Table of Contents
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 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 September 30, 2009
OR
o
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
|
incorporation or organization)
|
|
Identification Number)
|
12525
Chadron Avenue
Hawthorne,
California 90250
(Address of principal executive offices)
(310)
978-0516
(Registrants telephone number, including area code)
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 that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes
x
No
o
Indicate by check mark whether the registrant has
submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post
such files). Yes
o
No
x
Indicate by check mark whether the registrant is a
large accelerated filer, an accelerated filer, a non-accelerated filer or a
smaller reporting company. See the definitions of large accelerated filer, accelerated
filer, and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated
filer
o
|
|
Accelerated filer
x
|
|
|
|
Non-accelerated filer
o
|
|
Smaller reporting
company
o
|
(Do
not check if a smaller reporting company)
|
|
|
Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
o
No
x
As of October 26, 2009, there were 17,551,524
shares of the registrants common stock outstanding.
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1.
Condensed Consolidated Financial Statements
OSI
SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands,
except share amounts)
(Unaudited)
|
|
June 30,
|
|
September 30,
|
|
|
|
2009
|
|
2009
|
|
ASSETS
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
25,172
|
|
$
|
24,630
|
|
Accounts receivable
|
|
110,453
|
|
112,542
|
|
Other receivables
|
|
2,950
|
|
3,397
|
|
Inventories
|
|
150,763
|
|
141,755
|
|
Deferred income taxes
|
|
20,128
|
|
21,073
|
|
Prepaid expenses and
other current assets
|
|
13,777
|
|
14,440
|
|
|
|
|
|
|
|
Total current assets
|
|
323,243
|
|
317,837
|
|
Property and equipment,
net
|
|
42,232
|
|
42,116
|
|
Goodwill
|
|
60,195
|
|
64,932
|
|
Intangible assets, net
|
|
32,451
|
|
32,837
|
|
Other assets
|
|
16,707
|
|
17,537
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
474,828
|
|
$
|
475,259
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS EQUITY
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
Bank lines of credit
|
|
$
|
4,000
|
|
$
|
2,000
|
|
Current portion of
long-term debt
|
|
8,557
|
|
8,497
|
|
Accounts payable
|
|
54,980
|
|
53,320
|
|
Accrued payroll and
employee benefits
|
|
22,416
|
|
17,300
|
|
Advances from customers
|
|
12,863
|
|
17,691
|
|
Accrued warranties
|
|
10,106
|
|
9,507
|
|
Deferred revenue
|
|
8,880
|
|
8,017
|
|
Other accrued expenses
and current liabilities
|
|
13,833
|
|
15,947
|
|
Total current
liabilities
|
|
135,635
|
|
132,279
|
|
Long-term debt
|
|
39,803
|
|
33,867
|
|
Other long-term
liabilities
|
|
23,390
|
|
29,314
|
|
|
|
|
|
|
|
Total liabilities
|
|
198,828
|
|
195,460
|
|
Commitment and
contingencies (Note 7)
|
|
|
|
|
|
Shareholders Equity:
|
|
|
|
|
|
Preferred stock, no par
valueauthorized, 10,000,000 shares; no shares issued or outstanding
|
|
|
|
|
|
Common stock, no par
valueauthorized, 100,000,000 shares; issued and outstanding, 17,411,569 at
June 30, 2009 and 17,545,162 shares at September 30, 2009
|
|
225,297
|
|
228,198
|
|
Retained earnings
|
|
53,124
|
|
55,634
|
|
Accumulated other
comprehensive loss
|
|
(2,421
|
)
|
(4,033
|
)
|
Total shareholders
equity
|
|
276,000
|
|
279,799
|
|
Total liabilities and
equity
|
|
$
|
474,828
|
|
$
|
475,259
|
|
See
accompanying notes to condensed consolidated financial statements
3
Table of Contents
OSI
SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in
thousands, except per share amount data)
(Unaudited)
|
|
For
the Three Months Ended
September 30,
|
|
|
|
2008
|
|
2009
|
|
Revenues
|
|
$
|
148,161
|
|
$
|
133,761
|
|
Cost of goods sold
|
|
98,526
|
|
89,294
|
|
Gross profit
|
|
49,635
|
|
44,467
|
|
Operating expenses:
|
|
|
|
|
|
Selling, general and
administrative expenses
|
|
37,541
|
|
32,280
|
|
Research and
development
|
|
10,213
|
|
7,989
|
|
Restructuring and other
charges
|
|
801
|
|
|
|
Total operating
expenses
|
|
48,555
|
|
40,269
|
|
Income from operations
|
|
1,080
|
|
4,198
|
|
Interest expense, net
|
|
(895
|
)
|
(605
|
)
|
Income before income
taxes
|
|
185
|
|
3,593
|
|
Provision for income
taxes
|
|
53
|
|
1,083
|
|
Net income
|
|
$
|
132
|
|
$
|
2,510
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
Basic
|
|
$
|
0.01
|
|
$
|
0.14
|
|
Diluted
|
|
$
|
0.01
|
|
$
|
0.14
|
|
Shares used in per
share calculation:
|
|
|
|
|
|
Basic
|
|
17,797
|
|
17,503
|
|
Diluted
|
|
18,166
|
|
17,818
|
|
See accompanying notes to
condensed consolidated financial statements.
4
Table of Contents
OSI
SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts
in thousands)
(Unaudited)
|
|
For
the Three Months Ended
September 30
|
|
|
|
2008
|
|
2009
|
|
Cash flows from
operating activities:
|
|
|
|
|
|
Net income
|
|
$
|
132
|
|
$
|
2,510
|
|
Adjustments to
reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
Depreciation and
amortization
|
|
4,359
|
|
4,181
|
|
Stock based
compensation expense
|
|
1,193
|
|
1,128
|
|
Provision for
(recapture of) losses on accounts receivable
|
|
1,144
|
|
(56
|
)
|
Equity in earnings
(losses) of unconsolidated affiliates
|
|
25
|
|
(33
|
)
|
Deferred income taxes
|
|
(294
|
)
|
(909
|
)
|
Other
|
|
(18
|
)
|
(6
|
)
|
Changes in operating
assets and liabilitiesnet of business acquisitions:
|
|
|
|
|
|
Accounts receivable
|
|
14,288
|
|
(1,360
|
)
|
Other receivables
|
|
(1,497
|
)
|
(45
|
)
|
Inventories
|
|
(9,228
|
)
|
9,087
|
|
Prepaid expenses and
other current assets
|
|
(5,528
|
)
|
(1,502
|
)
|
Accounts payable
|
|
(1,643
|
)
|
(1,515
|
)
|
Accrued payroll and
related expenses
|
|
(1,054
|
)
|
(2,841
|
)
|
Advances from customers
|
|
14,825
|
|
5,234
|
|
Accrued warranties
|
|
(492
|
)
|
(522
|
)
|
Deferred revenue
|
|
1,337
|
|
(772
|
)
|
Other accrued expenses
and current liabilities
|
|
(2,863
|
)
|
(2,069
|
)
|
Net cash provided by
operating activities
|
|
14,686
|
|
10,510
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
Acquisition of property
and equipment
|
|
(2,186
|
)
|
(1,513
|
)
|
Proceeds from the sale
of property and equipment
|
|
30
|
|
|
|
Acquisition of
businesses
|
|
|
|
(3,241
|
)
|
Acquisition of
intangible and other assets
|
|
(727
|
)
|
(495
|
)
|
Net cash used in
investing activities
|
|
(2,883
|
)
|
(5,249
|
)
|
Cash flows from
financing activities:
|
|
|
|
|
|
Net repayments of bank
lines of credit
|
|
(9,413
|
)
|
(1,836
|
)
|
Payments on long-term
debt
|
|
(1,794
|
)
|
(5,917
|
)
|
Net payments of capital
lease obligations
|
|
(263
|
)
|
(168
|
)
|
Proceeds from exercise
of stock options and employee stock purchase plan
|
|
1,599
|
|
1,585
|
|
Net cash used in
financing activities
|
|
(9,871
|
)
|
(6,336
|
)
|
Effect of exchange rate
changes on cash
|
|
884
|
|
533
|
|
Net increase (decrease)
in cash and cash equivalents
|
|
2,816
|
|
(542
|
)
|
Cash and cash
equivalents-beginning of period
|
|
18,232
|
|
25,172
|
|
Cash and cash
equivalents-end of period
|
|
$
|
21,048
|
|
$
|
24,630
|
|
Supplemental disclosure
of cash flow information:
|
|
|
|
|
|
Cash paid during the
year for:
|
|
|
|
|
|
Interest
|
|
$
|
1,063
|
|
$
|
639
|
|
Income taxes
|
|
$
|
1,139
|
|
$
|
1,805
|
|
See accompanying notes to
condensed consolidated financial statements.
5
Table of Contents
OSI
SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
Description of Business
OSI Systems, Inc., together with its subsidiaries (the Company),
is a vertically integrated designer and manufacturer of specialized electronic
systems and components for critical applications. The Company sells its
products in diversified markets, including homeland security, healthcare,
defense and aerospace.
