DOCUMENT AND ENTITY INFORMATION
DOCUMENT AND ENTITY INFORMATION - shares | 6 Months Ended | |
Mar. 30, 2018 | Apr. 30, 2018 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 30, 2018 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q2 | |
Trading Symbol | VREX | |
Entity Registrant Name | Varex Imaging Corporation | |
Entity Central Index Key | 1,681,622 | |
Current Fiscal Year End Date | --09-28 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Common Stock, Shares Outstanding | 37,954,175 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Mar. 30, 2018 | Mar. 31, 2017 | Mar. 30, 2018 | Mar. 31, 2017 | |
Income Statement [Abstract] | ||||
Revenues | $ 201.2 | $ 154.8 | $ 377.4 | $ 312.2 |
Cost of revenues | 131.1 | 97.2 | 245.8 | 195.8 |
Gross margin | 70.1 | 57.6 | 131.6 | 116.4 |
Operating expenses: | ||||
Research and development | 22 | 14.4 | 41.8 | 27.7 |
Selling, general and administrative | 30.9 | 19.7 | 59.1 | 46.8 |
Total operating expenses | 52.9 | 34.1 | 100.9 | 74.5 |
Operating earnings | 17.2 | 23.5 | 30.7 | 41.9 |
Interest income | 0 | 0 | 0.1 | 0.1 |
Interest expense | (5.6) | (1) | (11.1) | (1.6) |
Other income (expense), net | 4.1 | (0.1) | 3.1 | 0.3 |
Interest and other income (expense), net | (1.5) | (1.1) | (7.9) | (1.2) |
Earnings before taxes | 15.7 | 22.4 | 22.8 | 40.7 |
Income tax provision (benefit) on earnings | 3.4 | 7.4 | (1.1) | 14.5 |
Net earnings | 12.3 | 15 | 23.9 | 26.2 |
Less: Net earnings attributable to noncontrolling interests | 0.1 | 0 | 0.3 | 0.1 |
Net earnings attributable to Varex | $ 12.2 | $ 15 | $ 23.6 | $ 26.1 |
Net earnings per common share attributable to Varex | ||||
Earnings per share, basic (in USD per share) | $ 0.32 | $ 0.40 | $ 0.62 | $ 0.70 |
Earnings per share, diluted (in USD per share) | $ 0.32 | $ 0.40 | $ 0.62 | $ 0.69 |
Weighted average common shares outstanding | ||||
Weighted average number of shares outstanding, basic | 37.8 | 37.5 | 37.8 | 37.5 |
Weighted average number of shares outstanding,diluted | 38.4 | 37.8 | 38.3 | 37.8 |
CONDENSED CONSOLIDATED STATEME3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Mar. 30, 2018 | Mar. 31, 2017 | Mar. 30, 2018 | Mar. 31, 2017 | |
Statement of Comprehensive Income [Abstract] | ||||
Net earnings | $ 12.3 | $ 15 | $ 23.9 | $ 26.2 |
Other comprehensive earnings, net of tax: | ||||
Unrealized gain on interest rate swap contracts, net of tax expense of $0.7 and $0 during the three months ended March 30, 2018 and $1.2 and $0 during the six months ended March 31, 2017, respectively | 2.1 | 0 | 4 | 0 |
Other comprehensive earnings, net of tax | 2.1 | 0 | 4 | 0 |
Comprehensive earnings | 14.4 | 15 | 27.9 | 26.2 |
Less: Net earnings attributable to noncontrolling interests | 0.1 | 0 | 0.3 | 0.1 |
Comprehensive earnings attributable to Varex | $ 14.3 | $ 15 | $ 27.6 | $ 26.1 |
CONDENSED CONSOLIDATED STATEME4
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (Parenthetical) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Mar. 30, 2018 | Mar. 31, 2017 | Mar. 30, 2018 | Mar. 31, 2017 | |
Statement of Comprehensive Income [Abstract] | ||||
Tax on interest rate swap contracts | $ 0.7 | $ 0 | $ 1.2 | $ 0 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Mar. 30, 2018 | Sep. 29, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 55.4 | $ 83.3 |
Accounts receivable, net | 129.2 | 163.6 |
Inventories, net | 245.3 | 234.5 |
Prepaid expenses and other current assets | 15.8 | 13.9 |
Total current assets | 445.7 | 495.3 |
Property, plant and equipment, net | 146.3 | 148.3 |
Goodwill | 242.2 | 241.9 |
Intangibles assets | 82.9 | 91.3 |
Investments in privately-held companies | 51.7 | 52.3 |
Other assets | 17.1 | 11 |
Total assets | 985.9 | 1,040.1 |
Current liabilities: | ||
Accounts payable | 53.5 | 58.9 |
Accrued liabilities | 53.5 | 62.4 |
Current maturities of long-term debt | 20 | 20 |
Deferred revenues | 10 | 10.5 |
Total current liabilities | 137 | 151.8 |
Long-term debt | 397.1 | 463.9 |
Deferred tax liabilities | 19.6 | 29.5 |
Other long-term liabilities | 7.9 | 4.7 |
Total liabilities | 561.6 | 649.9 |
Redeemable noncontrolling interests | 11.7 | 11.2 |
Stockholders' equity: | ||
Preferred stock, $.01 par value: 20,000,000 shares authorized, none issued | 0 | 0 |
Common stock, $.01 par value: 150,000 shares authorized, 37,878,841 issued and outstanding as of March 30, 2018 ; 37,633,747 issued and outstanding as of September 29, 2017 | 0.4 | 0.4 |
Additional paid-in capital | 348.8 | 342.7 |
Accumulated other comprehensive income | 4.7 | 0.8 |
Retained earnings | 58.7 | 35.1 |
Total stockholders' equity | 412.6 | 379 |
Total liabilities, redeemable noncontrolling interests and Varex stockholders' equity | $ 985.9 | $ 1,040.1 |
CONDENSED CONSOLIDATED BALANCE6
CONDENSED CONSOLIDATED BALANCE SHEET (Parenthetical) - $ / shares | Mar. 30, 2018 | Sep. 29, 2017 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in USD per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 20,000,000 | 20,000,000 |
Preferred stock, shares issued | 0 | 0 |
Common stock, par value per share (in USD per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 150,000,000 | 150,000,000 |
Common stock, shares, issued | 37,878,841 | 37,633,747 |
Common stock, shares, outstanding | 37,878,841 | 37,633,747 |
CONDENSED CONSOLIDATED STATEME7
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 6 Months Ended | |
Mar. 30, 2018 | Mar. 31, 2017 | |
Cash flows from operating activities: | ||
Net earnings | $ 23.9 | $ 26.2 |
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||
Share-based compensation expense | 4.7 | 3.6 |
Depreciation | 10.5 | 8.5 |
Amortization of intangible assets | 8.4 | 2.6 |
Deferred taxes | (11.1) | 6.9 |
Income from equity method investments | (3.2) | (0.4) |
Amortization of deferred loan costs | 1.2 | 0 |
Other, net | 0 | 0.6 |
Changes in assets and liabilities: | ||
Accounts receivable | 34.4 | 0.3 |
Inventories | (11) | (15.2) |
Prepaid expenses and other assets | 1.3 | (7.8) |
Accounts payable | (7.2) | 7.3 |
Accrued operating liabilities and other long-term operating liabilities | (6) | 2.4 |
Deferred revenues | (0.4) | (2) |
Net cash provided by operating activities | 45.5 | 33 |
Cash flows from investing activities: | ||
Purchases of property, plant and equipment | (6.9) | (6.7) |
Net cash used in investing activities | (6.9) | (6.7) |
Cash flows from financing activities: | ||
Net transfers from parent | 0 | 14.5 |
Distribution to Varian Medical Systems, Inc. | 0 | (200) |
Taxes related to net share settlement of equity awards | 2.3 | 1.9 |
Borrowings under credit agreements | 10 | 206 |
Repayments of borrowing under credit agreements | (78) | (3.8) |
Proceeds from exercise of stock options | 2.2 | 0.6 |
Proceeds from shares issued under employee stock purchase plan | 1.4 | 0 |
Other financing activities | 0 | 0.7 |
Net cash (used in) provided by financing activities | (66.7) | 16.1 |
Effects of exchange rate changes on cash and cash equivalents | 0.2 | 0.7 |
Net (decrease) increase in cash and cash equivalents | (27.9) | 43.1 |
Cash and cash equivalents at beginning of period | 83.3 | 36.5 |
Cash and cash equivalents at end of period | 55.4 | 79.6 |
Supplemental cash flow information: | ||
Cash paid for interest | 9.9 | 0.9 |
Cash paid for income tax | 11.9 | 0 |
Supplemental non-cash activities: | ||
Purchases of property, plant and equipment financed through accounts payable | 5.5 | 2.6 |
Transfers of property, plant and equipment from Varian Medical Systems, Inc. | 0 | 14.7 |
Distribution payable to Varian Medical Systems, Inc. | 0 | 27.1 |
Other non-cash transfers from parent | $ 0 | $ 12.4 |
DESCRIPTION OF BUSINESS
DESCRIPTION OF BUSINESS | 6 Months Ended |
Mar. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
DESCRIPTION OF BUSINESS | DESCRIPTION OF BUSINESS Varex Imaging Corporation (the “Company,” “Varex” or “Varex Imaging”) designs, manufactures, sells and services a broad range of X-ray imaging components, including X-ray tubes, digital detectors and accessories, high voltage connectors, high-energy inspection accelerators, image processing software and workstations, computer-aided diagnostic software, collimators, automatic exposure control devices, generators, ionization chambers and buckys, for use in a range of applications, including radiographic or fluoroscopic imaging, mammography, special procedures, computed tomography, radio therapy and computer-aided detection. The Company sells its products to imaging system original equipment manufacturer (“OEM”) customers for incorporation into new medical diagnostic, radiation therapy, dental, veterinary and industrial imaging systems, to independent service companies, distributors and directly to end-users for replacement purposes. The Company also designs, manufacturers, sells and services industrial products, which include Linatron® X-ray accelerators, imaging processing software and image detection products for security and inspection purposes, such as cargo screening at ports and borders, airports, and nondestructive examination in a variety of applications. The Company generally sells security and inspection products to OEM customers who incorporate Varex’s products into their inspection systems. The Company conducts an active research and development program to focus on new technology and applications in both the medical and industrial X-ray imaging markets. Varex Imaging Corporation was incorporated in Delaware on July 18, 2016 for the purpose of holding the assets and liabilities associated with the Company's business and separated from Varian Medical Systems, Inc. ("Varian") on January 28, 2017, upon which Varian completed the distribution of 100% of the outstanding common stock of Varex to Varian stockholders. Each Varian stockholder received 0.4 of a share of Varex common stock for every one share of Varian common stock held on the close of business on January 20, 2017. Following the separation and distribution, Varex became an independent publicly-traded company and is listed on the NASDAQ Global Select Market under the ticker “VREX.” BASIS OF PRESENTATION AND PRINCIPLE OF CONSOLIDATION The accompanying condensed consolidated financial statements are unaudited. These condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of management, these condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim periods. Prior to the date of separation and distribution, the financial statements were prepared on a stand-alone basis and are derived from Varian’s consolidated financial statements and records as it operated as part of Varian prior to the distribution, in conformity with GAAP. The condensed consolidated financial statements include the accounts of the Company and certain other assets and liabilities that were historically held at the Varian corporate level but are specifically identifiable and attributable to the Company. Prior to the separation and distribution, the condensed consolidated financial statements included allocations of certain Varian corporate expenses, including costs of information technology, human resources, accounting, legal, facilities, insurance, treasury and other corporate and infrastructure services. In addition, allocated costs included research and development expenses from Varian’s scientific research facility. Prior to the separation, these costs were allocated to the Company on the basis of direct usage when identifiable or other systematic measures that reflect utilization of services provided to or benefits received by the Company. The Company considers the expense allocation methodology and results to be reasonable for all periods presented. These condensed consolidated financial statements and the accompanying notes are unaudited and should be read in conjunction with the consolidated financial statements for the fiscal years ended 2017, 2016 and 2015 included in the Company’s Form 10-K, which was filed with the SEC on December 13, 2017. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Segment Reporting The Company has two reportable operating segments; (i) Medical and (ii) Industrial, which align with how its Chief Executive Officer, who has been identified as the Company's Chief Operating Decision Marker, views and measures the Company’s business performance. See Note 17, “Segment Information” for further information on the Company’s segments. Fiscal Year The fiscal years of the Company as reported are the 52 or 53-week period ending on the Friday nearest September 30. Fiscal year 2018 is the 52-week period ending September 28, 2018. Fiscal year 2017 was the 52-week period that ended on September 29, 2017. The second fiscal quarter of 2018 ended on March 30, 2018 . The second fiscal quarter of 2017 ended on March 31, 2017 . Variable Interest Entities For entities in which the Company has variable interests, the Company focuses on identifying which entity has the power to direct the activities that most significantly impact the variable interest entity’s economic performance and which enterprise has the obligation to absorb losses or the right to receive benefits from the variable interest entity. If the Company is the primary beneficiary of a variable interest entity, the assets, liabilities and results of operations of the variable interest entity will be included in the Company’s condensed consolidated financial statements. During the three months ended March 30, 2018 , the Company had three variable interest entities, two of which are consolidated, because it was determined that the Company was the primary beneficiary for those entities. As of March 30, 2018 , total assets and liabilities for consolidated variable interest entities was $4.6 million and $3.0 million , respectively. 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 disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates. Cash and Cash Equivalents The Company considers currency on hand, demand deposits, time deposits and all highly-liquid investments with an original maturity of three months or less at the date of purchase to be cash and cash equivalents. Fair Value Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. There is a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows: Level 1—Quoted prices in active markets for identical assets or liabilities. Level 2—Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or, other inputs that are observable or can be corroborated by observable market data. Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Derivative Instruments and Hedging Activities The Company records all derivatives on the balance sheet at fair value. For a derivative such as an interest rate swap that is designated as a cash flow hedge, the effective portion of changes in the fair value of the derivative is initially reported in accumulated other comprehensive income (loss) on the consolidated balance sheet and the ineffective portion of changes in the fair value of the derivative is recognized directly in earnings. To the extent the effective portion of a hedge subsequently becomes ineffective, the corresponding amount of the change in fair value of the derivative initially reported in accumulated other comprehensive income (loss) is reclassified and is recognized directly in earnings. Accordingly, on a quarterly basis, the Company assesses the effectiveness of each hedging relationship by comparing the changes in fair value or cash flows of the derivative hedging instrument with the changes in fair value or cash flows of a hypothetical designated perfect hedged item or transaction. If the change in the actual swap is greater than the change in the hypothetical perfect swap, the difference is referred to as “ineffectiveness” and is recognized in earnings in the current period. Concentration of Risk Financial instruments that potentially expose the Company to concentrations of credit risk consist principally of cash, cash equivalents and trade accounts receivable. Cash held with financial institutions may exceed the Federal Deposit Insurance Corporation insurance limits or similar limits in foreign jurisdictions. The Company has not experienced any losses on its deposits of cash and cash equivalents. The Company performs ongoing credit evaluations of its customers and, except for government tenders, group purchases and orders with a letter of credit, its industrial customers often provide a down payment. The Company maintains an allowance for doubtful accounts based upon the expected collectability of all accounts receivable. The Company obtains some of the components in its products from a limited group of suppliers or from a single-source supplier. The Company has neither experienced nor expects any significant disruptions to its operations due to supplier concentration. Inventories Inventories are valued at the lower of cost or net realizable value. Excess and obsolete inventories are determined primarily based on future demand forecasts, and write-downs of excess and obsolete inventories are recorded as a component of cost of revenues. Cost is computed using standard cost (which approximates actual cost) on a first-in-first-out basis. Property, Plant and Equipment Property, plant and equipment are stated at cost, net of accumulated depreciation. Major improvements are capitalized, while repairs and maintenance are expensed as incurred. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets. Land is not subject to depreciation, but land improvements are depreciated over fifteen years. Land leasehold rights and leasehold improvements are amortized over the lesser of their estimated useful lives or remaining lease terms. Buildings are depreciated over twenty years. Machinery and equipment are depreciated over their estimated useful lives, which range from three to seven years. Assets subject to lease are amortized over the lesser of their estimated useful lives or remaining lease terms. Estimated useful lives are periodically reviewed and, when appropriate, changes are made prospectively. When certain events or changes in operating conditions occur, asset lives may be adjusted, and an impairment assessment may be performed on the recoverability of the carrying amounts. When assets are retired or otherwise disposed of, the assets and related accumulated depreciation are removed from the accounts. Investments The Company accounts for its equity investments in privately-held companies under the equity method of accounting as the Company holds at least a 20% ownership interest or has the ability to exercise significant influence in these investments. The Company monitors these equity investments for impairment and makes appropriate reductions in carrying values if the Company determines that impairment charges are required for an other than temporary decline in fair value based primarily on the financial condition and near-term prospects of these companies. Goodwill and Intangible Assets Goodwill is recorded when the purchase price of an acquisition exceeds the fair value of the net identified tangible and intangible assets acquired. Purchased intangible assets are carried at cost, net of accumulated amortization. Intangible assets with finite lives are amortized over their estimated useful lives of primarily two to seven years using the straight-line method. Impairment of Long-lived Assets, Intangible Assets and Goodwill The Company reviews long-lived assets and identifiable intangible assets with finite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. The Company assesses these assets for impairment based on their estimated undiscounted future cash flows. If the carrying value of the assets exceeds the estimated future undiscounted cash flows, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. The Company did not recognize any impairment charges for long-lived assets and identifiable intangible assets during any of the periods presented. The Company evaluates goodwill and indefinite lived intangible assets qualitatively for impairment at least annually in beginning of the fourth quarter of each fiscal year or whenever an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. If the Company determines that a quantitative analysis is necessary, the impairment test for goodwill is currently a two-step process. Step one consists of a comparison of the fair value of a reporting unit against its carrying amount, including the goodwill allocated to each reporting unit. The Company determines the fair value of its reporting units based on a combination of income and market approaches. The income approach is based on the present value of estimated future cash flows of the reporting units, and the market approach is based on a market multiple calculated for each reporting unit based on market data of other companies engaged in similar business. If the carrying amount of the reporting unit is in excess of its fair value, step two requires the comparison of the implied fair value of the reporting unit’s goodwill against the carrying amount of the reporting unit’s goodwill. Any excess of the carrying value of the reporting unit’s goodwill over the implied fair value of the reporting unit’s goodwill is recorded as an impairment loss. The impairment test for intangible assets with indefinite useful lives, if any, consists of a comparison of fair value to carrying value, with any excess of carrying value over fair value being recorded as an impairment loss. No impairment charges were recognized for any of the prior periods presented. Loss Contingencies From time to time, the Company is a party to or otherwise involved in legal proceedings, claims and government inspections or investigations and other legal matters, both inside and outside the United States, arising in the ordinary course of its business or otherwise. The Company accrues amounts, to the extent they can be reasonably estimated, that it believes are adequate to address any liabilities related to legal proceedings and other loss contingencies that it believes will result in a probable loss. Product Warranty The Company warrants most of its products for a specific period of time, usually 12 to 24 months from delivery or acceptance, against material defects. The Company provides for the estimated future costs of warranty obligations in cost of revenues when the related revenues are recognized. The accrued warranty costs represent the best estimate at the time of sale of the total costs that the Company will incur to repair or replace product parts that fail while still under warranty. The amount of the accrued estimated warranty costs obligation for established products is primarily based on historical experience as to product failures adjusted for current information on repair costs. For new products, estimates include the historical experience of similar products, as well as reasonable allowance for warranty expenses associated with new products. On a quarterly basis, the Company reviews the accrued warranty costs and updates the historical warranty cost trends, if required. Revenue Recognition The Company’s revenues are derived primarily from the sale of hardware and software products, and services. The Company recognizes its revenues net of any value added or sales tax and net of sales discounts. The Company sells a high proportion of its X-ray products to a limited number of OEM customers. X-ray tubes, digital detectors and image-processing tools and security and inspection products are generally sold on a stand-alone basis. However, the Company occasionally sells its digital detectors, X-ray tubes and imaging processing tools as a package that is optimized for digital X-ray imaging and sells its Linatron ® X-ray accelerators together with its imaging processing software and image detection products to OEM customers that incorporate them into their inspection systems. Service contracts are often sold with certain security and inspection products and computer-aided detection products. Revenues related to service contracts usually start after the expiration of the warranty period for non-software products or upon delivery of software products. For a multiple-element arrangement that includes software and non-software deliverables which includes service contracts, the Company allocates revenues among the software and non-software deliverables on a relative selling price basis. The amounts allocated to the non-software products and software are accounted for as follows: Non-Software Products Non-software products include hardware products, software components that function together with the hardware components to deliver the product’s essential functionality, as well as service contracts. Except as described below under “Service,” the Company recognizes revenues for non-software products when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable and collectability is reasonably assured. For multiple-element revenue arrangements that involve non-software products, a delivered non-software element is considered as a separate unit of accounting when it has stand-alone value. The allocation of revenue to all deliverables based on their relative selling prices is determined at the inception of the arrangement. The selling price for each deliverable is determined using vendor-specific objective evidence (“VSOE”) of selling price, if it exists; otherwise, third-party evidence of selling price (“TPE”) is used. If the Company is not able to establish VSOE or TPE of selling prices for its non-software products, the Company uses the deliverable's estimated selling price (“ESP”). The Company estimates selling prices following an established process that considers market conditions, including the product offerings and pricing strategies of competitors, as well as internal factors such as historical pricing practices and margin objectives. The establishment of product and service ESPs is controlled and reviewed by the appropriate level of management in all of the Company’s businesses. The Company recognizes revenues upon the transfer of risk of loss, which is either at the time of shipment or delivery, depending upon the terms of the contract, provided that all other revenue recognition criteria have been met. Software Products The Company recognizes revenues for software products in accordance with the software revenue recognition guidance. The Company recognizes license revenues when all of the following criteria have been met: persuasive evidence of an arrangement exists, the vendor’s fee is fixed or determinable, collection of the related receivable is probable and delivery of the product has occurred. Revenues earned on software arrangements involving multiple elements are allocated to each element based on VSOE of fair value, which is based on the price charged when the same element is sold separately. In instances when evidence of VSOE of fair value of all undelivered elements exists, but evidence does not exist for one or more delivered elements, revenues are recognized using the residual method. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue. Revenue allocated to maintenance and support is recognized ratably over the maintenance term (typically one year). For those software products that are not sold stand-alone or for which VSOE cannot be established or maintained, all software revenue under the contract will be deferred until the software product(s) that lack VSOE are all delivered. If the only undelivered software element that lacks VSOE is maintenance and support, then the software revenue would be recognized ratably over the term of the maintenance and support arrangement. The Company recognizes revenues upon the transfer of risk of loss, which is either at the time of shipment or delivery, depending upon the shipping terms of the contract, provided that all other criteria for revenue recognition have been met. Service Service revenues include revenues from hardware and software service contracts, bundled support arrangements, paid services and trainings and parts that are sold by the service department. Revenues allocated to service contracts are recognized ratably over the period of performance of the related contracts. Revenues related to services performed on a time-and-materials basis are recognized when they are earned and billable. Deferred Revenues Deferred revenue primarily represents (i) the amount billed, billable or received applicable to non-software products for which parts and services under the warranty contracts have not been delivered, (ii) the amount billed, billable or received applicable to software products for which the Company’s obligations under the maintenance contracts have not been fulfilled and (iii) the amount billed, billable or received for service contracts for which the services have not been rendered. Except for government tenders, group purchases and orders with letters of credit, the Company's security and inspection customers often provide a down payment prior to transfer of risk of loss of ordered products. These payments are also included in deferred revenue on the condensed consolidated balance sheets. Share-Based Compensation Expense The Company has an equity-based incentive plan that provides for the grant of nonqualified stock options and restricted stock units to directors, officers and other employees. The Company also permits employees to purchase shares under the Varex employee stock purchase plan. Prior to the separation, the Company’s employees historically participated in Varian’s equity-based incentive plans. Share-based compensation expense through the date of separation included allocations to the Company based on the awards and terms previously granted to its employees as well as an allocation of Varian’s corporate and shared functional employee expenses. The Company values stock options granted and the option component of the shares of common stock purchased under the equity-based incentive plans and stock purchased under the employee stock purchase plan using the Black-Scholes option-pricing model. Share-based compensation expense for restricted stock units is measured using the fair value of the Company’s stock on the date of grant and is amortized over the award’s respective service period. The Black-Scholes option-pricing model requires the input of certain assumptions, and changes in the assumptions can materially affect the fair value estimates of share-based payment awards. The Company measures and recognizes expense for all share-based payment awards based on their fair values. Share-based compensation expense recognized in the condensed consolidated statements of earnings includes compensation expense for the share-based payment awards based on the grant date fair value estimated in accordance with the guidance on share-based compensation. Share-based compensation expense recognized is based on the value of the portion of share-based payment awards that is ultimately expected to vest. The Company attributes the value of share-based compensation to expense using the straight-line method. The Company considers only the direct tax impacts of share-based compensation awards when calculating the amount of tax windfalls or shortfalls. Shipping and Handling Costs Shipping and handling costs are included as a component of cost of revenues. Research and Development Research and development costs have been expensed as incurred. These costs primarily include employees’ compensation, consulting fees and material costs. Software Development Costs Costs for the development of new software products and substantial enhancements to existing software products are expensed as incurred until technological feasibility has been established, at which time any additional costs would be capitalized. No costs associated with the development of software have been capitalized, as the Company believes its current software development process is essentially completed concurrent with the establishment of technological feasibility. Taxes on Earnings Taxes on earnings, as presented, are calculated in accordance with ASC 740, Accounting for Income Taxes. Under this guidance, each interim reporting period is considered integral to the annual period and tax expense is calculated using an estimated annual effective tax rate. The Company records tax expense each quarter based on its effective tax rate estimated for the full fiscal year and uses that rate to provide for income taxes on a current year-to-date basis, adjusted for discrete taxable events that occur during the interim period. On December 22, 2017, the U.S. Government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Reform Act”). The Tax Reform Act significantly revised the U.S. corporate income tax structure. U.S. GAAP requires that the impact of tax legislation be recognized in the period in which the law is enacted. In accordance with these rules, the Company is including the impact of certain provisions of the Tax Reform Act to the extent they are effective during the current reporting period. Certain other provisions included in the Tax Reform Act have later effective dates for fiscal year filers and will be included in the period in which they become effective. In response to the Tax Reform Act, the SEC issued guidance under Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”) that allows for reasonable estimated amounts to be recorded and a measurement period of up to one year from the date of enactment to revise these provisional amounts as new information is obtained and additional guidance is issued. Pursuant to the guidance included in SAB 118, the Company deems amounts recorded and positions taken to date as provisional estimates to be adjusted and finalized in future periods. Significant judgments and estimates are required in evaluating the Company’s tax positions and provision for taxes on earnings. The Company accounts for uncertainty in income taxes following a two-step approach for recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining whether the weight of available evidence indicates that it is more likely than not that, based on the technical merits, the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. Recognition and measurement are based on management’s best judgment given the facts, circumstances and information available at the end of the accounting period. The Company is subject to taxes on earnings in both the United States and numerous foreign jurisdictions. Foreign earnings are generally taxed at rates that differ from the United States rates, earnings in certain foreign jurisdictions are currently subject to tax in the United States, and the benefit of losses generated in some other foreign jurisdictions is reduced due to full valuation allowance positions in those jurisdictions. Our effective tax rate is impacted by these factors as well as existing laws in both the United States and in the respective countries in which foreign subsidiaries do business. In addition, a change in the mix of earnings and losses among the various jurisdictions could increase or decrease our effective tax rate. Foreign Currency Translation The Company uses the U.S. Dollar as the functional currency of its foreign operations. Gains and losses from remeasurement of foreign currency balances into U.S. Dollars are included in the condensed consolidated statements of earnings. Recent Accounting Standards or Updates Not Yet Effective In August 2017, the Financial Accounting Standards Board (the "FASB") issued Accounting Standard Update ("ASU") 2017-12 which targets improvements to accounting for hedging activities which amends and simplifies existing guidance in order to allow companies to more accurately present the economic effects of risk management activities in the financial statements. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The Company does not expect that the adoption of this guidance will have a material impact on its consolidated financial statements. In May 2017, the FASB issued ASU 2017-09 which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The guidance is effective for the Company beginning in the first quarter of fiscal year 2019. Early adoption is permitted. The Company does not expect that the adoption of this guidance will have a material impact on its consolidated financial statements. In March 2017, the FASB issued ASU 2017-07 which amended its guidance on the accounting related to defined benefit plans and other post-retirement benefits. This amendment requires the service cost component of net periodic pension and post-retirement benefit cost be presented in the same line item as other employee compensation costs, while the other components be presented separately as non-operating income (expense). The amendment will be effective for the Company beginning in its first quarter of fiscal year 2019. Early adoption is permitted. The Company is evaluating the impact of adopting this amendment to its consolidated financial statements. In January 2017, the FASB issued ASU 2017-04 which clarified its guidance to simplify the measurement of goodwill by eliminating the Step 2 impairment test. The new guidance requires companies to perform the goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The amendment will be effective for the Company beginning in its first quarter of fiscal year 2021. The amendment is required to be adopted prospectively. Early adoption is permitted. The Company is evaluating the impact of adopting this amendment to its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02 on accounting for leases. The new standard is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet. The new standard will continue to classify leases as either finance or operating, with classification affecting the pattern of expense recognition in the statement of earnings. The new standard is required to be adopted using |
BASIS OF PRESENTATION AND PRINC
BASIS OF PRESENTATION AND PRINCIPLE OF CONSOLIDATION | 6 Months Ended |
Mar. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BASIS OF PRESENTATION AND PRINCIPLE OF CONSOLIDATION | DESCRIPTION OF BUSINESS Varex Imaging Corporation (the “Company,” “Varex” or “Varex Imaging”) designs, manufactures, sells and services a broad range of X-ray imaging components, including X-ray tubes, digital detectors and accessories, high voltage connectors, high-energy inspection accelerators, image processing software and workstations, computer-aided diagnostic software, collimators, automatic exposure control devices, generators, ionization chambers and buckys, for use in a range of applications, including radiographic or fluoroscopic imaging, mammography, special procedures, computed tomography, radio therapy and computer-aided detection. The Company sells its products to imaging system original equipment manufacturer (“OEM”) customers for incorporation into new medical diagnostic, radiation therapy, dental, veterinary and industrial imaging systems, to independent service companies, distributors and directly to end-users for replacement purposes. The Company also designs, manufacturers, sells and services industrial products, which include Linatron® X-ray accelerators, imaging processing software and image detection products for security and inspection purposes, such as cargo screening at ports and borders, airports, and nondestructive examination in a variety of applications. The Company generally sells security and inspection products to OEM customers who incorporate Varex’s products into their inspection systems. The Company conducts an active research and development program to focus on new technology and applications in both the medical and industrial X-ray imaging markets. Varex Imaging Corporation was incorporated in Delaware on July 18, 2016 for the purpose of holding the assets and liabilities associated with the Company's business and separated from Varian Medical Systems, Inc. ("Varian") on January 28, 2017, upon which Varian completed the distribution of 100% of the outstanding common stock of Varex to Varian stockholders. Each Varian stockholder received 0.4 of a share of Varex common stock for every one share of Varian common stock held on the close of business on January 20, 2017. Following the separation and distribution, Varex became an independent publicly-traded company and is listed on the NASDAQ Global Select Market under the ticker “VREX.” BASIS OF PRESENTATION AND PRINCIPLE OF CONSOLIDATION The accompanying condensed consolidated financial statements are unaudited. These condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of management, these condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim periods. Prior to the date of separation and distribution, the financial statements were prepared on a stand-alone basis and are derived from Varian’s consolidated financial statements and records as it operated as part of Varian prior to the distribution, in conformity with GAAP. The condensed consolidated financial statements include the accounts of the Company and certain other assets and liabilities that were historically held at the Varian corporate level but are specifically identifiable and attributable to the Company. Prior to the separation and distribution, the condensed consolidated financial statements included allocations of certain Varian corporate expenses, including costs of information technology, human resources, accounting, legal, facilities, insurance, treasury and other corporate and infrastructure services. In addition, allocated costs included research and development expenses from Varian’s scientific research facility. Prior to the separation, these costs were allocated to the Company on the basis of direct usage when identifiable or other systematic measures that reflect utilization of services provided to or benefits received by the Company. The Company considers the expense allocation methodology and results to be reasonable for all periods presented. These condensed consolidated financial statements and the accompanying notes are unaudited and should be read in conjunction with the consolidated financial statements for the fiscal years ended 2017, 2016 and 2015 included in the Company’s Form 10-K, which was filed with the SEC on December 13, 2017. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Segment Reporting The Company has two reportable operating segments; (i) Medical and (ii) Industrial, which align with how its Chief Executive Officer, who has been identified as the Company's Chief Operating Decision Marker, views and measures the Company’s business performance. See Note 17, “Segment Information” for further information on the Company’s segments. Fiscal Year The fiscal years of the Company as reported are the 52 or 53-week period ending on the Friday nearest September 30. Fiscal year 2018 is the 52-week period ending September 28, 2018. Fiscal year 2017 was the 52-week period that ended on September 29, 2017. The second fiscal quarter of 2018 ended on March 30, 2018 . The second fiscal quarter of 2017 ended on March 31, 2017 . Variable Interest Entities For entities in which the Company has variable interests, the Company focuses on identifying which entity has the power to direct the activities that most significantly impact the variable interest entity’s economic performance and which enterprise has the obligation to absorb losses or the right to receive benefits from the variable interest entity. If the Company is the primary beneficiary of a variable interest entity, the assets, liabilities and results of operations of the variable interest entity will be included in the Company’s condensed consolidated financial statements. During the three months ended March 30, 2018 , the Company had three variable interest entities, two of which are consolidated, because it was determined that the Company was the primary beneficiary for those entities. As of March 30, 2018 , total assets and liabilities for consolidated variable interest entities was $4.6 million and $3.0 million , respectively. 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 disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates. Cash and Cash Equivalents The Company considers currency on hand, demand deposits, time deposits and all highly-liquid investments with an original maturity of three months or less at the date of purchase to be cash and cash equivalents. Fair Value Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. There is a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows: Level 1—Quoted prices in active markets for identical assets or liabilities. Level 2—Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or, other inputs that are observable or can be corroborated by observable market data. Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Derivative Instruments and Hedging Activities The Company records all derivatives on the balance sheet at fair value. For a derivative such as an interest rate swap that is designated as a cash flow hedge, the effective portion of changes in the fair value of the derivative is initially reported in accumulated other comprehensive income (loss) on the consolidated balance sheet and the ineffective portion of changes in the fair value of the derivative is recognized directly in earnings. To the extent the effective portion of a hedge subsequently becomes ineffective, the corresponding amount of the change in fair value of the derivative initially reported in accumulated other comprehensive income (loss) is reclassified and is recognized directly in earnings. Accordingly, on a quarterly basis, the Company assesses the effectiveness of each hedging relationship by comparing the changes in fair value or cash flows of the derivative hedging instrument with the changes in fair value or cash flows of a hypothetical designated perfect hedged item or transaction. If the change in the actual swap is greater than the change in the hypothetical perfect swap, the difference is referred to as “ineffectiveness” and is recognized in earnings in the current period. Concentration of Risk Financial instruments that potentially expose the Company to concentrations of credit risk consist principally of cash, cash equivalents and trade accounts receivable. Cash held with financial institutions may exceed the Federal Deposit Insurance Corporation insurance limits or similar limits in foreign jurisdictions. The Company has not experienced any losses on its deposits of cash and cash equivalents. The Company performs ongoing credit evaluations of its customers and, except for government tenders, group purchases and orders with a letter of credit, its industrial customers often provide a down payment. The Company maintains an allowance for doubtful accounts based upon the expected collectability of all accounts receivable. The Company obtains some of the components in its products from a limited group of suppliers or from a single-source supplier. The Company has neither experienced nor expects any significant disruptions to its operations due to supplier concentration. Inventories Inventories are valued at the lower of cost or net realizable value. Excess and obsolete inventories are determined primarily based on future demand forecasts, and write-downs of excess and obsolete inventories are recorded as a component of cost of revenues. Cost is computed using standard cost (which approximates actual cost) on a first-in-first-out basis. Property, Plant and Equipment Property, plant and equipment are stated at cost, net of accumulated depreciation. Major improvements are capitalized, while repairs and maintenance are expensed as incurred. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets. Land is not subject to depreciation, but land improvements are depreciated over fifteen years. Land leasehold rights and leasehold improvements are amortized over the lesser of their estimated useful lives or remaining lease terms. Buildings are depreciated over twenty years. Machinery and equipment are depreciated over their estimated useful lives, which range from three to seven years. Assets subject to lease are amortized over the lesser of their estimated useful lives or remaining lease terms. Estimated useful lives are periodically reviewed and, when appropriate, changes are made prospectively. When certain events or changes in operating conditions occur, asset lives may be adjusted, and an impairment assessment may be performed on the recoverability of the carrying amounts. When assets are retired or otherwise disposed of, the assets and related accumulated depreciation are removed from the accounts. Investments The Company accounts for its equity investments in privately-held companies under the equity method of accounting as the Company holds at least a 20% ownership interest or has the ability to exercise significant influence in these investments. The Company monitors these equity investments for impairment and makes appropriate reductions in carrying values if the Company determines that impairment charges are required for an other than temporary decline in fair value based primarily on the financial condition and near-term prospects of these companies. Goodwill and Intangible Assets Goodwill is recorded when the purchase price of an acquisition exceeds the fair value of the net identified tangible and intangible assets acquired. Purchased intangible assets are carried at cost, net of accumulated amortization. Intangible assets with finite lives are amortized over their estimated useful lives of primarily two to seven years using the straight-line method. Impairment of Long-lived Assets, Intangible Assets and Goodwill The Company reviews long-lived assets and identifiable intangible assets with finite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. The Company assesses these assets for impairment based on their estimated undiscounted future cash flows. If the carrying value of the assets exceeds the estimated future undiscounted cash flows, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. The Company did not recognize any impairment charges for long-lived assets and identifiable intangible assets during any of the periods presented. The Company evaluates goodwill and indefinite lived intangible assets qualitatively for impairment at least annually in beginning of the fourth quarter of each fiscal year or whenever an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. If the Company determines that a quantitative analysis is necessary, the impairment test for goodwill is currently a two-step process. Step one consists of a comparison of the fair value of a reporting unit against its carrying amount, including the goodwill allocated to each reporting unit. The Company determines the fair value of its reporting units based on a combination of income and market approaches. The income approach is based on the present value of estimated future cash flows of the reporting units, and the market approach is based on a market multiple calculated for each reporting unit based on market data of other companies engaged in similar business. If the carrying amount of the reporting unit is in excess of its fair value, step two requires the comparison of the implied fair value of the reporting unit’s goodwill against the carrying amount of the reporting unit’s goodwill. Any excess of the carrying value of the reporting unit’s goodwill over the implied fair value of the reporting unit’s goodwill is recorded as an impairment loss. The impairment test for intangible assets with indefinite useful lives, if any, consists of a comparison of fair value to carrying value, with any excess of carrying value over fair value being recorded as an impairment loss. No impairment charges were recognized for any of the prior periods presented. Loss Contingencies From time to time, the Company is a party to or otherwise involved in legal proceedings, claims and government inspections or investigations and other legal matters, both inside and outside the United States, arising in the ordinary course of its business or otherwise. The Company accrues amounts, to the extent they can be reasonably estimated, that it believes are adequate to address any liabilities related to legal proceedings and other loss contingencies that it believes will result in a probable loss. Product Warranty The Company warrants most of its products for a specific period of time, usually 12 to 24 months from delivery or acceptance, against material defects. The Company provides for the estimated future costs of warranty obligations in cost of revenues when the related revenues are recognized. The accrued warranty costs represent the best estimate at the time of sale of the total costs that the Company will incur to repair or replace product parts that fail while still under warranty. The amount of the accrued estimated warranty costs obligation for established