The election of a new government in Albania has led to the halt of Rapiscan’s 15-year turnkey screening services contract announced last year and the project is in doubt moving forward, Deepak Chopra, president and CEO of OSI Systems [OSIS], tells investors.
The program in Albania was ahead of schedule and going smoothly but the new government “has halted further progress on the contract and put into doubt the continuation of the program,” Chopra says.
Chopra says his company won’t give up on the contract.
“We intend to strongly enforce our contractual rights and hope to reach an amicable outcome,” Chopra says on OSI’s fourth quarter earnings call.
While Rapiscan has made investments in the Albanian project, it doesn’t expect to take any charges against its earnings, says Alan Edrick, OSI’s chief financial officer.
Rapiscan announced the Albanian contract in Aug. 2013, saying that the 15-year project was worth between $150 million and $250 million. Under the turnkey services deal, the company would provide the screening technologies and the screeners to conduct cargo and vehicle security screening services on a fee-per-scan type arrangement.
Rapiscan already has a handsome turnkey screening services deal with Mexico and another with the port authority in Puerto Rico. Chopra says the company continues to pursue additional turnkey services deals worldwide.
The withdrawal by Albania from the contract with Rapiscan does not affect OSI’s sales guidance for its fiscal year 2015, which is expected to range between $960 million and $985 million. The company posted $906.7 million in sales in fiscal year 2014 that ended June 30.