The Company has three operating divisions: (i) Security, providing
security inspection systems and related services; (ii) Healthcare,
providing patient monitoring, diagnostic cardiology and anesthesia systems, and
related services; and (iii) Optoelectronics and Manufacturing, providing
specialized electronic components for the Security and Healthcare divisions as
well as for applications in the defense and aerospace markets, among others.
Through its Security division, the Company designs, manufactures and
markets security and inspection systems worldwide primarily under the Rapiscan
Systems trade name. Rapiscan Systems products are used to inspect baggage,
cargo, vehicles and other objects for weapons, explosives, drugs and other
contraband and to screen people. These products are also used for the safe,
accurate and efficient verification of cargo manifests for the purpose of
assessing duties and monitoring the export and import of controlled materials.
Rapiscan Systems products fall into four categories: baggage and parcel
inspection, cargo and vehicle inspection, hold (checked) baggage screening and
people screening.
Through its Healthcare division, the Company designs, manufactures and
markets patient monitoring, diagnostic cardiology and anesthesia delivery and
ventilation systems worldwide primarily under the Spacelabs trade name. These
products are used by care providers in critical care, emergency and
perioperative areas within hospitals as well as physicians offices, medical
clinics and ambulatory surgery centers.
Through its Optoelectronics and Manufacturing division, the Company
designs, manufactures and markets optoelectronic devices and provides
electronics manufacturing services worldwide for use in a broad range of
applications, including aerospace and defense electronics, security and
inspection systems, medical imaging and diagnostics, computed tomography (CT),
telecommunications, office automation, computer peripherals and industrial
automation. The Company sells optoelectronic devices primarily under the OSI
Optoelectronics trade name and performs electronics manufacturing services
primarily under the OSI Electronics trade name. This division provides
products and services to original equipment manufacturers as well as to the
Companys own Security and Healthcare divisions. The Optoelectronics and
Manufacturing division also designs toll and traffic management systems under
the OSI LaserScan trade name and systems for measuring bone density under the
Osteometer trade name.
Basis of Presentation
The condensed consolidated financial statements include the accounts of
OSI Systems, Inc. and its subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation. The condensed
consolidated financial statements have been prepared by the Company, without
audit, pursuant to interim financial reporting guidelines and the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in annual financial statements prepared
in accordance with accounting principles generally accepted in the United
States of America have been condensed or omitted pursuant to such rules and
regulations. In the opinion of the Companys 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 condensed consolidated financial statements and the
accompanying notes should be read in conjunction with the audited consolidated
financial statements and accompanying notes included in the Companys Annual
Report on Form 10-K for the fiscal year ended June 30, 2009, filed
with the Securities and Exchange Commission on August 28, 2009. The
results of operations for the three months ended September 30, 2009, are
not necessarily indicative of the operating results to be expected for the full
fiscal year or any future periods.
6
Table of Contents
Per Share Computations
The Company computes basic earnings per share by dividing net income
available to common shareholders by the weighted average number of common
shares outstanding during the period. The Company computes diluted earnings per
share by dividing net income available to common shareholders by the sum of the
weighted average number of common and dilutive potential common shares
outstanding during the period. Potential common shares consist of restricted
shares and shares issuable upon the exercise of stock options or warrants under
the treasury stock method. Stock options and warrants to purchase a total of
1.1 million and 1.3 million shares of common stock for the three months ended September 30,
2008 and 2009, respectively, were not included in diluted earnings per share
calculations because to do so would have been antidilutive. The following table
sets forth the computation of basic and diluted earnings per share (in
thousands, except per share amounts):
|
|
Three
months Ended
September 30
|
|
|
|
2008
|
|
2009
|
|
|
|
|
|
|
|
Net income for
diluted earnings per share calculation
|
|
$
|
132
|
|
$
|
2,510
|
|
|
|
|
|
|
|
Weighted average
shares for basic earnings per share calculation
|
|
17,797
|
|
17,503
|
|
Dilutive effect
of stock options and warrants
|
|
369
|
|
315
|
|
Weighted average
shares for diluted earnings per share calculation
|
|
18,166
|
|
17,818
|
|
|
|
|
|
|
|
Basic net income
per share attributable to OSI Systems
|
|
$
|
0.01
|
|
$
|
0.14
|
|
Diluted net
income per share attributable to OSI Systems
|
|
$
|
0.01
|
|
$
|
0.14
|
|
Comprehensive Income
Comprehensive income (loss) is computed as follows (in thousands):
|
|
Three
Months Ended
September 30,
|
|
|
|
2008
|
|
2009
|
|
Net income
|
|
$
|
132
|
|
$
|
2,510
|
|
Foreign currency
translation adjustments
|
|
(6,408
|
)
|
(1,577
|
)
|
Unrealized gain
(loss) from derivative contracts
|
|
55
|
|
(199
|
)
|
Unrealized gain
on investments available for sale
|
|
|
|
146
|
|
Minimum pension
liability adjustment
|
|
199
|
|
18
|
|
Comprehensive
income (loss)
|
|
$
|
(6,022
|
)
|
$
|
898
|
|
Fair Value of Financial Instruments
The Companys financial
instruments consist primarily of cash, marketable securities, accounts
receivable, accounts payable and debt instruments. The carrying values of
financial instruments, other than debt instruments, are representative of their
fair values due to their short-term maturities. The carrying values of the
Companys long-term debt instruments are considered to approximate their fair
values because the interest rates of these instruments are variable or
comparable to current rates offered to the Company.
Fair value is the price
that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. The Company has determined that all of its
marketable securities fall into the Level 1 category, which values assets at
the quoted prices in active markets for identical assets; while the Companys
derivative instruments fall into the Level 2 category, which values assets
and liabilities from observable inputs other than quoted market prices. As of September 30,
2009, the fair value of such assets was $3.4 million, while at June 30,
2009, the fair value was $2.9 million. There were no assets or liabilities for
which Level 3 valuation techniques were used and there were no assets and
liabilities measured at fair value on a non-recurring basis.
Certain assets are
measured at fair value on a non-recurring basis. These assets are not measured
at fair value on an ongoing basis but are subject to fair value adjustments
only in certain circumstances. Included in this category are cost and equity
method investments that are written down to fair value when their declines are
determined to be other-than-temporary, long-lived assets that are written down
to fair value when they are held for sale or determined to be impaired,
goodwill and other intangible assets that are written down to fair value when
they are determined to be impaired, the remeasurement of retained investments
in former consolidated subsidiaries, and the remeasurement of previous equity
interests upon acquisition of a controlling interest. During the
three months ended June 30, 2009, the Company did not have any
non-recurring fair value adjustments.
7
Table of Contents
Derivative Instruments and Hedging Activity
The Companys use of
derivatives consists primarily of foreign exchange contracts and interest rate
swap agreements. As of September 30, 2009, the Company had outstanding
foreign currency forward contracts totaling $7.0 million. In addition, to
reduce the unpredictability of cash flows from interest payments related to
variable, LIBOR-based debt, the Company has outstanding a three-year interest
rate swap agreement, under which the Company incurs interest expense based upon
a fixed 1.69% rate index for a portion of its term loan. The interest rate swap
matures in March 2012. Each of these derivative contracts is considered an
effective cash flow hedge in its entirety. As a result, the net gains or losses
on such derivative contracts have been reported as a component of other
comprehensive income in the Consolidated Financial Statements and are
reclassified as net earnings when the hedged transactions settle.
Business Combinations
On
July 28, 2009, the Company completed the acquisition of certain assets and
the assumption of certain liabilities of RAD Electronics, Inc. The
acquired operations design and manufacture cable assemblies and printed circuit
boards for original equipment manufacturers in the commercial electronics
industry. The Company acquired accounts receivable, inventory, and fixed
assets, as well as all of the patents, intellectual property and intangible
assets used in the acquired operations, all in exchange for (i) a
$3.2 million
cash payment due at the closing
of the transaction and (ii) additional
consideration that may become payable over the next four years depending on the
performance of the acquired operations.
Under recently implemented guidelines for business combinations, the
fair value of this contingent consideration was estimated to be $5.8 million
and was recognized at the time of the acquisition as an other long-term
liability in the condensed consolidated financial statements. Such liability shall be assessed and
adjusted, if necessary, throughout the contingency period with changes in fair
value being recognized in the consolidated statement of operations. The
acquisition of RAD Electronics, Inc. was not considered material to the balance
sheet as of September 30, 2009 and consolidated statement of operations for the
three months ended September 30, 2009.
Recent Accounting Updates Not Yet
Adopted
In
October 2009, the Financial Accounting Standards Board (FASB) issued an
accounting standards update amending revenue recognition requirements for
multiple-deliverable revenue arrangements.
