Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Sep. 30, 2017 | Oct. 26, 2017 | |
Document and Entity Information | ||
Entity Registrant Name | OSI SYSTEMS INC | |
Entity Central Index Key | 1,039,065 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --06-30 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 18,968,450 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q1 |
UNAUDITED CONDENSED CONSOLIDATE
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2017 | Jun. 30, 2017 |
CURRENT ASSETS: | ||
Cash and cash equivalents | $ 192,028 | $ 169,650 |
Accounts receivable, net | 203,068 | 206,526 |
Inventories | 271,309 | 248,510 |
Prepaid expenses and other current assets | 34,425 | 28,314 |
Total current assets | 700,830 | 653,000 |
Property and equipment, net | 151,170 | 141,539 |
Goodwill | 282,656 | 242,129 |
Intangible assets, net | 145,036 | 118,450 |
Deferred income taxes | 29,705 | 34,897 |
Other assets | 42,127 | 40,072 |
Total assets | 1,351,524 | 1,230,087 |
CURRENT LIABILITIES: | ||
Bank lines of credit | 214,000 | 103,000 |
Current portion of long-term debt | 2,286 | 2,396 |
Accounts payable | 86,112 | 76,121 |
Accrued payroll and related expenses | 31,271 | 34,621 |
Advances from customers | 34,458 | 37,934 |
Other accrued expenses and current liabilities | 93,224 | 92,062 |
Total current liabilities | 461,351 | 346,134 |
Long-term debt | 243,416 | 241,750 |
Deferred income taxes | 20,323 | 20,681 |
Other long-term liabilities | 55,054 | 52,309 |
Total liabilities | 780,144 | 660,874 |
Commitments and contingencies (Note 9) | ||
Stockholders' Equity: | ||
Preferred stock, $0.001 par value-authorized, 10,000,000 shares; no shares issued or outstanding | ||
Common stock, $0.001 par value-authorized, 100,000,000 shares; issued and outstanding, 18,689,568 shares at June 30, 2017 and 18,958,834 shares at September 30, 2017 | 212,931 | 222,529 |
Retained earnings | 374,029 | 363,872 |
Accumulated other comprehensive loss | (15,580) | (17,188) |
Total stockholders' equity | 571,380 | 569,213 |
Total liabilities and stockholders' equity | $ 1,351,524 | $ 1,230,087 |
UNAUDITED CONDENSED CONSOLIDAT3
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Sep. 30, 2017 | Jun. 30, 2017 |
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, authorized shares | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, authorized shares | 100,000,000 | 100,000,000 |
Common stock, shares issued | 18,958,834 | 18,689,568 |
Common stock, shares outstanding | 18,958,834 | 18,689,568 |
UNAUDITED CONDENSED CONSOLIDAT4
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Net revenues: | ||
Products | $ 165,653 | $ 153,457 |
Services | 91,480 | 67,398 |
Total net revenues | 257,133 | 220,855 |
Cost of goods sold: | ||
Products | 114,180 | 113,121 |
Services | 51,682 | 39,647 |
Total cost of goods sold | 165,862 | 152,768 |
Gross profit | 91,271 | 68,087 |
Operating expenses: | ||
Selling, general and administrative | 55,647 | 43,553 |
Research and development | 15,100 | 12,478 |
Impairment, restructuring and other charges | 1,130 | 9,957 |
Total operating expenses | 71,877 | 65,988 |
Income from operations | 19,394 | 2,099 |
Interest and other expense, net | (4,249) | (1,158) |
Income before income taxes | 15,145 | 941 |
Provision for income taxes | 4,988 | 264 |
Net income | $ 10,157 | $ 677 |
Earnings per share: | ||
Basic (in dollars per share) | $ 0.54 | $ 0.04 |
Diluted (in dollars per share) | $ 0.52 | $ 0.03 |
Shares used in per share calculation: | ||
Basic (in shares) | 18,778 | 18,943 |
Diluted (in shares) | 19,591 | 19,591 |
UNAUDITED CONDENSED CONSOLIDAT5
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands | 3 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | ||
Net income | $ 10,157 | $ 677 |
Other comprehensive income (loss): | ||
Foreign currency translation adjustment | 1,580 | (801) |
Other | 28 | 79 |
Other comprehensive income (loss) | 1,608 | (722) |
Comprehensive income (loss) | $ 11,765 | $ (45) |
UNAUDITED CONDENSED CONSOLIDAT6
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Cash flows from operating activities: | ||
Net income | $ 10,157 | $ 677 |
Adjustments to reconcile net income to cash flows from operating activities: | ||
Depreciation and amortization | 20,375 | 15,426 |
Stock based compensation expense | 5,487 | 5,830 |
Deferred income taxes | 5,346 | 98 |
Amortization of debt discount and issuance costs | 2,098 | |
Impairment charges | 5,418 | |
Other | 490 | 160 |
Changes in operating assets and liabilities-net of business acquisitions: | ||
Accounts receivable | 16,232 | (11,412) |
Inventories | (10,098) | 10,901 |
Prepaid expenses and other current assets | (8,220) | (3,427) |
Accounts payable | 6,586 | (8,791) |
Accrued payroll and related expenses | (5,742) | (5,251) |
Advances from customers | (3,484) | (10,469) |
Other | (4,120) | (1,018) |
Net cash provided by (used in) operating activities | 35,107 | (1,858) |
Cash flows from investing activities: | ||
Acquisition of property and equipment | (23,719) | (2,806) |
Acquisition of businesses, net of cash acquired | (83,632) | (186,861) |
Acquisition of intangible and other assets | (1,179) | (1,881) |
Net cash used in investing activities | (108,530) | (191,548) |
Cash flows from financing activities: | ||
Net borrowings on bank lines of credit | 111,000 | 214,000 |
Proceeds from long-term debt | 118 | 233 |
Payments on long-term debt | (670) | (707) |
Proceeds from exercise of stock options and employee stock purchase plan | 3,718 | 2,099 |
Repurchase of common shares | (2,712) | |
Taxes paid related to net share settlement of equity awards | (18,802) | (290) |
Net cash provided by financing activities | 95,364 | 212,623 |
Effect of exchange rate changes on cash | 437 | (621) |
Net increase in cash and cash equivalents | 22,378 | 18,596 |
Cash and cash equivalents-beginning of period | 169,650 | 104,370 |
Cash and cash equivalents-end of period | 192,028 | 122,966 |
Supplemental disclosure of cash flow information: | ||
Interest | 2,852 | 956 |
Income taxes | $ 4,172 | $ 6,022 |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Sep. 30, 2017 | |
Basis of Presentation | |
Basis of Presentation | 1. Basis of Presentation Description of Business OSI Systems, Inc., together with our subsidiaries, is a vertically integrated designer and manufacturer of specialized electronic systems and components for critical applications. We sell our products in diversified markets, including homeland security, healthcare, defense and aerospace. We have three reporting segments: (i) Security, providing security inspection systems, turnkey security screening solutions and related services; (ii) Healthcare, providing patient monitoring, diagnostic cardiology, and anesthesia systems, and related services; and (iii) Optoelectronics and Manufacturing, providing specialized electronic components and electronic manufacturing services for the Security and Healthcare divisions as well as to external OEM customers and end users for applications in the defense, aerospace, medical and industrial markets, among others. Through our Security segment, we provide security screening products and related services globally. These products fall into the following categories: baggage and parcel inspection; cargo and vehicle inspection; hold (checked) baggage screening; people screening; radiation detection; and explosive and narcotics trace detection. In addition to these products, we also provide site design, installation, training and technical support services to our customers. We also provide turnkey security screening solutions, which can include the construction, staffing and long-term operation of security screening checkpoints for our customers. Through our Healthcare segment, we design, manufacture, market and service patient monitoring, diagnostic cardiology, and anesthesia delivery and ventilation systems, and related supplies and accessories worldwide. These products are used by care providers in critical care, emergency and perioperative areas within hospitals as well as physicians’ offices, medical clinics and ambulatory surgery centers among other sites. Through our Optoelectronics and Manufacturing segment, we design, manufacture and market optoelectronic components and provide electronics manufacturing services globally for use in a broad range of applications, including aerospace and defense electronics, security and inspection systems, medical imaging and diagnostic products, telecommunications, computer peripherals, industrial automation systems, automotive diagnostic systems, and consumer products. This division provides products and services to OEM customers and end users as well as to our Security and Healthcare divisions. Basis of Presentation The condensed consolidated financial statements include the accounts of OSI Systems, Inc. and its 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 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 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 condensed consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2017. The results of operations for the three months ended September 30, 2017 are not necessarily indicative of the operating results to be expected for the full 2018 fiscal year or any future periods. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and costs of sales during the reporting period. The most significant of these estimates and assumptions for our company relate to contract revenue, profit and loss recognition, fair values of assets acquired and liabilities assumed in business combinations, market values for inventories reported at lower of cost or net realizable value, stock-based employee compensation expense, income taxes, accrued product warranty costs, and the recoverability, useful lives and valuation of recorded amounts of long lived assets, identifiable intangible assets and goodwill. Changes in estimates are reflected in the periods during which they become known. Actual amounts will likely differ from these estimates and could differ materially. 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. Stock options and stock awards to purchase 0.1 million shares of common stock for each of the three months ended September 30, 2016 and September 30, 2017, respectively, were excluded from the calculation because to include such options and awards would have been antidilutive. Prior to our adoption of ASU 2016-09 in the fourth quarter of fiscal 2017, we included tax benefits in assessing whether equity awards were dilutive and in our calculations of weighted average dilutive shares under the treasury stock method. The underlying equity component of the 1.25% convertible senior notes discussed in Note 6 to the condensed consolidated financial statements will have no impact to diluted earnings per share until the average price of our common stock exceeds the conversion price because the principal amount of the Notes is intended to be settled in cash upon conversion. The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts): Three Months Ended September 30, 2016 2017 Net income available to common stockholders $ $ Weighted average shares outstanding—basic Dilutive effect of equity awards Weighted average shares outstanding—diluted Basic earnings per share $ $ Diluted earnings per share $ $ Cash Equivalents We consider all highly liquid investments purchased with maturities of three months or less as of the acquisition date to be cash equivalents. Our cash, cash equivalents, and investments totaled $192.0 million at September 30, 2017. Of this amount, approximately 99% was held by our foreign subsidiaries and subject to repatriation tax considerations. These foreign funds were located primarily in Mexico, Malaysia and the United Kingdom, and to a lesser extent in India, Singapore, Germany and China among others. We intend to permanently reinvest a significant portion of our earnings from foreign operations, and we currently do not anticipate that we will need this cash in foreign countries to fund our U.S. operations. In the event that funds from foreign operations are needed to fund operations in the United States and if U.S. taxes have not been previously provided on the related earnings, we would provide for and pay additional U.S. taxes at the time we change our intention with regard to the reinvestment of those earnings. Fair Value of Financial Instruments Our financial instruments consist primarily of cash, marketable securities, derivative instruments, accounts receivable, accounts payable and debt instruments. The carrying values of financial instruments, other than long term debt instruments, are representative of their fair values due to their short term maturities. The carrying values of our long term debt instruments are considered to approximate their fair values because the interest rates of these instruments are variable or comparable to current rates available to us. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. “Level 1” category includes assets and liabilities at the quoted prices in active markets for identical assets and liabilities. “Level 2” category includes assets and liabilities from observable inputs other than quoted market prices. “Level 3” category includes assets and liabilities for which valuation techniques are unobservable and significant to the fair value measurement. There were no assets where “Level 3” valuation techniques were used. As further discussed in Note 9 to the condensed consolidated financial statements, our contingent payment obligations related to acquisitions are valued using “Level 3” valuation techniques. Such obligations are measured at fair value on a recurring basis. The fair values of the our financial assets and liabilities as of June 30, 2017 and September 30, 2017 are categorized as follows (in thousands): June 30, 2017 September 30, 2017 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets: Equity securities $ $ — $ — $ $ $ — $ — $ Insurance company contracts — — — — Interest rate contract — — — — Total assets $ $ $ — $ $ $ $ — $ Liabilities—Contingent payment obligations $ — $ — $ $ $ — $ — $ $ Derivative Instruments and Hedging Activity Our use of derivatives consists of an interest rate swap agreement. The interest rate swap agreement was entered into to improve the predictability of cash flows from interest payments related to variable, LIBOR based debt for the duration of the term loan. The interest rate swap matures in October 2019. The interest rate swap is considered an effective cash flow hedge and, as a result, the net gains or losses on such instrument were reported as a component of Other comprehensive income (loss) in the consolidated financial statements and are reclassified as net income when the hedge transaction settles. Property and Equipment Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are charged while assets are used in service and are generally computed using the straight-line method over the estimated useful lives of the assets taking into consideration any estimated salvage value. Amortization of leasehold improvements is calculated on the straight-line method over the shorter of the useful life of the asset or the lease term. Leased capital assets are included in property and equipment. Amortization of property and equipment under capital leases is included with depreciation expense. In the event that property and equipment are idle, as a result of excess capacity or the early termination, non-renewal or reduction in scope of a turnkey screening operation, such assets are assessed for impairment on a periodic basis. Goodwill Impairment Goodwill represents the excess purchase price over the estimated fair value of the assets acquired and liabilities assumed in a business combination. Goodwill is allocated to our segments based on the nature of the product line of the acquired business. The carrying value of goodwill is not amortized, but is annually tested for impairment during our second quarter and more frequently if there is an indicator of impairment. We assess qualitative factors of each of our three reporting units to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. Revenue Recognition Product Sales. We recognize revenue from sales of products upon shipment when title and risk of loss passes and when terms are fixed and collection is probable. In an instance where terms of a product sale include subjective customer acceptance criteria, revenue is deferred until we have achieved the acceptance criteria unless customer acceptance terms are perfunctory or inconsequential. Service Revenue. Revenue from services includes after-market services, installation and implementation of products and turnkey security screening services. Generally, revenue from services is recognized when the services are performed. Revenues from out-of-warranty service maintenance contracts are recognized ratably over the respective terms of such contracts. Deferred revenue for such services arises from payments received from customers for services not yet performed. Multiple-Deliverable Arrangements. We enter into certain agreements with customers for the sale of capital equipment that contain multiple elements that may include civil works to prepare a site for the installation of equipment, manufacture and delivery of equipment, installation and integration of equipment, training of customer personnel to operate the equipment and after-market service of the equipment. The duration to fulfill each of these deliverables can range from completion in a short amount of time and entirely within a single reporting period to completion over several reporting periods. The general timing of revenue recognition for each deliverable may be dependent upon several milestones, including physical delivery of equipment, completion of factory acceptance test, completion of site acceptance test, installation and connectivity of equipment, certification of training of personnel and, in the case of after-market service deliverables, the passage of time (typically evenly over the post-warranty period of the service deliverable). Multiple-deliverable arrangements require that consideration be allocated to each deliverable based on its relative selling price and recognized as revenue when the revenue recognition criteria for each deliverable has been met. The arrangement is separated into more than one unit of accounting if both of the following criteria are met: (i) the delivered item has value to the customer on a stand-alone basis; and (ii) for an arrangement including a general right of return relative to the delivered item, delivery or performance of the undelivered item is considered probable and substantially within our control. If these criteria are not met, the arrangement is accounted for as one unit of accounting and the recognition of revenue is deferred until delivery is complete or is recognized ratably over the contract period as appropriate. If these criteria are met, consideration is allocated at inception of the arrangement to all deliverables on the basis of the relative selling price. We have generally met these criteria for the multiple-deliverable arrangement as all of the deliverables in our arrangements have stand-alone value in that either the customer can resell that item or another vendor sells that item separately. We typically do not offer a general right of return in regards to our multiple-deliverable arrangements. The selling price of each deliverable is determined by establishing vendor-specific objective evidence (“VSOE”), third party evidence (“TPE”) or best estimate of selling price (“BESP”) for each delivered item. Generally, either VSOE or TPE is determinable; however, in the few instances where neither VSOE nor TPE is determinable, we utilize our BESP in order to allocate consideration to those deliverables. BESP for our product deliverables is determined by utilizing a weighted average price approach. BESP for our service deliverables is determined primarily by utilizing a cost-plus margin approach, though in some instances average price per hour is used. We often provide a guarantee to support our performance under multiple-deliverable arrangements. In the event that customers are permitted to terminate such arrangements, the underlying contract typically requires payment for deliverables and reimbursement of costs incurred through the date of termination. Proportional Performance. In connection with the agreement with the Servicio de Administración Tributaria (“SAT”) in Mexico, revenue is recognized based upon proportional performance, measured by the actual number of labor hours incurred divided by the total estimated number of labor hours for the project. The impact of changes in the estimated labor hours to service the agreement is reflected in the period during which the change becomes known. In the SAT agreement, customer billings may be submitted for several separate deliverables, including monthly services, activation of services, training of customer personnel and consultation on the design and location of security scanning operations, among others. In the event that payments received from the customer exceed revenue recognition, deferred revenue is recorded. Critical judgments made by management related to revenue recognition include the determination of whether or not customer acceptance criteria are perfunctory or inconsequential. The determination of whether or not customer acceptance terms are perfunctory or inconsequential impacts the amount and timing of revenue recognition. Concurrent with revenue recognition, we accrue reserves for estimated product return and warranty costs. Critical judgments also include estimates of warranty reserves, which are established based on historical experience and knowledge regarding the product under warranty. Recent Accounting Updates Not Yet Adopted In May 2014, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update (“ASU”) amending revenue recognition requirements for multiple deliverable revenue arrangements. This update provides guidance on how revenue is recognized for the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for the goods or services. This determination is made in five steps: (i) identify the contract with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The ASU is effective for fiscal years beginning after December 15, 2017 and for interim reporting periods within such fiscal years. Earlier adoption is permitted only for fiscal years beginning after December 15, 2016, including interim reporting periods within such fiscal years. We are in the process of selecting a transition method and our preliminary evaluation of the impact of this ASU indicates that it will not have a material impact on the timing of revenue recognition. In January 2016, FASB issued an ASU which affects the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. This guidance retains the current accounting for classifying and measuring investments in debt securities and loans, but requires equity investments to be measured at fair value with subsequent changes recognized in net income, except for those accounted for under the equity method or requiring consolidation. The guidance also changes the accounting for investments without a readily determinable fair value and that do not qualify for the practical expedient permitted by the guidance to estimate fair value. A policy election can be made for these investments whereby estimated fair value may be measured at cost and adjusted in subsequent periods for any impairment or changes in observable prices of identical or similar investments. This ASU is effective for fiscal years beginning after December 15, 2017, including interim reporting periods within such fiscal years. Early application is permitted. We have not yet adopted this ASU and are currently evaluating the impact it may have on our financial condition and results of operations. In February 2016, the FASB issued an ASU which affects the accounting for leases. The guidance requires lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months. The amendment also will require qualitative and quantitative disclosures designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases. This ASU is effective for fiscal years beginning after December 15, 2018, including interim reporting periods within such fiscal years. Early application is permitted. We have not yet adopted this ASU and are currently evaluating the impact it may have on our financial condition and results of operations. In August 2016, the FASB issued an ASU to address the diverse classifications being applied to cash receipts and payments in the reporting entities’ cash flow statement. This ASU addresses eight specific cash flow issues to reduce diversity in practice. This ASU is effective for fiscal years beginning after December 15, 2017, including interim reporting periods within such fiscal years. We have not yet adopted this ASU and are currently evaluating the impact it may have on our financial condition and results of operations. Adoption of ASU 2015-11 Effective July 1, 2017, we adopted ASU 2015-11 “Simplifying the Measurement of Inventory.” This ASU requires an entity to measure in scope inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The adoption of this ASU did not have a material impact on our financial condition and results of operations. |
Business Combinations
Business Combinations | 3 Months Ended |
Sep. 30, 2017 | |
Business Combinations | |
Business Combinations | 2 . Business Combinations Under ASU 805, the acquisition method of accounting requires us to record assets acquired and liabilities assumed in an acquisition at their estimated fair values at the date of acquisition. Any excess of the total estimated purchase price of over the estimated fair value of the assets acquired and liabilities assumed should be recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired customers, acquired technology, trade names, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding adjustments to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. Acquisition of Explosive Trace Detection Business On July 7, 2017, we completed the acquisition of the global explosive trace detection business (“ETD”) from Smiths Group plc. We financed the total estimated purchase price of $80.5 million with a combination of cash on hand and borrowings under our existing revolving bank line of credit. Due to the timing and complexity of the transaction, we are in the process of finalizing our valuation of the assets acquired and liabilities assumed. As of September 30, 2017, the final valuation of certain assets and liabilities of ETD are preliminary in nature as they are awaiting the conclusion of the valuation of certain assets by a third party, resolution of accurately carving out certain assets and liabilities from the prior owners of the business and final determination of the working capital adjustment on the purchase price. As a result, the ETD acquisition could necessitate the use of the full one year measurement period to establish the fair values of assets and liabilities as of the acquisition date, including intangible assets, goodwill, accounts receivable, inventory, deferred revenue, property and equipment, contractual obligations, income tax obligations, and certain reserves. Any potential adjustments made could be material in relation to these preliminary values below: Cash and cash equivalents $ Accounts receivable Inventories Property and equipment Intangible assets Other long-term assets Accounts payable ) Accrued payroll and related expenses ) Deferred revenues — current ) Accrued warranties ) Other accrued expenses and current liabilities ) Net assets acquired Goodwill Total consideration $ The goodwill is largely attributable to expected growth and the assembled workforce of the ETD business. Intangible assets are recorded at estimated fair value, as determined by management based on available information, which includes a preliminary valuation prepared by an independent third party. The fair value attributed to the intangible assets acquired was based on preliminary estimates, assumptions and other information compiled by management, including independent valuations that utilized established valuation techniques. The value attributed to goodwill and intangible assets is not deductible for income tax purposes. The following table summarizes the fair value of acquired identifiable intangible assets as of the acquisition date (amounts in thousands): Weighted Average Fair Lives Value Amortizable assets: Developed technology 10 years $ Customer relationships/backlog 7 years Total amortizable assets Non-amortizable asset — IPR&D Total intangible assets $ The condensed consolidated statements of operations include $21.7 million of revenue and $4.0 million of pre-tax income from ETD for the period from July 8, 2017 to September 30, 2017. The following unaudited pro forma results are prepared for comparative purposes only and do not necessarily reflect the results that would have occurred had the acquisition occurred at the beginning of the periods presented or the results which may occur in the future. The following unaudited pro forma results of operations assume the ETD acquisition had occurred on July 1, 2016 (in thousands): Three Months Ended 2016 2017 Revenues $ $ Income from operations $ $ Significant pro forma adjustments incorporated into the pro forma results above include the recognition of additional amortization expense related to acquired intangible assets. In addition, the pro forma results for the three months ended September 30, 2016 were carved out from the operations of the business when it was owned by its former parent. As a result, these carve-out results have been prepared from the historical accounts of its former parent, and include revenues and expenses specifically identified to ETD, and allocations of certain overhead expenses. Acquisition of American Science and Engineering On September 9, 2016, we acquired by merger 100 percent ownership of American Science and Engineering, Inc. (“AS&E”), a leading provider of detection solutions for advanced cargo, parcel, and personnel inspection. AS&E’s operations are included in our Security division. We financed the total purchase price of $266 million with a combination of cash on hand and borrowing under our existing revolving bank line of credit, and also issued restricted stock units (“RSUs”) of the Company to replace RSUs previously issued by AS&E. Immediately following the close of the acquisition, we used $69 million of AS&E’s existing cash on hand to pay down the revolving bank line of credit. The valuation of the estimated fair value of the assets acquired and liabilities assumed as a result of this business combination has been finalized, and there were no adjustments to these values during the three months ended September 30, 2017. The assets acquired and the liabilities assumed by us in the acquisition, reconciled to total purchase consideration are as follows (in thousands): Current assets $ Intangible assets Other long term assets Current liabilities ) Long-term liabilities ) Net assets acquired Goodwill Total consideration $ Other Acquisitions During the three months ended September 30, 2017, the Company (through our Security division) also completed an acquisition of a technology company. The acquisition was financed with cash on hand and determined to be immaterial by management. |
