UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
May 4, 2005
OSI SYSTEMS, INC.
(EXACT NAME OF REGISTRANT SPECIFIED IN CHARTER)
| CALIFORNIA | 000-23125 | 330238801 | ||
| (STATE OR OTHER JURISDICTION OF INCORPORATION) |
(COMMISSION FILE NUMBER) | (IRS EMPLOYER IDENTIFICATION NO.) |
| 12525 Chadron Avenue, Hawthorne, CA | 90250 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (310) 978-0516
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. Results of Operations and Financial Condition
On May 4, 2005, OSI Systems, Inc. (the “Company”) issued a press release announcing the Company’s earnings for the third quarter ended March 31, 2005. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated by reference herein in its entirety.
The information in this report (including Exhibit 99.1) is being furnished pursuant to Item 2.02 and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Act”) or the Exchange Act.
Item 9.01. Financial Statements and Exhibits.
(c) Exhibits.
Exhibit 99.1: Press Release dated May 4, 2005.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| OSI SYSTEMS, INC. | ||||
| Date: May 6, 2005 |
By: |
/s/ Victor Sze | ||
| Victor Sze | ||||
| General Counsel | ||||
EXHIBIT INDEX
| Exhibit Number |
Description | |
| 99.1 | Press release dated May 4, 2005 |
Exhibit 99. 1
OSI Systems Announces Third Quarter Operating Results
HAWTHORNE, Calif.—(BUSINESS WIRE)—May 4, 2005—OSI Systems, Inc. (NASDAQ:OSIS) today announced its revenues and results for the third quarter of fiscal 2005.
The company reported revenues of $94.2 million for the third quarter of fiscal 2005, an increase of 53% from the $61.5 million reported for the third quarter of fiscal 2004. For the nine months ended March 31, 2005, revenues increased by $133.0 million, or 88%, to $284.3 million, from $151.3 million for the comparable period of fiscal 2004. Revenue growth was primarily due to the March 2004 acquisition of Spacelabs Medical.
The net loss for the third quarter of fiscal 2005 was $2.9 million compared to net income of $3.4 million for the third quarter of fiscal 2004. For the nine months ended March 31, 2005, net income decreased by $7.0 million, to $840,000, from $7.8 million for the comparable period of fiscal 2004.
For the third quarter of fiscal 2005 the company reported a net loss of $0.18 per diluted share compared to earnings of $0.23 per diluted share for the third quarter of fiscal 2004. For the nine months ended March 31, 2005, earnings per diluted share decreased by $0.47, to $0.05 per diluted share, from $0.52 per diluted share for the comparable period of fiscal 2004. Results for the third quarter of fiscal 2005 include approximately $0.03 per diluted share of amortization and retention bonus expenses related to the acquisition of Spacelabs Medical.
The company reported an operating loss of $4.1 million for the Security Group in the third quarter of fiscal 2005. This loss was due to the continued weak performance of the Cargo and Vehicle Inspection product line and the establishment of a bad debt reserve for an international Cargo and Vehicle Inspection receivable of $2.5 million ($1.6 million after tax). Additionally, in the third quarter the Corporate segment incurred litigation and Sarbanes-Oxley implementation expenses that exceeded expectations by approximately $900,000 ($560,000 after tax). The third quarter results were favorable impacted by a tax benefit of approximately $626,000 from the resolution of a tax contingency.
At March 31, 2005 cash and cash equivalents were approximately $12.7 million compared to $29.1 million as of December 31, 2004. During the third quarter the company borrowed approximately $7.4 million cash under its lines of credit. The company utilized cash of approximately $9.4 million for the acquisition of Blease Medical Holdings in February 2005, approximately $2.3 million for the down payment of the purchase of a facility in the U.K and approximately $9.4 million in operating activities. Cash used in operating activities was primarily due to the increase in accounts receivable and inventory associated with the timing of product shipments.
The company revises its revenue guidance to $102 million to $104 million for the fourth quarter of fiscal 2005, including revenue contributed by recently-acquired Blease Medical Holdings. The company expects the gross margins for the fourth quarter to be similar to those of the third quarter of fiscal 2005. Due to a significant increase in litigation expenses from those incurred in the third quarter and continued Sarbanes-Oxley implementation expenses, the company lacks adequate visibility to provide earnings guidance for the fourth quarter of fiscal 2005.
