OSI SYSTEMS INC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-K)

The following management's discussion and analysis of financial condition and
results of operations ("MD&A") is intended to help the reader understand our
results of operations and financial condition. MD&A is provided as a supplement
to, and should be read in conjunction with, our financial statements and the
accompanying notes. This MD&A contains forward-looking statements and the
matters discussed in these forward-looking statements are subject to risks,
uncertainties, and other factors that could cause actual results to differ
materially from those projected or implied in the forward-looking statements.
Please see "Risk Factors" and "Forward-Looking Statements" for a discussion of
the uncertainties, risks and assumptions associated with these statements.

Overview

We are a vertically integrated designer and manufacturer of specialized
electronic systems and components for critical applications. We sell our
products and provide related services in diversified markets, including homeland
security, healthcare, defense and aerospace. We have three operating divisions,
each of which is a reportable segment: (a) Security, providing security and
inspection systems and turnkey security screening solutions; (b) Healthcare,
providing patient monitoring, cardiology and remote monitoring, and connected
care systems and associated accessories; and (c) Optoelectronics and
Manufacturing, providing specialized electronic components and electronic
manufacturing services for our Security and Healthcare divisions, as well as to
third parties for applications in the defense and aerospace markets, among
others.

Security Division. Through our Security division, we provide security screening
products and services globally, as well as turnkey security screening solutions.
These products and services are used to inspect baggage, parcels, cargo, people,
vehicles and other objects for weapons, explosives, drugs, radioactive and
nuclear materials and other contraband. Revenues from our Security division
accounted for 56% of our total consolidated revenues for fiscal 2022.

As a result of terrorist attacks and smuggling operations against the U.S. and
in other locations worldwide, security and inspection products have increasingly
been used at a wide range of facilities other than airports, such as border
crossings, railways, seaports, cruise line terminals, freight forwarding
operations, sporting venues, government and military installations and nuclear
facilities. We believe that our wide-ranging product portfolio together with our
ability to provide turnkey screening solutions position us to competitively
pursue security and inspection opportunities as they arise throughout the world.

Currently, the U.S. federal government is discussing various options to address
the U.S. federal government's overall fiscal challenges and we cannot predict
the outcome of these efforts. While we believe that national security spending
will continue to be a priority, U.S. government budget deficits and the national
debt have created increasing pressure to examine and reduce spending across many
federal agencies. Additionally, there continues to be volatility in
international markets that has impacted international security spending. We
believe that the diversified product portfolio and international customer mix of
our Security division position us well to withstand the impact of these
uncertainties and even benefit from specific initiatives within various
governments. However, depending on how future budgetary reductions may be
implemented and how the U.S. federal government and our other international
customers manage their fiscal challenges, including the impact of the COVID-19
pandemic, we believe that these actions could have a material, adverse effect on
our business, financial condition and results of operations.

Healthcare Division. Through our Healthcare division, we design, manufacture,
market and service patient monitoring, cardiology and remote monitoring, and
connected care systems globally for sale primarily to hospitals and medical
centers. Our products monitor patients in critical, emergency and perioperative
care areas of the hospital and provide information, through wired and wireless
networks, to physicians and nurses who may be at the patient's bedside, in
another area of the hospital or even outside the hospital. Revenues from our
Healthcare division accounted for 17% of our total consolidated revenues for
fiscal 2022.

The healthcare markets in which we operate are highly competitive. We believe
that our customers choose among competing products on the basis of product
performance, functionality, value and service. Although there has been an
increase in demand for patient monitoring products due to the COVID-19 pandemic,
there is continued uncertainty regarding the U.S. federal government budget and
the Affordable Care Act, either of which may impact hospital spending,
third-party payer reimbursement and fees to be levied on certain medical device
revenues, any of which could adversely affect our business and results of
operations. In addition, hospital capital spending appears to have been impacted
by strategic uncertainties surrounding the Affordable Care Act and economic
pressures. We also believe that global economic uncertainty has caused some
hospitals and healthcare providers to delay purchases of our products and
services. During this period of uncertainty, sales of our healthcare products
may be negatively impacted. A prolonged delay could have a material adverse
effect on our business, financial condition and results of operations.

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Optoelectronics and Manufacturing Division. Through our Optoelectronics and
Manufacturing division, we design, manufacture and market optoelectronic devices
and flex circuits and provide electronics manufacturing services globally for
use in a broad range of applications, including aerospace and defense
electronics, security and inspection systems, medical imaging and diagnostics,
telecommunications, office automation, computer peripherals, industrial
automation, and consumer products. We also provide our optoelectronic devices
and electronics manufacturing services to OEM customers, and our own Security
and Healthcare divisions. Revenues from external customers in our
Optoelectronics and Manufacturing division accounted for 27% of our total
consolidated revenues for fiscal 2022.

