Deepak Chopra - President & Chief Executive Officer Alan Edrick - Executive Vice President & Chief Financial Officer Ajay Mehra - President of Security Division, Rapiscan Systems Victor Sze - General Counsel

Tim Quillin - Stephens Incorporated Rick Hoss - Roth Capital Partners Brian Ruttenbur - Morgan Keegan Josephine Millward - Dougherty & Co. Michael Kim - Imperial Capital

Good day, ladies and gentlemen and welcome to the first quarter 2010 OSI Systems earnings conference call. My name is Katina and I’ll be your coordinator for today. At this time all participants in a listen-only mode. We will conduct a question-and-answer session towards the end of this presentation. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today’s call, Mr. Alan Edrick, Chief Financial Officer. Please proceed.

Thank you. Good morning and thank you for joining us. I’m Alan Edrick, Executive Vice President and Chief Financial Officer of OSI Systems. I’m here today with Deepak Chopra, our President and CEO, Ajay Mehra, President of Security Division Rapiscan Systems and Victor Sze, our General Counsel. Welcome to the OSI Systems first quarter of fiscal 2010 conference call. We like to extend a special welcome to any who is a first time participant on our conference calls. Please also note that this presentation is being webcast and will remain on our website for approximately two weeks. Before discussing our financial and operational highlights I’d like to read the following statement. In connection with this conference call, the company wishes to take advantage of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 with respect to statements that maybe deemed to be forward-looking statements under the act. Such forward-looking statements could include general or specific comments by company officials on this call about future company performance as well as certain responses to questions posed to company officials about future operating matters. During today’s conference call, we may refer to both GAAP and non-GAAP financial measures of the company’s operating and financial results. For complete information regarding non-GAAP measures, the most directly comparable GAAP measures and a reconciliation of any of these measures, please see today’s press release. The press release has also been filed with the SEC as part of a Form 8-K. The company wishes to caution participants on this call that numerous factors could cause actual results to differ materially from forward-looking statements made by the company. These factors include the risk factors set forth in the SEC filings. Any forward-looking statements made on this call speak only as of the date of this call and the company undertakes no obligation to revise or to update any forward-looking statements whether as a result of new information, future results or otherwise. Having said that and before turning the call over to Deepak, I will provide a high level overview of our financial performance during our first quarter. We will again, touch on several themes that we discussed during past conference calls. We continue to effectively execute our core strategy. This strategy continues to focus on generating meaningful earnings and free cash flow while simultaneously investing in key sales markets and research and development initiatives, which will gave the way for sales growth. In the face of a challenging sales quarter, we have been able to achieve bottom line results that demonstrate the effectiveness of this plan. Highlights for our first quarter of fiscal 2010 are as follows. First, Q1 bookings totaled $165 million. We ended the quarter with a backlog of approximately $234 million, representing a 15% increase from June led by our Security Division Rapiscan, which had a key one book-to-bill ratio of 1.6 leading to a new record security backlog including numerous significant contract wins that Deepak will touch on shortly. We also saw improvements in our healthcare backlog, providing encouraging signs for a return to sales growth in this division. With improving disability on sales, we expect to see 10% to 15% revenue growth over the remainder of our fiscal year. Second, although sales declined 10% for the quarter, we reported a significant increase in earnings per share. In fact, this quarter marked the strongest Q1 earnings per share in the past five years. Improved operating efficiencies, coupled with the cost containment initiatives that we have discussed on each of our calls drove the solid improvement. Third, we reported positive free cash flow for the seventh consecutive quarter for an aggregate of about $50 million generated over this period. For the quarter, we generated $9 million in free cash flow or approximately $0.50 per share. Although our top line was impacted by economic conditions at large, we are pleased with the first quarter of fiscal 2010 earnings and cash flow performance. More importantly, with an ever improving outlook, we believe we are well positioned for significant top line growth and operating margin expansion. I’ll be updating you further with more Q1 financial details and discussing our fiscal 2010 guidance, but first, let me turn the call over to Deepak.

