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

^{Published on 2010-12-16 13:10:36 - Market Wire}
 

SUNNYVALE, Calif.--([ BUSINESS WIRE ])--Applied Signal Technology, Inc. (NASDAQ:APSG) today announced operating results for the fourth quarter and fiscal year ended October 31, 2010. Revenues for the fourth quarter increased 15% to $62,576,000 compared to the year-ago perioda™s revenues of $54,231,000. This increase resulted from growth generated in several business areas, including network intelligence, tactical SIGINT and sensor surveillance, offset by slightly lower revenues in broadband communications.

"We are excited by continued strong demand and a good funding environment for a wide range of our products and services. In particular, we are capturing significant increases in orders for our tactical SIGINT programs, where we are providing our customers with a range of game-changing new technology and capabilities."

The Companya™s operating results for the quarter reflect the inclusion of certain non-recurring acquisition-related expenses, both cash and non-cash. While operating income for the fourth quarter decreased by 9% to $5,395,000; non-GAAP operating income, which excludes these expenses from the current and prior year periods, increased 12% to $7,047,000. This increase was achieved despite growth in legal costs associated with the Companya™s protection of its intellectual property.

Similarly, earnings per share in the quarter decreased to $0.23 per share versus $0.27 per share during the year-ago period. However, on a non-GAAP basis, excluding expenses related to acquisitions, earnings per share for the fourth quarter were $0.30.

William Van Vleet, President and Chief Executive Officer of Applied Signal Technology, Inc., commented, aWe are excited by continued strong demand and a good funding environment for a wide range of our products and services. In particular, we are capturing significant increases in orders for our tactical SIGINT programs, where we are providing our customers with a range of game-changing new technology and capabilities.a

New orders received during the fourth quarter of fiscal year 2010 were $59,001,000 compared to new orders received during the fourth quarter of fiscal year 2009 of $69,475,000. Fourth quarter orders were driven by increased demand in three divisions, tactical SIGINT, network intelligence and sensor surveillance, offset by a delay in the receipt of a major, anticipated order in the broadband communications division. New orders for fiscal year 2010 were $221,614,000 compared to new orders of $210,285,000 received during fiscal year 2009 and were driven by increased orders in network intelligence and tactical SIGINT. Specifically, orders in tactical SIGINT increased by 83% to $41.7 million during fiscal year 2010 when compared to fiscal year 2009.

Mr. Van Vleet continued, aAs a result of a well-executed acquisition and integration strategy, we have quickly created and enabled a highly capable network intelligence business. Our scale and ability to provide specialized cyber-security solutions places us in a position to compete for a wide range of programs, in some instances as a prime contractor.a

Mr. Van Vleet concluded, aWe are executing well and addressing a full spectrum of todaya™s urgent challenges in the ISR market. We are proud and pleased to have developed a true technology leadership position in each of our businesses. We are dedicated to maintaining this core strategic and competitive advantage in order to provide our customers with the tools that enable them to anticipate and address the challenges and threats of tomorrow. a

Fiscal Year 2010 Results

Revenues for fiscal 2010 grew 11% to $225,229,000 compared to fiscal 2009 revenues of $202,615,000. Operating income for fiscal 2010 declined 3% to $22,152,000 compared to $22,870,000 in fiscal 2009. However, non-GAAP operating income, which excludes the impact of acquisition-related expenses grew by 14% to $26,662,000. Net income for fiscal year 2010 was $13,223,000 or $0.98 per diluted share, compared to the year-ago level of $14,529,000 or $1.10 per diluted share. Net income on a non-GAAP basis for fiscal year 2010 was $15,931,000 or $1.18 per diluted share compared to the year-ago level of $14,826,000 or $1.12 per diluted share.

A detailed reconciliation between GAAP and non-GAAP results is provided in a table following the GAAP financial statements below.

Forward Looking Guidance

Based on a strong order backlog, good core program visibility, and an expectation for a continued favorable funding environment for its products and services, Applied Signal Technology currently anticipates revenue growth in fiscal 2011 and believes that fiscal 2011 revenues are likely to be in the $250 million to $270 million range. The Company also anticipates that operating income, as measured on a GAAP basis, is likely to be in the $22 million to $25 million range but excluding any costs related to exploring strategic alternatives. In addition, a fiscal 2011 effective tax rate of between 37-39% is anticipated, assuming the Federal R&D tax credit will be extended.

Applied Signal adopted the revised accounting standard for business combinations (ASC Topic 805) during fiscal year 2010 and therefore must expense, rather than capitalize, the Seismic acquisition costs. Other acquisition related costs including the amortization of intangibles, retention bonuses and compensation expense related to a potential earn-out will also be expensed. In addition, Applied Signal continues to protect its intellectual property aggressively and anticipates increased litigation expenses this fiscal year compared to the prior year.

Use of Non-GAAP Financial Information

To help investors understand past financial performance and project future results, the Company supplements the financial results provided in accordance with generally accepted accounting principles, or on a GAAP basis, with certain non-GAAP financial measures. To supplement the consolidated financial results prepared under GAAP, the Company uses a non-GAAP conforming, or non-GAAP, measure of net income that is GAAP net income and earnings per share adjusted to exclude certain costs related to completed acquisitions including the transaction costs, the amortization of intangibles, retention bonuses and compensation expense related to a potential earn-out. Non-GAAP net income and earnings per share gives an indication of the baseline performance before acquisition expenses that are considered by management to be outside the core operating results. These measures are not in accordance with, or an alternative for, GAAP and may be materially different from non-GAAP measures used by other companies. Non-GAAP net income is computed by adjusting GAAP net income for acquisition-related expenses. These non-GAAP results should be read only in conjunction with the consolidated financial statements prepared in accordance with GAAP. AST management regularly uses supplemental non-GAAP financial measures to internally understand, manage and evaluate the business and make operating decisions. These non-GAAP measures are among the primary factors management uses in planning and forecasting future periods. Management believes that these non-GAAP financial measures reflect an additional way of viewing aspects of operations that, when viewed with GAAP results, provide a more complete understanding of factors and trends affecting the business. Management compensates for the limitations in the use of non-GAAP financial measures by relying on comparable GAAP financial measures and providing investors with a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures. Investors are encouraged to review the reconciliation of our non-GAAP financial measures to the comparable GAAP results attached to this earnings release.

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 Companya™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.