Consolidated Results

Discussion and analysis of our financial condition and results of operations for
fiscal 2020 has been omitted from this Annual Report on Form 10-K, and is
available in Item 7 of Part II, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" of our Annual Report on Form 10-K
for the year ended June 30, 2021.

Fiscal 2022 Compared with Fiscal 2021. We reported consolidated sales of
$1,183.2 million in fiscal 2022, a 3.2% increase compared to the prior year,
which drove a year-over-year increase in gross profit of $4.5 million. Our
income from operations increased to $121.7 million in 2022 or 5.5% growth from
the prior year driven by the increased sales and a reduction in operating
expenses of $1.9 million.

Acquisitions. We acquired two small businesses during fiscal 2022 and one small
business during fiscal 2021 as described in Note 2 to the consolidated financial
statements, none of which were considered material.

Trends and Uncertainties

The following is a discussion of certain trends and uncertainties that we believe have influenced, and may continue to influence, our results of operations.

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Coronavirus Pandemic. The coronavirus disease 2019 ("COVID-19") pandemic,
including the emergence of new variants, has dramatically impacted the global
health and economic environment, with millions of confirmed cases, business
slowdowns and shutdowns, and market volatility. The COVID-19 pandemic has
caused, and is likely to continue to cause, significant economic disruptions and
has impacted, and is expected to continue to impact, our operations and the
operations of our suppliers, logistics providers and customers as a result of
supply chain disruptions and delays, as well as labor challenges associated with
employee absences, travel restrictions, site access, quarantine restrictions,
remote work, and adjusted work schedules. Our ability to continue to operate
without significant negative impacts will in part depend on our ability to
protect our employees and our supply chain and to keep our manufacturing
facilities open and operating effectively. We have endeavored to implement
government and health authority recommendations to protect our employees
worldwide including with respect to vaccine administration. There is substantial
uncertainty regarding the duration, scope, and ultimate impact of the COVID-19
pandemic. During the early stages of the pandemic and continuing to a lesser
extent throughout the duration of the pandemic, our Healthcare division
experienced increased demand for certain products as a result of COVID-19. In
our Security division, throughout the pandemic, receipt of certain orders has
been delayed, most notably with respect to our aviation and cargo products, and
our revenues have been adversely impacted as a result of the pandemic. As many
customers of our Security division continue to be impacted by the pandemic, we
have received and could receive further requests to delay deliveries of
equipment and modify service arrangements or the scheduling of factory or site
acceptance tests, which has impacted, and could further impact, timing of
revenue recognition. In addition, as a result of COVID-19 related government
regulations, certain of our global manufacturing facilities have had to limit
operations and might have to limit operations in the future. While we have been
able to broadly maintain our operations, we experienced some disruption in our
supply chain in certain markets due primarily to materials shortages, longer
lead times on deliveries and transportation constraints. If these business
interruptions resulting from COVID-19 were to be prolonged or expanded in scope,
our business, financial condition, results of operations and cash flows would be
materially and adversely impacted. We intend to continue to actively monitor the
situation and may take further actions that alter our business operations as may
be required by federal, state or local authorities or that we determine are in
our best interests and the best interests of our employees, suppliers and
customers. The ultimate impact of COVID-19 on our operations and financial
performance in future periods, including our ability to execute our programs in
the expected timeframe, remains uncertain and will depend on future
pandemic-related developments, including the duration of the pandemic, potential
subsequent waves of COVID-19 infection or potential new variants, the
effectiveness and adoption of COVID-19 vaccines and therapeutics, supplier
impacts and related government actions to prevent and manage disease spread,
including the implementation of any federal, state, local or foreign vaccine
mandates, all of which are uncertain and difficult to predict. The long-term
impacts of COVID-19 on government budgets and other funding priorities,
including international priorities, that impact demand for our products and
services are also difficult to predict, but could negatively affect our future
results and performance.

Global Economic Considerations. Our products and services are sold in numerous
countries worldwide, with a large percentage of our sales generated outside the
United States. Therefore, we are exposed to and impacted by global macroeconomic
factors, U.S. and foreign government policies and foreign exchange fluctuations.
There is uncertainty surrounding macroeconomic factors in the U.S. and globally
characterized by the supply chain environment, inflationary pressure, rising
interest rates, and labor shortages. Further, global economic conditions
continue to be highly volatile due to the COVID-19 pandemic, resulting in market
size contractions in certain countries due to economic slowdowns and government
restrictions on movement. In addition to the COVID-19 pandemic, these other
global macroeconomic factors, coupled with the U.S. political climate and
political unrest internationally, have created uncertainty and impacted demand
for certain of our products and services. Also, the invasion of Ukraine by
Russia and the sanctions imposed in response to this conflict have increased
global economic and political uncertainty. While the impact of these factors
remains uncertain, we will continue to evaluate the extent to which these
factors will impact our business, financial condition or results of operations.
We do not know how long this uncertainty will continue. These factors could have
a material negative effect on our business, results of operations and financial
condition.

