Friday, November 26, 2010

OSI Systems' Rapiscan

OSI Systems Inc. has forty seven subsidiaries, thirteen of which bear the name Rapiscan. Rapiscan makes the naked body scanner, currently multiplying in U.S. airports.

ECIL Rapiscan Ltd.-- Andhra Pradesh, India

The Annual Report describes this subsidiary (on page 47).

In 1994, we, together with an unrelated company, formed ECIL-Rapiscan Security Products Limited, a joint venture organized under the laws of India. We own a 36% interest in the joint venture, our Chairman and Chief Executive Officer owns a 10.5% interest, and our Executive Vice President and the President of our Security division owns a 4.5% ownership interest.
Rapiscan CEO Deepak Chopra (not the M.D.) is politically connected, flying with President Obama to India.  Ex-Homeland Security Chief Michael Chertoff consulted with the firm and is a huge proponent of naked body imaging.

Ajay Mehra is President of Rapiscan.  Their DEF-14A states:

Ajay Mehra is the first cousin of Deepak Chopra.

Other Rapiscan subsidiaries include:

Rapiscan Systems Electrical Trading LLC
Abu Dhabi

Rapiscan do Brazil Ltda
Rio de Janeiro, Brazil

Rapiscan Laboratories, Inc.
Sunnyvale, California

Rapiscan Systems (Cyprus) Limited
Nicosia, Cyprus

Rapiscan Systems Australia Pty Ltd
Victoria, Australia

Rapiscan Systems Hong Kong Limited
Hong Kong

Rapiscan Systems Limited
Salfords, United Kingdom

Rapiscan Systems Oy
Espoo, Finland

Rapiscan Systems Pte. Ltd.

Rapiscan Systems Sdn. Bhd.
Johor Bahru, Malaysia

Rapiscan Systems, Inc.
Hawthorne, California

Rapiscan Systems, S.A. de C.V.
Colonia Juarez, Mexico

Only two, roughly 15%, of Rapiscan's corporations are American.  This fits with the un-American nature of their product.

Two large holders have 19% of OSI's stock:

Wells Fargo & Company(4)

Wellington Management Company, LLP(5)

One month after the underwear bomber leaked flames on a Detroit bound jet, OSI released earnings:

We expect to benefit from the recent announcements by the TSA and other international authorities to expand the use of full body scanners at airport security checkpoints. We are currently fulfilling the initial order quantities from the $173 million Indefinite Delivery, Indefinite Quantity (IDIQ) contract with the TSA, which is for multiple units of the Rapiscan Secure 1000 Single Pose advanced checkpoint security screening system.
Ten months after a Nigerian terrorist set himself ablaze, OSI released earnings:

"Our Security Division is well-positioned to realize significant growth. With outstanding bookings of $112 million during the first quarter, our Security Division’s backlog grew to a record $205 million by quarter-end, which is a 42% increase since the beginning of the fiscal year. We were awarded several large contracts during the quarter including, among others, $35 million of orders from the TSA for checkpoint X-ray baggage inspection systems to screen passengers’ carry-on baggage. These TSA orders are among the first to be placed under the terms of our recently awarded, five year $325 million Indefinite Delivery, Indefinite Quantity (IDIQ) contract. Other orders include a contract worth up to $12 million from the U.S. Department of Homeland Security (DHS) to assist DHS in conducting transformational research and development initiatives to advance the country's nuclear materials detection capabilities; $31 million of orders from U.S. government agencies for cargo and vehicle inspection systems and people screening systems; and a $9 million order from the European Customs Agency for cargo and vehicle inspection systems.”

Rapiscan doubled orders from TSA in less than a year.  That doesn't count their Department of Defense work.

Growth needs capital and banks lined up to provide $250 million in loans to OSI.  With money and political connections, the Rapiscan train won't jump the tracks anytime soon.

Hold on to your nuts and drive, or fly and let the TSA do it for you.

Update 6-29-11:  Public safety won't interfere with Rapiscan's money machine anytime soon, despite cancer concerns amongst TSA workers.