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OSI Systems Inc. Reports Operating Results (10-Q)

April 27, 2010 | About:
10qk

10qk

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OSI Systems Inc. (OSIS) filed Quarterly Report for the period ended 2010-03-31.

Osi Systems Inc. has a market cap of $472.1 million; its shares were traded at around $26.35 with a P/E ratio of 24.4 and P/S ratio of 0.8. OSIS is in the portfolios of John Buckingham of Al Frank Asset Management, Inc., Kenneth Fisher of Fisher Asset Management, LLC, Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Consolidated Results. For the three months ended March 31, 2010, we reported an operating profit of $8.4 million, as compared to $4.5 million for the comparable prior-year period, which represents an 87% improvement over our prior-year performance, while our revenue increased by 1%. This $3.9 million improvement was primarily driven by a $3.4 million improvement in gross profit as a result of a 2.0% increase in gross margin due to changes in our product mix as well cost reductions resulting from cost containment initiatives we have been undertaking throughout our company, but primarily in our Healthcare division. In addition, non-recurring restructuring charges decreased by $1.5 million during the three months ended March 31, 2010. This reduction was partially offset by an increased investment in research and development (R&D) expenses of $0.6 million in support of new product introductions in both our Security and Healthcare divisions as well as increased selling, general and administrative (SG&A) expenses of $0.4 million, or 1%, primarily in our Security division to support the 23% year-over-year growth in Security division revenues experienced during the quarter.

For the nine months ended March 31, 2010, we reported an operating profit of $23.3 million, as compared to $12.8 million for the comparable prior-year period, which represents an 82% improvement over our prior-year performance. This $10.5 million improvement was primarily due to a $5.9 million reduction in SG&A expenses, as a result of our ongoing cost containment initiatives and due to a $4.5 million reduction in restructuring activities during the nine months ended March 31, 2010, as compared to the comparable prior-year period. Despite a year-over-year reduction in revenue of 5% for the nine months ended March 31, 2010, our gross margin increased by 1.7%, resulting in comparable gross profit due to changes in product mix and manufacturing cost reductions resulting from the cost containment initiatives we have been undertaking throughout our company, but primarily in our Healthcare division. For the nine months ended March 31, 2010, R&D expenses were unchanged as compared to the comparable prior-year period.

Revenues for the Security division for the three months ended March 31, 2010, increased $12.8 million, or 23%, to $69.3 million, from $56.5 million for the comparable prior-year period. The increase was primarily due to an $11.8 million, or 26%, increase in equipment sales, driven by growth in people screening and baggage screening products, which was partially offset by a 31% reduction in revenues from our cargo inspection products. In addition, service revenues increased by $1.0 million, or 9%, due to the growing installed base of products from which we derive service revenue as warranty periods expire.

Revenues for the Optoelectronics and Manufacturing division for the three months ended March 31, 2010, decreased by $10.6 million, or 22%, to $38.2 million, from $48.8 million for the comparable prior-year period. Total revenues for the three months ended March 31, 2010, include external sales of $30.2 million, compared to $37.2 million in the comparable prior-year period. This $7.0 million decrease was driven by lower revenue in our contract manufacturing business, primarily due to lower sales to a defense-industry customer. The $3.6 million decrease in intersegment sales resulted from lower sales to both our Security and Healthcare divisions, which is consistent with the decrease in revenues experienced by our Healthcare division and an increased emphasis on inventory management undertaken by our Security division, which, despite the aforementioned growth in sales within our Security division, has reduced inventory levels during the quarter. Such intersegment sales are eliminated in consolidation.

Gross profit increased $3.4 million, or 7%, to $53.2 million for the three months ended March 31, 2010, from $49.8 million for the comparable prior-year period on sales growth of 1%. The gross margin increased to 36.6%, from 34.6% over the comparable prior-year period. This increase was primarily attributable to manufacturing efficiencies gained through facility consolidation and operational improvement initiatives, and due to a more favorable sales product mix.

Revenues for the Optoelectronics and Manufacturing division for the nine months ended March 31, 2010, decreased by $10.8 million, or 8%, to $127.6 million as compared to $138.4 million for the comparable prior-year period. Total revenues for the nine months ended March 31, 2010, include external sales of $104.1 million, compared to $104.2 million in the comparable prior-year period. The $10.7 million decrease in intersegment sales from $34.2 million to $23.5 million resulted from lower sales to both our Healthcare and Security divisions, which is directionally consistent with the decrease in revenues experienced by our Security and Healthcare divisions and the increased emphasis on inventory management undertaken by our Security division, which has reduced inventory levels during the current fiscal year. Such intersegment sales are eliminated in consolidation.

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