products is primarily based on historical experience as to product failures adjusted for current information on repair costs. For new products, estimates include the historical experience of similar products, as well as reasonable allowance for warranty expenses associated with new products. On a quarterly basis, the Company reviews the accrued warranty costs and updates the historical warranty cost trends, if required. Revenue Recognition The Company’s revenues are derived primarily from the sale of hardware and software products, and services. The Company recognizes its revenues net of any value added or sales tax and net of sales discounts. The Company sells a high proportion of its X-ray products to a limited number of OEM customers. X-ray tubes, digital detectors and image-processing tools and security and inspection products are generally sold on a stand-alone basis. However, the Company occasionally sells its digital detectors, X-ray tubes and imaging processing tools as a package that is optimized for digital X-ray imaging and sells its Linatron ® X-ray accelerators together with its imaging processing software and image detection products to OEM customers that incorporate them into their inspection systems. Service contracts are often sold with certain security and inspection products and computer-aided detection products. Revenues related to service contracts usually start after the expiration of the warranty period for non-software products or upon delivery of software products. For a multiple-element arrangement that includes software and non-software deliverables which includes service contracts, the Company allocates revenues among the software and non-software deliverables on a relative selling price basis. The amounts allocated to the non-software products and software are accounted for as follows: Non-Software Products Non-software products include hardware products, software components that function together with the hardware components to deliver the product’s essential functionality, as well as service contracts. Except as described below under “Service,” the Company recognizes revenues for non-software products when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable and collectability is reasonably assured. For multiple-element revenue arrangements that involve non-software products, a delivered non-software element is considered as a separate unit of accounting when it has stand-alone value. The allocation of revenue to all deliverables based on their relative selling prices is determined at the inception of the arrangement. The selling price for each deliverable is determined using vendor-specific objective evidence (“VSOE”) of selling price, if it exists; otherwise, third-party evidence of selling price (“TPE”) is used. If the Company is not able to establish VSOE or TPE of selling prices for its non-software products, the Company uses the deliverable's estimated selling price (“ESP”). The Company estimates selling prices following an established process that considers market conditions, including the product offerings and pricing strategies of competitors, as well as internal factors such as historical pricing practices and margin objectives. The establishment of product and service ESPs is controlled and reviewed by the appropriate level of management in all of the Company’s businesses. The Company recognizes revenues upon the transfer of risk of loss, which is either at the time of shipment or delivery, depending upon the terms of the contract, provided that all other revenue recognition criteria have been met. Software Products The Company recognizes revenues for software products in accordance with the software revenue recognition guidance. The Company recognizes license revenues when all of the following criteria have been met: persuasive evidence of an arrangement exists, the vendor’s fee is fixed or determinable, collection of the related receivable is probable and delivery of the product has occurred. Revenues earned on software arrangements involving multiple elements are allocated to each element based on VSOE of fair value, which is based on the price charged when the same element is sold separately. In instances when evidence of VSOE of fair value of all undelivered elements exists, but evidence does not exist for one or more delivered elements, revenues are recognized using the residual method. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue. Revenue allocated to maintenance and support is recognized ratably over the maintenance term (typically one year). For those software products that are not sold stand-alone or for which VSOE cannot be established or maintained, all software revenue under the contract will be deferred until the software product(s) that lack VSOE are all delivered. If the only undelivered software element that lacks VSOE is maintenance and support, then the software revenue would be recognized ratably over the term of the maintenance and support arrangement. The Company recognizes revenues upon the transfer of risk of loss, which is either at the time of shipment or delivery, depending upon the shipping terms of the contract, provided that all other criteria for revenue recognition have been met. Service Service revenues include revenues from hardware and software service contracts, bundled support arrangements, paid services and trainings and parts that are sold by the service department. Revenues allocated to service contracts are recognized ratably over the period of performance of the related contracts. Revenues related to services performed on a time-and-materials basis are recognized when they are earned and billable. Deferred Revenues Deferred revenue primarily represents (i) the amount billed, billable or received applicable to non-software products for which parts and services under the warranty contracts have not been delivered, (ii) the amount billed, billable or received applicable to software products for which the Company’s obligations under the maintenance contracts have not been fulfilled and (iii) the amount billed, billable or received for service contracts for which the services have not been rendered. Except for government tenders, group purchases and orders with letters of credit, the Company's security and inspection customers often provide a down payment prior to transfer of risk of loss of ordered products. These payments are also included in deferred revenue on the condensed consolidated balance sheets. Share-Based Compensation Expense The Company has an equity-based incentive plan that provides for the grant of nonqualified stock options and restricted stock units to directors, officers and other employees. The Company also permits employees to purchase shares under the Varex employee stock purchase plan. Prior to the separation, the Company’s employees historically participated in Varian’s equity-based incentive plans. Share-based compensation expense through the date of separation included allocations to the Company based on the awards and terms previously granted to its employees as well as an allocation of Varian’s corporate and shared functional employee expenses. The Company values stock options granted and the option component of the shares of common stock purchased under the equity-based incentive plans and stock purchased under the employee stock purchase plan using the Black-Scholes option-pricing model. Share-based compensation expense for restricted stock units is measured using the fair value of the Company’s stock on the date of grant and is amortized over the award’s respective service period. The Black-Scholes option-pricing model requires the input of certain assumptions, and changes in the assumptions can materially affect the fair value estimates of share-based payment awards. The Company measures and recognizes expense for all share-based payment awards based on their fair values. Share-based compensation expense recognized in the condensed consolidated statements of earnings includes compensation expense for the share-based payment awards based on the grant date fair value estimated in accordance with the guidance on share-based compensation. Share-based compensation expense recognized is based on the value of the portion of share-based payment awards that is ultimately expected to vest. The Company attributes the value of share-based compensation to expense using the straight-line method. The Company considers only the direct tax impacts of share-based compensation awards when calculating the amount of tax windfalls or shortfalls. Shipping and Handling Costs Shipping and handling costs are included as a component of cost of revenues. Research and Development Research and development costs have been expensed as incurred. These costs primarily include employees’ compensation, consulting fees and material costs. Software Development Costs Costs for the development of new software products and substantial enhancements to existing software products are expensed as incurred until technological feasibility has been established, at which time any additional costs would be capitalized. No costs associated with the development of software have been capitalized, as the Company believes its current software development process is essentially completed concurrent with the establishment of technological feasibility. Taxes on Earnings Taxes on earnings, as presented, are calculated in accordance with ASC 740, Accounting for Income Taxes. Under this guidance, each interim reporting period is considered integral to the annual period and tax expense is calculated using an estimated annual effective tax rate. The Company records tax expense each quarter based on its effective tax rate estimated for the full fiscal year and uses that rate to provide for income taxes on a current year-to-date basis, adjusted for discrete taxable events that occur during the interim period. On December 22, 2017, the U.S. Government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Reform Act”). The Tax Reform Act significantly revised the U.S. corporate income tax structure. U.S. GAAP requires that the impact of tax legislation be recognized in the period in which the law is enacted. In accordance with these rules, the Company is including the impact of certain provisions of the Tax Reform Act to the extent they are effective during the current reporting period. Certain other provisions included in the Tax Reform Act have later effective dates for fiscal year filers and will be included in the period in which they become effective. In response to the Tax Reform Act, the SEC issued guidance under Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”) that allows for reasonable estimated amounts to be recorded and a measurement period of up to one year from the date of enactment to revise these provisional amounts as new information is obtained and additional guidance is issued. Pursuant to the guidance included in SAB 118, the Company deems amounts recorded and positions taken to date as provisional estimates to be adjusted and finalized in future periods. Significant judgments and estimates are required in evaluating the Company’s tax positions and provision for taxes on earnings. The Company accounts for uncertainty in income taxes following a two-step approach for recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining whether the weight of available evidence indicates that it is more likely than not that, based on the technical merits, the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. Recognition and measurement are based on management’s best judgment given the facts, circumstances and information available at the end of the accounting period. The Company is subject to taxes on earnings in both the United States and numerous foreign jurisdictions. Foreign earnings are generally taxed at rates that differ from the United States rates, earnings in certain foreign jurisdictions are currently subject to tax in the United States, and the benefit of losses generated in some other foreign jurisdictions is reduced due to full valuation allowance positions in those jurisdictions. Our effective tax rate is impacted by these factors as well as existing laws in both the United States and in the respective countries in which foreign subsidiaries do business. In addition, a change in the mix of earnings and losses among the various jurisdictions could increase or decrease our effective tax rate. Foreign Currency Translation The Company uses the U.S. Dollar as the functional currency of its foreign operations. Gains and losses from remeasurement of foreign currency balances into U.S. Dollars are included in the condensed consolidated statements of earnings. Recent Accounting Standards or Updates Not Yet Effective In August 2017, the Financial Accounting Standards Board (the "FASB") issued Accounting Standard Update ("ASU") 2017-12 which targets improvements to accounting for hedging activities which amends and simplifies existing guidance in order to allow companies to more accurately present the economic effects of risk management activities in the financial statements. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The Company does not expect that the adoption of this guidance will have a material impact on its consolidated financial statements. In May 2017, the FASB issued ASU 2017-09 which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The guidance is effective for the Company beginning in the first quarter of fiscal year 2019. Early adoption is permitted. The Company does not expect that the adoption of this guidance will have a material impact on its consolidated financial statements. In March 2017, the FASB issued ASU 2017-07 which amended its guidance on the accounting related to defined benefit plans and other post-retirement benefits. This amendment requires the service cost component of net periodic pension and post-retirement benefit cost be presented in the same line item as other employee compensation costs, while the other components be presented separately as non-operating income (expense). The amendment will be effective for the Company beginning in its first quarter of fiscal year 2019. Early adoption is permitted. The Company is evaluating the impact of adopting this amendment to its consolidated financial statements. In January 2017, the FASB issued ASU 2017-04 which clarified its guidance to simplify the measurement of goodwill by eliminating the Step 2 impairment test. The new guidance requires companies to perform the goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The amendment will be effective for the Company beginning in its first quarter of fiscal year 2021. The amendment is required to be adopted prospectively. Early adoption is permitted. The Company is evaluating the impact of adopting this amendment to its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02 on accounting for leases. The new standard is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet. The new standard will continue to classify leases as either finance or operating, with classification affecting the pattern of expense recognition in the statement of earnings. The new standard is required to be adopted using |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Mar. 30, 2018 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | DESCRIPTION OF BUSINESS Varex Imaging Corporation (the “Company,” “Varex” or “Varex Imaging”) designs, manufactures, sells and services a broad range of X-ray imaging components, including X-ray tubes, digital detectors and accessories, high voltage connectors, high-energy inspection accelerators, image processing software and workstations, computer-aided diagnostic software, collimators, automatic exposure control devices, generators, ionization chambers and buckys, for use in a range of applications, including radiographic or fluoroscopic imaging, mammography, special procedures, computed tomography, radio therapy and computer-aided detection. The Company sells its products to imaging system original equipment manufacturer (“OEM”) customers for incorporation into new medical diagnostic, radiation therapy, dental, veterinary and industrial imaging systems, to independent service companies, distributors and directly to end-users for replacement purposes. The Company also designs, manufacturers, sells and services industrial products, which include Linatron® X-ray accelerators, imaging processing software and image detection products for security and inspection purposes, such as cargo screening at ports and borders, airports, and nondestructive examination in a variety of applications. The Company generally sells security and inspection products to OEM customers who incorporate Varex’s products into their inspection systems. The Company conducts an active research and development program to focus on new technology and applications in both the medical and industrial X-ray imaging markets. Varex Imaging Corporation was incorporated in Delaware on July 18, 2016 for the purpose of holding the assets and liabilities associated with the Company's business and separated from Varian Medical Systems, Inc. ("Varian") on January 28, 2017, upon which Varian completed the distribution of 100% of the outstanding common stock of Varex to Varian stockholders. Each Varian stockholder received 0.4 of a share of Varex common stock for every one share of Varian common stock held on the close of business on January 20, 2017. Following the separation and distribution, Varex became an independent publicly-traded company and is listed on the NASDAQ Global Select Market under the ticker “VREX.” BASIS OF PRESENTATION AND PRINCIPLE OF CONSOLIDATION The accompanying condensed consolidated financial statements are unaudited. These condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of management, these condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim periods. Prior to the date of separation and distribution, the financial statements were prepared on a stand-alone basis and are derived from Varian’s consolidated financial statements and records as it operated as part of Varian prior to the distribution, in conformity with GAAP. The condensed consolidated financial statements include the accounts of the Company and certain other assets and liabilities that were historically held at the Varian corporate level but are specifically identifiable and attributable to the Company. Prior to the separation and distribution, the condensed consolidated financial statements included allocations of certain Varian corporate expenses, including costs of information technology, human resources, accounting, legal, facilities, insurance, treasury and other corporate and infrastructure services. In addition, allocated costs included research and development expenses from Varian’s scientific research facility. Prior to the separation, these costs were allocated to the Company on the basis of direct usage when identifiable or other systematic measures that reflect utilization of services provided to or benefits received by the Company. The Company considers the expense allocation methodology and results to be reasonable for all periods presented. These condensed consolidated financial statements and the accompanying notes are unaudited and should be read in conjunction with the consolidated financial statements for the fiscal years ended 2017, 2016 and 2015 included in the Company’s Form 10-K, which was filed with the SEC on December 13, 2017. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Segment Reporting The Company has two reportable operating segments; (i) Medical and (ii) Industrial, which align with how its Chief Executive Officer, who has been identified as the Company's Chief Operating Decision Marker, views and measures the Company’s business performance. See Note 17, “Segment Information” for further information on the Company’s segments. Fiscal Year The fiscal years of the Company as reported are the 52 or 53-week period ending on the Friday nearest September 30. Fiscal year 2018 is the 52-week period ending September 28, 2018. Fiscal year 2017 was the 52-week period that ended on September 29, 2017. The second fiscal quarter of 2018 ended on March 30, 2018 . The second fiscal quarter of 2017 ended on March 31, 2017 . Variable Interest Entities For entities in which the Company has variable interests, the Company focuses on identifying which entity has the power to direct the activities that most significantly impact the variable interest entity’s economic performance and which enterprise has the obligation to absorb losses or the right to receive benefits from the variable interest entity. If the Company is the primary beneficiary of a variable interest entity, the assets, liabilities and results of operations of the variable interest entity will be included in the Company’s condensed consolidated financial statements. During the three months ended March 30, 2018 , the Company had three variable interest entities, two of which are consolidated, because it was determined that the Company was the primary beneficiary for those entities. As of March 30, 2018 , total assets and liabilities for consolidated variable interest entities was $4.6 million and $3.0 million , respectively. 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 disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates. Cash and Cash Equivalents The Company considers currency on hand, demand deposits, time deposits and all highly-liquid investments with an original maturity of three months or less at the date of purchase to be cash and cash equivalents. Fair Value Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. There is a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows: Level 1—Quoted prices in active markets for identical assets or liabilities. Level 2—Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or, other inputs that are observable or can be corroborated by observable market data. Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Derivative Instruments and Hedging Activities The Company records all derivatives on the balance sheet at fair value. For a derivative such as an interest rate swap that is designated as a cash flow hedge, the effective portion of changes in the fair value of the derivative is initially reported in accumulated other comprehensive income (loss) on the consolidated balance sheet and the ineffective portion of changes in the fair value of the derivative is recognized directly in earnings. To the extent the effective portion of a hedge subsequently becomes ineffective, the corresponding amount of the change in fair value of the derivative initially reported in accumulated other comprehensive income (loss) is reclassified and is recognized directly in earnings. Accordingly, on a quarterly basis, the Company assesses the effectiveness of each hedging relationship by comparing the changes in fair value or cash flows of the derivative hedging instrument with the changes in fair value or cash flows of a hypothetical designated perfect hedged item or transaction. If the change in the actual swap is greater than the change in the hypothetical perfect swap, the difference is referred to as “ineffectiveness” and is recognized in earnings in the current period. Concentration of Risk Financial instruments that potentially expose the Company to concentrations of credit risk consist principally of cash, cash equivalents and trade accounts receivable. Cash held with financial institutions may exceed the Federal Deposit Insurance Corporation insurance limits or similar limits in foreign jurisdictions. The Company has not experienced any losses on its deposits of cash and cash equivalents. The Company performs ongoing credit evaluations of its customers and, except for government tenders, group purchases and orders with a letter of credit, its industrial customers often provide a down payment. The Company maintains an allowance for doubtful accounts based upon the expected collectability of all accounts receivable. The Company obtains some of the components in its products from a limited group of suppliers or from a single-source supplier. The Company has neither experienced nor expects any significant disruptions to its operations due to supplier concentration. Inventories Inventories are valued at the lower of cost or net realizable value. Excess and obsolete inventories are determined primarily based on future demand forecasts, and write-downs of excess and obsolete inventories are recorded as a component of cost of revenues. Cost is computed using standard cost (which approximates actual cost) on a first-in-first-out basis. Property, Plant and Equipment Property, plant and equipment are stated at cost, net of accumulated depreciation. Major improvements are capitalized, while repairs and maintenance are expensed as incurred. