OSI Systems Reports Third Quarter Fiscal 2007 Financial Results

  
    
  
  
    
      OSI Systems, Inc. (NASDAQ:OSIS), a vertically integrated provider of 
      specialized electronics products for critical applications in the 
      Security and Healthcare industries, today announced operating results 
      for its third quarter and nine months ended March 31, 2007.
    
    
      The Company reported revenues of $126.5 million for the third quarter of 
      fiscal 2007, an increase of 17% from the $108.1 million reported for the 
      third quarter of fiscal 2006. The net income for the third quarter of 
      fiscal 2007 was $3.6 million, or $0.21 per diluted share, compared to 
      net income of $1.0 million, or $0.06 per diluted share, for the third 
      quarter of fiscal 2006.
    
    
      For the nine months ended March 31, 2007, the Company reported record 
      revenues of $379.5 million, an increase of $52.4 million, or 16%, from 
      $327.1 million for the first nine months of fiscal 2006. The net loss 
      for the first nine months of fiscal 2007 was ($23.0) million or ($1.37) 
      per diluted share, compared to a net loss of ($3.1) million, or ($0.20) 
      per diluted share, for the first nine months of fiscal 2006.
    
    
      The financial results for the three and nine months ended March 31, 2007 
      were favorably impacted by the settlement of a dispute with GE related 
      to the acquisition of Spacelabs Medical in fiscal 2004. The settlement 
      resulted in approximately $15.0 million of pre-tax income, which has 
      been recorded as other income. The results were adversely impacted by a 
      ($2.8) million fiscal third quarter operating loss in the OSI Defense 
      Systems business, which is included in the Optoelectronics and 
      Manufacturing division.
    
    
      In the third quarter of fiscal 2007 the Company consolidated certain 
      manufacturing processes and facilities resulting in a pre-tax 
      restructuring charge of $2.2 million. These costs were directly related 
      to the Company’s previously announced plan to 
      generate approximately $15 - $17 million of pre-tax annualized cost 
      savings through the integration of recent acquisitions and the 
      rationalization of the Company’s cost 
      structure. For the first nine months of fiscal 2007, the Company has 
      incurred impairment, restructuring and other charges of approximately 
      $34.0 million. Including the aforementioned restructuring charges the 
      company incurred non-cash pre-tax charges of approximately $21.5 million 
      associated with the impairment of certain fixed and intangible assets as 
      well as the recording of $10.3 million of additional inventory reserves, 
      which is included in cost of goods sold.
    
    
      Deepak Chopra, OSI Systems’ Chairman and CEO, 
      stated, “We continued our positive top line 
      momentum while our overall backlog increased to record levels due to the 
      strength of our Security bookings. Improving our overall operating 
      performance continues to be our top priority. We expect the previously 
      announced cost cutting measures to be largely implemented by the end of 
      the fiscal year.”
    
    
      The Company’s backlog as of March 31, 2007 
      was $209 million compared to $197 million as of December 31, 2006. The 
      Security Division had a backlog of approximately $124 million as of 
      March 31, 2007 compared to $115 million as of December 31, 2006.
    
    
      Forward-Looking Guidance
    
    
      The Company reaffirms its previously published revenue guidance of $535 
      - $545 million for the fiscal year ended June 30, 2007.
    
    
      Conference Call Information
    
    
      OSI Systems, Inc. will host a conference call and simultaneous webcast 
      over the Internet beginning at 9:00am PST (12:00pm EST), today to 
      discuss its results for the third quarter and first nine months of 
      fiscal 2007. 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 until May 21, 2007. 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 ‘71537634’ 
      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.
    
    
      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 size and 
      effect of its cost-cutting measures, steps being taken to improve 
      profitability and future revenues. 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 cost-cutting 
      measures will ultimately result in savings that are in line with current 
      expectations, that the Company will achieve profitability or that future 
      revenues predictions will ultimately prove accurate. 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 share and per share data)
          
        
      
      
        
           
        
      
      
        
        
        
        
        
          
             
          
        
        
          
            Three Months Ended
          
        
        
          
             
          
        
        
          
            Nine Months Ended
          
        
      
      
        
        
        
        
        
          
             
          
        
        
          
            March 31,
          
        
        
          
             
          
        
        
          
            March 31,
          
        
      
      
        
        
        
        
        
        
        
          2007 
        
        
        
        
          2006 
        
        
        
        
          2007 
        
        
        
        
          2006 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Revenues
        
        
        
        
          $
        
        
          
            126,498 
          
        
        
          
            $
          
        
        
          108,092 
        
        
          $
        
        
          
            379,485 
          
        
        
