OSI Systems (NASDAQ:OSIS)
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OSI Systems, Inc. (NASDAQ:OSIS), a vertically-integrated provider of
specialized electronic products for critical applications in the
Security and Healthcare industries, today announced an update for the
second quarter ended December 31, 2006.
The Company expects to report record revenues for the second quarter of
fiscal 2007 of approximately $137 million, an increase of 17% compared
to the second quarter of fiscal 2006 and a sequential increase of 19%
compared to the first quarter of fiscal 2007. The year-over-year growth
was led by an approximate 46% increase in revenues in the second quarter
for the security business. Revenues from the Company’s
healthcare business increased approximately 3% in the second quarter of
fiscal 2007 compared to the same period in 2006, with the quarter
benefiting from the acquisition of the Del Mar Reynolds diagnostic
cardiology business completed in July 2006. This business contributed
approximately $7.5 million of revenues in the second quarter which
mitigated the impact of the division’s weak
performance in the U.S. market.
The Company has undertaken a review of its global operations in order to
integrate recent acquisitions and rationalize the Company’s
cost structure. The review has resulted in plans to achieve
approximately $15-$17 million of pre-tax annualized cost savings
including a reduction of approximately 8% of its global workforce along
with the consolidation of multiple facilities. These cost cutting
measures have commenced across all divisions, with the goal of fully
implementing these cost reductions by the end of the current fiscal
year. These measures are expected to positively impact the fourth
quarter of fiscal 2007 inclusive of anticipated severance and
restructuring charges with the full benefit being realized in fiscal
2008.
In addition, the Company anticipates recording a non-cash pre-tax charge
of approximately $31 - $34 million in the second quarter primarily
associated with the impairment of certain fixed and intangible assets as
well as the recording of additional inventory reserves following a
review of the Company’s product portfolio. The
amortization expense associated with these fixed and intangible assets
has been approximately $1.3 million annually. Including these charges,
the Company expects to report an operating loss for the second quarter
of fiscal 2007 of approximately $30 - $33 million. Excluding these
charges, the non-GAAP operating income would be close to breakeven. The
non-GAAP measure is provided in order to assist investors in making a
comparison of the business activity occurring in the second quarter with
the business activities in prior periods.
Due to the aforementioned items, the Company has withdrawn its quarterly
and full year earnings guidance for fiscal 2007. The Company, however,
reaffirms its full year revenue guidance of $535 - $545 million with the
fourth quarter expected to be significantly stronger than the third
quarter driven by a record backlog of approximately $197 million as of
December 31, 2006. The backlog for the Security division as of December
31, 2006 was approximately $115 million.
OSI Systems Chief Financial Officer Alan Edrick stated, “Our
strong growth has created significant opportunities for cost reductions.
When fully implemented, the cost reduction measures currently under way
are expected to have a significant positive impact on our bottom line,
generating increased cash flow, and better preparing the Company for
prospective future growth.”
OSI Systems Chief Executive Officer, Deepak Chopra, said, “The
global cost structure review has identified significant cost cutting
measures which we intend to aggressively implement over the remaining
period of fiscal 2007. Going forward we will continue to proactively
pursue measures to improve our operating performance and overall
profitability.”
About OSI Systems, Inc.
OSI Systems, Inc. and its subsidiaries 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. 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, the company’s predictions about
quarterly and full-year revenues, cost-cutting measures, a non-cash
pre-tax charge and operating income. The actual results may differ
materially from those described in or implied by any forward-looking
statement. In particular, the company has not yet finalized the
financial statements to be included in its quarterly report on
Form 10-Q for the second quarter of fiscal year 2007, certain of the
cost-cutting measures it has identified may not ultimately be
implemented or realizable by the company, and expected full-year
revenues may not be achieved. Other important factors are set
forth in the Securities and Exchange Commission filings OSI Systems,
Inc. All forward-looking statements speak only as of the date made, and
the company undertakes no obligation to update these forward-looking
statements.