Global Trade. In addition to the COVID-19 pandemic, the current domestic and
international political environment, including in relation to recent and further
potential changes by the U.S. and other countries in policies on global trade
and tariffs, have resulted in uncertainty surrounding the future state of the
global economy and global trade. This uncertainty is exacerbated by sanctions
imposed by the U.S. government against certain businesses and individuals in
select countries. Continued or increased uncertainty regarding global trade due
to these or other factors may require us to modify our current business
practices and could have a material adverse effect on our business, results of
operations and financial condition.

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Healthcare Considerations. As described above, our Healthcare division
experienced some increased demand for its patient monitoring products as a
result of the COVID-19 pandemic during the earlier stages of the pandemic that
has continued to a lesser extent throughout the duration of the pandemic.
Increased healthcare capital purchases made in prior periods may result in fewer
capital purchases in subsequent periods. The pandemic may also impact our
ability to manufacture product needed to timely fill orders if we experience
supply chain disruptions or need to close any manufacturing facility due to
employee COVID-19 cases or local government regulations.

European Union Threat Detection Standards. The EU has implemented regulations
for all airports within the EU that use explosive detection systems to have hold
baggage screening systems that are compliant with the European Civil Aviation
Conference (ECAC) Standard 3. The deadline for compliance with this mandate was
initially set for September 2020. Given the uncertainty surrounding the COVID-19
pandemic, the EU revised the regulations, and the date by which airports using
explosive detection systems for hold baggage screening must meet Standard 3 has
been changed to March 2024, with certain larger airports required to meet
earlier installation dates. Our Security division's real time tomography (RTT)
product has passed the ECAC explosive detection system Standard 3 threat
detection requirement.

Government Policies. Our results of operations and cash flows could be materially affected by changes in U.S. or foreign government legislative, regulatory or enforcement policies, including U.S. and foreign government policies to manage the COVID-19 pandemic, such as travel restrictions or site closures.

Changes in Costs and Supply Chain Disruptions. Our costs are subject to
fluctuations, particularly due to changes in raw material, component, and
logistics costs. Our manufacturing and supply chain operations, including
freight and shipping activities, have been and may continue to be impacted by
increased vendor costs as well as the current global supply chain bottleneck.
Specifically, we are impacted by the global shortage of electronic components
and other materials needed for production and freight availability. We expect
continued disruptions in obtaining material and freight availability as the
world economies react to and recover from supply chain shortages. This increased
cost environment has been exacerbated by the COVID-19 pandemic. If we are unable
to mitigate the impact of increased costs through pricing or other actions,
there could be a negative impact on our business, results of operations, and
financial condition.

Russia's Invasion of Ukraine. The invasion of Ukraine by Russia and the
sanctions imposed in response to this conflict have increased global economic
and political uncertainty. This has the potential to indirectly disrupt our
supply chain and access to certain resources. While we have not experienced
significant adverse impacts to date and will continue to monitor for any impacts
and seek to mitigate disruption that may arise, we have certain research and
development activities within Ukraine for our Healthcare division which have
been somewhat impacted. The conflict also has increased the threat of malicious
cyber activity from nation states and other actors.

Critical Accounting Policies and Estimates

The following discussion and analysis of our financial condition and results of
operations is based on our consolidated financial statements, which have been
prepared in conformity with accounting principles generally accepted in the
United States ("U.S. GAAP"). Our preparation of these consolidated financial
statements requires us to make judgments and estimates that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. We base our estimates on
historical experience and on various other assumptions that we believe to be
reasonable under the circumstances. As a result, actual results may differ from
such estimates. Our senior management has reviewed these critical accounting
policies and estimates and related disclosures with the Audit Committee of our
Board of Directors. The following summarizes our critical accounting policies
and estimates used in preparing our consolidated financial statements:

Revenue Recognition. We recognize revenue when performance obligations under the
terms of the contracts with our customers are satisfied. Our performance
obligations are broadly categorized as product sales, service revenue, and
project-spcific contract revenue. Revenue from sales of products is recognized
upon shipment or delivery when control of the product transfers to the customer,
depending on the terms of each sale, and when collection is probable. Revenue
from services includes installation and implementation of products and turnkey
security screening services and after-market services. Generally, revenue from
services is recognized over time as the services are performed. Sales agreements
with customers can be project specific, cover a period of time, and can be
renewable periodically. The contracts may contain terms and conditions with
respect to payment, delivery, installation, services, warranty and other rights.
Contracts with customers may include the sale of products and services.

