Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Mar. 31, 2018 | Apr. 27, 2018 | |
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 | Mar. 31, 2018 | |
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 | 18,072,644 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q3 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) $ in Thousands | Mar. 31, 2018 | Jun. 30, 2017 |
CURRENT ASSETS: | ||
Cash and cash equivalents | $ 194,001 | $ 169,650 |
Accounts receivable, net | 216,680 | 206,526 |
Inventories | 304,293 | 248,510 |
Prepaid expenses and other current assets | 61,362 | 28,314 |
Total current assets | 776,336 | 653,000 |
Property and equipment, net | 113,667 | 141,539 |
Goodwill | 300,716 | 242,129 |
Intangible assets, net | 147,057 | 118,450 |
Deferred income taxes | 2,334 | 34,897 |
Other assets | 55,921 | 40,072 |
Total assets | 1,396,031 | 1,230,087 |
CURRENT LIABILITIES: | ||
Bank lines of credit | 228,000 | 103,000 |
Current portion of long-term debt | 2,252 | 2,396 |
Accounts payable | 101,571 | 76,121 |
Accrued payroll and related expenses | 35,248 | 34,621 |
Advances from customers | 70,115 | 37,934 |
Other accrued expenses and current liabilities | 121,295 | 92,062 |
Total current liabilities | 558,481 | 346,134 |
Long-term debt | 247,029 | 241,750 |
Deferred income taxes | 41,642 | 20,681 |
Other long-term liabilities | 66,493 | 52,309 |
Total liabilities | 913,645 | 660,874 |
Commitments and contingencies (Note 9) | ||
Stockholders' Equity: | ||
Preferred stock, $0.001 par value -10,000,000 shares authorized; no shares issued or outstanding | ||
Common stock, $0.001 par value -100,000,000 shares authorized; issued and outstanding, 18,689,568 shares at June 30, 2017 and 18,065,430 shares at March 31, 2018 | 166,633 | 222,529 |
Retained earnings | 329,631 | 363,872 |
Accumulated other comprehensive loss | (13,878) | (17,188) |
Total stockholders' equity | 482,386 | 569,213 |
Total liabilities and stockholders' equity | $ 1,396,031 | $ 1,230,087 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - $ / shares | Mar. 31, 2018 | Jun. 30, 2017 |
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) | ||
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 | 18,065,430 | 18,689,568 |
Common stock, shares outstanding | 18,065,430 | 18,689,568 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | |
Net revenues: | ||||
Products | $ 182,484 | $ 168,238 | $ 529,530 | $ 488,285 |
Services | 84,815 | 76,908 | 272,430 | 220,264 |
Total net revenues | 267,299 | 245,146 | 801,960 | 708,549 |
Cost of goods sold: | ||||
Products | 126,419 | 116,862 | 363,063 | 348,500 |
Services | 43,295 | 42,256 | 148,411 | 123,339 |
Total cost of goods sold | 169,714 | 159,118 | 511,474 | 471,839 |
Gross profit | 97,585 | 86,028 | 290,486 | 236,710 |
Operating expenses: | ||||
Selling, general and administrative | 59,846 | 49,431 | 175,591 | 144,528 |
Research and development | 15,934 | 14,395 | 46,122 | 39,811 |
Impairment, restructuring and other charges | 14,062 | 2,508 | 23,489 | 21,885 |
Total operating expenses | 89,842 | 66,334 | 245,202 | 206,224 |
Income from operations | 7,743 | 19,694 | 45,284 | 30,486 |
Interest expense, net | (4,783) | (2,583) | (14,317) | (5,716) |
Other income, net | 158 | 2,094 | 161 | 2,088 |
Income before income taxes | 3,118 | 19,205 | 31,128 | 26,858 |
Provision for income taxes | 565 | 5,186 | 65,369 | 7,329 |
Net income (loss) | $ 2,553 | $ 14,019 | $ (34,241) | $ 19,529 |
Earnings (loss) per share: | ||||
Basic (in dollars per share) | $ 0.14 | $ 0.74 | $ (1.82) | $ 1.03 |
Diluted (in dollars per share) | $ 0.13 | $ 0.72 | $ (1.82) | $ 1 |
Shares used in per share calculation: | ||||
Basic (in shares) | 18,569 | 18,913 | 18,773 | 18,964 |
Diluted (in shares) | 19,146 | 19,515 | 18,773 | 19,585 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) | ||||
Net income (loss) | $ 2,553 | $ 14,019 | $ (34,241) | $ 19,529 |
Other comprehensive income (loss): | ||||
Foreign currency translation adjustment | 1,366 | 1,697 | 3,272 | (3,303) |
Other | 103 | 15 | 38 | 134 |
Other comprehensive income (loss) | 1,469 | 1,712 | 3,310 | (3,169) |
Comprehensive income (loss) | $ 4,022 | $ 15,731 | $ (30,931) | $ 16,360 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Thousands | 9 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Cash flows from operating activities: | ||
Net income (loss) | $ (34,241) | $ 19,529 |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||
Depreciation and amortization | 55,368 | 49,042 |
Stock based compensation | 17,754 | 20,262 |
Provision for losses on accounts receivable | 1,054 | 863 |
Deferred income taxes | 50,775 | 101 |
Amortization of debt discount and issuance costs | 6,426 | 779 |
Impairment charges | 7,181 | 5,418 |
Gain on sale of business | (2,110) | |
Other | 1,071 | 222 |
Changes in operating assets and liabilities-net of business acquisitions: | ||
Accounts receivable | 7,131 | (20,677) |
Inventories | (48,703) | 26,410 |
Prepaid expenses and other assets | (22,121) | (6,017) |
Accounts payable | 19,522 | 6,733 |
Advances from customers | 32,152 | (27,417) |
Deferred revenues | 6,964 | (16,582) |
Other | 15,431 | (4,385) |
Net cash provided by operating activities | 115,764 | 52,171 |
Cash flows from investing activities: | ||
Acquisition of property and equipment | (36,432) | (11,979) |
Acquisition of businesses, net of cash acquired | (103,184) | (191,238) |
Net proceeds from sale of business | 12,793 | |
Acquisition of intangible and other assets | (2,250) | (4,034) |
Net cash used in investing activities | (141,866) | (194,458) |
Cash flows from financing activities: | ||
Net borrowings (payments) on bank lines of credit | 125,000 | (32,000) |
Proceeds from long-term debt | 626 | 280,261 |
Payments on long-term debt | (1,933) | (2,716) |
Proceeds from exercise of stock options and employee stock purchase plan | 6,608 | 9,953 |
Repurchase of common stock | (59,684) | (48,453) |
Taxes paid related to net share settlements of equity awards | (20,574) | (9,922) |
Net cash provided by financing activities | 50,043 | 197,123 |
Effect of exchange rate changes on cash | 410 | (734) |
Net increase in cash and cash equivalents | 24,351 | 54,102 |
Cash and cash equivalents-beginning of period | 169,650 | 104,370 |
Cash and cash equivalents-end of period | 194,001 | 158,472 |
Supplemental disclosure of cash flow information: | ||
Interest | 6,508 | 4,286 |
Income taxes | $ 21,728 | $ 16,108 |
Basis of Presentation
Basis of Presentation | 9 Months Ended |
Mar. 31, 2018 | |
Basis of Presentation | |
Basis of Presentation | 1. Basis of Presentation Basis of Presentation The condensed consolidated financial statements include the accounts of OSI Systems, Inc. and our subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The condensed consolidated financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in conjunction with the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures required for annual financial statements have been condensed or excluded in accordance with SEC rules and regulations 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 our Annual Report on Form 10-K for the fiscal year ended June 30, 2017. The results of operations for the nine months ended March 31, 2018 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. For each period presented where we reported a net loss, the effect of all potentially dilutive securities would be antidilutive, and, as a result, diluted net loss per common share is the same as basic net loss per common share. Stock options and stock awards to purchase 0.3 million shares of common stock for the three months ended March 31, 2018, were excluded from the calculation because to include such options and awards would have been antidilutive. During the nine months ended March 31, 2018, all stock options and stock awards were excluded. During the three months and nine months ended March 31, 2017, the number of stock options and stock awards excluded from the calculation because they were antidilutive was de minimis. 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 diluted shares under the treasury stock method. The underlying equity component of the 1.25% convertible senior notes due 2022 (the “Notes”) discussed in Note 6 to the condensed consolidated financial statements will have no impact on 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 (loss) per share (in thousands, except per share amounts): Three Months Ended Nine Months Ended 2017 2018 2017 2018 Net income (loss) available to common stockholders $ $ $ $ ) Weighted average shares outstanding—basic Dilutive effect of equity awards — Weighted average shares outstanding—diluted Basic earnings (loss) per share $ $ $ $ ) Diluted earnings (loss) per share $ $ $ $ ) Cash Equivalents We consider all highly liquid investments with maturities of three months or less as of the acquisition date to be cash equivalents. Our cash and cash equivalents totaled $194.0 million at March 31, 2018. Nearly all of this amount was held by our subsidiaries primarily in Mexico, United Kingdom, Malaysia, Puerto Rico, and Singapore, and to a lesser extent in India, Canada, Germany and China among others. We have cash holdings that exceed insured limits for financial institutions; however, we mitigate this risk by utilizing high credit quality financial institutions throughout the world. Fair Value of Financial Instruments Our financial instruments consist primarily of cash and cash equivalents, 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 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 on a recurring basis. The fair values of our financial assets and liabilities as of June 30, 2017 and March 31, 2018 are categorized as follows (in thousands): June 30, 2017 March 31, 2018 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets: Equity securities $ $ — $ — $ $ $ — $ — $ Insurance company contracts — — — — Interest rate swap agreement — — — — 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 described in Note 6. 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 will be reclassified to the statement of operations when the hedge transaction settles. 