Thank you, Alan and once again, good morning and welcome to the OSI Systems’ earnings conference call for the first quarter. In light of a continuing economic environment globally, we continue to deliver positive results for our shareholders. I will touch on the highlights, highlights for the first quarter as Alan mentioned, EPS, $0.14 versus $0.01 for the prior period, continued strong cash flow with operating cash flow for the quarter, up $10.5 million; and free cash flow up $9 million. Record backlogs for the security division of $146 million with a book-to-bill ratio of $1.6 million a new record for the company, overall company backlog of $234 million. Increased EPS guidance for fiscal 2010, $1.14 to $1.23 from previous guidance of $1.08 to 1.18, this is an increase of approximately 25% to 30% when compared to the EPS of $0.91 for prior period 2009. Also, as we mentioned the last conference call that we will be giving revenue guidance at this time for the year, our revenue guidance that we’ve given is $620 million to $640 million. Alan will go deeper into the financial details. Let me cover the state of the business for the three product lines. Security Division: Activity with Rapiscan remains very robust. Bookings for the quarter were an outstanding $77 million with a book-to-bill ratio of approximately $1.6. This resulted in the division achieving a record quarter ending backlog of $146 million. While revenues for the quarter were down when compared to the comparable period due primarily to the timing of shipments, we expect the division to achieve double digit revenue growth in fiscal 2010. Company highlights for the division during the first quarter included, a $10 million contract from Abu Dhabi Customs, a broad range of cargo and baggage inspection products, announced the inclusion of four products on the TSA technology list for air cargo inspection. The TSA’s certified cargo screening program requires 100% inspection of air cargo carried on passenger airplanes by August 2010. To-date, the company’s air cargo products have been deployed by a range of air cargo companies including indirect air carriers, passenger and cargo only airlines. Freight forwarders and other commercial freight companies: This Group of products we think are very well suited and as we move into the January period, we think the closer it gets to the requirement for August 2010, this portion of the business will continue to show growth. As previously discussed, there been a lot of attention this year on the division due to the stimulus package passed by the Obama administration. Under the package, the TSA has approximately $1 billion to spend on three programs. Hold Baggage Screening, advanced imaging technology programs and advanced technology X-ray for the aviation checkpoints. The customs and border protection also has approximately $100 million allocated for the purchase of scanners for trucks and cargo. In September, we were very excited to announce the receipt of a $173 million indefinite delivery, indefinite quantity order from TSA for our secure 1,000 Single Pose backscatter product. The award was part of the TSA’s advanced imaging technology program and included an initial contract award of approximately $25 million. The secure 1,000 Single Pose was a newly developed product specifically developed to meet the TSA, AIG program specifications. A system utilizes advanced backscatter technology and proprietary imaging processing software to rapidly detect potential threats that maybe concealed on passengers at aviation checkpoints offering an advantage over traditional methods such as metal detectors and pat-down searches. We continue to work closely with the TSA for the deployment of these systems. Today, we announced the receipt of two new contracts from the US customs and border protection, the first was an order for our mobile X-ray events, the contract was valued at $2.8 million and is a part of a five year, $17.2 million indefinite delivery, and indefinite quantity order. The second was for approximately $29 million of cargo and vehicle inspection equipment including the Rapiscan Eagle Mobile and the Rapiscan GaRDS Portal. The fixed and mobile configurations utilizing, both X-ray and gamma-ray technology for wide US Government with a comprehensive inspection solution for the detection of a wide variety of threats and contraband. As we have stated in