Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Sep. 30, 2019 | Oct. 22, 2019 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 30, 2019 | |
Document Transition Report | false | |
Entity File Number | 000-23125 | |
Entity Registrant Name | OSI SYSTEMS, INC. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 33-0238801 | |
Entity Address, Address Line One | 12525 Chadron Avenue | |
Entity Address, City or Town | Hawthorne | |
Entity Address, State or Province | CA | |
Entity Address, Postal Zip Code | 90250 | |
City Area Code | (310) | |
Local Phone Number | 978-0516 | |
Title of 12(b) Security | Common Stock | |
Trading Symbol | true | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Interactive Data Current | Yes | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 18,357,463 | |
Entity Central Index Key | 0001039065 | |
Current Fiscal Year End Date | --06-30 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) $ in Thousands | Sep. 30, 2019 | Jun. 30, 2019 |
CURRENT ASSETS: | ||
Cash and cash equivalents | $ 85,142 | $ 96,316 |
Accounts receivable, net | 245,093 | 238,440 |
Inventories | 268,761 | 273,711 |
Prepaid expenses and other current assets | 38,140 | 32,432 |
Total current assets | 637,136 | 640,899 |
Property and equipment, net | 128,293 | 127,385 |
Goodwill | 306,713 | 307,108 |
Intangible assets, net | 129,633 | 132,954 |
Other assets | 88,327 | 56,518 |
Total assets | 1,290,102 | 1,264,864 |
CURRENT LIABILITIES: | ||
Bank lines of credit | 95,000 | 88,000 |
Current portion of long-term debt | 801 | 804 |
Accounts payable | 100,942 | 93,500 |
Accrued payroll and related expenses | 31,794 | 43,521 |
Advances from customers | 49,845 | 43,227 |
Other accrued expenses and current liabilities | 116,320 | 112,956 |
Total current liabilities | 394,702 | 382,008 |
Long-term debt | 260,007 | 257,752 |
Deferred income taxes | 7,832 | 7,979 |
Other long-term liabilities | 85,997 | 65,398 |
Total liabilities | 748,538 | 713,137 |
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, 18,167,020 shares at June 30, 2019 and 18,357,464 shares at September 30, 2019 | 141,049 | 168,913 |
Retained earnings | 420,284 | 399,541 |
Accumulated other comprehensive loss | (19,769) | (16,727) |
Total stockholders' equity | 541,564 | 551,727 |
Total liabilities and stockholders' equity | $ 1,290,102 | $ 1,264,864 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - $ / shares | Sep. 30, 2019 | Jun. 30, 2019 |
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 | 18,357,464 | 18,167,020 |
Common stock, shares outstanding | 18,357,464 | 18,167,020 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Net revenues: | ||
Total net revenues | $ 290,852 | $ 266,249 |
Cost of goods sold: | ||
Total cost of goods sold | 191,641 | 170,336 |
Gross profit | 99,211 | 95,913 |
Operating expenses: | ||
Selling, general and administrative | 62,177 | 61,707 |
Research and development | 14,246 | 13,753 |
Restructuring and other charges (benefit), net | (2,099) | 4,196 |
Total operating expenses | 74,324 | 79,656 |
Income from operations | 24,887 | 16,257 |
Interest expense and other expense, net | (4,736) | (5,332) |
Income before income taxes | 20,151 | 10,925 |
(Provision) benefit for income taxes | 592 | (1,523) |
Net income | $ 20,743 | $ 9,402 |
Earnings per share: | ||
Basic (in dollars per share) | $ 1.14 | $ 0.52 |
Diluted (in dollars per share) | $ 1.10 | $ 0.50 |
Shares used in per share calculation: | ||
Basic (in shares) | 18,259 | 18,090 |
Diluted (in shares) | 18,903 | 18,736 |
Products | ||
Net revenues: | ||
Total net revenues | $ 209,761 | $ 182,480 |
Cost of goods sold: | ||
Total cost of goods sold | 146,342 | 125,371 |
Services | ||
Net revenues: | ||
Total net revenues | 81,091 | 83,769 |
Cost of goods sold: | ||
Total cost of goods sold | $ 45,299 | $ 44,965 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) - USD ($) $ in Thousands | 3 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) | ||
Net income | $ 20,743 | $ 9,402 |
Other comprehensive income (loss): | ||
Foreign currency translation adjustment | (3,052) | 1,173 |
Other | 10 | 6 |
Other comprehensive income (loss) | (3,042) | 1,179 |
Comprehensive income | $ 17,701 | $ 10,581 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED) - USD ($) $ in Thousands | Common | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total |
Balance at Jun. 30, 2018 | $ 169,475 | $ 334,745 | $ (14,784) | $ 489,436 |
Balance (in shares) at Jun. 30, 2018 | 18,032,374 | |||
Increase (Decrease) in Shareholders' Equity | ||||
Exercise of stock options | $ 269 | 269 | ||
Exercise of stock options (in shares) | 9,034 | |||
Vesting of RSUs (in shares) | 340,082 | |||
Shares issued under employee stock purchase program | $ 2,022 | 2,022 | ||
Shares issued under employee stock purchase program (in shares) | 39,293 | |||
Stock based compensation | $ 5,463 | 5,463 | ||
Repurchase of common stock | $ (7,844) | (7,844) | ||
Repurchase of common stock (in shares) | (104,146) | |||
Taxes paid related to net share settlement of equity awards | $ (12,625) | 0 | 0 | (12,625) |
Taxes paid related to net share settlement of equity awards (in shares) | (163,514) | |||
Net income | 9,402 | 9,402 | ||
Other comprehensive income (loss) | 1,179 | 1,179 | ||
Balance at Sep. 30, 2018 | $ 156,760 | 344,147 | (13,605) | 487,302 |
Balance (in shares) at Sep. 30, 2018 | 18,153,123 | |||
Balance at Jun. 30, 2019 | $ 168,913 | 399,541 | (16,727) | $ 551,727 |
Balance (in shares) at Jun. 30, 2019 | 18,167,020 | 18,167,020 | ||
Increase (Decrease) in Shareholders' Equity | ||||
Exercise of stock options | $ 2,832 | $ 2,832 | ||
Exercise of stock options (in shares) | 167,306 | |||
Vesting of RSUs (in shares) | 360,866 | |||
Shares issued under employee stock purchase program | $ 2,065 | 2,065 | ||
Shares issued under employee stock purchase program (in shares) | 34,837 | |||
Stock based compensation | $ 6,416 | 6,416 | ||
Repurchase of common stock | $ (13,262) | (13,262) | ||
Repurchase of common stock (in shares) | (126,051) | |||
Taxes paid related to net share settlement of equity awards | $ (25,915) | 0 | 0 | (25,915) |
Taxes paid related to net share settlement of equity awards (in shares) | (246,514) | |||
Net income | 20,743 | 20,743 | ||
Other comprehensive income (loss) | (3,042) | (3,042) | ||
Balance at Sep. 30, 2019 | $ 141,049 | $ 420,284 | $ (19,769) | $ 541,564 |
Balance (in shares) at Sep. 30, 2019 | 18,357,464 | 18,357,464 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Thousands | 3 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net income | $ 20,743 | $ 9,402 |
Adjustments to reconcile net income to net cash (used in) provided by operating activities, net of effects from acquisitions: | ||
Depreciation and amortization | 13,539 | 14,147 |
Stock-based compensation expense | 6,416 | 5,463 |
Deferred income taxes | (3) | (3,386) |
Amortization of debt discount and issuance costs | 2,308 | 2,220 |
Other | (61) | 49 |
Changes in operating assets and liabilities-net of business acquisitions: | ||
Accounts receivable | (6,940) | (8,701) |
Inventories | 4,167 | (28,690) |
Prepaid expenses and other assets | (13,272) | (9,913) |
Accounts payable | 7,594 | 9,177 |
Accrued payroll and related expenses | (11,675) | (9,585) |
Advances from customers | 6,673 | 18,409 |
Other | (4,651) | (1,413) |
Net cash (used in) provided by operating activities | 24,838 | (2,821) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Acquisition of property and equipment | (6,026) | (7,875) |
Acquisition of businesses, net of cash acquired | (18,259) | |
Acquisition of intangible and other assets | (2,088) | (4,176) |
Net cash used in investing activities | (8,114) | (30,310) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Net borrowings on bank lines of credit | 7,000 | 53,000 |
Proceeds from long-term debt | 198 | 468 |
Payments on long-term debt | (253) | (649) |
Proceeds from exercise of stock options and employee stock purchase plan | 4,897 | 2,289 |
Payments of contingent consideration | (144) | (217) |
Repurchases of common stock | (13,262) | (7,844) |
Taxes paid related to net share settlement of equity awards | (25,915) | (12,625) |
Net cash provided by (used in) financing activities | (27,479) | 34,422 |
Effect of exchange rate changes on cash | (419) | 306 |
Net change in cash and cash equivalents | (11,174) | 1,597 |
Cash and cash equivalents-beginning of period | 96,316 | 84,814 |
Cash and cash equivalents-end of period | 85,142 | 86,411 |
Cash paid, net during the period for: | ||
Interest | 2,986 | 3,702 |
Income taxes | $ 4,098 | $ 13,998 |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Sep. 30, 2019 | |
Basis of Presentation | |
Basis of Presentation | 1. Basis of Presentation Description of Business OSI Systems, Inc., together with our subsidiaries, is a vertically integrated designer and manufacturer of specialized electronic systems and components for critical applications. We sell our products in diversified markets, including homeland security, healthcare, defense and aerospace. We have three reporting segments: (i) Security, providing security inspection systems and related services, and turnkey security screening solutions; (ii) Healthcare, providing patient monitoring and diagnostic cardiology products and related services and (iii) Optoelectronics and Manufacturing, providing specialized electronic components and electronic manufacturing services for our Security and Healthcare divisions as well as to external original equipment manufacturer ("OEM") customers and end users for applications in the defense, aerospace, medical and industrial markets, among others. Through our Security segment, we provide security screening products and related services internationally. These products fall into the following categories: baggage and parcel inspection; cargo and vehicle inspection; hold (checked) baggage screening; people screening; radiation detection; and explosive and narcotics trace detection. In addition to these products, we also provide site design, installation, training and technical support services to our customers. We also provide turnkey security screening solutions, which can include the construction, staffing and long-term operation of security screening checkpoints for our customers. Through our Healthcare segment, we design, manufacture, market and service patient monitoring and diagnostic cardiology systems and related supplies and accessories internationally. These products are used by care providers in critical care, emergency and perioperative areas within hospitals as well as physicians' offices, medical clinics and ambulatory surgery centers, among others. Through our Optoelectronics and Manufacturing segment, we design, manufacture and market optoelectronic devices and flex circuits and provide electronics manufacturing services internationally for use in a broad range of applications, including aerospace and defense electronics, X-ray security and inspection systems and medical imaging, chemistry analysis and diagnostics instruments, telecommunications, scanners and industrial automations, automotive diagnostic systems, internet of things (IoT) and consumer wearable products. This division provides products and services to OEM customers and end users as well as to our Security and Healthcare divisions. Basis of Presentation The condensed consolidated financial statements include the accounts of OSI Systems, Inc. and 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, 2019 filed with the SEC. The results of operations for the three months ended September 30, 2019 are not necessarily indicative of the operating results to be expected for the full 2020 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, values for inventories reported at lower of cost or net realizable value, stock-based compensation expense, income taxes, accrued 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. Due to the inherent uncertainty involved in making estimates, our actual amounts reported in future periods could differ materially from these estimates. Earnings Per Share Computations We compute basic earnings per share by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. We compute diluted earnings per share by dividing net income available to common stockholders by the sum of the weighted average number of common shares and dilutive potential common shares outstanding during the period. Potential common shares consist of the shares issuable upon the exercise of stock options and restricted stock unit awards under the treasury stock method. The underlying equity component of the 1.25% convertible senior notes due 2022 (the “Notes”) discussed in Note 6 to the condensed consolidated financial statements will have a net impact on diluted earnings per share when the average price of our common stock exceeds the conversion price because the principal amount of the Notes is intended to be settled in cash upon conversion. The dilutive effect of the Notes is included in the calculation below for the three months ended September 30, 2019. There was no dilutive effect of the Notes for the three months ended September 30, 2018. The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts): Three Months Ended September 30, 2018 2019 Net income available to common stockholders $ 9,402 $ 20,743 Weighted average