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets. Land is not subject to depreciation, but land improvements are depreciated over fifteen years. Land leasehold rights and leasehold improvements are amortized over the lesser of their estimated useful lives or remaining lease terms. Buildings are depreciated over twenty years. Machinery and equipment are depreciated over their estimated useful lives, which range from three to seven years. Assets subject to lease are amortized over the lesser of their estimated useful lives or remaining lease terms. Estimated useful lives are periodically reviewed and, when appropriate, changes are made prospectively. When certain events or changes in operating conditions occur, asset lives may be adjusted, and an impairment assessment may be performed on the recoverability of the carrying amounts. When assets are retired or otherwise disposed of, the assets and related accumulated depreciation are removed from the accounts. Investments The Company accounts for its equity investments in privately-held companies under the equity method of accounting as the Company holds at least a 20% ownership interest or has the ability to exercise significant influence in these investments. The Company monitors these equity investments for impairment and makes appropriate reductions in carrying values if the Company determines that impairment charges are required for an other than temporary decline in fair value based primarily on the financial condition and near-term prospects of these companies. Goodwill and Intangible Assets Goodwill is recorded when the purchase price of an acquisition exceeds the fair value of the net identified tangible and intangible assets acquired. Purchased intangible assets are carried at cost, net of accumulated amortization. Intangible assets with finite lives are amortized over their estimated useful lives of primarily two to seven years using the straight-line method. Impairment of Long-lived Assets, Intangible Assets and Goodwill The Company reviews long-lived assets and identifiable intangible assets with finite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. The Company assesses these assets for impairment based on their estimated undiscounted future cash flows. If the carrying value of the assets exceeds the estimated future undiscounted cash flows, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. The Company did not recognize any impairment charges for long-lived assets and identifiable intangible assets during any of the periods presented. The Company evaluates goodwill and indefinite lived intangible assets qualitatively for impairment at least annually in beginning of the fourth quarter of each fiscal year or whenever an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. If the Company determines that a quantitative analysis is necessary, the impairment test for goodwill is currently a two-step process. Step one consists of a comparison of the fair value of a reporting unit against its carrying amount, including the goodwill allocated to each reporting unit. The Company determines the fair value of its reporting units based on a combination of income and market approaches. The income approach is based on the present value of estimated future cash flows of the reporting units, and the market approach is based on a market multiple calculated for each reporting unit based on market data of other companies engaged in similar business. If the carrying amount of the reporting unit is in excess of its fair value, step two requires the comparison of the implied fair value of the reporting unit’s goodwill against the carrying amount of the reporting unit’s goodwill. Any excess of the carrying value of the reporting unit’s goodwill over the implied fair value of the reporting unit’s goodwill is recorded as an impairment loss. The impairment test for intangible assets with indefinite useful lives, if any, consists of a comparison of fair value to carrying value, with any excess of carrying value over fair value being recorded as an impairment loss. No impairment charges were recognized for any of the prior periods presented. Loss Contingencies From time to time, the Company is a party to or otherwise involved in legal proceedings, claims and government inspections or investigations and other legal matters, both inside and outside the United States, arising in the ordinary course of its business or otherwise. The Company accrues amounts, to the extent they can be reasonably estimated, that it believes are adequate to address any liabilities related to legal proceedings and other loss contingencies that it believes will result in a probable loss. Product Warranty The Company warrants most of its products for a specific period of time, usually 12 to 24 months from delivery or acceptance, against material defects. The Company provides for the estimated future costs of warranty obligations in cost of revenues when the related revenues are recognized. The accrued warranty costs represent the best estimate at the time of sale of the total costs that the Company will incur to repair or replace product parts that fail while still under warranty. The amount of the accrued estimated warranty costs obligation for established products is primarily based on historical experience as to product failures adjusted for current information on repair costs. For new products, estimates include the historical experience of similar products, as well as reasonable allowance for warranty expenses associated with new products. On a quarterly basis, the Company reviews the accrued warranty costs and updates the historical warranty cost trends, if required. Revenue Recognition The Company’s revenues are derived primarily from the sale of hardware and software products, and services. The Company recognizes its revenues net of any value added or sales tax and net of sales discounts. The Company sells a high proportion of its X-ray products to a limited number of OEM customers. X-ray tubes, digital detectors and image-processing tools and security and inspection products are generally sold on a stand-alone basis. However, the Company occasionally sells its digital detectors, X-ray tubes and imaging processing tools as a package that is optimized for digital X-ray imaging and sells its Linatron ® X-ray accelerators together with its imaging processing software and image detection products to OEM customers that incorporate them into their inspection systems. Service contracts are often sold with certain security and inspection products and computer-aided detection products. Revenues related to service contracts usually start after the expiration of the warranty period for non-software products or upon delivery of software products. For a multiple-element arrangement that includes software and non-software deliverables which includes service contracts, the Company allocates revenues among the software and non-software deliverables on a relative selling price basis. The amounts allocated to the non-software products and software are accounted for as follows: Non-Software Products Non-software products include hardware products, software components that function together with the hardware components to deliver the product’s essential functionality, as well as service contracts. Except as described below under “Service,” the Company recognizes revenues for non-software products when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable and collectability is reasonably assured. For multiple-element revenue arrangements that involve non-software products, a delivered non-software element is considered as a separate unit of accounting when it has stand-alone value. The allocation of revenue to all deliverables based on their relative selling prices is determined at the inception of the arrangement. The selling price for each deliverable is determined using vendor-specific objective evidence (“VSOE”) of selling price, if it exists; otherwise, third-party evidence of selling price (“TPE”) is used. If the Company is not able to establish VSOE or TPE of selling prices for its non-software products, the Company uses the deliverable's estimated selling price (“ESP”). The Company estimates selling prices following an established process that considers market conditions, including the product offerings and pricing strategies of competitors, as well as internal factors such as historical pricing practices and margin objectives. The establishment of product and service ESPs is controlled and reviewed by the appropriate level of management in all of the Company’s businesses. The Company recognizes revenues upon the transfer of risk of loss, which is either at the time of shipment or delivery, depending upon the terms of the contract, provided that all other revenue recognition criteria have been met. Software Products The Company recognizes revenues for software products in accordance with the software revenue recognition guidance. The Company recognizes license revenues when all of the following criteria have been met: persuasive evidence of an arrangement exists, the vendor’s fee is fixed or determinable, collection of the related receivable is probable and delivery of the product has occurred. Revenues earned on software arrangements involving multiple elements are allocated to each element based on VSOE of fair value, which is based on the price charged when the same element is sold separately. In instances when evidence of VSOE of fair value of all undelivered elements exists, but evidence does not exist for one or more delivered elements, revenues are recognized using the residual method. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue. Revenue allocated to maintenance and support is recognized ratably over the maintenance term (typically one year). For those software products that are not sold stand-alone or for which VSOE cannot be established or maintained, all software revenue under the contract will be deferred until the software product(s) that lack VSOE are all delivered. If the only undelivered software element that lacks VSOE is maintenance and support, then the software revenue would be recognized ratably over the term of the maintenance and support arrangement. The Company recognizes revenues upon the transfer of risk of loss, which is either at the time of shipment or delivery, depending upon the shipping terms of the contract, provided that all other criteria for revenue recognition have been met. Service Service revenues include revenues from hardware and software service contracts, bundled support arrangements, paid services and trainings and parts that are sold by the service department. Revenues allocated to service contracts are recognized ratably over the period of performance of the related contracts. Revenues related to services performed on a time-and-materials basis are recognized when they are earned and billable. Deferred Revenues Deferred revenue primarily represents (i) the amount billed, billable or received applicable to non-software products for which parts and services under the warranty contracts have not been delivered, (ii) the amount billed, billable or received applicable to software products for which the Company’s obligations under the maintenance contracts have not been fulfilled and (iii) the amount billed, billable or received for service contracts for which the services have not been rendered. Except for government tenders, group purchases and orders with letters of credit, the Company's security and inspection customers often provide a down payment prior to transfer of risk of loss of ordered products. These payments are also included in deferred revenue on the condensed consolidated balance sheets. Share-Based Compensation Expense The Company has an equity-based incentive plan that provides for the grant of nonqualified stock options and restricted stock units to directors, officers and other employees. The Company also permits employees to purchase shares under the Varex employee stock purchase plan. Prior to the separation, the Company’s employees historically participated in Varian’s equity-based incentive plans. Share-based compensation expense through the date of separation included allocations to the Company based on the awards and terms previously granted to its employees as well as an allocation of Varian’s corporate and shared functional employee expenses. The Company values stock options granted and the option component of the shares of common stock purchased under the equity-based incentive plans and stock purchased under the employee stock purchase plan using the Black-Scholes option-pricing model. Share-based compensation expense for restricted stock units is measured using the fair value of the Company’s stock on the date of grant and is amortized over the award’s respective service period. The Black-Scholes option-pricing model requires the input of certain assumptions, and changes in the assumptions can materially affect the fair value estimates of share-based payment awards. The Company measures and recognizes expense for all share-based payment awards based on their fair values. Share-based compensation expense recognized in the condensed consolidated statements of earnings includes compensation expense for the share-based payment awards based on the grant date fair value estimated in accordance with the guidance on share-based compensation. Share-based compensation expense recognized is based on the value of the portion of share-based payment awards that is ultimately expected to vest. The Company attributes the value of share-based compensation to expense using the straight-line method. The Company considers only the direct tax impacts of share-based compensation awards when calculating the amount of tax windfalls or shortfalls. Shipping and Handling Costs Shipping and handling costs are included as a component of cost of revenues. Research and Development Research and development costs have been expensed as incurred. These costs primarily include employees’ compensation, consulting fees and material costs. Software Development Costs Costs for the development of new software products and substantial enhancements to existing software products are expensed as incurred until technological feasibility has been established, at which time any additional costs would be capitalized. No costs associated with the development of software have been capitalized, as the Company believes its current software development process is essentially completed concurrent with the establishment of technological feasibility. Taxes on Earnings Taxes on earnings, as presented, are calculated in accordance with ASC 740, Accounting for Income Taxes. Under this guidance, each interim reporting period is considered integral to the annual period and tax expense is calculated using an estimated annual effective tax rate. The Company records tax expense each quarter based on its effective tax rate estimated for the full fiscal year and uses that rate to provide for income taxes on a current year-to-date basis, adjusted for discrete taxable events that occur during the interim period. On December 22, 2017, the U.S. Government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Reform Act”). The Tax Reform Act significantly revised the U.S. corporate income tax structure. U.S. GAAP requires that the impact of tax legislation be recognized in the period in which the law is enacted. In accordance with these rules, the Company is including the impact of certain provisions of the Tax Reform Act to the extent they are effective during the current reporting period. Certain other provisions included in the Tax Reform Act have later effective dates for fiscal year filers and will be included in the period in which they become effective. In response to the Tax Reform Act, the SEC issued guidance under Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”) that allows for reasonable estimated amounts to be recorded and a measurement period of up to one year from the date of enactment to revise these provisional amounts as new information is obtained and additional guidance is issued. Pursuant to the guidance included in SAB 118, the Company deems amounts recorded and positions taken to date as provisional estimates to be adjusted and finalized in future periods. Significant judgments and estimates are required in evaluating the Company’s tax positions and provision for taxes on earnings. The Company accounts for uncertainty in income taxes following a two-step approach for recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining whether the weight of available evidence indicates that it is more likely than not that, based on the technical merits, the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. Recognition and measurement are based on management’s best judgment given the facts, circumstances and information available at the end of the accounting period. The Company is subject to taxes on earnings in both the United States and numerous foreign jurisdictions. Foreign earnings are generally taxed at rates that differ from the United States rates, earnings in certain foreign jurisdictions are currently subject to tax in the United States, and the benefit of losses generated in some other foreign jurisdictions is reduced due to full valuation allowance positions in those jurisdictions. Our effective tax rate is impacted by these factors as well as existing laws in both the United States and in the respective countries in which foreign subsidiaries do business. In addition, a change in the mix of earnings and losses among the various jurisdictions could increase or decrease our effective tax rate. Foreign Currency Translation The Company uses the U.S. Dollar as the functional currency of its foreign operations. Gains and losses from remeasurement of foreign currency balances into U.S. Dollars are included in the condensed consolidated statements of earnings. Recent Accounting Standards or Updates Not Yet Effective In August 2017, the Financial Accounting Standards Board (the "FASB") issued Accounting Standard Update ("ASU") 2017-12 which targets improvements to accounting for hedging activities which amends and simplifies existing guidance in order to allow companies to more accurately present the economic effects of risk management activities in the financial statements. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The Company does not expect that the adoption of this guidance will have a material impact on its consolidated financial statements. In May 2017, the FASB issued ASU 2017-09 which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The guidance is effective for the Company beginning in the first quarter of fiscal year 2019. Early adoption is permitted. The Company does not expect that the adoption of this guidance will have a material impact on its consolidated financial statements. In March 2017, the FASB issued ASU 2017-07 which amended its guidance on the accounting related to defined benefit plans and other post-retirement benefits. This amendment requires the service cost component of net periodic pension and post-retirement benefit cost be presented in the same line item as other employee compensation costs, while the other components be presented separately as non-operating income (expense). The amendment will be effective for the Company beginning in its first quarter of fiscal year 2019. Early adoption is permitted. The Company is evaluating the impact of adopting this amendment to its consolidated financial statements. In January 2017, the FASB issued ASU 2017-04 which clarified its guidance to simplify the measurement of goodwill by eliminating the Step 2 impairment test. The new guidance requires companies to perform the goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The amendment will be effective for the Company beginning in its first quarter of fiscal year 2021. The amendment is required to be adopted prospectively. Early adoption is permitted. The Company is evaluating the impact of adopting this amendment to its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02 on accounting for leases. The new standard is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet. The new standard will continue to classify leases as either finance or operating, with classification affecting the pattern of expense recognition in the statement of earnings. The new standard is required to be adopted using |
BUSINESS COMBINATIONS
BUSINESS COMBINATIONS | 6 Months Ended |
Mar. 30, 2018 | |
Business Combinations [Abstract] | |
BUSINESS COMBINATIONS | BUSINESS COMBINATIONS Acquisition of PerkinElmer’s Medical Imaging Business On May 1, 2017, the Company completed the acquisition of the medical imaging business (“Acquired Detector Business”) of PerkinElmer, Inc. ("PKI") for $273.3 million after post-closing working capital adjustments. The acquisition consisted of PerkinElmer Medical Holdings, Inc. and Dexela Limited, together with certain assets of PKI and its direct and indirect subsidiaries relating to digital flat panel X-ray detectors that serve as components for industrial, medical, dental and veterinary X-ray imaging systems. The Acquired Detector Business included about 280 employees, with operations in Santa Clara, California as well as operations in Germany, the Netherlands and the United Kingdom. The acquisition of the Acquired Detector Business was pursuant to the Master Purchase and Sale Agreement, dated December 21, 2016 (the “Purchase Agreement”), by and between PKI and Varian and the subsequent Assignment and Assumption Agreement, dated January 27, 2017, by and between Varian and Varex, pursuant to which Varian assigned and conveyed all of its rights, obligations, title and interest in the Purchase Agreement to Varex. Unaudited Pro Forma Information The unaudited pro-forma amounts presented below for the six months ended March 31, 2017 is presented for informational purposes only. In addition to the Company's results for the periods presented, the amounts below also include effects of the Acquired Detector Business as if it had been consummated on October 1, 2016. Audited results for the Acquired Detector Business for the fiscal years ended 2016 and 2015, are noted in the Company’s Form 8-K/A filed with the SEC on July 7, 2017. These unaudited pro-forma results include effects that are directly attributable to the acquisition which include the amortization of intangible assets, interest expense, and other adjustments, including estimated tax effects. The unaudited pro-forma results do not reflect any operating efficiencies or potential cost savings which may result from the consolidation of the Acquired Detector Business and are not necessarily indicative of what the actual results of operations of the combined company would have been if the acquisition had occurred at the beginning of the period presented nor are they indicative of future results of operations or results that might have been achieved had the acquisition been consummated as of October 1, 2016. Six Months Ended (In millions) March 31, 2017 Revenue $ 383.7 Operating earnings $ 42.8 Net earnings $ 22.1 Net earnings per share, basic $ 0.59 Net earnings per share, diluted $ 0.58 |
RELATED-PARTY TRANSACTIONS
RELATED-PARTY TRANSACTIONS | 6 Months Ended |
Mar. 30, 2018 | |
Related Party Transactions [Abstract] | |
RELATED-PARTY TRANSACTIONS | RELATED-PARTY TRANSACTIONS Transactions with Varian Medical Systems, Inc. During the three months ended March 30, 2018 and March 31, 2017 , the Company recorded sales to Varian of $6.7 million and $6.0 million , respectively, and recorded purchases of products from Varian of $1.1 million and $0.5 million , respectively. During the six months ended March 30, 2018 and March 31, 2017 , the Company recorded sales to Varian of $9.7 million and $11.4 million , respectively, and recorded purchases of products from Varian of $1.5 million and $0.9 million , respectively. Allocated Costs Prior to the separation on January 28, 2017, the condensed consolidated financial statements included allocations of corporate expenses from Varian to the Company. These allocated expenses included costs of information technology, human resources, accounting, legal, facilities, insurance, treasury and other corporate and infrastructure services. These costs were allocated to the Company on the basis of direct usage when identifiable or other systematic measures that reflect utilization of services provided to or benefits received by the Company. Allocated costs included in the accompanying condensed consolidated statements of earnings are as follows: Three Months Ended Six Months Ended (In millions) March 30, 2018 March 31, 2017 March 30, 2018 March 31, 2017 Selling, general and administrative $ — $ 0.5 $ — $ 12.4 Interest expense, net of interest income — — — 0.5 Equity Method Investment The Company has a 40% ownership interest in dpiX Holding LLC (“dpiX Holding”), a four -member consortium that has a 100% ownership interest in dpiX LLC (“dpiX”), a supplier of amorphous silicon based thin film transistor arrays for digital flat panel image detectors. In accordance with the dpiX Holding operating agreement, net profits or losses are allocated to the members, in accordance with their ownership interests. The equity investment in dpiX Holding is accounted for under the equity method of accounting. When the Company recognizes its share of net profits or losses of dpiX Holding, profits or losses in inventory purchased from dpiX are eliminated. During the three months ended March 30, 2018 and March 31, 2017 , the Company recorded income on the equity investment in dpiX Holding of $3.8 million and $0.3 million , respectively. During the six months ended March 30, 2018 and March 31, 2017 , the Company recorded income on the equity investment in dpiX Holding of $3.1 million and $0.4 million , respectively. Income and loss on the equity investment in dpiX Holding is included in other income (expense), net in the condensed consolidated statements of earnings. The carrying value of the equity investment in dpiX Holding was $48.7 million and $50.0 million at March 30, 2018 and September 29, 2017 , respectively, and comprises the majority of the Company's investments in privately-held companies on the condensed consolidated balance sheets of $51.7 million and $52.3 million at March 30, 2018 and September 29, 2017 , respectively. During the three months ended March 30, 2018 and March 31, 2017 , the Company purchased glass transistor arrays from dpiX totaling $5.4 million and $3.7 million , respectively. During the six months ended March 30, 2018 and March 31, 2017 , the Company purchased glass transistor arrays from dpiX totaling $12.0 million and 12.0 million , respectively. These purchases of glass transistor arrays are included as a component of inventories on the condensed consolidated balance sheets or cost of revenues—product in the condensed consolidated statements of earnings for these fiscal years. As of March 30, 2018 and September 29, 2017 , the Company had accounts payable to dpiX totaling $3.5 million and $3.4 million , respectively. In October 2013, the Company entered into an amended agreement with dpiX and other parties that, among other things, provides the Company with the right to 50% of dpiX’s total manufacturing capacity produced after January 1, 2014. The amended agreement requires the Company to pay for 50% of the fixed costs (as defined in the amended agreement), as determined at the beginning of each calendar year. In January 2018, the fixed cost commitment was determined and approved by the dpiX board of directors to be $16.3 million for calendar year 2018. As of March 30, 2018 , the Company had fixed cost commitments of $12.2 million related to this credit agreement remaining for calendar year 2018. The amended agreement will continue unless the ownership structure of dpiX changes (as defined in the amended agreement). The Company has determined that dpiX is a variable interest entity because at-risk equity holders, as a group, lack the characteristics of a controlling financial interest. Majority votes are required to direct the manufacturing activities, legal operations and other activities that most significantly affect dpiX’s economic performance. The Company does not have majority voting rights and no power to direct the activities of dpiX and therefore is not the primary beneficiary of dpiX. The Company’s exposure to loss as a result of its involvement with dpiX is limited to the carrying value of the Company’s investment and fixed cost commitments. |
