OSI Systems, Inc. (Nasdaq:OSIS): -0- *T -- Operating income of $2.9
million after stock-based compensation expenses of $1.3 million; --
Breakeven Diluted Earnings Per Share: -- Stock-based compensation
expenses of $1.3 million, or $0.06 per diluted share; -- Minority
Interest provision of approximately $1 million associated with
Spacelabs Healthcare, or $0.06 per diluted share; -- Tax expense
for the quarter of $1.9 million, tax rate of 64.4%. *T OSI Systems,
Inc. (Nasdaq:OSIS) today announced its revenues and results for the
second quarter of fiscal 2006. The company reported record revenues
of $117.1 million for the second quarter of fiscal 2006, an
increase of 14% from $102.5 million reported for the second quarter
of fiscal 2005. For the six months of fiscal 2006, revenues
increased by $28.8 million, or 15%, to $219.0 million, from $190.2
million for the first six months of fiscal 2005. Operating income
for the second quarter was $2.9 million, which included stock-based
compensation expenses of $1.3 million. This compares to operating
income of $3.2 million for the second quarter of fiscal 2005, which
did not include stock-based compensation expenses. For the first
six months of fiscal 2006, the company reported an operating loss
of $3.6 million, which included stock-based compensation expenses
of $2.5 million. This compares to operating income of $5.0 million
for the first six months of fiscal 2005, which did not include
stock-based compensation expenses. The tax rate for the second
quarter of fiscal 2006 was 64.4%, compared to 24.3% for the second
quarter of fiscal 2005. The increase in the tax rate for the second
quarter of fiscal 2006 was due to the Company not receiving any tax
benefit for losses in certain non-US subsidiaries and inclusion of
incentive stock options in the stock compensation expense, which
does not qualify as a tax deduction. For the first six months of
fiscal 2006 the tax benefit was 24%, compared to a tax provision of
26.9% for the first six months of fiscal 2005. Net income for the
second quarter of fiscal 2006 was $85,000, compared to net income
of $2.5 million for the second quarter of fiscal 2005. For the six
months of fiscal 2006, the Company reported a net loss of $4.1
million, compared to net income of $3.8 million for the first six
months of fiscal 2005. For the second quarter of fiscal 2006, the
Company reported earnings of $0.00 per diluted share, compared to
earnings of $0.15 per diluted share for the second quarter of
fiscal 2005. For the first six months of fiscal year 2006, the
Company reported a loss of $0.26 per diluted share, compared to
earnings of $0.23 per diluted share for the first six months of
fiscal 2005. In accordance with the Statement of Financial
Accounting Standards No. 123(R), Share-Based Payment, the Company
incurred stock-based compensation expenses of $1.3 million pre-tax,
or $0.06 per diluted share, for the second quarter of fiscal 2006.
For the first half of fiscal 2006, the Company incurred stock-based
compensation expenses of $2.5 million, or $0.12 per diluted share.
For fiscal 2006, the Company anticipates that the total stock-based
compensation expenses will be approximately $5.5 million. Results
for fiscal 2005 do not include stock-based compensation expenses.
As of December 31, 2005, cash and cash equivalents were
approximately $17.1 million, compared to $14.6 million as of June
30, 2005. During the second quarter of fiscal 2006, the Company
repaid approximately $24 million under its lines of credit. OSI
Chairman and CEO Deepak Chopra said, "I am very pleased with the
company's operating performance in the second quarter as we turned
the corner and returned to profitability. I expect that the company
will improve on this performance in the second half of fiscal 2006,
supported by the Company's strong backlog position, which currently
stands at approximately $134 million. The Security Group continues
to improve its operating performance, and we expect that the Group
will be profitable in the second half of fiscal 2006. Additionally,
both the Healthcare Group and Opto-electronics Group will continue
to be profitable for the remainder of fiscal 2006. "The Security
Group has been investing heavily in their Cargo and Vehicle
Inspection and Hold Baggage Screening ("HBS") product portfolio
over the last five quarters. In the second quarter of fiscal 2006,
we were excited to announce the launch and market acceptance of our
first product offering in the HBS market, the Rapiscan MVXR5000
Inline Automated Hold Baggage Screening System for checked baggage.
