UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
__________________
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission File Number 0-23125
___________________________________
OSI SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
California 33-0238801
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
12525 Chadron Avenue
Hawthorne, California 90250
(Address of principal executive offices)
Registrant's telephone number, including area code: (310) 978-0516
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period as the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past ninety days.
YES X No _____
-----
As of February 10, 2001 there were 9,083,468 shares of common stock outstanding.
OSI SYSTEMS, INC.
INDEX
PART I - FINANCIAL INFORMATION PAGE NUMBER
Item 1 - Consolidated Financial Statements
Consolidated Balance Sheets at December 31, 2000 3
and June 30, 2000
Consolidated Statements of Operations for the 4
three and six months ended December 31, 2000
and December 31, 1999
Consolidated Statements of Cash Flows for the 5
six months ended December 31, 2000 and December
31, 1999
Notes to Consolidated Financial Statements 6
(Unaudited)
Item 2 - Management's Discussion and Analysis of 11
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders 15
Item 6 - Exhibits and Reports on Form 8-K 15
Signatures 16
-2-
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
OSI SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
December 31, June 30,
2000 2000
---- ----
ASSETS
Current Assets:
Cash and cash equivalents $ 8,329 $ 10,892
Accounts receivable, net of allowance for doubtful accounts of $881 and $855
at December 31, 2000 and June 30, 2000, respectively 31,766 29,890
Other receivables 1,917 2,184
Inventory 35,025 30,920
Prepaid expenses 1,292 821
Deferred income taxes 1,941 1,807
Income taxes receivable 206 193
-------------- --------------
Total current assets 80,476 76,707
Property and Equipment, Net 14,348 14,248
Intangible and Other Assets, Net 9,676 9,052
Deferred income taxes 3,016 3,016
-------------- --------------
Total $ 107,516 $ 103,023
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Bank lines of credit $ 9,548 $ 6,079
Current portion of long-term debt 4,026 2,641
Accounts payable 13,146 12,728
Accrued payroll and related expenses 2,210 2,270
Income taxes payable 2,925 1,586
Advances from customers 1,241 558
Accrued warranties 1,672 1,805
Other accrued expenses and current liabilities 3,392 3,141
-------------- --------------
Total current liabilities 38,160 30,808
Long-Term Debt 6,548 7,698
Deferred Income Taxes 162 164
Minority interest 146
-------------- --------------
Total liabilities 44,870 38,816
Shareholders' Equity
Preferred stock, no par value; authorized, 10,000,000 shares; none issued
and outstanding at December 31, 2000 and June 30, 2000, respectively
Common stock, no par value; authorized, 40,000,000 shares; issued and outstanding
9,078,428 and 9,349,750 shares at December 31, 2000 and June 30, 2000, respectively 46,046 47,357
Retained earnings 18,635 18,787
Accumulated other comprehensive loss (2,035) (1,937)
-------------- --------------
Total shareholders' equity 62,646 64,207
-------------- --------------
Total $ 107,516 $ 103,023
============== ==============
See accompanying notes to consolidated financial statements
-3-
OSI SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
Three months ended December 31, Six months ended December 31,
------------------------------- -----------------------------
2000 1999 2000 1999
---- ---- ---- ----
Revenues $ 27,996 $ 26,507 $ 52,880 $ 51,462
Cost of goods sold 20,046 19,441 37,987 37,200
---------- ---------- ---------- ----------
Gross profit 7,950 7,066 14,893 14,262
Operating expenses:
Selling, general and administrative 5,583 5,055 11,200 10,238
Research and development 1,502 1,872 3,217 3,509
Goodwill amortization 129 137 257 264
Restrcuturing costs 1,898
----------- ---------- ---------- ----------
Total operating expenses 7,214 7,064 14,674 15,909
----------- ---------- ---------- ----------
Income (loss) from operations 736 2 219 (1,647)
Interest expense, net 285 176 589 299
Gain on sale of marketable securities (309) (309)
