OSI Systems(OSIS) - 2025 Q4 - Annual Report

PART I Business Overview OSI Systems, Inc. is a vertically integrated designer and manufacturer of specialized electronic systems and components for diverse markets including homeland security, healthcare, defense, and aerospace General - OSI Systems, Inc. is a vertically integrated designer and manufacturer of specialized electronic systems and components for critical applications[8] - The company sells products and provides related services in diverse markets including homeland security, healthcare, defense, and aerospace[8] - The company operates through three divisions: Security, Optoelectronics and Manufacturing, and Healthcare[9] Security Division - The security and inspection products market is influenced by terrorist incidents, drug and human trafficking, border security, gun violence, and new government mandates and appropriations[11] - Security and inspection products are used globally in airports, border crossings, seaports, cargo operations, government and military facilities, sports and concert venues, and correctional facilities[12] - Initiatives from the U.S. Department of Homeland Security and international regulators, such as C-TPAT, TSA air cargo screening mandates, CBP Container Security Initiative, and EU CCEI, drive demand for security and inspection products[12][13] Optoelectronics and Manufacturing Division - Technological advancements have expanded the optoelectronics market, with OEMs increasingly outsourcing the design and manufacturing of optoelectronic devices and value-added subsystems to specialized manufacturers[14] - Optoelectronic devices are widely used in aerospace and defense, automotive, medical imaging and diagnostics, life sciences and biotechnology, pharmaceuticals, nanotechnology, telecommunications, construction, and homeland security markets[15] - The division offers full turnkey solutions, printed circuit board assembly, cable harness assembly, LCD, and box build manufacturing services, including product design and development, supply chain management, and production manufacturing[15] Healthcare Division - The healthcare industry continues to grow globally, driven by infrastructure development in developing countries and aging populations in developed nations[16] - The industry faces inflationary pressures, labor shortages, and unfavorable payer mix shifts, increasing demand for remote monitoring and flexibly deployable products[17] - The company designs, manufactures, and sells patient monitoring, cardiology, remote monitoring, and connected care solutions for hospitals and clinics[18] Growth Strategy - Leveraging global presence and vertical integration to reduce manufacturing costs, shorten delivery times, and enhance sales and service capabilities[19][20] - Capitalizing on security and inspection system market opportunities, including cargo inspection systems, turnkey security screening services, and SaaS platforms integrating security data with government databases[21][22] - Continuously developing new products, enhancing existing ones through internal R&D and selective acquisitions, and strategically entering new markets and acquiring new technology companies[23][24][25][26] Products and Technology - The Security division (Rapiscan) designs, manufactures, and sells security and inspection systems for screening baggage, parcels, cargo, people, and vehicles, detecting contraband such as weapons, explosives, narcotics, and radioactive materials[28] - Security systems utilize dual-energy X-ray imaging technology, combined with software-enhanced imaging methods and algorithms, to improve the probability of detecting threat items like explosives and weapons[30] - The Optoelectronics and Manufacturing division (OSI Optoelectronics, OSI LaserDiode, Advanced Photonix) designs, manufactures, and sells active and passive optoelectronic devices, and provides electronic manufacturing services[36][38] - The Healthcare division (Spacelabs Healthcare) designs, manufactures, and sells patient monitoring, cardiology, remote monitoring, and connected care solutions, including bedside monitors, telemetry systems, SafeNSound™ workflow solutions, and the Rothman Index predictive analytics tool[39][40][41][42][43] Markets, Customers and Applications - Security and inspection product customers include the U.S. Departments of Homeland Security, Defense, State, Commerce, and Justice, as well as numerous international government agencies[46] - Optoelectronic devices and electronic manufacturing services customers span defense, aerospace, medical, life sciences, telecommunications, homeland