Earnings News and Notes

OSI Systems [OSIS]

Sales in the quarter were a record and increased 11% on the strength of a 27% jump at the Optoelectronics and Manufacturing Group and a 10% gain at the Healthcare Group. Rapiscan Systems, which makes up the Security Group, saw sales rise 4% to $78.7M. Company officials say the modest gain at Security was due to a tough comparison with a year ago when sales were up nearly 30%. The 50% increase in net income was driven by the higher sales and a drop in operating expenses as a percentage of revenues. Per share earnings in the quarter were a record. Operating profit at Rapiscan fell 26% to $8.1M as losses continued on a prime contract for aviation security services in Mexico. Losses on the contract are expected to continue through 1QFY12 before beginning to ease, company officials say. Business opportunities for security products remain strong and bookings at Rapiscan in the quarter, up 22% to $85M, contributed to a record backlog at the division of $200M, which helped propel the company to a record backlog at year end of $304M, up 27%. International security activity is also high and the company disclosed it a $12M contract in the quarter to provide third party logistics provider Deutsche Post DHL with baggage and parcel inspection systems to meet security demands for air cargo. Company officials say there are additional opportunities ahead in the air cargo security market. Revenues from Rapiscan’s new cargo container inspection services in Puerto Rico’s ports were immaterial in the quarter as only one site is operational but sales are expected to climb in the coming months as two additional scanning sites come on line, officials say. Free cash flow in the quarter was nearly $10M. Sales and earnings for the year were records. The company provided an initial outlook for FY12, with sales expected to grow between 10 and 13% to between $722M and $740M and earnings per share up between 20 and 26% to between $2.21 and $2.32, excluding restructuring and other non-recurring charges. Benchmark Capital analyst Josephine Millward says the guidance was better than expected, due to strong growth in backlog.