VAREX IMAGING CORP Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

The following discussion and analysis of the financial condition and results
should be read together with the unaudited condensed consolidated financial
statements and notes thereto that are contained in this Quarterly Report on Form
10-Q as well as our Annual Report on Form 10-K for the fiscal year ended
October 1, 2021 and our other filings, including the Current Reports on Form
8-K, that have been filed with the SEC through the date of this report.

Forward-looking statements

  This Quarterly Report on Form 10-Q (this "Quarterly Report") contains
"forward-looking" statements within the meaning of the Private Securities
Litigation Reform Act of 1995, which provides a "safe harbor" for statements
about future events, products and future financial performance that are based on
the beliefs of, estimates made by, and information currently available to the
management of Varex Imaging Corporation ("we," "our," "us," the "Company,"
"Varex," or "Varex Imaging"). Actual results and the outcome or timing of
certain events described in these forward-looking statements are subject to risk
and uncertainties and may differ significantly from those projected in these
forward-looking statements. Important factors that could cause our actual
results and financial condition to differ significantly from those projections
or expectations include, among other things, the risks described in the Summary
of Principal Risk Factors below and further described in the Risk Factors listed
in Part II, Item 1A - Risk Factors of this Quarterly Report.

  Statements concerning: the continuing impact of the ongoing COVID-19 pandemic
on the global economy or the Company; logistics, supply chain and manufacturing
challenges; industry or market segment outlook; market acceptance of or
transition to new products or technology such as advanced X-ray tube and digital
flat panel detector products; growth drivers; future orders, revenues, backlog,
earnings or other financial results; and any statements using the terms
"believe," "expect," "anticipate," "can," "should," "would," "could,"
"estimate," "may," "intended," "potential," and "possible" or similar statements
are forward-looking statements that involve risks and uncertainties that could
cause our actual results and the outcome and timing of certain events to differ
materially from those projected or management's current expectations.

  Any forward-looking statement made in this Quarterly Report (including in any
exhibits or documents incorporated by reference) is based only on information
currently available to Varex and its management and speaks only as of the date
on which it is made. We have not assumed any obligation to, and you should not
expect us to, update or revise those statements because of new information,
future events or otherwise.

Insight

  Varex Imaging Corporation is a leading innovator, designer and manufacturer of
X-ray tubes, digital detectors, linear accelerators and other image software
processing solutions, which are critical components in a variety of X-ray based
imaging equipment. Our components are used in medical diagnostic imaging,
security inspection systems, and industrial quality inspection systems, as well
as for analysis and measurement applications in industrial manufacturing
applications. Global original equipment manufacturers ("OEMs") incorporate our
X-ray imaging components in their systems to detect, diagnose, protect and
inspect. Varex has approximately 2,200 full-time equivalent employees, located
at manufacturing and service center sites in North America, Europe, and Asia.

  Our products are sold in three geographic regions: the Americas, EMEA, and
APAC. The Americas includes North America (primarily the United States) and
Latin America. EMEA includes Europe, Russia, the Middle East, India and
Africa. APAC includes Asia and Australia. Revenues by region are based on the
known final destination of products sold.

  Our success depends, among other things, on our ability to anticipate and
respond to changes in our markets, the direction of technological innovation and
the demand from our customers. We continually invest in research and development
and employ approximately 500 individuals in product development related
activities. Our focus on innovation and product performance along with strong
and long-term customer relationships allows us to collaborate with our customers
to bring industry-leading products to the X-ray imaging market. We continue to
work to improve the life and quality of our imaging components and leverage our
scale as one of the largest independent X-ray imaging component suppliers to
provide cost-effective solutions for our customers.
                                       28

————————————————– ——————————

Contents

Impact of COVID-19 and the general economic environment

  The unprecedented nature of the COVID-19 pandemic and its effect on the global
economy began to significantly disrupt our business in fiscal year 2020 by
initially reducing demand for our products followed by strong recovery in demand
but increasing variability in supply of raw materials and manufacturing
productivity.

