OSIS OSI Systems Inc

OSI Systems, Inc. (NASDAQ:OSIS), a vertically integrated provider of solutions in Security, Healthcare, and specialized electronics, today announced financial results for the second quarter ended December 31, 2009.

Deepak Chopra, OSI Systems’ Chairman and CEO, stated, “We have again demonstrated significantly improved earnings and strong free cash flow, as well as improved margins in each of our divisions. These achievements are the direct result of our initiatives to improve our overall operating efficiencies. With outstanding bookings and a record backlog, we are poised for significant sales and earnings growth in the second half of our fiscal year.”

The Company reported revenues of $150.6 million for the second quarter of fiscal 2010, a decrease of 5% as compared to the same period a year ago. Net income for the second quarter of fiscal 2010 was $7.0 million, or $0.39 per diluted share, compared to net income of $4.2 million, or $0.24 per diluted share, for the second quarter of fiscal 2009.

For the six months ended December 31, 2009, the Company reported revenues of $284.4 million, a decrease of 7% as compared to the same period a year ago. Net income for the six months ended December 31, 2009 was $9.5 million, or $0.53 per diluted share, compared to net income of $4.3 million, or $0.24 per diluted share, for the six months ended December 31, 2008.

Excluding the impact of restructuring and other charges, net income for the second quarter of fiscal 2010 would have been approximately $7.4 million or $0.41 per diluted share compared to a net income of $6.0 million or $0.34 per diluted share for the second quarter of fiscal 2009 and net income for the first half of fiscal 2010 would have been approximately $9.9 million or $0.56 per diluted share compared to a net income of $6.7 million or $0.37 per diluted share for the first half of fiscal 2009. These non-GAAP figures are provided to allow for the comparison of underlying earnings, net of restructuring and other charges, thus providing additional insight into the on-going operations of the Company.

As of December 31, 2009, the Company’s backlog was $240 million compared to $203 million as of June 30, 2009, an increase of 18%. During the three and six months ended December 31, 2009, the Company generated cash flow from operations of $12.9 million and $23.4 million, respectively.

Mr. Chopra continued, "Our Security division is well positioned to achieve significant operating margin expansion. With an expanded set of customers and product offerings we generated strong bookings which lead to a record Security division backlog of $164 million, a 41% increase since the beginning of the fiscal year. Major recent contract wins including a Screening Solution agreement with the Puerto Rico Ports Authority, which for the Company is a first-of-its-kind turnkey cargo scanning solution for port security and a $35 million order to construct baggage handling systems and install integrated baggage screening equipment at multiple Mexican airports demonstrate our diversified capabilities. In addition, we expect to benefit from the recent announcements by the TSA and other international authorities to expand the use of full body scanners at airport security checkpoints. We are currently fulfilling the initial order quantities from the $173 million Indefinite Delivery, Indefinite Quantity (IDIQ) contract with the TSA, which is for multiple units of the Rapiscan Secure 1000 Single Pose advanced checkpoint security screening system.”

Mr. Chopra concluded, “Our Healthcare division achieved an operating profit of $6.0 million, or an 11% operating margin, during the quarter, a significant increase over the second quarter of fiscal 2009, in spite of 4% lower revenues. Although the climate for our Healthcare division has improved, it continues to be a challenging environment. To leverage our new product introductions in the Healthcare segment, we are expanding sales efforts by increasing our presence at small-to-medium sized hospitals and outpatient surgery centers in the U.S. As demonstrated by this quarter’s results, we are well-positioned to experience strong operating margins as top line growth returns to the Healthcare segment."

Fiscal Year 2010 Outlook

Subject to the risk factors detailed in the Safe Harbor section of this press release, the Company is raising its fiscal 2010 earnings guidance and expects earnings per diluted share to increase at a rate of 35% - 45% to between $1.23 to $1.32, excluding the impact of restructuring and other non-recurring charges. In addition, the Company is reiterating its annual revenue guidance of $620 million to $640 million with growth in second half revenues of the fiscal year led by the Company’s Security division.