----------- ---------- ---------- ----------
Income (loss) before provision for income taxes and minority interest 451 135 (370) (1,637)
Provision (benefit) for income taxes 100 78 (70) (313)
----------- ---------- ---------- ----------
Income (loss) before minority interest in net loss of subsidiary 351 57 (300) (1,324)
Minority interest in net loss of subsidiary 98 146 98
----------- ---------- ---------- ----------
Net income (loss) $ 351 $ 155 ($154) ($1,226)
=========== ========== ========== ==========
Earnings (loss) per common share $ 0.04 $ 0.02 ($0.02) ($0.13)
=========== ========== ========== ==========
Earnings (loss) per common share,assuming dilution $ 0.04 $ 0.02 ($0.02) ($0.13)
=========== ========== ========== ==========
Weighted average shares outstanding -assuming dilution 9,311,229 9,393,548 9,310,199 9,421,195
=========== ========== ========== ==========
See accompanying notes to consolidated financial statements
-4-
OSI SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Six months ended December 31,
------------------------------------------
2000 1999
----------------- --------------
Cash flows from operating activities:
Net loss ($154) ($1,226)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 2,167 2,057
Loss on sale of property and equipment 134
Deferred income taxes (244) (17)
Gain on sale of marketable securities available for sale (309)
Minority interest in net loss of subsidiary (146) (98)
Changes in operating assets and liabilities:
Accounts receivable (2,159) (2,745)
Other receivables 286 (571)
Inventory (4,636) (2,928)
Prepaid expenses (477) (83)
Accounts payable 617 1,298
Accrued payroll and related expenses (37) (388)
Income taxes payable 1,375 567
Prepaid income taxes receivable 17 238
Advances from customers 689 (239)
Accrued warranty (130) (82)
Other accrued expenses and current liabilities 335 617
-------------- ------------
Net cash used in operating activities (2,363) (3,909)
-------------- ------------
Cash flows from investing activities:
Purchases of property and equipment (1,714) (1,628)
Proceeds from sale of property and equipment 16
Proceeds from sale of marketable securities available for sale 2,505
(Increase) decrease in equity investments (117) 95
Cash paid for business acquisitions, net of cash acquired (442) (1,342)
Other assets (361) 12
-------------- -------------
Net cash used in investing activities (2,618) (358)
-------------- -------------
Cash flows from financing activities:
Net proceeds (payment to) from bank lines of credits 3,478 (4,575)
Net proceeds on long-term debt 239 11,410
Proceeds from exercise of stock options and warrants 36 26
Purchase of treasury stock (1,347) (1,820)
-------------- -------------
Net cash provided by financing activities 2,406 5,041
-------------- -------------
Effect of exchange rate changes on cash 12 106
-------------- -------------
Net (decrease) increase in cash and cash equivalents (2,563) 880
Cash and cash equivalents, beginning of period 10,892 7,241
-------------- -------------
Cash and cash equivalents, end of period $8,329 $8,121
============== =============
Supplemental disclosures of cash flow information - Cash paid/(received) during
the period for:
Interest $472 $255
Income taxes ($1,243) ($989)
See accompanying notes to consolidated financial statements
-5-
OSI SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General. OSI Systems, Inc. and its subsidiaries (collectively, the "Company") is
a vertically integrated worldwide provider of devices, subsystems and end-
products based on optoelectronic and silicon pressure-sensor micro-structure
technology. The Company designs and manufactures optoelectronic and silicon
pressure-sensor devices and value-added subsystems for original equipment
manufacturers in a broad range of applications, including security, medical
diagnostics, telecommunications, gigabit ethernet and fiber optics, gaming,
office automation, aerospace, computer peripherals and industrial automation. In
addition, the Company utilizes its optoelectronic technology and design
capabilities to manufacture security and inspection products that it markets
worldwide to end users under the "Rapiscan", "Secure" and "Metor" brand names.