          
            $
          
        
        
          
            327,100 
          
        
      
      
        
          Cost of goods sold
        
        
        
        
        
        
          82,562 
        
        
        
        
          65,019 
        
        
        
        
          257,772 
        
        
        
        
          201,932 
        
      
      
        
          Gross profit
        
        
        
        
        
        
          43,936 
        
        
        
        
          43,073 
        
        
        
        
          121,713 
        
        
        
        
          125,168 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Operating expenses:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Selling, general and administrative
        
        
        
        
        
        
          36,199 
        
        
        
        
          33,805 
        
        
        
        
          110,531 
        
        
        
        
          100,738 
        
      
      
        
          Research and development
        
        
        
        
        
        
          11,390 
        
        
        
        
          8,851 
        
        
        
        
          33,424 
        
        
        
        
          26,281 
        
      
      
        
          Impairment, restructuring, and other charges
        
        
        
        
        
        
          2,226 
        
        
        
        
          - 
        
        
        
        
          23,769 
        
        
        
        
          800 
        
      
      
        
          Other operating expenses
        
        
        
        
        
        
          110 
        
        
        
        
          51 
        
        
        
        
          658 
        
        
        
        
          624 
        
      
      
        
          Total operating expenses
        
        
        
        
        
        
          49,925 
        
        
        
        
          42,707 
        
        
        
        
          168,382 
        
        
        
        
          128,443 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Income (loss) from operations
        
        
        
        
        
        
          (5,989)
        
        
        
        
          366 
        
        
        
        
          (46,669)
        
        
        
        
          (3,275)
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Interest expense
        
        
        
        
        
        
          (1,239)
        
        
        
        
          (236)
        
        
        
        
          (3,520)
        
        
        
        
          (1,186)
        
      
      
        
          Interest income
        
        
        
        
        
        
          85 
        
        
        
        
          91 
        
        
        
        
          322 
        
        
        
        
          180 
        
      
      
        
          Other income / (expense)
        
        
        
        
        
        
          15,772 
        
        
        
        
          - 
        
        
        
        
          15,772 
        
        
        
        
          349 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Income (loss) before provision for income taxes and minority interest
        
        
        
        
        
        
          8,629 
        
        
        
        
          221 
        
        
        
        
          (34,095)
        
        
        
        
          (3,932)
        
      
      
        
          Provision (benefit) for income taxes
        
        
        
        
        
        
          3,678 
        
        
        
        
          (820)
        
        
        
        
          (11,607)
        
        
        
        
          (1,816)
        
      
      
        
          Minority interest
        
        
        
        
        
        
          (1,338)
        
        
        
        
          (30)
        
        
        
        
          (553)
        
        
        
        
          (976)
        
      
      
        
          Net income (loss)
        
        
        
        
          $
        
        
          3,613 
        
        
          $
        
        
          1,011 
        
        
          $
        
        
          (23,041)
        
        
          $
        
        
          (3,092)
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Diluted income (loss) per share
        
        
        
        
          $
        
        
          0.21 
        
        
          $
        
        
          0.06 
        
        
          $
        
        
          (1.37)
        
        
          $
        
        
          (0.20)
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Weighted average shares outstanding - diluted
        
        
        
        
        
        
          17,237 
        
        
        
        
          16,766 
        
        
        
        
          16,779 
        
        
        
        
          16,326 
        
      
    
    
      
        
          
            Condensed Consolidated Balance Sheets
          
          
            (in thousands)
          
        
      
      
        
           
        
      
      
        
        
        
        
        
          June 30,
        
        
        
        
          March 31,
        
      
      
        
        
        
        
        
        
        
          2006 
        
        
        
        
        
        
          2007 
        
      
      
        
          
            Assets
          
        
        
        
        
        
        
        
        
        
      
      
        
          Cash and cash equivalents
        
        
        
        
          $
        
        
          13,799 
        
        
        
        
          $
        
        
          18,787 
        
      
      
        
          Accounts receivable, net
        
        
        
        
        
        
          119,419 
        
        
        
        
        
        
          120,134 
        
      
      
        
          Inventories
        
        
        
        
        
        
          120,604 
        
        
        
        
        
        
          121,702 
        
      
      
        
          Other current assets
        
        
        
        
        
        
          29,477 
        
        
        
        
        
        
          45,462 
        
      
      
        
          Total current assets
        
        
        
        
        
        
          283,299 
        
        
        
        
        
        
          306,085 
        
      
      
        
          Non-current assets
        
        
        
        
        
        
          119,774 
        
        
        
        
        
        
          126,704 
        
      
      
        
          Total
        
        
        