shares outstanding—basic 18,090 18,259 Dilutive effect of equity awards 646 628 Dilutive effect of the Notes — 16 Weighted average shares outstanding—diluted 18,736 18,903 Basic earnings per share $ 0.52 $ 1.14 Diluted earnings per share $ 0.50 $ 1.10 Shares excluded from diluted earnings per share due to their anti-dilutive effect 42 84 Cash and Cash Equivalents We consider all highly liquid investments with maturities of three months or less as of the acquisition date to be cash equivalents. Our cash and cash equivalents totaled $85.1 million at September 30, 2019. Of this amount, approximately 71% was held by our foreign subsidiaries and subject to repatriation tax considerations. These foreign funds were held primarily by our subsidiaries in Singapore, the United Kingdom, Malaysia, Canada and to a lesser extent in Mexico, Germany, and Albania 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, insurance company contracts, 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, as 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.The "Level 1" category includes assets and liabilities measured at quoted prices in active markets for identical assets and liabilities. The"Level 2" category includes assets and liabilities measured from observable inputs other than quoted market prices.The "Level 3" category includes assets and liabilities for which valuation inputs are unobservable and significant to the fair value measurement. As of June 30, 2019 and September 30, 2019, there were no assets in the "Level 3" category. Our contingent payment obligations related to acquisitions, which are further discussed in Note 9 to the condensed consolidated financial statements, are in the “Level 3” category for valuation purposes. The fair values of our financial assets and liabilities are categorized as follows (in thousands): June 30, 2019 September 30, 2019 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets: Insurance company contracts $ — $ 35,899 $ — $ 35,889 $ — $ 36,486 $ — $ 36,486 Liabilities: Contingent consideration $ — $ — $ 16,577 $ 16,577 $ — $ — $ 16,578 $ 16,578 Revenue Recognition We recognize revenue under Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC 606”), which superseded all prior revenue recognition methods and industry-specific guidance. The core principle of ASC 606 is that an entity should recognize revenue to depict the transfer of control for promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying the revenue principles, an entity is required to identify the contract(s) with a customer, identify the performance obligations, determine the transaction price, allocate the transaction price to the performance obligations and recognize revenue when the performance obligation is satisfied (i.e., either over time or at a point in time). ASC 606 further requires that companies disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Product Sales. Service Revenue. Contract Revenue. When determining revenue recognition for contracts, we use judgment based on our understanding of the obligations within each contract. We determine whether or not customer acceptance criteria are perfunctory or inconsequential. The determination of whether or not customer acceptance terms are perfunctory or inconsequential impacts the amount and timing of revenue recognition. Critical judgments also include estimates of warranty reserves, which are established based on historical experience and knowledge of the product under warranty. Multiple Performance Obligations. In cases where obligations in a contract are distinct and thus require separation into multiple performance obligations, revenue recognition guidance requires that contract consideration be allocated to each distinct performance obligation based on its relative standalone selling price. The value allocated to each performance obligation is then recognized as revenue when the revenue recognition criteria for each distinct promise or bundle of promises has been met. The standalone selling price for each performance obligation is an amount that depicts the amount of consideration to which the entity expects to be entitled in exchange for transferring the good or service. When there is only one performance obligation associated with a contract, the entire amount of consideration is attributed to that obligation. When a contract contains multiple performance obligations the standalone selling price is first estimated using the observable price, which is generally a list price net of applicable discount or the price used to sell the good or service in similar circumstances. In circumstances when a selling price is not directly observable, we will estimate the standalone selling price using information available to us including our market assessment and expected cost plus margin. The timetable for fulfilment of each of the distinct performance obligations can range from completion in a short amount of time and entirely within a single reporting period to completion over several reporting periods. The timing of revenue recognition for each performance obligation 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). We often provide a guarantee to support our performance under multiple performance obligations. 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. We disaggregate revenue by reporting segment (Security, Optoelectronics and Manufacturing, and Healthcare) to depict the nature of revenue in a manner consistent with our business operations and to be consistent with other communications and public filings. Refer to Note 11 to our condensed consolidated financial statements for additional details of revenues by reporting segment. Contract Assets and Liabilities. We enter into contracts to sell products and provide services, and we recognize contract assets and liabilities that arise from these transactions. We recognize revenue and corresponding accounts receivable according to ASC 606 and, at times, recognize revenue in advance of the time when contracts give us the right to invoice a customer. We may also receive consideration, per the terms of a contract, from customers prior to transferring goods to the customer. We record customer deposits as a contract liability. Additionally, we may receive payments, most typically for service and warranty contracts, at the onset of the contract and before the services have been performed. In such instances, we record a deferred revenue liability. We recognize these contract liabilities as sales after all revenue recognition criteria are met. The table below shows the balance of our contract assets and liabilities as of June 30, 2019 and September 30, 2019, including the change between the periods (in thousands): June 30, September 30, Contract Assets: 2019 2019 Change % Change Unbilled revenue $ 19,287 $ 38,257 $ 18,970 98 % Contract Liabilities: Advances from customers $ 43,227 $ 49,845 $ 6,618 15 % Deferred revenue—current 33,641 29,900 (3,741) (11) % Deferred revenue—long-term 9,506 8,656 (850) (9) % Contract assets increased during the three months ended September 30, 2019 primarily due to satisfaction of performance obligations for explosive detection systems and cargo and vehicle inspection systems in our Security division which have not yet been billed to customers. The net increase in contract liabilities were primarily due to deposits received on cargo and vehicle system contracts in our Security division. Remaining Performance Obligations Practical Expedients. Lease Accounting Right of use (“ROU”) assets represent our right to use an underlying asset during the reasonably certain lease terms and lease liabilities represent our obligation to make lease payments arising from the leases. We recognize ROU lease assets and lease liabilities at lease commencement on our consolidated balance sheet based on the present value of lease payments over the lease term using a discount rate determined based on our incremental borrowing rate since the rate implicit in each lease is not readily determinable. We elected the package of practical expedients, which permits us to not reassess (1) whether any expired or existing contracts are or contain leases, (2) the lease classification of any expired or existing leases, and (3) any initial direct costs for any existing leases as of the effective date. We elected the practical expedient to account for each separate lease component of a contract and its associated non-lease components as a single lease component. We also elected the hindsight practical expedient, which allows us to use hindsight in determining the lease term. We do not record an ROU asset and corresponding lease liability for leases with an initial term of 12 months or less (“short-term leases”). The terms in our leases may include options to extend or terminate the lease. We recognize ROU assets and liabilities when it is reasonably certain that we will exercise those options. Judgment is required in our assessment as to whether renewal or termination options are reasonably certain to be exercised and factors such as contractual terms compared to current market rates, the importance of the facility and location to our operations, among others, are considered. Lease payments are made in accordance with the lease terms and lease expense, including short-term lease expense, is recognized on a straight-line basis over the lease term. We lease facilities and certain equipment under various operating lease agreements. The majority of our lease arrangements are comprised of fixed payments while certain of our leases provide for periodic rent increases. Our leases may contain escalation clauses and renewal options. Most of the leases require us to pay for certain other costs such as common area maintenance and property taxes. Rent expense for leases with periodic rent increases or escalation clauses is recognized on a straight-line basis over the minimum lease term. The lease agreements do not contain any material residual value guarantees or material restrictive covenants. We also have finance leases for fleet vehicles that are not material to the condensed consolidated financial statements. The components of operating lease expense were as follows (in thousands): Three Months Ended September 30, 2019 Operating lease cost $ 2,649 Variable lease cost 138 Short-term lease cost 209 $ 2,996 Supplemental balance sheet assets and liabilities related to operating leases were as follows (in thousands): Balance Sheet Category September 30, 2019 Operating lease ROU assets, net Other assets $ 28,849 Operating lease liabilities, current portion Other accrued expenses and current liabilities $ 8,355 Operating lease liabilities, long-term Other long-term liabilities 20,750 Total operating lease liabilities $ 29,105 Weighted average remaining lease term 4.6 years Weighted average discount rate 4.3% Supplemental cash flow information related to operating leases was as follows (in thousands): Three Months Ended September 30, 2019 Cash paid for operating lease liabilities $ 2,572 ROU assets obtained in exchange for new lease obligations 1,313 Maturities of operating lease liabilities under ASC 842 (defined below) at September 30, 2019 were as follows (in thousands): September 30, 2019 Less than one year $ 9,361 1 – 2 years 7,527 2 – 3 years 5,050 3 – 4 years 3,338 4 – 5 years 2,775 Thereafter 4,095 32,146 Less: Imputed interest (3,041) Total lease liabilities $ 29,105 Maturities of minimum operating lease liabilities under non-cancelable leases under ASC 840 (defined below) at June 30, 2019 were as follows (in thousands): June 30, 2019 Less than one year $ 9,802 1 – 2 years 8,082 2 – 3 years 5,473 3 – 4 years 3,397 4 – 5 years 2,954 Thereafter 4,583 Total lease liabilities $ 34,291 Recently Adopted Accounting Pronouncement Leases In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASC 842”), which requires lessees to recognize ROU assets and lease liabilities, initially measured at present value of the lease payments, on its balance sheet for leases and classified as either financing or operating leases. We adopted ASC 842 on July 1, 2019, using the modified retrospective method, and we elected the package of practical expedients provided in ASC 842. In accordance with ASC 842, we did not restate comparative periods and instead reported comparative prior year periods under ASC 840, “Leases.” The cumulative effect of the changes made to our July 1, 2019 consolidated condensed balance sheet for the adoption of the new lease standard was as follows (in thousands): Balance at Effect of Adoption Balance at Balance Sheet June 30, 2019 of ASC 842 July 1, 2019 Assets Other assets $ 56,518 $ 30,066 $ 86,584 Liabilities Other accrued expenses and current liabilities $ 112,956 $ 8,324 $ 121,280 Other long-term liabilities 65,398 21,742 87,140 The adoption of the new lease accounting guidance did not have a material impact to the condensed consolidated statement of operations or the condensed consolidated statement of cash flows for the three months ended September 30, 2019. Recently Issued Accounting Pronouncements Not Yet Adopted Retirement Benefit Plans In August 2018, the FASB issued authoritative guidance under ASU 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General: Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans. This ASU eliminates requirements for certain disclosures and requires additional disclosures under defined benefit pension plans and other post-retirement plans. We are required to adopt this new guidance in the first quarter of fiscal 2021. We are currently evaluating the potential impact of the adoption of this guidance on our consolidated financial statements. Intangibles In August 2018, the FASB issued authoritative guidance under ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software: Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. This ASU requires implementation costs incurred by customers in cloud computing arrangements (i.e., hosting arrangements) to be capitalized under the same premises of authoritative guidance for internal-use software and deferred over the noncancellable term of the cloud computing arrangements plus any option renewal periods that are reasonably certain to be exercised by the customer or for which the exercise is controlled by the service provider. We are required to adopt this new guidance in the first quarter of fiscal 2021. We are currently evaluating the potential impact of adoption of this guidance on our consolidated financial statements. |
