OSI Systems Reports Earnings and Record Revenues for Fiscal Third Quarter 2004

[OSI Systems via BizWire]

HAWTHORNE, Calif.--(BUSINESS WIRE)--April 29, 2004--

Company Raises Fiscal 2004 Revenue Target
to Approximately $243 Million and Provides Fiscal 2005 Revenue
Guidance of Approximately $392 Million

OSI Systems, Inc. (Nasdaq:OSIS), today announced its revenues and
earnings for the third fiscal quarter and nine months ended March 31,
2004.
The Company's revenues for the third quarter of fiscal 2004 were
$61.5 million, compared to $50.9 million in the same quarter last
year, an increase of 21%. Net income for the third quarter was $3.4
million, or $0.23 per diluted share, compared to $3.6 million, or
$0.24 per diluted share, in the same quarter last year. Included in
the third quarter net income is a pre-tax gain on sale of marketable
securities of approximately $376,000, as well as a lower effective tax
rate for the quarter due to the favorable determination of a tax
contingency. Third quarter net income also includes legal expense
related to OSI Systems' ongoing litigation with L-3 Communications
Corporation of approximately $850,000 on a pre-tax basis.
For the nine months ended March 31, 2004, the Company's revenues
were $151.3 million compared to $131.7 million in the nine month
period ended March 31, 2003. This represents an increase of $19.6
million or 15%. Net income for the nine months ended March 31, 2004
was $7.8 million, or $0.52 per diluted share, compared to $10.6
million, or earnings per diluted share of $0.73, for the equivalent
prior-year period.
"Our company has been strengthened through the purchase of
Spacelabs Medical," said Deepak Chopra, OSI Systems Chairman and CEO.
"The addition of Spacelabs increases the size of our medical business
to match that of our security business, which has experienced rapid
growth over the past two years. We have further strengthened our end
product portfolios in security and inspection as well as in medical
monitoring. Our optoelectronics and contract manufacturing
capabilities continue to provide us with vertical integration and
manufacturing leverage as we expand our presence in end-product
markets."
Chopra continued, "With over $10 million in large cargo inspection
product revenues this quarter, our security business continues to
experience growth. Our large cargo inspection product subsidiaries
Ancore and ARACOR have been technological leaders in the industry, and
have developed first-of-its kind systems for a number of U.S.
government agencies. While these initial systems require a higher
investment in development from the company, we are confident that
subsequent potential follow-on orders will lead to increased margins
on these proprietary products. As it stands, we have the broadest
offering of large cargo inspection technologies which are available
for use in Homeland Security, customs, and narcotics interdiction at
border crossings, airports and seaports."
Additionally, management has provided increased revenue guidance
for the fiscal fourth quarter and year ending June 30, 2004. Total
fiscal year 2004 revenue guidance is being raised from approximately
$200 million for the year to $243 million. This results in fourth
quarter revenue guidance of approximately $92 to $93 million. The
majority of the increase in revenues is attributable to the
recently-acquired Spacelabs Medical business. While specific earnings
guidance for the fiscal fourth quarter was not provided due to ongoing
consolidation of the Spacelabs Medical business, management
anticipates a slight increase in earnings from operations as compared
to the fiscal third quarter of 2004. OSI Systems also provided initial
fiscal 2005 revenue guidance of approximately $392 million.
Management anticipates a potential of approximately $25 million in
annualized outsourced Spacelabs manufacturing that OSI Systems will
seek to in-source to its internal manufacturing capacity. The company
stated that it anticipates the benefit of the margin contribution from
the in-sourcing to be reflected in financial results beginning in the
latter part of fiscal 2005 with the full effect of in-sourcing
opportunities taking up to 18 months to realize.
OSI Systems, Inc. will webcast the live earnings call over the
Internet at 2:30 p.m. PT, today. To listen, please log on
www.fulldisclosure.com and follow the link that will be posted on the
front page. A replay of the webcast will be available shortly after
the presentation and will be archived on www.fulldisclosure.com.
A telephonic replay of the call will also be available from 4:30
p.m Pacific Time on April 29th to 4:30 p.m. Pacific Time on May 1st.
The replay may be accessed by calling 800-633-8284 and entering the
conference call identification number 21193465.