our last conference call, the level of activity in this market place, both domestically and internationally is unprecedented. We continue to see a very strong pipeline and we have mentioned before, think and confidently that this quarter would also have a very strong booking quarter. Sales for our healthcare division declined in the first quarter by approximately 14% when compared to the prior comparable period. Due to proactive measures, we undertook in the first and second quarter of fiscal 2009, the division was able to achieve a record operating profit for the first quarter despite a decline in revenues. We are beginning to see signs of improvement as Alan mentioned. Our bookings were quite good with the healthcare market and maintain that as sales improved, the division is well positioned to experience strong operating margin expansion. As we had mentioned previously in the last conference call, that for the year, healthcare division will show growth. During the quarter, our healthcare division had a number of positive announcements, the highlights of which included a $2 million follow on order with major US regional hospital for complete range of monitoring and connectivity products. A $1.3 million contract from Thomas Memorial Hospital, a significant contract due to the fact that the contract was a conversion, customer we were able to secure from one of our major competitors. Launch of Sentinel Cardiology information management system in the United States. The launch position Spacelabs within the market has a fully integrated provider of information management solutions. Additionally, with the launch it gives us the ability to leverage our existing patient monitoring customers in the United States to help drive sales of our diagnostic cardiology products, which to-date have primarily been sold within the European market. Subsequent to the completion of the quarter, we also announced the receipt of a $13.3 million Indefinite Delivery, Indefinite Quantity order from the U.S. government for patient monitoring and connectivity systems. In total, 25 monitoring and connectivity products were included in this IDIQ. The ability for our Healthcare division to be profitable and operating cash flow positive during such challenging economic conditions highlights the strength of our underlying business model. As previously discussed, with even a moderate revenue growth, we expect that the division will experience significant margin expansion. Since we acquired Spacelabs in 2004 from GE, we have executed upon our original strategy of creating a dynamic, competitive business with a dramatically lowered cost structure and entrepreneurial energy. We have shown strength in our core markets and are essentially proud of the ability to win conversion customers from our competitors outperforming our own internal benchmarks set for the North American market. Our International business, both in the emerging markets and Europe continue to grow. We have a good pipeline of new products and plan to introduce significant new products in the coming quarters. We continued to be proactive, product development in the near to mid term will see as addressing markets that are currently green field opportunities for Spacelabs with new product introductions planned in both in the upper end of the monitoring and connectivity market as well as in value product markets that represent perhaps our largest untapped global opportunity to-date in patient monitoring. We believe that, we have a winning combination in terms of core structure, brand and technology that is unparalleled in the monitoring market and positions us uniquely to capture market share from both the high end and the low end of the market where we participate. Optoelectronics and Manufacturing, our Optoelectronics and Manufacturing division continues to perform well in challenging economic conditions. Sales this quarter were 14% higher to third party customers as compared to the prior period. Sales to inter company both to the security and Healthcare were down due to lower revenues compared to the prior period both in the security and the healthcare segment. This quarter, we also announced the receipt of a further follow-on order from ITT for electronic subassemblies for the DoD Mine Resistant Ambush Protected vehicle program. With that, I’m going to hand it over to Alan to go into detail financial numbers.