Business Combinations
Business Combinations | 3 Months Ended |
Sep. 30, 2019 | |
Business Combinations | |
Business Combinations | 2. Business Combinations Under ASC 805, Business Combinations, the acquisition method of accounting requires us to record assets acquired less liabilities assumed in an acquisition at their estimated fair values at the date of acquisition. Any excess of the total estimated purchase consideration over the estimated fair value of the assets acquired less liabilities assumed should be recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired customers, acquired technology, trade names, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. We may record adjustments to the assets acquired and liabilities assumed, with corresponding adjustments to goodwill, during the one-year post-acquisition measurement period as additional information becomes available. Upon the conclusion of the measurement period, any subsequent adjustments are reflected in reported earnings. Fiscal Year 2020 Business Acquisition There were no acquisitions during the three months ended September 30,2019. Fiscal Year 2019 Business Acquisitions In January 2019, we (through our Security division) completed an acquisition of a privately held sales and services company. The acquisition was financed with cash on hand and was in an amount determined to be insignificant by management. In August 2018, we (through our Security division) completed an acquisition of a privately held services company for approximately $0.8 million, plus up to approximately $5 million in contingent consideration, which may be earned over a five-year period. The acquisition was financed with cash on hand. The goodwill recognized for this business is not expected to be deductible for income tax purposes. In July 2018, we (through our Optoelectronics and Manufacturing division) acquired an optoelectronics solutions business for $17.5 million, plus up to $1 million in potential contingent consideration, which may be earned after the completion of an 18-month period. The acquisition was financed with cash on hand and borrowings under our existing revolving bank line of credit. The goodwill recognized for this business is expected to be deductible for income tax purposes. These business acquisitions, individually and in the aggregate, were not material to our consolidated financial statements. Accordingly, pro-forma historical results of operations related to these businesses have not been presented. |
Balance Sheet Details
Balance Sheet Details | 3 Months Ended |
Sep. 30, 2019 | |
Balance Sheet Details | |
Balance Sheet Details | 3. Balance Sheet Details The following tables provide details of selected balance sheet accounts (in thousands): June 30, September 30, Accounts receivable, net 2019 2019 Accounts receivable $ 253,504 $ 259,383 Less allowance for doubtful accounts (15,064) (14,290) Total $ 238,440 $ 245,093 June 30, September 30, Inventories 2019 2019 Raw materials $ 143,697 $ 145,087 Work-in-process 67,897 75,499 Finished goods 62,117 48,175 Total $ 273,711 $ 268,761 June 30, September 30, Property and equipment, net 2019 2019 Land $ 16,564 $ 16,558 Buildings, civil works and improvements 55,391 55,461 Leasehold improvements 8,311 8,459 Equipment and tooling 128,428 129,055 Furniture and fixtures 3,190 2,986 Computer equipment 18,733 18,814 Computer software 20,146 20,289 Computer software implementation in process 8,563 9,314 Construction in process 5,760 7,473 Total 265,086 268,409 Less accumulated depreciation and amortization (137,701) (140,116) Property and equipment, net $ 127,385 $ 128,293 Depreciation and amortization expense for property and equipment was $5.1 million for each of the three months ended September 30, 2018 and 2019. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 3 Months Ended |
Sep. 30, 2019 | |
Goodwill and Intangible Assets | |
Goodwill and Intangible Assets | 4. Goodwill and Intangible Assets The changes in the carrying value of goodwill by segment for the three month period ended September 30, 2019 were as follows (in thousands): Optoelectronics and Security Healthcare Manufacturing Division Division Division Consolidated Balance as of June 30, 2019 $ 200,079 $ 40,064 $ 66,965 $ 307,108 Goodwill adjusted during the period 483 — — 483 Foreign currency translation adjustment (254) (78) (546) (878) Balance as of September 30, 2019 $ 200,308 $ 39,986 $ 66,419 $ 306,713 Intangible assets consisted of the following (in thousands): June 30, 2019 September 30, 2019 Weighted Gross Gross Average Carrying Accumulated Intangibles Carrying Accumulated Intangibles Lives Value Amortization Net Value Amortization Net Amortizable assets: Software development costs 8 years $ 29,393 $ (12,747) $ 16,646 $ 30,740 $ (13,992) $ 16,748 Patents 19 years 8,688 (1,927) 6,761 9,104 (2,033) 7,071 Developed technology 10 years 53,460 (14,050) 39,410 53,443 (15,412) 38,031 Customer relationships/backlog 7 years 63,101 (22,132) 40,969 62,484 (23,862) 38,622 Total amortizable assets 154,642 (50,856) 103,786 155,771 (55,299) 100,472 Non-amortizable assets: IPR&D 2,290 — 2,290 2,290 — 2,290 Trademarks 26,878 — 26,878 26,871 — 26,871 Total intangible assets $ 183,810 $ (50,856) $ 132,954 $ 184,932 $ (55,299) $ 129,633 Amortization expense related to intangible assets was $5.3 million and $4.9 million for the three months ended September 30, 2018 and 2019, respectively. At September 30, 2019, the estimated future amortization expense for intangible assets was as follows (in thousands): 2020 (remaining 9 months) $ 15,523 2021 19,009 2022 15,142 2023 14,001 2024 12,947 Thereafter, including assets that have not yet begun to be amortized 23,850 Total $ 100,472 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 September 30, 2018 and 2019, we capitalized software development costs in the amount of $0.4 million and $1.3 million, respectively. |
Restructuring and Other Charges
Restructuring and Other Charges | 3 Months Ended |
Sep. 30, 2019 | |
Restructuring and Other Charges | |
Restructuring and Other Charges | 5. Restructuring and Other Charges We endeavor to align our global capacity and infrastructure with demand by our customers as well as fully integrate acquisitions and thereby improve operational efficiency. During the quarter ended September 30, 2018, we incurred $3.6 million in legal fees in our Corporate division related to class action litigation and government investigations. Additionally, we incurred costs related to acquisitions completed during the quarter and as a result of employee terminations. During the quarter ended September 30, 2019, we recognized a net benefit of $2.1 million primarily related to reimbursements from our insurance carriers for covered legal charges, partially offset by additional legal fees related to class action litigation and government investigations. The following table summarizes restructuring and other charges (benefit), net for the periods set forth below (in thousands): Three Months Ended September 30, 2018 Optoelectronics and Healthcare Manufacturing Security Division Division Division Corporate Total Acquisition-related costs $ — $ — $ 267 $ — $ 267 Employee termination costs 35 191 107 — 333 Facility closures/consolidation 10 — — — 10 Legal costs — — — 3,586 3,586 Total expensed $ 45 $ 191 $ 374 $ 3,586 $ 4,196 Three Months Ended September 30, 2019 Optoelectronics and Healthcare Manufacturing Security Division Division Division Corporate Total Employee termination costs (benefit) $ — $ — $ (13) $ 71 $ 58 Legal costs (benefit), net — — — (2,157) (2,157) Total benefit $ — $ — $ (13) $ (2,086) $ (2,099) The changes in the accrued liability for restructuring and other charges for the three month period ended September 30, 2019 were as follows (in thousands): Employee Termination Legal Costs and Costs Settlements Total Balance as of June 30, 2019 $ 432 $ 6,331 $ 6,763 Restructuring and other charges (benefit), net 58 (2,157) (2,099) (Payments), adjustments and reimbursements, net (490) 1,417 927 Balance as of September 30, 2019 $ — $ 5,591 $ 5,591 |
Borrowings
Borrowings | 3 Months Ended |
Sep. 30, 2019 | |
Borrowings | |
Borrowings | 6. Borrowings Revolving Credit Facility Under our revolving credit facility, the aggregate committed amount available to us is $535 million. The credit facility matures in April 2024. 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 1.0% as of September 30, 2019 (which margin can range from 1.0% to 1.75% based on our consolidated net leverage ratio as defined in the credit facility). The LIBOR index is expected to be discontinued by the end of calendar year 2021. Under our credit facility, if the LIBOR index is discontinued, the terms of our revolving credit facility allow for a replacement rate to be determined in accordance with the Agreement. Letters of credit reduce the amount available to borrow by their face value. The unused portion of the facility bears a commitment fee of 0.10% as of September 30, 2019 (which fee can range from 0.10% to 0.25% 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 assets and substantially all the assets of certain of our subsidiaries. The agreement contains various representations and warranties, affirmative, negative and financial covenants and conditions of default. As of September 30, 2019, there was $95.0 million of borrowings outstanding under the revolving credit facility and $49.4 million outstanding under the letters of credit sub facility. The amount available to borrow under the credit facility as of September 30, 2019 was $390.6 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 September 30, 2019, 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 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 ended September 30, 2019 related to the Notes was $3.2 million, which consisted of $0.9 million of contractual interest expense, $2.0 million of debt discount amortization and $0.3 million of amortization of debt issuance costs. For the three months ended September 30, 2018, the total interest expense was $3.1 million, which consisted of $0.9 million of contractual interest expense, $1.9 million of debt discount amortization and $0.3 million of amortization of debt issuance costs. As of June 30, 2019 and September 30, 2019, the unamortized debt discount was $27.3 million and $25.3 million, respectively, 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 $3.7 million and $3.4 million as of June 30, 2019 and September 30, 2019, respectively, is amortized on a straight-line basis, which approximates the effective interest method, over the life of the Notes. Other Borrowings Several of our foreign subsidiaries maintain bank lines-of-credit, denominated in local currencies and U.S. dollars, primarily for the issuance of letters-of-credit. As of September 30, 2019, $44.2 million was outstanding under these letter-of-credit facilities. As of September 30, 2019, the total amount available under these credit facilities was $20.9 million. Long-term debt consisted of the following (in thousands): June 30, September 30, 2019 2019 1.25% convertible notes due 2022: Principal amount $ 287,500 $ 287,500 Unamortized discount (27,283) (25,268) Unamortized debt issuance costs (3,722) (3,428) 256,495 258,804 Other long-term debt 2,061 2,004 258,556 260,808 Less current portion of long-term debt (804) (801) Long-term portion of debt $ 257,752 $ 260,007 |
Stockholders' Equity
Stockholders' Equity | 3 Months Ended |
Sep. 30, 2019 | |
Stockholders' Equity | |