  During fiscal year 2021, demand for many of our products recovered to
pre-pandemic levels and business has continued to grow during fiscal year 2022.
We believe that demand for our products has increased due to increased
investments in healthcare and diagnostics coupled with end-users (such as
hospitals) making capital purchases that were previously deferred due to the
uncertainty surrounding COVID-19. While we are encouraged by the recovery, we
remain cautious as many factors remain unpredictable.

  We continue to experience logistics, supply chain, and manufacturing
challenges that we expect will continue throughout calendar year 2022. The
supply chain challenges related to certain components have become more
pronounced, and shortages in raw materials have become more widespread, since
the beginning of this calendar year. We continue to experience shortages of
certain materials and have used more of our inventory on hand of those materials
than we have used historically. In addition, we are purchasing more materials
that are critical to our processes, often at higher costs. Shortages of
materials, particularly micro-controller chips and associated electronic
components, have caused and may continue to cause, delays in manufacturing
products for our customers. In some cases, raw material shortages and delivery
delays from our suppliers are communicated to us with very little advanced
warning, which has caused operational and customer order fulfillment challenges.
During fiscal year 2021, inventory levels declined and in fiscal year 2022 it
has continued to be difficult to replenish certain components of that inventory.
While we are dedicating significant resources to manage, mitigate, and resolve
these issues, we currently expect supply chain challenges to continue to impact
our ability to deliver products to our customers over the next several quarters.

  In connection with these supply chain disruptions, we have experienced
inflationary increases of certain raw materials, as well as increases in
logistics, transportation and labor costs. Increased freight charges and
shipping delays became more common during the pandemic and subsequent periods,
and are expected to continue into the foreseeable future. Due to the rising cost
environment, in addition to ongoing expense management, we have raised prices on
certain products. While we expect to make pricing adjustments throughout fiscal
year 2022, our margins could be impacted by rising costs.

  During the three months ended July 1, 2022, our manufacturing facilities
continued to operate without significant disruption due to employee absences.
While we have from time to time taken significant precautions to maintain
employee safety, such as implementing mask requirements, encouraging
vaccination, and periodically asking non-production related employees to work
from home when possible, we have experienced and may in the future experience,
COVID-19 related employee absences that make it more difficult to manufacture
our products.

  The full extent to which the COVID-19 pandemic and ensuing supply chain
challenges have and will directly or indirectly impact us, including our
business, financial condition, and results of operations, will depend on future
developments that are highly uncertain and cannot be accurately predicted. We
will continue to actively monitor the situation and may take further actions
that alter our business operations or that we determine are in the best
interests of our employees, customers, suppliers, and stockholders. For
additional information on risks related to the pandemic and other supply chain
risks that could impact our results, see Part II, Item 1A - Risk Factors.

Operating segments and products

We have two operating segments to present: medical and industrial. The segments align our product and service offerings with customer usage in the medical and industrial markets.

Medical

  In our Medical segment, we design, manufacture, sell and service X-ray imaging
components, including X-ray tubes, digital detectors, high voltage connectors,
image-processing software and workstations, 3D reconstruction software,
computer-aided diagnostic software, collimators, automatic exposure control
devices, generators, heat exchangers, ionization chambers and buckys. These
components are used in a range of medical imaging applications including CT,
mammography, oncology, cardiac, surgery, dental, and other diagnostic
radiography uses.

  Our X-ray imaging components are primarily sold to OEM customers. These OEM
customers then design-in our products into their X-ray imaging systems for a
variety of medical modalities. A substantial majority of medical X-ray imaging
OEMs globally are our customers, and many of these have been our customers for
over 25 years. We believe one of the reasons for customer loyalty is that our
hardware and software products are tightly integrated with our customers'
systems. We work very closely with our customers to create custom built
components for their systems based on technology platforms that we have
developed. Because our products are often customized for our customers' specific
equipment, it can be costly and complex for our customers to switch to another
provider.
                                       29

————————————————– ——————————

Contents

Once our components are designed into our customers' equipment, our customers
will typically continue to buy from us for any replacement components and for
service and support for that equipment. Some of our products are also included
in product registrations for our customers' equipment that require regulatory
approval to change. In addition to sales to OEM customers, we sell our products
to independent service companies and distributors as well as directly to
end-users for replacement purposes.

