Earnings News and Notes

OSI Systems [OSIS]

Net income increased 31% on a 12% gain in sales as the company has been successful in containing operating costs through ongoing initiatives dating back to last year while also reaping big increases in operating profits at its Security and Optoelectronics segments in the quarter. The quarterly sales are a record for the company. OSI System’s Security segment, Rapiscan Systems, boosted operating profits 69% to $7M on a record $76.7M in sales, which were up 30% from a year ago. Rapiscan’s sales drivers were baggage inspection and cargo and vehicle inspection products as well as its services business, which continues to benefit from a growing installed base of the company’s systems. Interestingly, company officials say that sales of its high-profile whole body imaging systems–called Advanced Imaging Technology–to the Transportation Security Administration account for less than 1% of revenues. Backlog at the end of the quarter stood at a record $293M, a 22% increase since the end of FY ’10, driven by strong bookings, in particular at Rapiscan where the backlog has risen 17% to $191M over the first two quarters. The healthy backlog combined with continued strong order activity led the company to raise slightly its financial guidance for FY ’11, with sales now expected to be between $650M and $662M and earnings per share between $1.75 and $1.85, excluding the impact of restructuring and other non- recurring charges. The guidance implies a stronger second half to the fiscal year. Company officials also say that turnkey cargo inspection services program it is establishing for the Puerto Rico Ports Authority will begin generating sales later in the third quarter. The company is talking to several other potential customers around the world to offer a similar turnkey inspection services model, noting that the pipeline is “strong here.”