OSIS OSI Systems Inc

• Record Q2 Revenue of $236 million (22% increase over prior year)
• Record Non-GAAP Q2 Earnings Per Share
  • GAAP of $0.71
  • Non-GAAP of $0.78
• Free Cash Flow of $35 million

OSI Systems, Inc. (NASDAQ: OSIS) today announced financial results for the second fiscal quarter ended December 31, 2013.

“We are pleased to announce strong second quarter results. We achieved record sales, as each of our three divisions reported double digit sales growth over the prior year, resulting in overall growth of 22%. In addition, we reported record year-over-year non-GAAP earnings for the 18th straight quarter along with significant free cash flow,” said Deepak Chopra, OSI Systems’ Chairman and CEO.

The Company reported revenues of $236 million for the second quarter of fiscal 2014, an increase of 22% as compared to the same period a year ago. Net income for the second quarter of fiscal 2014 was $14.6 million, or $0.71 per diluted share, compared to net income of $12.4 million, or $0.60 per diluted share, for the second quarter of fiscal 2013. Excluding the impact of impairment, restructuring and other charges, net income for the second quarter of fiscal 2014 would have been $16.1 million, or $0.78 per diluted share, compared to net income of $14.4 million, or $0.70 per diluted share for the comparable quarter of the prior year.

For the six months ended December 31, 2013, the Company reported revenues of $443 million, an increase of 18% as compared to the same period a year ago. Net income in this period was $21.0 million, or $1.02 per diluted share, compared to net income of $18.8 million, or $0.91 per diluted share, in the same period a year ago. Excluding the impact of impairment, restructuring and other charges, net income for the six months ended December 31, 2013 would have been $25.5 million, or $1.24 per diluted share, compared to net income of $20.7 million, or $1.01 per diluted share, for the comparable period in the prior year.

As of December 31, 2013, the Company’s backlog was approximately $0.9 billion. During the second fiscal quarter, the Company generated cash flow from operations of $69 million and capital expenditures totaled $34 million.

Mr. Chopra continued, “During the second quarter, our Security Division generated both record sales and profits as sales grew by 16% over the prior year and operating income, excluding the impact of impairment, restructuring and other charges, increased by 49%. The excellent performance of our turnkey operations were a major contributor to our top line growth and increased operating margins.”

Mr. Chopra concluded, “We are also pleased with the performance of our Healthcare Division as sales grew by 12% over the prior year while operating income increased by 33% over the same period. This double-digit sales growth was encouraging and we remain optimistic about our new product offerings.”

Fiscal Year 2014 Outlook

The Company is raising its sales guidance for fiscal 2014 to $890 million - $920 million, representing an 11% to 15% increase over fiscal 2013. In addition, the Company is updating its fiscal 2014 earnings guidance and expects earnings per diluted share to increase at a rate of 12% - 23% to between $3.10 to $3.39, excluding the impact of impairment, restructuring and other charges, and the impact of certain tax elections. However, actual sales and non-GAAP diluted EPS could vary from this guidance due to the risks and uncertainties applicable to our business and industry including the timing of certain awards and the outcome of the issues with the Transportation Security Administration.

Non-GAAP Figures

Discussion of adjustments to arrive at non-GAAP figures for the three and six months ended December 31, 2013 and 2012 is provided to allow for the comparison of underlying earnings, net of impairment, restructuring and other non-recurring charges and their related tax benefit, thus providing additional insight into the on-going operations of the Company. Non-GAAP financial measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. We believe that these non-GAAP financial measures provide meaningful supplemental information regarding the Company’s results primarily because they exclude amounts that we do not view as reflective of ongoing operating results when planning and forecasting and when assessing the performance of the business. We believe that our non-GAAP financial measures also facilitate the comparison of results for current periods and guidance for future periods with results for past periods. Please see the reconciliation of GAAP to non-GAAP net income and earnings per share at the end of this release.

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 2014. To listen, please log on to the Company’s website at www.osi-systems.com and follow the link in the Investor Relations section. A replay of the webcast will be available shortly after the conclusion of the conference call until February 11, 2014. The replay can either be accessed through the Company’s website, www.osi-systems.com, or via telephonic replay by calling 888-286-8010 and entering the conference call identification number ‘56517283’ 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, and provider of security screening services. The Company sells its products in diversified markets, including homeland security, healthcare, defense and aerospace. The Company has more than 35 years of experience in electronics engineering and manufacturing and maintains offices and production facilities 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

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements relate to the Company’s current expectations, beliefs, projections and similar expressions concerning matters that are not historical facts and are not guarantees of future performance. Forward-looking statements involve uncertainties, risks, assumptions and contingencies, many of which are outside the Company’s control and which may cause actual results to differ materially from those described in or implied by any forward-looking statement. Such statements include, but are not limited to, information provided regarding expected revenues and earnings in fiscal 2014. For example, the Company could be exposed to a variety of negative consequences as a result of one or more enforcement actions in respect of the matters that are the subject of some or all of the Company’s ongoing investigations and compliance review, including contract and regulatory compliance matters with the U.S. Government, and such actions, if brought, may result in judgments, settlements, fines, injunctions, debarment and/or penalties, which could have a material and adverse impact on the Company's business, financial condition and results of operation. For a further discussion of these and other factors that could cause the Company’s future results to differ materially from any forward-looking statements, see the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2013 and other risks described in documents subsequently filed by the Company from time to time with the Securities and Exchange Commission. All forward-looking statements are based on currently available information and speak only as of the date on which they are made. The Company assumes no obligation to update any forward-looking statement made in this press release that becomes untrue because of subsequent events, new information or otherwise, except to the extent it is required to do so in connection with its ongoing requirements under federal securities laws.

