American Science And Engineering, Inc. F1Q11 (Qtr End 06/30/2010) Earnings Call Transcript

Company-funded research and development expenditures in the current quarter were $5 million or 9% of revenue as compared to the prior-year expenditure of $5.8 million or 11% of revenues. Our plan for the current quarter was below last year's actual spend in anticipation of efforts directed toward non-research and development activities.

Other income increased by $1.1 million, primarily due to the mark-to-market gain recognized on a foreign currency put, which appreciated during the quarter due to the volatility of the euro.

The company recorded income tax provision of $3.6 million in the current quarter as compared to a $4 million provision in the June '09 quarter. The decrease from the June '09 quarter is due to the reduced taxable income attributable to the factors noted earlier, and a reduction in the effective tax rate from 35.5% in the prior year quarter to 34.5% in the current year quarter.

The reduction in the effective tax rate in the current quarter is primarily attributable to a reduced state tax apportionment, and an increase in the qualifying manufacturing deduction in the current year. At this time we anticipate the effective tax rate to be 34.5% for the current year.

Fully diluted earnings per share in the June '10 quarter were $0.74 as compared to earnings per share in the June '09 quarter of $0.81.

Now let's take a look at the balance sheet. The balance in cash, restricted cash, and short-term investments at June 30, 2010 was $161 million or $18.1 million below the March 31, 2010 balance, while cash used by operating activities was $13.7 million, which was driven by a $5.7 million decrease in accrued expenses, primarily related to the payment of year-end incentive compensation programs, a $6.8 million reduction of deferred revenue, related to the recognition of revenues for which payment was received in a prior period, and a $2.5 million reduction in customer deposits as the revenue related to those pre-payments was recognized in the current quarter.

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