ARGON ST, INC.
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 Q3 Results
FAIRFAX, VA, August 10, 2006 / Business Wire / — Argon ST, Inc. (NASDAQ: STST), today announced revenues and earnings for its third fiscal quarter and nine months ended July 2, 2006.
Revenues for the three months ended July 2, 2006 were $68,902,000 compared to $75,611,000 for the prior year quarter. This represents a decrease of $6,709,000, down approximately 9%, from the prior year quarter. Revenues for the nine months ended July 2, 2006 increased $4,617,000 to $192,690,000 up approximately 2%, compared to $188,073,000 for the prior year period.
Net income for the three months ended July 2, 2006 was $5,166,000 or $0.23 per diluted share, a decrease of approximately 12% compared to $5,855,000 or $0.28 per diluted share for the prior year quarter. For the nine months ended July 2, 2006 net income was $15,291,000 or $0.69 per diluted share, a decrease of approximately 3% compared to the prior year period of $15,719,000 or $0.76 per diluted share.
The Company began reporting stock-based compensation expense in the first fiscal quarter of 2006 as required by Statement of Financial Accounting Standards No. 123R (FAS 123R). This non-cash expense was $603,000 and $1,489,000 or $489,000 and $1,211,000 after tax for the three and nine months ended July 2, 2006, respectively. This stock-based compensation expense reduced diluted earnings per share by $0.02 and $0.05 for the three and nine months ended July 2, 2006, respectively.
CEO’s comments
Terry Collins, CEO of Argon ST had the following comment: “Our third quarter performance was somewhat better than the revised mid year plan in terms of sales and earnings, but there was a reduction from last year’s results. Additionally, although contract awards are taking longer than planned, we are seeing both increasing opportunities and high success rates on those programs that we choose to pursue. We believe that with our new technology developments, acquisitions, and key contract awards we are laying the foundation for resumption of our targeted growth plans.”
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.
Forward-Looking Statements
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.
1
ARGON ST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
July 2, 2006 | September 30, 2005 | |||||||
(unaudited) | ||||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents | $ | 66,514,000 | $ | 4,064,000 | ||||
Accounts receivable, net | 86,202,000 | 103,577,000 | ||||||
Inventory | 1,779,000 | 1,166,000 | ||||||
Income taxes receivable | 537,000 | 2,464,000 | ||||||
Deferred income tax asset | 2,271,000 | 1,742,000 | ||||||
Prepaids and other | 1,303,000 | 888,000 | ||||||
TOTAL CURRENT ASSETS | 158,606,000 | 113,901,000 | ||||||
Property, equipment and software, net | 15,756,000 | 14,896,000 | ||||||
Advances and cash held in escrow | — | 10,900,000 | ||||||
Goodwill | 115,135,000 | 107,956,000 | ||||||
Intangibles, net | 1,851,000 | 1,219,000 | ||||||
Other assets | 665,000 | 962,000 | ||||||
TOTAL ASSETS | $ | 292,013,000 | $ | 249,834,000 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Line of Credit | $ | — | $ | 11,000,000 | ||||
Accounts payable and accrued expenses | 13,327,000 | 26,857,000 | ||||||
Accrued salaries and related expenses | 12,364,000 | 8,848,000 | ||||||
Deferred revenue | 3,928,000 | 7,139,000 | ||||||
Notes payable — current portion | — | 56,000 | ||||||
Capital lease obligations — current | 20,000 | 19,000 | ||||||
Deferred rent | 360,000 | 61,000 | ||||||
TOTAL CURRENT LIABILITIES | 29,999,000 | 53,980,000 | ||||||
Deferred income tax liability, long term | 303,000 | 1,979,000 | ||||||
Deferred rent | 1,614,000 | 1,799,000 | ||||||
Capital lease obligations — net of current | 48,000 | 63,000 | ||||||
Commitments and contingencies | — | — | ||||||
STOCKHOLDERS’ EQUITY | ||||||||
Common stock: | ||||||||
$.01 Par Value, 100,000,000 shares authorized, 22,260,512 and 20,153,878 shares issued at July 2, 2006 and September 30, 2005 | 223,000 | 202,000 | ||||||
Additional paid in capital | 211,067,000 | 158,458,000 | ||||||
Treasury stock at cost, 126,245 shares | (534,000 | ) | (534,000 | ) | ||||
Retained earnings | 49,293,000 | 34,002,000 | ||||||
Accumulated other comprehensive loss | — | (115,000 | ) | |||||
TOTAL STOCKHOLDERS’ EQUITY | $ | 260,049,000 | $ | 192,013,000 | ||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 292,013,000 | $ | 249,834,000 | ||||
2
ARGON ST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)
Third Quarter Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||
July 2, 2006 | July 3, 2005 | July 2, 2006 | July 3, 2005 | |||||||||||||||||||||||||||||||||
CONTRACT REVENUES | $ | 68,902,000 | $ | 75,611,000 | $ | 192,690,000 | $ | 188,073,000 | ||||||||||||||||||||||||||||
COST OF REVENUES | 56,206,000 | 62,555,000 | 153,068,000 | 151,534,000 | ||||||||||||||||||||||||||||||||
GENERAL AND ADMINISTRATIVE | ||||||||||||||||||||||||||||||||||||
EXPENSES | 4,837,000 | 3,474,000 | 15,617,000 | 11,305,000 | ||||||||||||||||||||||||||||||||
INCOME FROM OPERATIONS | 7,859,000 | 9,582,000 | 24,005,000 | 25,234,000 | ||||||||||||||||||||||||||||||||
OTHER INCOME (EXPENSE) | ||||||||||||||||||||||||||||||||||||
Interest income | 548,000 | 193,000 | 1,064,000 | 538,000 | ||||||||||||||||||||||||||||||||
Interest expense | (4,000 | ) | (1,000 | ) | (165,000 | ) | (10,000 | ) | ||||||||||||||||||||||||||||
544,000 | 192,000 | 899,000 | 528,000 | |||||||||||||||||||||||||||||||||
INCOME BEFORE INCOME TAXES | 8,403,000 | 9,774,000 | 24,904,000 | 25,762,000 | ||||||||||||||||||||||||||||||||
PROVISION FOR INCOME TAXES | 3,237,000 | 3,919,000 | 9,613,000 | 10,043,000 | ||||||||||||||||||||||||||||||||
NET INCOME | $ | 5,166,000 | $ | 5,855,000 | $ | 15,291,000 | $ | 15,719,000 | ||||||||||||||||||||||||||||
$ | ||||||||||||||||||||||||||||||||||||
EARNINGS PER SHARE (Basic) | $ | 0.23 | $ | 0.30 | $ | 0.71 | 0.80 | |||||||||||||||||||||||||||||
$ | ||||||||||||||||||||||||||||||||||||
EARNINGS PER SHARE (Diluted) | $ | 0.23 | $ | 0.28 | $ | 0.69 | 0.76 | |||||||||||||||||||||||||||||
WEIGHTED-AVERAGE SHARES | ||||||||||||||||||||||||||||||||||||
OUTSTANDING | ||||||||||||||||||||||||||||||||||||
Basic | 22,120,000 | 19,830,000 | 21,495,000 | 19,665,000 | ||||||||||||||||||||||||||||||||
Diluted | 22,717,000 | 20,694,000 | 22,127,000 | 20,563,000 | ||||||||||||||||||||||||||||||||
CONTACT: |
Victor F. Sellier, Chief Financial Officer
vic.sellier@argonst.com
URL:www.argonst.com
3