security, automotive, and industrial markets[47] - Patient monitoring, cardiology, remote monitoring, and connected care solutions are sold to hospitals, medical clinics, and outpatient surgery centers worldwide[48] Marketing, Sales and Service - The company sells security and inspection products, healthcare solutions, and optoelectronic devices and manufacturing services through a global direct sales force and an extensive network of independent distributors[50][51][52] - Maintenance services are a significant part of the business, offering post-warranty maintenance and providing healthcare customers with on-site repairs, telephone support, and spare parts exchange programs[53] Research and Development - Security and inspection systems and software are primarily designed in the U.S., UK, Australia, Germany, Singapore, and India[54] - Optoelectronic devices and electronic manufacturing services are primarily designed and manufactured at facilities in the U.S., UK, Canada, India, Indonesia, Malaysia, and Mexico[55] - Healthcare products are primarily designed in the U.S., UK, and India, with active participation in research projects to improve medical systems and expand product lines[56][57] Manufacturing and Materials - Security and inspection systems are manufactured in the U.S., Germany, Malaysia, and the UK; patient monitoring systems in Washington State; and optoelectronic devices and electronic manufacturing services in the U.S., Canada, Mexico, India, Indonesia, Malaysia, and the UK[58] - Most high-volume, labor-intensive manufacturing activities occur at facilities in Mexico, India, Indonesia, and Malaysia[58] - Key raw materials and sub-components include X-ray generators, detectors, data acquisition systems, semiconductor wafers, and electronic components, with some critical components manufactured in-house and others sourced from single suppliers[61][63][64][65] Information Technology and Cybersecurity Risk Management - The company extensively relies on digital technologies for operations and faces cyber threats such as intrusions, ransomware, and denial-of-service attacks[66] - An ISO/IEC 27001 certified Information Security Management System (ISMS) has been implemented, focusing on data confidentiality, integrity, and availability[66] - Governance, Risk, and Compliance (GRC) resources proactively monitor IT controls, conduct third-party risk assessments, ensure business function availability, develop incident response plans, and maintain cyber incident management and reporting procedures[66] Trademarks and Trade Names and Patents - The company holds numerous U.S. and foreign trademarks, service marks, and trade names, as well as U.S. and foreign patents related to security inspection products, healthcare products, and optoelectronic devices[67][68] - While patents are valuable, the loss of Rapiscan® or Spacelabs® trademarks could materially adversely affect financial performance and operations[69] Government Regulation of Medical Devices - The company's medical device products are extensively regulated by the U.S. FDA and other domestic and international agencies, requiring stringent pre-market approvals (e.g., 510(k)) and post-market compliance (e.g., QSR, MDR)[70][71][74] - Healthcare cost containment measures and industry consolidation increase product pricing pressure and may impact product demand[75][76] - The company must also comply with other healthcare laws such as HIPAA, anti-kickback statutes, false claims acts, and the Sunshine Act, with violations potentially leading to significant fines and sanctions[77][78][81][82][84] - The international regulatory landscape is increasingly complex, including EU CE marking, ISO 13485 standards, MDSAP, and the more stringent EU Medical Device Regulation (EU MDR)[86][87][88][90] Environmental Regulations - The company is subject to various environmental laws, directives, and regulations concerning the use, storage, handling, and disposal of hazardous materials and waste[91] - The company conducts environmental audits and surveys at its manufacturing facilities in North America, Asia Pacific, and Europe to ensure compliance with all environmental regulations and obtain necessary environmental permits[92] Competition - The markets in which the company operates are highly competitive, characterized by evolving customer needs and rapid technological changes[93] - Competition is primarily based on product performance, quality, reliability, government regulatory approvals, total cost-effectiveness of systems, customer relationships, technical capabilities, price, and the breadth of sales and service