Stockholders' Equity | 7. Stockholders’ Equity Stock-based Compensation As of September 30, 2019, we maintained the Amended and Restated 2012 Incentive Award Plan (the "2012 Plan ") and the Amended and Restated 2006 Equity Participation Plan ("2006 Plan") as stock-based employee compensation plans. No further grants may be made under the 2006 Plan. The 2012 Plan and the 2006 Plan are collectively referred to as the "OSI Plans." We recorded stock-based compensation expense in the consolidated statement of operations as follows (in thousands): Three Months Ended September 30, 2018 2019 Cost of goods sold $ 207 $ 171 Selling, general and administrative 5,111 6,085 Research and development 145 160 Stock-based compensation expense $ 5,463 $ 6,416 As of September 30, 2019, total unrecognized compensation cost related to share-based compensation grants under the OSI Plans were estimated at $0.4 million for stock options and $28.2 million for RSUs. We expect to recognize these costs over a weighted average period of 1.7 years with respect to the stock options and 1.7 years for grants of RSUs. The following summarizes stock option activity during the three months ended September 30, 2019: Weighted Average Weighted-Average Aggregate Number of Exercise Remaining Contractual Intrinsic Value Options Price Term (in thousands) Outstanding at June 30, 2019 515,884 $ 33.74 Granted — — Exercised (167,306) 16.92 Expired or forfeited — — Outstanding at September 30, 2019 348,578 41.81 2.8 years $ 20,829 Exercisable at September 30, 2019 314,261 37.82 2.2 years 20,030 The following summarizes RSU award activity during the three months ended September 30, 2019: Weighted- Average Shares Fair Value Nonvested at June 30, 2019 521,140 $ 73.97 Granted 272,489 86.98 Vested (360,866) 68.11 Forfeited (4,041) 77.57 Nonvested at September 30, 2019 428,722 87.14 As of September 30, 2019, there were approximately 1.1 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 We granted 96,151 and 80,326 performance-based RSUs during the three months ended September 30, 2018 and 2019, respectively. These performance based RSU awards are contingent on the achievement of certain performance metrics. The payout related to these awards can range from zero to 280% of the original number of shares or units awarded. Stock Repurchase Program In March 2018, the Board of Directors authorized a stock repurchase program of up to 1,000,000 shares. Repurchases may be made from time to time under the program through open-market purchases or privately-negotiated transactions at our discretion. Upon repurchase, the shares are restored to the status of authorized but unissued shares 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 months ended September 30, 2019, we repurchased 126,051 shares of our common stock. As of September 30, 2019, 436,656 shares were available for additional repurchase under the current stock repurchase program. Dividends We have not paid any cash dividends since the consummation of our initial public offering in 1997 and we do not currently intend to pay any cash dividends in the foreseeable future. Our Board of Directors will determine the payment of future cash dividends, if any. Certain of our current bank credit facilities restrict the payment of cash dividends and future borrowings may contain similar restrictions. |
Retirement Benefit Plans
Retirement Benefit Plans | 3 Months Ended |
Sep. 30, 2019 | |
Retirement Benefit Plans | |
Retirement Benefit Plans | 8. Retirement Benefit Plans We sponsor various retirement benefit plans including qualified and nonqualified defined benefit pension plans for our employees. The components of net periodic pension expense are as follows (in thousands): Three Months Ended September 30, 2018 2019 Service cost $ 98 $ 100 Interest cost 8 8 Amortization of prior service cost 14 13 Net periodic pension expense $ 120 $ 121 During each of the three months ended September 30, 2018 and 2019, we made no contributions to these defined benefit plans. We also maintain various defined contribution plans. During each of the three month periods ended September 30, 2018 and 2019, we made contributions totaling $1.8 million to these defined contribution plans. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Sep. 30, 2019 | |
Commitments and Contingencies | |
Commitments and Contingencies | 9. Commitments and Contingencies Acquisition-Related Contingent 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 remaining maximum amount of such potential future payments was We account for such contingent payments for acquisitions which occurred through the end of fiscal year 2009 as additions to the purchase price of the acquired business; we made $0.2 million and $0.1 million of such payments during the three months ended September 30, 2018 and 2019, respectively. For acquisitions completed 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, and the estimated probability of achieving the earn-outs. 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 roll-forward from June 30, 2019 to September 30, 2019 of the contingent consideration liability, which is included in other accrued expenses and current liabilities, and other long-term liabilities in our consolidated balance sheets (in thousands): Beginning fair value, June 30, 2019 $ 16,577 Addition of contingent earnout obligations — Foreign currency translation adjustment (147) Changes in fair value for contingent earnout obligations 148 Payments on contingent earnout obligations — Ending fair value, September 30, 2019 $ 16,578 Environmental Contingencies We are subject to various environmental laws. Our practice is to conduct appropriate environmental investigations at our manufacturing facilities in North America, Asia-Pacific, and Europe, and, to the extent practicable, on all new properties in order to identify, as of the date of such investigation, potential areas of environmental concern related to past and present activities or from nearby operations. In certain cases, we have conducted further environmental assessments consisting of soil and groundwater testing and other investigations deemed appropriate by independent environmental consultants. We continue to investigate contamination of the soil and groundwater beneath the Hawthorne, California facility that resulted from unspecified on-and off-site releases occurring 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 amount under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. We have not recorded any liability for costs related to contingent indemnification obligations as of September 30, 2019. 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. The bonus is recorded in the financial statements over the remaining term of the employment agreement and is included in other long-term liabilities. 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): Three Months Ended September 30, 2018 2019 Balance at beginning of period $ 21,819 $ 21,724 Additions and adjustments 1,480 2,254 Reductions for warranty repair costs (1,800) (2,291) Balance at end of period $ 21,499 $ 21,687 Legal Proceedings In December 2017, a short seller released a report regarding our compliance with the 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 " District 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 the actions, which were consolidated by the District Court in March 2018 in an action captioned Arkansas Teacher Retirement System et al. v. OSI Systems, Inc. et al. Riley v. Chopra et al. Kocen v. Chopra et al., The SEC and the U.S. Department of Justice (“DOJ”) are conducting an investigation of trading in our securities and have each subpoenaed information regarding trading by executives, directors, and employees, as well as our operations and disclosures in and around the time of certain trades. With respect to these trading related matters, in fiscal year 2018, we took 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 trading related investigations, or any penalties or remedial measures these agencies may seek. We place a high priority on compliance with our anticorruption and securities trading policies and are cooperating with each of the government investigations. 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 any such matters because we believe that, although unfavorable outcomes in the proceedings are 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 flows could be material. |
Income Taxes
Income Taxes | 3 Months Ended |
Sep. 30, 2019 | |
Income Taxes | |
Income Taxes | 10. Income Taxes The Tax Cuts and Jobs Act (the "Tax Act") enacted in 2017 resulted in the U.S. Federal income tax rate being reduced from 35% to 21% effective January 1, 2018. The Tax Act subjects a U.S. corporation to tax on its GILTI (Global Intangible Low-Taxed Income), FDII (Foreign-Derived Tangible Income Taxes), and BEAT (Base Erosion Anti-abuse Tax). We included the impact of these taxes in our effective tax rate. Interpretive guidance on the accounting for GILTI states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. In fiscal 2019, we made the accounting policy election to recognize GILTI as a period expense. 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. During the three months ended September 30, 2019, we recognized a tax benefit for equity-based compensation of $6.2 million under ASU 2016-09 resulting in an effective tax rate of -2.9%. During the three months ended September 30, 2018, we recognized a tax benefit for equity-based compensation of $1.5 million under ASU 2016-09 resulting in an effective tax rate of 13.9%. Excluding the impact of the discrete tax items noted above, our effective tax rate for the three months ended September 30, 2019 was 27.9% as compared to 28.1% in the prior-year period. |
Segment Information
Segment Information | 3 Months Ended |
Sep. 30, 2019 | |
Segment Information | |
Segment Information | 11. Segment Information We have determined that we operate in three identifiable industry segments: (a) security and inspection systems (Security division), (b) medical monitoring and diagnostic cardiology systems (Healthcare division) and (c) optoelectronic devices and manufacturing (Optoelectronics and Manufacturing division). We also have a corporate segment (Corporate) that includes executive compensation and certain other general and administrative expenses; expenses related to stock issuances and legal, audit and other professional service fees not allocated to 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 external 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, 2019. The following tables set forth the results of operations and identifiable assets by industry segment (in thousands): Three Months Ended September 30, 2018 2019 Revenues (1)—by Segment: Security division $ 169,960 $ 188,964 Healthcare division 38,273 40,208 Optoelectronics and Manufacturing division, including intersegment revenues 70,954 73,638 Intersegment revenues elimination (12,938) (11,958) Total $ 266,249 $ 290,852 Income (Loss) from Operations—by Segment: Security division $ 23,050 $ 20,318 Healthcare division (1,875) 2,817 Optoelectronics and Manufacturing division 6,825 8,769 Corporate (11,351) (7,337) Eliminations (2) (392) 320 Total $ 16,257 $ 24,887 June 30, September 30, 2019 2019 Assets—by Segment: Security division $ 793,810 $ 803,388 Healthcare division 157,639 193,342 Optoelectronics and Manufacturing division 237,851 238,883 Corporate 79,498 97,202 Eliminations (2) (3,934) (42,713) Total $ 1,264,864 $ 1,290,102 (1) (2) |
Basis of Presentation (Policies
Basis of Presentation (Policies) | 3 Months Ended |
Sep. 30, 2019 | |
Basis of Presentation | |
Description of Business | Description of Business OSI Systems, Inc., together with our subsidiaries, is a vertically integrated designer and manufacturer of specialized electronic systems and components for critical applications. We sell our products in diversified markets, including homeland security, healthcare, defense and aerospace. We have three reporting segments: (i) Security, providing security inspection systems and related services, and turnkey security screening solutions; (ii) Healthcare, providing patient monitoring and diagnostic cardiology products and related services and (iii) Optoelectronics and Manufacturing, providing specialized electronic components and electronic manufacturing services for our Security and Healthcare divisions as well as to external original equipment manufacturer ("OEM") customers and end users for applications in the defense, aerospace, medical and industrial markets, among others. Through our Security segment, we provide security screening products and related services internationally. These products fall into the following categories: baggage and parcel inspection; cargo and vehicle inspection; hold (checked) baggage screening; people screening; radiation detection; and explosive and narcotics trace detection. In addition to these products, we also provide site design, installation, training and technical support services to our customers. We also provide turnkey security screening solutions, which can include the construction, staffing and long-term operation of security screening checkpoints for our customers. Through our Healthcare segment, we design, manufacture, market and service patient monitoring and diagnostic cardiology systems and related supplies and accessories internationally. These products are used by care providers in critical care, emergency and perioperative areas within hospitals as well as physicians' offices, medical clinics and ambulatory surgery centers, among others. Through our Optoelectronics and Manufacturing segment, we design, manufacture and market optoelectronic devices and flex circuits and provide electronics manufacturing services internationally for use in a broad range of applications, including aerospace and defense electronics, X-ray security and inspection systems and medical imaging, chemistry analysis and diagnostics instruments, telecommunications, scanners and industrial automations, automotive diagnostic systems, internet of things (IoT) and consumer wearable products. This division provides products and services to OEM customers and end users as well as to our Security and Healthcare divisions. |