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In certain instances, contracts with customers can contain multiple performance
obligations such as civil works to prepare a site for equipment installation,
training of customer personnel to operate equipment, and after-market service of
equipments. We generally separate multiple elements in a contract into separate
performance obligations if those elements are distinct, both individually and in
the context of the contract. If multiple promises comprise a series of distinct
services which are substantially the same and have the same pattern of transfer,
they are combined and accounted for as a single performance obligation.

Inventory. Inventories are stated at the lower of cost or net realizable value.
We write down inventory for slow-moving and obsolete inventory based on
historical usage, orders on hand, assessments of future demands, and market
conditions, among other items. If these factors are less favorable than those
projected, additional inventory write-downs may be required.

Income Taxes. Our annual tax rate is based on our income, statutory tax rates
and tax planning opportunities available to us in the various jurisdictions in
which we operate. Tax laws are complex and subject to different interpretations
by the taxpayer and respective governmental taxing authorities. Significant
judgment is required in determining our tax expense and in evaluating our tax
positions including evaluating uncertainties. We review our tax positions
quarterly and adjust the balances as new information becomes available.

Deferred income tax assets represent amounts available to reduce income taxes
payable on taxable income in future years. Such assets arise because of
temporary differences between the financial reporting and tax bases of assets
and liabilities, as well as from net operating loss and tax credit
carryforwards. We evaluate the recoverability of these future tax deductions by
assessing the adequacy of future expected taxable income from all sources,
including reversal of taxable temporary differences, forecasted operating
earnings and available tax planning strategies. These sources of income
inherently rely on estimates. To provide insight, we use our historical
experience and our short and long-range business forecasts. We believe it is
more likely than not that a portion of the deferred income tax assets may expire
unused and therefore have established a valuation allowance against them.
Although realization is not assured for the remaining deferred income tax
assets, we believe it is more likely than not that the deferred tax assets will
be fully recoverable within the applicable statutory expiration periods.
However, deferred tax assets could be reduced in the near term if our estimates
of taxable income are significantly reduced or available tax planning strategies
are no longer viable.

Business Combinations. In connection with the acquisition of a business, we
record the fair value of purchase consideration for the tangible and intangible
assets acquired, and liabilities assumed based on their estimated fair values.
The excess of the fair value of purchase consideration over the fair values of
these identifiable assets and liabilities is recorded as goodwill. Such
valuations require management to make significant estimates and assumptions,
especially with respect to intangible assets. Significant estimates in valuing
certain intangible assets include, but are not limited to, future expected cash
flows from acquired customers, acquired technology, trade names, useful lives
and discount rates. Our estimates of fair value are based upon assumptions
believed to be reasonable, but which are inherently uncertain and unpredictable
and, as a result, actual results may differ from estimates. During the
measurement period, which is up to one year from the acquisition date, we may
record adjustments to the assets acquired and liabilities assumed, with the
corresponding offset to goodwill. Upon the conclusion of the measurement period,
any subsequent adjustments are recorded to earnings.

Impairment of Goodwill, Other Intangible Assets and Long-Lived Assets.  Goodwill
represents the excess purchase consideration over the estimated fair value of
the assets acquired and liabilities assumed in a business combination. Goodwill
is allocated to our segments based on the nature of the product line of the
acquired business. The carrying value of goodwill is not amortized but is
annually tested for impairment as of the end of the second quarter and more
frequently if there is an indicator of impairment. We assess qualitative factors
of each of our three reporting units to determine whether it is more likely than
not that the fair value of a reporting unit is less than its carrying amount,
including goodwill. The assessments conducted as of December 31, 2021 indicated
that it is not more likely than not that the fair values of our three reporting
units are less than their carrying amounts, including goodwill. Despite the
COVID-19 pandemic, there were no qualitative factors which would trigger
impairment testing between measurement dates. Thus, we have determined that
there is no goodwill impairment for any of our three reporting units.

We evaluate long-lived assets with finite lives for impairment whenever events
or changes in circumstances indicate that the carrying amount of the asset may
not be recoverable. Impairment is considered to exist if the total estimated
future cash flows on an undiscounted basis are less than the carrying amount of
the assets. If impairment does exist, we measure the impairment loss and record
it based on the discounted estimate of future cash flows. In estimating future
cash flows, we group assets at the lowest level for which there are identifiable
cash flows that are largely independent of the cash flows from other asset
groups. Our estimate of future cash flows is based upon, among other things,
certain assumptions about expected future operating performance, growth rates
and other factors.