This update provides guidance on separating the deliverables and on the
method to measure and allocate arrangement consideration, particularly when the
arrangement includes both products and services provided to the customers. The update is effective for revenue
arrangements entered into or materially modified in fiscal years beginning on
or after June 15, 2010. Early
adoption is permitted. The Company has
not yet adopted this update and is currently evaluating the impact it may have
on its financial condition and results of operations.
2. Balance Sheet Details
The following tables provide details of selected balance sheet accounts
(in thousands):
|
|
June 30,
2009
|
|
September 30,
2009
|
|
Accounts
receivable
|
|
|
|
|
|
Trade
receivables
|
|
$
|
116,140
|
|
$
|
117,269
|
|
Receivables
related to long term contractsunbilled costs and accrued profit on progress
completed
|
|
1,209
|
|
2,093
|
|
Total
|
|
$
|
117,349
|
|
$
|
119,362
|
|
Less: allowance
for doubtful accounts
|
|
(6,896
|
)
|
(6,820
|
)
|
Accounts
receivable, net
|
|
$
|
110,453
|
|
$
|
112,542
|
|
The Company expects to bill and collect the receivables for unbilled costs
and accrued profits at September 30, 2009, during the next twelve months.
8
Table of Contents
|
|
June 30,
2009
|
|
September 30,
2009
|
|
Inventories,
net
|
|
|
|
|
|
Raw materials
|
|
$
|
77,488
|
|
$
|
71,350
|
|
Work-in-process
|
|
24,648
|
|
23,977
|
|
Finished goods
|
|
48,627
|
|
46,428
|
|
Total
|
|
$
|
150,763
|
|
$
|
141,755
|
|
|
|
June 30,
2009
|
|
September 30,
2009
|
|
Property
and equipment, net
|
|
|
|
|
|
Land
|
|
$
|
5,426
|
|
$
|
5,289
|
|
Buildings
|
|
8,927
|
|
8,800
|
|
Leasehold
improvements
|
|
12,628
|
|
12,924
|
|
Equipment and
tooling
|
|
48,659
|
|
49,739
|
|
Furniture and
fixtures
|
|
4,802
|
|
4,889
|
|
Computer
equipment
|
|
16,773
|
|
16,532
|
|
Computer
software
|
|
11,032
|
|
12,329
|
|
Total
|
|
108,247
|
|
110,502
|
|
Less: accumulated
depreciation and amortization
|
|
(66,015
|
)
|
(68,386
|
)
|
Property and
equipment, net
|
|
$
|
42,232
|
|
$
|
42,116
|
|
3. Goodwill and Intangible Assets
The goodwill acquired during the period related to the acquisition of RAD
Electronics, Inc.. The changes in the carrying value of goodwill for the
three month period ended September 30, 2009, are as follows (in
thousands):
|
|
Security
Group
|
|
Healthcare
Group
|
|
Optoelectronics
and
Manufacturing
Group
|
|
Consolidated
|
|
Balance as of
June 30, 2009
|
|
$
|
17,112
|
|
$
|
35,736
|
|
$
|
7,347
|
|
$
|
60,195
|
|
Goodwill
acquired during the period
|
|
|
|
|
|
4,677
|
|
4,677
|
|
Foreign currency
translation adjustment
|
|
178
|
|
(130
|
)
|
12
|
|
60
|
|
Balance as of
September 30, 2009
|
|
$
|
17,290
|
|
$
|
35,606
|
|
$
|
12,036
|
|
$
|
64,932
|
|
Intangible assets consisted of the following (in thousands):
|
|
|
|
June 30,
2009
|
|
September 30,
2009
|
|
|
|
Weighted
|
|
Gross
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
|
Average
|
|
Carrying
|
|
Accumulated
|
|
Intangibles
|
|
Carrying
|
|
Accumulated
|
|
Intangibles
|
|
|
|
Lives
|
|
Value
|
|
Amortization
|
|
Net
|
|
Value
|
|
Amortization
|
|
Net
|
|
Amortizable
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software
development costs
|
|
5 years
|
|
$
|
9,754
|
|
$
|
3,198
|
|
$
|
6,556
|
|
$
|
10,095
|
|
$
|
3,379
|
|
$
|
6,716
|
|
Patents
|
|
9 years
|
|
921
|
|
334
|
|
587
|
|
1,063
|
|
346
|
|
717
|
|
Core technology
|
|
10 years
|
|
2,224
|
|
977
|
|
1,247
|
|
2,147
|
|
997
|
|
1,150
|
|
Developed technology
|
|
13 years
|
|
17,360
|
|
7,169
|
|
10,191
|
|
17,315
|
|
7,607
|
|
9,708
|
|
Customer
relationships/ backlog
|
|
7 years
|
|
9,456
|
|
4,876
|
|
4,580
|
|
10,393
|
|
5,170
|
|
5,223
|
|
Total
amortizable assets
|
|
|
|
39,715
|
|
16,554
|
|
23,161
|
|
41,013
|
|
17,499
|
|
23,514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
Table of Contents
|
|
|
|
June 30,
2009
|
|
September 30,
2009
|
|
|
|
Weighted
|
|
Gross
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
|
Average
|
|
Carrying
|
|
Accumulated
|
|
Intangibles
|
|
Carrying
|
|
Accumulated
|
|
Intangibles
|
|
|
|
Lives
|
|
Value
|
|
Amortization
|
|
Net
|
|
Value
|
|
Amortization
|
|
Net
|
|
Non-amortizable
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks
|
|
|
|
9,290
|
|
|
|
9,290
|
|
9,323
|
|
|
|
9,323
|
|
Total intangible
assets
|
|
|
|
$
|
49,005
|
|
$
|
16,554
|
|
$
|
32,451
|
|
$
|
50,336
|
|
$
|
17,499
|
|
$
|
32,837
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense related to intangibles assets was $1.0 million for
each of the three months ended September 30, 2008 and 2009. At September 30,
2009, the estimated future amortization expense was as follows (in thousands):
2010 (remaining
9 months)
|
|
$
|
3,089
|
|
2011
|
|
4,096
|
|
2012
|
|
4,055
|
|
2013
|
|
3,772
|
|
2014
|
|
2,542
|
|
2015
|
|
581
|
|
2016 and
thereafter
|
|
5,379
|
|
Total
|
|
$
|
23,514
|
|
4. Borrowings
The Company maintains a
credit agreement with certain lenders allowing for initial borrowings of up to
$124.5 million. The credit agreement consists of a $74.5 million, five-year,
revolving credit facility (including a $45 million sub-limit for
letters-of-credit) and a $50 million five-year term loan. Borrowings under the
agreement bear interest at either (i) the London Interbank Offered Rate
(LIBOR) plus between 2.00% and 2.50% or (ii) the banks prime rate plus
between 1.00% and 1.50%. The rates are determined based on the Companys
consolidated leverage ratio. As of September 30, 2009, the
weighted-average interest rate under the credit agreement was 3.1%. The Companys
borrowings under the credit agreement are guaranteed by the Companys domestic
subsidiaries and are secured by substantially all of the Companys and its
subsidiary guarantors assets. The agreement contains various representations,
warranties, affirmative, negative and financial covenants, and conditions of
default customary for financing agreements of this type, including restrictions
on the Companys ability to pay cash dividends. As of September 30, 2009,
$37.4 million was outstanding under the term loan, $2.0 million was outstanding
under the revolving credit facility, and $29.1 million was outstanding under
the letter-of-credit facility.
Several of the Companys
foreign subsidiaries maintain bank lines-of-credit, denominated in local
currencies, to meet short-term working capital requirements and for the
issuance of letters-of-credit. As of September 30, 2009, $18.8 million was
outstanding under these letter-of-credit facilities, while no debt was
outstanding. As of September 30, 2009, the total amount available under
these credit facilities was $26.1 million, with a total cash borrowing
sub-limit of $6.0 million.
In fiscal 2005, the
Company entered into a bank loan of $5.3 million to fund the acquisition of
land and buildings in the U.K. The loan is payable over a 20-year period. The
loan bears interest at British pound-based LIBOR plus 1.2%, payable on a
quarterly basis. As of September 30, 2009, $3.4 million remained
outstanding under this loan at an interest rate of 1.7% per annum.
Long-term debt consisted of the following (in thousands):
|
|
June 30,
2009
|
|
September 30,
2009
|
|
Five-year term
loan due in fiscal 2013
|
|
$
|
42,763
|
|
$
|
37,431
|
|
Twenty-year term
loan due in fiscal 2024
|
|
3,533
|
|
3,356
|
|
Capital leases
|
|
1,354
|
|
1,187
|
|
Other
|
|
710
|
|
390
|
|
|
|
48,360
|
|
42,364
|
|
Less current
portion of long-term debt
|
|
8,557
|
|
8,497
|
|
|
|
|
|
|
|
|
|
10
Table of Contents
|
|
June 30,
2009
|
|
September 30,
2009
|
|
Long-term
portion of debt
|
|
$
|
39,803
|
|
$
|
33,867
|
|
|
|
|
|
|
|
|
|
5. Stock-based Compensation
As of September 30, 2009, the Company maintained an equity
participation plan and an employee stock purchase plan.
