OSI Systems Announces 4th Quarter Operating Results
OSI Systems, Inc. (Nasdaq:OSIS - News) 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.
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
Contact:
OSI Systems, Inc.
Jeremy Norton, 310-349-2237