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OSI Reports Q2 Fiscal 2009 Results

OSI Systems, Inc. (OSI) has reported revenues of $159 million for the second quarter of fiscal 2009, down 3%, compared with the revenues of $164 million in the year-ago quarter. It reported a net income of $4.2 million, or $0.24 per diluted share, for the second quarter of fiscal 2009, compared with the net income of $3.5 million, or $0.20 per diluted share, in the year-ago quarter.

For the six months ended December 31, 2008, the company reported revenues of $307.2 million, up $12.0 million, or 4%, from $295.2 million for the first half of fiscal 2008. Without the adverse impact of foreign exchange for the six months ended December 31, 2008, revenues would have grown about 6%. Net income for the first half of fiscal 2009 was $4.3 million, or $0.24 per diluted share, against net income of $1.4 million, or $0.08 per diluted share, for the first half of fiscal 2008.

For the three and six months ended December 31, 2008, the company incurred restructuring and other charges of $2.8 million and $3.6 million, respectively, against $2.1 million and $2.2 million for the comparable periods of fiscal 2008. In response to the expected slowdown in the company’s Healthcare division, such charges were incurred in the current fiscal year to reduce costs by about $10 million on an annualized basis.

Excluding the impact of these restructuring and other charges, net income for the second quarter of fiscal 2009 would have been about $6.0 million or $0.34 per diluted share against a net income of $4.9 million or $0.27 per diluted share for the second quarter of fiscal 2008 and net income for the first half of fiscal 2009 would have been about $6.7 million or $0.37 per diluted share against a net income of $2.8 million or $0.16 per diluted share for the first half of fiscal 2008. These non-GAAP figures are provided to allow for the comparison of underlying earnings, net of restructuring and other charges, thus providing additional insight into the on-going operations of the company.

During the three months ended December 31, 2008, the company generated cash flow from operations of $18.4 million as against using $10.9 million during the second quarter of fiscal 2008. For the six months ended December 31, 2008, the company generated cash flow from operations of $33.1 million as against using $14.6 million during the first half of fiscal 2008. During the quarter ended December 31, 2008, the company repurchased 604,000 shares of its common stock for about $7.2 million.

As of December 31, 2008, the company had a record backlog of $239 million against $231 million as of September 30, 2008.

Deepak Chopra, OSI Systems’ chairman and chief executive officer, stated, “Despite being the most challenging economic environment in decades, our financial results for the second quarter of fiscal 2009 continue to demonstrate the earnings-generating potential of our businesses. We significantly improved earnings, generated record free cash flow of $15.5 million and ended the quarter with a record backlog. These achievements are the direct result of our initiatives over the past two years to implement organizational changes that have reduced our cost structure and improve our overall operating efficiencies.”

Chopra continued, “Our Security Division continues to perform well, led by strong demand for both air cargo and cargo and vehicle inspection products. For the first half of fiscal 2009, our Security division generated strong bookings, which resulted in a 13% increase in backlog since the beginning of the fiscal year. The sales pipeline remains robust and the division’s operating margin continues to improve. The climate for our Healthcare division continues to be challenging, and for the second quarter we reported a decline in revenues of about 12% when against the second quarter of fiscal 2008. The decline in revenues was isolated to North America, where economic factors including credit availability caused certain hospitals to delay purchases. In response to these market conditions, we moved proactively in the second quarter to address our cost structure within the division, the full benefit of which should be reflected in our results for the second half of fiscal 2009.”

Fiscal Year 2009 guidance

The company announced that it predicts fiscal 2009 sales to be comparable to fiscal 2008. However, given the company’s operational improvement initiatives and cost containment programs, the company predicts earnings per diluted share to increase at a rate of 10-25% to between $0.81 to $0.93, excluding the impact of restructuring and other one-time charges.