The Company recorded stock-based-compensation expense in the condensed
consolidated statement of operations as follows (in thousands):
|
|
Three
Months Ended
September 30,
|
|
|
|
2008
|
|
2009
|
|
Cost of goods
sold
|
|
$
|
60
|
|
$
|
72
|
|
Selling, general
and administrative
|
|
1,065
|
|
1,002
|
|
Research and
development
|
|
68
|
|
54
|
|
|
|
$
|
1,193
|
|
$
|
1,128
|
|
As of September 30, 2009, total unrecognized compensation cost
related to non-vested, share-based compensation arrangements granted was
approximately $8.7 million. The Company expects to recognize these costs over a
weighted-average period of 2.7 years.
6. Retirement Benefit Plans
The Company sponsors a number of qualified and nonqualified defined
benefit pension plans for its employees. The benefits under these plans are
based on years of service and an employees highest twelve months compensation
during the last five years of employment. The components of net periodic
pension expense are as follows (in thousands):
|
|
Three
Months Ended
September 30,
|
|
|
|
2008
|
|
2009
|
|
Service cost
|
|
$
|
316
|
|
$
|
82
|
|
Interest cost
|
|
79
|
|
10
|
|
Expected return
on plan assets
|
|
(28
|
)
|
|
|
Amortization of
net loss
|
|
26
|
|
27
|
|
Net periodic
pension expense
|
|
$
|
393
|
|
$
|
119
|
|
For the three months ended September 30, 2008 and 2009, the
Company made contributions of $0.4 million and $0.1 million, respectively, to
these defined benefit plans.
In addition, the Company sponsors several defined contribution benefit
plans. For the three months ended September 30, 2008 and 2009, the Company
made contributions of $0.7 million and $0.8 million, respectively, to these
defined contribution plans.
7. Commitments and Contingencies
Legal Proceedings
In November 2002,
L-3 Communications Corporation (L-3) brought suit against the Company seeking a
declaratory judgment that L-3 had not breached its obligations to us concerning
the acquisition of PerkinElmers Security Detection Systems Business. The
Company asserted counterclaims for, among other things, fraud and breach of
fiduciary duty. In December 2006, judgment was entered in the Companys
favor. However, on appeal the judgment was reversed in part and vacated in
part. The Court of Appeals has remanded the case to the trial court, where it
is currently pending for retrial. In conjunction with this vacated judgment,
L-3 asserted that it is entitled to reimbursement by the Company of certain
costs related to the original judgment. On April 27, 2009, L-3s assertion
was upheld by the court requiring the Company to reimburse L-3 for such costs
of approximately $2 million, which was accrued in restructuring and other
11
Table of Contents
charges during the third
quarter of fiscal 2009. Such amount has
not been paid and remains in other long-term liabilities in the condensed
consolidated financial statements .
The Company is also
involved in various other claims and legal proceedings arising out of the
ordinary course of business. In the Companys opinion after consultation with
legal counsel, the ultimate disposition of such proceedings is not likely to
have a material adverse effect on its financial position, future results of
operations, or cash flows. The Company
has not accrued for loss contingencies relating to such matters because the
Company believes that, although unfavorable outcomes in the proceedings may be
possible, they are not considered by management to be probable or reasonably
estimable. If one or more of these matters are resolved in a manner adverse to
the Company, the impact on the Companys results of operations, financial
position and/or liquidity could be material.
Contingent Acquisition Obligations
Under the terms and conditions of the purchase agreements associated
with the following acquisitions, the Company may be obligated to make
additional payments.
In fiscal 2003, the
Company purchased a minority equity interest in CXR Limited. In June 2004,
the Company increased its equity interest to approximately 75% and in December 2004,
the Company acquired the remaining 25%. As compensation to the selling
shareholders for this remaining interest, the Company agreed to make certain
royalty payments during the 18 years following the acquisition of this
remaining interest. Royalty payments are based on the license of, or sales of
products containing, technology owned by CXR Limited. As of September 30,
2009, no royalty payments had been earned.
In fiscal 2004, the
Company acquired Advanced Research & Applications Corp. During the
seven years following the acquisition, contingent consideration is payable
based on net revenues of products developed prior to the acquisition, provided
certain requirements are met. The contingent consideration is capped at $30.0
million. As of September 30, 2009, no contingent consideration had been
earned.
In fiscal 2006, the
Company acquired InnerStep, B.S.E., Inc. During the seven years following
the acquisition, contingent consideration is payable based on its profits
before interest and taxes, provided certain requirements are met. The
contingent consideration is capped at $6.0 million. As of September 30,
2009, no contingent consideration had been earned.
In fiscal 2009, the
Company acquired a company that offers services in connection with security
inspection products. Contingent consideration is payable based on net receipts
generated from new business during the three years following the acquisition,
provided certain requirements are met. The contingent consideration is capped
at $10.0 million. As of September 30, 2009, no contingent consideration
had been earned.
During the first quarter
of fiscal 2010, the Company acquired RAD Electronics, Inc. During the four years following the acquisition,
contingent consideration is payable based on the performance of its
operations. The contingent obligation is
capped at $14.4 million. The fair market
value of contingent consideration estimated to be paid is recorded as a
liability at the time of the acquisition.
As a result, the Company recorded $5.8 million as other long-term
liabilities in the condensed consolidated financial statements as of September 30,
2009.
Environmental Contingencies
The Company is subject to
various environmental laws. The Companys practice is to ensure that Phase I
environmental site assessments are conducted for each of its properties in the
United States at which the Company manufactures products in order to identify,
as of the date of such report, potential areas of environmental concern related
to past and present activities or from nearby operations. In certain cases, the
Company has conducted further environmental assessments consisting of soil and
groundwater testing and other investigations deemed appropriate by independent
environmental consultants.
During one investigation,
the Company discovered soil and groundwater contamination at its Hawthorne,
California facility. The Company filed the requisite reports concerning this
problem with the appropriate environmental authorities in fiscal 2001. The
Company has not yet received any response to such reports, and no agency action
or litigation is presently pending or threatened. The Companys site was
previously used by other companies for semiconductor manufacturing similar to
that presently conducted on the site by us, and it is not presently known who
is responsible for the contamination or, if required, the remediation. The
groundwater contamination is a known regional problem, not limited to the
Companys premises or its immediate surroundings.
12
Table of Contents
The Company has also been
informed of soil and groundwater evaluation efforts at a facility that its
Ferson Technologies subsidiary previously leased in Ocean Springs, Mississippi.
Ferson Technologies occupied the facility until October 2003. The Company
believes that the owner and previous occupants of the facility have primary responsibility
for any remediation that may be required and have an agreement with the
facilitys owner under which the owner is responsible for remediation of
pre-existing conditions. However, as site evaluation efforts are still in
progress, and may be for some time, the Company is unable at this time to
ascertain whether Ferson Technologies bears any exposure for remediation costs
under applicable environmental regulations.
The Company has not
accrued for loss contingencies relating to the above environmental matters
because it believes that, although unfavorable outcomes may be possible, they
are not considered by the Companys management to be probable and reasonably
estimable.
If one or more of these matters are resolved in a manner adverse to the
Company, the impact on the Companys results of operations, financial position
and/or liquidity could be material.
Product Warranties
The Company offers its customers warranties on many of the products
that it sells. These warranties typically provide for repairs and maintenance
of products if problems arise during a specified time period after original
shipment. Concurrent with the sale of products, the Company records a provision
for estimated warranty expenses with a corresponding increase in cost of goods
sold. The Company periodically adjusts this provision based on historical and
anticipated experience. The Company charges actual expenses of repairs under
warranty, including parts and labor, to this provision when incurred.
The following table presents changes in warranty provisions (in
thousands):
|
|
Three
Months Ended
September 30,
|
|
|
|
2008
|
|
2009
|
|
Balance at
beginning of period
|
|
$
|
11,597
|
|
$
|
10,106
|
|
Additions
|
|
1,016
|
|
271
|
|
Reductions for
warranty repair costs and adjustments
|
|
(1,908
|
)
|
(870
|
)
|
Balance at end
of period
|
|
$
|
10,705
|
|
$
|
9,507
|
|
8. Income Taxes
The provision for income taxes is determined using an effective tax
rate that is subject to fluctuations during the year as new information is
obtained, which may affect the assumptions used to estimate the annual
effective tax rate, including factors such as the mix of pre-tax earnings in
the various tax jurisdictions in which the Company operates, valuation
allowances against deferred tax assets, the recognition or derecognition of tax
benefits related to uncertain tax positions, utilization of R&D tax credits
and changes in or the interpretation of tax laws in jurisdictions where the
Company conducts business. The Company recognizes deferred tax assets and
liabilities for temporary differences between the financial reporting basis and
the tax basis of its assets and liabilities along with net operating loss and
tax credit carryovers. The Company records a valuation allowance against its
deferred tax assets to reduce the net carrying value to an amount that it
believes is more likely than not to be realized. When the Company establishes
or reduces the valuation allowance against its deferred tax assets, the
provision for income taxes will be adjusted in the period such determination is
made.
