensive income (loss) in our consolidated financial statements and are reclassified as net income when the underlying hedged interest impacts earnings. A qualitative and quantitative assessment over the hedge effectiveness is performed on a quarterly basis, unless facts and circumstances indicate that the hedge may no longer be highly effective.

As of June 30, 2023 and December 31, 2023, the notional amount of the derivative instruments designated as an interest rate swap hedge was $175 million. The fair value of the interest rate swap contract as of as of June 30, 2023 and December 31, 2023 is recorded in Other assets within the consolidated balance sheet.

The effect of the cash flow hedges on other comprehensive income (loss) and earnings for the periods presented was as follows:

    

Three Months Ended December 31, 

    

Six Months Ended December 31, 

2022

    

2023

2022

    

2023

Total interest and other expense, net presented in the condensed consolidated statements of operations in which the effects of cash flow hedges are recorded

$

(5,180)

$

(6,534)

$

(8,612)

$

(12,282)

Gain (loss) recognized in other comprehensive income (loss), net of tax

$

(1,012)

$

(3,390)

$

2,528

$

(2,243)

Gain reclassified from accumulated other comprehensive income (loss) to interest expense, net

$

164

$

912

$

43

$

1,784

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB and other regulatory bodies that are adopted as of the specified effective dates. Unless otherwise discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on our Consolidated Financial Statements upon adoption. There were no new pronouncements adopted in the second quarter of fiscal year 2024.

2. Business Combinations

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

Fiscal Year 2024 Business Acquisition

In December 2023, we (through our Optoelectronics and Manufacturing division) acquired a privately held contract manufacturer for approximately $6.3 million.  The acquisition was financed with cash on hand. The goodwill recognized for this business acquisition is deductible for income tax purposes.

In October 2023, we (through our Security division) acquired a privately held provider of radiation detection technology for approximately $2.8 million, plus up to $3.6 million in potential contingent consideration. The acquisition was financed with cash on hand. The goodwill recognized for this business acquisition is not deductible for income tax purposes.

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Table of Contents

Fiscal Year 2023 Business Acquisitions

In April 2023, we (through our Optoelectronics and Manufacturing division) acquired a privately held provider of engineering and contract manufacturing solutions for approximately $2.5 million, plus up to $2.5 million in potential contingent consideration. The acquisition was financed with cash on hand.

In February 2023, we (through our Healthcare division) acquired a privately held provider of software and solutions for approximately $2.1 million plus up to $5.0 million in potential contingent consideration. The acquisition was financed with cash on hand.

Through our Security division, we acquired (i) in December 2022 certain assets of a provider of baggage and parcel inspection systems for approximately $1.6 million and (ii) in August 2022 a privately held provider of training software and solutions for approximately $1.9 million plus an immaterial amount of potential contingent consideration. These acquisitions were financed with cash on hand.

The goodwill recognized for each of the fiscal year 2023 business acquisitions is not deductible for income tax purposes. These business acquisitions in fiscal 2023 and 2024, 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 set forth details of selected balance sheet accounts (in thousands):

June 30, 

December 31, 

Accounts receivable, net

    

2023

    

2023

Accounts receivable

$

395,218

$

386,581

Less allowance for doubtful accounts

 

(14,373)

 

(16,413)

Total

$

380,845

$

370,168

June 30, 

December 31, 

Inventories

    

2023

    

2023

Raw materials

$

233,217

$

265,653

Work-in-process

 

56,329

 

89,585

Finished goods

 

48,462

 

90,580

Total

$

338,008

$

445,818

June 30, 

December 31, 

Property and equipment, net

    

2023

    

2023

Land

$

15,691

$

15,538

Buildings, civil works and improvements

 

49,166

 

48,724

Leasehold improvements

 

13,553

 

13,772

Equipment and tooling

 

135,703

 

141,872

Furniture and fixtures

 

3,632

 

3,272

Computer equipment

 

24,119

 

21,769

Computer software

 

26,981

 

28,952

Computer software implementation in process

9,705

7,409

Construction in process

 

4,108

 

5,060

Total

 

282,658

 

286,368

Less accumulated depreciation and amortization

 

(173,725)

 

(176,180)

Property and equipment, net

$

108,933

$

110,188

Depreciation and amortization expense for property and equipment was $4.8 million and $4.6 million for the three months ended December 31, 2022 and 2023, respectively, and $9.7 million and $9.5 million for the six months ended December 31, 2022 and 2023, respectively.

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4. Goodwill and Intangible Assets

The changes in the carrying value of goodwill by segment for the six-month period ended December 31, 2023 were as follows (in thousands)

Optoelectronics

And

Security

Manufacturing

Healthcare

    

Division

    

Division

    

Division

    

Consolidated

Balance as of June 30, 2023

$

230,662

$

70,388

$

48,455

$

349,505

Goodwill acquired

 

2,072

 

828

 

 

2,900

Foreign currency translation adjustment

 

220

252

34

506

Balance as of December 31, 2023

$

232,954

$

71,468

$

48,489

$

352,911

Intangible assets consisted of the following (in thousands):

June 30, 2023

December 31, 2023

Gross

Gross

Carrying

Accumulated

Intangibles

Carrying

Accumulated

Intangibles

    

Value

    

Amortization

    

Net

    

Value

    

Amortization

    

Net

Amortizable assets:

Software development costs

$

77,844

$

(20,285)

$

57,559