These products are used to inspect people, baggage, cargo and other objects for
weapons, explosives, drugs and other contraband. The Company also manufactures
and sells bone densitomers, which are used to provide bone loss measurements in
the diagnosis of osteoporosis.
Consolidation. The consolidated financial statements include the accounts of OSI
Systems, Inc. and its majority-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation. The
consolidated balance sheet as of December 31, 2000, the consolidated statements
of operations for the three-month and six-month periods ended December 31, 2000
and 1999 and the consolidated statements of cash flows for the six month periods
ended December 31, 2000 and 1999 have been prepared by the Company, without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission (the "Commission"). Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. However, in the opinion of management all adjustments,
consisting of only normal and recurring adjustments, necessary for a fair
presentation of the financial position and the results of operations for the
periods presented have been included. These consolidated financial statements
and the accompanying notes should be read in conjunction with the audited
consolidated financial statements and accompanying notes for the fiscal year
ended June 30, 2000 included in the Company's Annual Report on Form 10K as filed
with the Commission on September 27, 2000. The results of operations for the six
months ended December 31, 2000 are not necessarily indicative of the results to
be expected for the fiscal year ending June 30, 2001.
-6-
Recent Developments - In August 2000, the Company acquired substantially all the
assets of Square One Technology for total consideration consisting of: $228,000
in cash, a $30,000 advance for future royalties, the return of the Square One
stock held by the Company with a carrying value of $259,000, and an agreement to
pay royalties equal to ten percent of net sales of the Square One products in
the next five years, up to a maximum of one million dollars. The cash
consideration of $228,000 approximates the fair value of the tangible assets
acquired. Additional consideration, if any, will be recorded as intangible
assets, and will be amortized over a period of twenty years.
In September 2000, the Company acquired an additional equity interest,
representing approximately 10% of the ownership of OSI Medical Inc., for
$183,000. This amount was recorded as goodwill based on the estimated fair value
of the underlying net assets and is being amortized over a period of twenty
years. With this additional equity investment, the Company increased its common
stock ownership in OSI Medical Inc. to approximately 64%.
New Accounting Pronouncements - In December 1999, the Securities and Exchange
Commission issued Staff Accounting Bulletin 101, Revenue Recognition In
Financial Statements ("SAB 101"). SAB 101 provides guidance on applying
generally accepted accounting principles to revenue recognition in financial
statements. The Company will adopt SAB 101 as required in the fourth quarter of
fiscal 2001. The Company is currently evaluating the impact of adopting SAB 101,
and does not expect it to have a material impact on the Company's financial
position or result of operations.
Effective July 1, 2000, the Company adopted FASB Statement No. 133, Accounting
for Derivative Instruments and Hedging Activities ("FAS 133"). FAS 133 requires
that all derivative financial instruments, such as foreign exchange contracts,
be recognized in the financial statements and measured at fair value regardless
of the purpose or intent for holding them. Changes in the fair value of
derivative financial instruments are either recognized periodically in income or
shareholders' equity (as a component of comprehensive income), depending on
whether the derivative is being used to hedge changes in fair value or cash
flows. The adoption of FAS 133 did not have a material effect on the Company's
financial position or result of operations for the quarter and six months ended
December 31, 2000.
Financial Instruments - The Company enters into forward foreign exchange
contracts principally to hedge currency fluctuation in transactions denominated
in foreign currencies, thereby limiting the Company's risk that would otherwise
result from changes in exchange rates. The periods of the forward foreign
exchange contracts correspond to the periods of the hedged transactions. The
Company does not use the contracts for trading purposes. As of December 31,
2000, the total notional amount of all outstanding foreign currency contracts
was $1.5 million. The estimated fair value of foreign currency contracts was not
material.