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 involving 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 timetable for fulfilment of 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 the delivered item has value to the customer on a stand-alone basis; and with respect to 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 multiple-deliverable arrangements 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 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 our previous agreement with the Servicio de Administración Tributaria (“SAT”) in Mexico, in effect through January 13, 2018, revenue had been 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 was reflected in the period during which the change became known. In the SAT agreement, customer billings were 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 exceeded revenue recognition, deferred revenue was recorded. In January 2018, we entered into a new, two-year contract with SAT to continue providing security screening services. Revenue under the new contract is recognized as Service revenues as services are performed. New Accounting Pronouncements Recently Issued Accounting Pronouncements 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. We are currently evaluating our business and contracts to determine any changes to accounting policies or processes necessary to adopt the requirements of the new standard and are in the process of selecting a transition method. Our preliminary evaluation of the impact of this ASU is that it will not have a material impact on our financial condition or results of operations. However, the adoption of this ASU will result in expanded disclosures in first quarter of fiscal 2019. 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. 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 us in the first quarter of fiscal 2020 with early adoption 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 reporting companies’ cash flow statements. This ASU addresses eight specific cash flow issues to reduce divergence 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. Recently Adopted Accounting Pronouncements In January 2017, FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment , which eliminates Step 2, the computation of the implied fair value of goodwill to determine the amount of impairment, from the goodwill impairment test. In computing the implied fair value of goodwill for Step 2 under current accounting standards, we calculate the fair value of our assets and liabilities as if acquired or assumed in a business combination. Under the amendments in this update, we will determine the amount of goodwill impairment by comparing the Step 1 fair value of a reporting unit with its carrying amount. To the extent the carrying value of a reporting unit exceeds its Step 1 fair value, a goodwill impairment charge is recognized. The new standard is effective for fiscal years beginning after December 15, 2019 with early adoption permitted. We elected to early adopt the new standard effective October 1, 2017, because the ASU significantly simplifies the evaluation of goodwill for impairment. The adoption of this standard did not have an impact on our financial condition and results of operations. U.S. Tax Reform On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). In connection with the enactment of the Tax Act, we recognized a charge of $56 million in the second quarter of fiscal 2018. The charge included our current estimate of the tax on accumulated overseas profits and the revaluation of deferred tax assets and liabilities. As we have a June 30 fiscal year end, the Tax Act’s lower corporate tax rate will be phased in, and is expected to result in a U.S. statutory federal tax rate of approximately 28% for the fiscal year ending June 30, 2018. The provisional estimates are based on our initial analysis of the Tax Act. The changes included in the Tax Act are broad and complex. The final impacts of the Tax Act may differ materially from the amounts estimated due to, among other things, changes in interpretation of the Tax Act, any legislative action that may be taken to address questions arising due to the Tax Act, any changes in accounting standards for income taxes or related interpretations in response to the Tax Act or any updates or changes to estimates we have utilized to calculate the impacts, including impacts from changes to current year earnings estimates and foreign exchange rates. The SEC has issued rules, including Staff Accounting Bulletin 118 (“SAB 118”), that allow for a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impacts. We currently anticipate finalizing and recording any resulting adjustments during the 2018 calendar year. |
Business Combinations
Business Combinations | 9 Months Ended |
Mar. 31, 2018 | |
Business Combinations | |
Business Combinations | 2 . Business Combinations Under ASU 805, the acquisition method of accounting requires us to record assets acquired less liabilities assumed in an acquisition at their estimated fair values at the date of acquisition. Any excess of the total estimated purchase price over the estimated fair value of the assets acquired less liabilities assumed should be recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired customers, acquired technology, trade names, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. 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 included in earnings. Acquisition of Explosive Trace Detection Business On July 7, 2017, we acquired the global explosive trace detection business (“ETD”) from Smiths Group plc. We financed the total purchase price of $80.5 million with a combination of cash on hand and borrowing under our existing revolving bank line of credit. Due to the timing and complexity of the ETD transaction, we are in the process of finalizing our valuation of the assets acquired and liabilities assumed. As of March 31, 2018, the valuation of certain assets and liabilities of ETD were preliminary in nature as we are awaiting the conclusion of the valuation of certain assets by a third party and resolution of carving out certain assets and liabilities from the prior owners of the business. 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. Changes in the fair values of assets and liabilities from what was previously reported in our condensed consolidated financial statements are primarily a result of additional information that impacted our estimates of fair value and conformance to our accounting policies. During the quarter ended March 31, 2018, goodwill decreased by $0.2 million, driven primarily by reduction of accounts receivable reserve of $1.2 million offset by reduction in fair value of inventory of $0.8 million, and an increase of $0.2 million in accrued liabilities. Further potential adjustments made could be material in relation to these preliminary values below (amounts in thousands): Cash and cash equivalents $ Accounts receivable, net 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, intellectual capital 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 a third party. The fair value attributed to the intangible assets acquired was based on preliminary estimates, assumptions and other information compiled by management, and valuations that utilized established valuation techniques. The value attributed to goodwill and intangible assets is partially non-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 8 years Backlog 2 years Total amortizable assets Non-amortizable asset — IPR&D Total intangible assets $ The condensed consolidated statements of operations include $17.6 million of revenue and $3.1 million of income from operations from ETD for the three months ended March 31, 2018, and $59.0 million of revenue and $9.8 million of income from operations from ETD for the period from July 7, 2017 to March 31, 2018. 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 ETD 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 Nine Months Ended 2017 2018 2017 2018 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. The pro forma results for the three and nine months ended March 31, 2017 were carved out from the operations of the business when it was owned by its former parent. 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% 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 cash merger consideration 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. Other Acquisitions In July 2017, we (through our Security division) completed an acquisition of a privately held technology company. The acquisition purchase price was financed with cash on hand and was in an amount including potential earnout consideration determined to be insignificant by management. On January 12, 2018, we (through our Optoelectronics and Manufacturing division) acquired an electronics component designer and manufacturer for approximately $22 million, plus up to $6 million in potential earnout consideration. In aggregate, $12.6 million was attributed to intangible assets, $10.9 million was attributed to goodwill, and $3.2 million was attributed to net assets acquired. The acquisition was financed with cash on hand and borrowing under our existing revolving bank line of credit. |
Balance Sheet Details
Balance Sheet Details | 9 Months Ended |
Mar. 31, 2018 | |
Balance Sheet Details | |
Balance Sheet Details | 3. Balance Sheet Details The following tables provide details of selected balance sheet accounts (in thousands): June 30, March 31, Accounts receivable $ $ Less allowance for doubtful accounts ) ) Accounts receivable, net $ $ June 30, March 31, Raw materials $ $ Work-in-process Finished goods Inventories $ $ June 30, March 31, 2017 2018 Land, buildings, civil works and improvements $ $ Leasehold improvements Equipment and tooling Furniture and fixtures Computer equipment Computer software Computer software implementation in process Construction in process Total Less accumulated depreciation and amortization ) ) Property and equipment, net $ $ In September 2017, we purchased the AS&E facility in Billerica, MA for $19.8 million. Depreciation expense was approximately $13.3 million and $5.4 million for the three months ended March 31, 2017 and 2018, respectively, and approximately $39.9 million and $38.4 million for the nine months ended March 31, 2017 and 2018, respectively. In January 2018, we entered into a new two-year agreement with the Mexican government to continue providing security screening services. Upon inception of the new contract, we transferred certain fixed assets to the customer, and this remaining cost to obtain the contract is amortized on a straightline basis as corresponding revenues are recognized. As of March 31, 2018, $14.7 million and $11.6 million are recorded within Prepaid expenses and other current assets and Other assets, respectively. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 9 Months Ended |
Mar. 31, 2018 | |
Goodwill and Intangible Assets | |
