OSI Systems Reports Fourth Quarter and Fiscal Year 2013 Financial Results

OSI Systems, Inc. (NASDAQ: OSIS) today announced financial results for its fourth quarter and fiscal year ended June 30, 2013.

Deepak Chopra, OSI Systems President and CEO, stated, “We are pleased to announce the results of our fourth quarter, as we finished the year strong, positioning us well for future growth. We achieved record non-GAAP earnings for the 16th consecutive quarter as a result of significant operating margin expansion. As expected, sales decreased 3% as our fourth quarter sales from the prior year were unusually high due to a large U.S. Army program that was substantially completed during that quarter, making our prior fourth quarter results a difficult point of comparison. Excluding the impact of this program, sales increased by 20%.”

Mr. Chopra continued, “The momentum gained from a strong finish by each division, combined with a year-end backlog of approximately $1 billion and a significant pipeline of opportunities, positions us well for solid growth in fiscal 2014.”

The Company reported revenues of $228 million for the fourth quarter of fiscal 2013, a decrease of 3% from the $235 million reported for the fourth quarter of fiscal 2012. Net income for the fourth quarter of fiscal 2013 was $11.8 million, or $0.58 per diluted share, compared to net income of $15.9 million, or $0.78 per diluted share for the fourth quarter of fiscal 2012. Excluding the impact of impairment, restructuring and other charges, and the impact of tax elections discussed below, net income for the fourth quarter of fiscal 2013 would have been approximately $20.9 million, or $1.02 per diluted share, compared to net income of $16.3 million, or $0.79 per diluted share for the fourth quarter of fiscal 2012.

For the fiscal year ended June 30, 2013, the Company reported revenues of $802 million, a 1% increase from the $793 million reported for fiscal 2012. Net income for fiscal 2013 was $44.1 million, or $2.15 per diluted share, compared to net income of $45.5 million, or $2.24 per diluted share in fiscal 2012. Excluding the impact of impairment, restructuring and other charges, and the impact of tax elections discussed below, net income for fiscal 2013 would have been approximately $56.8 million, or $2.76 per diluted share, compared to net income of $46.6 million, or $2.29 per diluted share for the comparable period of fiscal 2012.

During the fourth quarter, the Company made certain tax elections related to the turnkey program in Mexico to accelerate depreciation and realize cash tax savings of approximately $26 million. In doing so, the Company forfeited tax basis in certain fixed assets that resulted in a charge to income tax of $6.8 million, resulting in an effective tax rate of 52.7% and 36.4% for the three months and fiscal year ended June 30, 2013, respectively. Had this election not been made, the effective tax rate would have been 25.4% and 26.6% for the three months and fiscal year ended June 30, 2013, respectively.

As of June 30, 2013, the Company’s backlog was approximately $1.0 billion, which was comparable to the amount as of March 31, 2013. During fiscal 2013, the Company generated cash flow from operations of $58.7 million and capital expenditures were $157.4 million primarily as a result of the significant investment in the turnkey program in Mexico.

Mr. Chopra continued, “During the fourth quarter, our Security Division achieved record operating profits as the higher margin turnkey screening solution business was a key factor in increasing our operating margins from 7% in fiscal 2012 to 16% in fiscal 2013. As expected, sales declined as we recognized $47 million in revenues in the prior year quarter related to a $98 million contract where we served as a prime contractor and hardware systems integrator. The success of our turnkey screening solution programs, the pipeline of opportunities and our expanded product portfolio continue to provide an outstanding outlook for our Security Division.”

Mr. Chopra further commented, “Our Healthcare Division finished a challenging year with a strong quarter. Although our fourth quarter revenues were slightly lower than the prior year, we rebounded sharply with 41% sequential sales growth leading to both record operating income and operating margin, excluding the impact of restructuring and other charges.”

Mr. Chopra concluded, “Our Optoelectronics and Manufacturing Division achieved record sales during our fourth quarter. Although our operating margins were lower than the prior year due primarily to product mix and increased reserves, we believe that our expanded customer base provides optimism for continued growth.”

Company Outlook – Guidance for Fiscal 2014

Subject to the risk factors referenced in the Safe Harbor section of this press release, the Company announced that it anticipates fiscal 2014 sales to be between $870 million and $895 million, representing an 8% to 12% increase over fiscal 2013. In addition, the Company anticipates approximately 17% - 22% growth in earnings per diluted share to $3.22 to $3.38, excluding the impact of impairment, restructuring and other non-recurring charges, and the impact of certain tax elections.

Non-GAAP Figures

Discussion of adjustments to arrive at non-GAAP figures for the three months and fiscal year ended June 30, 2013 is provided to allow for the comparison of underlying earnings, net of impairment, restructuring and other non-recurring charges, and the impact of tax elections made related to the Company’s turnkey program in Mexico that result in tax charges, thus providing additional insight into the on-going operations of the Company. Non-GAAP financial measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. We believe that these non-GAAP financial measures provide meaningful supplemental information regarding the Company’s results primarily because they exclude amounts that we do not view as reflective of ongoing financial results when planning and forecasting and when assessing the performance of the business. We believe that our non-GAAP financial measures also facilitate the comparison of results for current periods and guidance for future periods with results for past periods. Please see the reconciliation of GAAP to non-GAAP net income and earnings per share at the end of this release.

Conference Call Information

OSI Systems, Inc. will host a conference call and simultaneous webcast over the Internet beginning at 9:00am PT (12:00pm ET) today to discuss its results for the fourth quarter of fiscal 2013. To listen, please visit the investor relations section of OSI Systems’ website, http://investors.osi-systems.com/index.cfm, and follow the link that will be posted on the front page. A replay of the webcast will be available shortly after the conclusion of the conference call until 11:59pm PT on August 31, 2013. The replay can either be accessed through the Company’s website, www.osi-systems.com, or via telephonic replay by calling 1-888-286-8010 and entering the conference call identification number ‘98153730’ when prompted for the replay code.

About OSI Systems, Inc.

OSI Systems, Inc. is a vertically integrated designer and manufacturer of specialized electronic systems and components for critical applications. The Company sells its products and services in diversified markets, including homeland security, healthcare, defense and aerospace. The Company has more than 30 years of experience in electronics engineering and manufacturing and maintains offices and production facilities located in more than a dozen countries. It implements a strategy of expansion by leveraging its electronics and contract manufacturing capabilities into selective end product markets through organic growth and acquisitions. For more information on OSI Systems, Inc. or any of its subsidiary companies, visit www.osi-systems.com. News Filter: OSIS-E

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements relate to the Company’s current expectations, beliefs, projections and similar expressions concerning matters that are not historical facts. They are not intended to be guarantees of future performance. Forward-looking statements involve uncertainties, risks, assumptions and contingencies, many of which are outside the Company’s control and which cause actual results to differ materially from those described in or implied by any forward-looking statement. Such statements include, but are not limited to, information provided regarding expected revenues and earnings growth in fiscal 2014, sales of recently-introduced products and expectations surrounding the performance of the Company under its agreement with Mexico’s tax and customs authority. All forward-looking statements are based on currently available information and speak only as of the date on which they are made. The Company assumes no obligation to update any forward-looking statement made in this press release that becomes untrue because of subsequent events, new information or otherwise, except to the extent it is required to do so in connection with its ongoing requirements under Federal securities laws. For a further discussion of these and other factors that could cause the Company’s future results to differ materially from any forward-looking statements, see the section entitled “Risk Factors” in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 and other risks described in documents filed by the Company from time to time with the Securities and Exchange Commission.

OSI SYSTEMS, INC. AND SUBSIDIARIES