Security Group
The Security Group reported revenues of $29.0 million for the third quarter of fiscal 2005, a decrease of 14% from $33.7 million reported for the third quarter of fiscal 2004. For the nine months ended March 31, 2005 revenues increased by $4.6 million, or 5%, to $91.0 million, from $86.4 million for the comparable period of fiscal 2004.
Loss from operations for the third quarter of fiscal 2005 was $4.1 million compared to $3.5 million of income from operations for the third quarter of fiscal 2004. For the nine months ended March 31, 2005, earnings from operations decreased by $12.0 million, to a loss of $3.0 million, from income of $9.0 million for the comparable period of fiscal 2004.
As previously disclosed, the reported results were impacted by the weak performance of the Cargo and Vehicle Inspection product line and the establishment of a bad debt reserve of approximately $2.5 million ($1.6 million after tax) for a Cargo and Vehicle Inspection receivable. The Security Group was impacted by a decline in third quarter revenues for the Cargo and Vehicle Inspection product line to $4.7 million from $8.4 million in the second quarter of fiscal 2005.
The remainder of the Security Group’s business, consisting primarily of Baggage and Parcel Inspection and People Screening products continued to post favorable results in the third quarter of fiscal 2005 with sales of $24.3 million versus revenues $23.6 million in the second quarter of fiscal 2005.
Due to the company’s strong belief in the opportunity that exists in the marketplace for Cargo and Vehicle Inspection and Hold Baggage Screening, the company continues to invest heavily in R&D for both of these product lines. Our current projects in Cargo and Vehicle Inspection product line are primarily developmental programs, consisting of either first-of-its-kind projects, with new technologies, or development grants with minimal margins and large up-front engineering costs.
Healthcare Group
The Healthcare Group reported revenues of $47.8 million for the third quarter of fiscal 2005, compared to $8.6 million reported for the third quarter of fiscal 2004. For the nine months ended March 31, 2005, revenues increased by $129.3 million, to $144.6 million from $15.3 million for the comparable period of fiscal 2004. Revenue growth was primarily due to the March 2004 acquisition of Spacelabs Medical.
Income from operations for the third quarter of fiscal 2005 was $691,000, after Spacelabs-related amortization and retention expenses of $637,000. For the nine months ended March 31, 2005, income from operations was $5.8 million, after Spacelabs-related amortization and retention expenses of $2.4 million.
The Healthcare Group continued to perform well in the third quarter of fiscal 2005, a quarter that is traditionally a softer quarter for patient monitoring sales in North America. Going forward the company intends to increase Healthcare R&D expenditures on an incremental basis when compared to the third quarter of fiscal 2005.
The company confirmed its long term commitment to the healthcare market, in line with the key objectives outlined to the European Commission, with the acquisition of Blease Medical Holdings in February 2005. Blease, a U.K. manufacturer of anesthesia systems, vaporizers and ventilators will work closely with Spacelabs to develop and market a suite of products and applications focused on the perioperative and critical care markets. The acquisition enables both businesses to become more competitive in the Asian and European marketplaces where cross selling of anesthesia and patient monitoring systems is commonplace. The company does not expect Blease to contribute to the operating profit of the Healthcare Group until the acquisition has been fully integrated into the Healthcare Group and operating synergies have been achieved.
Optoelectronics & Manufacturing Group
The Optoelectronics & Manufacturing Group reported external revenues of $17.3 million for the third quarter of fiscal 2005, a decrease of 10% from $19.2 million reported for the third quarter of fiscal 2004. For the nine months ended March 31, 2005, external revenues decreased by $900,000, to $48.7 million from $49.6 million for the comparable period of fiscal 2004.
Income from operations for the third quarter of fiscal 2005 was $2.0 million, compared to $2.7 million for the third quarter of fiscal 2004. For the nine months ended March 31, 2005, income from operations decreased by $1.2 million, to $5.6 million from $6.8 million for the comparable period of fiscal 2004.
For the third quarter of fiscal 2005 the Optoelectronics & Manufacturing Group reported inter-company revenues of $5.0 million, an increase of $700,000, from $4.3 million reported for the third quarter of fiscal 2004. For the nine months ended March 31, 2005, inter-company revenues increased by $3.6 million, to $15.0 million from $11.4 million for the comparable period of fiscal 2004.