  The COVID-19 pandemic had a significant effect on hospitals, clinics and
outpatient imaging centers as they encountered declines in elective procedures
volume. As a result, they reduced the capital purchases of imaging equipment
from OEMs, which led to lower demand for X-ray imaging components for us.
Additionally, equipment installations were delayed, due to reduced access to
healthcare institutions. Partially offsetting this was an increased demand for
imaging equipment used to diagnose respiratory diseases, such as radiographic
X-ray imaging systems and CT imaging systems. The Company has experienced growth
in demand for its products as health systems globally have continued to address
healthcare services gaps. However, the Company has not been able to convert all
the demand into sales due to on-going supply chain related interruptions and
uncertainties, particularly with the availability of micro-controller chips and
other electronic components. As a result, uncertainty in overall sales volume is
expected to continue at least for the remainder of calendar year 2022.

  In China, the government is broadening the availability of healthcare
services. As a result, the number of diagnostic X-ray imaging systems, including
CT, has grown significantly. We are developing CT X-ray tubes and related
subsystems for Chinese OEMs as they introduce new systems in China. Over the
long-term, our objective is to become the partner of choice both for OEMs and in
the replacement market as CT systems become more widely adopted throughout the
Chinese market.

  In recent years our business in China has been impacted by the trade war with
the United States in three principal ways: (1) importing raw materials from
China to the United States has become more expensive, (2) importing raw
materials and sub-assemblies from the United States to China has become more
expensive, and (3) importing finished U.S. manufactured products into China has
become more difficult and expensive. Recently the governments of both the United
States and China have granted tariff exclusions which temporarily eliminate the
additional duties payable for specific commodities, providing partial relief.
However, U.S. exclusions possess a calendar year-end expiration and Chinese
exclusions must be solicited and approved on a shipment-by-shipment basis. There
is no guarantee that such exclusions will be granted or extended by either
government. In order to mitigate the impact of tariffs on materials imported
from China, we have implemented changes to secure more non-China sources of
materials used to manufacture our X-ray imaging products. To help mitigate the
impact of tariffs, and to be closer to our global customer base, we continue to
expand manufacturing capabilities at our facilities in China, Germany and the
Philippines. We have also implemented local sourcing strategies to offer local
content. This local-for-local strategy has been well received by both our local
customers as well as global OEMs, and acts as a natural hedge against trade wars
and other potential supply chain disruptions.

Industrial

  In our Industrial segment, we design, develop, manufacture, sell and service
X-ray imaging products for use in a number of markets, including security
applications for cargo screening at ports and borders and baggage screening at
airports, and nondestructive testing and inspection applications used in a
number of other vertical markets. Our industrial products include Linatron®
X-ray linear accelerators, X-ray tubes, digital detectors and high voltage
connectors. In addition, we license proprietary image-processing and detection
software designed to work with other Varex products to provide packaged
sub-assembly solutions to our industrial customers. Our Industrial business
benefits from the research and development investment and manufacturing
economies of scale on the Medical side of our business, as we continue to find
new applications for our technology. Along with more favorable pricing dynamics,
this allows us to generally achieve higher gross profit for industrial products
relative to our Medical business. In addition, our Industrial business benefits
from our long-term service agreements for our Linatron® products.

  The security market primarily consists of cargo security for the screening of
trucks, trains, and cargo containers at ports and borders as well as airport
security for carry-on baggage, checked baggage and palletized cargo. The end
customers for border protection systems are typically government agencies, many
of which are in oil-based economies and war zones where there can be significant
variation in buying patterns.