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Although we believe the assumptions and estimates we have made in the past have
been reasonable and appropriate, different assumptions and estimates could
materially impact our reported financial results. More conservative estimates of
the anticipated future benefits from these businesses could result in impairment
charges, which would decrease net income and result in lower asset values on our
balance sheet.

Stock-Based Compensation Expense. We account for stock-based compensation using
fair value recognition provisions. Thus, we record stock-based compensation as a
charge to earnings net of the estimated impact of forfeited awards. As such, we
recognize stock-based compensation cost only for those stock-based awards that
are estimated to ultimately vest over their requisite vesting period, based on
the vesting provisions of the individual grants.

The process of estimating the fair value of stock-based compensation awards and
recognizing stock-based compensation cost over their requisite vesting period
involves significant assumptions and judgments. We estimate the fair value of
stock option awards on the date of grant using the Black-Scholes
option-valuation model which requires that we make certain assumptions
regarding: (i) the expected volatility in the market price of our Common Stock;
(ii) dividend yield; (iii) risk-free interest rates; and (iv) the period of time
employees are expected to hold the award prior to exercise. We estimate the fair
value of restricted stock unit awards on the date of the grant using the market
price of our Common Stock on that date. In addition, we estimate the expected
impact of forfeited awards and recognize stock-based compensation cost only for
those awards expected to vest. If actual forfeiture rates differ materially from
our estimates, stock-based compensation expense could differ significantly from
the amounts we have recorded in the current period. We periodically review
actual forfeiture experience and revise our estimates, as necessary. We
recognize the cumulative effect of changes in the estimated forfeiture rate as
compensation cost in earnings in the period of the revision. As a result, if we
revise our assumptions and estimates, our stock-based compensation expense could
change materially in the future. Certain restricted stock units vest based upon
the achievement of pre-established performance criteria. We estimate the fair
value of performance-based awards at the date of grant based upon the
probability that the specified performance criteria will be met, adjusted for
estimated forfeitures. Each quarter we update our assessment of the probability
that the specified performance criteria will be achieved and adjust our estimate
of the fair value of the performance-based awards if necessary. We amortize the
fair values of performance-based awards over the requisite service period
adjusted for estimated forfeitures for each separately vesting tranche of the
award. See Note 9 to the consolidated financial statements for a further
discussion of stock-based compensation.

Legal and Other Contingencies. We are subject to various claims and legal
proceedings. We review the status of each significant legal dispute to which we
are a party and assess our potential financial exposure, if any. If the
potential financial exposure from any claim or legal proceeding is considered
probable and the amount can be reasonably estimated, we record a liability and
an expense for the estimated loss. Significant judgment is required in both the
determination of probability and the determination as to whether an exposure is
reasonably estimable. Because of uncertainties related to these matters,
accruals are based only on the best information available at the time. As
additional information becomes available, we reassess the potential liability
related to our pending claims and litigation and revise our estimates
accordingly. Such revisions in the estimates of the potential liabilities could
have a material impact on our results of operations and financial position.

Net Revenues

The table below and the discussion that follows are based upon the way we analyze our business. See Note 14 to the consolidated financial statements for additional information about business segments.

                                                                                                                            Fiscal       Fiscal
                                    Fiscal          % of         Fiscal          % of           Fiscal          % of       2020-2021    2021-2022
                                     2020       Net Revenues      2021       Net Revenues        2022       Net Revenues   % Change     % Change

                                                                               (Dollars in millions)
Security                           $   742.0              64 %  $   633.3              55 %    $   663.2              56 %      (15) %          5 %
Healthcare                             185.3              16 %      212.3              19 %        205.7              17 %        15 %        (3) %

Optoelectronics / Manufacturing        238.7              20 %      301.3  

           26 %        314.3              27 %        26 %          4 %
Total Net Revenues                 $ 1,166.0                    $ 1,146.9                      $ 1,183.2                         (2) %          3 %


Fiscal 2022 Compared with Fiscal 2021. Revenues for the Security division during
the fiscal year ended June 30, 2022 increased on a year-over-year basis. Our
product revenues increased by approximately $20 million, and our service
revenues increased by approximately $10 million as compared to the prior year
comparable period.

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Revenues for the Healthcare division during the fiscal year ended June 30, 2022
decreased 3% year-over-year. While cardiology sales increased by approximately
$4.4 million and service, supplies and accessories sales increased by
approximately $5.1 million, patient monitoring sales decreased by approximately
$16.1 million as a result of the increased demand related to the COVID-19
pandemic in fiscal year 2021.