CONCENTRATION OF CREDIT RISK
CONCENTRATION OF CREDIT RISK | 6 Months Ended |
Mar. 30, 2018 | |
Risks and Uncertainties [Abstract] | |
CONCENTRATION OF CREDIT RISK | CONCENTRATION OF CREDIT RISK Credit is extended to customers based on an evaluation of the customer’s financial condition, and collateral is not required. During the periods presented, one customer accounted for a significant portion of revenues, which are as follows: Three Months Ended Six Months Ended March 30, 2018 March 31, 2017 March 30, 2018 March 31, 2017 Revenues to Canon (formerly Toshiba Medical Systems) 17.3 % 19.3 % 19.2% 21.5% Canon (formerly Toshiba Medical Systems) accounted for 10.8% and 9.0% of the Company’s accounts receivable as of March 30, 2018 and September 29, 2017 , respectively. |
FINANCIAL DERIVATIVES AND HEDGI
FINANCIAL DERIVATIVES AND HEDGING ACTIVITIES | 6 Months Ended |
Mar. 30, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
FINANCIAL DERIVATIVES AND HEDING ACTIVITIES | FINANCIAL DERIVATIVES AND HEDGING ACTIVITIES As part of the Company’s overall risk management practices, the Company enters into financial derivatives, which include interest rate swaps designed as cash flow hedges, to hedge the LIBOR-based, floating interest rate on its debt. The Company records all derivatives on the consolidated balance sheets at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. The effective portion of the gain or loss on derivative instruments designated and qualifying for cash flow hedge accounting is deferred in other comprehensive income. Any ineffectiveness in these designated hedging relationships is recognized in current period earnings. The changes in fair value for all trades that are not designated for hedge accounting are recognized in current period earnings. Deferred gains or losses from designated cash flow hedges are reclassified into earnings in the period that the hedged interest expense effect earnings. The effectiveness of cash flow hedges is assessed at inception and quarterly thereafter. If the instrument were to no longer qualify for hedge accounting due to it becoming probable that the originally-forecasted hedged transactions will not occur, then hedge accounting would cease and the related change in fair value of the ineffective portion of the derivative instrument would be reclassified from accumulated other comprehensive income (loss) and recognized in earnings. The Company does not offset fair value amounts recognized for derivative instruments in its balance sheet for presentation purposes. Credit risk related to derivative transactions reflects the risk that a party to the transaction could fail to meet its obligation under the derivative contracts. Therefore, the Company’s exposure to the counterparty’s credit risk is generally limited to the amounts, if any, by which the counterparty’s obligations to the Company exceed the Company’s obligations to the counterparty. The Company’s policy is to enter into contracts only with financial institutions which meet certain minimum credit ratings to help mitigate counterparty credit risk. Derivatives Designated as Hedging Instruments - Cash Flow Hedges The Company uses interest rate swap contracts as cash flow hedges to manage its exposure to fluctuations in LIBOR interest rates. Interest rate swap contracts hedging variable rate debt effectively fix the LIBOR component of its interest rate for a specific period of time. The effective portion of changes in the fair value of derivatives designated and qualifying as cash flow hedges is deferred as a component of accumulated other comprehensive income in the accompanying consolidated balance sheets and is subsequently reclassified into earnings in the period that the hedged interest expense effects earnings. The ineffective portion of the changes in fair value of derivatives designated as cash flow hedges are recognized directly to earnings and reflected in the accompanying condensed consolidated statements of earnings. No ineffectiveness was reported in earnings for the period ending March 30, 2018 . As of March 30, 2018 , the Company had the following outstanding derivatives designated as hedging instruments: (In millions, except for number of instruments) Number of Instruments Notional Value Interest Rate Swap Contracts 6 $ 285.0 These contracts have maturities of four years or less. The following table summarizes the amount of income recognized from derivative instruments for the periods indicated and the line items in the accompanying statements of operations where the results are recorded for cash flow hedges: Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion) Three months ended Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Three months ended Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion) Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion) (In millions) 2018 2017 2018 2017 2018 2017 Interest Rate Swap Contracts $ 2.8 $ — Interest expense $ (0.1 ) $ — Interest expense $ — $ — Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion) Six months ended Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Six months ended Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion) Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion) (In millions) 2018 2017 2018 2017 2018 2017 Interest Rate Swap Contracts $ 4.8 $ — Interest expense $ (0.3 ) $ — Interest expense $ — $ — The Company expects that approximately $1.2 million recorded as a component of accumulated other comprehensive income (loss) will be realized in the statements of earnings over the next 12 months and the amount will vary depending on interest rates. These derivative instruments are subject to master netting agreements giving effect to rights of offset with each counterparty. The following table summarizes the fair values of derivative instruments as of the periods indicated and the line items in the accompanying consolidated balance sheets where the instruments are recorded: Derivative Assets Derivative Liabilities (In millions) March 30, 2018 September 29, 2017 March 30, 2018 September 29, 2017 Derivatives designated as cash flow hedges Balance sheet location Balance sheet location Interest rate swap contracts Other current assets $ 1.2 $ — Other current liabilities $ — $ (0.6 ) Interest rate swap contracts Other non-current assets 4.9 1.6 Other non-current liabilities — — $ 6.1 $ 1.6 $ — $ (0.6 ) |
FAIR VALUE
FAIR VALUE | 6 Months Ended |
Mar. 30, 2018 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE | FAIR VALUE Assets/Liabilities Measured at Fair Value on a Recurring Basis In the tables below, the Company has segregated all assets and liabilities that are measured at fair value on a recurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date. (In millions) Fair Value Measurements at March 30, 2018 Quoted Prices in Active Markets for Identical Assets and Liabilities Significant Other Significant Unobservable Inputs Total Assets: Cash equivalents - Money market funds $ — $ 13.3 $ — $ 13.3 Interest rate swap contracts — 6.1 — 6.1 Total assets measured at fair value $ — $ 19.4 $ — $ 19.4 Liabilities: Interest rate swap contracts $ — $ — $ — $ — As of March 30, 2018 , the outstanding borrowings under the Company's credit agreement were $417.1 million , net of deferred loan costs, which approximated its fair value. The fair values of certain of the Company’s financial instruments, including bank deposits included in cash and cash equivalents, accounts receivable and accounts payable, also approximate their fair values due to their short maturities. The Company has elected to use the income approach to value its derivative instruments using standard valuation techniques and Level 2 inputs, such as currency spot rates, forward points and credit default swap spreads. There were no financial assets or liabilities measured on a recurring basis using significant unobservable inputs (Level 3) and there were no transfers in or out of Level 1, 2 or 3 during the three months ended March 30, 2018 . At September 29, 2017 , the Company determined the following levels of inputs at fair value for following assets or liabilities: (In millions) Fair Value Measurements at September 29, 2017 Quoted Prices in Active Markets for Identical Assets and Liabilities Significant Other Significant Unobservable Inputs Total Assets: Cash equivalents - Money market funds $ — $ 11.4 $ — $ 11.4 Interest rate swap contracts — 1.6 — 1.6 Total assets measured at fair value $ — $ 13.0 $ — $ 13.0 Liabilities: Interest rate swap contracts $ — $ 0.6 $ — $ 0.6 |
INVENTORIES, NET
INVENTORIES, NET | 6 Months Ended |
Mar. 30, 2018 | |
Inventory Disclosure [Abstract] | |
INVENTORIES, NET | INVENTORIES, NET The following table summarizes the Company’s inventories, net: (In millions) March 30, 2018 September 29, 2017 Raw materials and parts, net $ 148.7 $ 164.5 Work-in-process, net 33.1 20.3 Finished goods, net 63.5 49.7 Total inventories, net $ 245.3 $ 234.5 |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS | 6 Months Ended |
Mar. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL AND INTANGIBLE ASSETS | GOODWILL AND INTANGIBLE ASSETS The following table reflects goodwill by reportable operating segment: (In millions) Medical Industrial Total Balance at September 29, 2017 $ 146.9 $ 95.0 $ 241.9 Settlement of post-close working capital adjustment 0.2 0.1 0.3 Balance at March 30, 2018 $ 147.1 $ 95.1 $ 242.2 There were no impairment charges against goodwill during the three and six months ended March 30, 2018 and March 31, 2017 . The following table reflects the gross carrying amount and accumulated amortization of the Company’s finite-lived intangible assets included in other assets in the condensed consolidated balance sheets: (In millions) March 30, 2018 September 29, 2017 Acquired existing technology $ 57.0 $ 57.0 Patents, licenses and other 19.4 19.4 Customer contracts and supplier relationship 42.1 42.1 Accumulated amortization (39.6 ) (31.2 ) Total intangible assets with finite lives 78.9 87.3 In-process research and development with indefinite lives 4.0 4.0 Total intangible assets $ 82.9 $ 91.3 Amortization expense for intangible assets was $4.2 million and $1.3 million for the three months ended March 30, 2018 and March 31, 2017 , respectively, and $8.4 million and $2.6 million for the six months ended March 30, 2018 and March 31, 2017 , respectively. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Mar. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Product Warranty The following table reflects the changes in the Company’s accrued product warranty: (In millions) Warranty Allowance Accrued product warranty, September 29, 2017 $ 7.0 Charged to cost of revenues 5.9 Product warranty expenditures (5.1 ) Accrued product warranty, March 30, 2018 $ 7.8 Other Commitments See Note 5, “Related Party Transactions” for additional information about the Company’s commitments to dpiX. See Note 13, “Noncontrolling Interests” for additional information about the Company’s commitment to the noncontrolling shareholders of MeVis. Contingencies From time to time, the Company is a party to or otherwise involved in legal proceedings, claims and government inspections or investigations and other legal matters, both inside and outside the United States, arising in the ordinary course of its business or otherwise. The Company accrues amounts, to the extent they can be reasonably estimated, that it believes are adequate to address any liabilities related to legal proceedings and other loss contingencies that the Company believes will result in a probable loss (including, among other things, probable settlement value). A loss or a range of loss is disclosed when it is reasonably possible that a material loss will be incurred and can be estimated or when it is reasonably possible that the amount of a loss, when material, will exceed the recorded provision. The Company did not have any contingent liabilities as of March 30, 2018 and September 29, 2017 . Legal expenses are expensed as incurred. Restructuring Charges In the second quarter of fiscal year 2018, the Company implemented a workforce reduction. The Company incurred $1.7 million in restructuring charges in the second quarter of fiscal year 2018. The restructuring charges were a results of consolidating engineering activities and such charges were primarily comprised of employee severance and the Company expects such charges to be complete in fiscal year 2018 and 2019. The restructuring charges are included in selling, general and administrative expenses in the Condensed Consolidated Statement of Earnings. |
BORROWINGS
BORROWINGS | 6 Months Ended |
Mar. 30, 2018 | |
Debt Disclosure [Abstract] | |
BORROWINGS | BORROWINGS Credit Facility On January 25, 2017, the Company entered into a revolving credit facility (the "Previous Revolving Credit Facility"), which matured in five years, and a term facility (the "Previous Term Facility"), which was to be repaid over five years, with 7.5% payable in quarterly installments during the first two years, 10% payable in quarterly installments during the third and fourth years and 15% payable in quarterly installments in the fifth year. The credit agreement relating to the Previous Revolving Credit Facility and the Previous Term Facility (the “Previous Credit Agreement”) contained various customary restrictive covenants that limited, among other things, the incurrence of indebtedness by Varex and its subsidiaries, the grant or incurrence of liens by Varex and its subsidiaries, the entry into sale and leaseback transactions by Varex and its subsidiaries, and the entry into certain fundamental change transactions by Varex and its subsidiaries. It also contained customary events of default and certain financial covenants, including the requirement to maintain certain financial ratios. The Previous Credit Agreement was secured by the stock and assets of certain Varex subsidiaries. The Previous Credit Agreement had several borrowing and interest rate options including the following indices: (i) the LIBOR rate, or (ii) the base rate (equal to the greater of the prime rate, the federal funds rate plus 0.50% or the LIBOR rate for a one-month period plus 1.00% ); provided that if the base rate shall be less than zero. Loans under the Previous Credit Agreement bore interest at a rate per annum using the applicable indices plus a varying interest rate margin of between 1.125% and 2.125% . The Previous Credit Agreement also provided for fees applicable to amounts available to be drawn under outstanding letters of credit of 0.125% and a fee on unused commitments which ranges from 0.20% to 0.40% . On January 25, 2017, Varex borrowed $203 million under Previous Term Facility and transferred $200.0 million to Varian. On May 1, 2017 and in connection with the acquisition of the Acquired Detector Business, Varex entered into a new secured revolving credit facility (the "Revolving Credit Facility") in an aggregate principal amount of up to $200 million with a five -year term, and a secured term facility (the "Term Facility" and together with the Revolving Credit Facility, the "Credit Agreement") in an aggregate principal amount of $400 million . The Term Facility will be repaid over five years, with 5.0% payable in quarterly installments during each of the first two years of the term thereof, 7.5% payable in quarterly installments during the third and fourth years of the term thereof, and 10% payable in quarterly installments in the fifth year of the term thereof, with the remaining amount due at maturity. Varex used the net proceeds from the Term Facility, and the net proceeds from approximately $97 million drawn on the Revolving Credit Facility, to pay the approximately $276 million purchase price for the acquisition of the Acquired Detector Business, plus related credit facility fees, and to repay all of Varex’s obligations under the Previous Credit Agreement. The Credit Agreement contains various customary restrictive covenants that limits, among other things, the incurrence of indebtedness by Varex and its subsidiaries, the grant or incurrence of liens by Varex and its subsidiaries, the entry into sale and leaseback transactions by Varex and its subsidiaries, and the entry into certain fundamental change transactions by Varex and its subsidiaries. It also contains customary events of default and certain financial covenants, including the requirement to maintain certain financial ratios. The Credit Agreement is secured by the stock and assets of Varex’s material subsidiaries. The Credit Agreement has several borrowing and interest rate options including the following indices: (a) LIBOR rate, or (b) the base rate (equal to the greater of the prime rate, the federal funds rate plus 0.50% or the LIBOR rate for a one-month period plus 1.00% ); provided that if the base rate shall be less than zero. Loans under the Credit Agreement bear interest at a rate per annum using the applicable indices plus a varying interest rate margin of between 1.75% and 2.75% (for LIBOR rate loans) and 0.75% - 1.75% (for base rate loans). The Credit Agreement also provides for fees applicable to amounts available to be drawn under outstanding letters of credit of 0.125% , and a fee on unused commitments which ranges from 0.25% to 0.40% . (Dollars in millions) March 30, 2018 September 29, 2017 $ Change Current portion of Term Facility $ 20.0 $ 20.0 $ — Revolving Credit Facility 46.0 104.0 (58.0 ) Long-Term portion of Term Facility 360.0 370.0 (10.0 ) Total debt outstanding, gross 426.0 494.0 (68.0 ) Debt issuance costs (8.9 ) (10.1 ) 1.2 Total debt outstanding, net $ 417.1 $ 483.9 $ (66.8 ) At March 30, 2018 , the Company had approximately $154 million of the Revolving Credit Facility available for borrowings. |
REDEEMABLE NONCONTROLLING INTER
REDEEMABLE NONCONTROLLING INTERESTS | 6 Months Ended |
Mar. 30, 2018 | |
Noncontrolling Interest [Abstract] | |
REDEEMABLE NONCONTROLLING INTERESTS | REDEEMABLE NONCONTROLLING INTERESTS In April 2015, the Company completed the acquisition of 73.5% of the then outstanding shares of MeVis, a public company based in Bremen, Germany that provides image processing software and services for cancer screening. In August 2015, the Company, through one of its German subsidiaries, entered into a Domination and Profit and Loss Transfer Agreement (the “DPLTA”) with MeVis. In October 2015, the DPLTA became effective upon its registration at the local court of Bremen, Germany. Under the DPLTA, MeVis subordinates its management to the Company and undertakes to transfer all of its annual profits and losses to the Company. In return, the DPLTA grants the noncontrolling shareholders of MeVis: (1) an annual recurring net compensation of €0.95 per MeVis share starting from January 1, 2015; and (2) a put right for their MeVis shares at €19.77 per MeVis share. Upon effectiveness of the DPLTA, the noncontrolling interests in MeVis became redeemable as a result of the put right and were reclassified to temporary equity. Changes in redeemable noncontrolling interests relating to MeVis were as follows: (In millions) Redeemable Noncontrolling Interests Balance at beginning of period, September 29, 2017 $ 11.2 Net earnings attributable to noncontrolling interests 0.3 Other, including foreign currency remeasurement 0.2 Balance at end of period, March 30, 2018 $ 11.7 At March 30, 2018 , noncontrolling shareholders together held approximately 0.5 million shares of MeVis, representing 26.3% of the outstanding shares. |
NET EARNINGS PER SHARE
NET EARNINGS PER SHARE | 6 Months Ended |
Mar. 30, 2018 | |
Earnings Per Share [Abstract] | |
NET EARNINGS PER SHARE | NET EARNINGS PER SHARE Basic net earnings per common share is computed by dividing the net earnings for the period by the weighted average number of shares of common stock outstanding during the reporting period. Diluted net earnings per common share reflects the effects of potentially dilutive securities, which is computed by dividing net earnings by the sum of the weighted average number of common shares outstanding and dilutive common shares, which consists of stock options and unvested restricted stock. A reconciliation of the numerator and denominator used in the calculation of basic and diluted net income per common share is as follows: Three Months Ended Six Months Ended (In millions, except per share amounts) March 30, 2018 March 31, 2017 March 30, 2018 March 31, 2017 Net earnings attributable to Varex $ 12.2 $ 15.0 $ 23.6 $ 26.1 Weighted average shares outstanding - basic 37.8 37.5 37.8 37.5 Dilutive effect of potential common shares 0.6 0.3 0.5 0.3 Weighted average shares outstanding - diluted 38.4 37.8 38.3 37.8 Net earnings per share attributable to Varex - basic $ 0.32 $ 0.40 $ 0.62 $ 0.70 Net earnings per share attributable to Varex - diluted $ 0.32 $ 0.40 $ 0.62 $ 0.69 Anti-dilutive employee shared based awards, excluded 0.1 1.0 1.0 1.0 The Company excludes potentially dilutive common shares (consisting of shares underlying stock options, unvested stock awards and purchase rights granted under the employee stock purchase plan) from the computation of diluted weighted average shares outstanding if the inclusion of the shares underlying these stock awards would be anti-dilutive to earnings per share. |
EMPLOYEE STOCK PLANS
EMPLOYEE STOCK PLANS | 6 Months Ended |
Mar. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
EMPLOYEE STOCK PLANS | EMPLOYEE STOCK PLANS Employee Stock Plans Prior to the separation and distribution, the Company’s employees, consultants and certain members of the Company's board of directors were eligible to participate in Varian's 2005 Omnibus Stock Plan (the "2005 Plan"). The 2005 Plan provides for the grants of stock options, restricted stock units, performance units and deferred stock units among other types of awards. The expense associated with the Company’s employees who participated in the Third Amended 2005 Plan is included in the accompanying condensed consolidated statements of earnings. Subsequent to the separation and distribution, the Company's employees, consultants and members of the Company's board of directors are eligible to participate in Varex's 2017 Omnibus Stock Plan and only in the case of employees, Varex's 2017 Employee Stock Purchase Plan. Share-Based Compensation Expense As share-based compensation expense recognized in the condensed consolidated statements of earnings is based on awards ultimately expected to vest. Share-based compensation expense includes expenses related to the Company’s direct employees. Prior to the separation, Varian also charged the Company for the allocated share-based compensation costs of certain employees of Varian who provided selling, general and administrative services on the Company’s behalf. The table below summarizes the effect of recording share-based compensation expense and for the option component of the employee stock purchase plan shares: Three Months Ended Six Months Ended (In millions) March 30, 2018 March 31, 2017 March 30, 2018 March 31, 2017 Cost of revenues $ 0.4 $ 0.1 $ 0.6 $ 0.3 Research and development 0.5 0.4 0.8 0.7 Selling, general and administrative 1.7 0.9 3.3 2.6 Total share-based compensation expense $ 2.6 $ 1.4 $ 4.7 $ 3.6 Stock Option Activity The following table summarizes the activity for stock options under Varex’s 2017 Omnibus Stock Plan and 2017 Employee Stock Purchase Plan for the Company’s employees: Options Outstanding (In thousands, except per share amounts and the remaining term) Number of Shares Weighted Average Weighted Average Remaining Term (in years) Aggregate Intrinsic Value (1) Balance at September 29, 2017 1,926 $ 29.11 Granted 232 37.12 Canceled, expired or forfeited (2 ) 30.74 Exercised (83 ) 26.42 Balance at March 30, 2018 2,073 $ 30.11 5.1 $ 12,058 Exercisable at March 30, 2018 965 $ 27.99 4.0 $ 7,519 (1) The aggregate intrinsic value represents the total pre-tax intrinsic value, which is computed based on the difference between the exercise price and the closing price of Varex common stock of $35.78 as of March 30, 2018 , the last trading date of the Company's first quarter, and which represents the amount that would have been received by the option holders had all option holders exercised their options and sold the shares received upon exercise as of that date. Restricted Stock Units The following table summarizes the activity for restricted stock units under Varex’s 2017 Omnibus Stock Plan for the Company’s employees: (In thousands, except per share amounts) Number of Shares Weighted Average Balance at September 29, 2017 525 $ 29.76 Granted 336 37.11 Vested (183 ) 29.35 Canceled or expired — — Balance at March 30, 2018 678 $ 33.49 |
TAXES ON EARNINGS
TAXES ON EARNINGS | 6 Months Ended |
Mar. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