Basis of Presentation | Basis of Presentation The condensed consolidated financial statements include the accounts of OSI Systems, Inc. and 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, 2019 filed with the SEC. The results of operations for the three months ended September 30, 2019 are not necessarily indicative of the operating results to be expected for the full 2020 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, values for inventories reported at lower of cost or net realizable value, stock-based compensation expense, income taxes, accrued 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. Due to the inherent uncertainty involved in making estimates, our actual amounts reported in future periods could differ materially from these estimates. |
Earnings Per Share Computations | Earnings Per Share Computations We compute basic earnings per share by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. We compute diluted earnings per share by dividing net income available to common stockholders by the sum of the weighted average number of common shares and dilutive potential common shares outstanding during the period. Potential common shares consist of the shares issuable upon the exercise of stock options and restricted stock unit awards under the treasury stock method. The underlying equity component of the 1.25% convertible senior notes due 2022 (the “Notes”) discussed in Note 6 to the condensed consolidated financial statements will have a net impact on diluted earnings per share when the average price of our common stock exceeds the conversion price because the principal amount of the Notes is intended to be settled in cash upon conversion. The dilutive effect of the Notes is included in the calculation below for the three months ended September 30, 2019. There was no dilutive effect of the Notes for the three months ended September 30, 2018. The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts): Three Months Ended September 30, 2018 2019 Net income available to common stockholders $ 9,402 $ 20,743 Weighted average shares outstanding—basic 18,090 18,259 Dilutive effect of equity awards 646 628 Dilutive effect of the Notes — 16 Weighted average shares outstanding—diluted 18,736 18,903 Basic earnings per share $ 0.52 $ 1.14 Diluted earnings per share $ 0.50 $ 1.10 Shares excluded from diluted earnings per share due to their anti-dilutive effect 42 84 |
Cash and Cash Equivalents | Cash and Cash Equivalents We consider all highly liquid investments with maturities of three months or less as of the acquisition date to be cash equivalents. Our cash and cash equivalents totaled $85.1 million at September 30, 2019. Of this amount, approximately 71% was held by our foreign subsidiaries and subject to repatriation tax considerations. These foreign funds were held primarily by our subsidiaries in Singapore, the United Kingdom, Malaysia, Canada and to a lesser extent in Mexico, Germany, and Albania 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, insurance company contracts, 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, as 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.The "Level 1" category includes assets and liabilities measured at quoted prices in active markets for identical assets and liabilities. The"Level 2" category includes assets and liabilities measured from observable inputs other than quoted market prices.The "Level 3" category includes assets and liabilities for which valuation inputs are unobservable and significant to the fair value measurement. As of June 30, 2019 and September 30, 2019, there were no assets in the "Level 3" category. Our contingent payment obligations related to acquisitions, which are further discussed in Note 9 to the condensed consolidated financial statements, are in the “Level 3” category for valuation purposes. The fair values of our financial assets and liabilities are categorized as follows (in thousands): June 30, 2019 September 30, 2019 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets: Insurance company contracts $ — $ 35,899 $ — $ 35,889 $ — $ 36,486 $ — $ 36,486 Liabilities: Contingent consideration $ — $ — $ 16,577 $ 16,577 $ — $ — $ 16,578 $ 16,578 |
Revenue Recognition | Revenue Recognition We recognize revenue under Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC 606”), which superseded all prior revenue recognition methods and industry-specific guidance. The core principle of ASC 606 is that an entity should recognize revenue to depict the transfer of control for promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying the revenue principles, an entity is required to identify the contract(s) with a customer, identify the performance obligations, determine the transaction price, allocate the transaction price to the performance obligations and recognize revenue when the performance obligation is satisfied (i.e., either over time or at a point in time). ASC 606 further requires that companies disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Product Sales. Service Revenue. Contract Revenue. When determining revenue recognition for contracts, we use judgment based on our understanding of the obligations within each contract. We determine whether or not customer acceptance criteria are perfunctory or inconsequential. The determination of whether or not customer acceptance terms are perfunctory or inconsequential impacts the amount and timing of revenue recognition. Critical judgments also include estimates of warranty reserves, which are established based on historical experience and knowledge of the product under warranty. Multiple Performance Obligations. In cases where obligations in a contract are distinct and thus require separation into multiple performance obligations, revenue recognition guidance requires that contract consideration be allocated to each distinct performance obligation based on its relative standalone selling price. The value allocated to each performance obligation is then recognized as revenue when the revenue recognition criteria for each distinct promise or bundle of promises has been met. The standalone selling price for each performance obligation is an amount that depicts the amount of consideration to which the entity expects to be entitled in exchange for transferring the good or service. When there is only one performance obligation associated with a contract, the entire amount of consideration is attributed to that obligation. When a contract contains multiple performance obligations the standalone selling price is first estimated using the observable price, which is generally a list price net of applicable discount or the price used to sell the good or service in similar circumstances. In circumstances when a selling price is not directly observable, we will estimate the standalone selling price using information available to us including our market assessment and expected cost plus margin. The timetable for fulfilment of each of the distinct performance obligations can range from completion in a short amount of time and entirely within a single reporting period to completion over several reporting periods. The timing of revenue recognition for each performance obligation 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). We often provide a guarantee to support our performance under multiple performance obligations. 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. We disaggregate revenue by reporting segment (Security, Optoelectronics and Manufacturing, and Healthcare) to depict the nature of revenue in a manner consistent with our business operations and to be consistent with other communications and public filings. Refer to Note 11 to our condensed consolidated financial statements for additional details of revenues by reporting segment. Contract Assets and Liabilities. We enter into contracts to sell products and provide services, and we recognize contract assets and liabilities that arise from these transactions. We recognize revenue and corresponding accounts receivable according to ASC 606 and, at times, recognize revenue in advance of the time when contracts give us the right to invoice a customer. We may also receive consideration, per the terms of a contract, from customers prior to transferring goods to the customer. We record customer deposits as a contract liability. Additionally, we may receive payments, most typically for service and warranty contracts, at the onset of the contract and before the services have been performed. In such instances, we record a deferred revenue liability. We recognize these contract liabilities as sales after all revenue recognition criteria are met. The table below shows the balance of our contract assets and liabilities as of June 30, 2019 and September 30, 2019, including the change between the periods (in thousands): June 30, September 30, Contract Assets: 2019 2019 Change % Change Unbilled revenue $ 19,287 $ 38,257 $ 18,970 98 % Contract Liabilities: Advances from customers $ 43,227 $ 49,845 $ 6,618 15 % Deferred revenue—current 33,641 29,900 (3,741) (11) % Deferred revenue—long-term 9,506 8,656 (850) (9) % Contract assets increased during the three months ended September 30, 2019 primarily due to satisfaction of performance obligations for explosive detection systems and cargo and vehicle inspection systems in our Security division which have not yet been billed to customers. The net increase in contract liabilities were primarily due to deposits received on cargo and vehicle system contracts in our Security division. Remaining Performance Obligations Practical Expedients. |
Lease Accounting | Lease Accounting Right of use (“ROU”) assets represent our right to use an underlying asset during the reasonably certain lease terms and lease liabilities represent our obligation to make lease payments arising from the leases. We recognize ROU lease assets and lease liabilities at lease commencement on our consolidated balance sheet based on the present value of lease payments over the lease term using a discount rate determined based on our incremental borrowing rate since the rate implicit in each lease is not readily determinable. We elected the package of practical expedients, which permits us to not reassess (1) whether any expired or existing contracts are or contain leases, (2) the lease classification of any expired or existing leases, and (3) any initial direct costs for any existing leases as of the effective date. We elected the practical expedient to account for each separate lease component of a contract and its associated non-lease components as a single lease component. We also elected the hindsight practical expedient, which allows us to use hindsight in determining the lease term. We do not record an ROU asset and corresponding lease liability for leases with an initial term of 12 months or less (“short-term leases”). The terms in our leases may include options to extend or terminate the lease. We recognize ROU assets and liabilities when it is reasonably certain that we will exercise those options. Judgment is required in our assessment as to whether renewal or termination options are reasonably certain to be exercised and factors such as contractual terms compared to current market rates, the importance of the facility and location to our operations, among others, are considered. Lease payments are made in accordance with the lease terms and lease expense, including short-term lease expense, is recognized on a straight-line basis over the lease term. We lease facilities and certain equipment under various operating lease agreements. The majority of our lease arrangements are comprised of fixed payments while certain of our leases provide for periodic rent increases. Our leases may contain escalation clauses and renewal options. Most of the leases require us to pay for certain other costs such as common area maintenance and property taxes. Rent expense for leases with periodic rent increases or escalation clauses is recognized on a straight-line basis over the minimum lease term. The lease agreements do not contain any material residual value guarantees or material restrictive covenants. We also have finance leases for fleet vehicles that are not material to the condensed consolidated financial statements. The components of operating lease expense were as follows (in thousands): Three Months Ended September 30, 2019 Operating lease cost $ 2,649 Variable lease cost 138 Short-term lease cost 209 $ 2,996 Supplemental balance sheet assets and liabilities related to operating leases were as follows (in thousands): Balance Sheet Category September 30, 2019 Operating lease ROU assets, net Other assets $ 28,849 Operating lease liabilities, current portion Other accrued expenses and current liabilities $ 8,355 Operating lease liabilities, long-term Other long-term liabilities 20,750 Total operating lease liabilities $ 29,105 Weighted average remaining lease term 4.6 years Weighted average discount rate 4.3% Supplemental cash flow information related to operating leases was as follows (in thousands): Three Months Ended September 30, 2019 Cash paid for operating lease liabilities $ 2,572 ROU assets obtained in exchange for new lease obligations 1,313 Maturities of operating lease liabilities under ASC 842 (defined below) at September 30, 2019 were as follows (in thousands): September 30, 2019 Less than one year $ 9,361 1 – 2 years 7,527 2 – 3 years 5,050 3 – 4 years 3,338 4 – 5 years 2,775 Thereafter 4,095 32,146 Less: Imputed interest (3,041) Total lease liabilities $ 29,105 Maturities of minimum operating lease liabilities under non-cancelable leases under ASC 840 (defined below) at June 30, 2019 were as follows (in thousands): June 30, 2019 Less than one year $ 9,802 1 – 2 years 8,082 2 – 3 years 5,473 3 – 4 years 3,397 4 – 5 years 2,954 Thereafter 4,583 Total lease liabilities $ 34,291 |