networks[94] - The company differentiates itself by offering a broad range of security inspection solutions, consistent user interfaces and connectivity for medical monitoring products, and specialized engineering expertise in optoelectronics[94][95][96][97] Backlog Consolidated Backlog | Metric | June 30, 2024 | June 30, 2025 | | :--- | :--- | :--- | | Consolidated Backlog | $1.7 billion | $1.8 billion | - Backlog includes quantifiable purchase orders or contracts expected to be recognized as revenue within the next five years[98] - Shipments may be delayed due to supply chain disruptions, specific customer requirements, on-site construction, design changes, export license and letter of credit acquisition, among other reasons[99][100] Human Capital - The company is committed to attracting, developing, and retaining talent, supporting employees through competitive compensation structures, employee stock purchase plans, retirement benefits, and health and well-being programs[102] - The company values a diverse workforce, is committed to maintaining a diverse, equitable, and inclusive culture, and pledges pay equity and protection of vulnerable groups' rights[103] Employee Composition (as of June 30, 2025) | Metric | Value | | :--- | :--- | | Total Employees | 7,337 | | Global Female Employee Ratio | 43.7% | | U.S. Ethnically Diverse Employee Ratio | 48.5% | Available Information - The company files periodic reports, proxy statements, and other information as required by the Securities Exchange Act, available free of charge on the SEC website and the company's website (www.osi-systems.com)[105](index=105&type=chunk)[106] Risk Factors The company faces multiple risks including product liability, government contract termination, acquisition integration, currency fluctuations, geopolitical conflicts, intense competition, healthcare cost pressures, technological obsolescence, supply chain disruptions, IT failures, cybersecurity threats, complex regulatory compliance, and financial impacts from inflation and rising interest rates - Failure of security and inspection system operators or algorithms to detect contraband could lead to product and professional liability claims[109][110] - Government agency contracts may be terminated for convenience, and acquisition and alliance activities pose risks of integration difficulties, potential liabilities, and management distraction[112][113] - Unfavorable currency exchange rate fluctuations, declining crude oil prices, disruptions in the U.S. budget process, and intense competition across divisions could negatively impact financial performance[115][116][117][118] - Healthcare cost containment pressures, industry consolidation, and technological advancements may lead to decreased product sales and pricing pressure[120][122][123] - Geopolitical events, such as the Russia-Ukraine conflict and Middle East conflicts, may cause supply chain disruptions, increased cyberattacks, and economic uncertainty[127][128][129] - As a U.S. government contractor, the company must comply with strict procurement rules and may face contract termination, litigation, and administrative penalties[130][131][132] - Long and unpredictable product sales cycles, along with rising raw material and sub-component prices and supply disruptions, could impact profitability[134][136] - Reliance on third-party suppliers, natural disasters, product recalls, and IT system failures and cybersecurity breaches could lead to operational disruptions and financial losses[137][145][146][150][151] - Complex international legal and regulatory compliance risks, including anti-bribery, data privacy, and medical device regulation, along with financial pressures from inflation and rising interest rates[168][170][172][182] Unresolved Staff Comments There are no unresolved staff comments in this report - There are no unresolved staff comments in this report[186] Cybersecurity The company integrates cybersecurity risk management into its enterprise risk management framework, adhering to NIST Cybersecurity Framework principles and holding ISO/IEC 27001 certification. Its risk management and strategy encompass preventative controls, 24/7 monitoring, vulnerability management, incident response plans, third-party risk management, and employee training. To date, no cybersecurity incidents have materially impacted business strategy, operating results, or financial condition Risk Management and Strategy - The company integrates cybersecurity risk management into its enterprise risk management framework, overseen by the Information Security Officer (ISO) and adhering to NIST Cybersecurity