Balance Sheet Details
Balance Sheet Details | 3 Months Ended |
Sep. 30, 2017 | |
Balance Sheet Details | |
Balance Sheet Details | 3. Balance Sheet Details The following tables provide details of selected balance sheet accounts (in thousands): June 30, September 30, 2017 2017 Accounts receivable $ $ Less allowance for doubtful accounts ) ) Total $ $ June 30, September 30, 2017 2017 Raw materials $ $ Work-in-process Finished goods Total $ $ Estimated Useful June 30, September 30, Lives 2017 2017 Land N/A $ $ Buildings, civil works and improvements 5 - 40 years Leasehold improvements 1 - 12 years Equipment and tooling 3 - 10 years Furniture and fixtures 3 - 13 years Computer equipment 3 - 5 years Computer software 3 - 10 years Computer software implementation in process N/A Construction in process N/A Total Less accumulated depreciation and amortization ) ) Property and equipment, net $ $ In September 2017, we purchased the AS&E facility in Billerica, MA for a purchase price of $19.8 million. Of this amount, $16.9 million was included in Buildings, civil works and improvements and $2.9 million was included in Land above. Depreciation expense was $13.3 million and $16.2 million for the three months ended September 30, 2016 and 2017, respectively. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 3 Months Ended |
Sep. 30, 2017 | |
Goodwill and Intangible Assets | |
Goodwill and Intangible Assets | 4. Goodwill and Intangible Assets The changes in the carrying value of goodwill for the three month period ended September 30, 2017 are as follows (in thousands): Optoelectronics and Security Healthcare Manufacturing Division Division Division Consolidated Balance as of June 30, 2017 $ $ $ $ Goodwill acquired or adjusted during the period — Foreign currency translation adjustment Balance as of September 30, 2017 $ $ $ $ Intangible assets consisted of the following (in thousands): June 30, 2017 September 30, 2017 Weighted Gross Gross Average Carrying Accumulated Intangibles Carrying Accumulated Intangibles Lives Value Amortization Net Value Amortization Net Amortizable assets: Software development costs 9 years $ $ ) $ $ $ ) $ Patents 20 years ) ) Developed technology 10 years ) ) Customer relationships/backlog 7 years ) ) Total amortizable assets ) ) Non-amortizable assets: Trademarks and trade names — — IPR&D — — Total intangible assets $ $ ) $ $ $ ) $ Amortization expense related to intangible assets was $2.1 million and $4.2 million for the three months ended September 30, 2016 and 2017, respectively. At September 30, 2017, the estimated future amortization expense was as follows (in thousands): 2018 (remaining 9 months) $ 2019 2020 2021 2022 2023 2024 and thereafter, including assets that have not yet begun to be amortized Total $ Software development costs for software products incurred before establishing technological feasibility are charged to operations. Software development costs incurred after establishing technological feasibility are capitalized on a product by product basis until the product is available for general release to customers at which time amortization begins. Annual amortization, charged to cost of goods sold, is the amount computed using the ratio that current revenues for a product bear to the total current and anticipated future revenues for that product. In the event that future revenues are not estimable, such costs are amortized on a straight line basis over the remaining estimated economic life of the product. Amortizable assets that have not yet begun to be amortized are included in 2024 and thereafter in the table above. For the three months ended September 30, 2016 and 2017, we capitalized software development costs in the amount of $1.4 million and $0.1 million, respectively. |
Impairment, Restructuring and O
Impairment, Restructuring and Other Charges | 3 Months Ended |
Sep. 30, 2017 | |
Impairment, Restructuring and Other Charges | |
Impairment, Restructuring and Other Charges | 5. Impairment, Restructuring and Other Charges Impairment During the first quarter of fiscal 2017, we abandoned a product line in our Security division related to a technology we no longer support. As a result, $5.4 million of assets, including the intangible and fixed assets associated with this product line, were fully written off as we determined that these assets have no value and were permanently impaired. Restructuring and Other Charges We endeavor to align our global capacity and infrastructure with demand by our customers as well as fully integrate acquisitions, thereby improving operational efficiency. The significant initiatives undertaken by us are further discussed below and a summary of such activity is included in the succeeding tables. In conjunction with the acquisition of ETD, beginning in fiscal 2017 we incurred professional fees to complete the acquisition. Such costs accumulated to $1.7 million through the first quarter of fiscal 2018, of which $0.7 million was incurred during the quarter ended September 30, 2017. The following table summarizes impairment, restructuring and other charges for the periods set forth below (in thousands): Three Months Ended September 30, 2016 Security Division Healthcare Optoelectronics and Corporate Total Impairment charges $ $ $ — $ — $ Acquisition-related costs — — $ Employee termination costs — Facility closures/consolidation — — — Other charges — — Total expensed $ $ $ $ $ Three Months Ended September 30, 2017 Security Division Healthcare Optoelectronics and Corporate Total Acquisition-related costs $ — $ — $ — $ $ Employee termination costs — — — Facility closures/consolidation — — — Total expensed $ $ — $ — $ $ The changes in the accrual for restructuring and other charges for the three-month period ended September 30, 2017 were as follows (in thousands): Acquisition- Employee Facility Total Balance as of June 30, 2017 $ — $ $ $ Restructuring and other charges Payments and other adjustments ) ) ) ) Balance as of September 30, 2017 $ — $ $ $ |
Borrowings
Borrowings | 3 Months Ended |
Sep. 30, 2017 | |
Borrowings | |
Borrowings | 6. Borrowings Revolving Credit Facility In December 2016, we entered into an amendment to our revolving credit facility, which, among other things, increased the aggregate committed amount available to us from $450 million to $525 million and extended the maturity date to December 2021. The credit facility includes a $300 million sub-limit for letters of credit. Under certain circumstances, we have the ability to increase the facility by the greater of $250 million or such amount as would not cause our secured leverage ratio to exceed a specified level. Borrowings under this facility bear interest at LIBOR plus a margin of 1.25% as of September 30, 2017, but this margin can range from 1.25% to 2.0% based on our consolidated net leverage ratio as defined in the credit facility. Letters of credit reduce the amount available to borrow by their face value. The unused portion of the facility bears a commitment fee of 0.20% as of September 30, 2017, but this fee can range from 0.20% to 0.30% based on our consolidated net leverage ratio as defined in the credit facility. Due to increased borrowings under this facility as a result of the acquisition of ETD, the borrowing margin is scheduled to increase to 1.50% during the second quarter of fiscal 2018. Our borrowings under the credit agreement are guaranteed by certain of our U.S. based subsidiaries and are secured by substantially all of our and certain subsidiaries’ assets. The agreement contains various representations and warranties, affirmative, negative and financial covenants and conditions of default customary for financing agreements of this type. As of September 30, 2017, there was $214.0 million of borrowings outstanding under the revolving credit facility and $33.1 million outstanding under the letters of credit sub facility. The amount available to borrow under the credit facility as of September 30, 2017 was $277.9 million. Under the terms of the revolving credit facility, loan amounts may be borrowed, repaid and re-borrowed during the term. Although the principal amount of each revolving loan is due and payable in full on the maturity date, we have the right to repay each revolving loan in whole or in part from time to time without penalty. It is our practice to routinely borrow and repay several times per year under this revolving facility. Therefore, borrowings under the credit facility are included in current liabilities. As of September 30, 2017, we are in compliance with all covenants under this credit facility. 1.25% Convertible Senior Notes Due 2022 In February 2017, we issued $287.5 million of 1.25% convertible senior notes due 2022 (the “Notes”) in a private offering. The Notes are governed by an indenture dated February 22, 2017. The maturity for the payment of principal is September 1, 2022. The Notes bear interest at the rate of 1.25% and are payable in cash semiannually in arrears on each March 1 and September 1, commencing on September 1, 2017. The Notes are senior unsecured obligations and rank senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the Notes; equal in right of payment to any of our unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of OSI Systems, Inc. and our subsidiaries, as well as any of the existing and future indebtedness that may be guaranteed by our subsidiaries to the extent of such guarantee (including the guarantees of certain of our subsidiaries under our existing revolving credit facility). The Notes are convertible prior to March 1, 2022 only upon specified events and during specified periods and are, thereafter convertible, at any time, in each case at an initial conversion rate of 9.3056 per $1,000 principal amount of the Notes, which is equal to an initial conversion price of approximately $107.46 per share or a 38.5% premium to our stock price at the time of the issuance. The conversion rate is subject to adjustment upon certain events. Upon conversion, the Notes may be settled, at our election, in shares of our Common Stock, cash or a combination of cash and shares of Common Stock. We have initially elected a combination settlement method to satisfy the conversion obligation, which allows us to settle the principal amount of the Notes in cash and to settle the excess conversion value, if any, in shares, as well as cash in lieu of fractional shares. We may not redeem the Notes prior to March 6, 2020. Thereafter, we may redeem the Notes if the last reported sale price of our Common Stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any period of 30 consecutive trading days. If we undergo a fundamental change, as defined in the indenture for the Notes, subject to certain conditions, holders of the Notes may require us to repurchase all or part of the Notes for cash at a price equal to 100% of the principal amount of the Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date. The occurrence of a fundamental change will also result in the Notes becoming immediately convertible. Pursuant to ASC 470-20, we allocated the $287.5 million gross proceeds of the Notes between liability and equity components. The initial $242.4 million liability component was determined based on the fair value of similar debt instruments excluding the conversion feature for similar terms and priced on the same day the Notes were issued. The initial $45.1 million equity component represents the debt discount and was calculated as the difference between the fair value of the debt and the gross proceeds of the Notes. Issuance costs of $7.7 million were allocated between debt ($6.5 million) and equity ($1.2 million) components with the portion allocated to the debt presented as an offset against long term debt in the consolidated balance sheet and is amortized as interest expense over the life of the Notes using the effective interest method. The total interest expense recognized for three months ended September 30, 2017 was $3.0 million, which consists of $0.9 million of contractual interest expense, $1.8 million of amortization of the debt discount and $0.3 million of amortization of debt issuance costs. As of September 30, 2017, the unamortized debt discount was $40.8 million and is being amortized over the remaining contractual term to maturity of the Notes using an effective interest rate of 4.50%. The unamortized debt issuance cost of $5.8 million as of September 30, 2017 is amortized on a straight-line basis, which approximates the effective interest method, over the life of the Notes. Based on our September 30, 2017 stock price of $91.37 per share, the “if-converted” value of the Notes did not exceed the principal amount. Other Borrowings Several of our foreign subsidiaries maintain bank lines-of-credit, denominated in local currencies and U.S. dollars, primarily for the issuance of letters-of-credit. As of September 30, 2017, $61.1 million was outstanding under these letter-of-credit facilities. As of September 30, 2017, the total amount available under these credit facilities was $13.6 million. In September 2012, we entered into a seven year term loan agreement for $11.1 million to fund the acquisition of land and a building in the state of Washington. The loan, which bears interest at LIBOR plus 1.25%, is payable on a monthly basis over seven years. Concurrent with entering into the floating rate loan, we entered into an interest rate swap agreement that effectively locks the interest rate of the loan to 2.2% per annum for the term of the loan. Long-term debt consisted of the following (in thousands): June 30, September 30, 1.25% convertible notes due 2022: Principal amount $ $ Unamortized discount ) ) Unamortized debt issuance costs ) ) 1.25% convertible notes due 2022, net of unamortized discount and debt issuance costs Term loans Other long-term debt Less current portion of long-term debt ) ) Long-term portion of debt $ $ |
