8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 11, 2006

INTEGRAL SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Maryland	0-18603	52-1267968
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

5000 Philadelphia Way, Lanham, Maryland 20706-4417

(Address of principal executive offices) (ZIP Code)

Registrant’s telephone number, including area code: (301) 731-4233

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 2 – Financial Information

Item 2.02. Results of Operations and Financial Condition.

On December 11, 2006, Integral Systems, Inc. (the “Company”), issued a press release announcing the Company’s financial results for the fiscal year ended September 30, 2006 and a cash dividend of $0.07 per share. A copy of the press release is attached hereto as Exhibit 99.1.

The information in this Form 8-K and the Exhibit attached to this Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except if the Company expressly states that such information is to be considered “filed” under the Exchange Act or incorporates it by specific reference in such filing.

Section 9 – Financial Statements and Exhibits

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

Exhibit	Description
99.1	Press Release dated December 11, 2006.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

INTEGRAL SYSTEMS, INC.
By:	/s/ Peter J. Gaffney
	Peter J. Gaffney
	Chief Executive Officer

Date: December 11, 2006

EXHIBIT INDEX

Exhibit Number	Description
99.1	Press release dated December 11, 2006.

EX-99.1

EXHIBIT 99.1

FOR IMMEDIATE RELEASE

CONTACT:

Elaine Brown

Chief Financial Officer

Integral Systems, Inc.

Phone: 301-731-4233

Fax: 301-731-9606

www.integ.com

INTEGRAL SYSTEMS ANNOUNCES RESULTS

FOR 2006 AND GUIDANCE FOR 2007

Company Has Its Best Year Ever

Integral Increases Cash Dividend Payment by 40%

Lanham, Md., December 11, 2006 — Integral Systems, Inc. (NASDAQ: ISYS) today reported its financial results for the fourth quarter of fiscal 2006. Revenues for the quarter were $27.7 million, up from $27.1 million in the fourth quarter of fiscal 2005—an increase of approximately 2%. Excluding a one-time, non-cash compensation charge related to the acceleration of stock option share vesting of approximately $1.2 million in fiscal 2005, operating income increased to $4.5 million for the current quarter, versus $3.5 million in the fourth quarter of fiscal 2005.

Net income increased to $3.0 million in the fourth quarter of fiscal 2006 compared to $2.2 million for the fourth quarter of fiscal year 2005 while earnings per share increased from $.20 per share to $.27 per share (all exclusive of the one-time compensation charge). Including the one-time compensation charge in the fourth quarter of 2005, net income increased by $1.8 million and earnings per share increased by $.16 per share for the fourth quarter of 2006.

For the fiscal year ended September 30, 2006 in its entirety, revenues increased to $116.5 million compared to $97.7 million last year. Operating income rose to $18.3 million from $11.0 million, while net income for fiscal year 2006 was $12.3 million, or $1.12 per share on a fully-diluted basis, compared to $7.3 million, or $0.69 per share, for fiscal year 2005 (exclusive of the one-time compensation charge). Fiscal year 2006 revenue, operating income, net income and earnings per share exceeded Company annual historic records (all previously from fiscal year 2005, exclusive of the one-time compensation charge) by 19%, 66%, 69% and 62%, respectively.

“I am quite pleased to post record financial results for the year and to also beat our twice upwardly revised full year guidance,” commented Pete Gaffney, Chief Executive Officer. “All operating segments were profitable and our latest acquisition, Lumistar, continues to be accretive to our earnings, contributing over $2 million in operating income in fiscal year 2006,” Gaffney continued.

Looking forward to fiscal year 2007 in its entirety, the Company is anticipating revenue, operating income, net income, and earnings per common share to increase by 13%, 6%, 10% and 9%, respectively, over fiscal year 2006, exclusive of legal fees related to the ongoing previously announced SEC and NASDAQ inquiries.

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“We are projecting another record setting year for the Company, although some recent procurement delays in the Air Force business in the last month have tempered our previously announced expectations for 2007,” commented Gaffney. “Even with the recent delays, we are projecting 15% growth in our Air Force business and we are still pursuing several additional large opportunities with the Air Force. Additionally, our subsidiaries continue to be very profitable with expected increases from Lumistar, Newpoint, and SAT in fiscal year 2007,” Gaffney stated.