Thank you, Deepak. As mentioned on each of our conference calls over the past few years, we remained focused on driving earnings and cash flow improvement. Our efforts continue to pay off as reflected in our first quarter results. Providing a glimpse of the future earnings power we believe we can achieve. I’ll speak to our guidance shortly, but first, let’s review the financial results of the first quarter of 2010. Overall, net sales decreased 10% to $134 million in fiscal 2010. While we were extremely pleased with the 14% increase in our Opto division external sales as Deepak just mentioned, we saw some softness in our healthcare and security division particularly as it relates to the timing of shipments. Though Q1 was a challenging sales quarter in healthcare, as we anticipated, and communicated on our last conference call, we are encouraged by signs indicating some renewed CapEx spending particularly in the United States. Thus, we expect operating margin expansion opportunities in healthcare as we reported the strongest Q1 operating income for this division in the company’s history in what is typically considered a soft quarter. As revenues increased, we believe there is a significant opportunity to leverage our reduced fixed cost structure. Sales in our Security division reflected the lumpiness associated with this business. Strong bookings led to a record backlog providing good visibility for the remainder of fiscal 2010. Our gross margin was comparable to the prior year as ongoing efficiency projects compensated for the lower revenue base. Our gross margin typically varies from quarter-to-quarter as a result of a number of factors including a product mix and unit volumes, pricing, inventory reserves and capacity utilization. Looking forward, we anticipate margin improvement as a result of our ongoing efficiency initiatives as demonstrated in Q1, as well as economies to scale associated with revenue growth. During Q1, we realized additional operating efficiencies, continuing the momentum, evident over the past couple of years. With strong cost controls in place, our Q1 SG&A expenses decreased 14% from the comparable prior year quarter continuing to reflect the impact of the actions we undertook early in fiscal ‘09. As a percentage of revenue, SG&A declined to 24.1% as compared to 25.4% during the prior year quarter. Our Q1 research and development expenses were $8 million or 6% of sales, which is about one percentage point below the 6.9% we reported in the prior year quarter. This reduction in spending was primarily attributable to the timing of government funded programs as well as overall efficiencies in our R&D programs. We continue to invest significant resources in technologies to effectively add value to both our security and our healthcare product offerings. As a result of these programs, we believe that the company is well positioned to capture major opportunities in our core markets of the future. Our first quarter net interest expense was down almost 30% compared to the prior year. Primarily due to lower weighted-average interest rates and reduced average borrowings as a result of generating $43 million of free cash flow during fiscal 2009 and through the first quarter of fiscal 2010. Our effective tax rate for the quarter was 30.2% compared to 34% in Q1 last year. Our provision for income taxes is dependent on the mix of income from U.S. and foreign locations, due to tax rate differences among such countries as well as the impact of permanent taxable differences. As a result of each of these items, we saw significant improvement in our net income resulting in diluted EPS of $0.14 per share compared to a penny in the prior year. Moving to cash flow, we generated operating cash flow at $10.5 million during the first quarter driven by our improved profitability as well as our continued focus on working capital management. Capital expenditures were $1.5 million, while depreciation and amortization was $4.2 million. Our debt balance continues to comedown as such amounts were further reduced by approximately $8 million in Q1. As mentioned in many previous conference calls, generating strong cash flow continues to be a top priority and we are very pleased with the sustained progress we have made in this effort. Finally, turning to our fiscal 2010 guidance, with increased top line visibility, aided by a record backlog as the government’s fiscal year ended in September in our Rapiscan division and more on our other divisions. We’re introducing our fiscal 2010 sales guidance of $620 million to $640 million, which represents 10% to 15% sales growth for our remaining three quarters. As a result, we anticipate a stronger bottom line and as Deepak mentioned, we’re increasing our fiscal 2010 EPS guidance to $1.14 to $1.23 per share, which represents growth of 25% to 35%. These amounts exclude the impact of restructuring and other charges for appropriate comparison. In fiscal 2009, we undertook decisive and meaningful actions to right size our business in response to economic conditions. These actions produced meaningful first quarter fiscal 2010 earnings performance and positioned us for further earnings leverage. During the past few years, we have transformed our company into a sustainable and consistent performer. The impact of the economic issues not withstanding, we also built a strong foundation for significant future earnings power. Given the operational improvements that we have implemented over the past two plus years, coupled with the restructuring activities that have reduced our cost structure, we believe we’re well positioned for significant operating margin expansion in the coming years. Thank you for listening to this conference call and at this time, I’d like to open the call to questions.