Recently Adopted Accounting Pronouncements and Recently Issued Accounting Pronouncements Not Yet Adopted | Recently Adopted Accounting Pronouncement Leases In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASC 842”), which requires lessees to recognize ROU assets and lease liabilities, initially measured at present value of the lease payments, on its balance sheet for leases and classified as either financing or operating leases. We adopted ASC 842 on July 1, 2019, using the modified retrospective method, and we elected the package of practical expedients provided in ASC 842. In accordance with ASC 842, we did not restate comparative periods and instead reported comparative prior year periods under ASC 840, “Leases.” The cumulative effect of the changes made to our July 1, 2019 consolidated condensed balance sheet for the adoption of the new lease standard was as follows (in thousands): Balance at Effect of Adoption Balance at Balance Sheet June 30, 2019 of ASC 842 July 1, 2019 Assets Other assets $ 56,518 $ 30,066 $ 86,584 Liabilities Other accrued expenses and current liabilities $ 112,956 $ 8,324 $ 121,280 Other long-term liabilities 65,398 21,742 87,140 The adoption of the new lease accounting guidance did not have a material impact to the condensed consolidated statement of operations or the condensed consolidated statement of cash flows for the three months ended September 30, 2019. Recently Issued Accounting Pronouncements Not Yet Adopted Retirement Benefit Plans In August 2018, the FASB issued authoritative guidance under ASU 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General: Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans. This ASU eliminates requirements for certain disclosures and requires additional disclosures under defined benefit pension plans and other post-retirement plans. We are required to adopt this new guidance in the first quarter of fiscal 2021. We are currently evaluating the potential impact of the adoption of this guidance on our consolidated financial statements. Intangibles In August 2018, the FASB issued authoritative guidance under ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software: Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. This ASU requires implementation costs incurred by customers in cloud computing arrangements (i.e., hosting arrangements) to be capitalized under the same premises of authoritative guidance for internal-use software and deferred over the noncancellable term of the cloud computing arrangements plus any option renewal periods that are reasonably certain to be exercised by the customer or for which the exercise is controlled by the service provider. We are required to adopt this new guidance in the first quarter of fiscal 2021. We are currently evaluating the potential impact of adoption of this guidance on our consolidated financial statements. |
Basis of Presentation (Tables)
Basis of Presentation (Tables) | 3 Months Ended |
Sep. 30, 2019 | |
Basis of Presentation | |
Schedule of computation of basic and diluted earnings per share | The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts): Three Months Ended September 30, 2018 2019 Net income available to common stockholders $ 9,402 $ 20,743 Weighted average shares outstanding—basic 18,090 18,259 Dilutive effect of equity awards 646 628 Dilutive effect of the Notes — 16 Weighted average shares outstanding—diluted 18,736 18,903 Basic earnings per share $ 0.52 $ 1.14 Diluted earnings per share $ 0.50 $ 1.10 Shares excluded from diluted earnings per share due to their anti-dilutive effect 42 84 |
Summary of fair values of financial assets and liabilities | The fair values of our financial assets and liabilities are categorized as follows (in thousands): June 30, 2019 September 30, 2019 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets: Insurance company contracts $ — $ 35,899 $ — $ 35,889 $ — $ 36,486 $ — $ 36,486 Liabilities: Contingent consideration $ — $ — $ 16,577 $ 16,577 $ — $ — $ 16,578 $ 16,578 |
Schedule of contract assets and contract liabilities | The table below shows the balance of our contract assets and liabilities as of June 30, 2019 and September 30, 2019, including the change between the periods (in thousands): June 30, September 30, Contract Assets: 2019 2019 Change % Change Unbilled revenue $ 19,287 $ 38,257 $ 18,970 98 % Contract Liabilities: Advances from customers $ 43,227 $ 49,845 $ 6,618 15 % Deferred revenue—current 33,641 29,900 (3,741) (11) % Deferred revenue—long-term 9,506 8,656 (850) (9) % |
Schedule of components of operating lease expense | The components of operating lease expense were as follows (in thousands): Three Months Ended September 30, 2019 Operating lease cost $ 2,649 Variable lease cost 138 Short-term lease cost 209 $ 2,996 |
Schedule of supplemental balance sheet assets and liabilities related to operating leases | Supplemental balance sheet assets and liabilities related to operating leases were as follows (in thousands): Balance Sheet Category September 30, 2019 Operating lease ROU assets, net Other assets $ 28,849 Operating lease liabilities, current portion Other accrued expenses and current liabilities $ 8,355 Operating lease liabilities, long-term Other long-term liabilities 20,750 Total operating lease liabilities $ 29,105 Weighted average remaining lease term 4.6 years Weighted average discount rate 4.3% |
Schedule of supplemental cash flow information related to operating leases | Supplemental cash flow information related to operating leases was as follows (in thousands): Three Months Ended September 30, 2019 Cash paid for operating lease liabilities $ 2,572 ROU assets obtained in exchange for new lease obligations 1,313 |
Schedule of maturities of operating lease liabilities | Maturities of operating lease liabilities under ASC 842 (defined below) at September 30, 2019 were as follows (in thousands): September 30, 2019 Less than one year $ 9,361 1 – 2 years 7,527 2 – 3 years 5,050 3 – 4 years 3,338 4 – 5 years 2,775 Thereafter 4,095 32,146 Less: Imputed interest (3,041) Total lease liabilities $ 29,105 Maturities of minimum operating lease liabilities under non-cancelable leases under ASC 840 (defined below) at June 30, 2019 were as follows (in thousands): June 30, 2019 Less than one year $ 9,802 1 – 2 years 8,082 2 – 3 years 5,473 3 – 4 years 3,397 4 – 5 years 2,954 Thereafter 4,583 Total lease liabilities $ 34,291 |
Schedule of cumulative effect of the changes made to consolidated condensed balance sheet for the adoption of the new lease standard | The cumulative effect of the changes made to our July 1, 2019 consolidated condensed balance sheet for the adoption of the new lease standard was as follows (in thousands): Balance at Effect of Adoption Balance at Balance Sheet June 30, 2019 of ASC 842 July 1, 2019 Assets Other assets $ 56,518 $ 30,066 $ 86,584 Liabilities Other accrued expenses and current liabilities $ 112,956 $ 8,324 $ 121,280 Other long-term liabilities 65,398 21,742 87,140 |
Balance Sheet Details (Tables)
Balance Sheet Details (Tables) | 3 Months Ended |
Sep. 30, 2019 | |
Balance Sheet Details | |
Schedule of selected balance sheet accounts | The following tables provide details of selected balance sheet accounts (in thousands): June 30, September 30, Accounts receivable, net 2019 2019 Accounts receivable $ 253,504 $ 259,383 Less allowance for doubtful accounts (15,064) (14,290) Total $ 238,440 $ 245,093 June 30, September 30, Inventories 2019 2019 Raw materials $ 143,697 $ 145,087 Work-in-process 67,897 75,499 Finished goods 62,117 48,175 Total $ 273,711 $ 268,761 June 30, September 30, Property and equipment, net 2019 2019 Land $ 16,564 $ 16,558 Buildings, civil works and improvements 55,391 55,461 Leasehold improvements 8,311 8,459 Equipment and tooling 128,428 129,055 Furniture and fixtures 3,190 2,986 Computer equipment 18,733 18,814 Computer software 20,146 20,289 Computer software implementation in process 8,563 9,314 Construction in process 5,760 7,473 Total 265,086 268,409 Less accumulated depreciation and amortization (137,701) (140,116) Property and equipment, net $ 127,385 $ 128,293 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 3 Months Ended |
Sep. 30, 2019 | |
Goodwill and Intangible Assets | |
Schedule of changes in carrying amount of goodwill | The changes in the carrying value of goodwill by segment for the three month period ended September 30, 2019 were as follows (in thousands): Optoelectronics and Security Healthcare Manufacturing Division Division Division Consolidated Balance as of June 30, 2019 $ 200,079 $ 40,064 $ 66,965 $ 307,108 Goodwill adjusted during the period 483 — — 483 Foreign currency translation adjustment (254) (78) (546) (878) Balance as of September 30, 2019 $ 200,308 $ 39,986 $ 66,419 $ 306,713 |
Schedule of intangible assets | Intangible assets consisted of the following (in thousands): June 30, 2019 September 30, 2019 Weighted Gross Gross Average Carrying Accumulated Intangibles Carrying Accumulated Intangibles Lives Value Amortization Net Value Amortization Net Amortizable assets: Software development costs 8 years $ 29,393 $ (12,747) $ 16,646 $ 30,740 $ (13,992) $ 16,748 Patents 19 years 8,688 (1,927) 6,761 9,104 (2,033) 7,071 Developed technology 10 years 53,460 (14,050) 39,410 53,443 (15,412) 38,031 Customer relationships/backlog 7 years 63,101 (22,132) 40,969 62,484 (23,862) 38,622 Total amortizable assets 154,642 (50,856) 103,786 155,771 (55,299) 100,472 Non-amortizable assets: IPR&D 2,290 — 2,290 2,290 — 2,290 Trademarks 26,878 — 26,878 26,871 — 26,871 Total intangible assets $ 183,810 $ (50,856) $ 132,954 $ 184,932 $ (55,299) $ 129,633 |
Schedule of estimated future amortization expense for intangible assets | At September 30, 2019, the estimated future amortization expense for intangible assets was as follows (in thousands): 2020 (remaining 9 months) $ 15,523 2021 19,009 2022 15,142 2023 14,001 2024 12,947 Thereafter, including assets that have not yet begun to be amortized 23,850 Total $ 100,472 |
Restructuring and Other Charg_2
Restructuring and Other Charges (Tables) | 3 Months Ended |
Sep. 30, 2019 | |
Restructuring and Other Charges | |
Summary of restructuring and other charges (benefit), net | The following table summarizes restructuring and other charges (benefit), net for the periods set forth below (in thousands): Three Months Ended September 30, 2018 Optoelectronics and Healthcare Manufacturing Security Division Division Division Corporate Total Acquisition-related costs $ — $ — $ 267 $ — $ 267 Employee termination costs 35 191 107 — 333 Facility closures/consolidation 10 — — — 10 Legal costs — — — 3,586 3,586 Total expensed $ 45 $ 191 $ 374 $ 3,586 $ 4,196 Three Months Ended September 30, 2019 Optoelectronics and Healthcare Manufacturing Security Division Division Division Corporate Total Employee termination costs (benefit) $ — $ — $ (13) $ 71 $ 58 Legal costs (benefit), net — — — (2,157) (2,157) Total benefit $ — $ — $ (13) $ (2,086) $ (2,099) |
Summary of changes in the accrued liability for restructuring and other charges | The changes in the accrued liability for restructuring and other charges for the three month period ended September 30, 2019 were as follows (in thousands): Employee Termination Legal Costs and Costs Settlements Total Balance as of June 30, 2019 $ 432 $ 6,331 $ 6,763 Restructuring and other charges (benefit), net 58 (2,157) (2,099) (Payments), adjustments and reimbursements, net (490) 1,417 927 Balance as of September 30, 2019 $ — $ 5,591 $ 5,591 |
Borrowings (Tables)
Borrowings (Tables) | 3 Months Ended |
Sep. 30, 2019 | |
Borrowings | |
Schedule of long-term debt | Long-term debt consisted of the following (in thousands): June 30, September 30, 2019 2019 1.25% convertible notes due 2022: Principal amount $ 287,500 $ 287,500 Unamortized discount (27,283) (25,268) Unamortized debt issuance costs (3,722) (3,428) 256,495 258,804 Other long-term debt 2,061 2,004 258,556 260,808 Less current portion of long-term debt (804) (801) Long-term portion of debt $ 257,752 $ 260,007 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 3 Months Ended |
Sep. 30, 2019 | |
Stockholders' Equity | |
Schedule of stock-based compensation expense in the consolidated statement of operations | We recorded stock-based compensation expense in the consolidated statement of operations as follows (in thousands): Three Months Ended September 30, 2018 2019 Cost of goods sold $ 207 $ 171 Selling, general and administrative 5,111 6,085 Research and development 145 160 Stock-based compensation expense $ 5,463 $ 6,416 |