-7-
Inventory. Inventory is stated at the lower of cost or market; cost is
determined on the first-in, first-out method. Inventory at December 31, 2000 and
June 30, 2000 consisted of the following (in thousands):
December 31, June 30,
2000 2000
Raw Materials................................... $18,463 $16,877
Work-in-process................................. 6,977 6,619
Finished goods.................................. 9,585 7,424
------- -------
Total.......................................... $35,025 $30,920
======= =======
Earnings Per Share. Earnings per common share is computed using the weighted
average number of shares outstanding during the period. Earnings per common
share-assuming dilution, is computed using the weighted average number of shares
outstanding during the period and dilutive common stock equivalents from the
Company's stock option plans.
The following table reconciles the numerator and denominator used in calculating
earnings per common share and earnings per common share-assuming dilution.
-8-
For the Quarter ended December 31,
-------------------------------------------------------
2000 1999
------------- ------------
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
Earnings per common share
Income available to
common stockholders $351,000 9,265,095 $0.04 $155,000 9,320,695 $0.02
===== =====
Effect of Dilutive Securities
Options, treasury stock method 46,134 72,853
----------------------- -----------------------
Earnings per common share assuming dilution
Income available to common
stockholder, assuming dilution $351,000 9,311,229 $0.04 $155,000 9,393,548 $0.02
================================== ===================================
For the six months ended December 31,
------------------------------------------------------
2000 1999
------------- -----------
Loss Shares Per-Share Loss Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
Earnings per common share
Loss to common stockholders ($154,000) 9,310,199 ($0.02) ($1,226,000) 9,421,195 ($0.13)
====== ======
Effect of Dilutive Securities
Options, treasury stock method
---------------------- -----------------------
Earnings per common share assuming dilution
Loss to common stockholders,
assuming dilution ($154,000) 9,310,199 ($0.02) ($1,226,000) 9,421,195 ($0.13)
=================================== ==================================
Comprehensive Income - Comprehensive income is computed as follows (in
thousands):
For the quarter For the six months
ended December 31, ended December 31,
2000 1999 2000 1999
--------------------------- ---------------------
Net income (loss) $351 $155 ($154) ($1,226)
-------------------------- --------------------
Other comprehensive income (loss), net of taxes:
Foreign currency translation adjustments 484 (431) (98) 63
Unrealized gains on marketable securities available for sale 427 486
-------------------------- --------------------
Other comprehensive income (loss) 484 (4) (98) 549
-------------------------- --------------------
Comprehensive income (loss) $835 $151 ($252) ($677)
========================== ====================
-9-
Segment information. The company's operating locations include the North America
(United States and Canada), Europe(United Kingdom, Denmark, Finland and Norway)
and Asia(Singapore and Malaysia). The company's operations by geographical areas
are as follows (in thousands);
Three months ended December 31, 2000
--------------------------------------------------------------
North
America Europe Asia Eliminations Consolidated
--------------------------------------------------------------
Revenues $ 21,000 $ 5,869 $ 1,127 $ 27,996
Transfer between geographical areas $ 2,254 $ 1,152 $ 7,760 $ (11,166)
--------------------------------------------------------------
Net revenues $ 23,254 $ 7,021 $ 8,887 $ (11,166) $ 27,996
==============================================================
Income (loss) from operations $ (709) $ 249 $ 989 $ 207 $ 736
==============================================================
Six months ended December 31, 2000
--------------------------------------------------------------
North
America Europe Asia Eliminations Consolidated
--------------------------------------------------------------
Revenues $ 36,606 $ 13,138 $ 3,136 $ 52,880
Transfer between geographical areas $ 4,535 $ 2,591 $ 13,544 $ (20,670)
--------------------------------------------------------------
Net revenues $ 41,141 $ 15,729 $ 16,680 $ (20,670) $ 52,880
==============================================================
Income (loss) from operations $ (2,333) $ 882 $ 1,525 $ 145 $ 219
==============================================================
Three months ended December 31, 1999
--------------------------------------------------------------
North
America Europe Asia Eliminations Consolidated
--------------------------------------------------------------
Revenues $ 14,798 $ 9,166 $ 2,543 $ 26,507
Transfer between geographical areas $ 15,004 $ 1,199 $ 5,264 $ (21,467)
--------------------------------------------------------------
