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Applied Signal Technology, Inc. Announces Results For Fourth Quarter 2010

Attached to this news release are condensed, consolidated statements of income, balance sheets, statements of cash flows and a reconciliation between net income on a GAAP basis and non-GAAP net income for the fourth quarter and fiscal year 2010 ended October 31, 2010.

Investor Conference Call

The Company will host a conference call on December 16, 2010 to discuss fourth quarter fiscal 2010 results. If you wish to participate in the conference call, please dial 1-877-407-8031 for domestic callers or 1-201-689-8031 for international callers on December 16, 2010 at 5:00 p.m. eastern time/2:00 p.m. pacific time. There is no pass code required. This call may be listened to simultaneously at the Web site www.InvestorCalendar.com. A rebroadcast of the call will be available upon its completion and will remain available for a limited time.

Applied Signal Technology, Inc. provides advanced intelligence, surveillance and reconnaissance (ISR) products, systems and services to enhance global security. For further information about Applied Signal Technology visit our website at www.appsig.com.

Except for historical information contained herein, matters discussed in this news release may contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially. Statements relating to our ability to effectively position the company for a wide range of programs, including as a prime contractor, the funding environment for our business areas, our ability to continue to capture new business, our ability to realize the full benefits from our recent acquisitions, continued growth opportunities in the intelligence, surveillance and reconnaissance (ISR) and cyber-security markets, our ability to provide customers with differentiated and compelling solutions across the full array of ISR activities, as well as statements regarding our estimating results for the fiscal year are forward-looking statements. The risks and uncertainties associated with these statements include the ability to achieve the anticipated benefits of the acquisitions, the ability to capture organic growth opportunities and to utilize the strategic advantages of a strong capital position; the ability to obtain new orders from procurers, including the U. S. Government when anticipated and to successfully perform and achieve profitability on such contracts; the ability to hire qualified staff as needed; and other risks detailed from time to time in the Company’s SEC reports including the latest Form 10-K filed for the fiscal year ended October 31, 2009. The Company assumes no obligation to update the information provided in this news release.

APPLIED SIGNAL TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE PERIODS ENDED OCTOBER 31, 2010 AND OCTOBER 31, 2009
   
(In thousands except per share data)
 
Three Months Ended Twelve Months Ended
October 31, October 31, October 31, October 31,
  2010   2009   2010   2009
Revenues from contracts $ 61,247 $ 53,221 $ 218,573 $ 196,371
Revenues from royalties   1,329   1,010   6,656   6,244
Total revenues 62,576 54,231 225,229 202,615
Operating expenses:
Contract costs 45,021 38,355 159,949 142,722
Research and development 3,986 3,853 15,082 14,482
General and administrative   8,174   6,100   28,046   22,541
 
Total operating expenses   57,181   48,308   203,077   179,745
 
Operating income 5,395 5,923 22,152 22,870
Interest income/(expense), net   (42)   1   (116)   223
 
Income before provision
for income taxes 5,353 5,924 22,036 23,093
Provision for income taxes   2,129   2,314   8,813   8,564
 
Net income $ 3,224 $ 3,610 $ 13,223 $ 14,529
 
Net income per share - basic $0.24 $0.27 $0.99 $1.11
Average shares - basic 13,211 13,005 13,130 12,890
 
Net income per share - diluted $0.23 $0.27 $0.98 $1.10
Average shares - diluted 13,350 13,213 13,248 13,083
APPLIED SIGNAL TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
   
ASSETS
 
October 31, October 31,
  2010   2009
 
Current assets:
Cash and cash equivalents $ 5,523 $ 4,102
Short term investments   30,398   43,454
Cash, cash equivalents, and short term investments 35,921 47,556
Accounts receivable 48,054 47,063
Inventory 10,222 8,378
Receivable - acquisition related 280 1,093
Other current assets   10,579   9,424
Total current assets 105,056 113,514
 
Property and equipment, at cost 75,143 70,400
Accumulated depreciation and amortization   (59,813)   (55,405)
Net property and equipment 15,330 14,995
 
Goodwill 58,470 33,158
 
Intangible assets, net 4,646 1,904
 
Long-term deferred tax asset, net 3,908 4,196
Long term investment - 2,129
Other assets   1,136   1,104
 
Total assets $ 188,546 $ 171,000
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
Current liabilities:
Accounts payable, accrued payroll and benefits $ 25,126 $ 22,158
Notes payable 1,429 1,429
Income taxes payable - 444
Other accrued liabilities 2,590 2,298
Contingent consideration   6,124   -
Total current liabilities 35,269 26,329
 
Long-term liabilities:
 
Long-term notes payable 1,071 2,500
Other long-term liabilities   2,743   3,146
Total long-term liabilities $ 3,814 $ 5,646
 
Shareholders' equity   149,463   139,025
 
Total liabilities and shareholders' equity $ 188,546 $ 171,000
APPLIED SIGNAL TECHNOLOGY, INC.
CONDENSED STATEMENTS OF CASH FLOWS
Increase (decrease) in cash and cash equivalents
(In thousands)
Twelve Months Ended
2010   2009
Operating activities:
 