Stockholders' Equity
Stockholders' Equity | 3 Months Ended |
Sep. 30, 2017 | |
Stockholders' Equity | |
Stockholders' Equity | 7. Stockholders’ Equity Stock-based Compensation As of September 30, 2017, we maintained two share based employee compensation plans: the 2012 Incentive Award Plan (“2012 Plan”) and the Amended and Restated 2006 Equity Participation Plan (“2006 Plan”). Upon stockholder approval of the 2012 Plan, we ceased to make grants under the 2006 Plan. In addition, pursuant to the acquisition of AS&E, we assumed two share based employee compensation plans: the AS&E 2005 Equity and Incentive Plan (“2005 AS&E Plan”) and the AS&E 2014 Equity and Incentive Plan (“2014 AS&E Plan”). No new RSU grants will be made under the 2005 AS&E Plan or the 2014 AS&E Plan. The 2012 Plan, the 2006 Plan, the 2005 AS&E Plan and the 2014 AS&E Plan are collectively referred to as the “OSI Plans”. We recorded stock based compensation expense in the consolidated statement of operations as follows (in thousands): Three Months Ended September 30, 2016 2017 Cost of goods sold $ $ Selling, general and administrative Research and development Stock based compensation expense As of September 30, 2017, total unrecognized compensation cost related to share based compensation grants were estimated at $0.6 million for stock options and $29.7 million for RSUs under the OSI Plans. We expect to recognize these costs over a weighted average period of 1.9 years with respect to the stock options and 1.8 years for grants of RSUs. The following summarizes stock option activity during the three months ended September 30, 2017: Weighted Average Weighted-Average Aggregate Number of Exercise Remaining Contractual Intrinsic Value Options Price Term (in thousands) Outstanding at June 30, 2017 $ Granted $ Exercised ) $ Expired or forfeited ) $ Outstanding at September 30, 2017 $ 3.4 years $ Exercisable at September 30, 2017 $ 3.1 years $ The following summarizes RSU award activity during the three months ended September 30, 2017: Weighted- Average Shares Fair Value Nonvested at June 30, 2017 $ Granted $ Vested ) $ Forfeited ) $ Nonvested at September 30, 2017 $ As of September 30, 2017, there were approximately 0.7 million shares available for grant under the 2012 Plan. Under the terms of the 2012 Plan, RSUs and restricted stock granted from the pool of shares available for grant reduce the pool by 1.87 shares for each award granted. RSUs and restricted stock forfeited and returned to the pool of shares available for grant increase the pool by 1.87 shares for each award forfeited. We granted 155,488 and 117,346 performance-based RSUs during the three months ended September 30, 2016 and 2017, respectively. These performance-based RSUs are contingent on the achievement of certain performance metrics. The payout can range from zero to 250% of the original number of shares or units awarded. Share Repurchase Program In April 2016, the Board of Directors authorized a stock repurchase program of up to 1.0 million shares. During the three months ended September 30, 2017, no shares were repurchased under this program, which leaves available 872,481 shares under this program. This program does not automatically expire unless the Board acts to terminate the program. Upon repurchase, the shares are restored to the status of authorized but unissued, and we record them as a reduction in the number of shares of common stock issued and outstanding in the consolidated financial statements. |
Retirement Benefit Plans
Retirement Benefit Plans | 3 Months Ended |
Sep. 30, 2017 | |
Retirement Benefit Plans | |
Retirement Benefit Plans | 8. Retirement Benefit Plans We sponsor various retirement benefit plans including qualified and nonqualified defined benefit pension plans for our employees. The components of net periodic pension expense are as follows (in thousands): Three Months Ended September 30, 2016 2017 Service cost $ $ Interest cost Amortization of prior service cost Net periodic pension expense $ $ For the three months ended September 30, 2016, we made no contributions to these defined benefit plans. For the three months ended September 30, 2017, we made contributions of $0.7 million to these defined benefit plans. In addition, we maintain various defined contribution plans. For the three months ended September 30, 2016 and 2017, we made contributions of $1.2 and $1.6 million, respectively, to these defined contribution plans. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Sep. 30, 2017 | |
Commitments and Contingencies | |
Commitments and Contingencies | 9. Commitments and Contingencies Contingent Acquisition Obligations Under the terms and conditions of the purchase agreements associated with certain acquisitions, we may be obligated to make additional payments based on the achievement of certain sales or profitability milestones by the acquired operations. The maximum amount of such future payments under arrangements with contingent consideration caps is $26.4 million as of September 30, 2017. In addition, we are required to make royalty payments through 2022 based on the license of, or sales of products containing, the technology of CXR Limited, a company acquired in 2004. For acquisitions that occurred through the end of fiscal year 2009, we account for such contingent payments as an addition to the purchase price of the acquired business. For acquisitions after fiscal 2009, pursuant to Financial Accounting Standard 141R, which was codified into ASC 805, the estimated fair value of these obligations is recorded as a liability at the time of the acquisition with subsequent revisions recorded in Selling, general and administrative expense in the consolidated financial statements. The estimated fair value measurements of contingent earn-out obligations are primarily based on unobservable inputs, which may include projected revenues, gross margins, operating income, estimated probability of achieving and the estimated probability of earn-out payments being made. These projections and probabilities are used to estimate future contingent earnout payments, which are discounted back to present value to compute the contingent earnout liability. The following table reconciles the contingent earnout liability, which is included in Other accrued expenses and current liabilities, and Other long-term liabilities in the accompanying consolidated balance sheets, from June 30, 2017 to September 30, 2017: Beginning fair value, June 30, 2017 $ Addition of contingent earn-out obligations Remeasurement of fair value for contingent earn-out obligations ) Payments on contingent earn-out obligations ) Ending fair value, September 30, 2017 $ Environmental Contingencies We are subject to various environmental laws. Our practice is to conduct appropriate environmental investigations at our manufacturing facilities in North America, Asia Pacific, and Europe, and, to the extent practicable, on all new properties in order to identify, as of the date of such investigation, potential areas of environmental concern related to past and present activities or from nearby operations. In certain cases, we have conducted further environmental assessments consisting of soil and groundwater testing and other investigations deemed appropriate by independent environmental consultants. We continue to investigate contamination of the soil and groundwater beneath the Hawthorne, California facility that resulted from unspecified on and off site releases we believe occurred prior to our occupancy. We believe the releases are of a historical nature and not uncommon to the region in general. We continue to take voluntary actions, in cooperation with the local governing agency, to fully investigate the site in order to develop appropriate remedial actions. We have not accrued for loss contingencies relating to the Hawthorne facility or any other environmental matters because we believe that, although unfavorable outcomes may be possible, they are not considered by our management to be probable and reasonably estimable. If one or more of these environmental matters are resolved in a manner adverse to us, the impact on our business, financial condition, results of operations and cash flow could be material. Indemnifications In the normal course of business, we have agreed to indemnify certain parties with respect to certain matters. We have agreed to hold certain parties harmless against losses arising from a breach of representations, warranties or covenants, or intellectual property infringement or other claims made by third parties. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim. In addition, we have entered into indemnification agreements with our directors and certain of our officers. It is not possible to determine the maximum potential amount under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. We have not recorded any liability for costs related to contingent indemnification obligations as of September 30, 2017. Product Warranties We offer our customers warranties on many of the products that we sell. These warranties typically provide for repairs and maintenance of the products if problems arise during a specified time period after original shipment. Concurrent with the sale of products, we record a provision for estimated warranty expenses with a corresponding increase in cost of goods sold. We periodically adjust this provision based on historical experience and anticipated expenses. We charge actual expenses of repairs under warranty, including parts and labor, to this provision when incurred. The warranty provision is included in the Other accrued expenses and current liabilities in the consolidated balance sheets. The following table presents changes in warranty provisions (in thousands): Three Months Ended September 30, 2016 2017 Balance at beginning of period $ $ Additions and adjustments Reductions for warranty repair costs ) ) Balance at end of period $ $ Legal Proceedings Our acquired subsidiary, AS&E, has been the subject of an investigation by the Office of the Inspector General of the U.S. General Services Administration (“GSA”). The investigation relates to AS&E’s discount practices and compliance with the pricing provisions of AS&E’s GSA Schedule contract prior to the date of acquisition. The investigation could lead to claims or findings of violations of the False Claims Act in connection with AS&E’s GSA contracting activity. Violations of the False Claims Act could result in the imposition of damages (up to treble damages) plus civil penalties in some cases, and we have been incurring legal costs and expect to incur further legal costs in connection with the investigation. We and AS&E continue to cooperate with the GSA investigation and management believes that an appropriate accrual for this uncertainty has been provided in the accompanying condensed consolidated financial statements. We are involved in various other claims and legal proceedings arising in the ordinary course of business. In our opinion after consultation with legal counsel, the ultimate disposition of such proceedings is not likely to have a material adverse effect on our business, financial condition, results of operations or cash flows. We have not accrued for loss contingencies relating to such matters because we believe that, although unfavorable outcomes in the proceedings may be possible, they are not considered by management to be probable and reasonably estimable. If one or more of these matters are resolved in a manner adverse to our company, the impact on our business, financial condition, results of operations and cash flow could be material. |
Income Taxes
Income Taxes | 3 Months Ended |
Sep. 30, 2017 | |
Income Taxes | |
Income Taxes | 10. Income Taxes The provision for income taxes is determined using an effective tax rate that is subject to fluctuations during the year as new information is obtained. The assumptions used to estimate the annual effective tax rate include factors such as the mix of pre-tax earnings in the various tax jurisdictions in which we operate, valuation allowances against deferred tax assets, increases or decreases in uncertain tax positions, utilization of research and development tax credits, changes in or the interpretation of tax laws in jurisdictions where we conduct business and certain tax elections. We recognize deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of our assets and liabilities along with net operating loss and tax credit carryovers. We record a valuation allowance against our deferred tax assets to reduce the net carrying value to an amount that we believe is more likely than not to be realized. When we establish or reduce the valuation allowance against our deferred tax assets, the provision for income taxes will increase or decrease in the period such determination is made. We believe it is more likely than not that a portion of the Company’s deferred income tax assets, for which no valuation allowance has been recorded, may expire unused. Accordingly, during the three months ended September 30, 2017, we increased our valuation allowance by $5.3 million. The impact of the increase in valuation allowance was partially offset by a tax benefit for equity-based compensation of $4.3 million under ASU 2016-09 during the quarter resulting in an effective tax rate of 32.9%. Excluding the net impact of these discrete tax items, our effective tax rate for the three months ended September 30, 2017 was 28.3% as compared to 28.0% for the comparable prior-year period. |
Segment Information
Segment Information | 3 Months Ended |
Sep. 30, 2017 | |
Segment Information | |