9. Segment Information
The Company operates in three identifiable industry segments: (i) Security,
providing security and inspection systems; (ii) Healthcare, providing
patient monitoring, diagnostic cardiology and anesthesia systems; and (iii) Optoelectronics
and Manufacturing, providing specialized electronic components for affiliated
end-products divisions, as well as for applications in the defense and
aerospace markets, among others. The Company also has a Corporate segment that
includes executive compensation and certain other general and administrative
expenses. Interest expense, and certain expenses related to legal, audit and
other professional service fees, are not allocated to industry segments. Both
the Security and Healthcare divisions comprise primarily end-product businesses
whereas the Optoelectronics and Manufacturing division comprises businesses
that primarily supply components and subsystems to original equipment
manufacturers, including to the businesses of the Security and Healthcare
divisions. All intersegment sales are eliminated in consolidation.
13
Table of Contents
The following table presents segment information (in thousands):
|
|
Three
months ended
September 30,
|
|
|
|
2008
|
|
2009
|
|
Revenues by Segment:
|
|
|
|
|
|
Security
division
|
|
$
|
58,685
|
|
$
|
47,335
|
|
Healthcare
division
|
|
54,827
|
|
46,962
|
|
Optoelectronics
and Manufacturing division, including intersegment revenues
|
|
44,882
|
|
45,791
|
|
Intersegment
revenues elimination
|
|
(10,233
|
)
|
(6,327
|
)
|
Total
|
|
$
|
148,161
|
|
$
|
133,761
|
|
Revenues by Geography:
|
|
|
|
|
|
North America
|
|
$
|
106,190
|
|
$
|
96,075
|
|
Europe
|
|
35,090
|
|
30,535
|
|
Asia
|
|
17,114
|
|
13,478
|
|
Intersegment
revenues elimination
|
|
(10,233
|
)
|
(6,327
|
)
|
Total
|
|
$
|
148,161
|
|
$
|
133,761
|
|
|
|
Three
months ended
September 30,
|
|
|
|
2008
|
|
2009
|
|
Operating income (loss) by Segment:
|
|
|
|
|
|
Security
division
|
|
$
|
3,048
|
|
$
|
1,969
|
|
Healthcare
division
|
|
(1,824
|
)
|
1,495
|
|
Optoelectronics
and Manufacturing division
|
|
3,863
|
|
3,461
|
|
Corporate
|
|
(4,185
|
)
|
(3,280
|
)
|
Eliminations (1)
|
|
178
|
|
553
|
|
Total
|
|
$
|
1,080
|
|
$
|
4,198
|
|
|
|
June 30,
2009
|
|
September 30,
2009
|
|
Assets by Segment:
|
|
|
|
|
|
Security
division
|
|
$
|
191,164
|
|
$
|
193,184
|
|
Healthcare
division
|
|
155,366
|
|
143,700
|
|
Optoelectronics
and Manufacturing division
|
|
84,434
|
|
93,780
|
|
Corporate
|
|
47,633
|
|
47,810
|
|
Eliminations (1)
|
|
(3,769
|
)
|
(3,215
|
)
|
Total
|
|
$
|
474,828
|
|
$
|
475,259
|
|
(1)
|
Eliminations within operating income primarily
reflect the change in the elimination of intercompany profit in inventory
not-yet-realized; while the eliminations in assets reflect the amount of
intercompany profits in inventory as of the balance sheet date. Such
intercompany profit will be realized when inventory is shipped to the
external customers of the Security and Healthcare divisions.
|
10. Subsequent Event
Subsequent events have been evaluated through
October 27, 2009, the date the financial statements were issued. There were no
items that would have a material impact to the financial statements presented
in this Form 10-Q.
14
Table of Contents
Item 2.
Managements Discussion and Analysis of Financial Condition and Results
of
Operations
Cautionary Statement
Certain statements contained in this
quarterly report on Form 10-Q that are not
related to
historical results, including, without limitation, statements
regarding our business strategy, objectives and
future financial position, are
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, and involve risks and uncertainties. These forward-looking
statements may be identified by the use of
forward-looking terms such as
anticipate,
believe, expect, may, could, likely to, should, or
will, or by discussions of strategy that involve
predictions which are based
upon
a number of future conditions that ultimately may prove to be inaccurate.
Statements in this quarterly report on Form 10-Q
that are forward-looking are
based
on current expectations and actual results may differ materially.
Forward-looking statements involve numerous risks and
uncertainties described
in this
quarterly report on Form 10-Q, our Annual Report on Form 10-K and
other
documents previously filed
or hereafter filed by us from time to time with the
Securities and Exchange Commission. Such factors, of
course, do not include all
factors
that might affect our business and financial condition. Although we
believe that the assumptions upon which our
forward-looking statements are
based
are reasonable, such assumptions could prove to be inaccurate and actual
results could differ materially from those
expressed in or implied by the
forward-looking
statements. All forward-looking statements contained in this
quarterly report on Form 10-Q are qualified in
their entirety by this
statement.
We undertake no obligation other than as may be required under
securities laws to publicly update or revise any
forward-looking statements,
whether
as a result of new information, future events or otherwise.
Critical Accounting Policies and
Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires us to make
estimates and assumptions and select accounting policies that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements, as well as the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates. Our critical accounting policies are
detailed in our Annual Report on Form 10-K for the year ended June 30,
2009.
Recent Accounting Pronouncements
We describe recent accounting pronouncements in Item 1 Condensed
Consolidated Financial Statements Notes to Condensed Consolidated Financial
Statements.
Executive Summary
We are a vertically integrated designer and manufacturer of specialized
electronic systems and components for critical applications. We sell our
products and provide related services in diversified markets, including
homeland security, healthcare, defense and aerospace. We have three operating
divisions: (i) Security; (ii) Healthcare; and (iii) Optoelectronics
and Manufacturing.
Security Division.
Through our Security division, we design,
manufacture, market and service security and inspection systems worldwide for
sale primarily to federal, state and local and foreign government agencies.
These products are used to inspect baggage, cargo, vehicles and other objects
for weapons, explosives, drugs and other contraband as well as to screen
people. Revenues from our Security division accounted for 35% and 40% of our
total consolidated revenues for the three months ended September 30, 2009
and 2008, respectively.
Following the September 11, 2001 terrorist attacks, worldwide
spending for the development and acquisition of security and inspection systems
increased in response to the attacks and has continued at high levels. This
spending has had a favorable impact on our business. However, future levels of
such spending could decrease as a result of changing budgetary priorities or
could shift to products that we do not provide. Additionally, competition for
contracts with government agencies has become more intense in recent years as
new competitors and technologies have entered this market.
Healthcare Division.
Through our Healthcare division, we
design, manufacture, market and service patient monitoring, diagnostic
cardiology and anesthesia delivery and ventilation systems for sale primarily
to hospitals and medical centers. Our products monitor patients in critical,
emergency and perioperative care areas of the hospital and provide such
information, through wired and wireless networks, to physicians and nurses who
may be at the patients bedside, in another area of the hospital or even
outside the hospital. Revenues from our Healthcare division accounted for 35%
and 37% of our total consolidated revenues for the three months ended September 30,
2009 and 2008, respectively.
The healthcare markets in which we operate are highly competitive. We
believe that our customers choose among competing products on the basis of
product performance, functionality, value and service. We also believe that the
worldwide economic slowdown has caused some hospitals and healthcare providers to
delay purchases of our products and services.
During this period of uncertainty, we anticipate lower sales of patient
monitoring, diagnostic cardiology and anesthesia systems products than we have
historically experienced, resulting in a negative impact on our sales. We
cannot predict when the markets will recover and therefore when this period of
delayed and diminished purchasing will end. A prolonged delay could have a
material adverse effect on our business, financial condition and results of
operations.
15
Table of Contents
Optoelectronics and Manufacturing
Division.
Through
our Optoelectronics and Manufacturing division, we design, manufacture and
market optoelectronic devices and value-added manufacturing services worldwide
for use in a broad range of applications, including aerospace and defense
electronics, security and inspection systems, medical imaging and diagnostics,
computed tomography (CT), fiber optics, telecommunications, gaming, office
automation, computer peripherals and industrial automation. We also provide our
optoelectronic devices and value-added manufacturing services to our own
Security and Healthcare divisions. Revenues from our Optoelectronics and
Manufacturing division accounted for 30% and 23% of our total consolidated
revenues for the three months ended September 30, 2009 and 2008,
respectively.
For the three months ended September 30, 2009, we reported an
operating profit of $4.2 million, as compared to $1.1 million for the
comparable prior year period. We realized this $3.1 million year over year
increase in operating profit despite a 10% decrease in total revenue during the
same periods. This improved
profitability was driven primarily by a $7.5 million reduction in SG&A and
R&D as a result of reducing our fixed cost structure by aggressive
cost-cutting activities in fiscal 2009.