Net revenues $ 29,802 $ 10,365 $ 7,807 $ (21,467) $ 26,507
==============================================================
Income (loss) from operations $ (1,041) $ 298 $ 1,382 $ (637) $ 2
==============================================================
Six months ended December 31, 1999
--------------------------------------------------------------
North
America Europe Asia Eliminations Consolidated
--------------------------------------------------------------
Revenues $ 30,282 $ 17,233 $ 3,947 $ 51,462
Transfer between geographical areas $ 17,018 $ 2,169 $ 10,646 $ (29,833)
--------------------------------------------------------------
Net revenues $ 47,300 $ 19,402 $ 14,593 $ (29,833) $ 51,462
==============================================================
Income (loss) from operations $ (2,142) $ (1,431) $ 29,708 $ (782) $ (1,647)
==============================================================
-10-
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Statements in this report that are forward-looking are based on current
expectations, and actual results may differ materially. Forward-looking
statements involve numerous risks and uncertainties that could cause actual
results to differ materially, including, but not limited to, the possibilities
that the demand for the Company's products may decline as a result of possible
changes in general and industry specific economic conditions and the effects of
competitive pricing and such other risks and uncertainties as are described in
this report on Form 10-Q and other documents previously filed or hereafter filed
by the Company from time to time with the Securities and Exchange Commission.
Results of Operations
Revenues. Revenues consist of sales of optoelectronic and pressure sensor
devices, medical imaging systems and security and inspection products. Revenues
are recorded net of all inter-company transactions. Revenues increased by 5.6%
to $28.0 million for the three months ended December 31, 2000, compared to $26.5
million for the comparable prior year period. For the six months ended December
31, 2000, revenues increased by 2.8% to $52.9 million from $51.5 million for the
comparable prior year period. Revenues for the three months ended December 31,
2000 from optoelectronic devices, value added subsystems and medical imaging
systems were $15.7 million, or approximately 56.1% of the Company's revenues,
and revenues from security and inspection products were $12.3 million, or
approximately 43.9% of the Company's revenues. Revenues for the six months ended
December 31, 2000 from optoelectronic devices, value added subsystems and
medical imaging systems were $29.2 million, or approximately 55.2%, of the
Company's revenues from security and inspection products were $23.7 million, or
approximately 44.8% of the Company's revenues. The increase in revenues from
sales of optoelectronic devices, value added subsystems and medical imaging
systems for the quarter and six months ended December 31, 2000 was primarily due
to increased sales of fiber optics and silicon pressure sensors and was offset
in part by decreased sales of the discontinued product line of data/video
projector systems. The increase in revenues from sale of security and inspection
products for the quarter and six months ended December 31, 2000 was primarily
due to the shipment of a large domestic order.
Gross Profit. Cost of goods sold consists of material, labor and manufacturing
overhead. Gross profit increased by 12.5% to $8.0 million for the three months
ended December 31, 2000, compared to $7.1 million for the comparable prior year
period. For the six months ended December 31, 2000, gross profit increased by
4.4% to $14.9 million, compared to $14.3 million for the comparable prior year
period. As a percentage of revenues, gross profit increased in the quarter and
six months to 28.4% and 28.2% this year, from 26.7% and 27.7% last year,
respectively. The increase in gross profit was due to improved
-11-
product mix and discontinuation of the data/video projector systems product
line, which had lower gross margin.
Selling, General and Administrative. Selling, general and administrative
expenses consisted primarily of compensation paid to sales, marketing and
administrative personnel, and professional service fees and marketing expenses.
For the three months ended December 31, 2000, such expenses increased 10.4% to
$5.6 million, compared to $5.1 million for the comparable prior year period. For
the six months ended December 31, 2000, such expenses increased by 9.4% to $11.2
million, compared to $10.2 million for the comparable prior year period. As a
percentage of revenues, selling, general and administrative expenses increased
in the quarter and six months to 19.9% and 21.2% this year, from 19.1% and 19.9%
last year, respectively. The increase in expenses for the quarter and six months
was primarily due to the increased legal and professional fees and increased
administrative expenses.