Framework principles[187] - ISO/IEC 27001 certification has been obtained, and independent third-party auditors and security firms are engaged annually to test and assess cybersecurity controls[187] - Key elements include preventative controls and monitoring, vulnerability management and testing, incident response plans, third-party risk management, and employee training[187][188][189] - To date, no cybersecurity threats, including incidents, have materially impacted the company's business strategy, operating results, or financial condition[190] Governance and Oversight - The Board of Directors has delegated primary cybersecurity oversight responsibility to the Risk Management Committee (RMC)[191] - The Chief Information Officer (CIO) and Information Security Officer (ISO) report to the RMC at least quarterly on security posture and threat intelligence, and to the full Board when necessary[191] - The company maintains an interdisciplinary Cybersecurity Committee to coordinate cybersecurity risk management and incident response across the organization[192] - The leadership team, including the CIO and ISO, possesses deep expertise in technology and security, providing robust oversight for cybersecurity strategy[193] Properties As of June 30, 2025, the company owns primary facilities in Massachusetts, Washington, Texas, Indonesia, and the UK, and leases facilities in Malaysia, California, Massachusetts, and Mexico. The company believes its current facilities are adequate for operations and expects to renew expiring leases on existing terms - As of June 30, 2025, the company owns primary facilities in Massachusetts, Washington, Texas, Indonesia, and the UK[194] - The company leases primary facilities in Malaysia, California, Massachusetts, and Mexico[194] - The company believes its current facilities are adequate for current operations and expects to renew expiring leases on existing terms or find suitable alternative space[195] Legal Proceedings The company faces various legal proceedings and claims, including a Department of Justice subpoena related to a former employee's alleged corrupt activities in Mexico. Despite potential adverse outcomes, management believes the ultimate disposition of these matters will not materially adversely affect the company's business, financial condition, operating results, or cash flows - The company is subject to various legal actions, proceedings, and claims that arise in the ordinary course of business[196] - The company received a subpoena from the U.S. Department of Justice (DoJ) concerning alleged corrupt and other activities by a former employee in Mexico, has provided documents, and plans to continue cooperating[477] - Management believes that, despite the possibility of adverse outcomes, the ultimate disposition of these matters is not likely to have a material adverse effect on the company's business, financial condition, operating results, or cash flows[478] Mine Safety Disclosures This item is not applicable - This item is not applicable[197] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on the Nasdaq Global Select Market under 'OSIS', with approximately 89 registered shareholders as of August 18, 2025. No dividends have been paid since the 1997 IPO, nor are any planned for the foreseeable future. While no unregistered equity securities were sold in fiscal 2025, $350 million in 2.25% convertible senior notes were issued in July 2024. The company repurchased 531,314 shares in Q1 FY2025, with 1,190,556 shares remaining for repurchase as of June 30, 2025, and its stock performance has outperformed the Nasdaq Composite and peer group - The company's common stock trades on the Nasdaq Global Select Market under the ticker symbol “OSIS”[200] Shareholder Information (as of August 18, 2025) | Metric | Value | | :--- | :--- | | Number of Registered Shareholders | Approximately 89 | - The company has not paid any dividends since its initial public offering in 1997 and does not intend to pay dividends in the foreseeable future[201] - No unregistered common stock was sold during fiscal year 2025[202] 2029 Convertible Senior Notes Issuance (July 2024) | Metric | Value | | :--- | :--- | | Aggregate Principal Amount | $350 million | | Interest Rate | 2.25% | | Maturity Date | August 2029 | | Maximum Number of Common Shares Convertible | 2,324,490 shares | Issuer Purchases of Equity Securities (Fiscal Year 2025) | Metric | Q1 Fiscal Year 2025 | As of June 30, 2025 | | :--- | :--- | :--- | | Number of Common Shares Repurchased | 531,314 shares | N/A | | Remaining Shares Available for Repurchase Under Current Plan | N/A | 1,190,556 shares | Securities Authorized for Issuance Under Equity Compensation Plans (as of June 30, 2025) | Metric | Value | | :--- | :--- | | Number of Securities to be Issued Upon Exercise of Options, Warrants, and Rights | 60,253 | | Weighted-Average Exercise Price of Outstanding Options, Warrants, and Rights | $121.41 | | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans | 1,984,358 | | Note | Restricted stock units or other full value awards counted at a ratio of 1:1.87 | Cumulative Total Shareholder Return Performance (Indexed to $100 on June 30, 2020) | Year | OSI Systems, Inc. | Nasdaq Composite Index | Peer Group | | :--- | :---------------- | :----------------- | :----- | | 2020 | 100.00 | 100.00 | 100.00 | | 2021 | 136.17 | 145.23 | 112.85 | | 2022 | 114.47 | 111.21 | 99.56 | | 2023 | 157.86 | 140.28 | 116.39 | | 2024 | 184.24 | 181.81 | 121.83 | | 2025 | 301.26 | 210.31 | 159.41 | RESERVED This item is reserved with no specific information - This item is reserved with no specific information[214] Management's Discussion and Analysis of Financial Condition and Results of Operations In fiscal year 2025, consolidated net revenue grew by 11.3% to $1.7132 billion, and operating income increased by 15% to $217.5 million. Security division revenue rose by 14.7%, Optoelectronics and Manufacturing by 7.5%, while Healthcare declined by 1.8%. Gross profit increased by $56.7 million, with gross margin maintained at 34.3%. Total operating expenses grew by 8.3%, with selling, general, and administrative expenses decreasing as a percentage of net revenue. R&D expenses increased by $8.1 million. Net interest and other expenses rose to $31.4 million. Income tax expense was $36.5 million, with an effective tax rate of 19.6%. The company maintains ample liquidity with $106.4 million in cash and cash equivalents, revised and extended its credit facility in July 2025, and implemented a stock repurchase program - OSI Systems, Inc. is a vertically integrated designer and manufacturer of specialized electronic systems and components, serving homeland security, healthcare, defense, and aerospace markets[215] Fiscal Year 2025 Revenue Contribution by Segment | Segment | Percentage of Total Consolidated Revenue FY2025 | | :--- | :--- | | Security | 70% | | Optoelectronics and Manufacturing | 20% | | Healthcare | 10% | Consolidated Performance (FY2025 vs. FY2024) | Metric | FY2024 (Millions USD) | FY2025 (Millions USD) | Change Rate | | :--- | :--- | :--- | :--- | | Net Revenue | 1,538.8 | 1,713.2 | +11.3% | | Operating Income | 189.1 | 217.5 | +15.0% | - The $174.4 million increase in net revenue and $56.7 million increase in gross profit primarily drove the operating income growth in fiscal year 2025, partially offset by a $28.3 million increase in operating expenses[220] - Two business acquisitions were completed in fiscal year 2025, and two in fiscal year 2024, none of which were material[221] - The company faces uncertainties from global macroeconomic factors (supply chain, inflation, rising interest rates, labor shortages) and geopolitical conflicts (U.S.-China trade tensions, Russia-Ukraine conflict, Israel-Hamas conflict)[223][226] - A weaker U.S. dollar positively impacted reported sales by approximately 0.4% in fiscal year 2025[227] Revenue Recognition for Significant International Security Contracts | Fiscal Year | Revenue Recognized (Millions USD) | | :--- | :--- | | 2023 | 17 | | 2024 | 404 | | 2025 | 231 | - Key accounting policies and estimates include revenue recognition, inventory valuation, income taxes, business combinations, and legal and other contingencies[229][231][232][235][236] Net Revenue by Segment (FY2023-FY2025) | Segment | FY2023 (Millions USD) | FY2024 (Millions USD) | FY2025 (Millions USD) | 2023-2024 Change Rate | 2024-2025 Change Rate | | :------------------------ | :---------------- | :---------------- | :---------------- | :----------------- | :----------------- | | Security | 760.3 | 1,043.1 | 1,196.2 | 37.2% | 14.7% | | Optoelectronics and Manufacturing | 327.6 | 324.3 | 348.6 | (1.0)% | 7.5% | | Healthcare | 190.5 | 171.4 | 168.4 | (10.0)% | (1.8)% | | Total Net Revenue | 1,278.4 | 1,538.8 | 1,713.2 | 20.4% | 11.3% | - Security division revenue growth was primarily driven by increased sales of cargo and vehicle inspection systems, trace detection systems, and checkpoint security, along with higher service revenue from an expanded installed product base[238] - Optoelectronics and Manufacturing division revenue growth was primarily due to a $23.5 million increase in contract manufacturing business[239] - Healthcare division