OSI Systems [OSIS]
3Q16 3Q15
Sales $210.8M $215.4M
Net Inc. $9.3M, 0.47 $13.2M, 0.64
Net income tumbled 30% as the Healthcare division swung to an $188,000 loss versus a $3.7 million profit a year ago and the company posted $1 million in restructuring cost versus nothing a year ago. Research and development expenses were also higher in the quarter. Sales slipped 2% on declines at both the Healthcare and Optoelectronics segments, more than offsetting an 11% uptick in the Security segment to $110.6 million, the second highest third quarter ever for the segment. Operating income at the security segment was up 10% to $14.6 million, with charges related to impairments and restructuring down $900,000 from a year ago. Sales at Rapiscan Systems, which is the Security segment, increased on a large Middle East contract that added $23 million to the top line and revenue from the turnkey screening services in Albania where all sites are now fully operational, company officials say. The Middle East work, which was delayed from the second quarter, will add revenue in the fourth quarter and first half of FY ’17, Deepak Chopra, OSI’s chairman and CEO, says on the earnings call. Rapiscan had $73 million in orders in the quarter, excluding turnkey services business, with key wins in Asia. Chopra says the turnkey services contracts in Albania, Mexico and Puerto Rico continue to perform well and there are additional opportunities in the pipeline. He also says the company has reduced its cost base at Rapiscan and is working on improving manufacturing processes there, particularly with regard to its RTT explosive detection system line, to boost efficiency and lower product cost. Free cash flow in the quarter was a strong $16.7 million and the company spent $50.7 million to buy back 5% of its outstanding shares. Backlog at the end of the quarter stood at $661 million, $90 million above the end of the second quarter. OSI lowered sales and earnings guidance again due to delays on the timing of security orders, in part due to lower government budgets impacted by declines in oil prices and global economic weakness, an ongoing reorganization in the Healthcare segment, and global market uncertainty, Chopra says.