Earnings News and Notes

American Science and Engineering [ASEI]

Net income in the quarter fell 22% on the 5% decline in sales, an increase in parts usage on maintenance contracts, warranty requirements and a tough comparison to a year ago when the company had a spike in spare parts shipments. AS&E says that sales were down in the quarter on delays in recognizing cargo revenues due to the unforeseen need to do site preparation work in countries where infrastructure is lacking and due to a decrease in field service sales versus the spike a year ago that stemmed from a large order. Company officials suggest that the site preparation delays trimmed sales by around $5 million. The sales breakout by product category was: Cargo, $13.8M; Z Backscatter Systems, $21.3M; People and Parcel, $7.7M; Field Service, $23.5M; and Contract Research and Development, $1.4M. Bookings in the quarter were down slightly from a year ago, $41.6 million versus $43.1 million. For the year, sales were up 15% to a new record and net income was up 18% to a new record while free cash flow was $27.9 million. Backlog increased 10% for the year to $215.2 million, also a record. Bookings for the year were also a record $298.1 million. Company officials say the pipeline is a high as ever, up 6 to 15% in the quarter, which is cause to be “bullish,” but that there are some potential headwinds due to unrest in the Middle East–which they say doesn’t dampen long-term growth prospects in that region–and fallout from the nuclear disaster in Japan that is distracting other countries in the Pacific Rim. AS&E also believes that orders from the U.S. government will likely be smaller in FY12. AS&E increased its internal R&D spending for the year by 14% as it aimed to develop new products to close gaps in its portfolio and upgrade existing products to meet new customer requirements. Anthony Fabiano, AS&E’s president and CEO, says the company has developed security management software that will link its various products to allow for centralized management, creating new opportunities for large projects. Another new development is a safety upgrade to its Z Backscatter Van that meets new international standards that will allow it to be used in urban and high density areas by including a beam-stop capability that shuts the system down if a person gets into the X-Ray beam.

OSI Systems [OSIS]

Net income increased 44% on record sales, which were up 20%, and a decline in selling, general and administrative costs as a percent of revenue. The strong results coupled with strong bookings and backlog led the company to raise its annual guidance again, this time several million in sales to between $655 and $665 million, and to between $1.78 to $1.86 earnings per share, an add of 3 cents on the low end and a penny at the top of the range. Sales grew by double digits in all three of the company’s segments, led by the Rapiscan Systems division, which increased revenues 27% to $88.2 million. Company officials say that sales were up at Rapiscan on demand for multiple platforms as well as double-digit growth in services. Operating income at all OSI’s segments was up, including a 15% rise at Rapiscan to $8.2 million. Rapiscan did suffer cost overruns related to an aviation security contract in Mexico where it is the prime contractor and also in charge of construction services, which is the work that is giving it trouble. Still, the overruns had less than a percent impact on gross margins the project is making money though less than expected. The company expects the overruns to continue for two more quarters. The officials say they are learning lessons from the project and hope to do similar prime contract work elsewhere. Rapiscan’s bookings exceeded $90 million in the quarter, a 62% increase from a year ago, and backlog stood at $194 million, up 34% so far in the fiscal year. OSI’s overall backlog stood at $304 million at the end of March, up 27% for the fiscal year. Free cash flow in the quarter was about $2.3 million, marking 13 straight quarters of positive free cash. As for Rapiscan’s new turnkey cargo screening solution that just went operational in Puerto Rico, the company says there is still interest globally in this service. Officials say it will be another three to six months before they are ready to provide more financial metrics to analysts related to the service in Puerto Rico.