revenue decline was primarily due to a $4.8 million decrease in cardiology sales and a $1.8 million decrease in patient monitoring sales, partially offset by increased service revenue and consumables and accessories revenue[240] Gross Profit (FY2023-FY2025) | Metric | FY2023 (Millions USD) | Percentage of Net Revenue | FY2024 (Millions USD) | Percentage of Net Revenue | FY2025 (Millions USD) | Percentage of Net Revenue | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Gross Profit | 430.5 | 33.7% | 530.5 | 34.5% | 587.2 | 34.3% | - Gross profit increased by $56.7 million in fiscal year 2025, with gross margin remaining largely consistent with the prior year[241] Operating Expenses (FY2023-FY2025) | Expense Category | FY2023 (Millions USD) | Percentage of Net Revenue | FY2024 (Millions USD) | Percentage of Net Revenue | FY2025 (Millions USD) | Percentage of Net Revenue | 2024-2025 Change Rate | | :-------------------------- | :---------------- | :---------------- | :---------------- | :---------------- | :---------------- | :---------------- | :----------------- | | Selling, General and Administrative Expenses | 228.3 | 17.9% | 269.7 | 17.5% | 290.9 | 17.0% | 7.9% | | Research and Development Expenses | 59.4 | 4.7% | 65.3 | 4.3% | 73.4 | 4.3% | 12.4% | | Restructuring and Other Charges, Net | 7.6 | 0.5% | 6.4 | 0.4% | 5.3 | 0.3% | (17.2)% | | Total Operating Expenses | 295.3 | 23.1% | 341.4 | 22.2% | 369.6 | 21.6% | 8.3% | - Selling, general, and administrative expenses increased by $21.2 million in fiscal year 2025, primarily due to compensation expenses, professional service fees, information technology costs, and unfavorable foreign currency impacts, but decreased as a percentage of net revenue from 17.5% to 17.0%[244] - Research and development expenses increased by $8.1 million in fiscal year 2025, primarily to support new product development initiatives, especially within the Security division[246] - Restructuring and other charges, net, totaled $5.3 million in fiscal year 2025, including facility closure costs, employee severance, acquisition-related costs, and legal fees[249] Interest and Other Expenses, Net (FY2023-FY2025) | Metric | FY2023 (Millions USD) | FY2024 (Millions USD) | FY2025 (Millions USD) | | :--- | :--- | :--- | :--- | | Interest and Other Expenses, Net | 20.0 | 27.8 | 31.4 | - The increase in net interest and other expenses in fiscal year 2025 was primarily due to higher average borrowing levels supporting revenue growth, business acquisition activities, and stock repurchases, partially offset by lower average borrowing rates from the 2029 Notes and interest rate swaps[250] Income Tax Expense and Effective Tax Rate (FY2023-FY2025) | Metric | FY2023 (Millions USD) | FY2024 (Millions USD) | FY2025 (Millions USD) | | :--- | :--- | :--- | :--- | | Income Tax Expense | 23.5 | 33.1 | 36.5 | | Effective Tax Rate | 20.4% | 20.5% | 19.6% | - The effective tax rate decreased to 19.6% in fiscal year 2025, primarily benefiting from $6.7 million in net discrete tax benefits, including equity compensation, foreign tax dispute resolution, and changes in uncertain tax positions[252] Cash and Cash Equivalents (as of June 30) | Metric | FY2024 (Millions USD) | FY2025 (Millions USD) | | :--- | :--- | :--- | | Cash and Cash Equivalents | 95.4 | 106.4 | Cash Flow from Operating Activities (FY2024-FY2025) | Fiscal Year | Cash Flow (Millions USD) | | :--- | :--- | | 2024 | (87.5) | | 2025 | 97.6 | - The positive change in cash flow from operating activities was primarily attributable to improved accounts receivable collections and enhanced inventory utilization driven by Security division revenue growth[256] Cash Flow from Investing Activities (FY2024-FY2025) | Fiscal Year | Cash Flow (Millions USD) | | :--- | :--- | | 2024 | (37.6) | | 2025 | (117.9) | - Investing activities in fiscal year 2025 primarily included $76.7 million for business acquisitions and $23.8 million in capital expenditures[257] Cash Flow from Financing Activities (FY2024-FY2025) | Fiscal Year | Cash Flow (Millions USD) | | :--- | :--- | | 2024 | 144.3 | | 2025 | 30.8 | - Financing activities in fiscal year 2025 included proceeds from the issuance of $350 million in senior convertible notes, partially offset by $214.2 million in net repayments on bank credit facilities and $80.4 million in stock repurchases[258] Key Cash Requirements (as of June 30, 2025) | Metric | Amount (Millions USD) | | :--- | :--- | | Total Borrowings | 649.6 | | Lease Payment Obligations | 32.7 | - The credit facility was amended and extended in July 2025, increasing the limit to $725 million and maturing in July 2030[255] Cash Held by Foreign Subsidiaries (as of June 30, 2025) | Metric | Amount (Millions USD) | Percentage of Total Cash | | :--- | :--- | :--- | | Cash and Cash Equivalents | 106.4 | N/A | | Percentage Held by Foreign Subsidiaries | N/A | Approximately 78% | - Cash held by foreign subsidiaries is primarily located in India, the UK, Canada, Singapore, and Malaysia, intended for permanent reinvestment, and not expected to fund U.S. operations[262] - The Board authorized the repurchase of up to 2 million shares of common stock in September 2022. 