OSI Systems, Inc. (Nasdaq:OSIS): -- Net Loss of $4.0 million for
the Fourth Quarter Impacted by: -- Weakness in Cargo & Vehicle
Inspection Product Line; and -- Legal and Sarbanes-Oxley Related
Expenses of approximately $4.4 million. -- Company announces $16
million order for Cargo & Vehicle Inspection products --
Company to pursue UK IPO of its Healthcare Group OSI Systems, Inc.
(Nasdaq:OSIS) today announced its revenues and results for the
fourth quarter of fiscal 2005. The company reported revenues of
$100.7 million for the fourth quarter of fiscal 2005, an increase
of 5% from the $95.8 million reported for the fourth quarter of
fiscal 2004. For the fiscal year ended June 30, 2005, revenues
increased by $139.3 million, or 56%, to $385.0 million, from $247.1
million for fiscal 2004. Revenue growth for the year was primarily
attributable to the March 2004 acquisition of Spacelabs Medical and
the February 2005 acquisition of Blease Medical. The net loss for
the fourth quarter of fiscal 2005 was $4.0 million compared to net
income of $2.2 million for the fourth quarter of fiscal 2004. For
the fiscal year ended June 30, 2005, the company reported a net
loss of $3.2 million, compared to net income of $10.0 million for
fiscal 2004. For the fourth quarter of fiscal 2005 the company
reported a net loss of $0.25 per diluted share compared to earnings
of $0.14 per diluted share for the fourth quarter of fiscal 2004.
For the fiscal year ended June 30, 2005, the company reported a
loss of $0.20 per diluted share, compared to earnings of $0.65 per
diluted share for fiscal 2004. The results for the fourth quarter
were favorably impacted by a change in the Healthcare Groups'
estimated warranty provision of approximately $2.1 million pre-tax
due to lower than expected warranty claims on a specific product.
In addition, the fourth quarter results were favorably impacted by
a tax benefit of approximately $3.5 million due to the outcome of a
study conducted with the assistance of the company's outside tax
advisors to determine the company's available R&D tax credit.
The company reported an operating loss of $2.4 million for the
Security Group in the fourth quarter of fiscal 2005. This loss was
due to the continued weakness in the Cargo and Vehicle Inspection
product line and higher R&D spending compared to the fourth
quarter of the prior fiscal year. As anticipated, R&D
expenditures for the Automated Hold Baggage Screening product line
were higher in the fourth quarter compared to the third quarter of
fiscal 2005. Additionally, in the fourth quarter the Corporate
segment incurred legal and Sarbanes-Oxley implementation expenses
of approximately $4.4 million. At June 30, 2005, cash and cash
equivalents were approximately $14.6 million compared to $12.7
million as of March 31, 2005. During the fourth quarter the company
borrowed approximately $8.2 million cash under its lines of credit.
Cash and borrowings during the quarter were utilized for working
capital, the purchase of capital equipment and the repurchase of
approximately 157,000 shares of OSI common stock at an average
price of $14.25 per share. Deepak Chopra, Chairman and CEO of OSI
Systems, stated, "The fourth quarter for the company was a very
difficult period as our overall operating performance was impacted
by the continued weakness in the Cargo and Vehicle Inspection
product line and legal and Sarbanes-Oxley related expenses of
approximately $4.4 million. We continue to believe in the
fundamentals of the Cargo and Vehicle Inspection product line as
evidenced by today's announced new bookings of $16 million and the
previously announced $2.7 million grant for the development of the
Radiological Threat Identification System. However, we remain
cautious as we are still awaiting certain U.S. government
procurement decisions for cargo products. We expect the revenue
weakness to continue in the first quarter of fiscal 2006 as it
pertains to the Cargo and Vehicle Inspection product line, with
revenue and operating results improving for the remainder of fiscal
2006. "In the fourth quarter we also announced an important order
from the BAA Plc. (formerly the British Aerospace Authority) for
the three Secure 1000 units that were on trial at London's Heathrow
airport for several months. We worked closely with the BAA to
achieve their privacy goals while maintaining the integrity of the
inspection. This signifies the first aviation deployment of our
backscatter technology for passenger screening. In addition, we are
currently working with the TSA to implement the Secure 1000 in the
US aviation arena for live trials. Our installed base for the
Secure 1000 backscatter units increased significantly in the
non-aviation sector during the fiscal year." Company to Pursue UK
IPO of its Global Healthcare Operations For the past year the
company has been exploring strategic alternatives for its various
business units. The company's Healthcare Group has grown from
approximately $11 million in annual revenues in fiscal 2003, to
$195.7 million in fiscal 2005, primarily as a result of the
acquisitions of Spacelabs and Blease. The company has engaged
Collins Stewart, a London-based investment bank to pursue the
listing and public offering of approximately 30% to 35% of the
equity in Spacelabs Healthcare, Inc., a newly formed Delaware
corporation composed of the Healthcare operations of OSI: Spacelabs
Medical, Blease Medical, Dolphin Medical and Osteometer MediTech.