Goodwill and Intangible Assets | 4. Goodwill and Intangible Assets The changes in the carrying value of goodwill for the nine month period ended March 31, 2018 were as follows (in thousands): Security Healthcare Optoelectronics Consolidated Balance as of June 30, 2017 $ $ $ $ Goodwill acquired or adjusted during the period — Foreign currency translation adjustment Balance as of March 31, 2018 $ $ $ $ Intangible assets consisted of the following (in thousands): June 30, 2017 March 31, 2018 Gross Gross Carrying Accumulated Intangibles Carrying Accumulated Intangibles Value Amortization Net Value Amortization Net Amortizable assets: Software development costs $ $ ) $ $ $ ) $ Patents ) ) Developed technology ) ) Customer relationships/backlog ) ) Total amortizable assets ) ) Non-amortizable assets: Trademarks and trade names — — IPR&D — — Intangible assets, net $ $ ) $ $ $ ) $ Amortization expense related to intangible assets was $3.6 million and $5.1 million for the three month periods ended March 31, 2017 and 2018, respectively. For the nine months ended March 31, 2017 and 2018, amortization expense was $9.1 million and $13.8 million, respectively. At March 31, 2018, the estimated future amortization expense was as follows (in thousands): 2018 (remaining 3 months) $ 2019 2020 2021 2022 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 Thereafter in the table above. For the three months ended March 31, 2018, we capitalized software development costs in the amount of $1.0 million; while during the three months ended March 31, 2017, we did not capitalize any software development costs. For the nine-month periods ended March 31, 2017 and 2018, we capitalized software development costs in the amount of $2.0 million and $1.3 million, respectively. |
Impairment, restructuring and o
Impairment, restructuring and other charges | 9 Months Ended |
Mar. 31, 2018 | |
Impairment, restructuring and other charges | |
Impairment, restructuring and other charges | 5. Impairment, restructuring and other charges Impairment During the nine months ended March 31, 2018, we abandoned (i) a product line in our Security division that became redundant as a result of the ETD acquisition, (ii) two non-core product lines in our Healthcare division, and (iii) certain trademarks in our Optoelectronics and Manufacturing division that are no longer used. As a result, $7.1 million of assets, including intangible and fixed assets, were written off as we determined that these assets have no value and were permanently impaired. $4.0 million of this was incurred during the three months ended March 31, 2018 and related to the abandonment of a product line in our Healthcare division that we no longer sell. 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. Beginning in fiscal 2017 we incurred professional fees to complete the acquisition of ETD. Such costs totaled $2.1 million through the third quarter of fiscal 2018. This included $0.2 million and $1.1 million during the three and nine months ended March 31, 2018, respectively. During the three and nine months ended March 31, 2018, we accrued $3.8 million and $8.1 million, respectively, for legal and estimated settlement costs. For the three and nine months ended March 31, 2018, we incurred charges of $0.4 million and $1.2 million, respectively, for facility consolidation and employee terminations. The following table summarizes impairment, restructuring and other charges for the periods set forth below (in thousands): Three Months Ended March 31, 2017 Security Division Healthcare Optoelectronics and Corporate Total Acquisition-related costs $ — $ — $ — $ $ Employee termination costs — Facility closures/consolidation — Other charges (reversals) — ) Total expensed $ $ $ $ $ Three Months Ended March 31, 2018 Security Division Healthcare Optoelectronics and Corporate Total Impairment charges $ $ $ — $ — $ Acquisition-related costs — — — Employee termination costs — Facility closures/consolidation ) — — Legal and accrued settlement costs — — Total expensed $ $ $ $ $ Nine Months Ended March 31, 2017 Security Division Healthcare Optoelectronics and Corporate Total Impairment charges $ $ $ — $ $ Acquisition-related costs — — Employee termination costs — Facility closures/consolidation — Other charges (reversals) ) Total expensed $ $ $ $ $ Nine Months Ended March 31, 2018 Security Division Healthcare Optoelectronics and Corporate Total Impairment charges $ $ $ $ — $ Acquisition-related costs — — — Employee termination costs — Facility closures/consolidation — — Legal and accrued settlement costs — — Total expensed $ $ $ $ $ The changes in the accrual for restructuring and other charges for the nine-month period ended March 31, 2018 were as follows (in thousands): Acquisition- Employee Facility Legal Total Balance as of June 30, 2017 $ — $ $ $ — $ Restructuring and other charges Payments and other adjustments ) ) ) ) ) Balance as of March 31, 2018 $ — $ $ $ $ |
Borrowings
Borrowings | 9 Months Ended |
Mar. 31, 2018 | |
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 1.50% as of March 31, 2018, 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 March 31, 2018, but this fee can range from 0.20% to 0.30% based on our consolidated net leverage ratio as defined in the credit facility. 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 of our subsidiaries’ assets. The agreement contains various representations and warranties, affirmative, negative and financial covenants and conditions of default. As of March 31, 2018, there was $228.0 million of borrowings outstanding under the revolving credit facility and $33.3 million outstanding under the letters of credit sub facility. The amount available to borrow under the credit facility as of March 31, 2018 was $263.7 million. Loan amounts under the revolving credit facility 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 March 31, 2018, 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 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. 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 our subsidiaries, as well as any of our existing and future indebtedness that may be guaranteed by our subsidiaries to the extent of such guarantees (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 of common stock, 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 being amortized as interest expense over the life of the Notes using the effective interest method. The total interest expense recognized for the three months and nine months ended March 31, 2018 was $3.1 million and $9.2 million, respectively, which consists of $0.9 million and $2.7 million of contractual interest expense, $1.9 million and $5.6 million of debt discount amortization and $0.3 million and $0.9 million of amortization of debt issuance costs. As of March 31, 2018, the unamortized debt discount was $38.9 million, which 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 $5.2 million as of March 31, 2018 is amortized on a straight-line basis, which approximates the effective interest method, over the life of the Notes. Based on our March 29, 2018 stock price of $65.27 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 March 31, 2018, $60.3 million was outstanding under these lines-of-credit facilities. As of March 31, 2018, the total amount available under these credit facilities was $12.9 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, March 31, 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 | 9 Months Ended |
Mar. 31, 2018 | |
Stockholders' Equity | |
Stockholders' Equity | 7. Stockholders’ Equity Stock-based Compensation On December 11, 2017, our stockholders approved our Amended and Restated 2012 Incentive Award Plan (the “2012 Plan”), which, among other things, increased the maximum number of shares of common stock which may be issued under such plan by 1.6 million shares. As of March 31, 2018, we maintained the following share based employee compensation plans: the 2012 Plan and the Amended and Restated 2006 Equity Participation Plan (“2006 Plan”). No further grants may be made 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 condensed consolidated statements of operations as follows (in thousands): Three Months Ended Nine Months Ended 2017 2018 2017 2018 Cost of goods sold $ $ $ $ Selling, general and administrative Research and development Restructuring — — — Stock-based compensation expense before taxes $ $ $ $ Less: related income tax benefit ) ) ) ) Stock-based compensation expense, net of estimated taxes $ $ $ $ As of March 31, 2018, total unrecognized compensation cost related to share based compensation grants under the OSI Plans were estimated at $0.7 million for stock options and $19.9 million for RSUs. We expect to recognize these costs over a weighted average period of 2.0 years with respect to the stock options and 1.9 years for grants of RSUs. The following summarizes stock option activity during the nine months ended March 31, 2018: Number of Weighted Average Weighted- Average Aggregate Outstanding at June 30, 2017 $ Granted $ Exercised ) $ Expired or forfeited ) $ Outstanding at March 31, 2018 $ 3.2 years $ Exercisable at March 31, 2018 $ 2.8 years $ The following summarizes RSU activity during the nine months ended March 31, 2018: Shares Weighted- Nonvested at June 30, 2017 $ Granted Vested ) Forfeited ) Nonvested at March 31, 2018 $ As of March 31, 2018, there were approximately 2.3 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 nine months ended March 31, 2017 and 2018, 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 share repurchase program of up to one million shares, which was completed during the three months ended March 31, 2018. In March 2018, the Board of Directors authorized a new share repurchase program up to one million shares. This program does not expire unless our Board of Directors acts to terminate the program. The timing and actual number of shares purchased depend on a variety of factors, including stock price, general business and market conditions and other investment opportunities and may be purchased through the open market. 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 our consolidated financial statements. During the three and nine months ended March 31, 2018, we repurchased 972,481 shares of our common stock. |
Retirement Benefit Plans
Retirement Benefit Plans | 9 Months Ended |
Mar. 31, 2018 | |
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 Nine Months Ended 2017 2018 2017 2018 Service cost $ $ $ $ Interest cost Amortization of prior service cost Net periodic pension expense $ $ $ $ For the three months ended March 31, 2017 and 2018, we made no contributions to these defined benefit plans. For each of the nine months ended March 31, 2017 and 2018, we made contributions of $1.0 million to these defined benefit plans. We also maintain various defined contribution plans. For the three months ended March 31, 2017 and 2018, we made contributions of $1.4 million and $1.6 million, respectively, to these defined contribution plans. For the nine months ended March 31, 2017 and 2018, we made contributions of $3.6 million and $4.6 million, respectively, to these defined contribution plans. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Mar. 31, 2018 | |