(Operator Instructions) Your first question comes from the line of Tim Quillin representing Stephens Incorporated. Please proceed. Tim Quillin – Stephens Incorporated: Good morning. Nice results, very encouraging in a lot of different ways. In the security business, maybe if you could just get a sense of, what you can do to a follow up act to the strong bookings that you put up in the September quarter and the bookings you’ve had so far this month. What is your pipeline look like, especially on the large cargo side and especially internationally?

Well, Tim, this is Deepak here. As I mentioned, that we expect another very strong booking quarter both domestically and internationally. As you’ve seen today, we already announced about $30 million of orders. These are both domestic there are many other things in the pipeline both with the domestic agencies of US Government and International customers, obviously, timing wise it can go from one quarter to the other, but we are very confident that we will have another very strong booking quarter. Tim Quillin – Stephens Incorporated: As far as international demand, where are you seeing the most opportunities in the Middle East, South America, Asia, where exactly are you seeing the most demand right now?

I think the best way to answer it, we’re looking at all of those areas and we’re seeing demand everywhere. I want to go specifically in which areas for competitive reasons but we see things picking up across the world. Tim Quillin – Stephens Incorporated: Okay, great and just a couple of detailed questions for Alan. Do you mentioned that kind of the puts and takes on determining a tax rate, but what kind of a tax rate are you expecting for the full year?

Tim, I think we’ll see something lower than last year. I think we’ll probably see it in the low 30s. Tim Quillin – Stephens Incorporated: Okay and then in terms I think you had threw out all of the statistics. Just I want to make sure I have them right, but I think you said D&A is $4.2 million was CapEx $1.6 million?

Yes. $1.5 million. Tim Quillin – Stephens Incorporated: $1.5 million and then the $9 million, was that a cash from operations number?

Cash from operations was $10.5 million and the $9 million represented free cash flow. Tim Quillin – Stephens Incorporated: Brilliant, perfect. Nice resulted. Thanks.

Thank you.

Your next question comes from the line of Rick Hoss representing Roth Capital Partners. Please proceed. Rick Hoss – Roth Capital Partners: Hi, good morning, gentlemen. Question on restructuring last SG&A. It didn’t look like there was any impairment or restructuring charges this quarter on your press release; you talk about the guidance excluding any restructuring charges. What’s the expectation for the remainder of the year?

Rick, this is Alan. I think much of the heavy lifting on restructuring was done in our last fiscal year. We’ll continue to look for areas of opportunity and, there maybe some restructuring charges that take place over the next three quarters, but we’re not looking at those numbers to be significant at all at this point in time. Rick Hoss – Roth Capital Partners: Okay, so maybe for the remainder of the year, maybe $100 million a good starting point?

Difficult to say at this point but we don’t believe it will be too significant. Rick Hoss – Roth Capital Partners: Okay and then R&D was way down you talked about in your prepared remarks about maybe some timing associated with the department of homeland security orders. Assuming that there maybe it ticks up substantially from the first quarter.

We do believe that the run rate and R&D for Q2 through Q4 will be higher than of Q1, yes. Rick Hoss – Roth Capital Partners: Okay and I know in past calls, you’ve talked about part of the restructuring was moving some of this R&D activity overseas and so longer term, you would expect the number to be on a percentage basis, to be lower than years pass though, right?

That’s a true statement, yes. Rick Hoss – Roth Capital Partners: Okay and then is there any appreciable difference in the gross margins for the Rapiscan business under the stimulus programs?

I’m not going to go specifically into what the gross margins are I think the best way to look at it we position the company. We’ve gotten a lot more efficient over the last couple of years and we feel good about our gross margins going forward. I think, specifically, I don’t want to break them down to what they are. Rick Hoss – Roth Capital Partners: Right, so would it be fair to say that the stimulus program gross margins would be lower, but you’ve had restructuring and you’ve chasing around anticipation of…?

I think they’ll be comparable. Rick Hoss – Roth Capital Partners: Okay, and then the last question, several quarters ago, we were talking about operating margin expansion at 10% as an eventual goal, and I don’t quite remember if there was a year associated with that, but without something that you’re starting to take a look at and you’re plotting it out?

Well, basically, if we strive for that and as you can see, the earnings guidance that was given as the revenue line expands, we are approaching that level. Alan, you want to add something?

Certainly, like yes the 10% operating margin is a nice target for us. I think it is attainable in the future. We haven’t given a specific year when we think we’re going to get there as there is a number of factors that go into that, but we believe we’re making progress in that direction. Rick Hoss – Roth Capital Partners: So, on the current structure, is there estimated revenue that would enable that 10% target to be hit?

Yes, it really depends upon the mix in the revenues from where it’s coming from. So, wouldn’t want to go there at this point. Rick Hoss – Roth Capital Partners: Okay, thanks for taking my questions.