This listing and offering is planned in the United Kingdom on the
AIM Exchange, which is owned and administered by the London Stock
Exchange. Comparable companies of similar size and technologies are
valued at approximately one times revenue. The proposed transaction
is expected to be completed in the second quarter of fiscal 2006.
Any proposed listing is subject to a number of factors including
the company's satisfaction with the valuation; therefore, we can
give no assurance regarding the completion of any such listing or
offering. Under SEC Regulation S, U.S. residents are prohibited
from participating in this proposed offering of shares in the newly
formed company, and any shares offered cannot be acquired by U.S.
residents for a period of twelve months from the date of the
offering. However, if the listing and offering are completed, OSI
Systems, Inc. will own approximately 65% to 70% of the newly formed
company upon completion. First Quarter Fiscal 2006 Guidance For the
first quarter of fiscal 2006, the company announces revenue
guidance of $101 million to $103 million compared to revenues of
$87.6 million for the first quarter of fiscal 2005. The company
expects the gross margin for the first quarter to be in the range
of 34% to 36%. Due to the weakness in Cargo and Vehicle Inspection
product line revenues and continued litigation and Sarbanes-Oxley
related expenses, the company expects to incur a net loss for the
first quarter of fiscal 2006. The company, however, expects to
return to profitability in the second quarter of fiscal 2006.
Additionally, the Healthcare and Opto-Electronics &
Manufacturing Groups are expected to continue to generate operating
profits in the first quarter and for the full year fiscal 2006. The
company's current backlog has increased to approximately $118
million, compared to approximately $90 million as of March 31, 2005
as previously announced during the company's third quarter earnings
conference call. Segment Information Security Group The Security
Group reported revenues of $32.2 million for the fourth quarter of
fiscal 2005, an increase of 3% from $31.3 million reported for the
fourth quarter of fiscal 2004. For the fiscal year ended June 30,
2005 revenues increased by $5.4 million, or 5%, to $123.2 million,
from $117.8 million for the comparable period of fiscal 2004. The
loss from operations for the fourth quarter of fiscal 2005 was $2.4
million compared to $1.5 million of income from operations for the
fourth quarter of fiscal 2004. For the fiscal year ended June 30,
2005, income from operations decreased by $15.9 million, to a loss
from operations of $5.4 million, versus income from operations of
$10.5 million for fiscal 2004. As previously disclosed, the
reported results were impacted by the weak performance of the Cargo
and Vehicle Inspection product line. Healthcare Group The
Healthcare Group reported revenues of $51.1 million for the fourth
quarter of fiscal 2005, compared to $45.4 million reported for the
fourth quarter of fiscal 2004. For the fiscal year ended June 30,
2005, revenues increased by $135 million, to $195.7 million from
$60.7 million for fiscal 2004. Revenue growth was primarily due to
the March 2004 acquisition of Spacelabs Medical and the February
2005 acquisition of Blease Medical. Income from operations for the
fourth quarter of fiscal 2005 was $2.4 million, after
Spacelabs-related amortization and retention expenses of $786,000.
