Varex Imaging(VREX) - 2019 Q1 - Quarterly Report

Revenue Performance - Total revenues for the three months ended December 28, 2018, were $185.7 million, an increase of $9.5 million or 5.4% compared to $176.2 million for the same period in 2017[147] - Medical segment revenues increased by $4.7 million to $143.9 million, primarily due to increased sales of digital detectors for oncology, dental, and fluoroscopic applications[147] - Industrial segment revenues increased by $4.8 million to $41.8 million, driven by higher sales of X-ray tubes and linear accelerators[148] Gross Margin - Total gross margin decreased to $60.0 million, a decline of $1.5 million or 2.4% from $61.5 million, with a gross margin percentage of 32.3%[149] - Medical gross margin percentage decreased to 31.3%, down from 33.3%, primarily due to restructuring charges[149] Expenses - Research and development expenses for the first quarter of 2019 were $18.8 million, representing 10.1% of total revenues, down from 11.2% in the prior year[150] - Selling, general and administrative expenses increased to $30.8 million, or 16.6% of total revenues, up from 16.0%[150] Market Trends - The company anticipates continued growth in China-based revenues as a percentage of total revenues due to increased healthcare service availability[138] - The digital detector market is experiencing price erosion, particularly in the competitive radiographic detector market, which is expected to continue[136] Research and Development - The company maintains a long-term research and development expense target of approximately 8% to 10% of annual revenues to support innovation[151] Financial Position - Interest and other expense, net decreased slightly to $6.3 million for the three months ended December 28, 2018, compared to $6.5 million for the same period in 2017, primarily due to a decrease in total debt outstanding[153] - The effective tax rate increased to 26.8% for the three months ended December 28, 2018, from a benefit of (60.6)% in the same period of 2017, reflecting one-time benefits from the U.S. Tax Reform enacted in 2017[154] - Total debt outstanding, net decreased to $375.4 million as of December 28, 2018, from $389.8 million as of September 28, 2018, a reduction of $14.4 million[162] - Cash and cash equivalents increased to $55.1 million as of December 28, 2018, up from $51.9 million as of September 28, 2018, an increase of $3.2 million[161] Cash Flow - Net cash provided by operating activities was $20.0 million for the three months ended December 28, 2018, compared to $40.1 million for the same period in 2017, a decrease of 50%[163] - Days Sales Outstanding (DSO) improved to 65 days as of December 28, 2018, down from 68 days as of September 28, 2018, indicating better collection performance[167] - Net cash used in investing activities was $3.4 million for the three months ended December 28, 2018, compared to $2.6 million for the same period in 2017, reflecting increased capital expenditures[165] - Financing activities included borrowings of $4.0 million and repayments of $19.0 million for the three months ended December 28, 2018, compared to borrowings of $2.0 million and repayments of $32.0 million in the same period of 2017[166] Liquidity - The company had a liquidity availability of $137.0 million under its credit facility as of December 28, 2018, indicating strong liquidity position[160] - The company reevaluated its indefinite reinvestment assertion for foreign earnings, resulting in a deferred tax liability of approximately $0.1 million related to potential repatriation[159]