Segment Information | 11. Segment Information We have determined that we operate in three identifiable industry segments: (a) security and inspection systems (Security division), (b) medical monitoring and anesthesia systems (Healthcare division) and (c) optoelectronic devices and manufacturing (Optoelectronics and Manufacturing division). We also have a corporate segment (Corporate) that includes executive compensation and certain other general and administrative expenses; expenses related to stock issuances and legal, audit and other professional service fees not allocated to product segments. Both the Security and Healthcare divisions comprise primarily end product businesses whereas the businesses of the Optoelectronics and Manufacturing division primarily supply components and subsystems to OEM customers, including to the Security and Healthcare divisions. Sales between divisions are at transfer prices that approximate market values. All other accounting policies of the segments are the same as described in Note 1, Summary of Significant Accounting Policies of the Form 10-K for the fiscal year ended June 30, 2017. The following tables present the operations and identifiable assets by industry segment (in thousands): Three Months Ended September 30, 2016 2017 Revenues (1) — by Segment: Security division $ $ Healthcare division Optoelectronics and Manufacturing division, including intersegment revenues Intersegment revenues elimination ) ) Total $ $ Three Months Ended September 30, 2016 2017 Operating income (loss) — by Segment: Security division $ $ Healthcare division ) Optoelectronics and Manufacturing division Corporate ) ) Eliminations (2) ) Total $ $ June 30, September 30, 2017 2017 Assets— by Segment: Security division $ $ Healthcare division Optoelectronics and Manufacturing division Corporate Eliminations (2) ) ) Total $ $ (1) For both of the three months ended September 30, 2016 and 2017, one customer, SAT in Mexico, accounted for approximately 13% of total net revenues. (2) Eliminations within operating income primarily reflect the change in the elimination of intercompany profit in inventory not-yet-realized. Eliminations in assets reflect the amount of intercompany profits in inventory as of the balance sheet date. Such intercompany profit will be realized when inventory is shipped to the external customers of the Security and Healthcare divisions. |
Basis of Presentation (Policies
Basis of Presentation (Policies) | 3 Months Ended |
Sep. 30, 2017 | |
Basis of Presentation | |
Description of Business | Description of Business OSI Systems, Inc., together with our subsidiaries, is a vertically integrated designer and manufacturer of specialized electronic systems and components for critical applications. We sell our products in diversified markets, including homeland security, healthcare, defense and aerospace. We have three reporting segments: (i) Security, providing security inspection systems, turnkey security screening solutions and related services; (ii) Healthcare, providing patient monitoring, diagnostic cardiology, and anesthesia systems, and related services; and (iii) Optoelectronics and Manufacturing, providing specialized electronic components and electronic manufacturing services for the Security and Healthcare divisions as well as to external OEM customers and end users for applications in the defense, aerospace, medical and industrial markets, among others. Through our Security segment, we provide security screening products and related services globally. These products fall into the following categories: baggage and parcel inspection; cargo and vehicle inspection; hold (checked) baggage screening; people screening; radiation detection; and explosive and narcotics trace detection. In addition to these products, we also provide site design, installation, training and technical support services to our customers. We also provide turnkey security screening solutions, which can include the construction, staffing and long-term operation of security screening checkpoints for our customers. Through our Healthcare segment, we design, manufacture, market and service patient monitoring, diagnostic cardiology, and anesthesia delivery and ventilation systems, and related supplies and accessories worldwide. These products are used by care providers in critical care, emergency and perioperative areas within hospitals as well as physicians’ offices, medical clinics and ambulatory surgery centers among other sites. Through our Optoelectronics and Manufacturing segment, we design, manufacture and market optoelectronic components and provide electronics manufacturing services globally for use in a broad range of applications, including aerospace and defense electronics, security and inspection systems, medical imaging and diagnostic products, telecommunications, computer peripherals, industrial automation systems, automotive diagnostic systems, and consumer products. This division provides products and services to OEM customers and end users as well as to our Security and Healthcare divisions. |
Basis of Presentation | Basis of Presentation The condensed consolidated financial statements include the accounts of OSI Systems, Inc. and its 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 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 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 condensed consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2017. The results of operations for the three months ended September 30, 2017 are not necessarily indicative of the operating results to be expected for the full 2018 fiscal year or any future periods. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and costs of sales during the reporting period. The most significant of these estimates and assumptions for our company relate to contract revenue, profit and loss recognition, fair values of assets acquired and liabilities assumed in business combinations, market values for inventories reported at lower of cost or net realizable value, stock-based employee compensation expense, income taxes, accrued product warranty costs, and the recoverability, useful lives and valuation of recorded amounts of long lived assets, identifiable intangible assets and goodwill. Changes in estimates are reflected in the periods during which they become known. Actual amounts will likely differ from these estimates and could differ materially. |
Per Share Computations | 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. Stock options and stock awards to purchase 0.1 million shares of common stock for each of the three months ended September 30, 2016 and September 30, 2017, respectively, were excluded from the calculation because to include such options and awards would have been antidilutive. Prior to our adoption of ASU 2016-09 in the fourth quarter of fiscal 2017, we included tax benefits in assessing whether equity awards were dilutive and in our calculations of weighted average dilutive shares under the treasury stock method. The underlying equity component of the 1.25% convertible senior notes discussed in Note 6 to the condensed consolidated financial statements will have no impact to diluted earnings per share until the average price of our common stock exceeds the conversion price because the principal amount of the Notes is intended to be settled in cash upon conversion. The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts): Three Months Ended September 30, 2016 2017 Net income available to common stockholders $ $ Weighted average shares outstanding—basic Dilutive effect of equity awards Weighted average shares outstanding—diluted Basic earnings per share $ $ Diluted earnings per share $ $ |
Cash Equivalents | Cash Equivalents We consider all highly liquid investments purchased with maturities of three months or less as of the acquisition date to be cash equivalents. Our cash, cash equivalents, and investments totaled $192.0 million at September 30, 2017. Of this amount, approximately 99% was held by our foreign subsidiaries and subject to repatriation tax considerations. These foreign funds were located primarily in Mexico, Malaysia and the United Kingdom, and to a lesser extent in India, Singapore, Germany and China among others. We intend to permanently reinvest a significant portion of our earnings from foreign operations, and we currently do not anticipate that we will need this cash in foreign countries to fund our U.S. operations. In the event that funds from foreign operations are needed to fund operations in the United States and if U.S. taxes have not been previously provided on the related earnings, we would provide for and pay additional U.S. taxes at the time we change our intention with regard to the reinvestment of those earnings. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments Our financial instruments consist primarily of cash, marketable securities, derivative instruments, accounts receivable, accounts payable and debt instruments. The carrying values of financial instruments, other than long term debt instruments, are representative of their fair values due to their short term maturities. The carrying values of our long term debt instruments are considered to approximate their fair values because the interest rates of these instruments are variable or comparable to current rates available to us. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. “Level 1” category includes assets and liabilities at the quoted prices in active markets for identical assets and liabilities. “Level 2” category includes assets and liabilities from observable inputs other than quoted market prices. “Level 3” category includes assets and liabilities for which valuation techniques are unobservable and significant to the fair value measurement. There were no assets where “Level 3” valuation techniques were used. As further discussed in Note 9 to the condensed consolidated financial statements, our contingent payment obligations related to acquisitions are valued using “Level 3” valuation techniques. Such obligations are measured at fair value on a recurring basis. The fair values of the our financial assets and liabilities as of June 30, 2017 and September 30, 2017 are categorized as follows (in thousands): June 30, 2017 September 30, 2017 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets: Equity securities $ $ — $ — $ $ $ — $ — $ Insurance company contracts — — — — Interest rate contract — — — — Total assets $ $ $ — $ $ $ $ — $ Liabilities—Contingent payment obligations $ — $ — $ $ $ — $ — $ $ |
Derivative Instruments and Hedging Activity | Derivative Instruments and Hedging Activity Our use of derivatives consists of an interest rate swap agreement. The interest rate swap agreement was entered into to improve the predictability of cash flows from interest payments related to variable, LIBOR based debt for the duration of the term loan. The interest rate swap matures in October 2019. The interest rate swap is considered an effective cash flow hedge and, as a result, the net gains or losses on such instrument were reported as a component of Other comprehensive income (loss) in the consolidated financial statements and are reclassified as net income when the hedge transaction settles. |
Property and Equipment | Property and Equipment Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are charged while assets are used in service and are generally computed using the straight-line method over the estimated useful lives of the assets taking into consideration any estimated salvage value. Amortization of leasehold improvements is calculated on the straight-line method over the shorter of the useful life of the asset or the lease term. Leased capital assets are included in property and equipment. Amortization of property and equipment under capital leases is included with depreciation expense. In the event that property and equipment are idle, as a result of excess capacity or the early termination, non-renewal or reduction in scope of a turnkey screening operation, such assets are assessed for impairment on a periodic basis. |
Goodwill Impairment | Goodwill Impairment Goodwill represents the excess purchase price over the estimated fair value of the assets acquired and liabilities assumed in a business combination. Goodwill is allocated to our segments based on the nature of the product line of the acquired business. The carrying value of goodwill is not amortized, but is annually tested for impairment during our second quarter and more frequently if there is an indicator of impairment. We assess qualitative factors of each of our three reporting units to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. |