Net Income $ 13,223 $ 14,529
 
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization 7,080 6,361
Stock-based compensation 2,055 2,236
Excess tax benefits from stock-based payment arrangements (100) (384)
 
Changes in:
Accounts receivable 2,284 (2,914)
Inventory, prepaid expenses, and other assets (2,579) 482
Accounts payable, taxes payable and accrued liabilities 932 (3,141)
   
Net cash provided by operating activities 22,895 17,169
 
Investing activities:
 
Cash paid for business acquired, net (23,623) (17,325)
Cash received from Pyxis's escrow account, net 670 -
Purchase of available-for-sale securities (75,287) (63,687)
Maturity and sale of available-for-sale securities 89,746 71,776
Additions to property and equipment (5,593) (5,415)
   
Net cash used in investing activities (14,087) (14,651)
 
Financing Activities:
 
Issuance of common stock 2,227 3,995
Shares repurchased for tax withholding of vested restricted stock awards (387) (284)
Excess tax benefits from stock-based payment arrangements 100 384
Term loans (2,669) (2,054)
Dividends paid (6,658) (6,507)
   
Net cash used in financing activities (7,387) (4,466)
 
Net increase (decrease) in cash and cash equivalents 1,421 (1,948)
Cash and cash equivalents, beginning of period 4,102 4,668
Cash and cash equivalents, end of period $ 5,523 $ 2,720
 
Supplemental disclosure of cash flow information:
Interest paid 194 219
Income taxes paid 8,976 6,785
APPLIED SIGNAL TECHNOLOGY, INC.
GAAP TO NON-GAAP RECONCILATION
FOR THE PERIODS ENDED OCTOBER 31, 2010 AND OCTOBER 31, 2009
     
(In thousands except per share data)
 
Three Months Ended Twelve Months Ended
October 31, October 31, October 31, October 31,
  2010   2009   2010   2009
CONTRACT COSTS
GAAP contract costs $ 45,021 $ 38,355 $ 159,949 $ 142,722
Non-GAAP acquisition expenses:
Compensation expense c (503)   -   (1,463)   -
Total non-GAAP acquisition expenses (503) - (1,463) -
 
Non-GAAP contract costs 44,518   38,355   158,486   142,722
 
 
GENERAL AND ADMINISTRATIVE EXPENSES
GAAP general and administrative expenses $ 8,174 $ 6,100 $ 28,046 $ 22,541
Non-GAAP acquisition expenses:
Transaction costs a (363) (142) (1,305) (186)
Amortization of intangibles b (377) (134) (1,218) (188)
Compensation expense c (409)   (106)   (524)   (106)
Total non-GAAP acquisition expenses (1,149) (382) (3,047) (480)
 
Non-GAAP general and administrative expenses 7,025   5,718   24,999   22,061
 
 
OPERATING EXPENSES
GAAP operating expenses 57,181 48,308 203,077 179,745
Non-GAAP acquisition expenses:
Transaction costs a (363) (142) (1,305) (186)
Amortization of intangibles b (377) (134) (1,218) (188)
Compensation expense c (912)   (106)   (1,987)   (106)
Total non-GAAP acquisition expenses (1,652) (382) (4,510) (480)
 
Non-GAAP operating expenses 55,529   47,926   198,567   179,265
 
 
OPERATING INCOME
GAAP operating income 5,395 5,923 22,152 22,870
Non-GAAP acquisition expenses:
Transaction costs a 363 142 1,305 186
Amortization of intangibles b 377 134 1,218 188
Compensation expense c 912   106   1,987   106
Total non-GAAP acquisition expenses 1,652 382 4,510 480
 
Non-GAAP operating income 7,047   6,305   26,662   23,350
 
 
NET INCOME
GAAP net income 3,224 3,610 13,223 14,529
Non-GAAP acquisition expenses:
Transaction costs a 363 142 1,305 186
Amortization of intangibles b 377 134 1,218 188
Compensation expense c 912 106 1,987 106
Income tax effect on non-GAAP adjustments d (724)   (149)   (1,802)   (183)
Total non-GAAP acquisition expenses 928 233 2,708 297
 
Non-GAAP net income $ 4,152 $ 3,843 $ 15,931 $ 14,826
 
 
 
Non-GAAP net income per share - basic $0.30 $0.29 $1.19 $1.13
Average shares - basic 13,211 13,005 13,130 12,890
 
Non-GAAP net income per share - diluted $0.30 $0.29 $1.18 $1.12
Average shares - diluted 13,350 13,213 13,248 13,083
 
 
a. Transaction Costs. Transaction costs are primarily legal, due diligence, and other consulting costs that are incurred directly as a result of the acquisition activities.
b. Amortization of intangibles. Amortization of intangibles arise from current and prior acquisitions and is non-cash in nature.
c. Compensation Expense. Compensation expense includes the retention and performance bonuses payable to the employees of the acquired Seismic and Pyxis businesses.
d. Income tax effect on non-GAAP adjustments. This amount adjusts the provision for income taxes to reflect the effect of the non-GAAP adjustments on non-GAAP net income.




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