Exhibit 99.1
12701 Fair Lakes Circle, Fairfax, VA 22033
703.322.0881 Fax 703.322.0885
www.argonst.com
NEWS RELEASE
For Immediate Release
Argon ST, Inc. Announces Fiscal Q1 Results
FAIRFAX, VA, February 9, 2006 / Business Wire / — Argon ST, Inc. (NASDAQ: STST), today announced revenues and earnings for its first fiscal quarter ended January 1, 2006.
Revenues for the first quarter ended January 1, 2006 increased $11,597,000 to $68,107,000, up 21% when compared to revenues of $56,510,000 for the prior year quarter ended January 2, 2005.
Before considering the effect of FAS 123R expenses, operating income for the period was $9,615,000, an increase of 23% when compared to operating income of $7,837,000 for thefirst quarter of fiscal year 2005, and net income was $5,919,000, an increase of 20% when compared to net income of $4,920,000 for the first fiscal quarter of 2005. Excluding the effect of FAS 123R, diluted earnings per share increased $0.04 from $0.24 in the first quarter of fiscal year 2005 to $0.28 for the first quarter of fiscal year 2006.
Effective October 1, 2005, the Company adopted Financial Accounting Standards Board Statement No. 123R “Share-Based Payment” (“FAS 123R”), which requires that share-based payment transactions be recognized as a compensation expense in its financial statements. Including the effect of FAS 123R, quarterly GAAP operating income was $9,247,000, net income was $5,603,000, and diluted earnings per share were $0.27. Management believes that the presentation excluding the effect of FAS 123R provides a better comparison of prior year results and the results of companies not yet required to comply with FAS 123R. A reconciliation of GAAP results to results excluding the effect of FAS 123R is provided at the end of this press release.
Terry Collins, Chairman, CEO and President, stated “We are pleased to announce record operating income, prior to FAS 123R expenses, even with the termination of the Aerial Common Sensor program. Although bookings were weak in the first quarter, we have not lost any identified targets and expect significantly improved bookings and cash flow in the next two quarters. We continue to see opportunities across all of our business areas.”
Financial Highlights
| n | Revenue for the first quarter increased 21% over the prior year quarter to $68,107,000 | |
| n | Net income for the first quarter, excluding the effect of FAS 123R, was $5,919,000, or $0.28 per diluted share, up 20% from the prior year quarter | |
| n | Funded and unfunded backlog as of the end of the first quarter was $231,091,000, an increase of 5% from the prior year first quarter-end funded and unfunded backlog of $219,864,000 |
About Argon ST, Inc.
Argon ST, Inc. designs, develops, and produces systems and sensors for the Command and Control Communications, Computers, Intelligence, Surveillance, and Reconnaissance (C4ISR) markets including SIGINT (Signals Intelligence), ESM (Electronic Support Measures), EW (Electronic Warfare), imaging, and acoustic systems serving domestic and worldwide markets.
Statements in this press release which are not historical facts are forward-looking statements under the provision of the Private Securities Litigation Reform Act of 1955. Forward-looking statements are not guarantees of future performance and are based upon numerous assumptions about future conditions that could prove not to be accurate. Forward looking statements are subject to numerous risks and uncertainties, and our actual results could differ materially as a result of such risks and other factors. In addition to those risks specifically mentioned in the reports filed by the Company with the Securities and Exchange Commission (including the Company’s Form 10-K for the fiscal year ended September 30, 2005), such risks and uncertainties include, but are not limited to: the availability of U.S. and international government funding for the Company’s products and services; changes in the U.S. federal government procurement laws, regulations, policies and budgets (including changes to respond to budgetary constraints and cost-cutting initiatives); the number and type of contracts and task orders awarded to the Company; the exercise by the U.S. government of options to extend the Company’s contracts; the Company’s ability to retain contracts during any rebidding process; the timing of Congressional funding on the Company’s contracts; any government delay or termination of the Company’s contracts and programs; difficulties in developing and producing operationally advanced technology systems; the timing and customer acceptance of contract deliverables; the Company’s ability to attract and retain qualified personnel, including technical personnel and personnel with required security clearances; charges from any future impairment reviews; the future impact of any acquisitions or divestitures the Company may make; the competitive environment for defense and intelligence information technology products and services; general economic, business and political conditions domestically and internationally; and other factors affecting the Company’s business that are beyond its control. All of the forward-looking statements should be considered in light of these factors. Investors should not put undue reliance on any forward-looking statements. We undertake no obligation to update these forward-looking statements to reflect new information, future events or otherwise, except as provided by law.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)
The Company has presented net income, as adjusted, to show the effect that the adoption of FAS No. 123R had on the Company’s earnings per share. The Company believes that these non-GAAP financial measures provide useful information to investors because they allow investors to compare the Company’s current performance to prior performance and to the performance of companies that have not yet adopted FAS No. 123R. These non-GAAP financial measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.