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 through the acquired operations. For agreements that contain contingent consideration caps, the maximum amount of such potential future payments is $30.3 million as of March 31, 2018. 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. We account for such contingent payments for acquisitions through the end of fiscal year 2009 as additions to the purchase price of the acquired business; and 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 contingent earnout liabilities. The following table provides a rollforward of the contingent consideration liability, which is included in Other accrued expenses and current liabilities, and Other long-term liabilities in the consolidated balance sheets: Beginning fair value, June 30, 2017 $ Additions Change in fair value ) Payments ) Ending fair value, March 31, 2018 $ 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 certain 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 and Certain Employment-Related Contingencies 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 indemnification amount under these agreements due to a limited history of prior indemnification claims and the unique facts and circumstances that may be involved in each particular claim. While we maintain directors and officers liability insurance coverage, such insurance coverage may be insufficient to cover all losses or all types of claims that may arise. We have not recorded any liability for costs related to contingent indemnification obligations as of March 31, 2018. On December 31, 2017, we and Deepak Chopra, our Chief Executive Officer, entered into an amendment to Mr. Chopra’s employment agreement that, among other things, provides for a $13.5 million bonus payment to Mr. Chopra on or within 45 days of January 1, 2024 contingent upon Mr. Chopra’s continued employment with us through that date, subject to accelerated payout terms in the event of Mr. Chopra’s death or disability after January 1, 2019. The bonus is recorded in the financial statements over the remaining term of the employment agreement. 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 Other accrued expenses and current liabilities in the consolidated balance sheets. The following table presents changes in warranty provisions (in thousands): Nine Months Ended March 31, 2017 2018 Balance at beginning of period $ $ Additions and adjustments Reductions for warranty repair costs ) ) Balance at end of period $ $ Legal Proceedings In December 2017, a short seller released a report regarding our compliance with the Foreign Corrupt Practices Act (FCPA). Following that report, we and certain of our executive officers have been named as defendants in several lawsuits in the United States District Court for the Central District of California (the “Court”) that were filed in December 2017 and February 2018. Each of the complaints closely tracks the allegations set forth in the short seller’s report. All of these actions allege violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), relating to certain of our filings with the SEC, and seek damages and other relief based upon the allegations in the complaints. The matters are captioned Longo v. OSI Systems, Inc. et al. , No. 17-cv-08841, Doyel v. OSI Systems, Inc. et al. , No. 17-cv-08855, Kerbs v. OSI Systems, Inc. et al. , No. 17-cv-08991, and The Police Retirement System of St. Louis v. OSI Systems, Inc ., No. 18-cv-00894. In April 2018, a shareholder derivative complaint captioned Riley v. Chopra et al. , No. 2:18-cv-03371 was filed in the Court purportedly on behalf of the Company against the current members of our Board of Directors (as individual defendants), a former member of our Board of Directors, and our Chief Financial Officer. The complaint alleges, among other things, violations of the anti-fraud provisions of federal securities laws, as well as breach of fiduciary duties, relating to the allegations contained in the above-mentioned short seller report. The complaint seeks damages, restitution, injunctive relief, attorneys’ and experts’ fees, costs, expenses, and other unspecified relief. We believe that these actions are without merit and intend to defend them vigorously, and we expect to incur costs associated with defending against these actions. At this early stage of the litigations, the ultimate outcomes are uncertain and we cannot reasonably predict the timing or outcomes, or estimate the amount of loss, if any, or their effect, if any, on our financial statements. Following the short seller report, the SEC commenced an investigation into our compliance with the FCPA. The U.S. Attorney’s Office for the Central District of California (“DOJ”) has also said it intends to request information regarding FCPA compliance matters. The SEC and DOJ are also conducting an investigation of trading in our securities, and have subpoenaed information regarding trading by executives, directors and employees, as well as our operations and disclosures in and around the time of certain trades. In relation to the matters that are the subject of the trading-related investigation, we have taken action with respect to a senior-level employee. At this time, we are unable to predict what, if any, action may be taken by the DOJ or SEC as a result of these investigations, or any penalties or remedial measures these agencies may seek. 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 | 9 Months Ended |
Mar. 31, 2018 | |
Income Taxes | |
Income Taxes | 10. Income Taxes The Tax Act enacted in December 2017 introduced significant changes to the U.S. income tax law, which includes a reduction to the U.S. federal corporate income tax rate from 35% to 21%, a one-time repatriation tax on deferred foreign income (“Transition Tax”), deductions, credits and business-related exclusions. The reduction to the U.S. federal corporate income tax rate from 35% to 21% is effective January 1, 2018. When a U.S. federal tax rate change occurs during a fiscal year, taxpayers are required to compute a weighted daily average rate for the fiscal year of enactment. As a result of the Tax Act, we calculated a U.S. federal statutory corporate income tax rate of 28.1% for the year ending June 30, 2018. We expect the U.S. federal statutory rate to be 21% for fiscal years beginning after June 30, 2018. The SEC staff recognized that a registrant’s review of certain income tax effects of the Tax Act may be incomplete at the time financial statements are issued and thus issued SAB 118 in December 2017 that allows a company to report provisional numbers and adjust those amounts during the measurement period not to extend beyond one year. Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Act, we recognized within our provision for income taxes $56 million during the second quarter of fiscal 2018 that included $64.6 million of Transition Tax and $8.4 million reduction for the net impact on U.S. deferred tax assets and liabilities. As we collect and prepare necessary data, and interpret the Tax Act and any additional guidance issued by the U.S. Treasury Department, the Internal Revenue Service, and other standard-setting bodies, we may make adjustments to the provisional amounts. Those adjustments may materially affect our provision for income taxes and effective tax rate in the period in which the adjustments are made. The accounting for the tax effects of the Tax Act will be completed later in calendar year 2018. During the quarter ended March 31, 2018, we did not make changes to these estimates. Our tax returns are subject to audits by U.S. federal, state, and foreign tax authorities, and these audits are at various stages of completion at any given time. Reviews of tax matters by authorities and lapses of the applicable statutes of limitations may result in changes to tax expense. Fiscal years remaining open to examination in significant foreign jurisdictions include 2008 and thereafter. The determination of the annual effective tax rate is based upon a number of significant estimates and judgments, including the estimated annual pretax income in each tax jurisdiction in which we operate, and the development of tax planning strategies during the year. In addition, as a global commercial enterprise, our tax expense can be impacted by changes in tax rates or laws, such as the Tax Act, the finalization of tax audits and reviews, and other factors that cannot be predicted with certainty. As such, there can be significant volatility in interim tax provisions. |
Segment Information
Segment Information | 9 Months Ended |
Mar. 31, 2018 | |
Segment Information | |
Segment Information | 11. Segment Information Our business operations are organized into 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, including expenses related to stock issuances and legal, audit and other professional service fees not allocated to industry segments. Both the Security and Healthcare divisions comprise primarily end product businesses whereas the Optoelectronics and Manufacturing division primarily supplies components and subsystems to OEM customers, as well as 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 set forth the results of operations and identifiable assets by industry segment (in thousands): Three Months Ended Nine Months Ended 2017 2018 2017 2018 Revenues (1) — by Segment: Security division $ $ $ $ Healthcare division Optoelectronics and Manufacturing division, including intersegment revenues Intersegment revenues elimination ) ) ) ) Total $ $ $ $ Three Months Ended Nine Months Ended 2017 2018 2017 2018 Operating income (loss) — by Segment: Security division $ $ $ $ Healthcare division ) ) ) Optoelectronics and Manufacturing division Corporate ) ) ) ) Intersegment eliminations (2) ) ) Total $ $ $ $ June 30, March 31, Assets — by Segment: Security division $ $ Healthcare division Optoelectronics and Manufacturing division Corporate Intersegment eliminations (2) ) ) Total $ (1) For the three months ended March 31, 2017, one customer, SAT in Mexico, accounted for 12% of total net revenues. For the nine months ended March 31, 2017 and 2018, SAT accounted for 12% and 11% of total net revenues, respectively. (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) | 9 Months Ended |
Mar. 31, 2018 | |
Basis of Presentation | |