531,314 shares were repurchased in fiscal year 2025, with 1,190,556 shares remaining available for repurchase as of June 30, 2025[264] Quantitative and Qualitative Disclosures About Market Risk The company faces inherent market risks from financial instruments, including interest rate risk on borrowings and foreign currency fluctuations. Derivative financial instruments like forward contracts and interest rate swaps are used to manage these risks, not for speculation. International markets offer growth opportunities but also present risks from economic downturns, trade policy changes, and political instability. In fiscal year 2025, a weaker U.S. dollar positively impacted foreign currency sales by 0.4%, but net foreign currency transaction losses totaled $12.7 million. Inflation and rising interest rates may increase operating and borrowing costs and affect customer purchasing power - The company faces inherent market risks from financial instruments, including interest rate risk on borrowings and foreign currency fluctuation risk[266][267] - The company uses derivative financial instruments, such as foreign currency forward contracts and interest rate swap agreements, to manage or reduce market risks, not for speculative purposes[266][352] - International markets offer significant growth opportunities but also expose the company to risks from global economic downturns, changes in trade policies, civil unrest or military conflicts, and other political instabilities[268] - A weaker U.S. dollar positively impacted reported sales by approximately 0.4% in fiscal year 2025[227][269] Net Foreign Currency Transaction Gains (Losses) (FY2023-FY2025) | Fiscal Year | Net Gain (Loss) (Millions USD) | | :--- | :--- | | 2023 | 2.0 | | 2024 | (5.1) | | 2025 | (12.7) | - A 10% appreciation/depreciation of the U.S. dollar relative to local currencies would result in an approximate $11.5 million net increase/decrease in operating income for fiscal year 2025[269] - High inflation and rising interest rates may increase material, manufacturing, and labor costs, thereby pressuring profits and margins, and potentially limiting customer purchasing power[270] Long-Term Debt Exposure (as of June 30, 2025) | Debt Type | Annual Interest Rate | Total Amount (Thousands USD) | Fair Value (Thousands USD) | | :--- | :--- | :--- | :--- | | Term Loan | 5.68% | 128,125 | 128,125 | | Convertible Notes | 2.25% | 350,000 | 472,770 | | Finance Lease Obligations | 6.1% | 1,278 | 1,278 | - The credit facility was amended and extended in July 2025, with the new term loan maturing in July 2030[271] Financial Statements and Supplementary Data This item incorporates by reference the report of independent registered public accounting firm, consolidated balance sheets, consolidated statements of operations, consolidated statements of comprehensive income, consolidated statements of stockholders' equity, consolidated statements of cash flows, notes to consolidated financial statements, and unaudited quarterly financial information - This item incorporates by reference the report of independent registered public accounting firm, consolidated financial statements (including balance sheets, statements of operations, comprehensive income, stockholders' equity, and cash flows), notes to consolidated financial statements, and unaudited quarterly financial information[272][295][297] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There are no changes in or disagreements with accountants on accounting and financial disclosure for this item - There are no changes in or disagreements with accountants on accounting and financial disclosure for this item[273] Controls and Procedures As of June 30, 2025, management, including the CEO and CFO, assessed and concluded that the company's disclosure controls and procedures are effective, providing reasonable assurance that required information is timely recorded, processed, summarized, and reported. Management also assessed and concluded that internal control over financial reporting is effective based on the COSO 