OSI Systems, Inc. will webcast the live earnings call over the Internet at 2:30 p.m. PT, today. 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 May 4th until 4:30 p.m. PT on May 11th. The replay may be accessed by calling 888-286-8010 and entering the conference call identification number 44661424.
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 new products to be offered by 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 or Healthcare Groups 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 March 31, |
||||||||
| 2005 |
2004 |
|||||||
| Revenues |
$ | 94,153 | $ | 61,531 | ||||
| Cost of goods sold |
60,975 | 41,957 | ||||||
| Gross profit |
33,178 | 19,574 | ||||||
| Operating expenses: |
||||||||
| Selling, general and administrative |
30,347 | 12,419 | ||||||
| Research and development |
7,306 | 3,543 | ||||||
| Restructuring charges |
— | — | ||||||
| Management retention bonus |
288 | — | ||||||
| Total operating expenses |
37,941 | 15,962 | ||||||
| (Loss) income from operations |
(4,763 | ) | 3,612 | |||||
| Interest income |
(27 | ) | (209 | ) | ||||
| Interest expense |
153 | 65 | ||||||
| Impairment of equity investment |
— | — | ||||||
| Gain on sale of marketable securities |
— | (376 | ) | |||||
| (Loss) income before provision for income taxes and minority interest |
(4,889 | ) | 4,132 | |||||
| (Benefit) provision for income taxes |
(1,961 | ) | 739 | |||||
| (Loss) income before minority interest |
(2,928 | ) | 3,393 | |||||
| Minority interest |
— | 48 | ||||||
| Net (Loss) income |
$ | (2,928 | ) | $ | 3,441 | |||
| (Loss) earnings per share |
$ | (0.18 | ) | $ | 0.24 | |||
| Diluted (loss) earnings per share |
$ | (0.18 | ) | $ | 0.23 | |||
| Weighted average shares outstanding |
16,276,323 | 14,626,245 | ||||||
| Weighted average shares outstanding -assuming dilution |
16,276,323 | 15,169,598 | ||||||
| Nine months ended March 31, |
||||||||
| 2005 |
2004 |
|||||||
| Revenues |
$ | 284,328 | $ | 151,271 | ||||
| Cost of goods sold |
180,908 | 104,534 | ||||||
| Gross profit |
103,420 | 46,737 | ||||||
| Operating expenses: |
||||||||
| Selling, general and administrative |
80,733 | 28,129 | ||||||
| Research and development |
21,042 | 7,953 | ||||||
| Restructuring charges |
— | 1,061 | ||||||
| Management retention bonus |
1,386 | — | ||||||
| Total operating expenses |
103,161 | 37,143 | ||||||
| (Loss) income from operations |
259 | 9,594 | ||||||
| Interest income |
(217 | ) | (820 | ) | ||||
| Interest expense |
306 | 232 | ||||||
| Impairment of equity investment |
— | 247 | ||||||
| Gain on sale of marketable securities |
— | (376 | ) | |||||
| (Loss) income before provision for income taxes and minority interest |
170 | 10,311 | ||||||
| (Benefit) provision for income taxes |
(602 | ) | 2,543 | |||||
| (Loss) income before minority interest |
772 | 7,768 | ||||||
| Minority interest |
68 | — | ||||||
| Net (Loss) income |
$ | 840 | $ | 7,768 | ||||
| (Loss) earnings per share |
$ | 0.05 | $ | 0.53 | ||||
| Diluted (loss) earnings per share |
$ | 0.05 | $ | 0.52 | ||||
| Weighted average shares outstanding |
16,215,620 | 14,584,116 | ||||||
| Weighted average shares outstanding -assuming dilution |
16,589,734 | 15,069,478 | ||||||
Condensed Consolidated Balance Sheets