OSI SYSTEMS, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(Unaudited)

                  For the Three Months Ended

December 31,

For the Six Months Ended

December 31,

  2012           2013   2012           2013 Revenues $ 194,049 $ 236,408 $ 375,743 $ 442,682 Cost of goods sold   123,961   155,469   244,300   293,797 Gross profit 70,088 80,939 131,443 148,885 Operating expenses: Selling, general and administrative 36,829 45,556 76,754 87,770 Research and development 11,858 11,175 23,174 22,195 Impairment, restructuring and other charges   2,723   2,179   2,723   6,418 Total operating expenses   51,410   58,910   102,651   116,383 Income from operations 18,678 22,029 28,792 32,502 Interest expense and other, net   1,385   1,503   2,482   2,973 Income before income taxes 17,293 20,526 26,310 29,529 Provision for income taxes   4,872   5,953   7,550   8,562 Net income $ 12,421 $ 14,573 $ 18,760 $ 20,967   Diluted earnings per share $ 0.60 $ 0.71 $ 0.91 $ 1.02 Weighted average shares outstanding - diluted   20,609   20,589   20,589   20,604  

CONSOLIDATED BALANCE SHEETS

(in thousands)

(Unaudited)

                  June 30, 2013 December 31, 2013 Assets Cash and cash equivalents $ 34,697 $ 39,899 Accounts receivable, net 206,817 164,006 Inventories 206,213 219,998 Other current assets   78,972   82,246 Total current assets 526,699 506,149 Non-current assets   393,097   429,121 Total Assets $ 919,796 $ 935,270   Liabilities and Stockholders' Equity Bank lines of credit $ 59,000 $ 60,000 Current portion of long-term debt 1,797 2,971 Accounts payable and accrued expenses 123,660 95,926 Deferred revenues 18,131 46,539 Other current liabilities   78,825   80,847 Total current liabilities 281,413 286,283 Long-term debt 10,673 11,724 Advances from customers 75,000 62,500 Other long-term liabilities   74,259   81,507 Total liabilities 441,345 442,014 Total stockholders’ equity   478,451   493,256 Total Liabilities and Equity $ 919,796 $ 935,270  

SEGMENT INFORMATION

(in thousands)

(unaudited)

                 

Three Months EndedDecember 31,

Six Months EndedDecember 31,

  2012             2013     2012             2013   Revenues – by Segment Group: Security Group $ 91,863 $ 106,588 $ 174,779 $ 203,741 Healthcare Group 56,114 63,106 107,695 108,893 Optoelectronics and Manufacturing Group including intersegment revenues 57,277 76,358 114,424 147,669 Intersegment revenues elimination   (11,205 )   (9,644 )   (21,155 )   (17,621 ) Total $ 194,049   $ 236,408   $ 375,743   $ 442,682     Operating income (loss) – by Segment Group: Security Group (1) $ 8,607 $ 15,149 $ 13,072 $ 26,771 Healthcare Group (2) 6,915 9,226 10,796 7,228 Optoelectronics and Manufacturing Group (3) 5,457 2,121 10,290 6,886 Corporate (2,438 ) (4,355 ) (5,687 ) (8,400 ) Eliminations   137     (112 )   321     17   Total $ 18,678   $ 22,029   $ 28,792   $ 32,502     (1)   Includes impairment, restructuring and other charges of $1.7 million and $3.3 million for the three and six months ended December 31, 2013, respectively, and $2.7 million for the three and six months ended December 31, 2012.   (2) Includes impairment, restructuring and other charges of $2.0 million for the six months ended December 31, 2013.   (3) Includes impairment, restructuring and other charges of $0.5 million and $1.1 million for the three and six months ended December 31, 2013, respectively.  

Reconciliation of GAAP to Non-GAAP

(in thousands, except earnings per share data)

(Unaudited)

            For the Three Months Ended December 31, For the Six Months Ended December 31, 2012       2013 2012       2013 Net income       EPS Net income       EPS Net income       EPS Net income       EPS   GAAP basis $ 12,421 $ 0.60 $ 14,573 $ 0.71 $ 18,760 $ 0.91 $ 20,967 $ 1.02   Impairment, restructuring and other charges, net of tax 1,956 0.10 1,547 0.07 1,956 0.10 4,557 0.22                 Non-GAAP basis $ 14,377 $ 0.70 $ 16,120 $ 0.78 $ 20,716 $ 1.01 $ 25,524 $ 1.24  

OSI Systems, Inc.Ajay VashishatVice President, Business Development310-349-2237avashishat@osi-systems.com