Your next question comes from the line of Brian Ruttenbur representing Morgan Keegan. Please proceed. Brian Ruttenbur - Morgan Keegan: That was a weird one. This is Brian Ruttenbur with Morgan Keegan. I assume that’s me. I must have changed my name. A couple of questions, your gross margins as I look at it, are going to be down slightly versus you know, this year versus last year, because of mix of business. Is that right?

Brian, this is Alan. That was true in the first quarter. I think as the year goes on, there are certainly some opportunities that we may see some gross margin expansion. Brian Ruttenbur - Morgan Keegan: Okay, so I was talking about fiscal ‘09 versus fiscal ‘10. You had around 34% gross margins. Do you think that you can achieve that again on this mix of business in 2010?

We do. Especially as there is some growth in the healthcare part of our business, which inherently carries higher gross margins. We believe that’s very attainable. Brian Ruttenbur - Morgan Keegan: Okay, and then the question were already asked about R&D. Can you talk about R&D on the year as a percentage of revenue what is it going to be 5%, 5.5%? Do you look at it that way at all?

We do. I think last year, we were 6.2% of revenue. Brian Ruttenbur - Morgan Keegan: Right.

I believe we’ll, probably be slightly below that this year. Brian Ruttenbur - Morgan Keegan: Okay, and SG&A, can you tell us on the same way as a percentage of revenue?

Well, we’d rather not go quite into that level of detail. We’d rather stick with the bottom line earnings guidance that we provided. Brian Ruttenbur - Morgan Keegan: Okay and then, share count. Can you talk about your earnings guidance based on what share is outstanding and what your plans are with the share count?

Yes, we generally look to see our share count increased by a few hundred thousand shares each quarter just associated with typical grants as well as if there happens to be some stock price appreciation using the treasury stock method, we’ll see an increase in the share count. Brian Ruttenbur - Morgan Keegan: Okay and then last question is, on the competitive environment on the securities side, any changes out there? One of your competitors, American Science Engineering has be getting more in the large cargo as we see from some of their press releases and some of that large cargo is without their signature technology. I didn’t know if that is changing the competitive landscape at all or not?

You know, we’ve seen them for awhile now, competitive landscape. It’s very competitive out there, but I don’t think it has made a significant impact as far as we’re concerned at this point.

Brian, this is Deepak. Just to add on, as any was always a competitor in that space. We welcome them and they had a good competitor. Business is quite robust. There is a lot of opportunity and there are other competitors like AS&E. We continue to grow. We’re very excited about the product line. Brian Ruttenbur - Morgan Keegan: Great, thank you.

Your next question comes from the line of Josephine Millward representing Dougherty & Co. Please proceed. Josephine Millward - Dougherty & Co.: Good morning, everyone.

Good morning. Josephine Millward - Dougherty & Co.: Very nice quarter Deepak and great bookings.

Thank you. Josephine Millward - Dougherty & Co.: Just want to clarify the $77 million in booking, that doesn’t include the contracts you announced after your fiscal year end, right?

That is true. Josephine Millward - Dougherty & Co.: Okay, great and can you give us a little more color on your win with the TSA for whole body images, that I think it’s very material because after years of evaluating the system, TSA has finally decided to move forward. Do you talk about whether you envision this being rolled out across the country? What do the opportunities look like and what the competitive landscape looks like?

This is Ajay, let me just try to answer that. First of all, yes it is very significant. We’re very excited that finally, we’re the first actually and the only to have achieved this. I’m sure the competitive landscape is going to change as we go forward. In terms of how deep TSA deploys it, it would be inappropriate for me to comment on that. I think that TSA is working closely with us, as well as doing their own programs. So I would hesitate to answer, but I’m sure if you called the TSA, they might be able to give you more information on that, but as far as we’re concerned, we are very excited and we’re working very closely with TSA on this program.

Josephine, just to add on to it, I want to just add on, it’s definitely a significant win for us. Not only for TSA, but as you know, as they deploy and this replaces a pat down search, which is not very comfortable for people and as people get used to this, the rest of the world is watching. We think it’s a great opportunity, how U.S. had deploys these units. The rest of the world is going to watch and we’re quite excited about it. As Ajay mentioned, definitely the competitive landscape going forward would change, but we are very proud and honored to be selected as the first one out of the gate with 151 units getting deployed. Josephine Millward - Dougherty & Co.: Can you give us a rough ASP and if you expect to deploy all your systems within your fiscal year?