TAXES ON EARNINGS | TAXES ON EARNINGS Three Months Ended Six Months Ended March 30, 2018 March 31, 2017 March 30, 2018 March 31, 2017 Estimated effective tax rate 21.7 % 33.0 % (4.8 )% 35.6 % The Company recognized income tax expense of $3.4 million and $7.4 million for the three months ended March 30, 2018 and March 31, 2017 , respectively, for effective rates of 21.7% and 33.0% , respectively. The Company recognized an income tax benefit of $(1.1) million and income tax expense of $14.5 million for the six months ended March 30, 2018 and March 31, 2017 , respectively, for effective rates of (4.8)% and 35.6% , respectively. The Company's effective tax rate decreased primarily due to the enactment of the Tax Reform Act in the U.S. during the period. The Tax Reform Act significantly revised the U.S. corporate income tax structure. Among the revisions impacting the Company’s effective tax rate are a lower U.S. corporate statutory rate going from 35% to 21% effective January 1, 2018, a repeal of the deduction for domestic production activities, and changes to the way foreign earnings are taxed. As a September fiscal year filer, the lower corporate income tax rate will be phased in resulting in a U.S. statutory federal rate of 24.5% for the fiscal year ending September 28, 2018. U.S. GAAP requires the impact of tax legislation to be recognized in the period in which the law is enacted. The lower U.S. statutory rate has been included in the estimated annual effective rate used to calculate the year-to-date income tax benefit as of the end of the quarter. The repeal of the deduction for domestic production does not apply to the Company until the fiscal year beginning September 29, 2018, and so has also been included in the calculation of the estimated annual effective rate. Also, as a result of the Tax Reform Act, the Company recorded income tax expense of $3.4 million for the tax on the deemed repatriation of deferred foreign earnings offset by a tax benefit of $9.5 million due to the revaluation of net deferred taxes. The $3.4 million of tax on the deemed repatriation of foreign earnings has been reduced by the utilization of an estimated foreign tax credit carryforward from the prior fiscal year which was previously subject to a full valuation allowance. The anticipated utilization of this deferred tax asset resulted in the release of that valuation allowance and the benefit of approximately $1.9 million has been included in the income tax benefit for the quarter ended March 30, 2018. The changes included in the Tax Reform Act are broad, complex, and subject to interpretation. In addition, the calculation of the impact of certain provisions is dependent on amounts such as current year earnings and year end balances that, while they can be reasonably estimated, will only become final at the end of future accounting periods. On December 22, 2017, the SEC issued SAB 118, allowing registrants to consider the estimated impact of the U.S. legislation as “provisional” when it does not have the information necessary to complete the accounting for the change in tax law. In accordance with SAB 118, the tax on the deemed repatriation of foreign earnings of $3.4 million and the benefit of $9.5 million for the revaluation of net deferred taxes represent the Company’s best and reasonable estimate based on interpretation of the U.S. legislation, are considered provisional, and will be finalized before December 22, 2018. These provisional estimates may be revised as adjustments to tax expense in subsequent periods as additional information is obtained and as additional guidance is issued by regulatory bodies. Certain other provisions included in the Tax Reform Act have later effective dates for fiscal year filers and may have an impact on the Company’s future effective tax rate. These include, but are not limited to, changes in the taxation of foreign earnings. The Company is in the process of analyzing the effects of these provisions including GILTI (global intangible low-taxed income), BEAT (base-erosion anti-abuse tax), FDII (foreign-derived intangible income), limitations on interest expense deductions (if certain conditions apply), and other components of the Tax Reform Act. The Company has elected to account for GILTI as a period cost if and when incurred pursuant to the exposure draft issued by the FASB in January 2018. Other future adjustments to tax expense may include the impact of actions the Company may take as a result of the Tax Reform Act. As a result of the changes to the U.S. taxation of foreign earnings included in the Tax Reform Act, the Company is re-evaluating its previous indefinite reinvestment assertion with respect to these earnings. The preliminary outcome of this evaluation results in the Company revoking its assertion for current and future earnings for all countries while maintaining the assertion that historic earnings are indefinitely reinvested outside the U.S. Due to the level of earnings available for repatriation, the treaty benefits applicable to jurisdictions in which those earnings are located, and the now favorable U.S. tax treatment of repatriated foreign earnings, the amount of deferred tax liability recorded in the current quarter related to the potential repatriation is approximately $0.1 million . This estimated liability is for U.S. State income taxes that may be due if the foreign earnings were actually repatriated in the form of a dividend. As a number of states are still making legislative changes in response to the Tax Reform Act, and under the guidance provided by SAB 118, this estimated amount, as well as the assertion itself, are deemed provisional and subject to change in future periods. These amounts are expected to be finalized no later than the December 22, 2018 due date. |
SEGMENT INFORMATION
SEGMENT INFORMATION | 6 Months Ended |
Mar. 30, 2018 | |
Segment Reporting [Abstract] | |
SEGMENT INFORMATION | SEGMENT INFORMATION The Company has two reportable operating segments; (i) Medical and (ii) Industrial, which align with how its Chief Executive Officer views and measures the Company's business performance. The Company's Chief Executive Officer is the Chief Operating Decision Maker and allocates resources to and evaluates the financial performance of each operating segment primarily based on revenues and gross margin. Description of Segments The Medical segment designs, manufactures, sells and services X-ray imaging components for use in a range of applications, including radiographic or fluoroscopic imaging, mammography, special procedures, computed tomography, radiation therapy and computer-aided detection. The Company provides a broad range of X-ray imaging components for Medical customers including X-ray tubes, digital detectors, high voltage connectors, image-processing software and workstations, computer-aided diagnostic software, collimators, automatic exposure control devices, generators, ionization chambers and buckys. The Company’s X-ray imaging components are primarily sold to imaging system OEM customers that incorporate them into their medical diagnostic, radiation therapy, dental, veterinary and industrial imaging systems. The Company also sells its X-ray imaging components to independent service companies, distributors and directly to end-users for replacement purposes. The Industrial segment designs, manufactures, sells and services security and inspection products, which include Linatron X-ray accelerators, X-ray tubes, digital detectors, high voltage connectors, image processing software and image detection products for security and inspection purposes, such as cargo screening at ports and borders, airports, and nondestructive examination in a variety of applications. The Company generally sells its Industrial products to OEM customers that incorporate its products into their inspection systems. Accordingly, the following information is provided for purposes of achieving an understanding of operations, but it may not be indicative of the financial results of the reported segments were they independent organizations. In addition, comparisons of the Company’s operations to similar operations of other companies may not be meaningful. Information related to the Company’s segments is as follows: Three Months Ended Six Months Ended (In millions) March 30, 2018 March 31, 2017 March 30, 2018 March 31, 2017 Revenues Medical $ 158.5 $ 125.7 $ 297.7 $ 257.4 Industrial 42.7 29.1 79.7 54.8 Total revenues 201.2 154.8 $ 377.4 $ 312.2 Gross margin Medical 53.5 44.6 $ 99.9 $ 91.5 Industrial 16.6 13.0 31.7 24.9 Total gross margin $ 70.1 $ 57.6 $ 131.6 $ 116.4 Total operating expenses 52.9 34.1 100.9 74.5 Interest and other income (expenses), net (1.5 ) (1.1 ) (7.9 ) (1.2 ) Earnings before taxes 15.7 22.4 22.8 40.7 Taxes on earnings 3.4 7.4 (1.1 ) 14.5 Net earnings 12.3 15.0 23.9 26.2 Less: Net earnings attributable to noncontrolling interests 0.1 — 0.3 0.1 Net earnings attributable to Varex $ 12.2 $ 15.0 $ 23.6 $ 26.1 The following table summarizes the Company’s total assets by its reportable segments: (In millions) March 30, 2018 September 29, 2017 Identifiable assets Medical $ 778.9 $ 832.1 Industrial 207.0 208.0 Total reportable segments $ 985.9 $ 1,040.1 |
SUMMARY OF SIGNIFICANT ACCOUN25
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Mar. 30, 2018 | |
Accounting Policies [Abstract] | |
Basis of Presentation | The accompanying condensed consolidated financial statements are unaudited. These condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of management, these condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim periods. Prior to the date of separation and distribution, the financial statements were prepared on a stand-alone basis and are derived from Varian’s consolidated financial statements and records as it operated as part of Varian prior to the distribution, in conformity with GAAP. |
Consolidation | The condensed consolidated financial statements include the accounts of the Company and certain other assets and liabilities that were historically held at the Varian corporate level but are specifically identifiable and attributable to the Company. Prior to the separation and distribution, the condensed consolidated financial statements included allocations of certain Varian corporate expenses, including costs of information technology, human resources, accounting, legal, facilities, insurance, treasury and other corporate and infrastructure services. In addition, allocated costs included research and development expenses from Varian’s scientific research facility. Prior to the separation, these costs were allocated to the Company on the basis of direct usage when identifiable or other systematic measures that reflect utilization of services provided to or benefits received by the Company. The Company considers the expense allocation methodology and results to be reasonable for all periods presented. These condensed consolidated financial statements and the accompanying notes are unaudited and should be read in conjunction with the consolidated financial statements for the fiscal years ended 2017, 2016 and 2015 included in the Company’s Form 10-K, which was filed with the SEC on December 13, 2017. |
Segment Reporting | Segment Reporting The Company has two reportable operating segments; (i) Medical and (ii) Industrial, which align with how its Chief Executive Officer, who has been identified as the Company's Chief Operating Decision Marker, views and measures the Company’s business performance. |
Fiscal Year | Fiscal Year The fiscal years of the Company as reported are the 52 or 53-week period ending on the Friday nearest September 30. Fiscal year 2018 is the 52-week period ending September 28, 2018. Fiscal year 2017 was the 52-week period that ended on September 29, 2017. The second fiscal quarter of 2018 ended on March 30, 2018 . The second fiscal quarter of 2017 ended on March 31, 2017 . |
Variable Interest Entities | Variable Interest Entities For entities in which the Company has variable interests, the Company focuses on identifying which entity has the power to direct the activities that most significantly impact the variable interest entity’s economic performance and which enterprise has the obligation to absorb losses or the right to receive benefits from the variable interest entity. If the Company is the primary beneficiary of a variable interest entity, the assets, liabilities and results of operations of the variable interest entity will be included in the Company’s condensed consolidated financial statements. During the three months ended March 30, 2018 , the Company had three variable interest entities, two of which are consolidated, because it was determined that the Company was the primary beneficiary for those entities. |
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 disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers currency on hand, demand deposits, time deposits and all highly-liquid investments with an original maturity of three months or less at the date of purchase to be cash and cash equivalents. |
Fair Value | Fair Value Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. There is a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows: Level 1—Quoted prices in active markets for identical assets or liabilities. Level 2—Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or, other inputs that are observable or can be corroborated by observable market data. Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
Derivative Instruments and Hedging Activities | Derivative Instruments and Hedging Activities The Company records all derivatives on the balance sheet at fair value. For a derivative such as an interest rate swap that is designated as a cash flow hedge, the effective portion of changes in the fair value of the derivative is initially reported in accumulated other comprehensive income (loss) on the consolidated balance sheet and the ineffective portion of changes in the fair value of the derivative is recognized directly in earnings. To the extent the effective portion of a hedge subsequently becomes ineffective, the corresponding amount of the change in fair value of the derivative initially reported in accumulated other comprehensive income (loss) is reclassified and is recognized directly in earnings. Accordingly, on a quarterly basis, the Company assesses the effectiveness of each hedging relationship by comparing the changes in fair value or cash flows of the derivative hedging instrument with the changes in fair value or cash flows of a hypothetical designated perfect hedged item or transaction. If the change in the actual swap is greater than the change in the hypothetical perfect swap, the difference is referred to as “ineffectiveness” and is recognized in earnings in the current period. |
Concentration of Risk | Concentration of Risk Financial instruments that potentially expose the Company to concentrations of credit risk consist principally of cash, cash equivalents and trade accounts receivable. Cash held with financial institutions may exceed the Federal Deposit Insurance Corporation insurance limits or similar limits in foreign jurisdictions. The Company has not experienced any losses on its deposits of cash and cash equivalents. The Company performs ongoing credit evaluations of its customers and, except for government tenders, group purchases and orders with a letter of credit, its industrial customers often provide a down payment. The Company maintains an allowance for doubtful accounts based upon the expected collectability of all accounts receivable. The Company obtains some of the components in its products from a limited group of suppliers or from a single-source supplier. The Company has neither experienced nor expects any significant disruptions to its operations due to supplier concentration. Credit is extended to customers based on an evaluation of the customer’s financial condition, and collateral is not required. |
Inventories | Inventories Inventories are valued at the lower of cost or net realizable value. Excess and obsolete inventories are determined primarily based on future demand forecasts, and write-downs of excess and obsolete inventories are recorded as a component of cost of revenues. Cost is computed using standard cost (which approximates actual cost) on a first-in-first-out basis. |
Property, Plant and Equipment | Property, Plant and Equipment Property, plant and equipment are stated at cost, net of accumulated depreciation. Major improvements are capitalized, while repairs and maintenance are expensed as incurred. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets. Land is not subject to depreciation, but land improvements are depreciated over fifteen years. Land leasehold rights and leasehold improvements are amortized over the lesser of their estimated useful lives or remaining lease terms. Buildings are depreciated over twenty years. Machinery and equipment are depreciated over their estimated useful lives, which range from three to seven years. Assets subject to lease are amortized over the lesser of their estimated useful lives or remaining lease terms. Estimated useful lives are periodically reviewed and, when appropriate, changes are made prospectively. When certain events or changes in operating conditions occur, asset lives may be adjusted, and an impairment assessment may be performed on the recoverability of the carrying amounts. When assets are retired or otherwise disposed of, the assets and related accumulated depreciation are removed from the accounts. |
Investments | Investments The Company accounts for its equity investments in privately-held companies under the equity method of accounting as the Company holds at least a 20% ownership interest or has the ability to exercise significant influence in these investments. The Company monitors these equity investments for impairment and makes appropriate reductions in carrying values if the Company determines that impairment charges are required for an other than temporary decline in fair value based primarily on the financial condition and near-term prospects of these companies. |
Goodwill and Intangible Assets | Goodwill and Intangible Assets Goodwill is recorded when the purchase price of an acquisition exceeds the fair value of the net identified tangible and intangible assets acquired. Purchased intangible assets are carried at cost, net of accumulated amortization. Intangible assets with finite lives are amortized over their estimated useful lives of primarily two to seven years using the straight-line method. |
Impairment of Long-lived Assets, Intangible Assets and Goodwill | Impairment of Long-lived Assets, Intangible Assets and Goodwill The Company reviews long-lived assets and identifiable intangible assets with finite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. The Company assesses these assets for impairment based on their estimated undiscounted future cash flows. If the carrying value of the assets exceeds the estimated future undiscounted cash flows, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. The Company did not recognize any impairment charges for long-lived assets and identifiable intangible assets during any of the periods presented. The Company evaluates goodwill and indefinite lived intangible assets qualitatively for impairment at least annually in beginning of the fourth quarter of each fiscal year or whenever an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. If the Company determines that a quantitative analysis is necessary, the impairment test for goodwill is currently a two-step process. Step one consists of a comparison of the fair value of a reporting unit against its carrying amount, including the goodwill allocated to each reporting unit. The Company determines the fair value of its reporting units based on a combination of income and market approaches. The income approach is based on the present value of estimated future cash flows of the reporting units, and the market approach is based on a market multiple calculated for each reporting unit based on market data of other companies engaged in similar business. If the carrying amount of the reporting unit is in excess of its fair value, step two requires the comparison of the implied fair value of the reporting unit’s goodwill against the carrying amount of the reporting unit’s goodwill. Any excess of the carrying value of the reporting unit’s goodwill over the implied fair value of the reporting unit’s goodwill is recorded as an impairment loss. The impairment test for intangible assets with indefinite useful lives, if any, consists of a comparison of fair value to carrying value, with any excess of carrying value over fair value being recorded as an impairment loss. |
Loss Contingencies | Loss Contingencies From time to time, the Company is a party to or otherwise involved in legal proceedings, claims and government inspections or investigations and other legal matters, both inside and outside the United States, arising in the ordinary course of its business or otherwise. The Company accrues amounts, to the extent they can be reasonably estimated, that it believes are adequate to address any liabilities related to legal proceedings and other loss contingencies that it believes will result in a probable loss. |
Product Warranty | Product Warranty The Company warrants most of its products for a specific period of time, usually 12 to 24 months from delivery or acceptance, against material defects. The Company provides for the estimated future costs of warranty obligations in cost of revenues when the related revenues are recognized. The accrued warranty costs represent the best estimate at the time of sale of the total costs that the Company will incur to repair or replace product parts that fail while still under warranty. The amount of the accrued estimated warranty costs obligation for established products is primarily based on historical experience as to product failures adjusted for current information on repair costs. For new products, estimates include the historical experience of similar products, as well as reasonable allowance for warranty expenses associated with new products. On a quarterly basis, the Company reviews the accrued warranty costs and updates the historical warranty cost trends, if required. |
Revenue Recognition | Revenue Recognition The Company’s revenues are derived primarily from the sale of hardware and software products, and services. The Company recognizes its revenues net of any value added or sales tax and net of sales discounts. The Company sells a high proportion of its X-ray products to a limited number of OEM customers. X-ray tubes, digital detectors and image-processing tools and security and inspection products are generally sold on a stand-alone basis. However, the Company occasionally sells its digital detectors, X-ray tubes and imaging processing tools as a package that is optimized for digital X-ray imaging and sells its Linatron ® X-ray accelerators together with its imaging processing software and image detection products to OEM customers that incorporate them into their inspection systems. Service contracts are often sold with certain security and inspection products and computer-aided detection products. Revenues related to service contracts usually start after the expiration of the warranty period for non-software products or upon delivery of software products. For a multiple-element arrangement that includes software and non-software deliverables which includes service contracts, the Company allocates revenues among the software and non-software deliverables on a relative selling price basis. |
Non-Software Products | Non-Software Products Non-software products include hardware products, software components that function together with the hardware components to deliver the product’s essential functionality, as well as service contracts. Except as described below under “Service,” the Company recognizes revenues for non-software products when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable and collectability is reasonably assured. For multiple-element revenue arrangements that involve non-software products, a delivered non-software element is considered as a separate unit of accounting when it has stand-alone value. The allocation of revenue to all deliverables based on their relative selling prices is determined at the inception of the arrangement. The selling price for each deliverable is determined using vendor-specific objective evidence (“VSOE”) of selling price, if it exists; otherwise, third-party evidence of selling price (“TPE”) is used. If the Company is not able to establish VSOE or TPE of selling prices for its non-software products, the Company uses the deliverable's estimated selling price (“ESP”). The Company estimates selling prices following an established process that considers market conditions, including the product offerings and pricing strategies of competitors, as well as internal factors such as historical pricing practices and margin objectives. The establishment of product and service ESPs is controlled and reviewed by the appropriate level of management in all of the Company’s businesses. The Company recognizes revenues upon the transfer of risk of loss, which is either at the time of shipment or delivery, depending upon the terms of the contract, provided that all other revenue recognition criteria have been met. |
Software Products | Software Products The Company recognizes revenues for software products in accordance with the software revenue recognition guidance. The Company recognizes license revenues when all of the following criteria have been met: persuasive evidence of an arrangement exists, the vendor’s fee is fixed or determinable, collection of the related receivable is probable and delivery of the product has occurred. Revenues earned on software arrangements involving multiple elements are allocated to each element based on VSOE of fair value, which is based on the price charged when the same element is sold separately. In instances when evidence of VSOE of fair value of all undelivered elements exists, but evidence does not exist for one or more delivered elements, revenues are recognized using the residual method. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue. Revenue allocated to maintenance and support is recognized ratably over the maintenance term (typically one year). For those software products that are not sold stand-alone or for which VSOE cannot be established or maintained, all software revenue under the contract will be deferred until the software product(s) that lack VSOE are all delivered. If the only undelivered software element that lacks VSOE is maintenance and support, then the software revenue would be recognized ratably over the term of the maintenance and support arrangement. The Company recognizes revenues upon the transfer of risk of loss, which is either at the time of shipment or delivery, depending upon the shipping terms of the contract, provided that all other criteria for revenue recognition have been met. |