Summary of stock option activity | Weighted Average Weighted-Average Aggregate Number of Exercise Remaining Contractual Intrinsic Value Options Price Term (in thousands) Outstanding at June 30, 2019 515,884 $ 33.74 Granted — — Exercised (167,306) 16.92 Expired or forfeited — — Outstanding at September 30, 2019 348,578 41.81 2.8 years $ 20,829 Exercisable at September 30, 2019 314,261 37.82 2.2 years 20,030 |
Summary of RSU award activity | Weighted- Average Shares Fair Value Nonvested at June 30, 2019 521,140 $ 73.97 Granted 272,489 86.98 Vested (360,866) 68.11 Forfeited (4,041) 77.57 Nonvested at September 30, 2019 428,722 87.14 |
Retirement Benefit Plans (Table
Retirement Benefit Plans (Tables) | 3 Months Ended |
Sep. 30, 2019 | |
Retirement Benefit Plans | |
Schedule of net periodic pension expense | Three Months Ended September 30, 2018 2019 Service cost $ 98 $ 100 Interest cost 8 8 Amortization of prior service cost 14 13 Net periodic pension expense $ 120 $ 121 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 3 Months Ended |
Sep. 30, 2019 | |
Commitments and Contingencies | |
Schedule of roll-forward of the contingent consideration liability | Beginning fair value, June 30, 2019 $ 16,577 Addition of contingent earnout obligations — Foreign currency translation adjustment (147) Changes in fair value for contingent earnout obligations 148 Payments on contingent earnout obligations — Ending fair value, September 30, 2019 $ 16,578 |
Schedule of changes in warranty provisions | The following table presents changes in warranty provisions (in thousands): Three Months Ended September 30, 2018 2019 Balance at beginning of period $ 21,819 $ 21,724 Additions and adjustments 1,480 2,254 Reductions for warranty repair costs (1,800) (2,291) Balance at end of period $ 21,499 $ 21,687 |
Segment Information (Tables)
Segment Information (Tables) | 3 Months Ended |
Sep. 30, 2019 | |
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 September 30, 2018 2019 Revenues (1)—by Segment: Security division $ 169,960 $ 188,964 Healthcare division 38,273 40,208 Optoelectronics and Manufacturing division, including intersegment revenues 70,954 73,638 Intersegment revenues elimination (12,938) (11,958) Total $ 266,249 $ 290,852 Income (Loss) from Operations—by Segment: Security division $ 23,050 $ 20,318 Healthcare division (1,875) 2,817 Optoelectronics and Manufacturing division 6,825 8,769 Corporate (11,351) (7,337) Eliminations (2) (392) 320 Total $ 16,257 $ 24,887 June 30, September 30, 2019 2019 Assets—by Segment: Security division $ 793,810 $ 803,388 Healthcare division 157,639 193,342 Optoelectronics and Manufacturing division 237,851 238,883 Corporate 79,498 97,202 Eliminations (2) (3,934) (42,713) Total $ 1,264,864 $ 1,290,102 (1) (2) |
Basis of Presentation - Descrip
Basis of Presentation - Description of Business (Details) | 3 Months Ended |
Sep. 30, 2019segment | |
Description of Business | |
Number of reporting segments | 3 |
Basis of Presentation - Per Sha
Basis of Presentation - Per Share Computations (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Feb. 28, 2017 | |
Computation of basic and diluted earnings per share | |||
Net income available to common stockholders | $ 20,743 | $ 9,402 | |
Weighted average shares outstanding-basic | 18,259 | 18,090 | |
Dilutive effect of equity awards | 628 | 646 | |
Dilutive effect of the Notes | 16 | 0 | |
Weighted average shares outstanding-diluted | 18,903 | 18,736 | |
Basic earnings per share | $ 1.14 | $ 0.52 | |
Diluted earnings per share | $ 1.10 | $ 0.50 | |
Weighted average shares excluded from diluted earnings (loss) per share due to their anti-dilutive effect (in thousands) | 84 | 42 | |
1.25% Convertible Senior Notes Due 2022 | |||
Per Share Computations | |||
Interest rate (as a percentage) | 1.25% | 1.25% |
Basis of Presentation - Cash Eq
Basis of Presentation - Cash Equivalents (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Sep. 30, 2019 | Jun. 30, 2019 | |
Cash Equivalents | ||
Cash and cash equivalents | $ 85,142 | $ 96,316 |
Cash, cash equivalents, and investments held by our foreign subsidiaries and subject to repatriation tax considerations(as a percentage) | 71.00% |
Basis of Presentation - Fair Va
Basis of Presentation - Fair Value (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Jun. 30, 2019 |
Fair Value of Financial Instruments | ||
Liabilities-contingent consideration | $ 16,578 | $ 16,577 |
Recurring | ||
Fair Value of Financial Instruments | ||
Insurance company contracts | 36,486 | 35,889 |
Liabilities-contingent consideration | 16,578 | 16,577 |
Recurring | Level 2 | ||
Fair Value of Financial Instruments | ||
Insurance company contracts | 36,486 | 35,899 |
Recurring | Level 3 | ||
Fair Value of Financial Instruments | ||
Total assets | 0 | 0 |
Liabilities-contingent consideration | $ 16,578 | $ 16,577 |
Basis of Presentation - Revenue
Basis of Presentation - Revenue Recognition (Detail) - USD ($) $ in Thousands | 3 Months Ended | |
Sep. 30, 2019 | Jun. 30, 2019 | |
Contract Assets | ||
Unbilled revenue | $ 38,257 | $ 19,287 |
Contract Liabilities | ||
Advances from customers | 49,845 | 43,227 |
Deferred revenue - current | 29,900 | 33,641 |
Deferred revenue - long-term | 8,656 | $ 9,506 |
Remaining Performance Obligations | ||
Revenue remaining performance obligation | 150,100 | |
Recognized revenue from contract liabilities | $ 34,300 | |
Revenue, Practical Expedient, Financing Component [true false] | true | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-10-01 | ||
Remaining Performance Obligations | ||
Remaining performance obligation expected timing of satisfaction period | 12 months | |
Remaining performance obligation expected percentage recognized | 49.00% | |
ASU 2014-09 | Effect of Change | ||
Contract Assets | ||
Unbilled revenue | $ 18,970 | |
Percentage of change in unbilled revenue | 98.00% | |
Contract Liabilities | ||
Advances from customers | $ 6,618 | |
Deferred revenue - current | (3,741) | |
Deferred revenue - long-term | $ (850) | |
Percentage of of change in customer deposits and prepayments | 15.00% | |
Percentage of change deferred revenue current | (11.00%) | |
Percentage of change deferred revenue noncurrent | (9.00%) |
Basis of Presentation - Lease A
Basis of Presentation - Lease Accounting Policy (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Sep. 30, 2019 | Jun. 30, 2019 | |
Basis of Presentation | ||
Lease, Practical Expedients, Package [true false] | true | |
Lease, Practical Expedient, Use of Hindsight [true false] | true | |
Lessee, operating lease, term of contract | 12 months | |
Operating lease expense | ||
Operating lease cost | $ 2,649 | |
Variable lease cost | 138 | |
Short-term lease cost | 209 | |
Operating lease expense | 2,996 | |
Balance sheet assets and liabilities related to operating leases | ||
Operating lease ROU assets, net | $ 28,849 | |
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List] | Other Assets, Noncurrent. | |
Operating lease liabilities, current portion | $ 8,355 | |
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List] | Other Liabilities, Current | |
Operating lease liabilities, long-term | $ 20,750 | |
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List] | Other Liabilities, Noncurrent | |
Total lease liabilities | $ 29,105 | |
Weighted average remaining lease term | 4 years 7 months 6 days | |
Weighted average discount rate | 4.30% | |
Cash flow information related to operating leases | ||
Cash paid for operating lease liabilities | $ 2,572 | |
ROU assets obtained in exchange for new lease obligations | 1,313 | |
Maturities of operating lease liabilities | ||
Less than one year | 9,361 | |
1 - 2 years | 7,527 | |
2 - 3 years | 5,050 | |
3 - 4 years | 3,338 | |
4 - 5 years | 2,775 | |
Thereafter | 4,095 | |
Total | 32,146 | |
Less: Imputed interest | (3,041) | |
Lease liabilities | $ 29,105 | |
Maturities of minimum operating lease liabilities under non-cancelable leases | ||
Less than one year | $ 9,802 | |
1 - 2 years | 8,082 | |
2 - 3 years | 5,473 | |
3 - 4 years | 3,397 | |
4 - 5 years | 2,954 | |
Thereafter | 4,583 | |
Total lease liabilities | $ 34,291 |
Basis of Presentation - Recentl
Basis of Presentation - Recently Adopted Accounting Pronouncement (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Jul. 01, 2019 | Jun. 30, 2019 |
ASSETS | |||
Other assets | $ 88,327 | $ 86,584 | $ 56,518 |
Liabilities | |||
Other accrued expenses and current liabilities | 116,320 | 121,280 | 112,956 |
Other long-term liabilities | $ 85,997 | $ 87,140 | 65,398 |
Effect of Adoption of ASC 842 | |||
ASSETS | |||
Other assets | 30,066 | ||
Liabilities | |||
Other accrued expenses and current liabilities | 8,324 | ||
Other long-term liabilities | $ 21,742 |
Business Combinations - Other B
Business Combinations - Other Business Acquisition (Details) - USD ($) $ in Millions | Jul. 31, 2018 | Aug. 31, 2018 |
A privately held services company | ||
Business Combinations | ||
Total purchase price | $ 0.8 | |
Maximum contingent consideration | $ 5 | |
Contingent consideration earnout period | 5 years | |
Optoelectronics solutions business | ||
Business Combinations | ||
Total purchase price | $ 17.5 | |
Maximum contingent consideration | $ 1 |
Balance Sheet Details (Details)
Balance Sheet Details (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Jun. 30, 2019 | |
Accounts Receivable | |||
Accounts receivable | $ 259,383 | $ 253,504 | |
Less allowance for doubtful accounts | (14,290) | (15,064) | |
Total | 245,093 | 238,440 | |
Inventories | |||
Raw materials | 145,087 | 143,697 | |
Work-in-process | 75,499 | 67,897 | |
Finished goods | 48,175 | 62,117 | |
Total | 268,761 | 273,711 | |
Property and equipment, net | |||
Property and equipment, gross | 268,409 | 265,086 | |
Less accumulated depreciation and amortization | (140,116) | (137,701) | |
Property and equipment, net | 128,293 | 127,385 | |
Depreciation and amortization expense for property and equipment | 5,100 | $ 5,100 | |
Land | |||
Property and equipment, net | |||
Property and equipment, gross | 16,558 | 16,564 | |
Buildings, civil works and improvements | |||
Property and equipment, net | |||
Property and equipment, gross | 55,461 | 55,391 | |
Leasehold improvements | |||
Property and equipment, net | |||
Property and equipment, gross | 8,459 | 8,311 | |
Equipment and tooling | |||
Property and equipment, net | |||
Property and equipment, gross | 129,055 | 128,428 | |
Furniture and fixtures | |||
Property and equipment, net | |||
Property and equipment, gross | 2,986 | 3,190 | |
Computer equipment | |||
Property and equipment, net | |||
Property and equipment, gross | 18,814 | 18,733 | |
Computer software | |||
Property and equipment, net | |||
Property and equipment, gross | 20,289 | 20,146 | |
Computer software implementation in process | |||
Property and equipment, net | |||
Property and equipment, gross | 9,314 | 8,563 | |
Construction in process | |||
Property and equipment, net | |||
Property and equipment, gross | $ 7,473 | $ 5,760 |
Goodwill and Intangible Asset_2
Goodwill and Intangible Assets - Goodwill (Details) $ in Thousands | 3 Months Ended |
Sep. 30, 2019USD ($) | |
Changes in the carrying value of goodwill | |
Balance at the beginning of the period | $ 307,108 |
Goodwill adjusted during the period | 483 |
Foreign currency translation adjustment | (878) |
Balance at the end of the period | 306,713 |
Security Division | |
Changes in the carrying value of goodwill | |
Balance at the beginning of the period | 200,079 |
Goodwill adjusted during the period | 483 |
Foreign currency translation adjustment | (254) |
Balance at the end of the period | 200,308 |
Healthcare Division | |
Changes in the carrying value of goodwill | |
Balance at the beginning of the period | 40,064 |
Foreign currency translation adjustment | (78) |
Balance at the end of the period | 39,986 |
Optoelectronics and Manufacturing Division | |
Changes in the carrying value of goodwill | |
Balance at the beginning of the period | 66,965 |
Foreign currency translation adjustment | (546) |
Balance at the end of the period | $ 66,419 |
Goodwill and Intangible Asset_3
Goodwill and Intangible Assets - Intangible Assets Subject to Amortization (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Jun. 30, 2019 | |
Amortizable assets: | |||
Gross Carrying Value | $ 155,771 | $ 154,642 | |
Accumulated Amortization | (55,299) | (50,856) | |
Total | 100,472 | 103,786 | |
Total intangible assets | |||
Gross Carrying Value | 184,932 | 183,810 | |
Intangible assets, net | 129,633 | 132,954 | |
Amortization expense | 4,900 | $ 5,300 | |
IPR&D | |||
Non-amortizable assets: | |||
Gross Carrying Value | 2,290 | 2,290 | |
Trademarks | |||
Non-amortizable assets: | |||
Gross Carrying Value | $ 26,871 | 26,878 | |
Software development costs | |||
Intangible assets | |||
Weighted Average Lives (in Years) | 8 years | ||
Amortizable assets: | |||
Gross Carrying Value | $ 30,740 | 29,393 | |
Accumulated Amortization | (13,992) | (12,747) | |
Total | $ 16,748 | 16,646 | |
Patents | |||
Intangible assets | |||
Weighted Average Lives (in Years) | 19 years | ||
Amortizable assets: | |||
Gross Carrying Value | $ 9,104 | 8,688 | |
Accumulated Amortization | (2,033) | (1,927) | |
Total | $ 7,071 | 6,761 | |
Developed technology | |||
Intangible assets | |||
Weighted Average Lives (in Years) | 10 years | ||