(in thousands)
| March 31, 2005 |
June 30, 2004 | |||||
| Cash and cash equivalents |
$ | 12,655 | $ | 39,879 | ||
| Accounts receivable, net of allowance for doubtful accounts |
93,187 | 85,774 | ||||
| Inventory |
110,252 | 97,174 | ||||
| Other current assets |
19,101 | 18,062 | ||||
| Total current assets |
235,195 | 240,889 | ||||
| Non current assets |
110,068 | 90,912 | ||||
| Total |
$ | 345,263 | $ | 331,801 | ||
| Bank line of credit |
$ | 7,550 | $ | 723 | ||
| Current portion of long term debt |
261 | 1,798 | ||||
| Current portion of capital lease obligation |
252 | — | ||||
| Other current liabilities |
94,795 | 94,970 | ||||
| Total current liabilities |
102,858 | 97,491 | ||||
| Long-term debt |
4,919 | 32 | ||||
| Long-term capital lease obligation |
300 | — | ||||
| Other long term liabilities |
7,088 | 6,727 | ||||
| Minority interest |
— | 69 | ||||
| Shareholders’ equity |
230,098 | 227,482 | ||||
| Total |
$ | 345,263 | $ | 331,801 | ||
Segment Information
(in thousands)
Quarter ended March 31, 2005
| Security Group |
Healthcare Group |
Opto- electronics Group |
Corporate |
Eliminations |
Total |
|||||||||||||||||
| Revenues: |
||||||||||||||||||||||
| External |
$ | 29,037 | $ | 47,793 | $ | 17,323 | — | — | $ | 94,153 | ||||||||||||
| Inter-company |
— | — | 5,042 | — | (5,042 | ) | — | |||||||||||||||
| Total Revenues |
$ | 29,037 | $ | 47,793 | $ | 22,365 | $ | — | $ | (5,042 | ) | $ | 94,153 | |||||||||
| Operating Income (Loss) |
$ | (4,109 | ) | $ | 691 | $ | 1,955 | $ | (3,259 | ) | $ | (41 | ) | $ | (4,763 | ) | ||||||
Quarter ended March 31, 2004
| Security Group |
Healthcare Group |
Opto- electronics Group |
Corporate |
Eliminations |
Total | ||||||||||||||||
| Revenues: |
|||||||||||||||||||||
| External |
$ | 33,694 | $ | 8,647 | $ | 19,190 | — | — | $ | 61,531 | |||||||||||
| Inter-company |
4,256 | (4,256 | ) | ||||||||||||||||||
| Total Revenues |
$ | 33,694 | $ | 8,647 | $ | 23,446 | $ | — | $ | (4,256 | ) | $ | 61,531 | ||||||||
| Operating Income (Loss) |
$ | 3,457 | $ | (8 | ) | $ | 2,736 | $ | (2,355 | ) | $ | (218 | ) | $ | 3,612 | ||||||
Nine months ended March 31, 2005
| Security Group |
Healthcare Group |
Opto- electronics Group |
Corporate |
Eliminations |
Total | ||||||||||||||||
| Revenues: |
|||||||||||||||||||||
| External |
$ | 91,017 | $ | 144,597 | $ | 48,714 | $ | — | $ | — | $ | 284,328 | |||||||||
| Inter-company |
— | — | 14,959 | — | (14,959 | ) | — | ||||||||||||||
| Total Revenues |
$ | 91,017 | $ | 144,597 | $ | 63,673 | $ | — | $ | (14,959 | ) | $ | 284,328 | ||||||||
| Operating Income (Loss) |
$ | (3,033 | ) | $ | 5,790 | $ | 5,645 | $ | (7,685 | ) | $ | (458 | ) | $ | 259 | ||||||
Nine months ended March 31, 2004
| Security Group |
Healthcare Group |
Opto- electronics Group |
Corporate |
Eliminations |
Total | ||||||||||||||||
| Revenues: |
|||||||||||||||||||||
| External |
$ | 86,428 | $ | 15,270 | $ | 49,573 | $ | — | — | $ | 151,271 | ||||||||||
| Inter-company |
— | — | 11,432 | — | (11,432 | ) | — | ||||||||||||||
| Total Revenues |
$ | 86,428 | $ | 15,270 | $ | 61,005 | $ | — | $ | (11,432 | ) | $ | 151,271 | ||||||||
| Operating Income (Loss) |
$ | 8,962 | $ | (802 | ) | $ | 6,813 | $ | (5,003 | ) | $ | (376 | ) | $ | 9,594 | ||||||