Service | Service Service revenues include revenues from hardware and software service contracts, bundled support arrangements, paid services and trainings and parts that are sold by the service department. Revenues allocated to service contracts are recognized ratably over the period of performance of the related contracts. Revenues related to services performed on a time-and-materials basis are recognized when they are earned and billable. |
Deferred Revenues | Deferred Revenues Deferred revenue primarily represents (i) the amount billed, billable or received applicable to non-software products for which parts and services under the warranty contracts have not been delivered, (ii) the amount billed, billable or received applicable to software products for which the Company’s obligations under the maintenance contracts have not been fulfilled and (iii) the amount billed, billable or received for service contracts for which the services have not been rendered. Except for government tenders, group purchases and orders with letters of credit, the Company's security and inspection customers often provide a down payment prior to transfer of risk of loss of ordered products. These payments are also included in deferred revenue on the condensed consolidated balance sheets. |
Share-Based Compensation Expense | Share-Based Compensation Expense The Company has an equity-based incentive plan that provides for the grant of nonqualified stock options and restricted stock units to directors, officers and other employees. The Company also permits employees to purchase shares under the Varex employee stock purchase plan. Prior to the separation, the Company’s employees historically participated in Varian’s equity-based incentive plans. Share-based compensation expense through the date of separation included allocations to the Company based on the awards and terms previously granted to its employees as well as an allocation of Varian’s corporate and shared functional employee expenses. The Company values stock options granted and the option component of the shares of common stock purchased under the equity-based incentive plans and stock purchased under the employee stock purchase plan using the Black-Scholes option-pricing model. Share-based compensation expense for restricted stock units is measured using the fair value of the Company’s stock on the date of grant and is amortized over the award’s respective service period. The Black-Scholes option-pricing model requires the input of certain assumptions, and changes in the assumptions can materially affect the fair value estimates of share-based payment awards. The Company measures and recognizes expense for all share-based payment awards based on their fair values. Share-based compensation expense recognized in the condensed consolidated statements of earnings includes compensation expense for the share-based payment awards based on the grant date fair value estimated in accordance with the guidance on share-based compensation. Share-based compensation expense recognized is based on the value of the portion of share-based payment awards that is ultimately expected to vest. The Company attributes the value of share-based compensation to expense using the straight-line method. The Company considers only the direct tax impacts of share-based compensation awards when calculating the amount of tax windfalls or shortfalls. |
Shipping and Handling Costs | Shipping and Handling Costs Shipping and handling costs are included as a component of cost of revenues. |
Research and Development | Research and Development Research and development costs have been expensed as incurred. These costs primarily include employees’ compensation, consulting fees and material costs. |
Software Development Costs | Software Development Costs Costs for the development of new software products and substantial enhancements to existing software products are expensed as incurred until technological feasibility has been established, at which time any additional costs would be capitalized. No costs associated with the development of software have been capitalized, as the Company believes its current software development process is essentially completed concurrent with the establishment of technological feasibility. |
Taxes on Earnings | Taxes on Earnings Taxes on earnings, as presented, are calculated in accordance with ASC 740, Accounting for Income Taxes. Under this guidance, each interim reporting period is considered integral to the annual period and tax expense is calculated using an estimated annual effective tax rate. The Company records tax expense each quarter based on its effective tax rate estimated for the full fiscal year and uses that rate to provide for income taxes on a current year-to-date basis, adjusted for discrete taxable events that occur during the interim period. On December 22, 2017, the U.S. Government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Reform Act”). The Tax Reform Act significantly revised the U.S. corporate income tax structure. U.S. GAAP requires that the impact of tax legislation be recognized in the period in which the law is enacted. In accordance with these rules, the Company is including the impact of certain provisions of the Tax Reform Act to the extent they are effective during the current reporting period. Certain other provisions included in the Tax Reform Act have later effective dates for fiscal year filers and will be included in the period in which they become effective. In response to the Tax Reform Act, the SEC issued guidance under Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”) that allows for reasonable estimated amounts to be recorded and a measurement period of up to one year from the date of enactment to revise these provisional amounts as new information is obtained and additional guidance is issued. Pursuant to the guidance included in SAB 118, the Company deems amounts recorded and positions taken to date as provisional estimates to be adjusted and finalized in future periods. Significant judgments and estimates are required in evaluating the Company’s tax positions and provision for taxes on earnings. The Company accounts for uncertainty in income taxes following a two-step approach for recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining whether the weight of available evidence indicates that it is more likely than not that, based on the technical merits, the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. Recognition and measurement are based on management’s best judgment given the facts, circumstances and information available at the end of the accounting period. The Company is subject to taxes on earnings in both the United States and numerous foreign jurisdictions. Foreign earnings are generally taxed at rates that differ from the United States rates, earnings in certain foreign jurisdictions are currently subject to tax in the United States, and the benefit of losses generated in some other foreign jurisdictions is reduced due to full valuation allowance positions in those jurisdictions. Our effective tax rate is impacted by these factors as well as existing laws in both the United States and in the respective countries in which foreign subsidiaries do business. In addition, a change in the mix of earnings and losses among the various jurisdictions could increase or decrease our effective tax rate. |
Foreign Currency Translation | Foreign Currency Translation The Company uses the U.S. Dollar as the functional currency of its foreign operations. Gains and losses from remeasurement of foreign currency balances into U.S. Dollars are included in the condensed consolidated statements of earnings. |
Recent Accounting Standards or Updates Not Yet Effective | Recent Accounting Standards or Updates Not Yet Effective In August 2017, the Financial Accounting Standards Board (the "FASB") issued Accounting Standard Update ("ASU") 2017-12 which targets improvements to accounting for hedging activities which amends and simplifies existing guidance in order to allow companies to more accurately present the economic effects of risk management activities in the financial statements. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The Company does not expect that the adoption of this guidance will have a material impact on its consolidated financial statements. In May 2017, the FASB issued ASU 2017-09 which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The guidance is effective for the Company beginning in the first quarter of fiscal year 2019. Early adoption is permitted. The Company does not expect that the adoption of this guidance will have a material impact on its consolidated financial statements. In March 2017, the FASB issued ASU 2017-07 which amended its guidance on the accounting related to defined benefit plans and other post-retirement benefits. This amendment requires the service cost component of net periodic pension and post-retirement benefit cost be presented in the same line item as other employee compensation costs, while the other components be presented separately as non-operating income (expense). The amendment will be effective for the Company beginning in its first quarter of fiscal year 2019. Early adoption is permitted. The Company is evaluating the impact of adopting this amendment to its consolidated financial statements. In January 2017, the FASB issued ASU 2017-04 which clarified its guidance to simplify the measurement of goodwill by eliminating the Step 2 impairment test. The new guidance requires companies to perform the goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The amendment will be effective for the Company beginning in its first quarter of fiscal year 2021. The amendment is required to be adopted prospectively. Early adoption is permitted. The Company is evaluating the impact of adopting this amendment to its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02 on accounting for leases. The new standard is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet. The new standard will continue to classify leases as either finance or operating, with classification affecting the pattern of expense recognition in the statement of earnings. The new standard is required to be adopted using a modified retrospective method to each prior reporting period presented with various optional practical expedients. The new standard will be effective for the Company beginning in its first quarter of fiscal year 2020 with early adoption permitted. The Company is evaluating the impact of adopting this new standard to its consolidated financial statements. In May 2014, the FASB issued ASU 2014-09, a new revenue standard, which sets forth a single, comprehensive revenue recognition model for all contracts with customers to improve comparability. The new standard requires revenue recognition to depict the transfer of 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 March 2016, the FASB amended the principal-versus-agent implementation guidance and illustrations in the new standard. In April 2016, the FASB amended the guidance on identifying performance obligations and the implementation guidance on licensing in the new standard. In May 2016, the FASB amended the guidance on collectability, noncash consideration, presentation of sales tax and transition in the new standard. The new standard will be effective for the Company beginning in its first quarter of fiscal year 2019, with early adoption permitted. The new standard can be applied either retrospectively to each prior reporting period presented (i.e., full retrospective adoption) or with the cumulative effect of initially applying the update recognized at the date of the initial application (i.e., modified retrospective adoption) along with additional disclosures. The Company currently expects to apply the modified retrospective adoption and is evaluating the timing and the impact of adopting this standard on its consolidated financial statements. Accounting Standards Recently Adopted In March 2016, the FASB issued ASU 2016-09 which includes an amendment to its accounting guidance related to employee share-based payments. The amendment simplifies several aspects of the accounting for employee share-based payments, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The Company retrospectively adopted this amendment in the first quarter of fiscal year 2018, resulting in an immaterial change on the Condensed Consolidated Balance Sheets. |
BUSINESS COMBINATIONS (Tables)
BUSINESS COMBINATIONS (Tables) | 6 Months Ended |
Mar. 30, 2018 | |
Business Combinations [Abstract] | |
Business Acquisition, Pro Forma Information | The unaudited pro-forma results do not reflect any operating efficiencies or potential cost savings which may result from the consolidation of the Acquired Detector Business and are not necessarily indicative of what the actual results of operations of the combined company would have been if the acquisition had occurred at the beginning of the period presented nor are they indicative of future results of operations or results that might have been achieved had the acquisition been consummated as of October 1, 2016. Six Months Ended (In millions) March 31, 2017 Revenue $ 383.7 Operating earnings $ 42.8 Net earnings $ 22.1 Net earnings per share, basic $ 0.59 Net earnings per share, diluted $ 0.58 |
RELATED-PARTY TRANSACTIONS (Tab
RELATED-PARTY TRANSACTIONS (Tables) | 6 Months Ended |
Mar. 30, 2018 | |
Related Party Transactions [Abstract] | |
Schedule of Related Party Transactions | Allocated costs included in the accompanying condensed consolidated statements of earnings are as follows: Three Months Ended Six Months Ended (In millions) March 30, 2018 March 31, 2017 March 30, 2018 March 31, 2017 Selling, general and administrative $ — $ 0.5 $ — $ 12.4 Interest expense, net of interest income — — — 0.5 |
CONCENTRATION OF CREDIT RISK (T
CONCENTRATION OF CREDIT RISK (Tables) | 6 Months Ended |
Mar. 30, 2018 | |
Risks and Uncertainties [Abstract] | |
Schedules of Concentration of Risk, by Risk Factor | During the periods presented, one customer accounted for a significant portion of revenues, which are as follows: Three Months Ended Six Months Ended March 30, 2018 March 31, 2017 March 30, 2018 March 31, 2017 Revenues to Canon (formerly Toshiba Medical Systems) 17.3 % 19.3 % 19.2% 21.5% |
FINANCIAL DERIVATIVES AND HED29
FINANCIAL DERIVATIVES AND HEDGING ACTIVITIES (Tables) | 6 Months Ended |
Mar. 30, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value | As of March 30, 2018 , the Company had the following outstanding derivatives designated as hedging instruments: (In millions, except for number of instruments) Number of Instruments Notional Value Interest Rate Swap Contracts 6 $ 285.0 |
Derivative Instruments, Gain (Loss) | The following table summarizes the amount of income recognized from derivative instruments for the periods indicated and the line items in the accompanying statements of operations where the results are recorded for cash flow hedges: Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion) Three months ended Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Three months ended Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion) Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion) (In millions) 2018 2017 2018 2017 2018 2017 Interest Rate Swap Contracts $ 2.8 $ — Interest expense $ (0.1 ) $ — Interest expense $ — $ — Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion) Six months ended Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Six months ended Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion) Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion) (In millions) 2018 2017 2018 2017 2018 2017 Interest Rate Swap Contracts $ 4.8 $ — Interest expense $ (0.3 ) $ — Interest expense $ — $ — The Company expects that approximately $1.2 million recorded as a component of accumulated other comprehensive income (loss) will be realized in the statements of earnings over the next 12 months and the amount will vary depending on interest rates. These derivative instruments are subject to master netting agreements giving effect to rights of offset with each counterparty. The following table summarizes the fair values of derivative instruments as of the periods indicated and the line items in the accompanying consolidated balance sheets where the instruments are recorded: Derivative Assets Derivative Liabilities (In millions) March 30, 2018 September 29, 2017 March 30, 2018 September 29, 2017 Derivatives designated as cash flow hedges Balance sheet location Balance sheet location Interest rate swap contracts Other current assets $ 1.2 $ — Other current liabilities $ — $ (0.6 ) Interest rate swap contracts Other non-current assets 4.9 1.6 Other non-current liabilities — — $ 6.1 $ 1.6 $ — $ (0.6 ) |
FAIR VALUE (Tables)
FAIR VALUE (Tables) | 6 Months Ended |
Mar. 30, 2018 | |
Fair Value Disclosures [Abstract] | |
Fair Value, Liabilities Measured on Recurring Basis | At September 29, 2017 , the Company determined the following levels of inputs at fair value for following assets or liabilities: (In millions) Fair Value Measurements at September 29, 2017 Quoted Prices in Active Markets for Identical Assets and Liabilities Significant Other Significant Unobservable Inputs Total Assets: Cash equivalents - Money market funds $ — $ 11.4 $ — $ 11.4 Interest rate swap contracts — 1.6 — 1.6 Total assets measured at fair value $ — $ 13.0 $ — $ 13.0 Liabilities: Interest rate swap contracts $ — $ 0.6 $ — $ 0.6 In the tables below, the Company has segregated all assets and liabilities that are measured at fair value on a recurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date. (In millions) Fair Value Measurements at March 30, 2018 Quoted Prices in Active Markets for Identical Assets and Liabilities Significant Other Significant Unobservable Inputs Total Assets: Cash equivalents - Money market funds $ — $ 13.3 $ — $ 13.3 Interest rate swap contracts — 6.1 — 6.1 Total assets measured at fair value $ — $ 19.4 $ — $ 19.4 Liabilities: Interest rate swap contracts $ — $ — $ — $ — |
Fair Value, Assets Measured on Recurring Basis | In the tables below, the Company has segregated all assets and liabilities that are measured at fair value on a recurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date. (In millions) Fair Value Measurements at March 30, 2018 Quoted Prices in Active Markets for Identical Assets and Liabilities Significant Other Significant Unobservable Inputs Total Assets: Cash equivalents - Money market funds $ — $ 13.3 $ — $ 13.3 Interest rate swap contracts — 6.1 — 6.1 Total assets measured at fair value $ — $ 19.4 $ — $ 19.4 Liabilities: Interest rate swap contracts $ — $ — $ — $ — At September 29, 2017 , the Company determined the following levels of inputs at fair value for following assets or liabilities: (In millions) Fair Value Measurements at September 29, 2017 Quoted Prices in Active Markets for Identical Assets and Liabilities Significant Other Significant Unobservable Inputs Total Assets: Cash equivalents - Money market funds $ — $ 11.4 $ — $ 11.4 Interest rate swap contracts — 1.6 — 1.6 Total assets measured at fair value $ — $ 13.0 $ — $ 13.0 Liabilities: Interest rate swap contracts $ — $ 0.6 $ — $ 0.6 |
INVENTORIES, NET (Tables)
INVENTORIES, NET (Tables) | 6 Months Ended |
Mar. 30, 2018 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventory, Current | The following table summarizes the Company’s inventories, net: (In millions) March 30, 2018 September 29, 2017 Raw materials and parts, net $ 148.7 $ 164.5 Work-in-process, net 33.1 20.3 Finished goods, net 63.5 49.7 Total inventories, net $ 245.3 $ 234.5 |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS (Tables) | 6 Months Ended |
Mar. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Goodwill | The following table reflects goodwill by reportable operating segment: (In millions) Medical Industrial Total Balance at September 29, 2017 $ 146.9 $ 95.0 $ 241.9 Settlement of post-close working capital adjustment 0.2 0.1 0.3 Balance at March 30, 2018 $ 147.1 $ 95.1 $ 242.2 |
Schedule of Finite-Lived Intangible Assets | The following table reflects the gross carrying amount and accumulated amortization of the Company’s finite-lived intangible assets included in other assets in the condensed consolidated balance sheets: (In millions) March 30, 2018 September 29, 2017 Acquired existing technology $ 57.0 $ 57.0 Patents, licenses and other 19.4 19.4 Customer contracts and supplier relationship 42.1 42.1 Accumulated amortization (39.6 ) (31.2 ) Total intangible assets with finite lives 78.9 87.3 In-process research and development with indefinite lives 4.0 4.0 Total intangible assets $ 82.9 $ 91.3 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 6 Months Ended |
Mar. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Product Warranty Liability | The following table reflects the changes in the Company’s accrued product warranty: (In millions) Warranty Allowance Accrued product warranty, September 29, 2017 $ 7.0 Charged to cost of revenues 5.9 Product warranty expenditures (5.1 ) Accrued product warranty, March 30, 2018 $ 7.8 |
BORROWINGS (Tables)
BORROWINGS (Tables) | 6 Months Ended |
Mar. 30, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of Long-term Debt Instruments | (Dollars in millions) March 30, 2018 September 29, 2017 $ Change Current portion of Term Facility $ 20.0 $ 20.0 $ — Revolving Credit Facility 46.0 104.0 (58.0 ) Long-Term portion of Term Facility 360.0 370.0 (10.0 ) Total debt outstanding, gross 426.0 494.0 (68.0 ) Debt issuance costs (8.9 ) (10.1 ) 1.2 Total debt outstanding, net $ 417.1 $ 483.9 $ (66.8 ) |
REDEEMABLE NONCONTROLLING INT35
REDEEMABLE NONCONTROLLING INTERESTS (Tables) | 6 Months Ended |
Mar. 30, 2018 | |
Noncontrolling Interest [Abstract] | |
Redeemable Noncontrolling Interest | Changes in redeemable noncontrolling interests relating to MeVis were as follows: (In millions) Redeemable Noncontrolling Interests Balance at beginning of period, September 29, 2017 $ 11.2 Net earnings attributable to noncontrolling interests 0.3 Other, including foreign currency remeasurement 0.2 Balance at end of period, March 30, 2018 $ 11.7 |
NET EARNINGS PER SHARE (Tables)
NET EARNINGS PER SHARE (Tables) | 6 Months Ended |
Mar. 30, 2018 | |
Earnings Per Share [Abstract] | |
Schedule of Earnings Per Share, Basic and Diluted | A reconciliation of the numerator and denominator used in the calculation of basic and diluted net income per common share is as follows: Three Months Ended Six Months Ended (In millions, except per share amounts) March 30, 2018 March 31, 2017 March 30, 2018 March 31, 2017 Net earnings attributable to Varex $ 12.2 $ 15.0 $ 23.6 $ 26.1 Weighted average shares outstanding - basic 37.8 37.5 37.8 37.5 Dilutive effect of potential common shares 0.6 0.3 0.5 0.3 Weighted average shares outstanding - diluted 38.4 37.8 38.3 37.8 Net earnings per share attributable to Varex - basic $ 0.32 $ 0.40 $ 0.62 $ 0.70 Net earnings per share attributable to Varex - diluted $ 0.32 $ 0.40 $ 0.62 $ 0.69 Anti-dilutive employee shared based awards, excluded 0.1 1.0 1.0 1.0 |
EMPLOYEE STOCK PLANS (Tables)
EMPLOYEE STOCK PLANS (Tables) | 6 Months Ended |
Mar. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs | The table below summarizes the effect of recording share-based compensation expense and for the option component of the employee stock purchase plan shares: Three Months Ended Six Months Ended (In millions) March 30, 2018 March 31, 2017 March 30, 2018 March 31, 2017 Cost of revenues $ 0.4 $ 0.1 $ 0.6 $ 0.3 Research and development 0.5 0.4 0.8 0.7 Selling, general and administrative 1.7 0.9 3.3 2.6 Total share-based compensation expense $ 2.6 $ 1.4 $ 4.7 $ 3.6 |
Schedule of Share-based Compensation, Stock Options, Activity | The following table summarizes the activity for stock options under Varex’s 2017 Omnibus Stock Plan and 2017 Employee Stock Purchase Plan for the Company’s employees: Options Outstanding (In thousands, except per share amounts and the remaining term) Number of Shares Weighted Average Weighted Average Remaining Term (in years) Aggregate Intrinsic Value (1) Balance at September 29, 2017 1,926 $ 29.11 Granted 232 37.12 Canceled, expired or forfeited (2 ) 30.74 Exercised (83 ) 26.42 Balance at March 30, 2018 2,073 $ 30.11 5.1 $ 12,058 Exercisable at March 30, 2018 965 $ 27.99 4.0 $ 7,519 (1) The aggregate intrinsic value represents the total pre-tax intrinsic value, which is computed based on the difference between the exercise price and the closing price of Varex common stock of $35.78 as of March 30, 2018 , the last trading date of the Company's first quarter, and which represents the amount that would have been received by the option holders had all option holders exercised their options and sold the shares received upon exercise as of that date. |
Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity | The following table summarizes the activity for restricted stock units under Varex’s 2017 Omnibus Stock Plan for the Company’s employees: (In thousands, except per share amounts) Number of Shares Weighted Average Balance at September 29, 2017 525 $ 29.76 Granted 336 37.11 Vested (183 ) 29.35 Canceled or expired — — Balance at March 30, 2018 678 $ 33.49 |
TAXES ON EARNINGS (Tables)
TAXES ON EARNINGS (Tables) | 6 Months Ended |
Mar. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Schedule of Effective Income Tax Rate Reconciliation | TAXES ON EARNINGS Three Months Ended Six Months Ended March 30, 2018 March 31, 2017 March 30, 2018 March 31, 2017 Estimated effective tax rate 21.7 % 33.0 % (4.8 )% 35.6 % |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 6 Months Ended |
Mar. 30, 2018 | |
Segment Reporting [Abstract] | |
Schedule of Segment Reporting Information, by Segment | Information related to the Company’s segments is as follows: Three Months Ended Six Months Ended (In millions) March 30, 2018 March 31, 2017 March 30, 2018 March 31, 2017 Revenues Medical $ 158.5 $ 125.7 $ 297.7 $ 257.4 Industrial 42.7 29.1 79.7 54.8 Total revenues 201.2 154.8 $ 377.4 $ 312.2 Gross margin Medical 53.5 44.6 $ 99.9 $ 91.5 Industrial 16.6 13.0 31.7 24.9 Total gross margin $ 70.1 $ 57.6 $ 131.6 $ 116.4 Total operating expenses 52.9 34.1 100.9 74.5 Interest and other income (expenses), net (1.5 ) (1.1 ) (7.9 ) (1.2 ) Earnings before taxes 15.7 22.4 22.8 40.7 Taxes on earnings 3.4 7.4 (1.1 ) 14.5 Net earnings 12.3 15.0 23.9 26.2 Less: Net earnings attributable to noncontrolling interests 0.1 — 0.3 0.1 Net earnings attributable to Varex $ 12.2 $ 15.0 $ 23.6 $ 26.1 |
