American Science And Engineering, Inc. F4Q10 (Qtr End 03/31/10) Earnings Call Transcript

American Science and Engineering, Inc. F4Q10 (Qtr End 03/31/10) Earnings Call Transcript
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American Science and Engineering, Inc. (ASEI)

F4Q10 (Qtr End 03/31/10) Earnings Call Transcript

May 11, 2010 4:30 pm ET

Executives

Anthony Fabiano – President & CEO

Ken Galaznik – SVP, CFO & Treasurer

Analysts

Steve Levenson – Stifel Nicolaus

Brian Ruttenbur – Morgan Keegan

Edward Marshall – Sidoti & Company

Sarah Catherine [ph] – Stephens

Michael Kim – Imperial Capital

Josephine Millward – Benchmark Company

Presentation

Operator

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Previous Statements by ASEI
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Good afternoon, ladies and gentlemen, and welcome to American Science and Engineering's fourth quarter of fiscal year 2010 results conference call. My name is Michelle and I will be your conference facilitator today. At this time, I would like to inform you that this conference is being recorded and all participants are in listen-only mode, and we will be facilitating a question-and-answer session at the end of the presentation.

Mr. Anthony Fabiano, President and Chief Executive Officer, will now begin the conference. Please go ahead.

Anthony Fabiano

Good afternoon. This is Anthony Fabiano. Welcome and thank you for joining us for our fourth quarter and fiscal year 2010 results conference call. I am joined by Ken Galaznik, our CFO and Treasurer. Ken will report the financial results and I will follow with comments on the results for the quarter and for the year.

I will now turn the call over to Ken, our CFO and Treasurer.

Ken Galaznik

Thank you, Anthony, and welcome to everyone to our quarterly conference call. Today, we released the results of our fourth quarter of fiscal year 2010, which ended March 31st. A copy of this press release will be e-mailed or faxed to those of you on our mailing list and has been posted on our Website.

Before we begin, I am obliged to share Safe Harbor guidelines with you. Forward-looking statements made during the course of this conference call are modified in their entirety by the risk factors we have identified in our press release and in our SEC filings.

Now, I would like to discuss the results of fourth quarter. Net sales and contract revenues in the March ’10 quarter were a new record high at $71.3 million, which represents a 24% increase when compared to the fourth quarter revenues in the prior year of $57.3 million. This increase in revenue is attributable to increases across all product lines except for contract, research and development, which was down $3.1 million, due to the absence of the CARS program in the current quarter.

The breakout of revenue by product line for the quarter was follows: cargo was $23.1 million, up 45% from the prior year; Z Backscatter Systems was $17.4 million, up 45%; parcel was $5.1 million, up 43%; Field Service was $25.4 million, up 6%; and contract research and development was $327,000, which was down from the prior-year quarter. The gross profit in the March 10 quarter was $33.4 million as compared to $27.1 million in the March ‘09 quarter. This increase in gross profit is a result of the increased revenues offset by the gross margin contribution decrease of 0.6 percentage points as a percent of revenues in the current quarter as compared to the prior-year quarter.

Selling, general and administrative expenses were $10.6 million or 15% of revenues in the March ’10 quarter as compared to $8.6 million or 15% of revenues in the March ’09 quarter. The increase in SG&A is a result of increased incentive and stock-compensation expense as the company achieved certain performance-based incentive goals, expanded bid and proposal activities and salaries and benefits related to headcount increases. Company-funded research and development expenditures in the current quarter were $4.9 million or 7% of revenues as compared to the prior-year expenditures of $5.5 million or 10% of revenues. While the current quarter spend is $661,000 below the prior-year quarter, for the year, expenditures were $1.7 million over the prior year.

The company recorded income tax provision of $5.5 million in the current quarter as compared to $4.8 million provision in the March ’09 quarter. The increase from the March ’09 quarter is due to the increase in taxable income attributable to the factors noted earlier, offset somewhat by a decrease in the effective tax rate from 36.6% in the prior-year quarter to 31% in the current quarter. The lower rate in the current quarter was primarily due to the reductions related to the reinforcement of revenues to states, probably recognizing nexus in states where we do perform services.

Fully diluted earnings per share in the March ’10 quarter were $1.34 as compared to $0.92 in the March ’09 quarter. A review of our annual results reflects the following. Revenues increased 11% to a new record-high of $242.1 million in the current year, from $218.4 million in the prior year. This is attributable to increases in cargo, Z Backscatter Systems, and Field Service, offset somewhat by decreases in parcel and contract research and development. Gross profit increased to $111.1 million in the current year from $93 million in the prior year. The increase is due to the increased revenues at an increase of 3.3 points in margin as a percent of revenue.

This improvement is due to a more favorable product mix and improved field service margins. SG&A expenses in the current year were $37 million or 15% of revenues as compared to $32.9 million or 15.1% of revenues in the prior year. This increase is primarily attributable to increased incentive in stock compensation expense, increased bidding proposal activities, and salaries and benefits related to headcount increases, offset somewhat by reduced legal expenses.

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