About OSI Systems Inc.

OSI Systems Inc. is a diversified global developer, manufacturer
and seller of security and inspection systems, medical monitoring
products, and optoelectronic-based components and systems. The company
has more than 30 years of optoelectronics experience, and through its
family of subsidiaries, competes in three specific growth areas: OEM
Manufacturing, Security and Inspection Systems, and Medical Devices.
For more information on OSI Systems Inc. or any of its subsidiary
companies, visit www.osi-systems.com.

This press release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Such
statements include information regarding our expectations, goals or
intentions about the future, including, but not limited to, statements
regarding the effect that the acquisition and integration of Spacelabs
will have on our business, sales of our large cargo systems, and
revenue guidance for the fourth fiscal quarter ending June 30, 2003.
The actual results may differ materially from those described in or
implied by any forward-looking statement. In particular, there can be
no assurance that we will fully reap those cost savings or technical
innovations that we currently anticipate from the integration of the
Spacelabs business, that sales opportunities for our large cargo
products will fully materialize, or that the consolidation of the
Spacelabs business will contribute to revenues to the extent described
above. Other important factors are set forth in our Securities and
Exchange Commission filings, including our Form 10-K for the year
ended June 30, 2003. All forward-looking statements speak only as of
the date made, and we undertake no obligation to update these
forward-looking statements.

OSI SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)

Three months Nine months
ended March 31, ended March 31,
------------------------------------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------

Revenues $61,531 $50,946 $151,271 $131,720
Cost of goods sold 41,957 34,852 104,534 88,159
----------- ----------- ----------- -----------

Gross profit 19,574 16,094 46,737 43,561
Operating expenses:
Selling, general
and
administrative 12,419 7,474 28,129 21,064
Research and
development 3,543 2,702 7,953 6,462
Restructuring
charges 1,061
----------- ----------- ----------- -----------
Total operating
expenses 15,962 10,176 37,143 27,526
----------- ----------- ----------- -----------

Income from operations 3,612 5,918 9,594 16,035
Interest income, net (144) (203) (588) (584)
Write off of deferred
acquisition costs 608
Write down of equity
investment 1,026 247 1,026
Gain on sale of
marketable securities (376) (376)
----------- ----------- ----------- -----------
Income before
provision for income
taxes and minority
interest 4,132 5,095 10,311 14,985
Provision for income
taxes 739 1,447 2,543 4,332
----------- ----------- ----------- -----------
Income before minority
interest 3,393 3,648 7,768 10,653
Minority interest 48 (41) - (85)
----------- ----------- ----------- -----------
Net income $3,441 $3,607 $7,768 $10,568
=========== =========== =========== ===========

Earnings per share $0.24 $0.25 $0.53 $0.76
=========== =========== =========== ===========

Diluted earnings per
share $0.23 $0.24 $0.52 $0.73
=========== =========== =========== ===========

Weighted average
shares outstanding 14,626,245 14,467,289 14,584,116 13,870,051
=========== =========== =========== ===========

Weighted average
shares outstanding
-assuming dilution 15,169,598 15,002,341 15,069,478 14,398,684
=========== =========== =========== ===========

Condensed Consolidated Balance Sheets
(in thousands)

March 31, June 30,
2004 2003
--------------------

Cash and cash equivalents $15,851 $94,246
Marketable securities, available for sale - 3,973
Accounts receivable, net of allowance for
doubtful accounts 83,977 36,901
Inventory 87,938 42,415
Other current assets 17,380 9,477
--------- ---------
Total current assets 205,146 187,012
Non current assets 68,093 42,526
--------- ---------
Total $273,239 $229,538
========= =========

Current portion of long-term debt $2,455 $2,625
Other current liabilities 75,465 42,471
--------- ---------
Total current liabilities 77,920 45,096
Long-term debt - 1,838
Other long term liabilities 2,556 1,970
Minority interest 1,152 235
Shareholders' equity 191,611 180,399
--------- ---------
Total $273,239 $229,538
========= =========