For the fiscal year ended June 30, 2005, income from operations was
$8.4 million, after Spacelabs-related amortization and retention
expenses of $3.2 million. The results for the fourth quarter and
fiscal year 2005 were favorably impacted by a change in the
Healthcare Groups' estimated warranty provision of approximately
$2.1 million pre-tax due to lower than expected warranty claims on
a specific product. Optoelectronics & Manufacturing Group The
Optoelectronics & Manufacturing Group reported external
revenues of $17.4 million for the fourth quarter of fiscal 2005, a
decrease of 9% from $19.1 million reported for the fourth quarter
of fiscal 2004. For the twelve months ended June 30, 2005, external
revenues decreased by $2.5 million to $66.1 million from $68.6
million for fiscal 2004. The decrease in external revenues was
primarily attributable to the weakness in the weapons simulation
defense electronics product line as previously disclosed. However,
we are pleased to announce that their order book has increased
significantly in the first quarter of fiscal 2006 with the receipt
of an order of approximately $7.2 million for weapons simulation
products. The shipments for this order are expected to be completed
by March 2007. Income from operations for the fourth quarter of
fiscal 2005 was $515,000, compared to $3.3 million for the fourth
quarter of fiscal 2004. For the fiscal year ended June 30, 2005,
income from operations decreased by $3.9 million, to $6.2 million
from $10.1 million for fiscal 2004. For the fourth quarter of
fiscal 2005 the Optoelectronics & Manufacturing Group reported
inter-company revenues of $3.5 million, a decrease of $500,000,
from $4.0 million reported for the fourth quarter of fiscal 2004.
For the fiscal year ended June 30, 2005, inter-company revenues
increased by $3.0 million, to $18.4 million from $15.4 million for
fiscal 2004. OSI Systems, Inc. will webcast the live earnings call
over the Internet at 2:30 p.m. Pacific Time on September 12, 2005.
To listen, please log on www.fulldisclosure.com or
www.osi-systems.com and follow the link that will be posted on the
front page. A replay of the webcast will be available shortly after
the presentation and will be archived on www.osi-systems.com. A
telephonic replay of the call will also be available from 4:30 p.m.
Pacific Time on September 12th, 2005, until 4:30 p.m. PT on
September 19th, 2005. The replay may be accessed by calling
888-286-8010 and entering the conference call identification number
57807793. About OSI Systems, Inc. OSI Systems Inc. is a Hawthorne,
California based diversified global developer, manufacturer and
seller of security and inspection systems, medical monitoring and
anesthesia delivery products, and optoelectronic-based components,
as well as a provider of engineering and manufacturing services.
The company has more than 30 years of experience in electronics
engineering and manufacturing and maintains offices and production
facilities located in more than a dozen countries. OSI Systems
implements a strategy of expansion by leveraging its electronics
and contract manufacturing capabilities into selective end product
markets through organic growth and acquisitions. For more
information on OSI Systems Inc. or any of its subsidiary companies,
visit www.osi-systems.com. This press release contains
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such statements
include information regarding the company's expectations, goals or
intentions about the future, including, but not limited to,
statements regarding revenues, the company's commitment to
particular markets, the company's commitment to research and
development funding, and any listing and offering of new securities
in the company's Healthcare Group. The actual results may differ
materially from those described in or implied by any
forward-looking statement. In particular, there can be no assurance
that future revenues and operating margins will meet current
expectations, that research and development funding by either of
the company's Security Group will result in valuable products or
product enhancements, that the company's current commitment to
certain markets or product lines will continue in the future, or
that the efforts of the company's Security Group will in fact
produce a profitable Cargo and Vehicle Inspection product line in
the long term. Other important factors are set forth in our
Securities and Exchange Commission filings. All forward-looking
statements speak only as of the date made, and we undertake no