| As Reported Quarter | Pro Forma | |||||||||||
| Ended | Quarter Ended | |||||||||||
| January 1, 2006 | Adjustments | January 1, 2006 | ||||||||||
| CONTRACT REVENUES | $ | 68,107,000 | $ | 68,107,000 | ||||||||
| COST OF REVENUES | 52,885,000 | (368,000 | ) | 52,517,000 | (1) | |||||||
| GENERAL AND ADMINISTRATIVE EXPENSES | 5,975,000 | 5,975,000 | ||||||||||
| INCOME FROM OPERATIONS | 9,247,000 | 368,000 | 9,615,000 | |||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||
| Interest income | 127,000 | 127,000 | ||||||||||
| Interest expense | (127,000 | ) | (127,000 | ) | ||||||||
| — | — | |||||||||||
| INCOME BEFORE INCOME TAXES | 9,247,000 | 368,000 | 9,615,000 | |||||||||
| PROVISION FOR INCOME TAXES | 3,644,000 | 52,000 | 3,696,000 | (2) | ||||||||
| NET INCOME | $ | 5,603,000 | $ | 316,000 | $ | 5,919,000 | ||||||
| EARNINGS PER SHARE (Basic) | $ | 0.27 | $ | 0.02 | $ | 0.29 | ||||||
| EARNINGS PER SHARE (Diluted) | $ | 0.27 | $ | 0.01 | $ | 0.28 | ||||||
| WEIGHTED-AVERAGE SHARES OUTSTANDING | ||||||||||||
| Basic | 20,382,000 | 20,382,000 | ||||||||||
| Diluted | 21,103,000 | 21,103,000 | ||||||||||
| 1. | To eliminate stock-based compensation resulting from the adoption of FAS No. 123R on October 1, 2005. | |
| 2. | To eliminate the tax effect related to the stock-based compensation described in Note 1. |
ARGON ST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
CONDENSED CONSOLIDATED BALANCE SHEETS
| January 1, 2006 | September 30, 2005 | |||||||
| (unaudited) | ||||||||
ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | 30,226,000 | $ | 4,064,000 | ||||
| Accounts receivable, net | 114,774,000 | 103,577,000 | ||||||
| Inventory | 1,477,000 | 1,166,000 | ||||||
| Income taxes receivable | — | 2,464,000 | ||||||
| Deferred income tax asset | 1,712,000 | 1,742,000 | ||||||
| Prepaids and other | 1,101,000 | 888,000 | ||||||
| TOTAL CURRENT ASSETS | 149,290,000 | 113,901,000 | ||||||
| Property, equipment and software, net | 15,112,000 | 14,896,000 | ||||||
| Advances and cash held in escrow | — | 10,900,000 | ||||||
| Goodwill | 116,141,000 | 107,956,000 | ||||||
| Intangibles, net | 2,016,000 | 1,219,000 | ||||||
| Other assets | 703,000 | 962,000 | ||||||
| TOTAL ASSETS | $ | 283,262,000 | $ | 249,834,000 | ||||
LIABILITIES AND STOCKHOLDER’S EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Line of Credit | $ | — | $ | 11,000,000 | ||||
| Accounts payable and accrued expenses | 15,725,000 | 26,857,000 | ||||||
| Accrued salaries and related expenses | 9,480,000 | 8,848,000 | ||||||
| Deferred revenue | 6,937,000 | 7,139,000 | ||||||
| Notes payable — current portion | — | 56,000 | ||||||
| Capital lease obligations — current | 19,000 | 19,000 | ||||||
| Income taxes payable | 716,000 | — | ||||||
| Deferred rent | 160,000 | 61,000 | ||||||
| TOTAL CURRENT LIABILITIES | 33,037,000 | 53,980,000 | ||||||
| Deferred income tax liability, long term | 2,504,000 | 1,979,000 | ||||||
| Deferred rent | 1,658,000 | 1,799,000 | ||||||
| Capital lease obligations — net of current | 60,000 | 63,000 | ||||||
| Commitments and contingencies | — | — | ||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Common stock: | ||||||||
| $.01 Par Value, 100,000,000 shares authorized, 21,979,917 and 20,153,878 shares issued at January 1, 2006 and September 30, 2005 | 220,000 | 202,000 | ||||||
| Additional paid in capital | 206,712,000 | 158,458,000 | ||||||
| Treasury stock at cost, 126,245 shares | (534,000 | ) | (534,000 | ) | ||||
| Retained earnings | 39,605,000 | 34,002,000 | ||||||
| Accumulated other comprehensive loss | — | (115,000 | ) | |||||
| TOTAL STOCKHOLDERS’ EQUITY | $ | 246,003,000 | $ | 192,013,000 | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 283,262,000 | $ | 249,834,000 | ||||
ARGON ST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)
| For the Fiscal Quarter Ended | ||||||||
| January 1, 2006 | January 2, 2005 | |||||||
| CONTRACT REVENUES | $ | 68,107,000 | $ | 56,510,000 | ||||
| COST OF REVENUES | 52,885,000 | 45,338,000 | ||||||
| GENERAL AND ADMINISTRATIVE EXPENSES | 5,975,000 | 3,335,000 | ||||||
| INCOME FROM OPERATIONS | 9,247,000 | 7,837,000 | ||||||
| OTHER INCOME (EXPENSE) | ||||||||
| Interest income | 127,000 | 140,000 | ||||||
| Interest expense | (127,000 | ) | (2,000 | ) | ||||
| — | 138,000 | |||||||
| INCOME BEFORE INCOME TAXES | 9,247,000 | 7,975,000 | ||||||
| PROVISION FOR INCOME TAXES | 3,644,000 | 3,055,000 | ||||||
| NET INCOME | $ | 5,603,000 | $ | 4,920,000 | ||||
| EARNINGS PER SHARE (Basic) | $ | 0.27 | $ | 0.25 | ||||
| EARNINGS PER SHARE (Diluted) | $ | 0.27 | $ | 0.24 | ||||
| WEIGHTED-AVERAGE SHARES OUTSTANDING | ||||||||
| Basic | 20,382,000 | 19,423,000 | ||||||
| Diluted | 21,103,000 | 20,415,000 | ||||||
| CONTACT: | Victor F. Sellier, Chief Financial Officer vic.sellier@argonst.com URL: www.argonst.com |