The Company also announced that its Board of Directors has declared a quarterly cash dividend of $.07 per share, an increase of $.02 or 40% per share over the prior quarterly cash dividend payment. The dividend is scheduled to be paid on or about January 3, 2007 to all stockholders of record as of the close of business on December 18, 2006.

Mr. Gaffney will host a conference call Tuesday, December 12, 2006 at 11:00 a.m. Eastern Time (ET). Gaffney will discuss the earnings release and other Company business. To participate or listen to the call, dial 800-732-6092. A replay of the conference call can be heard December 12, 2006 from 12:30 p.m. ET through Thursday, December 14, 2006 12:30 p.m. ET by dialing 800-633-8284 or 402-977-9140. Ask for reservation number 21311412.

About Integral Systems

Founded in 1982, Integral Systems is a leading provider of satellite ground systems and has supported over 205 different satellite missions for communications, science, meteorological and earth resource applications. The Company was the first to offer an integrated suite of COTS (Commercial-Off-The-Shelf) software products for satellite command & control, the EPOCH IPS (Integrated Product Suite) product line. EPOCH IPS has become the world market leader in commercial applications with successful installations on 5 continents.

Through its wholly owned subsidiary SAT Corporation, the Company provides satellite and terrestrial communications signal monitoring systems to satellite operators and users throughout the world. The Company also provides software for equipment monitoring and control to satellite operators and telecommunications firms through its Newpoint Technologies, Inc. subsidiary. The Company’s RT Logic subsidiary builds telemetry processing systems for military applications including tracking stations, control centers and range operations. The Company’s Lumistar, Inc. subsidiary is a provider of system level and board level telemetry acquisition products. Integral Systems has approximately 420 employees working at Company headquarters in Lanham, Maryland, and at other locations in the U.S. and Europe. For more information, visit http: //www.integ.com.

Except for statements of historical facts, this news release contains forward-looking statements about the Company, including but not necessarily limited to the Company’s financial projections, all of which are based on the Company’s current expectations. There can be no assurance that the Company’s projections will in fact be achieved and these projections do not reflect any acquisitions or divestitures that may occur in the future. The forward-looking statements contained in this news release are subject to additional risks and uncertainties, including the Company’s reliance on contracts and subcontracts funded by the U.S. government, intense competition in the ground systems industry, the competitive bidding process to which the Company’s government and commercial contracts are subject, the Company’s dependence on the satellite industry for most of its revenues, rapid technological changes in the satellite industry, the Company’s acquisition strategy and those other risks noted in the Company’s SEC filings. The Company assumes no obligation to update or revise any forward-looking statements appearing in this news release.

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INTEGRAL SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended September 30,						Fiscal Year September 30,
	2006			2005			2006			2005
	(unaudited)			(unaudited)
Revenue	$	27,705,491		$	27,079,942		$	116,531,143		$	97,724,835
Total Cost of Revenue		17,589,956			19,179,013			77,142,092			68,012,039
Gross Margin		10,115,535			7,900,929			39,389,051			29,712,796
Operating Expenses
Selling, General & Administrative (includes Stock Based Compensation costs of $450,583 and $1,184,538 for fiscal years 2006 and 2005 respectively)		4,649,156			4,348,479			16,355,730			14,616,825
Research and Development		482,024			543,297			2,631,593			2,415,147
Product Amortization		380,000			645,403			1,580,000			2,581,628
Intangible Asset Amortization		59,656			68,750			542,684			275,000
Total Operating Expenses		5,570,836			5,605,929			21,110,007			19,888,600
Income from Operations		4,544,699			2,295,000			18,279,044			9,824,196
Interest Income		560,194			332,008			1,875,953			1,150,879
Gain on sale of Marketable Securities		—			—			—			49,997
Other Income (Expense)		(392,392	)		(107,893	)		(733,858	)		(637,341	)
Income Before Income Taxes		4,712,501			2,519,115			19,421,139			10,387,731
Income Taxes		1,738,262			1,316,702			7,082,209			4,086,811
Net Income	$	2,974,239		$	1,202,413		$	12,338,930		$	6,300,920
Weighted Average Number of Common Shares Outstanding During Period		10,992,849			10,433,071			10,891,053			10,282,420
Earnings Per Share (Basic)	$	0.27		$	0.12		$	1.13		$	0.61
Weighted Average Number of Fully Diluted Common Shares Outstanding During Period		11,171,887			10,733,645			11,003,787			10,533,987
Earnings Per Share (Diluted)	$	0.27		$	0.11		$	1.12		$	0.60

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