Revenue Recognition | Revenue Recognition Product Sales. We recognize revenue from sales of products upon shipment when title and risk of loss passes and when terms are fixed and collection is probable. In an instance where terms of a product sale include subjective customer acceptance criteria, revenue is deferred until we have achieved the acceptance criteria unless customer acceptance terms are perfunctory or inconsequential. Service Revenue. Revenue from services includes after-market services, installation and implementation of products and turnkey security screening services. Generally, revenue from services is recognized when the services are performed. Revenues from out-of-warranty service maintenance contracts are recognized ratably over the respective terms of such contracts. Deferred revenue for such services arises from payments received from customers for services not yet performed. Multiple-Deliverable Arrangements. We enter into certain agreements with customers for the sale of capital equipment that contain multiple elements that may include civil works to prepare a site for the installation of equipment, manufacture and delivery of equipment, installation and integration of equipment, training of customer personnel to operate the equipment and after-market service of the equipment. The duration to fulfill each of these deliverables can range from completion in a short amount of time and entirely within a single reporting period to completion over several reporting periods. The general timing of revenue recognition for each deliverable may be dependent upon several milestones, including physical delivery of equipment, completion of factory acceptance test, completion of site acceptance test, installation and connectivity of equipment, certification of training of personnel and, in the case of after-market service deliverables, the passage of time (typically evenly over the post-warranty period of the service deliverable). Multiple-deliverable arrangements require that consideration be allocated to each deliverable based on its relative selling price and recognized as revenue when the revenue recognition criteria for each deliverable has been met. The arrangement is separated into more than one unit of accounting if both of the following criteria are met: (i) the delivered item has value to the customer on a stand-alone basis; and (ii) for an arrangement including a general right of return relative to the delivered item, delivery or performance of the undelivered item is considered probable and substantially within our control. If these criteria are not met, the arrangement is accounted for as one unit of accounting and the recognition of revenue is deferred until delivery is complete or is recognized ratably over the contract period as appropriate. If these criteria are met, consideration is allocated at inception of the arrangement to all deliverables on the basis of the relative selling price. We have generally met these criteria for the multiple-deliverable arrangement as all of the deliverables in our arrangements have stand-alone value in that either the customer can resell that item or another vendor sells that item separately. We typically do not offer a general right of return in regards to our multiple-deliverable arrangements. The selling price of each deliverable is determined by establishing vendor-specific objective evidence (“VSOE”), third party evidence (“TPE”) or best estimate of selling price (“BESP”) for each delivered item. Generally, either VSOE or TPE is determinable; however, in the few instances where neither VSOE nor TPE is determinable, we utilize our BESP in order to allocate consideration to those deliverables. BESP for our product deliverables is determined by utilizing a weighted average price approach. BESP for our service deliverables is determined primarily by utilizing a cost-plus margin approach, though in some instances average price per hour is used. We often provide a guarantee to support our performance under multiple-deliverable arrangements. In the event that customers are permitted to terminate such arrangements, the underlying contract typically requires payment for deliverables and reimbursement of costs incurred through the date of termination. Proportional Performance. In connection with the agreement with the Servicio de Administración Tributaria (“SAT”) in Mexico, revenue is recognized based upon proportional performance, measured by the actual number of labor hours incurred divided by the total estimated number of labor hours for the project. The impact of changes in the estimated labor hours to service the agreement is reflected in the period during which the change becomes known. In the SAT agreement, customer billings may be submitted for several separate deliverables, including monthly services, activation of services, training of customer personnel and consultation on the design and location of security scanning operations, among others. In the event that payments received from the customer exceed revenue recognition, deferred revenue is recorded. Critical judgments made by management related to revenue recognition include the determination of whether or not customer acceptance criteria are perfunctory or inconsequential. The determination of whether or not customer acceptance terms are perfunctory or inconsequential impacts the amount and timing of revenue recognition. Concurrent with revenue recognition, we accrue reserves for estimated product return and warranty costs. Critical judgments also include estimates of warranty reserves, which are established based on historical experience and knowledge regarding the product under warranty. |
Recent Accounting Updates Not Yet Adopted and Adoption of ASU 2015-11 | Recent Accounting Updates Not Yet Adopted In May 2014, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update (“ASU”) amending revenue recognition requirements for multiple deliverable revenue arrangements. This update provides guidance on how revenue is recognized for the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for the goods or services. This determination is made in five steps: (i) identify the contract with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The ASU is effective for fiscal years beginning after December 15, 2017 and for interim reporting periods within such fiscal years. Earlier adoption is permitted only for fiscal years beginning after December 15, 2016, including interim reporting periods within such fiscal years. We are in the process of selecting a transition method and our preliminary evaluation of the impact of this ASU indicates that it will not have a material impact on the timing of revenue recognition. In January 2016, FASB issued an ASU which affects the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. This guidance retains the current accounting for classifying and measuring investments in debt securities and loans, but requires equity investments to be measured at fair value with subsequent changes recognized in net income, except for those accounted for under the equity method or requiring consolidation. The guidance also changes the accounting for investments without a readily determinable fair value and that do not qualify for the practical expedient permitted by the guidance to estimate fair value. A policy election can be made for these investments whereby estimated fair value may be measured at cost and adjusted in subsequent periods for any impairment or changes in observable prices of identical or similar investments. This ASU is effective for fiscal years beginning after December 15, 2017, including interim reporting periods within such fiscal years. Early application is permitted. We have not yet adopted this ASU and are currently evaluating the impact it may have on our financial condition and results of operations. In February 2016, the FASB issued an ASU which affects the accounting for leases. The guidance requires lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months. The amendment also will require qualitative and quantitative disclosures designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases. This ASU is effective for fiscal years beginning after December 15, 2018, including interim reporting periods within such fiscal years. Early application is permitted. We have not yet adopted this ASU and are currently evaluating the impact it may have on our financial condition and results of operations. In August 2016, the FASB issued an ASU to address the diverse classifications being applied to cash receipts and payments in the reporting entities’ cash flow statement. This ASU addresses eight specific cash flow issues to reduce diversity in practice. This ASU is effective for fiscal years beginning after December 15, 2017, including interim reporting periods within such fiscal years. We have not yet adopted this ASU and are currently evaluating the impact it may have on our financial condition and results of operations. Adoption of ASU 2015-11 Effective July 1, 2017, we adopted ASU 2015-11 “Simplifying the Measurement of Inventory.” This ASU requires an entity to measure in scope inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The adoption of this ASU did not have a material impact on our financial condition and results of operations. |
Basis of Presentation (Tables)
Basis of Presentation (Tables) | 3 Months Ended |
Sep. 30, 2017 | |
Basis of Presentation | |
Schedule of computation of basic and diluted earnings per share | The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts): Three Months Ended September 30, 2016 2017 Net income available to common stockholders $ $ Weighted average shares outstanding—basic Dilutive effect of equity awards Weighted average shares outstanding—diluted Basic earnings per share $ $ Diluted earnings per share $ $ |
Summary of fair values of financial assets and liabilities | The fair values of the our financial assets and liabilities as of June 30, 2017 and September 30, 2017 are categorized as follows (in thousands): June 30, 2017 September 30, 2017 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets: Equity securities $ $ — $ — $ $ $ — $ — $ Insurance company contracts — — — — Interest rate contract — — — — Total assets $ $ $ — $ $ $ $ — $ Liabilities—Contingent payment obligations $ — $ — $ $ $ — $ — $ $ |
Business Combinations (Tables)
Business Combinations (Tables) | 3 Months Ended |
Sep. 30, 2017 | |
Summary of the fair value of acquired identifiable intangible assets as of the acquisition date | The following table summarizes the fair value of acquired identifiable intangible assets as of the acquisition date (amounts in thousands): Weighted Average Fair Lives Value Amortizable assets: Developed technology 10 years $ Customer relationships/backlog 7 years Total amortizable assets Non-amortizable asset — IPR&D Total intangible assets $ |
Unaudited pro forma results of operations assuming the ETD acquisition had occurred on July 1, 2016 | The following unaudited pro forma results of operations assume the ETD acquisition had occurred on July 1, 2016 (in thousands): Three Months Ended 2016 2017 Revenues $ $ Income from operations $ $ |
Explosive Trace Detection Business | |
Schedule of assets acquired and liabilities assumed | Cash and cash equivalents $ Accounts receivable Inventories Property and equipment Intangible assets Other long-term assets Accounts payable ) Accrued payroll and related expenses ) Deferred revenues — current ) Accrued warranties ) Other accrued expenses and current liabilities ) Net assets acquired Goodwill Total consideration $ |
AS&E | |
Schedule of assets acquired and liabilities assumed | The assets acquired and the liabilities assumed by us in the acquisition, reconciled to total purchase consideration are as follows (in thousands): Current assets $ Intangible assets Other long term assets Current liabilities ) Long-term liabilities ) Net assets acquired Goodwill Total consideration $ |
Balance Sheet Details (Tables)
Balance Sheet Details (Tables) | 3 Months Ended |
Sep. 30, 2017 | |
Balance Sheet Details | |
Schedule of selected balance sheet accounts | The following tables provide details of selected balance sheet accounts (in thousands): June 30, September 30, 2017 2017 Accounts receivable $ $ Less allowance for doubtful accounts ) ) Total $ $ June 30, September 30, 2017 2017 Raw materials $ $ Work-in-process Finished goods Total $ $ Estimated Useful June 30, September 30, Lives 2017 2017 Land N/A $ $ Buildings, civil works and improvements 5 - 40 years Leasehold improvements 1 - 12 years Equipment and tooling 3 - 10 years Furniture and fixtures 3 - 13 years Computer equipment 3 - 5 years Computer software 3 - 10 years Computer software implementation in process N/A Construction in process N/A Total Less accumulated depreciation and amortization ) ) Property and equipment, net $ $ |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 3 Months Ended |
Sep. 30, 2017 | |
Goodwill and Intangible Assets | |
Schedule of carrying value of goodwill | The changes in the carrying value of goodwill for the three month period ended September 30, 2017 are as follows (in thousands): Optoelectronics and Security Healthcare Manufacturing Division Division Division Consolidated Balance as of June 30, 2017 $ $ $ $ Goodwill acquired or adjusted during the period — Foreign currency translation adjustment Balance as of September 30, 2017 $ $ $ $ |
Schedule of intangible assets | Intangible assets consisted of the following (in thousands): June 30, 2017 September 30, 2017 Weighted Gross Gross Average Carrying Accumulated Intangibles Carrying Accumulated Intangibles Lives Value Amortization Net Value Amortization Net Amortizable assets: Software development costs 9 years $ $ ) $ $ $ ) $ Patents 20 years ) ) Developed technology 10 years ) ) Customer relationships/backlog 7 years ) ) Total amortizable assets ) ) Non-amortizable assets: Trademarks and trade names — — IPR&D — — Total intangible assets $ $ ) $ $ $ ) $ |
Schedule of estimated future amortization expense | At September 30, 2017, the estimated future amortization expense was as follows (in thousands): 2018 (remaining 9 months) $ 2019 2020 2021 2022 2023 2024 and thereafter, including assets that have not yet begun to be amortized Total $ |
Impairment, Restructuring and23
Impairment, Restructuring and Other Charges (Tables) | 3 Months Ended |
Sep. 30, 2017 | |
Impairment, Restructuring and Other Charges | |
Summary of the impairment, restructuring and other charges | The following table summarizes impairment, restructuring and other charges for the periods set forth below (in thousands): Three Months Ended September 30, 2016 Security Division Healthcare Optoelectronics and Corporate Total Impairment charges $ $ $ — $ — $ Acquisition-related costs — — $ Employee termination costs — Facility closures/consolidation — — — Other charges — — Total expensed $ $ $ $ $ Three Months Ended September 30, 2017 Security Division Healthcare Optoelectronics and Corporate Total Acquisition-related costs $ — $ — $ — $ $ Employee termination costs — — — Facility closures/consolidation — — — Total expensed $ $ — $ — $ $ |
Schedule of changes in the accrual for restructuring and other charges | The changes in the accrual for restructuring and other charges for the three-month period ended September 30, 2017 were as follows (in thousands): Acquisition- Employee Facility Total Balance as of June 30, 2017 $ — $ $ $ Restructuring and other charges Payments and other adjustments ) ) ) ) Balance as of September 30, 2017 $ — $ $ $ |
Borrowings (Tables)
Borrowings (Tables) | 3 Months Ended |
Sep. 30, 2017 | |
Borrowings | |
Schedule of long-term debt | Long-term debt consisted of the following (in thousands): June 30, September 30, 1.25% convertible notes due 2022: Principal amount $ $ Unamortized discount ) ) Unamortized debt issuance costs ) ) 1.25% convertible notes due 2022, net of unamortized discount and debt issuance costs Term loans Other long-term debt Less current portion of long-term debt ) ) Long-term portion of debt $ $ |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 3 Months Ended |
Sep. 30, 2017 | |
Stockholders' Equity | |
Schedule of stock based compensation expense in the consolidated statement of operations | We recorded stock based compensation expense in the consolidated statement of operations as follows (in thousands): Three Months Ended September 30, 2016 2017 Cost of goods sold $ $ Selling, general and administrative Research and development Stock based compensation expense |
Summary of stock option activity | Weighted Average Weighted-Average Aggregate Number of Exercise Remaining Contractual Intrinsic Value Options Price Term (in thousands) Outstanding at June 30, 2017 $ Granted $ Exercised ) $ Expired or forfeited ) $ Outstanding at September 30, 2017 $ 3.4 years $ Exercisable at September 30, 2017 $ 3.1 years $ |