Basis of Presentation | Basis of Presentation The condensed consolidated financial statements include the accounts of OSI Systems, Inc. and our subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The condensed consolidated financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in conjunction with the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures required for annual financial statements have been condensed or excluded in accordance with SEC rules and regulations 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 our Annual Report on Form 10-K for the fiscal year ended June 30, 2017. The results of operations for the nine months ended March 31, 2018 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. For each period presented where we reported a net loss, the effect of all potentially dilutive securities would be antidilutive, and, as a result, diluted net loss per common share is the same as basic net loss per common share. Stock options and stock awards to purchase 0.3 million shares of common stock for the three months ended March 31, 2018, were excluded from the calculation because to include such options and awards would have been antidilutive. During the nine months ended March 31, 2018, all stock options and stock awards were excluded. During the three months and nine months ended March 31, 2017, the number of stock options and stock awards excluded from the calculation because they were antidilutive was de minimis. 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 diluted shares under the treasury stock method. The underlying equity component of the 1.25% convertible senior notes due 2022 (the “Notes”) discussed in Note 6 to the condensed consolidated financial statements will have no impact on 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 (loss) per share (in thousands, except per share amounts): Three Months Ended Nine Months Ended 2017 2018 2017 2018 Net income (loss) available to common stockholders $ $ $ $ ) Weighted average shares outstanding—basic Dilutive effect of equity awards — Weighted average shares outstanding—diluted Basic earnings (loss) per share $ $ $ $ ) Diluted earnings (loss) per share $ $ $ $ ) |
Cash Equivalents | Cash Equivalents We consider all highly liquid investments with maturities of three months or less as of the acquisition date to be cash equivalents. Our cash and cash equivalents totaled $194.0 million at March 31, 2018. Nearly all of this amount was held by our subsidiaries primarily in Mexico, United Kingdom, Malaysia, Puerto Rico, and Singapore, and to a lesser extent in India, Canada, Germany and China among others. We have cash holdings that exceed insured limits for financial institutions; however, we mitigate this risk by utilizing high credit quality financial institutions throughout the world. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments Our financial instruments consist primarily of cash and cash equivalents, 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 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 on a recurring basis. The fair values of our financial assets and liabilities as of June 30, 2017 and March 31, 2018 are categorized as follows (in thousands): June 30, 2017 March 31, 2018 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets: Equity securities $ $ — $ — $ $ $ — $ — $ Insurance company contracts — — — — Interest rate swap agreement — — — — 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 described in Note 6. 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 will be reclassified to the statement of operations when the hedge transaction settles. |
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 involving 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 timetable for fulfilment of 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 the delivered item has value to the customer on a stand-alone basis; and with respect to 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 multiple-deliverable arrangements 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 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 our previous agreement with the Servicio de Administración Tributaria (“SAT”) in Mexico, in effect through January 13, 2018, revenue had been 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 was reflected in the period during which the change became known. In the SAT agreement, customer billings were 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 exceeded revenue recognition, deferred revenue was recorded. In January 2018, we entered into a new, two-year contract with SAT to continue providing security screening services. Revenue under the new contract is recognized as Service revenues as services are performed. |
New Accounting Pronouncements | New Accounting Pronouncements Recently Issued Accounting Pronouncements 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. We are currently evaluating our business and contracts to determine any changes to accounting policies or processes necessary to adopt the requirements of the new standard and are in the process of selecting a transition method. Our preliminary evaluation of the impact of this ASU is that it will not have a material impact on our financial condition or results of operations. However, the adoption of this ASU will result in expanded disclosures in first quarter of fiscal 2019. 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. 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 us in the first quarter of fiscal 2020 with early adoption 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 reporting companies’ cash flow statements. This ASU addresses eight specific cash flow issues to reduce divergence 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. Recently Adopted Accounting Pronouncements In January 2017, FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment , which eliminates Step 2, the computation of the implied fair value of goodwill to determine the amount of impairment, from the goodwill impairment test. In computing the implied fair value of goodwill for Step 2 under current accounting standards, we calculate the fair value of our assets and liabilities as if acquired or assumed in a business combination. Under the amendments in this update, we will determine the amount of goodwill impairment by comparing the Step 1 fair value of a reporting unit with its carrying amount. To the extent the carrying value of a reporting unit exceeds its Step 1 fair value, a goodwill impairment charge is recognized. The new standard is effective for fiscal years beginning after December 15, 2019 with early adoption permitted. We elected to early adopt the new standard effective October 1, 2017, because the ASU significantly simplifies the evaluation of goodwill for impairment. The adoption of this standard did not have an impact on our financial condition and results of operations. |
U.S. Tax Reform | U.S. Tax Reform On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). In connection with the enactment of the Tax Act, we recognized a charge of $56 million in the second quarter of fiscal 2018. The charge included our current estimate of the tax on accumulated overseas profits and the revaluation of deferred tax assets and liabilities. As we have a June 30 fiscal year end, the Tax Act’s lower corporate tax rate will be phased in, and is expected to result in a U.S. statutory federal tax rate of approximately 28% for the fiscal year ending June 30, 2018. The provisional estimates are based on our initial analysis of the Tax Act. The changes included in the Tax Act are broad and complex. The final impacts of the Tax Act may differ materially from the amounts estimated due to, among other things, changes in interpretation of the Tax Act, any legislative action that may be taken to address questions arising due to the Tax Act, any changes in accounting standards for income taxes or related interpretations in response to the Tax Act or any updates or changes to estimates we have utilized to calculate the impacts, including impacts from changes to current year earnings estimates and foreign exchange rates. The SEC has issued rules, including Staff Accounting Bulletin 118 (“SAB 118”), that allow for a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impacts. We currently anticipate finalizing and recording any resulting adjustments during the 2018 calendar year. |
Basis of Presentation (Tables)
Basis of Presentation (Tables) | 9 Months Ended |
Mar. 31, 2018 | |
Basis of Presentation | |
Schedule of computation of basic and diluted earnings (loss) per share | The following table sets forth the computation of basic and diluted earnings (loss) per share (in thousands, except per share amounts): Three Months Ended Nine Months Ended 2017 2018 2017 2018 Net income (loss) available to common stockholders $ $ $ $ ) Weighted average shares outstanding—basic Dilutive effect of equity awards — Weighted average shares outstanding—diluted Basic earnings (loss) per share $ $ $ $ ) Diluted earnings (loss) per share $ $ $ $ ) |
Summary of fair values of financial assets and liabilities | The fair values of our financial assets and liabilities as of June 30, 2017 and March 31, 2018 are categorized as follows (in thousands): June 30, 2017 March 31, 2018 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets: Equity securities $ $ — $ — $ $ $ — $ — $ Insurance company contracts — — — — Interest rate swap agreement — — — — Total assets $ $ $ — $ $ $ $ — $ Liabilities—contingent payment obligations $ — $ — $ $ $ — $ — $ $ |
Business Combinations (Tables)
Business Combinations (Tables) - Explosive Trace Detection Business ("ETD") | 9 Months Ended |
Mar. 31, 2018 | |
Business Combinations | |
Schedule of assets acquired and liabilities assumed | Further potential adjustments made could be material in relation to these preliminary values below (amounts in thousands): Cash and cash equivalents $ Accounts receivable, net 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 $ |
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 8 years Backlog 2 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, 2017 | The following unaudited pro forma results of operations assume the ETD acquisition had occurred on July 1, 2016 (in thousands): Three Months Ended Nine Months Ended 2017 2018 2017 2018 Revenues $ $ $ $ Income from operations $ $ $ $ |
Balance Sheet Details (Tables)
Balance Sheet Details (Tables) | 9 Months Ended |
Mar. 31, 2018 | |
Balance Sheet Details | |
Schedule of selected balance sheet accounts | The following tables provide details of selected balance sheet accounts (in thousands): June 30, March 31, Accounts receivable $ $ Less allowance for doubtful accounts ) ) Accounts receivable, net $ $ June 30, March 31, Raw materials $ $ Work-in-process Finished goods Inventories $ $ June 30, March 31, 2017 2018 Land, buildings, civil works and improvements $ $ Leasehold improvements Equipment and tooling Furniture and fixtures Computer equipment Computer software Computer software implementation in process Construction in process Total Less accumulated depreciation and amortization ) ) Property and equipment, net $ $ |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 9 Months Ended |
Mar. 31, 2018 | |
Goodwill and Intangible Assets | |
Schedule of changes in carrying value of goodwill | The changes in the carrying value of goodwill for the nine month period ended March 31, 2018 were as follows (in thousands): Security Healthcare Optoelectronics Consolidated Balance as of June 30, 2017 $ $ $ $ Goodwill acquired or adjusted during the period — Foreign currency translation adjustment Balance as of March 31, 2018 $ $ $ $ |