  Non-destructive testing and inspection verticals utilize X-ray imaging to scan
items for inspection of manufacturing defects and product integrity in a wide
range of industries including the aerospace, automotive, electronics, oil and
gas, food packaging, metal castings and 3D printing industries. In addition, new
applications for X-ray sources are being developed, such as sterilization of
food and its packaging. We provide X-ray sources, digital detectors, high
voltage connectors and image processing software to OEM customers, system
integrators and manufacturers in a variety of these verticals. We believe that
the non-destructive testing market represents a significant growth opportunity
for our business, and we are actively pursuing new potential applications for
our products.

  The economic downturn triggered by the COVID-19 pandemic reduced the demand
for X-ray imaging equipment utilized in the non-destructive testing market as
manufacturers focused on cash preservation and reduced spending for capital
equipment. However, we have seen improved conditions in this market, which
continued during the three months ended July 1, 2022.
                                       30

————————————————– ——————————

Contents

Significant Accounting Policies and Estimates

  The preparation of our condensed consolidated financial statements and related
disclosures in conformity with GAAP requires us to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses. These estimates and assumptions are based on historical experience
and on various other factors that we believe are reasonable under the
circumstances. Our critical accounting policies that are affected by accounting
estimates require us to use judgments, often as a result of the need to make
estimates and assumptions regarding matters that are inherently uncertain, and
actual results could differ materially from these estimates.

  We periodically review our accounting policies, estimates and assumptions and
make adjustments when facts and circumstances dictate. Refer to our Annual
Report on Form 10-K for the fiscal year ended October 1, 2021 filed with the SEC
on November 19, 2021 and Note 1, Summary of Significant Accounting Policies, of
the notes to the condensed consolidated financial statements of this report for
further details. Our critical accounting policies that are affected by
accounting estimates include valuation of inventories, assessment of
recoverability of goodwill and intangible assets, and income taxes. Such
accounting policies require us to use judgments, often as a result of the need
to make estimates and assumptions regarding matters that are inherently
uncertain, and actual results could differ materially from these estimates.
There have been no changes to our critical accounting policies, estimates and
assumptions or the judgments affecting the application of those estimates and
assumptions since the filing of our Annual Report on Form 10-K for year ended
October 1, 2021.

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 2022 is the 52-week
period ending September 30, 2022. Fiscal year 2021 was the 52-week period that
ended on October 1, 2021. The fiscal quarters ended July 1, 2022 and July 2,
2021 were both 13-week periods. The three fiscal quarters ended July 1, 2022
and July 2, 2021 were both 39-week periods.

Discussion of operating results for the three months ended July 1, 2022
Compared to the three months ended July 2, 2021

Revenues, net
                                             Three Months Ended
(In millions)                        July 1, 2022          July 2, 2021            $ Change                 % Change
Medical                            $       167.1          $      167.3          $       (0.2)                      (0.1) %
Industrial                                  47.4                  43.9                   3.5                        8.0  %
Total revenues                     $       214.5          $      211.2          $        3.3                        1.6  %
Medical as a percentage of total
revenues                                    77.9  %               79.2  %
Industrial as a percentage of
total revenues                              22.1  %               20.8  %


  Medical revenues decreased $0.2 million, primarily due to decreased sales of
digital detectors for dynamic imaging applications partially offset by higher
sales of CT X-ray tubes. Medical sales were particularly strong in CT, oncology,
and dental modalities.

Industrial revenues increased $3.5 millionprimarily due to increased sales of digital detectors for dynamic imaging applications and non-destructive inspection applications.