Conference Call Information

OSI Systems, Inc. will host a conference call and simultaneous webcast over the Internet beginning at 9:00am PT (12:00pm ET), today to discuss its results for the second quarter of fiscal 2010. To listen, please log on to 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 conclusion of the conference call at 12:00pm PT (3:00pm ET) until February 10, 2010. The replay can either be accessed through the Company’s website, www.osi-systems.com, or via telephonic replay by calling 1-888-286-8010 and entering the conference call identification number ‘55924741’ when prompted for the replay code.

About OSI Systems, Inc.

OSI Systems, Inc. is a vertically integrated designer and manufacturer of specialized electronic systems and components for critical applications. The Company sells its products in diversified markets, including homeland security, healthcare, defense and aerospace. 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. It 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. News Filter: OSIS-E

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, the Company’s predictions about the cash generating potential of its businesses and future earnings. 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 the Company will continue to generate cash, that strong sales by its Security division will continue to occur in the future, or that cost-cutting measures in its Healthcare division will ultimately prove beneficial. 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.

OSI SYSTEMS, INC. AND SUBSIDIARIES Consolidated Statements of Operations (in thousands, except per share data) (Unaudited)         Three Months Ended Six Months Ended

December 31,

December 31,   2008         2009     2008         2009   Revenue $ 159,042 $ 150,621 $ 307,203 $ 284,382 Cost of goods sold   104,623     94,256     203,149     183,550   Gross profit 54,419 56,365 104,054 100,832   Operating expenses: Selling, general and administrative 35,727 34,610 73,268 66,890 Research and development 8,669 10,353 18,882 18,342 Restructuring and other charges   2,798     607     3,599     607   Total operating expenses   47,194     45,570     95,749     85,839   Income from operations 7,225 10,795 8,305 14,993 Interest expense and other, net

 

  (863 )   (784 )   (1,758 )   (1,389 ) Income before income taxes 6,362 10,011 6,547 13,604 Income tax expense   2,200     3,059     2,253     4,142   Net income $ 4,162   $ 6,952   $ 4,294   $ 9,462   Diluted income per share $ 0.24   $ 0.39   $ 0.24   $ 0.53   Weighted average shares outstanding – diluted   17,558     18,014     17,765     17,906   Consolidated Balance Sheets (in thousands) (Unaudited)       June 30,       December 31,   2009   2009

Assets

Cash and cash equivalents $ 25,172 $ 27,568 Accounts receivable, net 110,453 117,134 Inventories 150,763 128,884 Other current assets   36,855   38,479 Total current assets 323,243 312,065 Non-current assets   151,585   161,047 Total Assets $ 474,828 $ 473,112 Liabilities and Stockholders' Equity Bank lines of credit $ 4,000 $ - Current portion of long-term debt 8,557 7,572 Accounts payable and accrued expenses 68,813 55,222 Other current liabilities   54,265   58,144 Total current liabilities 135,635 120,938 Long-term debt 39,803 30,938 Other long-term liabilities   23,390   29,463 Total liabilities 198,828 181,339 Total shareholders’ equity   276,000   291,773 Total Liabilities and Equity $ 474,828 $ 473,112 SEGMENT INFORMATION (in thousands) (unaudited)                 Three Months Ended Six Months Ended December 31, December 31,   2008     2009     2008     2009   Revenues – by Segment Group: Security Group $ 67,067 $ 59,092 $ 125,752 $ 106,427 Healthcare Group 59,695 57,048 114,522 104,010 Optoelectronics and Manufacturing Group including intersegment revenues 44,745 43,663 89,626 89,454 Intersegment revenues elimination   (12,465 )   (9,182 )   (22,697 )   (15,509 ) Total $ 159,042   $ 150,621   $ 307,203   $ 284,382     Operating income (loss) – by Segment Group: Security Group $ 4,846 $ 4,134 $ 7,894 $ 6,102 Healthcare Group 2,285 5,808 460 7,303 Optoelectronics and Manufacturing Group 3,195 3,257 7,057 6,718 Corporate (2,712 ) (2,689 ) (6,896 ) (5,969 ) Eliminations   (389 )   285     (210 )   839   Total $ 7,225   $ 10,795   $ 8,305   $ 14,993