2013 framework, excluding a recently acquired subsidiary. No material changes occurred in internal control over financial reporting during the fourth quarter of fiscal year 2025. Management acknowledges the inherent limitations of control systems, which can only provide reasonable assurance - As of June 30, 2025, management, including the Chief Executive Officer and Chief Financial Officer, assessed and concluded that the company's disclosure controls and procedures are effective[274] - Management concluded that, as of June 30, 2025, the company's internal control over financial reporting was effective, based on the COSO 2013 framework[275] - In assessing the effectiveness of internal control over financial reporting, management excluded a recently acquired subsidiary, which represented 6.1% of consolidated total assets and 4.7% of net sales in the consolidated financial statements[276][314] - No material changes occurred in internal control over financial reporting during the fourth quarter of fiscal year 2025[278] - Management acknowledges that any control and procedure, no matter how well designed and operated, can only provide reasonable assurance of achieving its control objectives, not absolute assurance[279] Other Information During the fourth quarter of fiscal year 2025, no director or officer informed the company of the adoption, modification, or termination of any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement - During the fourth quarter of fiscal year 2025, no director or officer informed the company of the adoption, modification, or termination of any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement[280] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable - This item is not applicable[281] PART III Directors, Executive Officers and Corporate Governance Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's definitive proxy statement for its December 2025 Annual Meeting of Shareholders. The company has adopted a Code of Ethics and Business Conduct and an Insider Trading Policy - Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's definitive proxy statement for its December 2025 Annual Meeting of Shareholders[284] - The company has adopted a Code of Ethics and Business Conduct and an Insider Trading Policy[284][285] Executive Compensation Information regarding executive compensation is incorporated by reference from the company's definitive proxy statement for its December 2025 Annual Meeting of Shareholders - Information regarding executive compensation is incorporated by reference from the company's definitive proxy statement for its December 2025 Annual Meeting of Shareholders[286] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership of certain beneficial owners and management and related stockholder matters is incorporated by reference from the company's definitive proxy statement for its December 2025 Annual Meeting of Shareholders - Information regarding security ownership of certain beneficial owners and management and related stockholder matters is incorporated by reference from the company's definitive proxy statement for its December 2025 Annual Meeting of Shareholders[287] Certain Relationships and Related Transactions, and Director Independence Information regarding certain relationships and related transactions, and director independence is incorporated by reference from the company's definitive proxy statement for its December 2025 Annual Meeting of Shareholders - Information regarding certain relationships and related transactions, and director independence is incorporated by reference from the company's definitive proxy statement for its December 2025 Annual Meeting of Shareholders[288] Principal Accountant Fees and Services Information regarding principal accountant fees and services is incorporated by reference from the company's definitive proxy statement for its December 2025 Annual Meeting of Shareholders - Information regarding principal accountant fees and services is incorporated by reference from the company's definitive proxy statement for its December 2025 Annual Meeting of Shareholders[289] PART IV Exhibits and Financial Statement Schedules This item lists exhibits and financial statement schedules filed as part of the report, including financial statements, notes, and supplementary data, all incorporated by reference - This item lists exhibits and financial statement schedules filed as part of the report, including financial statements, notes, and supplementary data, all incorporated by reference[292][295] Form 10-K Summary This item is not applicable - This item is not applicable[294]