                                       31

————————————————– ——————————

  Table of Contents

Gross Profit
                                  Three Months Ended
(In millions)               July 1, 2022      July 2, 2021      $ Change       % Change
Medical                    $     54.3        $      56.5       $    (2.2)        (3.9) %
Industrial                       19.1               17.6             1.5          8.5  %
Total gross profit         $     73.4        $      74.1       $    (0.7)        (0.9) %
Medical gross margin             32.5   %           33.8  %
Industrial gross margin          40.3   %           40.1  %
Total gross margin               34.2   %           35.1  %

The decline in medical gross margin is mainly due to lower sales of digital detectors for dynamic imaging applications, higher transportation costs and higher material costs.

  The Industrial segment gross profit increased primarily as a result of
increased sales of digital detectors for dynamic imaging applications and
non-destructive inspection applications, partially offset by higher freight and
material costs.

Operating Expenses
                                             Three Months Ended
(In millions)                          July 1, 2022      July 2, 2021      $ Change       % Change
Research and development              $     20.2        $      19.2       $     1.0          5.2  %
As a percentage of total revenues            9.4   %            9.1  %

Selling, general and administrative expenses $30.2 $29.2 $

     1.0          3.4  %
As a percentage of total revenues           14.1   %           13.8  %

Operating expenses                    $     50.4        $      48.4       $     2.0          4.1  %
As a percentage of total revenues           23.5   %           22.9  %


Research and development

  We are committed to investing in the business to support long-term growth and
believe long-term research and development expenses of approximately 8% to 10%
of annual revenues is the appropriate range that will allow us to innovate and
bring new products to market for our global OEM customers. Research and
development costs increased to 9.4% of revenues for the third quarter of 2022,
primarily due to increased spending on material costs supporting research and
development initiatives.

Selling, general and administrative expenses

  Selling, general and administrative expenses for the third quarter of 2022
increased $1.0 million and increased to 14.1% of total revenues, primarily due
to increased legal costs compared to the prior year.

Interest and other charges, net

  The following table summarizes the Company's interest and other expense, net:
                                          Three Months Ended
(In millions)                       July 1, 2022       July 2, 2021       $ Change
Interest income                   $     0.1           $           -      $     0.1
Interest expense                       (9.4)                  (10.6)           1.2
Other (expense) income, net            (0.2)                    0.2           (0.4)

Interest and other charges, net $(9.5) $(10.4) $

0.9

Interest expense decreased due to the redemption of $27 million of our senior secured notes in March 2022 and the redemption of $30 million of our senior secured notes in July 2022as well as reduced fees on the ABL agreement.

  Other (expense) income, net increased due to losses in certain investments in
privately-held companies being higher for the three months ended July 1, 2022,
compared to the three months ended July 2, 2021, partially offset by reduced
foreign exchange expense during the three months ended July 1, 2022 compared to
the three months ended July 2, 2021.
                                       32

————————————————– ——————————

Contents

Income taxes (loss)

  For the three months ended July 1, 2022, we recognized income tax expense of
$5.1 million on $13.5 million of pre-tax income. For the three months ended July
2, 2021, we recognized income tax expense of $3.1 million on $15.3 million of
pre-tax loss. Our tax expense for the three months ended July 1, 2022 increased
primarily due to increased pre-tax income in certain jurisdictions, valuation
allowance positions in the United States on deferred tax attributes, and losses
in certain foreign jurisdictions for which no benefit can be recorded.

Discussion of operating results for the nine months ended July 1, 2022
Compared to the nine months ended July 2, 2021

Revenues
                                             Nine Months Ended
(In millions)                       July 1, 2022          July 2, 2021            $ Change                 % Change
Medical                            $      493.2          $      463.1          $       30.1                        6.5  %
Industrial                                134.8                 128.7                   6.1                        4.7  %
Total revenues                     $      628.0          $      591.8          $       36.2                        6.1  %
Medical as a percentage of total
revenues                                   78.5  %               78.3  %
Industrial as a percentage of
total revenues                             21.5  %               21.7  %


  Medical revenues increased $30.1 million, primarily due to increased sales of
CT X-ray tubes. The increase in medical sales was particularly strong in CT and
oncology modalities.