Research and Development. Research and development expenses include research
related to new product development and product enhancement expenditures. For the
three months ended December 31, 2000, such expenses decreased 19.8% to $1.5
million, compared to $1.9 million for the comparable prior year period. For the
six months ended December 31, 2000, such expenses decreased 8.3% to $3.2
million, compared to $3.5 million for the comparable prior year period. As a
percentage of revenues, research and development expenses decreased in the three
month and six month periods to 5.4% and 6.1% this year from 7.1% and 6.8% last
year, respectively. The decrease in expenses for the quarter and six months
ended December 31, 2000 was primarily due to deploying certain research and
development personnel to the manufacturing of products, offset in part by
increased research spending for medical and fiber optic products.
Restructuring Costs. In August 1999, the Company decided to close the operations
of Osteometer in Denmark, and relocate certain of these operations to the
Company's U.S. facilities. For the six months ended December 31, 1999, the
Company recorded restructuring costs of $1.9 million related to the closure of
the Osteometer facility in Denmark. These costs were associated primarily with
the termination of certain employees, commitments and other facility closure
costs. The Company has completed the closure of the Osteometer facility in
Denmark and does not anticipate any future expenses.
Income (Loss) from Operations. For the three months ended December 31, 2000, the
Company had income from operations of $736,000 compared to $2,000 for the three
months ended December 31, 1999. For the six months ended December 31, 2000, the
Company had income from operations of $219,000 compared to loss from operations
of $1.6 million for the comparable prior year period. Excluding the non-
recurring restructuring costs of $1.9 million in the six months ended December
31, 1999, income from operations for six months ended December 31, 1999 was
$251,000. Income from operations for the three months ended December 31, 2000
increased due to increased gross margin, reduced research and development
expenses and was offset in part by
-12-
increased selling, general and administrative expenses.
Interest Expense. For the three months ended December 31, 2000, the Company
incurred net interest expense of $285,000, compared to net interest expense of
$176,000 for the three months ended December 31, 1999. For the six months ended
December 31, 2000, the Company incurred net interest expense of $589,000,
compared to net interest expense of $299,000 for the six months ended December
31, 1999. The increase in net interest expense for the three and six months
ended December 31, 2000 was due to increased borrowing on the Company's lines of
credit and a reduction in short term investments which were used for working
capital and acquisitions.
Provision (Benefit) for Income Taxes. Provision for income taxes increased to
$100,000 for the three months ended December 31, 2000, compared to $78,000 for
the three months ended December 31, 1999. For the six months ended December 31,
2000, the Company had an income tax benefit of $70,000 compared to a income tax
benefit of $313,000 for the six months ended December 31, 1999. The change in
income tax was due to a mix in income from U.S. and foreign operations.
Net Income (Loss). For the reasons outlined above, the Company had net income of
$351,000 and a net loss of $154,000 for the three and six months ended December
31, 2000, compared to net income of $155,000 and a net loss of $1.2 million for
the three and six months ended December 31, 1999, respectively. The six months
ended December 31, 1999 included non-recurring restructuring costs of $1.9
million ($1.5 million net of income taxes).
Liquidity and Capital Resources
The Company's operations used net cash of $2.4 million during the six months
ended December 31, 2000. The amount of net cash used by operations reflects
increases in accounts receivable, inventory and prepaid expenses. Net cash used
in operations was offset in part by an increase in accounts payable, income
taxes payable, advances from customers, and other accrued expenses and current
liabilities and reduction in other receivables. The increase in accounts
receivable is mainly due to the increased sales, and the timing of shipments of
certain large contracts. The increase in inventory is due to a change in product
mix and a longer intercompany in transit time due to certain manufacturing being
moved to Malaysia from the United States and the United Kingdom.