Schedule of intangible assets | Intangible assets consisted of the following (in thousands): June 30, 2017 March 31, 2018 Gross Gross Carrying Accumulated Intangibles Carrying Accumulated Intangibles Value Amortization Net Value Amortization Net Amortizable assets: Software development costs $ $ ) $ $ $ ) $ Patents ) ) Developed technology ) ) Customer relationships/backlog ) ) Total amortizable assets ) ) Non-amortizable assets: Trademarks and trade names — — IPR&D — — Intangible assets, net $ $ ) $ $ $ ) $ |
Schedule of estimated future amortization expense | At March 31, 2018, the estimated future amortization expense was as follows (in thousands): 2018 (remaining 3 months) $ 2019 2020 2021 2022 Thereafter, including assets that have not yet begun to be amortized Total $ |
Impairment, restructuring and23
Impairment, restructuring and other charges (Tables) | 9 Months Ended |
Mar. 31, 2018 | |
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 March 31, 2017 Security Division Healthcare Optoelectronics and Corporate Total Acquisition-related costs $ — $ — $ — $ $ Employee termination costs — Facility closures/consolidation — Other charges (reversals) — ) Total expensed $ $ $ $ $ Three Months Ended March 31, 2018 Security Division Healthcare Optoelectronics and Corporate Total Impairment charges $ $ $ — $ — $ Acquisition-related costs — — — Employee termination costs — Facility closures/consolidation ) — — Legal and accrued settlement costs — — Total expensed $ $ $ $ $ Nine Months Ended March 31, 2017 Security Division Healthcare Optoelectronics and Corporate Total Impairment charges $ $ $ — $ $ Acquisition-related costs — — Employee termination costs — Facility closures/consolidation — Other charges (reversals) ) Total expensed $ $ $ $ $ Nine Months Ended March 31, 2018 Security Division Healthcare Optoelectronics and Corporate Total Impairment charges $ $ $ $ — $ Acquisition-related costs — — — Employee termination costs — Facility closures/consolidation — — Legal and accrued settlement costs — — 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 nine-month period ended March 31, 2018 were as follows (in thousands): Acquisition- Employee Facility Legal Total Balance as of June 30, 2017 $ — $ $ $ — $ Restructuring and other charges Payments and other adjustments ) ) ) ) ) Balance as of March 31, 2018 $ — $ $ $ $ |
Borrowings (Tables)
Borrowings (Tables) | 9 Months Ended |
Mar. 31, 2018 | |
Borrowings | |
Schedule of long-term debt | Long-term debt consisted of the following (in thousands): June 30, March 31, 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) | 9 Months Ended |
Mar. 31, 2018 | |
Stockholders' Equity | |
Schedule of stock-based compensation expense in the condensed consolidated statements of operations | We recorded stock-based compensation expense in the condensed consolidated statements of operations as follows (in thousands): Three Months Ended Nine Months Ended 2017 2018 2017 2018 Cost of goods sold $ $ $ $ Selling, general and administrative Research and development Restructuring — — — Stock-based compensation expense before taxes $ $ $ $ Less: related income tax benefit ) ) ) ) Stock-based compensation expense, net of estimated taxes $ $ $ $ |
Summary of stock option activity | Number of Weighted Average Weighted- Average Aggregate Outstanding at June 30, 2017 $ Granted $ Exercised ) $ Expired or forfeited ) $ Outstanding at March 31, 2018 $ 3.2 years $ Exercisable at March 31, 2018 $ 2.8 years $ |
Summary of RSU award activity | Shares Weighted- Nonvested at June 30, 2017 $ Granted Vested ) Forfeited ) Nonvested at March 31, 2018 $ |
Retirement Benefit Plans (Table
Retirement Benefit Plans (Tables) | 9 Months Ended |
Mar. 31, 2018 | |
Retirement Benefit Plans | |
Schedule of net periodic pension expense | The components of net periodic pension expense are as follows (in thousands): Three Months Ended Nine Months Ended 2017 2018 2017 2018 Service cost $ $ $ $ Interest cost Amortization of prior service cost Net periodic pension expense $ $ $ $ |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Mar. 31, 2018 | |
Commitments and Contingencies | |
Schedule of rollforward of the contingent consideration liability | Beginning fair value, June 30, 2017 $ Additions Change in fair value ) Payments ) Ending fair value, March 31, 2018 $ |
Schedule of changes in warranty provisions | The following table presents changes in warranty provisions (in thousands): Nine Months Ended March 31, 2017 2018 Balance at beginning of period $ $ Additions and adjustments Reductions for warranty repair costs ) ) Balance at end of period $ $ |
Segment Information (Tables)
Segment Information (Tables) | 9 Months Ended |
Mar. 31, 2018 | |
Segment Information | |
Schedule of results of operations and identifiable assets by industry segment | The following tables set forth the results of operations and identifiable assets by industry segment (in thousands): Three Months Ended Nine Months Ended 2017 2018 2017 2018 Revenues (1) — by Segment: Security division $ $ $ $ Healthcare division Optoelectronics and Manufacturing division, including intersegment revenues Intersegment revenues elimination ) ) ) ) Total $ $ $ $ Three Months Ended Nine Months Ended 2017 2018 2017 2018 Operating income (loss) — by Segment: Security division $ $ $ $ Healthcare division ) ) ) Optoelectronics and Manufacturing division Corporate ) ) ) ) Intersegment eliminations (2) ) ) Total $ $ $ $ June 30, March 31, Assets — by Segment: Security division $ $ Healthcare division Optoelectronics and Manufacturing division Corporate Intersegment eliminations (2) ) ) Total $ (1) For the three months ended March 31, 2017, one customer, SAT in Mexico, accounted for 12% of total net revenues. For the nine months ended March 31, 2017 and 2018, SAT accounted for 12% and 11% of total net revenues, respectively. (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 - Per Sha
Basis of Presentation - Per Share Computations (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | Feb. 28, 2017 | |
Computation of basic and diluted earnings per share | |||||
Net income (loss) available to common stockholders | $ 2,553 | $ 14,019 | $ (34,241) | $ 19,529 | |
Weighted average shares outstanding-basic | 18,569 | 18,913 | 18,773 | 18,964 | |
Dilutive effect of equity awards | 577 | 602 | 621 | ||
Weighted average shares outstanding-diluted | 19,146 | 19,515 | 18,773 | 19,585 | |
Basic earnings (loss) per share | $ 0.14 | $ 0.74 | $ (1.82) | $ 1.03 | |
Diluted earnings (loss) per share | $ 0.13 | $ 0.72 | $ (1.82) | $ 1 | |
Shares excluded from computation of diluted net income per share | |||||
Stock options excluded from computation due to antidilutive effect (in shares) | 300 | ||||
1.25% Convertible Senior Notes Due 2022 | |||||
Per Share Computations | |||||
Interest rate (as a percentage) | 1.25% | 1.25% | 1.25% |
Basis of Presentation - Cash Eq
Basis of Presentation - Cash Equivalents (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Jun. 30, 2017 | Mar. 31, 2017 | Jun. 30, 2016 |
Cash Equivalents | ||||
Cash, cash equivalents, and investments | $ 194,001 | $ 169,650 | $ 158,472 | $ 104,370 |
Basis of Presentation - Fair Va
Basis of Presentation - Fair Value (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Jun. 30, 2017 |
Fair Value of Financial Instruments | ||
Liabilities - contingent payment obligations | $ 16,667 | $ 11,840 |
Recurring | ||
Fair Value of Financial Instruments | ||
Equity securities | 17 | 254 |
Insurance company contracts | 31,384 | 26,940 |
Interest rate swap agreement | 22 | 20 |
Total assets | 31,423 | 27,214 |
Liabilities - contingent payment obligations | 16,667 | 11,840 |
Recurring | Level 1 | ||
Fair Value of Financial Instruments | ||
Equity securities | 17 | 254 |
Total assets | 17 | 254 |
Recurring | Level 2 | ||
Fair Value of Financial Instruments | ||
Insurance company contracts | 31,384 | 26,940 |
Interest rate swap agreement | 22 | 20 |
Total assets | 31,406 | 26,960 |
Recurring | Level 3 | ||
Fair Value of Financial Instruments | ||
Total assets | 0 | |
Liabilities - contingent payment obligations | $ 16,667 | $ 11,840 |
Basis of Presentation - Revenue
Basis of Presentation - Revenue Recognition (Details) | 1 Months Ended |
Jan. 31, 2018 | |
SAT | |
Revenue Recognition | |
Term of Contract | 2 years |
Basis of Presentation - US Tax
Basis of Presentation - US Tax Reform (Details) - USD ($) $ in Millions | Jan. 01, 2018 | Dec. 31, 2017 | Mar. 31, 2018 | Jun. 30, 2018 |
Basis of Presentation | ||||
One-time charge effect of Tax Act | $ 56 | |||
Statutory tax rate (as a percent) | 21.00% | 35.00% | 28.10% |
Business Combinations - Explosi
Business Combinations - Explosive Trace Detection (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Jun. 30, 2017 | |
Allocation of total consideration to assets acquired and liabilities assumed | ||
Goodwill | $ 300,716 | $ 242,129 |
Explosive Trace Detection Business ("ETD") | ||
Business Combinations | ||
Decrease in goodwill | (200) | |
Decrease in accounts receivable reserve | 1,200 | |
Decrease in fair value of inventory | 800 | |
Increase in accrued liabilities | 200 | |
Allocation of total consideration to assets acquired and liabilities assumed | ||
Cash and cash equivalents | 4 | |
Accounts receivable, net | 13,358 | |
Inventories | 11,456 | |
Property and equipment | 1,599 | |
Intangible assets | 30,040 | |
Other long-term assets | 297 | |
Accounts payable | (4,784) | |
Accrued payroll and related expenses | (2,356) | |
Deferred revenues - current | (1,629) | |
Accrued warranties | (2,068) | |
Other accrued expenses and current liabilities | (1,582) | |
Net assets acquired | 44,335 | |
Goodwill | 36,132 | |
Total consideration | $ 80,467 |
Business Combinations - Intangi
Business Combinations - Intangible Assets (Details) - Explosive Trace Detection Business ("ETD") $ in Thousands | 9 Months Ended |
Mar. 31, 2018USD ($) | |
Business Combinations | |
Amortizable assets | $ 29,640 |
Total intangible assets | 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 | |
Business Combinations | |
Weighted Average Lives (in years) | 8 years |
Amortizable assets | $ 12,920 |
Backlog | |
Business Combinations | |
Weighted Average Lives (in years) | 2 years |
Amortizable assets | $ 3,500 |
Business Combinations - Revenue
Business Combinations - Revenue and Income (Details) - Explosive Trace Detection Business ("ETD") - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2018 | Mar. 31, 2017 | |
Business Combinations | |||||
Amount included in revenue | $ 17,600 | $ 59,000 | |||
Amount included in pre-tax income | 3,100 | $ 9,800 | |||
Pro forma results of operations assuming the ETD acquisition had occurred on July 1, 2016 | |||||
Revenues | 267,299 | $ 260,695 | $ 801,960 | $ 763,612 | |
Income from operations | $ 7,743 | $ 21,003 | $ 45,284 | $ 38,772 |
Business Combinations - America
Business Combinations - American Science and Engineering (Details) - AS&E $ in Millions | Sep. 09, 2016USD ($) |
Business Combinations | |