Industrial revenues increased $6.1 millionprimarily due to increased sales of X-ray tubes, digital detectors for dynamic imaging applications and non-destructive inspection applications.

Gross Profit
                                    Nine Months Ended
(In millions)                 July 1, 2022      July 2, 2021      $ Change       % Change
Medical                      $     153.7       $     146.3       $     7.4          5.1  %
Industrial                          55.3              49.6             5.7         11.5  %
Total gross profit           $     209.0       $     195.9       $    13.1          6.7  %
Medical gross margin %              31.2  %           31.6  %
Industrial gross margin %           41.0  %           38.5  %
Total gross margin %                33.3  %           33.1  %

The increase in the medical gross margin is mainly explained by the increase CT Xray application volumes compared to the nine-month period of the previous year, partially offset by the increase in transport and raw material costs.

Industrial gross margin increased primarily due to higher sales of X-ray tubes and digital detectors for dynamic imaging applications, partially offset by higher transportation and material costs.

Operating Expenses
                                             Nine Months Ended
(In millions)                          July 1, 2022      July 2, 2021      $ Change       % Change
Research and development              $      56.8       $      54.1       $     2.7          5.0  %
As a percentage of total revenues             9.0  %            9.1  %

Selling, general and administrative expenses $88.6 $94.2 $

    (5.6)        (5.9) %
As a percentage of total revenues            14.1  %           15.9  %

Operating expenses                    $     145.4       $     148.3       $    (2.9)        (2.0) %
As a percentage of total revenues            23.2  %           25.1  %


                                       33

————————————————– ——————————

Contents

Research and development

  We are committed to investing in the business to support long-term growth and
believe long-term research and development expenses of approximately 8% to 10%
of annual revenues is the appropriate range that will allow us to innovate and
bring new products to market for our global OEM customers. Research and
development costs remained at 9.0% of total revenues due to the relative
increase in revenue as compared to the increase in research and development
costs.

Selling, general and administrative expenses

  Selling, general and administrative expenses for the nine months ended July 1,
2022, decreased to 14.1% of sales primarily due to lower compensation costs,
reduced external audit fees and higher revenue.

Interest and other charges, net

  The following table summarizes the Company's interest and other income
(expense), net:
                                            Nine Months Ended
(In millions)                        July 1, 2022       July 2, 2021       $ Change
Interest income                     $         0.2      $           -      $     0.2
Interest expense                            (30.4)             (31.3)           0.9
Other expense, net                           (3.0)              (2.5)          (0.5)

Interest and other charges, net $(33.2) $(33.8) $

0.6


  Interest and other expense, net decreased during the nine months ended July 1,
2022 due to the redemption of $27 million of our Senior Secured Notes in March
2022 and the redemption of $30 million of our Senior Secured Notes in July 2021,
as well as reduced fees on the ABL agreement.

Other expenses, net increase during the nine months ended July 1, 2022 compared to the nine months ended July 2, 2021mainly due to losses related to currency effects.

Taxes on Income (Loss)

  For the nine months ended July 1, 2022, we recognized an income tax expense of
$12.8 million on $30.4 million of pre-tax income. For the nine months ended July
2, 2021, the Company recognized income tax expense of $4.7 million on $13.8
million of pre-tax loss. Our tax expense for the nine months ended July 1, 2022
increased, compared to the prior year, primarily due to pre-tax income in
certain jurisdictions, valuation allowances in the United States on deferred tax
attributes, and losses in certain foreign jurisdictions for which no benefit can
be recorded.