Net cash used in investing activities was $2.6 million and $358,000 for the six
months ended December 31, 2000 and 1999, respectively. In the six month period
ended December 31, 2000, net cash used in investing activities reflects cash
used in business acquisitions and the purchase of property and equipment. In the
six months ended December 31, 1999, the net cash used in investing activities
reflects primarily cash used in business acquisitions and the purchase of
property and equipment and was offset in part by proceeds received from the sale
of marketable securities.
-13-
Net cash provided by financing activities was $2.4 million and $5.0 million for
the six months ended December 31, 2000 and 1999, respectively. During the six
months ended December 31, 2000, net cash provided by financing activities
resulted primarily from borrowings under the Company's working capital lines of
credit and was offset in part by the purchase of the Company's common stock
pursuant to its stock repurchase program.
In March 1999, the Company announced a stock repurchase program of up to
2,000,000 shares of its common stock. Through February 10, 2001, the Company
repurchased 770,500 shares at an average price $4.68 per share. The stock
repurchase program did not have a material effect on the Company's liquidity and
is not expected to have a material effect on liquidity in subsequent quarters.
The Company retired the repurchased shares. The shares are included as a
deduction from issued and outstanding common shares in the accompanying
financial statements.
The Company anticipates that current cash balances, anticipated cash flows from
operations and current borrowing arrangements will be sufficient to meet its
working capital and capital expenditure needs for the foreseeable future. The
Company was in violation of a covenant for the three months ended December 31,
2000. The covenant was waived by the bank for the three months ended December
31, 2000 only. The Company is currently negotiating the renewal of loan
facilities with its existing lender. These loan facilities were to expire in
November 2000; however these facilities have been extended through February 28,
2001.
Foreign Currency Translation. The accounts of the Company's operations in
Singapore, Malaysia, England, Norway, Denmark, Finland and Canada are maintained
in Singapore dollars, Malaysian ringgits, U.K. pounds sterling, Norwegian
kroner, Danish kroner, Finnish markka and Canadian dollars, respectively.
Foreign currency financial statements are translated into U.S. dollars at
current rates, with the exception of revenues, costs and expenses, which are
translated at average rates during the reporting period. Gains and losses
resulting from foreign currency transactions are included in income, while those
resulting from translation of financial statements are excluded from income and
accumulated as a component of accumulated other comprehensive income. Net
transaction gain (loss) of approximately $79,000 and ($67,000) were included in
the Company's results for the six months ended December 31, 2000 and 1999,
respectively.
Inflation. The Company does not believe that inflation has had a material impact
on its results of operations for the six months ended December 31, 2000.
-14-
Item 4. Submission of Matters to a Vote of Security Holders
At the annual meeting of shareholders on November 16, 2000, the following
actions were taken:
1. Election of Directors
Name For Withheld
---- --- --------
Deepak Chopra 7,829,654 560,865
Ajay Mehra 7,829,654 560,865
Steven C. Good 7,829,654 560,865
Meyer Luskin 7,829,654 560,865
Madan G. Syal 7,829,654 560,865
2. Ratification of Deloitte & Touche L.L.P. as independent auditors for
the year ending June 30, 2001.
For 3,881,972
Against 830,423
Abstain 40,387
3. Ratification to an amendment to the OSI Systems, Inc. 1997 Stock
Option Plan.
For 3,881,972
Against 830,423
Abstain 40,387
Broker non votes 3,637,737
Item 6. Exhibits and Reports of Form 8-K
a. Exhibits
None
b. Reports on Form 8-K
None
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, in the City of Hawthorne, State of
California on the 14th day of February 2001.
OSI Systems, Inc.
-----------------
By: /s/ Deepak Chopra
-----------------------
Deepak Chopra
President and
Chief Executive Officer
By: /s/ Ajay Mehra
-----------------------
Ajay Mehra
Vice President and
Chief Financial Officer