obligation to update these forward-looking statements. -0- *T OSI
SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
OPERATIONS (in thousands, except share and per share amounts) Three
months ended Year ended June 30, June 30, -----------------------
----------------------- 2005 2004 2005 2004 ----------- -----------
----------- ----------- Revenues $100,713 $95,798 $385,041 $247,069
Cost of goods sold 62,507 59,178 243,415 163,712 -----------
----------- ----------- ----------- Gross profit 38,206 36,620
141,626 83,357 Operating expenses: Selling, general and
administrative 35,692 26,107 116,245 54,161 Research and
development 9,495 6,685 30,537 14,638 Restructuring charges - -
1,061 Management retention bonus 438 1,029 1,824 1,104 -----------
----------- ----------- ----------- Total operating expenses 45,625
33,821 148,606 70,964 ----------- ----------- -----------
----------- Income (loss) from operations (7,419) 2,799 (6,980)
12,393 Interest income 38 43 196 863 Interest expense (561) (52)
(807) (283) Write down of equity investment - - (182) (247) Gain on
sale of marketable securities - - - 376 ----------- -----------
----------- ----------- Income (loss) before provision for income
taxes and minority interest (7,942) 2,790 (7,773) 13,102 Provision
(benefit) for income taxes (3,924) 774 (4,526) 3,316 -----------
----------- ----------- ----------- Income (loss) before minority
interest (4,018) 2,016 (3,247) 9,786 Minority interest - 170 69 170
----------- ----------- ----------- ----------- Net income (loss)
$(4,018) $2,186 $(3,178) $9,956 =========== =========== ===========
=========== Net income (loss) available to common shareholders -
assuming dilution $(4,071) $2,186 $(3,285) $9,956 ===========
=========== =========== =========== Diluted earnings (loss) per
share $(0.25) $0.14 $(0.20) $0.65 =========== ===========
=========== =========== Weighted average shares outstanding -
assuming dilution 16,245,131 15,777,055 16,222,998 15,236,399
=========== =========== =========== =========== Condensed
Consolidated Balance Sheets (in thousands) June 30, June 30, 2005
2004 ------------ ----------- Cash and cash equivalents $14,623
$39,879 Marketable securities, available for sale 816 - Accounts
receivable, net of allowance for doubtful accounts 89,227 85,774
Inventory 107,441 97,174 Other current assets 21,062 18,062
----------- ----------- Total current assets 233,169 240,889 Non
current assets 119,185 90,912 ----------- ----------- Total
$352,354 $331,801 =========== =========== Bank line of credit
$15,752 $723 Current portion of long-term debt 499 1,798 Other
current liabilities 95,604 94,970 ----------- ----------- Total
current liabilities 111,855 97,491 Long-term debt 4,852 32 Other
long term liabilities 12,757 6,727 Minority interest - 69
Shareholders' equity 222,890 227,482 ----------- ----------- Total
$352,354 $331,801 =========== =========== Segment Information (in
thousands) Quarter ended June 30, 2005 Security Healthcare Opto-
Group Group electronics Group Corporate Eliminations Total --------
-------- -------- --------- ------------ ----- Revenues: External
$32,180 $51,101 $17,432 - - $100,713 Intercompany - - 3,453 -
(3,453) - Total Revenues $32,180 $51,101 $20,885 $- $(3,453)
$100,713 Operating Income (Loss) $(2,405) $2,423 $515 $(7,735)
$(217) $(7,419) Quarter ended June 30, 2004 Security Healthcare
Opto- Group Group electronics Group Corporate Eliminations Total
-------- -------- -------- --------- ------------ ----- Revenues:
External $31,318 $45,425 $19,055 - - $95,798 Intercompany 3,950
(3,950) Total Revenues $31,318 $45,425 $23,005 $- $(3,950) $95,798
Operating Income (Loss) $1,511 $885 $3,304 $(2,741) $(160) $2,799
Year Ended June 30, 2005 Security Healthcare Opto- Group Group
electronics Group Corporate Eliminations Total -------- --------
-------- --------- ------------ ----- Revenues: External $123,197
$195,698 $66,146 $- $- $385,041 Intercompany - - 18,412 - (18,412)
- Total Revenues $123,197 $195,698 $84,558 $- $(18,412) $385,041
Operating Income (Loss) $(5,438) $8,394 $6,159 $(15,420) $(675)
$(6,980) Year Ended June 30, 2004 Security Healthcare Opto- Group
Group electronics Group Corporate Eliminations Total --------
-------- -------- --------- ------------ ----- Revenues: External
$117,746 $60,695 $68,628 $- - $247,069 Intercompany - - 15,382 -
(15,382) - Total Revenues $117,746 $60,695 $84,010 $- $(15,382)
$247,069 Operating Income (Loss) $10,473 $83 $10,117 $(7,744)
$(536) $12,393 *T
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