This effort was initiated when it became apparent to us that the
worldwide economic slowdown was going to negatively impact our businesses, and
in particular our Healthcare division.
In addition, in the first quarter of fiscal 2009, we recognized $0.8
million of non-recurring restructuring charges.
Overall, these cost savings more than offset the $5.2 million reduction
in year-over-year gross profit as a result of the lower revenues in our
Security and Healthcare divisions.
Results of
Operations for the Three Months Ended September 30, 2009 Compared to
Three Months Ended September 30, 2008 (amounts in
millions)
Net Revenues
The table below and the discussion that follows are based upon the way
in which we analyze our business. See Note 9 to the condensed consolidated
financial statements for additional information about our business segments.
(in
millions)
|
|
Q1
2009
|
|
% of
Net Sales
|
|
Q1
2010
|
|
% of
Net Sales
|
|
$ Change
|
|
%
Change
|
|
Security
division
|
|
$
|
58.7
|
|
40
|
%
|
$
|
47.3
|
|
35
|
%
|
$
|
(11.4
|
)
|
(19
|
)%
|
Healthcare
division
|
|
54.8
|
|
37
|
%
|
47.0
|
|
35
|
%
|
(7.8
|
)
|
(14
|
)%
|
Optoelectronics
and Manufacturing division
|
|
44.9
|
|
30
|
%
|
45.8
|
|
34
|
%
|
0.9
|
|
2
|
%
|
Intersegment
revenues
|
|
(10.2
|
)
|
(7
|
)%
|
(6.3
|
)
|
(4
|
)%
|
3.9
|
|
38
|
%
|
Total revenues
|
|
$
|
148.2
|
|
|
|
$
|
133.8
|
|
|
|
$
|
(14.4
|
)
|
(10
|
)%
|
Net revenues for the three months ended September 30, 2009,
decreased $14.4 million, or 10%, to $133.8 million from $148.2 million for the
comparable prior year period.
Revenues for the Security division for the three months ended September 30,
2009, decreased $11.4 million, or 19%, to $47.3 million, from $58.7 million for
the comparable prior year period. The decrease was attributable to: (i) a
$3.8 million decrease in sales of baggage and parcel inspection, people
screening and hold baggage screening equipment; (ii) a $7.0 million
decrease in sales of cargo and vehicle inspection systems primarily in North
America; and (iii) a $0.6 million decrease in service revenue.
Revenues for the Healthcare division for the three months ended September 30,
2009, decreased $7.8 million, or 14%, to $47.0 million, from $54.8 million for
the comparable prior year period. The decrease was primarily attributable to: (i) a
$3.7 million decrease in patient monitoring revenues; (ii) a $0.9 million
decreased in our anesthesia revenues primarily in sales to other manufacturers;
and (iii) a $3.2 million decrease in the revenues of other product lines
such as ambulatory blood pressure monitors, pulse oximeters and clinical trials
services. Such decreases were mainly a consequence of the worldwide economic
slowdown that began during fiscal 2009 and continued into the three months
ended September 2009, and the inability of some of our customers, who rely
on the credit or equity markets for access to capital, to fund purchases of our
products and services.
Revenues for the Optoelectronics and Manufacturing division for the
three months ended September 30, 2009, increased $0.9 million, or 2%, to
$45.8 million, from $44.9 million for the comparable prior year period. This
growth was primarily the result of an increase in contract manufacturing sales
of $5.6 million including new orders under an existing defense-industry related
contract as well as new customer contracts, and was partially offset by
decreases in commercial optoelectronics sales of $4.7 million. The decreases in commercial optoelectronics
sales were also driven by unfavorable economic conditions. In addition, for the three months ended
16
Table of Contents
September 2009, the division recorded intercompany revenue of $
6.3 million, compared to $10.2 million for the comparable prior year
period. This decrease resulted from
lower sales by our Optoelectronics and Manufacturing division to both our
Healthcare and Security divisions. These
fluctuations in intercompany sales are directionally consistent with the
underlying businesses of our Security and Healthcare divisions. Intercompany
sales by our Optoelectronics and Manufacturing division to our Security and
Healthcare divisions are eliminated in consolidation.
Gross Profit
(in
millions)
|
|
Q1
2009
|
|
% of
Net
Sales
|
|
Q1
2010
|
|
% of
Net
Sales
|
|
Gross profit
|
|
$
|
49.7
|
|
33.5
|
%
|
$
|
44.5
|
|
33.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit decreased $5.2 million, or 10%, to $44.5 million for the
three months ended September 30, 2009, from $49.7 million for the
comparable prior year period, primarily as a result of the decreased revenues
discussed above. Although the gross profit margin was nearly the same in the
three months ended September 2009 as compared to the prior year, the gross
profit margin was negatively impacted by changes in the mix of product sold,
most notably the 14% decrease in revenues in our Healthcare division (products
sold by our Healthcare division generally carry higher gross margins than
products sold by our other divisions) and the increase in contract
manufacturing sales by our Optoelectronics and Manufacturing division (contract
manufacturing sales generally carry lower gross margins than other products
sold by this or other divisions). These
negative factors were offset by manufacturing efficiencies gained through
facility consolidations and cost-cutting activities undertaken over the past
several quarters.
Operating Expenses
(in
millions)
|
|
Q1
2009
|
|
% of
Net
Sales
|
|
Q1
2010
|
|
% of
Net
Sales
|
|
$ Change
|
|
%
Change
|
|
Selling, general
and administrative
|
|
$
|
37.6
|
|
25.4
|
%
|
$
|
32.3
|
|
24.1
|
%
|
$
|
(5.3
|
)
|
(14
|
)%
|
Research and
development
|
|
10.2
|
|
6.9
|
%
|
8.0
|
|
6.0
|
%
|
(2.2
|
)
|
(22
|
)%
|
Restructuring,
and other charges
|
|
0.8
|
|
0.5
|
%
|
|
|
|
%
|
(0.8
|
)
|
|
%
|
Total operating
expenses
|
|
$
|
48.6
|
|
32.8
|
%
|
$
|
40.3
|
|
30.1
|
%
|
$
|
(8.3
|
)
|
(17
|
)%
|
Selling, general and administrative
expenses
.
Selling, general and administrative (SG&A) expenses consist primarily of
compensation paid to sales, marketing and administrative personnel,
professional service fees and marketing expenses. For the three months ended September 30,
2009, SG&A expenses decreased by $5.3 million, or 14%, to $32.3 million, from
$37.6 million for the comparable prior year period. This reduction in spending
was a direct result of our ongoing cost containment initiatives and
restructuring activities we have implemented company-wide, but which were most
heavily focused in our Healthcare division. In addition, we continued to reduce
spending in our Corporate segment by further reducing outside support related
expenses. Due to our ongoing cost
containment and restructuring activities as well as focus on reducing support
spending, our SG&A as a percentage of sales decreased to 24.1% in the three
months ended September 2009, as compared to 25.4% in the three months
ended September 2008.
Research and development
.
Research and development (R&D)
expenses include research related to new product development and product
enhancement expenditures. For the three months ended September 30, 2009,
such expenses decreased $2.2 million, or 22%, to $8.0 million, from $10.2
million for the comparable prior year period. As a percentage of revenues, research
and development expenses were 6.0% for the three months ended September 30,
2009, compared to 6.9% for the comparable prior year period. The decrease in
research and development expenses for the three month period ended September 30,
2009 was primarily attributable to cost reduction efforts in our Healthcare
division and R&D grant programs in our Security division.
Restructuring, and other charges
. In response to the challenging economy,
we initiated an aggressive cost-cutting plan in the first quarter of fiscal
2009 to reduce our fixed cost structure.
In conjunction with these efforts, we incurred restructuring charges of
$0.5 million in our Healthcare division and $0.3 million in our Corporate
segment for facility closure and employee severance during the first quarter of
fiscal 2009.
Other Income and Expenses
(in
millions)
|
|
Q1
2009
|
|
% of
Net
Sales
|
|
Q1
2010
|
|
% of
Net
Sales
|
|
$ Change
|
|
%
Change
|
|
Interest expense
|
|
$
|
1.0
|
|
0.7
|
%
|
$
|
0.7
|
|
0.5
|
%
|
$
|
(0.3
|
)
|
(30
|
)%
|
Interest income
|
|
(0.1
|
)
|
(0.1
|
)%
|
(0.1
|
)
|
(0.1
|
)%
|
|
|
|
|
Total other
income and expense
|
|
$
|
0.9
|
|
0.6
|
%
|
$
|
0.6
|
|
0.4
|
%
|
$
|
(0.3
|
)
|
(33
|
)%
|
17
Table of Contents
Interest expense
. For the three months ended September 30,
2009, we incurred interest expense of $0.7 million, compared to $1.0 million
for the comparable prior year period. This 30% decrease in interest expense was
due to both lower, market-driven interest rates and the lower levels of
borrowing as a result of the generation of significant positive cash flow from
our operations.