Do you repeat that again? Josephine Millward - Dougherty & Co.: Roughly, how much is the body scanner per system and do you expect to deliver everything before the end of your fiscal year?

Obviously, we’re not going to talk about how much it is per system. There’s a lot of things that go into it. We have a very aggressive schedule in place and again for competitive reasons, I’m not going to go over when we deliver it, but it is very aggressive. Josephine Millward - Dougherty & Co.: What about airport checkpoint, Ajay? I understand a nice chunk of funding has been allocated to that upgrade from the stimulus, but we haven’t really seen a whole lot of contract awards. Can you give us an update on where we stand if you expect to see something before the end of this year?

Well, I think again, we’re working very closely with TSA on that program. As you know, we’ve already got about 500 plus machines deployed out there. So we’re working with them. We expect the TSA to make the decisions soon, really for me to comment any further than that would be inappropriate, but we are actively working with them. Josephine Millward - Dougherty & Co.: Okay, that’s helpful. I just have a few more on the contracts that you have announced. The two orders you announced today from border protection, were they all funded by the stimulus or just part of it, because it’s really unclear based on your press release?

I believe either all of it was a very big vast majority of it was. Alan, do you want to…?

I think Ajay is on target. Certainly, a portion of it was funded by the stimulus package. Josephine Millward - Dougherty & Co.: In terms of, by the way nice win from the government on patient monitoring systems, can you give us a sense of whether you’ve received any task orders under the IDIQ?

Well, first, I really don’t want to comment on it. It just got booked and maybe, Alan you can talk to the division. My gut feeling is nothing has started yet. It’s an IDIQ which is for a year. Josephine Millward - Dougherty & Co.: So it’s a one year IDIQ, but you haven’t received any delivery orders on it?

I don’t think so. I don’t think so anything has been booked yet. Josephine Millward - Dougherty & Co.: It looks promising.

Thank you. Josephine Millward - Dougherty & Co.: Deepak, since I have you on the line, can you give us an update on Manchester, and how the rollout is progressing?

Which one? Josephine Millward - Dougherty & Co.: The CT machine for checked baggage.

In the last conference call, we mentioned that the unit is not in Manchester anymore. As a matter of fact, the unit now is in our Rap Labs location in Northern California. It’s getting tested. At Manchester, it was placed for collecting data. We collected bag data, which is a necessary item to complete the testing and right now, it is in Rap Labs Northern California to get further testing done.

We finished all of the testing that we needed to do in Manchester, basically. Josephine Millward - Dougherty & Co.: Right, but are you still on track for deployment next year?

We are targeting for that. Josephine Millward - Dougherty & Co.: Okay, great. I was just hoping to get an update on that. Thank you very much.

Your final question comes from the line of Michael Kim representing Imperial Capital. Please proceed. Michael Kim - Imperial Capital: Hi, good morning, guys.

Good morning. Michael Kim - Imperial Capital: We’re going back to the guidance and I might have missed this, can you give us a directional sense on the Opto business for the year, if you see growths in that business or expect to see that pullback given some of the program activity?

Sure. Mike, this is Alan. We had a very nice Q1 in our Opto division and for the full year, we do anticipate seeing some growth. Back to the single digit type ranges that we have sometimes seen before. Michael Kim - Imperial Capital: Then so if I were to combine that with some of the comments on double digit growth for security, that does seem to imply that the Spacelab business also sees sort of double digit type growth in the back half of the year. Can you talk about if that’s more back end loaded or continuing to be driven by the emerging markets or any further color on that expectation?