Summary of RSU award activity | Weighted- Average Shares Fair Value Nonvested at June 30, 2017 $ Granted $ Vested ) $ Forfeited ) $ Nonvested at September 30, 2017 $ |
Retirement Benefit Plans (Table
Retirement Benefit Plans (Tables) | 3 Months Ended |
Sep. 30, 2017 | |
Retirement Benefit Plans | |
Schedule of net periodic pension expense | The components of net periodic pension expense are as follows (in thousands): Three Months Ended September 30, 2016 2017 Service cost $ $ Interest cost Amortization of prior service cost Net periodic pension expense $ $ |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 3 Months Ended |
Sep. 30, 2017 | |
Commitments and Contingencies | |
Schedule of reconciles the contingent earnout liabilities | Beginning fair value, June 30, 2017 $ Addition of contingent earn-out obligations Remeasurement of fair value for contingent earn-out obligations ) Payments on contingent earn-out obligations ) Ending fair value, September 30, 2017 $ |
Schedule of changes in warranty provisions | The following table presents changes in warranty provisions (in thousands): Three Months Ended September 30, 2016 2017 Balance at beginning of period $ $ Additions and adjustments Reductions for warranty repair costs ) ) Balance at end of period $ $ |
Segment Information (Tables)
Segment Information (Tables) | 3 Months Ended |
Sep. 30, 2017 | |
Segment Information | |
Schedule of operations and identifiable assets by industry segment | The following tables present the operations and identifiable assets by industry segment (in thousands): Three Months Ended September 30, 2016 2017 Revenues (1) — by Segment: Security division $ $ Healthcare division Optoelectronics and Manufacturing division, including intersegment revenues Intersegment revenues elimination ) ) Total $ $ Three Months Ended September 30, 2016 2017 Operating income (loss) — by Segment: Security division $ $ Healthcare division ) Optoelectronics and Manufacturing division Corporate ) ) Eliminations (2) ) Total $ $ June 30, September 30, 2017 2017 Assets— by Segment: Security division $ $ Healthcare division Optoelectronics and Manufacturing division Corporate Eliminations (2) ) ) Total $ $ (1) For both of the three months ended September 30, 2016 and 2017, one customer, SAT in Mexico, accounted for approximately 13% of total net revenues. (2) Eliminations within operating income primarily reflect the change in the elimination of intercompany profit in inventory not-yet-realized. Eliminations in assets reflect the amount of intercompany profits in inventory as of the balance sheet date. Such intercompany profit will be realized when inventory is shipped to the external customers of the Security and Healthcare divisions. |
Basis of Presentation (Details)
Basis of Presentation (Details) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | ||||
Sep. 30, 2017USD ($)segment$ / sharesshares | Sep. 30, 2016USD ($)$ / sharesshares | Jun. 30, 2017USD ($) | Feb. 28, 2017 | Jun. 30, 2016USD ($) | |
Description of Business | |||||
Number of reporting segments | segment | 3 | ||||
Computation of basic and diluted earnings per share | |||||
Net income available to common stockholders | $ | $ 10,157 | $ 677 | |||
Weighted average shares outstanding-basic | 18,778 | 18,943 | |||
Dilutive effect of equity awards | 813 | 648 | |||
Weighted average shares outstanding-diluted | 19,591 | 19,591 | |||
Basic earnings per share | $ / shares | $ 0.54 | $ 0.04 | |||
Diluted earnings per share | $ / shares | $ 0.52 | $ 0.03 | |||
Shares excluded from computation of diluted net income per share | |||||
Stock options excluded from computation due to antidilutive effect (in shares) | 100 | 100 | |||
Cash Equivalents | |||||
Cash, cash equivalents, and investments | $ | $ 192,028 | $ 122,966 | $ 169,650 | $ 104,370 | |
Cash, cash equivalents, and investments held by our foreign subsidiaries (as a percentage) | 99.00% | ||||
1.25% Convertible Senior Notes Due 2022 | |||||
Per Share Computations | |||||
Interest rate (as a percentage) | 1.25% | 1.25% |
Basis of Presentation - Fair Va
Basis of Presentation - Fair Value (Details) $ in Thousands | 3 Months Ended | |
Sep. 30, 2017USD ($)item | Jun. 30, 2017USD ($) | |
Fair Value of Financial Instruments | ||
Liabilities - Contingent payment obligations | $ 13,902 | $ 11,840 |
Goodwill Impairment | ||
Total number of reporting units | item | 3 | |
Recurring | ||
Fair Value of Financial Instruments | ||
Equity securities | $ 231 | 254 |
Insurance company contracts | 29,183 | 26,940 |
Interest rate contract | 18 | 20 |
Total assets | 29,432 | 27,214 |
Liabilities - Contingent payment obligations | 13,902 | 11,840 |
Recurring | Level 1 | ||
Fair Value of Financial Instruments | ||
Equity securities | 231 | 254 |
Total assets | 231 | 254 |
Recurring | Level 2 | ||
Fair Value of Financial Instruments | ||
Insurance company contracts | 29,183 | 26,940 |
Interest rate contract | 18 | 20 |
Total assets | 29,201 | 26,960 |
Recurring | Level 3 | ||
Fair Value of Financial Instruments | ||
Total assets | 0 | |
Liabilities - Contingent payment obligations | $ 13,902 | $ 11,840 |
Business Combinations - Explosi
Business Combinations - Explosive Trace Detection (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Jul. 07, 2017 | Jun. 30, 2017 |
Allocation of total consideration to assets acquired and liabilities assumed | |||
Goodwill | $ 282,656 | $ 242,129 | |
Explosive Trace Detection Business | |||
Allocation of total consideration to assets acquired and liabilities assumed | |||
Cash and cash equivalents | $ 4 | ||
Accounts receivable | 12,359 | ||
Inventories | 12,269 | ||
Property and equipment | 1,594 | ||
Intangible assets | $ 30,040 | 30,040 | |
Other long term assets | 303 | ||
Accounts payable | (3,070) | ||
Accrued payroll and related expenses | (2,450) | ||
Deferred revenues - current | (2,068) | ||
Accrued warranties | (1,260) | ||
Other accrued expenses and current liabilities | (1,018) | ||
Net assets acquired | 46,703 | ||
Goodwill | 33,764 | ||
Total consideration | $ 80,467 |
Business Combinations - Intangi
Business Combinations - Intangible Assets (Details) - Explosive Trace Detection Business - USD ($) $ in Thousands | 3 Months Ended | |
Sep. 30, 2017 | Jul. 07, 2017 | |
Business Combinations | ||
Amortizable assets | $ 29,640 | |
Total intangible assets | 30,040 | $ 30,040 |
IPR&D | ||
Business Combinations | ||
Non-amortizable asset | $ 400 | |
Developed technology | ||
Business Combinations | ||
Weighted Average Lives (in years) | 10 years | |
Amortizable assets | $ 13,220 | |
Customer relationships/backlog | ||
Business Combinations | ||
Weighted Average Lives (in years) | 7 years | |
Amortizable assets | $ 16,420 |
Business Combinations - Revenue
Business Combinations - Revenue and Income (Details) - Explosive Trace Detection Business - USD ($) $ in Thousands | 3 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2017 | Sep. 30, 2016 | |
Business Combinations | |||
Amount included in revenue | $ 21,700 | ||
Amount included in pre-tax income | $ 4,000 | ||
Pro forma results of operations assume the AS&E acquisition had occurred on July 1, 2016 | |||
Revenues | $ 257,133 | $ 236,752 | |
Income from operations | $ 19,394 | $ 4,441 |
Business Combinations - America
Business Combinations - American Science and Engineering (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Sep. 30, 2017 | Jun. 30, 2017 | Sep. 09, 2016 | |
Allocation of total consideration to assets acquired and liabilities assumed | |||
Goodwill | $ 282,656 | $ 242,129 | |
AS&E | |||
Business Combinations | |||
Percentage of ownership acquired | 100.00% | ||
Cash on hand to pay down the revolving bank line of credit | $ 69,000 | ||
Fair value adjustment | $ 0 | ||
Allocation of total consideration to assets acquired and liabilities assumed | |||
Current assets | 138,747 | ||
Intangible assets | 74,800 | ||
Other long term assets | 5,538 | ||
Current liabilities | (42,111) | ||
Long-term liabilities | (26,809) | ||
Net assets acquired | 150,165 | ||
Goodwill | 115,838 | ||
Total consideration | $ 266,003 |
Balance Sheet Details (Details)
Balance Sheet Details (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2017 | Sep. 30, 2016 | Jun. 30, 2017 | |
Accounts Receivable | ||||
Accounts receivable | $ 213,164 | $ 213,164 | $ 216,089 | |
Less allowance for doubtful accounts | (10,096) | (10,096) | (9,563) | |
Total | 203,068 | 203,068 | 206,526 | |
Inventories | ||||
Raw materials | 134,391 | 134,391 | 129,645 | |
Work-in-process | 67,412 | 67,412 | 65,454 | |
Finished goods | 69,506 | 69,506 | 53,411 | |
Total | 271,309 | 271,309 | 248,510 | |
Property and Equipment | ||||
Property and equipment, gross | 414,904 | 414,904 | 389,655 | |
Less accumulated depreciation and amortization | (263,734) | (263,734) | (248,116) | |
Property and equipment, net | 151,170 | 151,170 | 141,539 | |
Depreciation expense | 16,200 | $ 13,300 | ||
AS&E facility in Billerica, MA | ||||
Property and Equipment | ||||
Purchase of property and equipment | 19,800 | |||
Land | ||||
Property and Equipment | ||||
Property and equipment, gross | 17,129 | 17,129 | 14,212 | |
Land | AS&E facility in Billerica, MA | ||||
Property and Equipment | ||||
Purchase of property and equipment | 2,900 | |||
Buildings, civil works and improvements | ||||
Property and Equipment | ||||
Property and equipment, gross | 174,090 | $ 174,090 | 157,123 | |
Buildings, civil works and improvements | Minimum | ||||
Property and Equipment | ||||
Estimated Useful Lives | 5 years | |||
Buildings, civil works and improvements | Maximum | ||||
Property and Equipment | ||||
Estimated Useful Lives | 40 years | |||
Buildings, civil works and improvements | AS&E facility in Billerica, MA | ||||
Property and Equipment | ||||
Purchase of property and equipment | 16,900 | |||
Leasehold improvements | ||||
Property and Equipment | ||||
Property and equipment, gross | 9,412 | $ 9,412 | 9,025 | |
Leasehold improvements | Minimum | ||||
Property and Equipment | ||||
Estimated Useful Lives | 1 year | |||
Leasehold improvements | Maximum | ||||
Property and Equipment | ||||
Estimated Useful Lives | 12 years | |||
Equipment and tooling | ||||
Property and Equipment | ||||
Property and equipment, gross | 169,129 | $ 169,129 | 166,991 | |
Equipment and tooling | Minimum | ||||
Property and Equipment | ||||
Estimated Useful Lives | 3 years | |||
Equipment and tooling | Maximum | ||||
Property and Equipment | ||||
Estimated Useful Lives | 10 years | |||
Furniture and fixtures | ||||
Property and Equipment | ||||
Property and equipment, gross | 3,411 | $ 3,411 | 3,371 | |
Furniture and fixtures | Minimum | ||||
Property and Equipment | ||||
Estimated Useful Lives | 3 years | |||
Furniture and fixtures | Maximum | ||||
Property and Equipment | ||||
Estimated Useful Lives | 13 years | |||
Computer equipment | ||||
Property and Equipment | ||||
Property and equipment, gross | 18,741 | $ 18,741 | 17,991 | |
Computer equipment | Minimum | ||||
Property and Equipment | ||||
Estimated Useful Lives | 3 years | |||
Computer equipment | Maximum | ||||
Property and Equipment | ||||
Estimated Useful Lives | 5 years | |||
Computer Software | ||||
Property and Equipment | ||||
Property and equipment, gross | 17,368 | $ 17,368 | 17,303 | |
Computer Software | Minimum | ||||
Property and Equipment | ||||
Estimated Useful Lives | 3 years | |||
Computer Software | Maximum | ||||
Property and Equipment | ||||
Estimated Useful Lives | 10 years | |||
Computer software implementation in process | ||||
Property and Equipment | ||||
Property and equipment, gross | 3,090 | $ 3,090 | 2,590 | |
Construction in process | ||||
Property and Equipment | ||||
Property and equipment, gross | $ 2,534 | $ 2,534 | $ 1,049 |
Goodwill and Intangible Asset36
Goodwill and Intangible Assets - Goodwill (Details) $ in Thousands | 3 Months Ended |
Sep. 30, 2017USD ($) | |
Changes in the carrying value of goodwill | |
Balance at the beginning of the period | $ 242,129 |
Goodwill acquired or adjusted during the period | 39,751 |
Foreign currency translation adjustment | 776 |
Balance at the end of the period | 282,656 |
Security Division | |
Changes in the carrying value of goodwill | |
Balance at the beginning of the period | 155,083 |
Goodwill acquired or adjusted during the period | 39,701 |
Foreign currency translation adjustment | 152 |
Balance at the end of the period | 194,936 |
Healthcare Division | |
Changes in the carrying value of goodwill | |
Balance at the beginning of the period | 40,129 |
Foreign currency translation adjustment | 101 |
Balance at the end of the period | 40,230 |
Optoelectronics and Manufacturing Division | |
Changes in the carrying value of goodwill | |
Balance at the beginning of the period | 46,917 |
Goodwill acquired or adjusted during the period | 50 |
Foreign currency translation adjustment | 523 |
Balance at the end of the period | $ 47,490 |
Goodwill and Intangible Asset37
Goodwill and Intangible Assets - Intangible Assets Subject to Amortization (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Jun. 30, 2017 | |
Amortizable assets: | |||
Gross Carrying Value | $ 141,250 | $ 110,874 | |
Accumulated Amortization | (25,448) | (21,164) | |
Total | 115,802 | 89,710 | |
Total intangible assets | |||
Gross Carrying Value | 170,484 | 139,614 | |
Total intangible assets | 145,036 | 118,450 | |
Amortization expense | 4,200 | $ 2,100 | |
Trademarks and trade names | |||
Non-amortizable assets: | |||
Gross Carrying Value | 25,634 | 25,540 | |
IPR&D | |||
Non-amortizable assets: | |||
Gross Carrying Value | $ 3,600 | 3,200 | |
Computer Software | |||
Intangible assets | |||
Weighted Average Lives (in Years) | 9 years | ||
Amortizable assets: | |||
Gross Carrying Value | $ 26,855 | 26,753 | |
Accumulated Amortization | (6,905) | (6,291) | |
Total | $ 19,950 | 20,462 | |
Patents | |||
Intangible assets | |||
Weighted Average Lives (in Years) | 20 years | ||
Amortizable assets: | |||
Gross Carrying Value | $ 8,761 | 8,386 | |
Accumulated Amortization | (1,775) | (1,676) | |
Total | $ 6,986 | 6,710 | |
Developed technology | |||
Intangible assets | |||
Weighted Average Lives (in Years) | 10 years | ||
Amortizable assets: | |||
Gross Carrying Value | $ 50,766 | 37,446 | |
Accumulated Amortization | (6,793) | (5,530) | |
Total | $ 43,973 | 31,916 | |
Customer relationships/backlog | |||
Intangible assets | |||
Weighted Average Lives (in Years) | 7 years | ||
Amortizable assets: | |||
Gross Carrying Value | $ 54,868 | 38,289 | |
Accumulated Amortization | (9,975) | (7,667) | |
Total | $ 44,893 | $ 30,622 |
Goodwill and Intangible Asset38
Goodwill and Intangible Assets - Intangible Amortization (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Jun. 30, 2017 | |
