OSI Systems [OSIS]
3Q15 3Q14
Sales $215.4M $204M
Net Inc. $13.2M, 0.64 $4.8M, 0.23
Sales increased 6% in the quarter primarily due to growth at the Healthcare segment and to a lesser extent at the Rapiscan Systems security division. The strong U.S. dollar vis-à-vis foreign currencies trimmed $45 million or 2% off the top line. Bottom line growth more than doubled and was fueled primarily by a lower tax rate as operating profit increases at the Optoelectronics and Manufacturing division were largely offset by declines at Rapiscan and Healthcare. Operating profit at Rapiscan fell 6% to $13.3 million due to a less favorable sales mix toward lower margin business and $300,000 more in restructuring and other charges. Sales at Rapiscan were up 4% to $99.2 million due to work on a foreign military sales contract for Iraq, which is now largely completed except for a small amount of recurring service revenue. However, sales at Rapiscan were less than expected due mainly to delays in international orders and the impact of the strong dollar. The strong dollar, international security order delays, and the consolidation of a facility in the Opto segment led OSI to trim its sales outlook for the year by $25 million to between $950 million and $975 million. The lower sales combined with the less favorable product mix led the company to reduce its earnings forecast to between $3.42 and $3.60 per share from prior guidance of between $3.54 and $3.76 per share. Despite the weaker forecast, the company is upbeat given its win in the fourth quarter of a $27 million contract to supply its RTT 110 fixed-gantry explosive detection system to Rome airport in Italy, saying there is increasing momentum internationally, particularly in Europe, for new EDS systems to meet stricter aviation security screening requirements. More than 1,000 EDS machines will need to be replaced by 2020 in Europe, the company says. OSI officials also say the pipeline of opportunities internationally remains strong for cargo inspection and screening services. Backlog in the quarter was down $30 million to $630 million from the end of the second quarter. Orders were in line with the company’s overall sales and bookings at Rapiscan were also in line with sales. Free cash flow was a robust $23.1 million.