Income taxes
.
For the three months ended September 30, 2009, our income tax
provision was $1.1 million, compared to $0.1 million for the comparable prior
year period. Our effective tax rate for the three months ended September 30,
2009 was 30.2%, compared to 34.5% in the comparable prior year period. Our
provision for income taxes is dependent on the mix of income from U.S. and
foreign locations due to tax rate differences among countries as well as due to
the impact of permanent taxable differences.
Liquidity and Capital Resources
We have financed our operations primarily through cash flow from
operations, proceeds from equity issuances and our credit facilities. Cash and
cash equivalents totaled $24.6 million at September 30, 2009, a decrease
of $0.6 million from $25.2 million at June 30, 2009. The changes in our
working capital and cash and cash equivalent balances during the three months
ended September 30, 2009 are described below.
|
|
June 30,
2009
|
|
September 30,
2009
|
|
%
Change
|
|
Working capital
|
|
$
|
187.6
|
|
$
|
185.6
|
|
(1
|
)%
|
Cash and cash
equivalents
|
|
25.2
|
|
24.6
|
|
(2
|
)%
|
|
|
|
|
|
|
|
|
|
|
Working Capital
.
The decrease in working capital is primarily due to
decreases in inventory of $9.0 million, as a result of inventory reduction
initiatives in all three divisions and timing of product shipments in our
Optoelectronic and Manufacturing division, and increases in advances from
customers of $4.8 million in our Security division. These decreases were partially offset by (i) a
corresponding decrease in our bank lines of credit of $1.8 million; (ii) a
decrease in accrued payroll and employee benefits of $5.1 million; (iii) a
$1.7 million decrease in accounts payable; and (iv) a $2.1 million
increase in accounts receivable partially driven by revenue growth in Contract
manufacturing in our Optoelectronics and Manufacturing division.
|
|
Q1
2009
|
|
Q1
2010
|
|
%
Change
|
|
Cash provided by
operating activities
|
|
$
|
14.7
|
|
$
|
10.5
|
|
(29
|
)%
|
Cash used in
investing activities
|
|
(2.9
|
)
|
(5.2
|
)
|
(79
|
)%
|
Cash used by
financing activities
|
|
(9.9
|
)
|
(6.3
|
)
|
36
|
%
|
|
|
|
|
|
|
|
|
|
|
Cash Used in Operating Activities.
Cash flows from operating activities can
fluctuate significantly from period to period, as net income, tax timing
differences, and other items can significantly impact cash flows. Net cash
provided by operations for the three months ended September 30, 2009 was
$10.5 million, a $4.2 million reduction as compared to the $14.7 million
generated in the comparable prior year period. The reduction was primarily due
to the changes in working capital management in the current-year period versus
the prior year period resulting in: (i) a $15.6 million decrease in cash
from accounts receivable, primarily driven by the significant improvement we
realized in the prior fiscal year in days-sales-outstanding; (ii) a $9.6
million decrease in cash received as advances from customers; and (iii) a
$2.1 million decrease in the change in deferred revenues. These unfavorable changes in cash flow were
partially offset by: (i) an $18.3 million reduction in the change in
inventory; (ii) a $4.0 million reduction in the change in prepaid expenses
and other current assets; and (iii) an increase in our net income of $0.3
million after giving consideration to various adjustments to net income for
non-operating cash items, including depreciation and amortization, stock-based
compensation, deferred taxes and provision for losses on accounts receivable,
among others, for both periods.
Cash Used in Investing Activities.
Net cash used in investing activities was
$5.2 million for the three months ended September 30, 2009; an increase of
$2.3 million as compared to $2.9 million used for the three months ended September 30,
2008. In the three months ended September 30, 2009, we used cash to
acquire RAD Electronics, Inc for $3.2 million as compared to no acquisitions in
the comparable prior year period. During
the three months ended September 30, 2009, we also invested $1.5 million
in capital expenditures, compared to $2.2 million in capital expenditures
during the comparable prior year period.
Cash Provided by Financing
Activities.
Net
cash used in financing activities was $6.3 million for the three months ended September 30,
2009, compared to net cash used in financing activities of $9.9 million for the
three months ended September 30, 2008. During the three
18
Table of Contents
months ended September 30, 2009, we paid down our revolving lines
of credit by $1.8 million and we also paid down our ongoing scheduled debt and
capital leases by an additional $6.1 million. In the prior year period, we paid
down our revolving lines of credit by $9.4 million and we also paid down our
ongoing scheduled debt and capital leases by an additional $2.1 million. In addition, we received cash of $1.6
million in proceeds from the exercise of stock options, and purchase of stock
under our employee stock purchase plan in both the three months ended September 30,
2009 and the comparable prior year period.
Borrowings
Outstanding lines of credit and current and long-term debt totaled
$44.4 million at September 30, 2009, a decrease of $8.0 million from $52.4
million at June 30, 2009.
We maintain a credit
agreement with certain lenders allowing for initial borrowings of up to $124.5
million. The credit agreement consists of a $74.5 million, five-year, revolving
credit facility (including a $45 million sub-limit for letters-of-credit) and a
$50 million five-year term loan. Borrowings under the agreement bear interest
at either (i) the London Interbank Offered Rate (LIBOR) plus between 2.00%
and 2.50% or (ii) the banks prime rate plus between 1.00% and 1.50%. The
rates are determined based on our consolidated leverage ratio. As of September 30,
2009, the weighted-average interest rate under the credit agreement was 3.1%.
Our borrowings under the credit agreement are guaranteed by our domestic
subsidiaries and are secured by substantially all of our and our subsidiary
guarantors assets. The agreement contains various representations, warranties,
affirmative, negative and financial covenants, and conditions of default
customary for financing agreements of this type, including restrictions on our
ability to pay cash dividends. As of September 30, 2009, $37.4 million was
outstanding under the term loan, $2.0 million was outstanding under the
revolving credit facility, and $29.1 million was outstanding under the
letter-of-credit facility.
Several of our foreign
subsidiaries maintain bank lines-of-credit, denominated in local currencies, to
meet short-term working capital requirements and for the issuance of
letters-of-credit. As of September 30, 2009, $18.8 million was outstanding
under these letter-of-credit facilities, while no debt was outstanding. As of September 30,
2009, the total amount available under these credit facilities was $26.1
million, with a total cash borrowing sub-limit of $6.0 million.
In fiscal 2005, we
entered into a bank loan of $5.3 million to fund the acquisition of land and
buildings in the U.K. The loan is payable over a 20-year period. The loan bears
interest at British pound-based LIBOR plus 1.2%, payable on a quarterly basis.
As of September 30, 2009, $3.4 million remained outstanding under this
loan at an interest rate of 1.7% per annum.
Our long-term debt consisted of the following (in thousands):
|
|
June 30,
2009
|
|
September 30,
2009
|
|
Five-year term
loan due in fiscal 2013
|
|
$
|
42,763
|
|
$
|
37,431
|
|
Twenty-year term
loan due in fiscal 2024
|
|
3,533
|
|
3,356
|
|
Capital leases
|
|
1,354
|
|
1,187
|
|
Other
|
|
710
|
|
390
|
|
|
|
48,360
|
|
42,364
|
|
Less current
portion of long-term debt
|
|
8,557
|
|
8,497
|
|
Long-term
portion of debt
|
|
$
|
39,803
|
|
$
|
33,867
|
|
We anticipate that existing cash borrowing arrangements and future
access to capital markets should be sufficient to meet our cash requirements
for the foreseeable future. However, our future capital requirements will
depend on many factors, including future business acquisitions, litigation,
stock repurchases and levels of research and development spending, among other
factors and the adequacy of available funds will depend on many factors,
including the success of our businesses in generating cash, continued compliance
with financial covenants contained in our credit facility, and the capital
markets in general, among other factors.
19
Table of Contents
Stock Repurchase Program
Our Board of Directors has authorized a stock repurchase program under
which we can repurchase up to 3,000,000 shares of our common stock. During the three months ended September 30,
2009, we did not repurchase any shares under this program and 711,205 shares
were available for additional repurchase under the program as of September 30,
2009.
Dividend Policy
We have not paid cash dividends on our common stock in the past and
have no plans to do so in the foreseeable future.
Contractual Obligations
Under the terms and conditions of the purchase agreements associated
with the following acquisitions, we may be obligated to make additional
payments:
In August 2002, we purchased a minority equity interest in CXR
Limited. In June 2004, we increased our equity interest to approximately
75% and in December 2004, we acquired the remaining 25%. As compensation
to the selling shareholders for this remaining interest, we agreed to make
certain royalty payments during the 18 years following the acquisition of its
remaining interest. Royalty payments are based on the license of, or sales of
products containing technology owned by CXR Limited. As of September 30,
2009, no royalty payments had been earned.