Well, number one, I don’t think so that we’ve ever said that, that there will be double digit growth in healthcare. We said that healthcare is scheduled to grow. We project that it will grow in the next three quarters. If you combine single digit growth of healthcare, double digit growth for security and flat to some growth in Opto is what we have based our revenue guidance on. Inherently, healthcare has a stronger Q2 and a Q4. Q1 is inherently, historically weak and the Q3 is also historically the second weakest than the Q2 and Q4 are strong. Michael Kim - Imperial Capital: Okay and then, just going briefly back on the Opto side, is that driven by more third party sales or continued military orders or what’s the primary driver on the modest growth for the year?

It is a third party growth to outside. The military that you mentioned is also a third party sale. What we’ve call the inter company sale as what we sell from the Opto group to the security division, Rapiscan and to Spacelabs. Michael Kim - Imperial Capital: Okay and Alan, you mentioned opportunities to see significant margin expansion in the healthcare business. Can you maybe quantify what the leverage could look like what the sensitivity looks like for certain growth on the business?

Yes, Mike, without going into specifics, I think the first quarter gives you a little glimpse into what that could be? Because despite the change in revenues in Q1, we had very strong and in fact, record profits in the division for our first quarter. If you looked at last year, we did an operating margin of just shy of 4% in Spacelabs. So, with a little bit of growth this year, there’s some real opportunities to have some significant expansion at the operating margin level. Michael Kim - Imperial Capital: Would it look similar to historical levels for that business, or maybe somewhere in between?

I think the operating margins could exceed what we’ve seen in historical levels given the fact that we’ve made some permanent changes to the fixed cost structure. Michael Kim - Imperial Capital: Okay and then Ajay, going back to the air cargo opportunity, I know it’s a little ways off, but is it your sense that we’re on track to reach that 100% mandate or is the overall industry still probably waiting towards that deadline to start implementation?

First of all, I don’t think its a little ways off. I think it’s already happening and I think from what we hear is yes, they are going to go with a mandate, which is 2010 August. I think Deepak mentioned, I think we’ll see a pickup maybe from where we are in the January, February, March, as people actually start waking up to seeing the demand rate is right around the corner. So I think the next few quarters, definitely represent a big opportunity for us. Michael Kim - Imperial Capital: Is it your expectation to see additional systems approved on the TSA list or essentially sort of fixed where we are right now?

We believe there are going to be additional systems approved on the TSA list and we hope some of those are ours as well. Michael Kim - Imperial Capital: Okay and then in some of the previous filings, there’s been a discussion on the percentage growth year-on-year on cargo and conventional systems. Can you provide a similar commentary on that for the first quarter?

This is Alan. Given the timing of shipments in Rapiscan, where we were down year-on-year about 19% in sales, we saw a portion of that being down in both the cargo and the conventional, which would of course be consistent with the overall direction of revenues in Q1. Michael Kim - Imperial Capital: Then for the year, is it your expectation that cargo exceeds conventional or vice versa?

I don’t think we’re going to go specifically on whether it exceeds conventional or not, but as we said, cargo is a very important part. We see growth there, we see growth in conventional. Michael Kim - Imperial Capital: Okay, great. Thank you very much.

(Operator Instructions) With no further questions in queue, I would now like to turn the call back to Mr. Deepak Chopra for closing remarks.

Thank you very much for your time today. In closing, I would just like to reiterate the positive results we were able to achieve in the first quarter of 2010; to summarize, significant improvement in EPS $0.14 per diluted share, when compared to $0.01 per diluted share in fiscal 2009. Continued strong cash flow with operating cash flow for the first quarter of $10.5 million and free cash flow of $9 million; record quarter ending backlog levels for our security division of $146 million; overall, company backlog of $234 million, which gives us very good visibility. We have increased our EPS guidance for fiscal 2010. The new range announced is $1.14 to $1.23 and improvement of approximately 25% to 35%, when compared to the prior fiscal year. Revenue guidance for $620 million to $640 million and we expect this quarter to have a very strong bookings again for the security area, double digit growth for the security growth, single digit in healthcare and flat to some growth in the Opto. In closing, I would like to thank all of our employees for this dedication and continued hard work. Thank you.

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes your presentation. You may now disconnect. Good day.