EX-99.1 2 exhibit1.htm EX-99.1 EX-99.1

For Immediate Release

Argon ST, Inc. Announces Financial Results for Second Quarter Fiscal 2007;
Record Bookings of $135 Million

FAIRFAX, VA – May 10, 2007 Argon ST, Inc. (NASDAQ: STST), a leading systems engineering, development and services company providing full-service C4ISR (command, control, communications, computers, intelligence, surveillance and reconnaissance) systems and services to a wide range of defense and intelligence customers, today announced revenues and earnings for its second fiscal quarter and six months ended April 1, 2007.

Revenues for the three months ended April 1, 2007 were $64.3 million compared to $55.7 million for the prior year quarter. This represents an increase of $8.6 million from the prior year quarter. Revenues for the six months ended April 1, 2007 increased $927,000 to $124.7 million compared to $123.8 million for the same period in the prior year.

Net income for the three months ended April 1, 2007 was $4.2 million or $0.18 per diluted share compared to $4.5 million or $0.20 per diluted share for the prior year quarter. For the six months ended April 1, 2007 net income was $9.3 million or $0.41 per diluted share compared to net income of $10.1 million or $0.46 per diluted share in the prior year period.

The Company also reported bookings during the quarter of $134.9 million bringing total backlog at quarter end to $309.3 million. This compares to bookings of $103.7 million and backlog of $218.6 million, respectively, for the same period in the prior year. This represents a 41% increase in backlog over the last twelve months.

Terry Collins, Chairman and CEO, stated: “We were pleased to have achieved record bookings for the quarter from a broad set of opportunities our team has been pursuing. This result establishes a contract base for growth through the rest of FY2007 and into FY2008. Our quarterly margins were lower than planned as we elected to invest profits on a classified contract to achieve a technically superior solution and maintain positive relations with our customer. We anticipate that this should position us well for additional systems for this customer in the future. Additionally, our contract mix in the last quarter contained a higher proportion of cost type contracts which carry both less risk and lower margins than fixed price contracts. Despite our reduced margin in the quarter, we are maintaining our full year guidance as previously stated.”

Second Quarter Booking Highlights

  •   Awarded a contract modification for the exercise of an option on a multi-year full rate production contract to provide SSEE Increment E sensor systems with an approximate value of $43 million.

  •   Awarded four contracts for Intelligence, Surveillance, and Reconnaissance support. The base value of these contracts is more than $38.9 million with options totaling another $15.3 million.

  •   Awarded a contract modification for the Operational Test-Tactical Engagement System Communications Upgrade program to increase scope and value. US Army, PEO-STRI/PM-ITTS added $6.7 million to the contract value bringing the total value to over $40 million.

  •   Awarded contract modifications for engineering development in support of the Surface Ship Torpedo Defense (SSTD) for the U.S. Navy. The $5.3 million modification was awarded by the U.S. Naval Sea Systems Command for the continued development of Open Architecture functionality and sea trial certification of the AN/SLQ-25A/C system which is widely deployed on Navy surface ships.

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 1995. 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, 2006), 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 in award 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.

         
CONTACT:
  Victor Sellier
vic.sellier@argonst.com
www.argonst.com
 
        
 
     703.995.4219  
 
        

1

ARGON ST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)

                         
ASSETS   April 1, 2007           September 30, 2006
    (unaudited)                
CURRENT ASSETS
                        
Cash and cash equivalents
   $ 34,735             $ 33,498  
Accounts receivable, net
     92,553               86,842  
Inventory
     3,992               3,954  
Income taxes receivable
     267               23  
Deferred project costs
     —               5,597  
Deferred income tax asset
     2,553               2,083  
Prepaids and other
     996               1,481  
 
                        
TOTAL CURRENT ASSETS
     135,096               133,478  
Property, equipment and software, net
     17,203               16,726  
Goodwill
     149,171               148,719  
Intangibles, net
     12,037               13,200  
Other assets
     1,715               1,408  
 
                        
TOTAL ASSETS
   $ 315,222             $ 313,531  
 
                        
LIABILITIES AND STOCKHOLDERS’ EQUITY
                        
CURRENT LIABILITIES
                        
Accounts payable and accrued expenses
   $ 17,460             $ 19,124  
Accrued salaries and related expenses
     10,943               10,678  
Deferred revenue
     4,066               13,053  
Other liabilities
     552               452  
TOTAL CURRENT LIABILITIES
     33,021               43,307  
Deferred income tax liability, long term
     3,334               2,937  
Deferred rent and other liabilities
     1,405               1,591  
Commitments and contingencies
     —               —  
STOCKHOLDERS’ EQUITY
                        
Common stock:
                        