In January 2004, we acquired Advanced Research &
Applications Corp. During the seven years following the acquisition, contingent
consideration is payable based on net revenues of products developed prior to
the acquisition, provided certain requirements are met. The contingent consideration
is capped at $30.0 million. As of September 30, 2009, no contingent
consideration had been earned.
In July 2005, we acquired InnerStep, B.S.E., Inc. During the
seven years following the acquisition, contingent consideration is payable
based on its profits before interest and taxes, provided certain requirements
are met. The contingent consideration is capped at $6.0 million. As of September 30,
2009, no contingent consideration had been earned.
In fiscal 2009, we
acquired a company that offers services in connection with security inspection
products. Contingent consideration is payable based on net receipts generated
from new business during the three years following the acquisition, provided
certain requirements are met. The contingent consideration is capped at $10.0
million. As of September 30, 2009, no contingent consideration had been
earned.
During the first quarter
of fiscal 2010, we acquired RAD Electronics, Inc. During the four years following the
acquisition, contingent consideration is payable based on the performance of
its operations. The contingent
obligation is capped at $14.4 million.
Consistent with new accounting guidelines for acquisitions completed
after January 1, 2009, the fair market value of contingent consideration deemed
more-likely-than-not to be paid is recorded as a liability at the time of the
acquisition. As a result, we recorded
$5.8 million as other long-term liabilities in the condensed consolidated
financial statements as of September 30, 2009.
Contractual obligations
are summarized below (in thousands):
|
|
Payments
due by period
|
|
|
|
Total
|
|
Less than 1
year
|
|
2-3 years
|
|
4-5 years
|
|
After 5
years
|
|
Total debt (excluding
capital lease obligations)
|
|
$
|
43,177
|
|
$
|
9,827
|
|
$
|
18,019
|
|
$
|
12,958
|
|
$
|
2,373
|
|
Capital lease
obligations
|
|
$
|
1,187
|
|
$
|
477
|
|
$
|
710
|
|
$
|
|
|
$
|
|
|
Operating leases
|
|
$
|
39,035
|
|
$
|
8,054
|
|
$
|
17,231
|
|
$
|
11,289
|
|
$
|
2,461
|
|
Purchase obligations
|
|
$
|
36,387
|
|
$
|
31,810
|
|
$
|
4,577
|
|
$
|
|
|
$
|
|
|
Total contractual
obligations
|
|
$
|
119,786
|
|
$
|
50,168
|
|
$
|
40,537
|
|
$
|
24,247
|
|
$
|
4,834
|
|
Other commercial
commitments - letters of credits
|
|
$
|
47,811
|
|
$
|
26,535
|
|
$
|
20,804
|
|
$
|
|
|
$
|
472
|
|
20
Table of Contents
Off Balance Sheet Arrangements
As of September 30, 2009, we did not have any significant off
balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
For the three months ended September 30, 2009, no material changes
occurred with respect to market risk as disclosed in our Annual Report on Form 10-K
for the fiscal year ended June 30, 2009.
Market Risk
We are exposed to certain
market risks, which are inherent in our financial instruments and arise from
transactions entered into in the normal course of business. We may enter into
derivative financial instrument transactions in order to manage or reduce
market risk in connection with specific foreign-currency-denominated
transactions. We do not enter into derivative financial instrument transactions
for speculative purposes.
We are subject to
interest rate risk on our short-term borrowings under our bank lines of credit.
Borrowings under these lines of credit do not give rise to significant interest
rate risk because these borrowings have short maturities and are borrowed at
variable interest rates. Historically, we have not experienced material gains
or losses due to interest rate changes.
Foreign
Currency
We maintain the accounts
of our operations in each of the following countries in the following
currencies: Finland, France, Germany, Italy and Greece (Euros), Singapore
(Singapore dollars and U.S. dollars), Malaysia (Malaysian ringgits), United
Kingdom (U.K. pounds), Norway (Norwegian kroners), India (Indian rupees),
Indonesia (Indonesian rupiah), Hong Kong (Hong Kong dollars), China (Chinese
renminbi), Canada (Canadian dollars), Australia (Australian dollars) and Cyprus
(Cypriot pounds). Foreign currency financial statements are translated into
U.S. dollars at fiscal year-end rates, with the exception of revenues,
costs and expenses, which are translated at average rates during the reporting
period. We include gains and losses resulting from foreign currency
transactions in income, while we exclude those resulting from translation of
financial statements from income and include them as a component of accumulated
other comprehensive income. Transaction gains and losses, which were included
in our condensed consolidated statement of operations, amounted to a loss of
approximately $0.1 million during the three months ended September 30,
2009, as compared to a gain of $0.8 million for the comparable prior year
period. Furthermore, a 10% appreciation of the U.S. dollar relative to the local
currency exchange rates would have resulted in a net increase in our operating
income of approximately $1 million in first quarter of fiscal 2008. Conversely,
a 10% depreciation of the U.S. dollar relative to the local currency exchange
rates would have resulted in a net decrease in our operating income of
approximately $1 million in first quarter of fiscal 2010.
Use
of Derivatives
Our use of derivatives
consists primarily of foreign exchange contracts and interest rate swap
agreements. As discussed in Note 1 to the Consolidated Financials Statements,
as of September 30, 2009, we had outstanding foreign currency forward
contracts and an interest rate swap agreement, which were considered effective
cash flow hedges in their entirety. As a result, the net losses on such
derivative contracts have been reported as a component of other comprehensive
income in the Consolidated Financials Statements and will be reclassified into
net earnings when the hedged transactions settle.
Importance of International Markets
International markets provide us with significant growth opportunities.
However, the following events, among others, could adversely affect our
financial results in subsequent periods: periodic economic downturns in
different regions of the world, changes in trade policies or tariffs, wars and
other forms of political instability. We continue to perform ongoing credit
evaluations of our customers financial condition and, if deemed necessary, we
require advance payments for sales. We monitor economic and currency conditions
around the world to evaluate whether there may be any significant effect on our
international sales in the future. Due to our overseas investments and the
necessity of dealing in local currencies in many foreign business transactions,
we are at risk with respect to foreign currency fluctuations.
21
Table of Contents
Inflation
We do not believe that inflation had a material impact on our results
of operations during the three months ended September 30, 2009.
Interest Rate Risk
We utilize short-term and
long-term financing and may use interest rate hedges to manage the effect of
interest rate changes on our existing debt. As of September 30, 2009, we
had an interest rate swap agreement outstanding as discussed above under Use
of Derivatives.
Item 4.
Controls and Procedures
(a)
Evaluation of Disclosure
Controls and Procedures
As of September 30, 2009, the end of the period
covered by this report, our management, including our Chief Executive Officer
and our Chief Financial Officer, reviewed and evaluated the effectiveness of
our disclosure controls and procedures (as defined in Rule 13a-15(e) and
15d-15(e) of the Securities Exchange Act of 1934, as amended). Such
disclosure controls and procedures are designed to ensure that material
information we must disclose in this report is recorded, processed, summarized
and filed or submitted on a timely basis. Based upon that evaluation our
management, Chief Executive Officer and Chief Financial Officer, concluded that
our disclosure controls and procedures were effective as of September 30,
2009.
(b)
Changes in Internal Control
over Financial Reporting
There has been no change in our internal control over
financial reporting (as such term is defined in Rules 13a-15(f) and
15d-15(f) under the Securities Exchange Act of 1934, as amended) during
the quarter ended September 30, 2009 that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.
PART II OTHER INFORMATION
Item 1.
Legal Proceedings
We are involved in various claims and legal proceedings which have been
previously disclosed in our quarterly and annual reports. The results of such
legal proceedings cannot be predicted with certainty. Should we fail to prevail
in any of these legal matters or should several of these legal matters be
resolved against us in the same reporting period, the operating results of a
particular reporting period could be materially adversely affected.
We are also involved in various other claims and legal proceedings
arising out of the ordinary course of business which have not been previously
disclosed in our quarterly and annual reports. In our opinion, after
consultation with legal counsel, the ultimate disposition of such proceedings
will not likely have a material adverse effect on our financial position,
future results of operations or cash flows.
Item 1A.
Risk Factors
The discussion of our business and operations in this Quarterly Report
on form 10-Q should be read together with the risk factors contained in our
Annual Report on Form 10-K for the fiscal year ended June 30, 2009,
filed with the Securities and Exchange Commission, which describe various risks
and uncertainties to which we are or may become subject.
22
Table of Contents
Item 6.
Exhibits
31.1
|
|
Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
31.2
|
|
Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
32.1
|
|
Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
32.2
|
|
Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
23
Table of Contents
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 27th day of October 2009.
|
OSI SYSTEMS, INC.
|
|
|
|
By:
|
/s/ Deepak Chopra
|
|
|
Deepak Chopra
|
|
|
President and Chief Executive Officer
|
|
|
|
By:
|
/s/ Alan Edrick
|
|
|
Alan Edrick
|
|
|
Executive Vice President and
|
|
|
Chief Financial Officer
|
24
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