Estimated future amortization expense | |||
2018 (remaining 9 months) | $ 13,839 | ||
2,019 | 18,469 | ||
2,020 | 16,171 | ||
2,021 | 15,360 | ||
2,022 | 11,641 | ||
2,023 | 10,470 | ||
2024 and thereafter (including assets that have not yet begun to be amortized) | 29,852 | ||
Total | 115,802 | $ 89,710 | |
Computer Software | |||
Estimated future amortization expense | |||
Total | 19,950 | $ 20,462 | |
Capitalized software development costs | $ 100 | $ 1,400 |
Impairment, Restructuring and39
Impairment, Restructuring and Other Charges - Restructuring and other charges(Details) - USD ($) $ in Thousands | 3 Months Ended | 15 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | |
Impairment, restructuring and other charges | |||
Impairment charges | $ 5,418 | ||
Acquisition-related costs | $ 820 | 3,874 | |
Employee termination costs | 240 | 471 | |
Facility closures/consolidation | 70 | 176 | |
Other charges | 18 | ||
Total expensed | 1,130 | 9,957 | |
Explosive Trace Detection Business | |||
Impairment, restructuring and other charges | |||
Acquisition-related costs | 700 | $ 1,700 | |
Security Division | |||
Impairment, restructuring and other charges | |||
Impairment charges | 5,332 | ||
Acquisition-related costs | 725 | ||
Employee termination costs | 240 | 150 | |
Facility closures/consolidation | 70 | 176 | |
Other charges | 7 | ||
Total expensed | 310 | 6,390 | |
Healthcare Division | |||
Impairment, restructuring and other charges | |||
Impairment charges | 86 | ||
Employee termination costs | 256 | ||
Total expensed | 342 | ||
Optoelectronics and Manufacturing Division | |||
Impairment, restructuring and other charges | |||
Employee termination costs | 65 | ||
Total expensed | 65 | ||
Corporate | |||
Impairment, restructuring and other charges | |||
Acquisition-related costs | 820 | 3,149 | |
Other charges | 11 | ||
Total expensed | $ 820 | $ 3,160 |
Impairment, Restructuring and40
Impairment, Restructuring and Other Charges - Changes in the accrual for restructuring and other charges (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Restructuring and other charges | ||
Balance at the beginning of the period | $ 466 | |
Restructuring and other charges | 1,130 | $ 9,957 |
Payments and other adjustments | (1,248) | |
Balance at the end of the period | 348 | |
Acquisition-related Costs | ||
Restructuring and other charges | ||
Restructuring and other charges | 820 | |
Payments and other adjustments | (820) | |
Employee Termination Costs | ||
Restructuring and other charges | ||
Balance at the beginning of the period | 175 | |
Restructuring and other charges | 240 | |
Payments and other adjustments | (263) | |
Balance at the end of the period | 152 | |
Facility Closure / Consolidation Cost | ||
Restructuring and other charges | ||
Balance at the beginning of the period | 291 | |
Restructuring and other charges | 70 | |
Payments and other adjustments | (165) | |
Balance at the end of the period | $ 196 |
Borrowings (Details)
Borrowings (Details) $ / shares in Units, $ in Thousands | 1 Months Ended | 3 Months Ended | |||||
Sep. 30, 2012USD ($) | Sep. 30, 2017USD ($)item$ / shares | Sep. 30, 2016USD ($) | Jun. 30, 2017USD ($) | Feb. 28, 2017USD ($) | Dec. 31, 2016USD ($) | Nov. 30, 2016USD ($) | |
Borrowings | |||||||
Borrowings outstanding | $ 214,000 | $ 103,000 | |||||
Repurchase of common shares | $ 2,712 | ||||||
Threshold percentage of stock price | 130.00% | ||||||
Number of trading days | item | 20 | ||||||
Number of consecutive trading days | item | 30 | ||||||
Principal amount of the notes to be repurchased (as a percentage) | 100.00% | ||||||
Components of long-term debt | |||||||
Term loans | $ 3,304 | 3,700 | |||||
Other long-term debt | 1,476 | 1,621 | |||||
Total | 245,702 | 244,146 | |||||
Less current portion of long-term debt | (2,286) | (2,396) | |||||
Long-term portion of debt | 243,416 | 241,750 | |||||
Revolving Credit Facility | |||||||
Borrowings | |||||||
Maximum borrowing capacity | $ 525,000 | $ 450,000 | |||||
Sub-limit available for letters of credit | $ 300,000 | ||||||
Interest rate margin (as a percent) | 1.50% | ||||||
Unused commitment fee (as a percent) | 0.20% | ||||||
Borrowings outstanding | $ 214,000 | ||||||
Amount outstanding under letters-of-credit | 33,100 | ||||||
Available credit facility | $ 277,900 | ||||||
Revolving Credit Facility | Minimum | |||||||
Borrowings | |||||||
Unused commitment fee (as a percent) | 0.20% | ||||||
Revolving Credit Facility | Maximum | |||||||
Borrowings | |||||||
Increase in the credit agreement's borrowing capacity available under certain circumstances | $ 250,000 | ||||||
Unused commitment fee (as a percent) | 0.30% | ||||||
Revolving Credit Facility | LIBOR | |||||||
Borrowings | |||||||
Interest rate margin (as a percent) | 1.25% | ||||||
Revolving Credit Facility | LIBOR | Minimum | |||||||
Borrowings | |||||||
Interest rate margin (as a percent) | 1.25% | ||||||
Revolving Credit Facility | LIBOR | Maximum | |||||||
Borrowings | |||||||
Interest rate margin (as a percent) | 2.00% | ||||||
1.25% Convertible Senior Notes Due 2022 | |||||||
Borrowings | |||||||
Principal amount | $ 287,500 | $ 287,500 | |||||
Interest rate (as a percentage) | 1.25% | 1.25% | |||||
Conversion ratio | 9.3056 | ||||||
Conversion price | $ / shares | $ 107.46 | ||||||
Premium on stock price | 38.50% | ||||||
Liability component of convertible debt | $ 242,400 | ||||||
Equity component of convertible debt | 45,100 | ||||||
Debt issuance costs | 7,700 | ||||||
Debt Component of debt issuance costs | 6,500 | ||||||
Equity component of debt issuance costs | 1,200 | ||||||
Total interest expense | 3,000 | ||||||
Contractual interest expense | 900 | ||||||
Amortization of debt discount | 1,800 | ||||||
Amortization of debt issuance costs | 300 | ||||||
Unamortized debt discount | $ 40,799 | 42,602 | |||||
Effective interest rate (as a percent) | 4.50% | ||||||
Unamortized debt issuance costs | $ 5,779 | 6,073 | |||||
Stock price per share | $ / shares | $ 91.37 | ||||||
Components of long-term debt | |||||||
Principal amount | $ 287,500 | 287,500 | |||||
Unamortized discount | (40,799) | (42,602) | |||||
Unamortized debt issuance costs | (5,779) | (6,073) | |||||
Total | 240,922 | $ 238,825 | |||||
Bank lines-of-credit | |||||||
Borrowings | |||||||
Amount outstanding under letters-of-credit | 61,100 | ||||||
Available credit facility | $ 13,600 | ||||||
Seven-year term loan due in fiscal 2020 | |||||||
Borrowings | |||||||
Principal amount | $ 11,100 | ||||||
Effective interest rate (as a percent) | 2.20% | ||||||
Term of loan | 7 years | ||||||
Seven-year term loan due in fiscal 2020 | LIBOR | |||||||
Borrowings | |||||||
Interest rate margin (as a percent) | 1.25% |
Stockholders' Equity - Stock-ba
Stockholders' Equity - Stock-based Compensation (Details) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Sep. 30, 2017USD ($)ShareBasedCompensationPlan$ / sharesshares | Sep. 30, 2016USD ($)shares | |
Stock-based Compensation | ||
Number of share-based compensation maintained | ShareBasedCompensationPlan | 2 | |
Stock based compensation expense | $ | $ 5,487 | $ 5,410 |
RSU | ||
Stock-based Compensation | ||
Unrecognized compensation cost | $ | $ 29,700 | |
Weighted-average period | 1 year 9 months 18 days | |
Shares | ||
Nonvested at the beginning of the period (in shares) | 611,687 | |
Granted (in shares) | 320,837 | |
Vested (in shares) | (372,248) | |
Forfeited (in shares) | (10,051) | |
Nonvested at the end of the period (in shares) | 550,225 | |
Weighted-Average Fair Value | ||
Nonvested at the beginning of the period (in dollars per share) | $ / shares | $ 65.85 | |
Granted (in dollars per share) | $ / shares | 72.98 | |
Vested (in dollars per share) | $ / shares | 65.49 | |
Forfeited (in dollars per share) | $ / shares | 67.86 | |
Nonvested at the end of the period (in dollars per share) | $ / shares | $ 70.22 | |
Stock Options | ||
Stock-based Compensation | ||
Unrecognized compensation cost | $ | $ 600 | |
Weighted-average period | 1 year 10 months 24 days | |
Number of Options | ||
Outstanding at the beginning of the period (in shares) | 780,671 | |
Granted (in shares) | 6,492 | |
Exercised (in shares) | (80,101) | |
Expired or forfeited (in shares) | (750) | |
Outstanding at the end of the period (in shares) | 706,312 | |
Exercisable at the end of the period (in shares) | 670,471 | |
Weighted-Average Exercise Price | ||
Outstanding at the beginning of the period (in dollars per share) | $ / shares | $ 30 | |
Granted (in dollars per share) | $ / shares | 79.23 | |
Exercised (in dollars per share) | $ / shares | 21.93 | |
Expired or forfeited (in dollars per share) | $ / shares | 53.28 | |
Outstanding at the end of the period (in dollars per share) | $ / shares | 31.34 | |
Exercisable at the end of the period (in dollars per share) | $ / shares | $ 29.02 | |
Weighted-Average Remaining Contractual Term | ||
Outstanding at the end of the period | 3 years 4 months 24 days | |
Exercisable at the end of the period | 3 years 1 month 6 days | |
Aggregate Intrinsic Value | ||
Outstanding at the end of the period | $ | $ 42,401 | |
Exercisable at the end of the period | $ | $ 41,802 | |
Performance-based restricted stock units | ||
Shares | ||
Granted (in shares) | 117,346 | 155,488 |
Performance-based restricted stock units | Minimum | ||
Weighted-Average Fair Value | ||
Payout as a percentage of the original number of shares awarded or units awarded, which are converted into shares of the Company's common stock | 0.00% | |
Performance-based restricted stock units | Maximum | ||
Weighted-Average Fair Value | ||
Payout as a percentage of the original number of shares awarded or units awarded, which are converted into shares of the Company's common stock | 250.00% | |
2012 Plan | ||
Weighted-Average Fair Value | ||
Shares available for grant | 700,000 | |
2012 Plan | Restricted stock and RSU | ||
Weighted-Average Fair Value | ||
Number of shares available for grant reduced for each award granted | 1.87 | |
Number of shares available for grant increased for each award forfeited and returned | 1.87 | |
2005 AS&E Plan and the 2014 AS&E Plan | ||
Stock-based Compensation | ||
Number of share-based employee compensation plans assumed | ShareBasedCompensationPlan | 2 | |
2005 AS&E Plan and the 2014 AS&E Plan | RSU | ||
Number of Options | ||
Granted (in shares) | 0 | |
Cost of goods sold | ||
Stock-based Compensation | ||
Stock based compensation expense | $ | $ 241 | $ 295 |
Selling, general and administrative | ||
Stock-based Compensation | ||
Stock based compensation expense | $ | 5,111 | 5,060 |
Research and development | ||
Stock-based Compensation | ||
Stock based compensation expense | $ | $ 135 | $ 55 |
Stockholders' Equity - Share Re
Stockholders' Equity - Share Repurchase Program (Details) - shares | 3 Months Ended | |
Sep. 30, 2017 | Apr. 30, 2016 | |
Share Repurchase Program | ||
Number of repurchased shares authorized | 1,000,000 | |
Number of shares repurchased | 0 | |
Number of available shares may be repurchased | 872,481 |
Retirement Benefit Plans (Detai
Retirement Benefit Plans (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Net Periodic Benefit Costs | ||
Service cost | $ 216 | $ 224 |
Interest cost | 8 | 7 |
Amortization of prior service cost | 70 | 70 |
Net periodic pension expense | 294 | 301 |
Contributions made by the entity to the defined benefit plans | 700 | 0 |
Contributions made by the entity to defined contribution plans | $ 1,600 | $ 1,200 |
Commitments and Contingencies -
Commitments and Contingencies - Contingent Acquisition Obligations (Details) $ in Thousands | 3 Months Ended |
Sep. 30, 2017USD ($)agreement | |
Contingent Acquisition Obligations | |
Maximum amount of future payments under contingent consideration | $ 26,400 |
Beginning fair value | 11,840 |
Addition of contingent earn-out obligations | 3,519 |
Remeasurement of fair value for contingent earn-out obligations | (975) |
Payments on contingent earn-out obligations | (482) |
Ending fair value | $ 13,902 |
Royalty payments | |
Contingent Acquisition Obligations | |
Purchase agreements containing royalty payments, number | agreement | 1 |
Commitments and Contingencies46
Commitments and Contingencies - Product Warranties (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Changes in provision for warranties | ||
Warranty provision at beginning of period | $ 15,178 | $ 15,948 |
Additions and adjustments | 4,259 | 2,822 |
Reductions for warranty repair costs | (2,138) | (1,474) |
Warranty provision at end of period | $ 17,299 | $ 17,296 |
Income Taxes - (Details)
Income Taxes - (Details) - USD ($) $ in Millions | 3 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Net aggregate increase in valuation allowance | $ 5.3 | |
Effective income tax rate (as a percent) | 28.30% | 28.00% |
ASU 2016-09 | ||
Excess tax benefits from employee stock compensation benefit | $ 4.3 | |
Effective income tax rate (as a percent) | 32.90% |
Segment Information - Operation
Segment Information - Operations and Identifiable Assets (Details) $ in Thousands | 3 Months Ended | ||
Sep. 30, 2017USD ($)segmentcustomer | Sep. 30, 2016USD ($)customer | Jun. 30, 2017USD ($) | |
Operations and identifiable assets by industry segment | |||
Number of identifiable industry segments | segment | 3 | ||
Total revenues | $ 257,133 | $ 220,855 | |
Operating income (loss) | 19,394 | $ 2,099 | |
Segments assets | $ 1,351,524 | $ 1,230,087 | |
SAT in Mexico | Revenue | Customer | |||
Operations and identifiable assets by industry segment | |||
Number of major customers | customer | 1 | 1 | |
Percentage of benchmark derived from specified source | 13.00% | 13.00% | |
Operating Segments | Security Division | |||
Operations and identifiable assets by industry segment | |||
Total revenues | $ 162,245 | $ 123,709 | |
Operating income (loss) | 22,693 | 9,350 | |
Segments assets | 899,035 | 785,230 | |
Operating Segments | Healthcare Division | |||
Operations and identifiable assets by industry segment | |||
Total revenues | 45,529 | 45,650 | |
Operating income (loss) | 847 | (3,264) | |
Segments assets | 166,937 | 186,021 | |
Operating Segments | Optoelectronics and Manufacturing Division | |||
Operations and identifiable assets by industry segment | |||
Total revenues | 58,926 | 56,954 | |
Operating income (loss) | 5,175 | 4,650 | |
Segments assets | 199,617 | 196,567 | |
Corporate | |||
Operations and identifiable assets by industry segment | |||
Operating income (loss) | (8,753) | (9,013) | |
Segments assets | 89,192 | 64,959 | |
Eliminations | |||
Operations and identifiable assets by industry segment | |||
Total revenues | (9,567) | (5,458) | |
Operating income (loss) | (568) | $ 376 | |
Segments assets | $ (3,257) | $ (2,690) |