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], told 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 said during the company’s fourth quarter earnings call on Monday. OSI Systems is the parent of Rapiscan.

As part of its turnkey screening services model, Rapiscan uses its cargo and vehicle inspection systems for screening at ports and borders. Photo: OSI Systems
As part of its turnkey screening services model, Rapiscan uses its cargo and vehicle inspection systems for screening at ports and borders. Photo: OSI Systems

Chopra said 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 said during the earnings call.

While Rapiscan has made investments in the Albanian project, it doesn’t expect to take any charges against its earnings, Alan Edrick, OSI’s chief financial officer, said.

Rapiscan announced the Albanian contract in August 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 said the company continues to pursue additional turnkey services deals worldwide.

Benchmark Company security analyst Josephine Millward estimates that Rapiscan generated at least $130 million during its fiscal year 2014 from the screening services program with Mexico and between $12 million and $15 million with Puerto Rico.

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.