$.01 Par Value, 100,000,000 shares
                        
authorized, 22,488,165 and 22,313,709 shares 
                        
issued at April 1, 2007 and September 30, 2006 
     225               223  
Additional paid in capital
     215,028               212,610  
Treasury stock at cost, 126,245 shares
     (534 )             (534 )
Retained earnings
     62,743               53,397  
 
                        
TOTAL STOCKHOLDERS’ EQUITY
     277,462               265,696  
 
                        
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
   $ 315,222             $ 313,531  
 
                        

2

ARGON ST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)
(In Thousands, Except Per Share Data)

                                                                         
            Second Quarter Ended   Six Months Ended
            April 1, 2007   April 2, 2006   April 1, 2007   April 2, 2006
CONTRACT REVENUES
                   $ 64,310             $ 55,681             $ 124,715             $ 123,788  
COST OF REVENUES
                     51,901               43,686               97,655               96,438  
GENERAL AND ADMINISTRATIVE
                                                                
EXPENSES
                     5,908               5,096               12,851               11,204  
 
                                                                        
INCOME FROM OPERATIONS
                     6,501               6,899               14,209               16,146  
INTEREST INCOME, NET
                     267               355               597               355  
 
                                                                        
INCOME BEFORE INCOME TAXES
             6,768               7,254               14,806               16,501  
PROVISION FOR INCOME TAXES
             2,605               2,732               5,460               6,376  
 
                                                                        
NET INCOME
                   $ 4,163             $ 4,522             $ 9,346             $ 10,125  
 
                                                                        
EARNINGS PER SHARE (Basic)
           $ 0.19             $ 0.21             $ 0.42             $ 0.48  
 
                                                                        
EARNINGS PER SHARE (Diluted)
           $ 0.18             $ 0.20             $ 0.41             $ 0.46  
 
                                                                        
WEIGHTED-AVERAGE SHARES
                                                                        
   OUTSTANDING
                                                                
   Basic
             22,332               22,006               22,280               21,185  
 
                                                                        
   Diluted
             22,779               22,618               22,755               21,855  
 
                                                                        

3

ARGON ST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW (unaudited)
(In Thousands)

                                         
                            Six Months Ended
                            April 1, 2007   April 2, 2006
Cash flows from operating activities
                                
   Net income
                   $ 9,346     $ 10,125  
   Adjustments to reconcile net income to net cash provided by
                        
      operating activities:
                        
      Depreciation and amortization
             3,772       2,715  
      Deferred income tax benefit
             (61 )     (471 )
      Stock-based compensation
             865       886  
      Bad debt expense
             30       —  
      Loss on sale of equipment
             2       —  
      Change in:
                        
         Accounts receivable
     (5,805 )     26,851  
         Inventory
     (38 )     (357 )
         Deferred project costs
     5,597       —  
         Prepaids and other
     485       (267 )
         Accounts payable and accrued expenses
     (1,664 )     (17,709 )
         Accrued salaries and related expenses
     265       411  
         Deferred revenue
     (8,987 )     (2,686 )
         Income taxes receivable
     (244 )     1,285  
         Deferred rent
     (135 )     159  
 
                                        
      Net cash provided by operating activities
     3,428       20,942  
Cash flows from investing activities
                                
   Acquisitions of property, equipment and software
             (3,091 )     (1,909 )
   Reduction in advances and cash held in escrow
             -       10,900  
   Radix Technologies, Inc. acquisition
             (400 )     (9,935 )
   Acquisitions of ProDesign Solutions, LLS net of cash acquired
             -       (1,712 )
   Proceeds from sale of equipment
                     5       —  
   Deposits and other assets
                     (309 )     298  
 
                                        
      Net cash used in investing activities
     (3,795 )     (2,358 )
Cash flows from financing activities
                                
   Repayment on line of credit, net of borrowings
             -       (11,000 )
   Payment on note payable
                     —       (56 )
   Payments on capital leases
                     49       (10 )
   Tax benefit on stock option exercises
             438       1,512  
   Proceeds from exercise of stock options
             722       1,932  
   Proceeds from employee stock purchase plan exercises
             395       444  
   Proceeds from secondary offering
             -       46,768  
 
                                        
      Net cash provided by financing activities
     1,604       39,590  
   Net increase in cash and cash equivalents
             1,237       58,174  
   Cash and cash equivalents, beginning of period
             33,498       4,064  
 
                                        
   Cash and cash equivalents, end of period
           $ 34,735     $ 62,238  
 
                                        
   Supplemental disclosure
                                
      Income taxes paid
           $ 5,389     $ 4,051  
 
                                        
      Interest expense paid
           $ 3     $ 161  
 
                                        

4