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EMPLOYEE STOCK PLANS | 12 Months Ended
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Sep. 27, 2024
Share-Based Payment Arrangement [Abstract] |
EMPLOYEE STOCK PLANS | EMPLOYEE STOCK PLANS Employee Stock Plans Certain of the Company's employees participate in the Varex Imaging Corporation 2020 Omnibus Stock Plan, as Amended and Restated (the “2020 Stock Plan”), the 2017 Omnibus Stock Plan (the “2017 Stock Plan”), and the Varex Imaging Corporation 2017 Employee Stock Purchase Plan (the “2017 ESPP”) which allow the grants of stock options, restricted stock units and performance shares among other types of awards to eligible employees. In January 2017, Varex stockholders approved the 2017 ESPP, which provides eligible employees with an opportunity to purchase shares of Varex common stock at 85% of the lower of its fair market value at the start and end of a six-month purchase period. During the fiscal year 2022, the Company's Board of Directors approved an increase in the number of shares available for issuance under the 2017 ESPP of 0.8 million shares. As of September 27, 2024 the 2017 ESPP provides for the purchase of up to 1.8 million shares of Varex common stock. Share-Based Compensation Expense Share-based compensation expense recognized in the Consolidated Statements of Operations is based on awards ultimately expected to vest. Share-based compensation expense includes expenses related to the Company’s direct employees. The table below summarizes the effect of recording share-based compensation expense and the option value of the employee stock purchase plan shares:
| Fiscal Years
(In millions) | 2024 |  | 2023 |  | 2022
Cost of revenues | $ | 1.8 |  |  | $ | 1.7 |  |  | $ | 1.6 |
Research and development | 3.4 |  |  | 3.3 |  |  | 3.1 |
Selling, general and administrative | 10.1 |  |  | 8.5 |  |  | 9.3 |
Total share-based compensation expense | $ | 15.3 |  |  | $ | 13.5 |  |  | $ | 14.0 |
The unrecognized share-based compensation cost as of September 27, 2024 was $23.8 million, and is expected to be recognized over a weighted average period of 1.9 fiscal years. As of September 27, 2024, there were approximately 5.0 million and 0.3 million shares of common stock available for future issuances under the 2020 Stock Plan and the 2017 ESPP, respectively. The Company utilized the Black-Scholes valuation model for estimating the fair value of stock options granted and the option component of ESPP grants. The Company calculated the fair value of option grants and the option component of ESPP grants on the respective dates of grant using the following weighted average assumptions:
| Employee Stock Option Plan |  | Employee Stock Purchase Plans
| Fiscal Years |  | Fiscal Years
| 2024 |  | 2023 |  | 2022 |  | 2024 |  | 2023 |  | 2022
Expected term (in years) | 6.1 |  | 6.9 |  | 7.0 |  | 0.5 |  | 0.5 |  | 0.4
Risk-free interest rate | 3.8 | % |  | 3.6 | % |  | 1.4 | % |  | 5.2 | % |  | 4.8 | % |  | 1.6 | %
Expected volatility | 45.7 | % |  | 43.9 | % |  | 42.7 | % |  | 34.2 | % |  | 34.8 | % |  | 33.6 | %
Expected dividend | — | % |  | — | % |  | — | % |  | — | % |  | — | % |  | — | %
Weighted average fair value at grant date | $5.85 |  | $9.75 |  | $12.07 |  | $3.97 |  | $4.96 |  | $5.41
Option valuation methods, including Black-Scholes, require the input of subjective assumptions, which are discussed below. Risk-Free Interest Rate The interest rates used are based on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award. Expected Term Options granted generally vest over a period of 48 months and expire 7 to 10 years from the date of grant. Employee stock purchase plan offering periods are typically 6 months and provide eligible employees with an opportunity to purchase shares of Varex common stock at 85% of the lower of its fair market value at the start or end of a six-month purchase period. The Company has elected to use the simplified method in calculating the expected term of its options due to a lack of sufficient historical information. Expected Dividend Yield The dividend rate used is zero as the Company has never paid any cash dividends on its common stock and does not anticipate doing so in the foreseeable future. The Company is also restricted from paying dividends on common stock under its debt facilities. Expected Volatility Authoritative accounting guidance on stock-based compensation indicates that companies should consider volatility over a period generally commensurate with the expected or contractual term of the stock option. The expected volatility is based on the historical volatility of the Company's common stock. Stock Option Activity The following table summarizes the activity for stock options under Varex’s employee incentive plans for the Company’s employees:
(In thousands, except per share amounts and the remaining term) | Options |  | Price Range |  | Weighted Average Exercise Price |  | Weighted Average Remaining Term (in years) |  | Aggregate Intrinsic Value (1)
Outstanding at September 29, 2023 | 2,862 |  |  | $13.61 - $37.60 |  | $ | 28.08 |  |  | 4.8 |  | $ | 871.4 |
Granted | 17 |  |  | $13.84 - $13.84 |  | 13.84 |  |  |  |  |
Canceled, expired or forfeited | (782) |  | $31.08 - $34.13 |  | 31.23 |  |  |  |  |
Outstanding at September 27, 2024 | 2,097 |  | $13.61 - $37.60 |  | $ | 26.79 |  |  | 5.5 |  | $ | — |
Exercisable at September 27, 2024 | 1,720 |  | $13.61 - $37.60 |  | $ | 27.32 |  |  | 5.0 |  | $ | — |
(1) The aggregate intrinsic value represents the total pre-tax intrinsic value, which is computed based on the difference between the exercise price and the closing price of Varex common stock of $11.92 as of September 27, 2024, the last trading date of the Company's respective fiscal years, and which represents the amount that would have been received by the option holders had all option holders exercised their options and sold the shares received upon exercise as of that date. The grant-date fair value of options granted during fiscal years 2024, 2023 and 2022 was $0.1 million, $4.0 million and $3.9 million, respectively. The total intrinsic value of the options exercised during the years ended September 27, 2024, September 29, 2023 and September 30, 2022 was $0.0 million, $0.1 million and $0.5 million, respectively. Restricted Stock Units, Performance Stock Units, Restricted Stock Awards and Deferred Stock Units During the fiscal year 2024, the Company issued performance stock units ("PSUs") to certain officers and key employees in connection with our long-term incentive program. Each PSU represents the right to receive one share of our common stock, provided that the applicable performance and vesting conditions are satisfied. The following table summarizes the activity for restricted stock units, performance stock units, restricted stock awards and deferred stock units under the 2020 Stock Plan:
(In thousands, except per share amounts) | Number of Shares |  | Weighted Average Grant-Date Fair Value
Balance at September 29, 2023 | 1,277 |  |  | $ | 22.30 |
Granted | 872 |  |  | 19.67 |
Vested | (394) |  |  | 23.05 |
Canceled, expired or forfeited | (85) |  |  | 20.63 |
Balance at September 27, 2024 | 1,670 |  |  | $ | 20.74 |
The total grant-date fair value of shares granted was $17.2 million, $11.3 million and $10.8 million for fiscal years 2024, 2023 and 2022, respectively. Shares outstanding at September 27, 2024, September 29, 2023 and September 30, 2022 had an estimated market value of $20.0 million, $24.0 million and $22.1 million, respectively.

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