The product received `Approval for Use' accreditation from the UK
Department of Transport in December, allowing the Group to begin
selling the system internationally with the exception of the US
market. Additionally, we continue to invest in the development of
the first-of-its-kind, high speed, solid-state CT system that we
call `Real Time Tomography,' or RTT. The RTT, being electronic and
non-mechanical, can achieve a throughput of up to 1,500 bags per
hour, compared to the current systems on the market, which have a
throughput of approximately 600 bags an hour. The RTT will also
result in the reduction of installation costs and maintenance
issues. "This quarter also saw the successful IPO of Spacelabs
Healthcare, Inc., our Healthcare Group, on the London AIM market.
The IPO will provide us with an independent share currency, which
we intend to utilize for the growth and expansion of Spacelabs
Healthcare. Operationally, the Group achieved record revenues in
the second quarter, helped by a 36% bookings increase for patient
monitoring solutions in the US market. Additionally, Blease
Medical, recently acquired in February 2005, received 510(k)
approval from the FDA for the distribution of its Sirius
anaesthesia system and ventilators in the US market. We expect to
launch this product in the US market in 2007." Guidance for the Six
Months Ended June 30, 2006 For the second half of fiscal 2006 the
Company announced revenue guidance of $231 million to $236 million,
compared to revenues of $219 million for the first half of fiscal
2006, and $194.9 million for the second half of fiscal 2005. The
Company expects to be profitable for the second half of fiscal 2006
and anticipates that revenues and earnings will be stronger in the
fourth quarter when compared to the third quarter of fiscal 2006.
The Company expects that the effective tax rate for the full year
of fiscal 2006 will be in the mid-forties. Segment Information
Security Group The Security Group reported revenues of $30.4
million for the second quarter of fiscal 2006, a decrease of 5%,
from $32.0 million reported for the second quarter of fiscal 2005.
For the first six months of fiscal 2006, revenues decreased by $4.7
million, or 8%, to $57.3 million, from $62 million for the first
six months of fiscal 2005. Loss from operations for the second
quarter of fiscal 2006 was $651,000, compared to a loss from
operations of $1.3 million for the second quarter of fiscal 2005,
and $3.2 million for the first quarter of fiscal 2006. For the
first six months of fiscal 2006, the Group had a loss from
operations of $3.8 million, compared to income from operations of
$1.1 million for the first six months of fiscal 2005. For the
second quarter and first six months of fiscal 2006, the Group
incurred stock-based compensation expenses of $0.2 million and $0.4
million, respectively. In fiscal 2005, the Group did not incur
stock-based compensation expenses. Healthcare Group The Healthcare
Group reported record revenues of $61.0 million for the second
quarter of fiscal 2006, compared to $54.0 million reported for the
second quarter of fiscal 2005. For the first six months of fiscal
2006, revenues increased by $15.6 million to a record level of
$112.4 million from $96.8 million for the first six months of
fiscal 2005. Adjusting for the Blease acquisition completed in
February 2005, revenues grew for the second quarter of fiscal 2006
by approximately 6%, compared to the second quarter of fiscal 2005.
Income from operations for the second quarter of fiscal 2006 was
$5.3 million, compared to $4.9 million for the second quarter of
fiscal 2005. For the first six months of fiscal 2006, income from
operations increased by $1.4 million, or 27%, to $6.5 million, from
$5.1 million for the first half of fiscal 2005. Operating results
for the second quarter and six months ending December 31, 2005,
included stock-based compensation-related expenses of $0.3 million
and $0.5 million, respectively. In fiscal 2005, the Group did not
incur stock based-compensation expenses. Optoelectronics Group The
Optoelectronics & Manufacturing Group reported external
revenues of $25.8 million for the second quarter of fiscal 2006, an
increase of 56% from $16.5 million reported for the second quarter
of fiscal 2005. For the first half of fiscal 2006, external
revenues increased by $17.9 million, or 57%, to $49.3 million from
$31.4 million for first six months of fiscal 2005. Income from
operations for the second quarter of fiscal 2006 was $2.6 million,
compared to $2 million for the second quarter of fiscal 2005. For
the first half of fiscal 2006, income from operations increased by
$0.1 million, to $3.8 million from $3.7 million for the first six
months of fiscal 2005. For the second quarter and first six months
of fiscal 2006, the Group incurred stock-based compensation
expenses of $0.1 million and $0.3 million, respectively. In fiscal
2005, the Group did not incur stock-based compensation expenses.