Amortizable assets: | |||
Gross Carrying Value | $ 53,443 | 53,460 | |
Accumulated Amortization | (15,412) | (14,050) | |
Total | $ 38,031 | 39,410 | |
Customer relationships/backlog | |||
Intangible assets | |||
Weighted Average Lives (in Years) | 7 years | ||
Amortizable assets: | |||
Gross Carrying Value | $ 62,484 | 63,101 | |
Accumulated Amortization | (23,862) | (22,132) | |
Total | $ 38,622 | $ 40,969 |
Goodwill and Intangible Asset_4
Goodwill and Intangible Assets - Intangible Amortization (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Jun. 30, 2019 | |
Estimated future amortization expense | |||
2020 (remaining 9 months) | $ 15,523 | ||
2021 | 19,009 | ||
2022 | 15,142 | ||
2023 | 14,001 | ||
2024 | 12,947 | ||
Thereafter, including assets that have not yet begun to be amortized | 23,850 | ||
Total | 100,472 | $ 103,786 | |
Software development costs | |||
Estimated future amortization expense | |||
Total | 16,748 | $ 16,646 | |
Capitalized software development costs | $ 1,300 | $ 400 |
Restructuring and Other Charg_3
Restructuring and Other Charges - Restructuring and other charges (Details) - USD ($) | 3 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Restructuring and other charges | ||
Legal fees | $ 3,600,000 | |
Acquisition-related costs | 267,000 | |
Employee termination costs (benefit) | $ 58,000 | 333,000 |
Facility closures / consolidation | 10,000 | |
Legal costs (benefit), net | (2,157,000) | 3,586,000 |
Total expensed (benefit) | (2,099,000) | 4,196,000 |
Security Division | ||
Restructuring and other charges | ||
Employee termination costs (benefit) | 35,000 | |
Facility closures / consolidation | 10,000 | |
Total expensed (benefit) | 45,000 | |
Healthcare Division | ||
Restructuring and other charges | ||
Employee termination costs (benefit) | 191,000 | |
Total expensed (benefit) | 191,000 | |
Optoelectronics and Manufacturing Division | ||
Restructuring and other charges | ||
Acquisition-related costs | 267,000 | |
Employee termination costs (benefit) | (13,000) | 107,000 |
Total expensed (benefit) | (13,000) | 374,000 |
Corporate | ||
Restructuring and other charges | ||
Employee termination costs (benefit) | 71,000 | |
Legal costs (benefit), net | (2,157,000) | 3,586,000 |
Total expensed (benefit) | $ (2,086,000) | $ 3,586,000 |
Restructuring and Other Charg_4
Restructuring and Other Charges - Changes in the accrued liability for restructuring and other charges (Details) $ in Thousands | 3 Months Ended |
Sep. 30, 2019USD ($) | |
Restructuring and other charges | |
Balance at the beginning of the period | $ 6,763 |
Restructuring and other charges, net | (2,099) |
(Payments), adjustments and reimbursements, net | 927 |
Balance at the end of the period | 5,591 |
Employee Termination Costs | |
Restructuring and other charges | |
Balance at the beginning of the period | 432 |
Restructuring and other charges, net | 58 |
(Payments), adjustments and reimbursements, net | (490) |
Legal Costs and Settlements | |
Restructuring and other charges | |
Balance at the beginning of the period | 6,331 |
Restructuring and other charges, net | (2,157) |
(Payments), adjustments and reimbursements, net | 1,417 |
Balance at the end of the period | $ 5,591 |
Borrowings (Details)
Borrowings (Details) $ / shares in Units, $ in Thousands | 3 Months Ended | |||
Sep. 30, 2019USD ($)item$ / shares | Sep. 30, 2018USD ($) | Jun. 30, 2019USD ($) | Feb. 28, 2017USD ($) | |
Borrowings | ||||
Borrowings outstanding | $ 95,000 | $ 88,000 | ||
Number of consecutive trading days | item | 30 | |||
Components of long-term debt | ||||
Other long-term debt | $ 2,004 | 2,061 | ||
Total | 260,808 | 258,556 | ||
Less current portion of long-term debt | (801) | (804) | ||
Long-term portion of debt | 260,007 | 257,752 | ||
Revolving Credit Facility | ||||
Borrowings | ||||
Maximum borrowing capacity | 535,000 | |||
Sub-limit available for letters of credit | $ 300,000 | |||
Unused commitment fee (as a percent) | 0.10% | |||
Borrowings outstanding | $ 95,000 | |||
Amount outstanding under letters of credit | 49,400 | |||
Available credit facility | $ 390,600 | |||
Revolving Credit Facility | Minimum | ||||
Borrowings | ||||
Unused commitment fee (as a percent) | 0.10% | |||
Revolving Credit Facility | Maximum | ||||
Borrowings | ||||
Increase in the credit agreement's borrowing capacity available under certain circumstances | $ 250,000 | |||
Unused commitment fee (as a percent) | 0.25% | |||
Revolving Credit Facility | LIBOR | ||||
Borrowings | ||||
Interest rate margin (as a percent) | 1.00% | |||
Revolving Credit Facility | LIBOR | Minimum | ||||
Borrowings | ||||
Interest rate margin (as a percent) | 1.00% | |||
Revolving Credit Facility | LIBOR | Maximum | ||||
Borrowings | ||||
Interest rate margin (as a percent) | 1.75% | |||
1.25% Convertible Senior Notes Due 2022 | ||||
Borrowings | ||||
Principal amount | $ 287,500 | $ 287,500 | ||
Interest rate (as a percentage) | 1.25% | 1.25% | ||
Conversion ratio | 9.3056 | |||
Conversion price | $ / shares | $ 107.46 | |||
Premium on stock price | 38.50% | |||
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% | |||
Liability component of convertible debt | $ 242,400 | |||
Equity component of convertible debt | 45,100 | |||
Debt issuance costs | 7,700 | |||
Debt Component of debt issuance costs | 6,500 | |||
Equity component of debt issuance costs | 1,200 | |||
Total interest expense | 3,200 | $ 3,100 | ||
Contractual interest expense | 900 | 900 | ||
Amortization of debt discount | 2,000 | 1,900 | ||
Amortization of debt issuance costs | 300 | $ 300 | ||
Unamortized discount | $ (25,268) | (27,283) | ||
Effective interest rate (as a percent) | 4.50% | |||
Unamortized debt issuance costs | $ 3,428 | 3,722 | ||
Components of long-term debt | ||||
Principal amount | 287,500 | 287,500 | ||
Unamortized discount | (25,268) | (27,283) | ||
Unamortized debt issuance costs | (3,428) | (3,722) | ||
Total | 258,804 | $ 256,495 | ||
Bank lines of credit | ||||
Borrowings | ||||
Amount outstanding under letters of credit | 44,200 | |||
Available credit facility | $ 20,900 |
Stockholders' Equity - Stock-ba
Stockholders' Equity - Stock-based Compensation (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Stock-based Compensation | ||
Stock-based compensation expense | $ 6,416 | $ 5,463 |
RSU | ||
Stock-based Compensation | ||
Unrecognized compensation cost | $ 28,200 | |
Weighted-average period | 1 year 8 months 12 days | |
Shares | ||
Nonvested at the beginning of the period (in shares) | 521,140 | |
Granted (in shares) | 272,489 | |
Vested (in shares) | (360,866) | |
Forfeited (in shares) | (4,041) | |
Nonvested at the end of the period (in shares) | 428,722 | |
Weighted-Average Fair Value | ||
Nonvested at the beginning of the period (in dollars per share) | $ 73.97 | |
Granted (in dollars per share) | 86.98 | |
Vested (in dollars per share) | 68.11 | |
Forfeited (in dollars per share) | 77.57 | |
Nonvested at the end of the period (in dollars per share) | $ 87.14 | |
Stock options | ||
Stock-based Compensation | ||
Unrecognized compensation cost | $ 400 | |
Weighted-average period | 1 year 8 months 12 days | |
Number of Options | ||
Outstanding at the beginning of the period (in shares) | 515,884 | |
Exercised (in shares) | (167,306) | |
Outstanding at the end of the period (in shares) | 348,578 | |
Exercisable at the end of the period (in shares) | 314,261 | |
Weighted Average Exercise Price | ||
Outstanding at the beginning of the period (in dollars per share) | $ 33.74 | |
Exercised (in dollars per share) | 16.92 | |
Outstanding at the end of the period (in dollars per share) | 41.81 | |
Exercisable at the end of the period (in dollars per share) | $ 37.82 | |
Weighted-Average Remaining Contractual Term | ||
Outstanding at the end of the period | 2 years 9 months 18 days | |
Exercisable at the end of the period | 2 years 2 months 12 days | |
Aggregate Intrinsic Value | ||
Outstanding at the end of the period | $ 20,829 | |
Exercisable at the end of the period | $ 20,030 | |
Performance-based restricted stock units | ||
Shares | ||
Granted (in shares) | 80,326 | 96,151 |
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 | 280.00% | |
2012 Plan | ||
Weighted-Average Fair Value | ||
Shares available for grant | 1,100,000 | |
2012 Plan | 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 | |
2006 Plan | ||
Number of Options | ||
Granted (in shares) | 0 | |
Cost of goods sold | ||
Stock-based Compensation | ||
Stock-based compensation expense | $ 171 | $ 207 |
Selling, general and administrative | ||
Stock-based Compensation | ||
Stock-based compensation expense | 6,085 | 5,111 |
Research and development | ||
Stock-based Compensation | ||
Stock-based compensation expense | $ 160 | $ 145 |
Stockholders' Equity - Share Re
Stockholders' Equity - Share Repurchase Program (Details) - Common stock - shares | 3 Months Ended | |
Sep. 30, 2019 | Mar. 31, 2018 | |
Share Repurchase Program | ||
Number of shares repurchased | 126,051 | |
Number of available for additional shares repurchased | 436,656 | |
Maximum | ||
Share Repurchase Program | ||
Number of repurchased shares authorized | 1,000,000 |
Retirement Benefit Plans (Detai
Retirement Benefit Plans (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Net Periodic Benefit Costs | ||
Service cost | $ 100 | $ 98 |
Interest cost | 8 | 8 |
Amortization of prior service cost | 13 | 14 |
Net periodic pension expense | 121 | 120 |
Contributions made by the entity to the defined benefit plans | 0 | 0 |
Contributions made by the entity to defined contribution plans | $ 1,800 | $ 1,800 |
Commitments and Contingencies -
Commitments and Contingencies - Contingent Acquisition Obligations (Details) - USD ($) $ in Thousands | Dec. 31, 2017 | Sep. 30, 2019 | Sep. 30, 2018 |
Contingent Acquisition Obligations | |||
Beginning fair value | $ 16,577 | ||
Foreign currency translation adjustment | (147) | ||
Changes in fair value for contingent earnout obligations | 148 | ||
Ending fair value | 16,578 | ||
Mr. Chopra, Chief Executive Officer | Deferred bonus | |||
Indemnifications and Certain Employment-Related Contingencies | |||
Bonus payment on or within 45 days of January 1, 2024 contingent upon continued employment through that date | $ 13,500 | ||
Maximum number of days after January 1, 2024, bonus payment due | 45 days | ||
CXR Limited | |||
Contingent Acquisition Obligations | |||
Remaining maximum amount of contingent consideration | 26,800 | ||
Payments for contingent consideration | $ 100 | $ 200 |
Commitments and Contingencies_2
Commitments and Contingencies - Product Warranties (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Changes in provision for warranties | ||
Warranty provision at beginning of period | $ 21,724 | $ 21,819 |
Additions and adjustments | 2,254 | 1,480 |
Reductions for warranty repair costs | (2,291) | (1,800) |
Warranty provision at end of period | $ 21,687 | $ 21,499 |
Income Taxes - (Details)
Income Taxes - (Details) - USD ($) $ in Millions | Jan. 01, 2018 | Dec. 31, 2017 | Sep. 30, 2019 | Sep. 30, 2018 |
U.S. Federal income tax rate (as a percent) | 21.00% | 35.00% | ||
Effective income tax rate (as a percent) | (2.90%) | 13.90% | ||
Effective income tax rate excluding certain discrete tax items (as a percent) | 27.90% | 28.10% | ||
ASU 2016-09 | ||||
Excess tax benefits from employee stock compensation benefit | $ 6.2 | $ 1.5 |
Segment Information - Operation
Segment Information - Operations and Identifiable Assets (Details) $ in Thousands | 3 Months Ended | ||
Sep. 30, 2019USD ($)customersegment | Sep. 30, 2018USD ($)customer | Jun. 30, 2019USD ($) | |
Operations and identifiable assets by industry segment | |||
Number of identifiable industry segments | segment | 3 | ||
Total revenues | $ 290,852 | $ 266,249 | |
Income (Loss) from Operations | 24,887 | $ 16,257 | |
Segments assets | $ 1,290,102 | $ 1,264,864 | |
Revenue | Customer Concentration Risk | |||
Operations and identifiable assets by industry segment | |||
Number of major customers | customer | 0 | 0 | |
Servicio de Administaction Tributaria ("SAT") in Mexico | Revenue | Customer Concentration Risk | |||
Operations and identifiable assets by industry segment | |||
Concentration (as a percent) | 10.00% | 10.00% | |
Operating Segments | Security Division | |||
Operations and identifiable assets by industry segment | |||
Total revenues | $ 188,964 | $ 169,960 | |
Income (Loss) from Operations | 20,318 | 23,050 | |
Segments assets | 803,388 | 793,810 | |
Operating Segments | Healthcare Division | |||
Operations and identifiable assets by industry segment | |||
Total revenues | 40,208 | 38,273 | |
Income (Loss) from Operations | 2,817 | (1,875) | |
Segments assets | 193,342 | 157,639 | |
Operating Segments | Optoelectronics and Manufacturing Division | |||
Operations and identifiable assets by industry segment | |||
Total revenues | 73,638 | 70,954 | |
Income (Loss) from Operations | 8,769 | 6,825 | |
Segments assets | 238,883 | 237,851 | |
Corporate | |||
Operations and identifiable assets by industry segment | |||
Income (Loss) from Operations | (7,337) | (11,351) | |
Segments assets | 97,202 | 79,498 | |
Eliminations | |||
Operations and identifiable assets by industry segment | |||
Total revenues | (11,958) | (12,938) | |
Income (Loss) from Operations | 320 | $ (392) | |
Segments assets | $ (42,713) | $ (3,934) |