Cash and capital resources

  We assess our liquidity in terms of our ability to generate cash to fund our
operations, including working capital and investing activities. We believe that
our operating cash flow, cash on our balance sheet and availability under our
ABL Facility are sufficient to meet our anticipated operating cash needs for at
least the next 12 months and will be sufficient to allow us to continue to
invest in our existing businesses, consummate strategic acquisitions and manage
our capital structure on a short and long-term basis. We are currently not aware
of any trends or demands, commitments, events, or uncertainties that will result
in or that are reasonably likely to result in our liquidity increasing or
decreasing in any material way that will impact our capital needs during or
beyond the next 12 months. The maximum availability under our ABL Facility is
$100.0 million; however, the borrowing base under the ABL Facility fluctuates
from month-to-month depending on the amount of eligible accounts receivable,
inventory, and real estate. As of July 1, 2022 the amount available under our
ABL Facility was $97 million, and the ABL Facility remains undrawn. See Part II,
Item 1A. "Risk Factors" for a further discussion. At July 1, 2022 we had total
debt of $412.6 million net of discounts and deferred issuance costs of $38.0
million.
                                       34

————————————————– ——————————

Contents

Cash and Cash equivalents and marketable securities

  The following table summarizes our cash and cash equivalents and marketable
securities:
(In millions)                                     July 1, 2022           October 1, 2021            $ Change
Cash and cash equivalents                       $        99.6          $          144.6          $      (45.0)
Marketable securities not included in cash and
cash equivalents                                         10.4                         -                  10.4
Total                                           $       110.0          $          144.6          $      (34.6)


Borrowings

The following table summarizes the evolution of our outstanding debt:

                                                   July 1, 2022           October 1, 2021
(In millions, except for percentages)                 Amount                  Amount                 $ Change

Current long-term debt maturities

Other debt                                       $         2.5          $            2.8          $       (0.3)
Total current maturities of long-term debt       $         2.5          $            2.8          $       (0.3)
Non-current maturities of long-term debt:

Convertible Senior Unsecured Notes               $       200.0          $          200.0          $          -
Senior Secured Notes                                     243.0                     270.0                 (27.0)
Other debt                                                 5.1                       7.8                  (2.7)

Total non-current maturities of long-term debt: $448.1 $

        477.8          $      (29.7)
Unamortized issuance costs and debt discounts
Unamortized discount - Convertible Notes         $       (31.0)         $          (37.6)         $        6.6
Unamortized issuance costs - Convertible Notes            (3.4)                     (4.1)                  0.7
Unamortized issuance costs - Senior Secured
Notes                                                     (3.6)                     (4.4)                  0.8
Total                                            $       (38.0)         $          (46.1)         $        8.1
Total debt outstanding, net                      $       412.6          $  
       434.5          $      (21.9)


Cash Flows
                                                                         Nine Months Ended
(In millions)                                                    July 1, 2022           July 2, 2021
Net cash flow provided by (used in):
Operating activities                                          $       (0.2)            $       42.0
Investing activities                                                 (20.9)                   (12.9)
Financing activities                                                 (24.0)                    (1.3)

Effects of exchange rate changes on cash and cash equivalents and restricted cash

                                                   (0.1)                    (0.1)

(decrease) net increase in cash and cash equivalents and restricted cash

                                               $      (45.2)            $       27.7


  Net cash (used in) provided by operating activities. Net cash (used in)
provided by operating activities was $(0.2) million and $42.0 million for the
nine months ended July 1, 2022 and July 2, 2021, respectively. The decrease in
cash provided by operating activities was primarily due to increased purchases
of inventory, partially offset by an increase in accounts payable.

  Net cash used in investing activities. Net cash used in investing activities
was $20.9 million and $12.9 million for the nine months ended July 1, 2022 and
July 2, 2021, respectively. The increase in cash used in investing activities
was primarily due to the purchase of marketable securities during the nine
months ended July 1, 2022.