Earnings Conference Call Information OSI Systems, Inc. will webcast
the live earnings call over the Internet at 9:00 am PT (12:00 pm
ET) on February 9, 2006. To listen, please log on to
www.earnings.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.earnings.com or www.osi-systems.com. A telephonic replay of the
call will also be available from 11:00 am PT (2:00 pm ET) on
February 9, 2006, until February 16, 2006. The replay may be
accessed by calling 1-888-286-8010 (domestic) or +1-617-801-6888
(international) and entering the replay passcode of "10995854".
About OSI Systems, Inc. OSI Systems, Inc. is a Hawthorne-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 its revenues,
profitability, tax rates, stock-based compensation expenses, and
operating performance, the Security Group's real-time tomography
product, the use to which the company will put its Spacelabs
Healthcare share currency, the launch of the Healthcare Group's
Sirius anaesthesia system and ventilators in the US market, and
future revenues and operating income of the Optoelectronics and
Manufacturing Group will continue to experience growth or that the
medical OEM device sector will continue to contribute to such
growth. 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 predictions made in
connection with the foregoing financial matters will be in line
with current expectations, that the Security Group's real-time
tomography product will achieve throughput rates and other
currently expected benefits or be sold, that the Spacelabs
Healthcare IPO will ultimately prove to have been an auspicious
undertaking, that the Sirius anaesthesia system will launch in the
US on time or at all. 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 Six months ended December 31, December 31,
----------------------- ----------------------- 2005 2004 2005 2004
----------- ----------- ----------- ----------- Revenues $117,138
$102,531 $219,008 $190,175 Cost of goods sold - (includes non-cash,
stock-based expense of $53 and $108 for the three and six months
ended December 31, 2005) 71,999 66,079 136,917 119,933 -----------
----------- ----------- ----------- Gross profit 45,139 36,452
82,091 70,242 Operating expenses: Selling, general and
administrative - (includes non-cash, stock-based expense of $1,144
and $2,218 for the three and six months ended December 31, 2005)
33,515 25,595 66,929 50,388 Research and development - (includes
non-cash, stock-based expense of $103 and $215 for the three and
six months ended December 31, 2005) 8,700 7,066 17,431 13,736
Management retention bonus 51 549 572 Restructuring charges - - 800
1,098 ----------- ----------- ----------- ----------- Total
operating expenses 42,266 33,210 85,732 65,222 -----------
----------- ----------- ----------- Income (Loss) from operations
2,873 3,242 (3,641) 5,020 Interest income 69 103 89 191 Interest
expense (399) (98) (950) (154) Gain on marketable securities 349
349 ----------- ----------- ----------- ----------- Income (loss)
before provision (benefit) for income taxes and minority interest
2,892 3,247 (4,153) 5,057 Provision (benefit) for income taxes
1,861 789 (996) 1,358 ----------- ----------- -----------
----------- Income (loss) before minority interest 1,031 2,458
(3,157) 3,699 Minority interest (946) - (946) 68 -----------
----------- ----------- ----------- Net income (loss) $85 $2,458
($4,103) $3,767 =========== =========== =========== ===========
Earnings (loss) per share $0.01 $0.15 ($0.25) $0.23 ===========
=========== =========== =========== Diluted earnings (loss) per
share $0.00 $0.15 ($0.26) $0.23 =========== =========== ===========
=========== Weighted average shares outstanding 16,299,337
16,168,778 16,270,205 16,185,269 =========== ===========
=========== =========== Weighted average shares outstanding -
assuming dilution 16,490,714 16,592,724 16,270,205 16,577,752
=========== =========== =========== =========== Condensed
Consolidated Balance Sheets (in thousands) December 31, June 30,
2005 2005 ---------------- -------------- Cash, cash equivalents
and marketable securities $17,201 $14,623 Accounts receivable, net
of allowance for doubtful accounts 101,392 89,227 Inventory 110,235