        
          $
        
        
          403,073 
        
        
        
        
          $
        
        
          432,789 
        
      
      
        
           
        
      
      
        
          Liabilities and Stockholders' Equity
        
        
        
        
        
        
        
        
        
      
      
        
          Bank lines of credit
        
        
        
        
          $
        
        
          10,857 
        
        
        
        
          $
        
        
          16,358 
        
      
      
        
          Current portion of long-term debt
        
        
        
        
        
        
          1,251 
        
        
        
        
        
        
          5,578 
        
      
      
        
          Accounts payable and accrued expenses
        
        
        
        
        
        
          68,526 
        
        
        
        
        
        
          71,910 
        
      
      
        
          Other current liabilities
        
        
        
        
        
        
          40,509 
        
        
        
        
        
        
          43,312 
        
      
      
        
          Total current liabilities
        
        
        
        
        
        
          121,143 
        
        
        
        
        
        
          137,158 
        
      
      
        
          Long-term debt
        
        
        
        
        
        
          5,483 
        
        
        
        
        
        
          26,965 
        
      
      
        
          Other long-term liabilities
        
        
        
        
        
        
          17,769 
        
        
        
        
        
        
          20,349 
        
      
      
        
          Total liabilities
        
        
        
        
        
        
          144,395 
        
        
        
        
        
        
          184,472 
        
      
      
        
          Minority interest
        
        
        
        
        
        
          9,731 
        
        
        
        
        
        
          9,723 
        
      
      
        
          Shareholders' equity
        
        
        
        
        
        
          248,947 
        
        
        
        
        
        
          238,594 
        
      
      
        
          Total
        
        
        
        
          $
        
        
          403,073 
        
        
        
        
          $
        
        
          432,789 
        
      
    
    
      
        
          
            SEGMENT INFORMATION
          
          
            (in thousands)
          
        
      
      
        
           
        
      
      
        
        
        
          Three Months Ended
        
        
          
            Nine Months Ended
          
        
      
      
        
        
        
          
            March 31,
          
        
        
          
            March 31,
          
        
      
      
        
        
        
        
        
          2007 
        
        
        
        
          2006 
        
        
        
        
          2007 
        
        
        
        
          2006 
        
      
      
        
           
        
      
      
        
          Revenues - by Segment Group:
        
        
        
        
        
        
        
        
        
      
      
        
          Security Group
        
        
          $
        
        
          45,044 
        
        
          $
        
        
          36,446 
        
        
          $
        
        
          130,479 
        
        
          $
        
        
          93,787 
        
      
      
        
          Healthcare Group
        
        
        
        
          53,671 
        
        
        
        
          49,429 
        
        
        
        
          164,639 
        
        
        
        
          161,799 
        
      
      
        
          
            Optoelectronics and Manufacturing Group including intersegment 
            revenues
          
        
        
        
        
          37,200 
        
        
        
        
          29,689 
        
        
        
        
          111,068 
        
        
        
        
          88,593 
        
      
      
        
          Intersegment revenues elimination
        
        
        
        
          (9,417)
        
        
        
        
          (7,472)
        
        
        
        
          (26,701)
        
        
        
        
          (17,079)
        
      
      
        
          Total
        
        
          $
        
        
          126,498 
        
        
          $
        
        
          108,092 
        
        
          $
        
        
          379,485 
        
        
          $
        
        
          327,100 
        
      
      
        
           
        
      
      
        
          Operating income (loss) - by Segment Group:
        
        
        
        
        
        
        
        
        
      
      
        
          Security Group
        
        
          $
        
        
          527 
        
        
          $
        
        
          1,230 
        
        
          $
        
        
          (31,284)
        
        
          $
        
        
          (2,614)
        
      
      
        
          Healthcare Group
        
        
        
        
          (3,381)
        
        
        
        
          1,063 
        
        
        
        
          (8,994)
        
        
        
        
          8,159 
        
      
      
        
          Optoelectronics and Manufacturing Group
        
        
        
        
          547 
        
        
        
        
          3,608 
        
        
        
        
          7,279 
        
        
        
        
          7,391 
        
      
      
        
          Corporate
        
        
        
        
          (3,291)
        
        
        
        
          (5,293)
        
        
        
        
          (13,436)
        
        
        
        
          (16,002)
        
      
      
        
          Eliminations
        
        
        
        
          (391)
        
        
        
        
          (242)
        
        
        
        
          (234)
        
        
        
        
          (209)
        
      
      
        
          Total
        
        
          $
        
        
          (5,989)
        
        
          $
        
        
          366 
        
        
          $
        
        
          (46,669)
        
        
          $
        
        
          (3,275)