Revenues for the Optoelectronics and Manufacturing division during the fiscal
year ended June 30, 2022 increased year-over year as a result of an increase in
revenue in our optoelectronics business of approximately $10 million and an
increase in sales of approximately $3 million in our contract manufacturing

business.

Gross Profit

                Fiscal         % of        Fiscal         % of        Fiscal         % of
                 2020      Net Revenues     2021      Net Revenues     2022      Net Revenues

                                            (Dollars in millions)
Gross profit    $ 420.6            36.1 %  $ 419.9            36.6 %  $ 424.4            35.9 %


Fiscal 2022 Compared with Fiscal 2021. Gross profit is impacted by sales volume,
productivity, and changes in overall manufacturing-related costs, such as raw
materials and component costs, warranty expense, provision for inventory,
freight, and logistics. Gross profit increased approximately $5 million as
compared to the prior year on a 3% increase in sales.  The gross margin declined
from 36.6% to 35.9% driven by the mix of sales and increased costs. Our cost of
goods sold increased year-over-year primarily as a result of the increase in
revenues and higher raw material and freight costs. Gross profit as a percentage
of net revenues during the fiscal year ended June 30, 2022 decreased on a
year-over-year basis due to (i) strong sales growth within our Optoelectronics
and Manufacturing division (which has the lowest gross margin among our
divisions), (ii) a reduction in revenues in our Healthcare division (which has
the highest gross margin among our divisions), and (iii) a reduction in the
Security division gross margin due to increased component and freight costs, a
less favorable sales mix and a reduced service gross margin.

Operating Expenses

                                                                                                                Fiscal      Fiscal
                               Fiscal         % of        Fiscal         % of        Fiscal         % of       2020-2021   2021-2022
                                2020      Net Revenues     2021      Net Revenues     2022      Net Revenues   % Change    % Change

                                                                       (Dollars in millions)
Selling, general and             252.0            21.6      240.7            21.0      235.6            19.9         (5)         (2)
administrative                 $                       %  $                       %  $                       %           %           %

Research and development          57.3             4.9 %     53.7             4.7 %     59.6             5.0 %       (6) %        11 %
Impairment, restructuring          6.5             0.6       10.1             0.9        7.5             0.6          55        (25)
and other charges                                      %                          %                          %           %           %
Total operating expenses       $ 315.8            27.1 %  $ 304.5            26.5 %  $ 302.7            25.6 %       (4) %       (1) %

Selling, General and Administrative

Our significant selling, general and administrative ("SG&A") expenses include employee compensation, sales commissions, travel, professional services, marketing expenses, and depreciation and amortization expense.

Fiscal 2022 Compared with Fiscal 2021. SG&A expense for the fiscal year ended
June 30, 2022 was lower than such expense in the same prior-year period due to
reduced provision for losses on accounts receivable and certain bad debt
recoveries totaling $16 million as well as a decrease of approximately $3
million for professional fees and other miscellaneous reductions of
approximately $4 million. These decreases were partially offset by an increase
in employee compensation expense of $11 million, increased travel and
entertainment of $4 million, and increased marketing expenses of $3 million.

Research and Development

Our Security and Healthcare divisions have historically invested substantial
amounts in research and development ("R&D"). We intend to continue this trend in
future years, although specific programs may or may not continue to be funded
and funding levels may fluctuate. R&D expenses included research related to new
product development and product enhancement expenditures.

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Fiscal 2022 Compared with Fiscal 2021. The increase in R&D expense during the
fiscal year ended June 30, 2022 from the same prior-year period was primarily
due to higher employee compensation expense of $7 million to support new product
development initiatives and approximately $1 million in other expenses primarily
in our Security and Healthcare divisions. This increase was partially offset by
reductions in supplies of approximately $2 million.

Impairment, Restructuring and Other Charges

Impairment, restructuring and other charges generally consist of charges
relating to reductions in our workforce, facilities consolidation, impairment of
assets, costs related to acquisition activity, legal charges and other
non-recurring charges. We have undertaken certain restructuring activities in an
effort to align our global capacity and infrastructure with demand by our
customers and fully integrate acquisitions, thereby improving our operational
efficiency. Our efforts have helped enhance our ability to improve operating
margins, retain and expand existing relationships with customers and attract new
business. We may utilize similar measures in the future to realign our
operations to further increase our operating efficiencies. The effect of these
efforts may materially affect our future operating results.