107,441 Other current assets 29,218 26,382 ----------------
-------------- Total current assets 258,046 237,673 Non-current
assets 111,407 109,447 ---------------- -------------- Total
$369,453 $347,120 ================ ============== Bank lines of
credit $2,050 $15,752 Current portion of long-term debt and capital
lease obligations 1,037 499 Other current liabilities 104,091
97,024 ---------------- -------------- Total current liabilities
107,178 113,275 Long-term debt 5,567 4,852 Other long-term
liabilities 6,095 5,366 Minority interest 8,718 Shareholders'
equity 241,894 223,627 ---------------- -------------- Total
$369,453 $347,120 ================ ============== Segment
Information (in thousands) Quarter ended December 31, 2005 Security
Healthcare Optoelectronics Group(1) Group(1) Group(1) ---------
----------- ---------------- Revenues: External $30,378 $60,999
$25,761 Intercompany - - 5,367 --------- -----------
---------------- Total Revenues $30,378 $60,999 $31,128 =========
=========== ================ Operating (Loss) Income $(651) $5,319
$2,581 ========= =========== ================ Quarter ended
December 31, 2005 Corporate(1) Eliminations Total ------------
------------- --------- Revenues: External $- $- $117,138
Intercompany - (5,367) - ------------ ------------- --------- Total
Revenues $- $(5,367) $117,138 ============ ============= =========
Operating (Loss) Income $(4,293) $(83) $2,873 ============
============= ========= Quarter ended December 31, 2004 Security
Healthcare Optoelectronics Group Group Group --------- -----------
---------------- Revenues: External $32,037 $54,000 $16,494
Intercompany - - 5,652 --------- ----------- ---------------- Total
Revenues $32,037 $54,000 $22,146 ========= ===========
================ Operating (Loss) Income $(1,283) $4,863 $2,004
========= =========== ================ Quarter ended December 31,
2004 Corporate Eliminations Total ------------ -------------
--------- Revenues: External $- $- $102,531 Intercompany - (5,652)
- ------------ ------------- --------- Total Revenues $- $(5,652)
$102,531 ============ ============= ========= Operating (Loss)
Income $(2,062) $(280) $3,242 ============ ============= =========
(1) Includes non-cash, stock-based compensation in accordance with
SFAS 123R for the three months ended December 31, 2005, as follows:
Security Group $206 Healthcare Group 290 Optoelectronics Group 126
Corporate 678 ------- $1,300 Six months ended December 31, 2005
Security Healthcare Optoelectronics Group(2) Group(2) Group(2)
--------- ----------- ---------------- Revenues: External $57,341
$112,370 $49,297 Intercompany - - 9,607 --------- -----------
---------------- Total Revenues $57,341 $112,370 $58,904 =========
=========== ================ Operating (Loss) Income $(3,844)
$6,502 $3,783 ========= =========== ================ Six months
ended December 31, 2005 Corporate(2) Eliminations Total
--------------- ------------- --------- Revenues: External $- $-
$219,008 Intercompany - (9,607) - --------------- -------------
--------- Total Revenues $- $(9,607) $219,008 ===============
============= ========= Operating (Loss) Income $(10,115) $33
$(3,641) =============== ============= ========= Six months ended
December 31, 2004 Security Healthcare Optoelectronics Group Group
Group --------- ----------- ---------------- Revenues: External
$61,980 $96,804 $31,391 Intercompany - - 9,917 ---------
----------- ---------------- Total Revenues $61,980 $96,804 $41,308
========= =========== ================ Operating Income (Loss)
$1,076 $5,098 $3,689 ========= =========== ================ Six
months ended December 31, 2004 Corporate Eliminations Total
--------------- ------------- --------- Revenues: External $- $-
$190,175 Intercompany - (9,917) - --------------- -------------
--------- Total Revenues $- $(9,917) $190,175 ===============
============= ========= Operating Income (Loss) $(4,426) $(417)
$5,020 =============== ============= ========= (2) Includes
non-cash, stock-based compensation in accordance with SFAS 123R for
the six months ended December 31, 2005, as follows: Security Group
$447 Healthcare Group 457 Optoelectronics Group 277 Corporate 1360
------- $2,541 *T
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