Percentage of ownership acquired | 100.00% |
Total cash merger consideration | $ 266 |
Cash on hand to pay down the revolving bank line of credit | $ 69 |
Business Combinations - Other A
Business Combinations - Other Acquisition (Details) - USD ($) $ in Thousands | Jan. 12, 2018 | Mar. 31, 2018 | Jun. 30, 2017 |
Business Combinations | |||
Maximum amount of future payments under contingent consideration | $ 30,300 | ||
Goodwill | $ 300,716 | $ 242,129 | |
An electronics component designer and manufacturer | |||
Business Combinations | |||
Total consideration | $ 22,000 | ||
Maximum amount of future payments under contingent consideration | 6,000 | ||
Intangible assets | 12,600 | ||
Goodwill | 10,900 | ||
Net assets acquired | $ 3,200 |
Balance Sheet Details (Details)
Balance Sheet Details (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||||
Jan. 31, 2018 | Sep. 30, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | Jun. 30, 2017 | |
Accounts Receivable | |||||||
Accounts receivable | $ 226,217 | $ 226,217 | $ 216,089 | ||||
Less allowance for doubtful accounts | (9,537) | (9,537) | (9,563) | ||||
Accounts receivable, net | 216,680 | 216,680 | 206,526 | ||||
Inventories | |||||||
Raw materials | 157,434 | 157,434 | 129,645 | ||||
Work-in-process | 85,273 | 85,273 | 65,454 | ||||
Finished goods | 61,586 | 61,586 | 53,411 | ||||
Inventories | 304,293 | 304,293 | 248,510 | ||||
Property and Equipment | |||||||
Property and equipment, gross | 244,389 | 244,389 | 389,655 | ||||
Less accumulated depreciation and amortization | (130,722) | (130,722) | (248,116) | ||||
Property and equipment, net | 113,667 | 113,667 | 141,539 | ||||
Depreciation expense | 5,400 | $ 13,300 | 38,400 | $ 39,900 | |||
Contract with Mexican government | |||||||
Term of agreement with Mexican government to provide security screening services | 2 years | ||||||
Prepaid expenses and other current assets | |||||||
Contract with Mexican government | |||||||
Remaining cost to obtain the contract | 14,700 | 14,700 | |||||
Other assets | |||||||
Contract with Mexican government | |||||||
Remaining cost to obtain the contract | 11,600 | 11,600 | |||||
AS&E facility in Billerica, MA | |||||||
Property and Equipment | |||||||
Purchase of property and equipment | $ 19,800 | ||||||
Land, buildings, civil works and improvements | |||||||
Property and Equipment | |||||||
Property and equipment, gross | 73,893 | 73,893 | 171,335 | ||||
Leasehold improvements | |||||||
Property and Equipment | |||||||
Property and equipment, gross | 9,317 | 9,317 | 9,025 | ||||
Equipment and tooling | |||||||
Property and Equipment | |||||||
Property and equipment, gross | 115,220 | 115,220 | 166,991 | ||||
Furniture and fixtures | |||||||
Property and Equipment | |||||||
Property and equipment, gross | 3,429 | 3,429 | 3,371 | ||||
Computer equipment | |||||||
Property and Equipment | |||||||
Property and equipment, gross | 18,801 | 18,801 | 17,991 | ||||
Software development costs | |||||||
Property and Equipment | |||||||
Property and equipment, gross | 19,146 | 19,146 | 17,303 | ||||
Computer software implementation in process | |||||||
Property and Equipment | |||||||
Property and equipment, gross | 3,344 | 3,344 | 2,590 | ||||
Construction in process | |||||||
Property and Equipment | |||||||
Property and equipment, gross | $ 1,239 | $ 1,239 | $ 1,049 |
Goodwill and Intangible Asset40
Goodwill and Intangible Assets - Goodwill (Details) $ in Thousands | 9 Months Ended |
Mar. 31, 2018USD ($) | |
Changes in the carrying value of goodwill | |
Balance at the beginning of the period | $ 242,129 |
Goodwill acquired or adjusted during the period | 57,186 |
Foreign currency translation adjustment | 1,401 |
Balance at the end of the period | 300,716 |
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 | 43,106 |
Foreign currency translation adjustment | 259 |
Balance at the end of the period | 198,448 |
Healthcare Division | |
Changes in the carrying value of goodwill | |
Balance at the beginning of the period | 40,129 |
Foreign currency translation adjustment | 248 |
Balance at the end of the period | 40,377 |
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 | 14,080 |
Foreign currency translation adjustment | 894 |
Balance at the end of the period | $ 61,891 |
Goodwill and Intangible Asset41
Goodwill and Intangible Assets - Intangible Assets Subject to Amortization (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | Jun. 30, 2017 | |
Amortizable assets: | |||||
Gross Carrying Value | $ 151,001 | $ 151,001 | $ 110,874 | ||
Accumulated Amortization | (33,292) | (33,292) | (21,164) | ||
Total | 117,709 | 117,709 | 89,710 | ||
Total intangible assets | |||||
Gross Carrying Value | 180,349 | 180,349 | 139,614 | ||
Intangible assets, net | 147,057 | 147,057 | 118,450 | ||
Amortization expense | 5,100 | $ 3,600 | 13,800 | $ 9,100 | |
Trademarks and trade names | |||||
Non-amortizable assets: | |||||
Gross Carrying Value | 25,748 | 25,748 | 25,540 | ||
IPR&D | |||||
Non-amortizable assets: | |||||
Gross Carrying Value | 3,600 | 3,600 | 3,200 | ||
Software development costs | |||||
Amortizable assets: | |||||
Gross Carrying Value | 27,777 | 27,777 | 26,753 | ||
Accumulated Amortization | (8,709) | (8,709) | (6,291) | ||
Total | 19,068 | 19,068 | 20,462 | ||
Patents | |||||
Amortizable assets: | |||||
Gross Carrying Value | 8,757 | 8,757 | 8,386 | ||
Accumulated Amortization | (1,603) | (1,603) | (1,676) | ||
Total | 7,154 | 7,154 | 6,710 | ||
Developed technology | |||||
Amortizable assets: | |||||
Gross Carrying Value | 50,637 | 50,637 | 37,446 | ||
Accumulated Amortization | (8,902) | (8,902) | (5,530) | ||
Total | 41,735 | 41,735 | 31,916 | ||
Customer relationships/backlog | |||||
Amortizable assets: | |||||
Gross Carrying Value | 63,830 | 63,830 | 38,289 | ||
Accumulated Amortization | (14,078) | (14,078) | (7,667) | ||
Total | $ 49,752 | $ 49,752 | $ 30,622 |
Goodwill and Intangible Asset42
Goodwill and Intangible Assets - Intangible Amortization (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | Jun. 30, 2017 | |
Estimated future amortization expense | ||||
2018 (remaining 3 months) | $ 5,522 | |||
2,019 | 21,600 | |||
2,020 | 18,823 | |||
2,021 | 18,347 | |||
2,022 | 13,840 | |||
Thereafter, including assets that have not yet begun to be amortized | 39,577 | |||
Total | 117,709 | $ 89,710 | ||
Software development costs | ||||
Estimated future amortization expense | ||||
Total | 19,068 | $ 20,462 | ||
Capitalized software development costs | $ 1,000 | $ 1,300 | $ 2,000 |
Impairment, restructuring and43
Impairment, restructuring and other charges - Restructuring and other charges(Details) $ in Thousands | 3 Months Ended | 9 Months Ended | 18 Months Ended | |||
Mar. 31, 2018USD ($) | Mar. 31, 2017USD ($) | Dec. 31, 2016USD ($) | Mar. 31, 2018USD ($)item | Mar. 31, 2017USD ($) | Dec. 31, 2017USD ($) | |
Impairment, restructuring and other charges | ||||||
Employee termination and facility consolidation costs | $ 400 | $ 1,200 | ||||
Impairment charges | 4,037 | $ 7,100 | 7,181 | $ 5,418 | ||
Acquisition-related costs | 77 | $ 140 | 1,258 | 4,163 | ||
Employee termination costs | 290 | 579 | 766 | 9,797 | ||
Facility closures/consolidation | 109 | 1,478 | 433 | 1,750 | ||
Legal and accrued settlement costs | 9,549 | 13,851 | ||||
Other charges (reversals) | 311 | 757 | ||||
Total expensed | 14,062 | 2,508 | 23,489 | 21,885 | ||
Explosive Trace Detection Business ("ETD") | ||||||
Impairment, restructuring and other charges | ||||||
Acquisition-related costs | 200 | 1,100 | $ 2,100 | |||
Security Division | ||||||
Impairment, restructuring and other charges | ||||||
Impairment charges | 91 | 1,581 | 5,332 | |||
Acquisition-related costs | 810 | |||||
Employee termination costs | 18 | 345 | 348 | 8,152 | ||
Facility closures/consolidation | 117 | 650 | 198 | 829 | ||
Other charges (reversals) | 7 | |||||
Total expensed | 226 | 995 | $ 2,127 | 15,130 | ||
Healthcare Division | ||||||
Impairment, restructuring and other charges | ||||||
Number of non-core product lines abandoned | item | 2 | |||||
Impairment charges | 3,946 | $ 4,525 | 86 | |||
Employee termination costs | 3 | 182 | 3 | 1,262 | ||
Facility closures/consolidation | (8) | 634 | 235 | 703 | ||
Legal and accrued settlement costs | 5,766 | 9,966 | ||||
Other charges (reversals) | 297 | 297 | ||||
Total expensed | 9,707 | 1,113 | 14,729 | 2,348 | ||
Optoelectronics and Manufacturing division | ||||||
Impairment, restructuring and other charges | ||||||
Impairment charges | 1,075 | |||||
Employee termination costs | 269 | 52 | 415 | 383 | ||
Facility closures/consolidation | 194 | 218 | ||||
Other charges (reversals) | 19 | (48) | ||||
Total expensed | 269 | 265 | 1,490 | 553 | ||
Corporate | ||||||
Impairment, restructuring and other charges | ||||||
Acquisition-related costs | 77 | 140 | 1,258 | 3,353 | ||
Legal and accrued settlement costs | 3,783 | 3,885 | ||||
Other charges (reversals) | (5) | 501 | ||||
Total expensed | $ 3,860 | $ 135 | $ 5,143 | $ 3,854 |
Impairment, restructuring and44
Impairment, restructuring and other charges - Changes in the accrual for restructuring and other charges (Details) $ in Thousands | 9 Months Ended |
Mar. 31, 2018USD ($) | |
Restructuring and other charges | |
Balance at the beginning of the period | $ 466 |
Restructuring and other charges | 16,309 |
Payments and other adjustments | (8,150) |
Balance at the end of the period | 8,625 |
Acquisition-related Costs | |
Restructuring and other charges | |
Restructuring and other charges | 1,258 |
Payments and other adjustments | (1,258) |
Employee Termination Costs | |
Restructuring and other charges | |
Balance at the beginning of the period | 175 |
Restructuring and other charges | 767 |
Payments and other adjustments | (840) |
Balance at the end of the period | 102 |
Facility Closure / Consolidation Cost | |
Restructuring and other charges | |
Balance at the beginning of the period | 291 |
Restructuring and other charges | 433 |
Payments and other adjustments | (315) |
Balance at the end of the period | 409 |
Legal Charges | |
Restructuring and other charges | |
Restructuring and other charges | 13,851 |
Payments and other adjustments | (5,737) |
Balance at the end of the period | $ 8,114 |
Borrowings (Details)
Borrowings (Details) $ / shares in Units, $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||||
Sep. 30, 2012USD ($) | Mar. 31, 2018USD ($)$ / shares | Mar. 31, 2018USD ($)item$ / shares | Mar. 29, 2018$ / shares | Jun. 30, 2017USD ($) | Feb. 28, 2017USD ($) | Dec. 31, 2016USD ($) | Nov. 30, 2016USD ($) | |
Borrowings | ||||||||
Borrowings outstanding | $ 228,000 | $ 228,000 | $ 103,000 | |||||
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 | 2,511 | $ 2,511 | 3,700 | |||||
Other long-term debt | 1,506 | 1,506 | 1,621 | |||||
Total | 249,281 | 249,281 | 244,146 | |||||
Less current portion of long-term debt | (2,252) | (2,252) | (2,396) | |||||