Fiscal 2022 Compared with Fiscal 2021. During the fiscal year ended June 30,
2022, impairment, restructuring and other charges were $7.5 million and
consisted of $5.1 million for legal charges, net of insurance reimbursements,
$1.1 million in charges for employee terminations, $0.3 million in acquisition
related costs, and $1.0 million in impairment charges. During the year ended
June 30, 2021, we incurred $7.2 million for exit activities associated with an
expired turnkey contract in Mexico. Such exit costs include $2.8 million for
employee terminations, $1.1 million for facility closure and other exit costs,
direct transaction costs of $2.7 million, and $0.6 million for right-of-use
asset impairment for a leased facility. We also incurred costs of $2.1 million
for other employee terminations and facility closure costs for operational
efficiency activities, $0.3 million for acquisition-related activities, and $0.5
million for certain legal charges, net of insurance reimbursements.

Other Income

Fiscal 2022 Compared with Fiscal 2021. For the fiscal year ended June 30, 2022, other income was $27.4 million, driven by the gain on sale of property and equipment primarily from the sale of corporate owned real estate in a sale leaseback transaction of the Hawthorne Property in March 2022. There was no corresponding amount during the fiscal year ended June 30, 2021.

Interest and Other Expense, Net

                                   Fiscal     Fiscal      Fiscal
                                    2020       2021        2022

                                       (Dollars in millions)

Interest and other expense, net $ 18.8 $ 16.7 $ 9.0

Fiscal 2022 Compared with Fiscal 2021. For the fiscal year ended June 30, 2022,
interest and other expense, net was $9.0 million as compared to $16.7 million in
the comparable prior-year period. This decrease was driven by our adoption of
ASU 2020-06 (see Note 1 to the consolidated financial statements for further
discussion) which was partially offset by rising interest rates and higher
average levels of borrowing under our revolving credit facility during the
fiscal year ended June 30, 2022 in comparison with interest rates and levels of
borrowing during the same period in the prior fiscal year. Interest expense
during the fiscal years ended June 30, 2022 and 2021 included $0.5 million and
$9.0 million, respectively, of non-cash interest expense, which was primarily
related to the Notes.

Provision for Income Taxes

The effective tax rate for a particular period varies depending on a number of
factors including (i) the mix of income earned in various tax jurisdictions,
each of which applies a unique range of income tax rates and income tax credits,
(ii) changes in previously established valuation allowances for deferred tax
assets (changes are based upon our current analysis of the likelihood that these
deferred tax assets will be realized), (iii) the level of non-deductible
expenses, (iv) certain tax elections, (v) tax holidays granted to certain of our
international subsidiaries, (vi) return to provision adjustments and
(vii) changes in tax legislation.

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Fiscal 2022 Compared with Fiscal 2021. For the fiscal years ended June 30, 2022
and 2021, we recognized a provision for income taxes of $24.8 million and $24.6
million, respectively. The effective tax rate for the fiscal years ended June
30, 2022 and 2021 was 17.7% and 24.9%, respectively. During the fiscal years
ended June 30, 2022 and 2021, we recognized a net discrete tax benefit of $7.0
million and $1.2 million, respectively, mainly related to equity-based
compensation under ASU 2016-09 and changes in uncertain tax positions.

Liquidity and Capital Resources

Our principal sources of liquidity are our cash and cash equivalents, cash
generated from operations and our credit facility. Cash and cash equivalents
totaled $64.2 million at June 30, 2022, compared to $80.6 million at June 30,
2021. During fiscal 2022, we generated $63.8 million of cash flow from
operations. These proceeds and $64.8 million of net bank borrowings and
long-term debt were used for the following: $14.9 million invested in capital
expenditures, $14.1 million for the acquisition of two businesses and $131.0
million for share repurchases and taxes paid related to the net share settlement
of equity awards. If we continue to net settle equity awards, we will use
additional cash to pay our tax withholding obligations in connection with such
settlements. We currently anticipate that our available funds, credit facilities
and cash flow from operations will be sufficient to meet our operational cash
needs for the next 12 months and foreseeable future. In addition, we anticipate
that cash generated from operations, without repatriating earnings from our
non-U.S. subsidiaries, and our credit facilities will be sufficient to satisfy
our obligations in the U.S.

We have a $750 million credit facility that is comprised of a $600 million
revolving credit facility, which includes a $300 million subfacility for letters
of credit, and a $150 million delayed draw term loan of which a portion was
drawn. The term loan is available for us to draw until September 1, 2022. As of
June 30, 2022, there was $60.0 million outstanding under our revolving credit
facility, $50.0 million outstanding under the term loan, and $78.5 million of
outstanding letters of credit. As of June 30, 2022, the total amount available
under these credit facilities was $561.5 million. See Note 8 to the consolidated
financial statements for further discussion.