  Net cash used in financing activities. Net cash used in financing activities
was $24.0 million and $1.3 million for the nine months ended July 1, 2022 and
July 2, 2021, respectively. The increase in cash used in financing activities
was primarily due to the redemption of $27 million of the Senior Secured Notes
during the nine months ended July 1, 2022.
                                       35

————————————————– ——————————

Contents

Contractual obligations

  In October 2013, we entered into an amended agreement with dpiX and other
parties that, among other things, provides us with the right to 50% of dpiX's
total manufacturing capacity produced after January 1, 2014. The amended
agreement requires us to pay for 50% of the fixed costs (as defined in the
amended agreement), as determined at the beginning of each calendar year. As of
July 1, 2022, we estimate that we have fixed cost commitments of $6.6 million
related to this amended agreement through the remainder of calendar year 2022.
The amended agreement will continue unless the ownership structure of dpiX
changes (as defined in the amended agreement).

  In October 2015, pursuant to a Domination and Profit and Loss Transfer
Agreement (the "MeVis Agreement"), we committed to pay the noncontrolling
shareholders of MeVis an annual recurring net compensation of €0.95 per MeVis
share. The annual net payment will continue for the life of the MeVis Agreement,
which we anticipate will continue for as long as we remain as the controlling
shareholder of MeVis. As of July 1, 2022, noncontrolling shareholders together
held approximately 0.5 million shares of MeVis, representing 26.3% of the
outstanding shares.

  During the third quarter of fiscal year 2020, we entered into a purchase
agreement with a supplier to acquire certain equipment and intellectual property
from the supplier that is utilized to manufacture X-ray cables utilized in our
products. As of July 1, 2022, there has been no transfer of control of the
underlying equipment. This acquisition is expected to be completed during the
2022 fiscal year and the total consideration to be paid by us for the acquired
assets is expected to be ¥1,084.7 million or approximately $8.0 million, subject
to potential decreases for costs incurred by the Company. On April 14, 2022, we
entered into a foreign currency hedge related to this Japanese Yen payment,
which is expected to fix the purchase price of these assets at approximately
$7.9 million.

Contingencies

  From time to time, the we are a party to or otherwise involved in legal
proceedings, government inspections, investigations, customs and duty audits,
and other claims and contingency matters, both inside and outside the United
States, arising in the ordinary course of its business or otherwise. We accrue
amounts for probable losses, to the extent they can be reasonably estimated,
that we believe are adequate to address any liabilities related to legal
proceedings and other loss contingencies that we believe 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. We
did not have any material contingent liabilities as of July 1, 2022 and
October 1, 2021. Legal expenses are expensed as incurred.

Days of incredible deals

The number of days of sales outstanding (“DSO”) for customer accounts was 67 days at
July 1, 2022 and 62 days to October 1, 2021. Our accounts receivable and DSO are impacted by a number of factors, including the timing of product shipments, the performance of collections, payment terms, the mix of revenues from different regions, and the effects of economic instability.

Recent or updated accounting standards not yet in force

  See Note 1, Summary of Significant Accounting Policies, of the notes to the
accompanying condensed consolidated financial statements for a description of
recent accounting standards, including the expected dates of adoption and the
estimated effects on our condensed consolidated financial statements.

Back

  Backlog is the accumulation of all orders for which revenues have not been
recognized and are still considered valid. Backlog also includes a small portion
of billed service contracts that are included in deferred revenue. Our estimated
total backlog at July 1, 2022 was approximately $456 million.

  Orders may be revised or canceled, either according to their terms or as
customers' needs change. In addition, our ability to convert backlog into
revenue may be impacted by on-going supply chain related interruptions and
uncertainties. Consequently, it is difficult to predict with certainty the
amount of backlog that will result in revenues. We perform a quarterly review to
verify that outstanding orders in the backlog remain valid. Aged orders that are
not expected to be converted to revenues are deemed dormant and are reflected as
a reduction in the backlog amounts in the period identified.

  In addition to orders for which revenues have not been recognized and are
still considered valid, we have pricing agreements with many of our established
customers that span multi-year periods. These pricing agreements include volume
ranges under which orders are placed.
                                       36

————————————————– ——————————

Contents

© Edgar Online, source Previews

More Stories
Max Life Insurance partners with PhonePe to provide financial protection to consumers