Long-term portion of debt | 247,029 | 247,029 | 241,750 | |||||
Revolving Credit Facility | ||||||||
Borrowings | ||||||||
Maximum borrowing capacity | $ 525,000 | $ 450,000 | ||||||
Sub-limit available for letters of credit | 300,000 | $ 300,000 | ||||||
Unused commitment fee (as a percent) | 0.20% | |||||||
Borrowings outstanding | 228,000 | $ 228,000 | ||||||
Amount outstanding under lines-of-credit facilities | 33,300 | 33,300 | ||||||
Available credit facility | 263,700 | $ 263,700 | ||||||
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 | $ 250,000 | ||||||
Unused commitment fee (as a percent) | 0.30% | |||||||
Revolving Credit Facility | LIBOR | ||||||||
Borrowings | ||||||||
Interest rate margin (as a percent) | 1.50% | |||||||
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 | $ 287,500 | |||||
Interest rate (as a percentage) | 1.25% | 1.25% | 1.25% | |||||
Conversion ratio | 9.3056 | |||||||
Conversion price | $ / shares | $ 107.46 | $ 107.46 | ||||||
Premium on stock price | 38.50% | 38.50% | ||||||
Liability component of convertible debt | $ 242,400 | $ 242,400 | ||||||
Equity component of convertible debt | 45,100 | 45,100 | ||||||
Debt issuance costs | 7,700 | 7,700 | ||||||
Debt Component of debt issuance costs | 6,500 | 6,500 | ||||||
Equity component of debt issuance costs | 1,200 | 1,200 | ||||||
Total interest expense | 3,100 | 9,200 | ||||||
Contractual interest expense | 900 | 2,700 | ||||||
Amortization of debt discount | 1,900 | 5,600 | ||||||
Amortization of debt issuance costs | 300 | 900 | ||||||
Unamortized debt discount | $ 37,045 | $ 37,045 | 42,602 | |||||
Effective interest rate (as a percent) | 4.50% | 4.50% | ||||||
Unamortized debt issuance costs | $ 5,191 | $ 5,191 | 6,073 | |||||
Stock price per share | $ / shares | $ 65.27 | |||||||
Components of long-term debt | ||||||||
Principal amount | 287,500 | 287,500 | 287,500 | |||||
Unamortized discount | (37,045) | (37,045) | (42,602) | |||||
Unamortized debt issuance costs | (5,191) | (5,191) | (6,073) | |||||
Total | 245,264 | 245,264 | $ 238,825 | |||||
Bank lines-of-credit | ||||||||
Borrowings | ||||||||
Amount outstanding under lines-of-credit facilities | 60,300 | 60,300 | ||||||
Available credit facility | $ 12,900 | $ 12,900 | ||||||
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 | Dec. 11, 2017shares | Mar. 31, 2018USD ($)$ / sharesshares | Mar. 31, 2017USD ($) | Mar. 31, 2018USD ($)ShareBasedCompensationPlan$ / sharesshares | Mar. 31, 2017USD ($)shares |
Stock-based Compensation | |||||
Stock-based compensation expense before taxes | $ | $ 6,014 | $ 6,203 | $ 17,754 | $ 20,262 | |
Less: related income tax benefit | $ | (1,864) | (2,378) | (5,492) | (7,828) | |
Stock-based compensation expense, net of estimated taxes | $ | 4,150 | 3,825 | 12,262 | $ 12,434 | |
RSU | |||||
Stock-based Compensation | |||||
Unrecognized compensation cost | $ | $ 19,900 | $ 19,900 | |||
Weighted-average period | 1 year 10 months 24 days | ||||
Shares | |||||
Nonvested at the beginning of the period (in shares) | 611,687 | ||||
Granted (in shares) | 349,538 | ||||
Vested (in shares) | (401,773) | ||||
Forfeited (in shares) | (13,919) | ||||
Nonvested at the end of the period (in shares) | 545,533 | 545,533 | |||
Weighted-Average Fair Value | |||||
Nonvested at the beginning of the period (in dollars per share) | $ / shares | $ 65.85 | ||||
Granted (in dollars per share) | $ / shares | 74.11 | ||||
Vested (in dollars per share) | $ / shares | 65.27 | ||||
Forfeited (in dollars per share) | $ / shares | 70.11 | ||||
Nonvested at the end of the period (in dollars per share) | $ / shares | $ 71.46 | $ 71.46 | |||
Stock Options | |||||
Stock-based Compensation | |||||
Unrecognized compensation cost | $ | $ 700 | $ 700 | |||
Weighted-average period | 2 years | ||||
Number of Options | |||||
Outstanding at the beginning of the period (in shares) | 780,671 | ||||
Granted (in shares) | 25,379 | ||||
Exercised (in shares) | (113,255) | ||||
Expired or forfeited (in shares) | (5,730) | ||||
Outstanding at the end of the period (in shares) | 687,065 | 687,065 | |||
Exercisable at the end of the period (in shares) | 642,629 | 642,629 | |||
Weighted-Average Exercise Price | |||||
Outstanding at the beginning of the period (in dollars per share) | $ / shares | $ 30 | ||||
Granted (in dollars per share) | $ / shares | 85.83 | ||||
Exercised (in dollars per share) | $ / shares | 22.73 | ||||
Expired or forfeited (in dollars per share) | $ / shares | 73.38 | ||||
Outstanding at the end of the period (in dollars per share) | $ / shares | $ 32.89 | 32.89 | |||
Exercisable at the end of the period (in dollars per share) | $ / shares | $ 29.63 | $ 29.63 | |||
Weighted-Average Remaining Contractual Term | |||||
Outstanding at the end of the period | 3 years 2 months 12 days | ||||
Exercisable at the end of the period | 2 years 9 months 18 days | ||||
Aggregate Intrinsic Value | |||||
Outstanding at the end of the period | $ | $ 23,193 | $ 23,193 | |||
Exercisable at the end of the period | $ | $ 23,190 | $ 23,190 | |||
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 | |||||
Stock-based Compensation | |||||
Maximum number of shares of Common Stock which may be issued increased | 1,600,000 | ||||
Weighted-Average Fair Value | |||||
Shares available for grant | 2,300,000 | 2,300,000 | |||
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 | |||||
Shares | |||||
Granted (in shares) | 0 | ||||
2006 Plan | |||||
Number of Options | |||||
Granted (in shares) | 0 | ||||
Cost of goods sold | |||||
Stock-based Compensation | |||||
Stock-based compensation expense before taxes | $ | $ 251 | 417 | $ 739 | $ 1,116 | |
Selling, general and administrative | |||||
Stock-based Compensation | |||||
Stock-based compensation expense before taxes | $ | 5,614 | 5,627 | 16,574 | 15,909 | |
Research and development | |||||
Stock-based Compensation | |||||
Stock-based compensation expense before taxes | $ | $ 149 | $ 159 | $ 441 | 335 | |
Restructuring | |||||
Stock-based Compensation | |||||
Stock-based compensation expense before taxes | $ | $ 2,902 |
Stockholders' Equity - Share Re
Stockholders' Equity - Share Repurchase Program (Details) - shares | 3 Months Ended | 9 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2018 | Apr. 30, 2016 | |
Maximum | |||
Share Repurchase Program | |||
Number of repurchased shares authorized | 1,000,000 | ||
Common stock | |||
Share Repurchase Program | |||
Number of shares repurchased | 972,481 | 972,481 | |
Common stock | Maximum | |||
Share Repurchase Program | |||
Number of repurchased shares authorized | 1,000,000 | 1,000,000 |
Retirement Benefit Plans (Detai
Retirement Benefit Plans (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | |
Net Periodic Benefit Costs | ||||
Service cost | $ 216 | $ 224 | $ 648 | $ 672 |
Interest cost | 9 | 7 | 25 | 21 |
Amortization of prior service cost | 70 | 70 | 210 | 210 |
Net periodic pension expense | 295 | 301 | 883 | 903 |
Contributions made by the entity to the defined benefit plans | 0 | 0 | 1,000 | 1,000 |
Contributions made by the entity to defined contribution plans | $ 1,600 | $ 1,400 | $ 4,600 | $ 3,600 |
Commitments and Contingencies -
Commitments and Contingencies - Contingent Acquisition Obligations (Details) $ in Thousands | 9 Months Ended |
Mar. 31, 2018USD ($) | |
Contingent Acquisition Obligations | |
Maximum amount of future payments under contingent consideration | $ 30,300 |
Beginning fair value | 11,840 |
Additions of contingent consideration liability | 8,012 |
Change in fair value for contingent consideration liability | (1,303) |
Payments on contingent consideration liability | (1,882) |
Ending fair value | 16,667 |
Mr. Chopra | Deferred bonus | |
Employment-Related Contingencies | |
Contingent bonus payment to Mr. Chopra | $ 13,500 |
Maximum number of days after January 1, 2024, bonus payment to Mr. Chopra | 45 days |
Commitments and Contingencies50
Commitments and Contingencies - Product Warranties (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Changes in provision for warranties | ||
Warranty provision at beginning of period | $ 15,178 | $ 15,948 |
Additions and adjustments | 10,431 | 6,514 |
Reductions for warranty repair costs | (5,219) | (4,395) |
Warranty provision at end of period | $ 20,390 | $ 18,067 |
Income Taxes - (Details)
Income Taxes - (Details) - USD ($) $ in Millions | Jul. 01, 2018 | Jan. 01, 2018 | Dec. 31, 2017 | Mar. 31, 2018 | Jun. 30, 2018 |
Statutory tax rate (as a percent) | 21.00% | 35.00% | 28.10% | ||
Provision for income taxes due to enactment of Tax Act | $ 56 | ||||
Transition Tax | 64.6 | ||||
Net impact on U.S. deferred tax assets and liabilities | $ 8.4 | ||||
Forecast | |||||
Statutory tax rate (as a percent) | 21.00% |
Segment Information - Operation
Segment Information - Operations and Identifiable Assets (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Mar. 31, 2018USD ($) | Mar. 31, 2017USD ($)customer | Mar. 31, 2018USD ($)segment | Mar. 31, 2017USD ($) | Jun. 30, 2017USD ($) | |
Operations and identifiable assets by industry segment | |||||
Number of identifiable industry segments | segment | 3 | ||||
Total revenues | $ 267,299 | $ 245,146 | $ 801,960 | $ 708,549 | |
Operating income (loss) | 7,743 | $ 19,694 | 45,284 | $ 30,486 | |
Segments assets | 1,396,031 | $ 1,396,031 | $ 1,230,087 | ||
SAT in Mexico | Revenue | Customer | |||||
Operations and identifiable assets by industry segment | |||||
Number of major customers | customer | 1 | ||||
Percentage of benchmark derived from specified source | 12.00% | 11.00% | 12.00% | ||
Operating Segments | Security Division | |||||
Operations and identifiable assets by industry segment | |||||
Total revenues | 170,270 | $ 144,824 | $ 504,784 | $ 408,037 | |
Operating income (loss) | 21,028 | 18,287 | 66,192 | 36,767 | |
Segments assets | 975,807 | 975,807 | 785,230 | ||
Operating Segments | Healthcare Division | |||||
Operations and identifiable assets by industry segment | |||||
Total revenues | 43,758 | 49,667 | 141,793 | 146,427 | |
Operating income (loss) | (8,425) | 936 | (6,975) | (1,527) | |
Segments assets | 164,911 | 164,911 | 186,021 | ||
Operating Segments | Optoelectronics and Manufacturing division | |||||
Operations and identifiable assets by industry segment | |||||
Total revenues | 66,212 | 58,309 | 189,024 | 175,864 | |
Operating income (loss) | 6,547 | 5,974 | 16,224 | 16,149 | |
Segments assets | 225,672 | 225,672 | 196,567 | ||
Corporate | |||||
Operations and identifiable assets by industry segment | |||||
Operating income (loss) | (10,730) | (6,067) | (28,601) | (21,882) | |
Segments assets | 33,887 | 33,887 | 64,959 | ||
Intersegment Eliminations | |||||
Operations and identifiable assets by industry segment | |||||
Total revenues | (12,941) | (7,654) | (33,641) | (21,779) | |
Operating income (loss) | (677) | $ 564 | (1,556) | $ 979 | |
Segments assets | $ (4,246) | $ (4,246) | $ (2,690) |