Cash Provided by Operating Activities. Cash flows from operating activities can
fluctuate significantly from period to period, as net income, adjusted for
non-cash items, and working capital fluctuations impact cash flows. During
fiscal 2022, we generated cash from operations of $63.8 million compared to
$139.1 million in the prior fiscal year. This decrease was driven by increases
in inventory, decreases in accounts payable and a reduction in customer
advances, net and other changes in net working capital.

Cash Used in Investing Activities. Net cash used in investing activities was
$12.7 million during fiscal 2022 as compared to $34.7 million used during the
prior year. The decrease in cash used in investing activities was driven
primarily by $32 million of proceeds for the sale of corporate owned real estate
in a sale leaseback transaction of the Hawthorne Property. During fiscal 2022,
we used cash of $14.1 million for the acquisition of businesses as compared to
$3.0 million in the prior fiscal year. Net capital expenditures in fiscal 2022
were $14.9 million compared to $16.9 million in the prior year. Expenditures for
intangible and other assets in fiscal 2022 were $15.6 million compared to $13.8
million in the prior fiscal year. In addition, purchases of certificates of
deposit in fiscal 2022 were $2.2 million compared to $4.9 million in the same
prior-year period.

Cash Used in Financing Activities. Net cash used in financing activities was
$64.0 million during fiscal 2022, compared to $103.9 million during the prior
year. The changes in cash flows from financing activities primarily relate to
(i) net proceeds from bank borrowings and other debt totaling $64.3 million in
fiscal 2022 compared to net repayments of $59.3 million on bank lines of credit
and debt in fiscal 2021; and (ii) $131.0 million used for share repurchases and
taxes paid related to the net share settlement of equity awards in fiscal 2022
compared to $49.1 million in the prior year.

Material Cash Requirements

Our material cash requirements include the following contractual and other obligations.

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Borrowings. Outstanding lines of credit and current and long-term debt totaled
$353.4 million at June 30, 2022, an increase of $76.1 million from $277.3
million at June 30, 2021. As of June 30, 2022, we were in compliance with all
financial covenants under our various borrowing agreements. See Note 8 to the
consolidated financial statements for further discussion. We anticipate that
cash generated from our operations, in addition to existing cash borrowing
arrangements and future access to capital markets should be sufficient to meet
our cash requirements for at least the next 12 months, including the principal
payment of the convertible notes of $242.3 million maturing on September 1,
2022. However, our future capital requirements will depend on many factors,
including future business acquisitions, capital expenditures, litigation, stock
repurchases and levels of research and development spending, among other
factors. The adequacy of available funds will depend on many factors, including
the success of our businesses in generating cash, continued compliance with
financial covenants contained in our credit facility and the health of capital
markets in general, among other factors.

Leases. We have lease arrangements for certain facilities and equipment under
various operating lease agreements. As of June 30, 2022, we had lease payment
obligations of $40.0 million, with $10.9 million payable within the next 12
months.

Cash Held by Foreign Subsidiaries

Our cash and cash equivalents totaled $64.2 million at June 30, 2022. Of this
amount, approximately 78% was held by our foreign subsidiaries and subject to
repatriation tax considerations. These foreign funds were held primarily by our
subsidiaries in the United Kingdom, Singapore, Malaysia, Canada, India, and
Australia, and to a lesser extent in Albania and Germany among others. We intend
to permanently reinvest certain earnings from foreign operations, and we
currently do not anticipate that we will need this cash in foreign countries to
fund our U.S. operations. In the event we repatriate cash from certain foreign
operations and if taxes have not previously been withheld on the related
earnings, we would provide for withholding taxes at the time we change our
intention with regard to the reinvestment of those earnings.

Stock Repurchase Program

In April 2020, the Board of Directors authorized a new share repurchase program
of up to 1,000,000 shares, and in August 2020, the Board of Directors increased
the maximum number of shares to 3,000,000 shares authorized under the stock
repurchase program. This program does not expire unless our Board of Directors
acts to terminate the program. During fiscal 2022, we repurchased 1,294,594
shares. As of June 30, 2022, 1,253,401 shares remained available for repurchase.

The timing and actual numbers of shares purchased depends on a variety of
factors, including stock price, general business and market conditions and other
investment opportunities. Repurchases may be made from time to time under the
program through open-market purchases or privately-negotiated transactions at
our discretion. Upon repurchase, the shares are restored to the status of
authorized but unissued shares, and we record them as a reduction in the number
of shares of Common Stock issued and outstanding in our consolidated financial
statements.

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