Reconciliation of Assets from Segment to Consolidated | The following table summarizes the Company’s total assets by its reportable segments: (In millions) March 30, 2018 September 29, 2017 Identifiable assets Medical $ 778.9 $ 832.1 Industrial 207.0 208.0 Total reportable segments $ 985.9 $ 1,040.1 |
DESCRIPTION OF BUSINESS (Detail
DESCRIPTION OF BUSINESS (Details) - Varian Medical Systems, Inc. | Jan. 28, 2017 | Jan. 20, 2017 |
Schedule of Pro Rata Distribution [Line Items] | ||
Outstanding common stock, percentage distributed | 1 | |
Stockholders' equity, conversion ratio | 0.4 |
SUMMARY OF SIGNIFICANT ACCOUN41
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Property, Plant and Equipment (Details) $ in Millions | 6 Months Ended |
Mar. 30, 2018USD ($)entitysegment | |
Accounting Policies [Abstract] | |
Number of operating segments | segment | 2 |
Number of variable interest entities | entity | 3 |
Number of consolidated variable interest entities | entity | 2 |
Property, Plant and Equipment [Line Items] | |
Variable interest entity assets | $ | $ 4.6 |
Variable interest entity liabilities | $ | $ 3 |
Minimum | |
Property, Plant and Equipment [Line Items] | |
Finite-lived intangible asset, useful life | 2 years |
Maximum | |
Property, Plant and Equipment [Line Items] | |
Finite-lived intangible asset, useful life | 7 years |
Land Improvements | |
Property, Plant and Equipment [Line Items] | |
Property, plant and equipment, useful life (in years) | 15 years |
Building | |
Property, Plant and Equipment [Line Items] | |
Property, plant and equipment, useful life (in years) | 20 years |
Machinery and Equipment | Minimum | |
Property, Plant and Equipment [Line Items] | |
Property, plant and equipment, useful life (in years) | 3 years |
Machinery and Equipment | Maximum | |
Property, Plant and Equipment [Line Items] | |
Property, plant and equipment, useful life (in years) | 7 years |
BUSINESS COMBINATIONS (Details)
BUSINESS COMBINATIONS (Details) - PerkinElmer, Inc. $ in Millions | May 01, 2017USD ($)employee |
Business Acquisition [Line Items] | |
Payments to acquire businesses | $ | $ 273.3 |
Business combination, number of employees | employee | 280 |
BUSINESS COMBINATIONS Pro Forma
BUSINESS COMBINATIONS Pro Forma (Details) - PerkinElmer, Inc. $ / shares in Units, $ in Millions | 6 Months Ended |
Mar. 30, 2018USD ($)$ / shares | |
Business Acquisition [Line Items] | |
Revenue | $ 383.7 |
Operating earnings | 42.8 |
Net earnings | $ 22.1 |
Net earnings per share, basic | $ / shares | $ 0.59 |
Net earnings per share, diluted | $ / shares | $ 0.58 |
RELATED-PARTY TRANSACTIONS Inte
RELATED-PARTY TRANSACTIONS Intercompany Transactions (Details) - Varian - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Mar. 30, 2018 | Mar. 31, 2017 | Mar. 30, 2018 | Mar. 31, 2017 | |
Related Party Transaction [Line Items] | ||||
Revenue from related parties | $ 6.7 | $ 6 | $ 9.7 | $ 11.4 |
Purchases from related party | $ 1.1 | $ 0.5 | $ 1.5 | $ 0.9 |
RELATED-PARTY TRANSACTIONS Allo
RELATED-PARTY TRANSACTIONS Allocated Expenses (Details) - Varian - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Mar. 30, 2018 | Mar. 31, 2017 | Mar. 30, 2018 | Mar. 31, 2017 | |
Selling, general and administrative | ||||
Related Party Transaction [Line Items] | ||||
Costs and expenses, related party | $ 0 | $ 0.5 | $ 0 | $ 12.4 |
Interest expense, net of interest income | ||||
Related Party Transaction [Line Items] | ||||
Costs and expenses, related party | $ 0 | $ 0 | $ 0 | $ 0.5 |
RELATED-PARTY TRANSACTIONS Equi
RELATED-PARTY TRANSACTIONS Equity Method Investment-(Details) $ in Millions | 1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||
Oct. 31, 2013 | Mar. 30, 2018USD ($)member | Mar. 31, 2017USD ($) | Mar. 30, 2018USD ($)member | Mar. 31, 2017USD ($) | Sep. 28, 2018USD ($) | Sep. 29, 2017USD ($) | |
Related Party Transaction [Line Items] | |||||||
Income (loss) from equity method investments | $ 3.2 | $ 0.4 | |||||
Investments in privately-held companies | $ 51.7 | 51.7 | $ 52.3 | ||||
Varian | |||||||
Related Party Transaction [Line Items] | |||||||
Purchases from related party | $ 1.1 | $ 0.5 | $ 1.5 | 0.9 | |||
dpiX Holding | Varian | |||||||
Related Party Transaction [Line Items] | |||||||
Equity method investment, ownership percentage | 40.00% | 40.00% | |||||
Number of consortium members | member | 4 | 4 | |||||
Income (loss) from equity method investments | $ 3.8 | 0.3 | $ 3.1 | 0.4 | |||
Equity method investments | 48.7 | 48.7 | 50 | ||||
Purchases from related party | 5.4 | $ 3.7 | 12 | $ 12 | |||
Accounts payable, related parties | $ 3.5 | 3.5 | $ 3.4 | ||||
Percentage of manufacturing capacity | 50.00% | ||||||
Percentage of fixed costs | 50.00% | ||||||
Fixed Cost Commitments | dpiX Holding | Varian | |||||||
Related Party Transaction [Line Items] | |||||||
Purchases from related party | $ 12.2 | ||||||
Scenario, Forecast | Fixed Cost Commitments | dpiX Holding | Varian | |||||||
Related Party Transaction [Line Items] | |||||||
Purchases from related party | $ 16.3 |
CONCENTRATION OF CREDIT RISK (D
CONCENTRATION OF CREDIT RISK (Details) - Canon - Customer Concentration Risk | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Mar. 30, 2018 | Mar. 31, 2017 | Mar. 30, 2018 | Mar. 31, 2017 | Sep. 29, 2017 | |
Sales Revenue, Net | |||||
Concentration Risk [Line Items] | |||||
Concentration risk, percentage | 17.30% | 19.30% | 19.20% | 21.50% | |
Accounts Receivable | |||||
Concentration Risk [Line Items] | |||||
Concentration risk, percentage | 10.80% | 9.00% |
FINANCIAL DERIVATIVES AND HED48
FINANCIAL DERIVATIVES AND HEDGING ACTIVITIES (Details) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Mar. 30, 2018USD ($)derivative | Mar. 31, 2017USD ($) | Mar. 30, 2018USD ($)derivative | Mar. 31, 2017USD ($) | Sep. 29, 2017USD ($) | |
Interest Rate Swap | Designated as Hedging Instrument | |||||
Derivatives, Fair Value [Line Items] | |||||
Derivative, number of instruments held | derivative | 6 | 6 | |||
Derivative, notional amount | $ 285 | $ 285 | |||
Derivative, remaining maturity (in years) | 4 years | ||||
Derivative asset, fair value | 6.1 | $ 6.1 | $ 1.6 | ||
Derivative liability, fair value | 0 | 0 | (0.6) | ||
Cash Flow Hedging | |||||
Derivatives, Fair Value [Line Items] | |||||
Derivative instruments, gain (loss) recognized in other comprehensive income (loss), effective portion, net | 1.2 | ||||
Cash Flow Hedging | Interest Rate Swap | Designated as Hedging Instrument | |||||
Derivatives, Fair Value [Line Items] | |||||
Derivative, gain or loss recognized in OCI, effective portion | 2.8 | $ 0 | 4.8 | $ 0 | |
Derivative instruments, gain (loss) reclassified from accumulated OCI into income, effective portion, net | (0.1) | 0 | (0.3) | 0 | |
Derivative instruments, gain (loss) recognized in income, ineffective portion and amount excluded from effectiveness testing, net | 0 | $ 0 | 0 | $ 0 | |
Other Noncurrent Assets | Interest Rate Swap | Designated as Hedging Instrument | |||||
Derivatives, Fair Value [Line Items] | |||||
Derivative asset, fair value | 4.9 | 4.9 | 1.6 | ||
Other Noncurrent Liabilities | Interest Rate Swap | Designated as Hedging Instrument | |||||
Derivatives, Fair Value [Line Items] | |||||
Derivative liability, fair value | 0 | 0 | 0 | ||
Other Current Assets | Interest Rate Swap | Designated as Hedging Instrument | |||||
Derivatives, Fair Value [Line Items] | |||||
Derivative asset, fair value | 1.2 | 1.2 | 0 | ||
Other Current Liabilities | Interest Rate Swap | Designated as Hedging Instrument | |||||
Derivatives, Fair Value [Line Items] | |||||
Derivative liability, fair value | $ 0 | $ 0 | $ (0.6) |
FAIR VALUE (Details)
FAIR VALUE (Details) - USD ($) $ in Millions | Mar. 30, 2018 | Sep. 29, 2017 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-term debt, fair value | $ 417.1 | |
Fair Value, Measurements, Recurring | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash equivalents - Money market funds | 13.3 | $ 11.4 |
Interest rate swap contracts | 6.1 | 1.6 |
Total assets measured at fair value | 19.4 | 13 |
Interest rate swap contracts | 0 | 0.6 |
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash equivalents - Money market funds | 0 | 0 |
Interest rate swap contracts | 0 | 0 |
Total assets measured at fair value | 0 | 0 |
Interest rate swap contracts | 0 | 0 |
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash equivalents - Money market funds | 13.3 | 11.4 |
Interest rate swap contracts | 6.1 | 1.6 |
Total assets measured at fair value | 19.4 | 13 |
Interest rate swap contracts | 0 | 0.6 |
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash equivalents - Money market funds | 0 | 0 |
Interest rate swap contracts | 0 | 0 |
Total assets measured at fair value | 0 | 0 |
Interest rate swap contracts | $ 0 | $ 0 |
INVENTORIES, NET (Details)
INVENTORIES, NET (Details) - USD ($) $ in Millions | Mar. 30, 2018 | Sep. 29, 2017 |
Inventory Disclosure [Abstract] | ||
Raw materials and parts, net | $ 148.7 | $ 164.5 |
Work-in-process, net | 33.1 | 20.3 |
Finished goods, net | 63.5 | 49.7 |
Inventory, Net | $ 245.3 | $ 234.5 |
GOODWILL AND INTANGIBLE ASSET51
GOODWILL AND INTANGIBLE ASSETS (Details) $ in Millions | 6 Months Ended |
Mar. 30, 2018USD ($) | |
Goodwill [Roll Forward] | |
Goodwill | $ 241.9 |
Settlement of post-close working capital adjustment | 0.3 |
Goodwill | 242.2 |
Medical | |
Goodwill [Roll Forward] | |
Goodwill | 146.9 |
Settlement of post-close working capital adjustment | 0.2 |
Goodwill | 147.1 |
Industrial | |
Goodwill [Roll Forward] | |
Goodwill | 95 |
Settlement of post-close working capital adjustment | 0.1 |
Goodwill | $ 95.1 |
GOODWILL AND INTANGIBLE ASSET52
GOODWILL AND INTANGIBLE ASSETS Finite-lived Intangible Assets (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Mar. 30, 2018 | Mar. 31, 2017 | Mar. 30, 2018 | Mar. 31, 2017 | Sep. 29, 2017 | |
Finite-Lived Intangible Assets [Line Items] | |||||
Accumulated amortization | $ (39.6) | $ (39.6) | $ (31.2) | ||
Total intangible assets with finite lives | 78.9 | 78.9 | 87.3 | ||
Amortization of intangible assets | 4.2 | $ 1.3 | 8.4 | $ 2.6 | |
Intangibles assets | 82.9 | 82.9 | 91.3 | ||
Developed technology | |||||
Finite-Lived Intangible Assets [Line Items] | |||||
Finite-lived intangible assets, gross | 57 | 57 | 57 | ||
Patents, licenses and other | |||||
Finite-Lived Intangible Assets [Line Items] | |||||
Finite-lived intangible assets, gross | 19.4 | 19.4 | 19.4 | ||
Customer contracts and supplier relationship | |||||
Finite-Lived Intangible Assets [Line Items] | |||||
Finite-lived intangible assets, gross | $ 42.1 | 42.1 | 42.1 | ||
In Process Research and Development | |||||
Finite-Lived Intangible Assets [Line Items] | |||||
Indefinite-lived Intangible Assets Acquired | $ 4 | $ 4 |
COMMITMENTS AND CONTINGENCIES53
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended |
Mar. 30, 2018 | Mar. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Restructuring Charges | $ 1.7 | |
Movement in Standard Product Warranty Accrual [Roll Forward] | ||
Accrued product warranty, beginning balance | $ 7 | |
Charged to cost of revenues | 5.9 | |
Product warranty expenditures | (5.1) | |
Accrued product warranty, ending balance | $ 7.8 | $ 7.8 |
BORROWINGS (Details)
BORROWINGS (Details) - USD ($) | May 01, 2017 | Jan. 25, 2017 | Mar. 30, 2018 | Mar. 31, 2017 | Sep. 29, 2017 |
Line of Credit Facility [Line Items] | |||||
Distribution to Varian Medical Systems, Inc. | $ 0 | $ (200,000,000) | |||
Long-term debt outstanding | 397,100,000 | $ 463,900,000 | |||
Current maturities of long-term debt | 20,000,000 | 20,000,000 | |||
Debt issuance costs | 8,900,000 | 10,100,000 | |||
Secured Debt | |||||
Line of Credit Facility [Line Items] | |||||
Distribution to Varian Medical Systems, Inc. | $ (200,000,000) | ||||
Current maturities of long-term debt | $ 20,000,000 | $ 20,000,000 | |||
First Revolving Credit Facility | Revolving Credit Facility | |||||
Line of Credit Facility [Line Items] | |||||
Debt instrument, term | 5 years | ||||
First Revolving Credit Facility | Secured Debt | |||||
Line of Credit Facility [Line Items] | |||||
Debt instrument, term | 5 years | ||||
Proceeds from lines of credit | $ 203,000,000 | ||||
First Revolving Credit Facility | Line of Credit | |||||
Line of Credit Facility [Line Items] | |||||
Used capacity, commitment fee percentage | 0.125% | ||||
First Revolving Credit Facility | Federal Funds Effective Swap Rate | Line of Credit | |||||
Line of Credit Facility [Line Items] | |||||
Basis spread on variable rate | 0.50% | ||||
First Revolving Credit Facility | London Interbank Offered Rate (LIBOR) | Line of Credit | |||||
Line of Credit Facility [Line Items] | |||||
Basis spread on variable rate | 1.00% | ||||
First Revolving Credit Facility | Minimum | Line of Credit | |||||
Line of Credit Facility [Line Items] | |||||
Basis spread on variable rate | 1.125% | ||||
Unused capacity, commitment fee percentage | 0.20% | ||||
First Revolving Credit Facility | Maximum | Line of Credit | |||||
Line of Credit Facility [Line Items] | |||||
Basis spread on variable rate | 2.125% | ||||
Unused capacity, commitment fee percentage | 0.40% | ||||
First Revolving Credit Facility | Debt Instrument, Repayment, Period One | Secured Debt | |||||
Line of Credit Facility [Line Items] | |||||
Repayment percentage | 7.50% | ||||
First Revolving Credit Facility | Debt Instrument, Repayment, Period Two | Secured Debt | |||||
Line of Credit Facility [Line Items] | |||||
Repayment percentage | 7.50% | ||||
First Revolving Credit Facility | Debt Instrument, Repayment, Period Three | Secured Debt | |||||
Line of Credit Facility [Line Items] | |||||
Repayment percentage | 10.00% | ||||
First Revolving Credit Facility | Debt Instrument, Repayment, Period Four | Secured Debt | |||||
Line of Credit Facility [Line Items] | |||||
Repayment percentage | 10.00% | ||||
First Revolving Credit Facility | Debt Instrument, Repayment, Period Five | Secured Debt | |||||
Line of Credit Facility [Line Items] | |||||
Repayment percentage | 15.00% | ||||
Second Revolving Credit Facility | Revolving Credit Facility | |||||
Line of Credit Facility [Line Items] | |||||
Maximum borrowing capacity | $ 200,000,000 | ||||
Debt instrument, term | 5 years | ||||
Second Revolving Credit Facility | Secured Debt | |||||
Line of Credit Facility [Line Items] | |||||
Maximum borrowing capacity | $ 400,000,000 | ||||
Debt instrument, term | 5 years | ||||
Proceeds from lines of credit | $ 97,000,000 | ||||
Second Revolving Credit Facility | Line of Credit | |||||
Line of Credit Facility [Line Items] | |||||
Used capacity, commitment fee percentage | 0.125% | ||||
Second Revolving Credit Facility | Federal Funds Effective Swap Rate | Line of Credit | |||||
Line of Credit Facility [Line Items] | |||||
Basis spread on variable rate | 0.50% | ||||
Second Revolving Credit Facility | London Interbank Offered Rate (LIBOR) | Line of Credit | |||||
Line of Credit Facility [Line Items] | |||||
Basis spread on variable rate | 1.00% | ||||
Second Revolving Credit Facility | Minimum | Line of Credit | |||||
Line of Credit Facility [Line Items] | |||||
Unused capacity, commitment fee percentage | 0.25% | ||||
Second Revolving Credit Facility | Minimum | London Interbank Offered Rate (LIBOR) | Line of Credit | |||||
Line of Credit Facility [Line Items] | |||||
Basis spread on variable rate | 1.75% | ||||
Second Revolving Credit Facility | Minimum | Base Rate | Line of Credit | |||||
Line of Credit Facility [Line Items] | |||||
Basis spread on variable rate | 0.75% | ||||
Second Revolving Credit Facility | Maximum | Line of Credit | |||||
Line of Credit Facility [Line Items] | |||||
Unused capacity, commitment fee percentage | 0.40% | ||||
Second Revolving Credit Facility | Maximum | London Interbank Offered Rate (LIBOR) | Line of Credit | |||||
Line of Credit Facility [Line Items] | |||||
Basis spread on variable rate | 2.75% | ||||
Second Revolving Credit Facility | Maximum | Base Rate | Line of Credit | |||||
Line of Credit Facility [Line Items] | |||||
Basis spread on variable rate | 1.75% | ||||
Second Revolving Credit Facility | Debt Instrument, Repayment, Period One | Secured Debt | |||||
Line of Credit Facility [Line Items] | |||||
Repayment percentage | 5.00% | ||||
Second Revolving Credit Facility | Debt Instrument, Repayment, Period Two | Secured Debt | |||||
Line of Credit Facility [Line Items] | |||||
Repayment percentage | 5.00% | ||||
Second Revolving Credit Facility | Debt Instrument, Repayment, Period Three | Secured Debt | |||||
Line of Credit Facility [Line Items] | |||||
Repayment percentage | 7.50% | ||||
Second Revolving Credit Facility | Debt Instrument, Repayment, Period Four | Secured Debt | |||||
Line of Credit Facility [Line Items] | |||||
Repayment percentage | 7.50% | ||||
Second Revolving Credit Facility | Debt Instrument, Repayment, Period Five | Secured Debt | |||||
Line of Credit Facility [Line Items] | |||||
Repayment percentage | 10.00% | ||||
PerkinElmer, Inc. | |||||
Line of Credit Facility [Line Items] | |||||
Payments to acquire businesses | $ 276,000,000 |
BORROWINGS Summary (Details)
BORROWINGS Summary (Details) - USD ($) $ in Millions | 6 Months Ended | |
Mar. 30, 2018 | Sep. 29, 2017 | |
Debt Instrument [Line Items] | ||
Current maturities of long-term debt | $ 20 | $ 20 |
Long-Term portion of Term Facility | 426 | 494 |
Debt issuance costs | (8.9) | (10.1) |
Total debt outstanding | 417.1 | 483.9 |
Increase to debt outstanding during period | (68) | |
Decrease to debt issuance costs in period | 1.2 | |
Increase in debt outstanding during period | (66.8) | |
Secured Debt | ||
Debt Instrument [Line Items] | ||
Current maturities of long-term debt | 20 | 20 |
Long-Term portion of Term Facility | 360 | 370 |
Increase to debt outstanding during period | (10) | |
Revolving Credit Facility | ||
Debt Instrument [Line Items] | ||
Revolving Credit Facility | 46 | $ 104 |
Available borrowing capacity | 154 | |
Increase to debt outstanding during period | $ (58) |
REDEEMABLE NONCONTROLLING INT56
REDEEMABLE NONCONTROLLING INTERESTS Noncontrolling Interest (Details) - MeVis Medical Solutions AG (MeVis) shares in Millions, $ in Millions | 6 Months Ended | ||
Mar. 30, 2018USD ($) | Mar. 30, 2018€ / sharesshares | Apr. 30, 2015 | |
Noncontrolling Interest [Line Items] | |||
Percentage of voting interests acquired | 73.50% | ||
Annual recurring compensation (in euros per share) | € / shares | € 0.95 | ||
Temporary equity, redemption price per share (in pounds per share) | € / shares | € 19.77 | ||
Stockholders' Equity Attributable to Noncontrolling Interest [Roll Forward] | |||
Balance at beginning of period, September 29, 2017 | $ 11.2 | ||
Net earnings attributable to noncontrolling interests | 0.3 | ||
Other, including foreign currency remeasurement | 0.2 | ||
Balance at end of period, March 30, 2018 | $ 11.7 | ||
Temporary equity, shares outstanding | shares | 0.5 | ||
Noncontrolling interest, ownership percentage by noncontrolling owners | 26.30% |
NET EARNINGS PER SHARE (Details
NET EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Mar. 30, 2018 | Mar. 31, 2017 | Mar. 30, 2018 | Mar. 31, 2017 | |
Earnings Per Share [Abstract] | ||||
Net earnings attributable to Varex | $ 12.2 | $ 15 | $ 23.6 | $ 26.1 |
Weighted average number of shares outstanding, basic | 37.8 | 37.5 | 37.8 | 37.5 |
Dilutive effect of potential common shares | 0.6 | 0.3 | 0.5 | 0.3 |
Weighted average number of shares outstanding,diluted | 38.4 | 37.8 | 38.3 | 37.8 |
Earnings per share, basic (in USD per share) | $ 0.32 | $ 0.40 | $ 0.62 | $ 0.70 |
Earnings per share, diluted (in USD per share) | $ 0.32 | $ 0.40 | $ 0.62 | $ 0.69 |
Anti-dilutive employee shared based awards, excluded | 0.1 | 1 | 1 | 1 |
EMPLOYEE STOCK PLANS Share-base
EMPLOYEE STOCK PLANS Share-based Compensation Expense (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Mar. 30, 2018 | Mar. 31, 2017 | Mar. 30, 2018 | Mar. 31, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||||
Allocated share-based compensation expense | $ 2.6 | $ 1.4 | $ 4.7 | $ 3.6 |
Cost of revenues | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||||
Allocated share-based compensation expense | 0.4 | 0.1 | 0.6 | 0.3 |
Research and development | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||||
Allocated share-based compensation expense | 0.5 | 0.4 | 0.8 | 0.7 |
Selling, general and administrative | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||||
Allocated share-based compensation expense | $ 1.7 | $ 0.9 | $ 3.3 | $ 2.6 |
EMPLOYEE STOCK PLANS Stock Opti
EMPLOYEE STOCK PLANS Stock Option Activity (Details) $ / shares in Units, shares in Thousands, $ in Thousands | 6 Months Ended |
Mar. 30, 2018USD ($)$ / sharesshares | |
Number of Shares | |
Options, outstanding, beginning balance | shares | 1,926 |
Options, grants in period | shares | 232 |
Options, forfeitures and expirations in period | shares | (2) |
Options, exercises in period | shares | (83) |
Options, outstanding, ending balance | shares | 2,073 |
Options, exercisable | shares | 965 |
Weighted Average Exercise Price | |
Options, outstanding, weighted average exercise price, beginning (in USD per share) | $ 29.11 |
Options, grants in period, weighted average exercise price (in USD per share) | 37.12 |
Options, forfeitures and expirations in period, weighted average exercise price (in USD per share) | 30.74 |
Options, exercises in period, weighted average exercise price (in USD per share) | 26.42 |
Options, outstanding, weighted average exercise price, ending (in USD per share) | 30.11 |
Options, exercisable, weighted average exercise price (in USD per share) | $ 27.99 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract] | |
Options, outstanding, weighted average remaining contractual term (in years) | 5 years 1 month 6 days |
Options, exercisable, weighted average remaining contractual term (in years) | 4 years |
Options, outstanding, intrinsic value | $ | $ 12,058 |
Options, exercisable, intrinsic value | $ | $ 7,519 |
Share price (in usd per share) | $ 35.78 |
EMPLOYEE STOCK PLANS Restricted
EMPLOYEE STOCK PLANS Restricted Stock and Performance Stock (Details) shares in Thousands | 6 Months Ended |
Mar. 30, 2018$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | |
Restricted Stock Units and Performance Stock Units, nonvested, beginning balance, number of shares | shares | 525 |
Restricted Stock Units and Performance Stock Units, grants in period | shares | 336 |
Restricted Stock Units and Performance Stock Units, vested in period | shares | (183) |
Restricted Stock Units and Performance Stock Units, forfeited in period | shares | 0 |
Restricted Stock Units and Performance Stock Units, nonvested, ending balance, number of shares | shares | 678 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract] | |
Restricted Stock Units and Performance Stock Units, nonvested, beginning of period, weighted average grant date fair value (in USD per share) | $ / shares | $ 29.76 |
Restricted Stock Units and Performance Stock Units, grants in period, weighted average grant date fair value (in USD per share) | $ / shares | 37.11 |
Restricted Stock Units and Performance Stock Units, vested in period, weighted average grant date fair value (in USD per share) | $ / shares | 29.35 |
Restricted Stock Units and Performance Stock Units, forfeitures, weighted average grant date fair value (in USD per share) | $ / shares | 0 |
Restricted Stock Units and Performance Stock Units, nonvested, end of period, weighted average grant date fair value (in USD per share) | $ / shares | $ 33.49 |
TAXES ON EARNINGS Reconciliatio
TAXES ON EARNINGS Reconciliation (Details) | 3 Months Ended | 6 Months Ended | ||
Mar. 30, 2018 | Mar. 31, 2017 | Mar. 30, 2018 | Mar. 31, 2017 | |
Effective Income Tax Rate Reconciliation Rollforward [Roll Forward] | ||||
Effective tax rate percent | 21.70% | 33.00% | (4.80%) | 35.60% |
TAXES ON EARNINGS Narrative (De
TAXES ON EARNINGS Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Mar. 30, 2018 | Mar. 31, 2017 | Mar. 30, 2018 | Mar. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||||
Income tax provision (benefit) on earnings | $ 3.4 | $ 7.4 | $ (1.1) | $ 14.5 |
Effective tax rate percent | 21.70% | 33.00% | (4.80%) | 35.60% |
Estimated effective tax rate | 24.50% | 24.50% | ||
Repatriation of foreign earnings, amount | $ 3.4 | |||
Tax Cuts and Jobs Act of 2017,change in tax rate, deferred tax liability, income tax benefit | 9.5 | |||
Change in enacted tax rate, amount | 1.9 | |||
Deferred tax liabilities of undistributed foreign earnings | $ 0.1 | $ 0.1 |
SEGMENT INFORMATION (Details)
SEGMENT INFORMATION (Details) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Mar. 30, 2018USD ($) | Mar. 31, 2017USD ($) | Mar. 30, 2018USD ($)segment | Mar. 31, 2017USD ($) | |
Segment Reporting Information [Line Items] | ||||
Number of operating segments | segment | 2 | |||
Revenues | $ 201.2 | $ 154.8 | $ 377.4 | $ 312.2 |
Gross profit | 70.1 | 57.6 | 131.6 | 116.4 |
Operating Expenses | 52.9 | 34.1 | 100.9 | 74.5 |
Nonoperating Income (Expense) | (1.5) | (1.1) | (7.9) | (1.2) |
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest | 15.7 | 22.4 | 22.8 | 40.7 |
Income tax provision (benefit) on earnings | 3.4 | 7.4 | (1.1) | 14.5 |
Net earnings | 12.3 | 15 | 23.9 | 26.2 |
Less: Net earnings attributable to noncontrolling interests | 0.1 | 0 | 0.3 | 0.1 |
Net Income (Loss) Attributable to Parent | 12.2 | 15 | 23.6 | 26.1 |
Operating Segments | Medical | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | 158.5 | 125.7 | 297.7 | 257.4 |
Gross profit | 53.5 | 44.6 | 99.9 | 91.5 |
Operating Segments | Industrial | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | 42.7 | 29.1 | 79.7 | 54.8 |
Gross profit | $ 16.6 | $ 13 | $ 31.7 | $ 24.9 |
SEGMENT INFORMATION Assets (Det
SEGMENT INFORMATION Assets (Details) - USD ($) $ in Millions | Mar. 30, 2018 | Sep. 29, 2017 |
Segment Reporting Information [Line Items] | ||
Assets | $ 985.9 | $ 1,040.1 |
Operating Segments | ||
Segment Reporting Information [Line Items] | ||
Assets | 985.9 | 1,040.1 |
Medical | ||
Segment Reporting Information [Line Items] | ||
Assets | 778.9 | 832.1 |
Industrial | ||
Segment Reporting Information [Line Items] | ||
Assets | $ 207 | $ 208 |