APSG Applied Signal Technology, Inc. (MM)

Applied Signal Technology, Inc. (NASDAQ:APSG) today announced operating results for the fiscal fourth quarter and fiscal year which ended October 31, 2008. During the fourth quarter, the Company reported $48.4 million in revenue and $0.20 of earnings per diluted share, increases of 4.6% and 5.3%, respectively, versus the fourth quarter of fiscal 2007. For the full fiscal year, the Company reported that revenues increased to a record level of $186.3 million versus the fiscal 2007 level of $170.4 million. Diluted earnings per share for the fiscal year increased 14.5% to $0.63 versus the fiscal 2007 level of $0.55 per diluted share. Management Commentary Mr. William Van Vleet, President and Chief Executive Officer of Applied Signal Technology, Inc., commented �We are pleased with our good financial performance in fiscal 2008. Our revenue performance was driven primarily by continued demand for our core SIGINT products. Our improved operating income resulted primarily from a revenue mix shift towards development programs and technology-driven licensing revenues offset by a decrease in profits from our standard products. This improvement came despite a $1.3 million write-down for obsolete inventory during fiscal 2008. As we look ahead, we believe that spending levels in our high-demand niche markets will increase, even if total defense spending moderates. We are excited to compete on a variety of programs, including the planned cyber security initiative and the recapitalization of existing signal intelligence equipment.� Mr. Van Vleet concluded, �Given these opportunities, our mandate is clear. We will continue to improve our cost structure to become incrementally competitive. We will seek to capture organic growth opportunities across several categories of existing and in-development products. We will also utilize the strategic advantages provided to us by our strong capital position to find new, complementary growth opportunities. Our organization is motivated and focused on achieving each of these goals, which we believe will drive value to our customers, our partners, and our shareholders.� Results of Operations Revenues for the fourth quarter and fiscal year 2008 were $48,374,000 and $186,331,000, respectively, compared with revenues of $46,235,000 and $170,375,000 recorded during the same periods of fiscal year 2007. Fourth quarter and fiscal year 2008 revenues increased primarily due to increased sales related to engineering development programs. Operating income for the fourth quarter and fiscal year 2008 was $4,354,000 and $12,787,000, respectively, compared with operating income of $4,065,000 and $11,304,000 for the fourth quarter and fiscal year 2007, respectively. Operating income increased for the fourth quarter and fiscal year 2008 primarily due to greater royalties associated with the licensing of intellectual property into commercial satellite communications markets and to increased profitability generated from engineering development contracts. Net income for the fourth quarter and fiscal year 2008 was $2,549,000, or $0.20 per diluted share, and $8,017,000, or $0.63 per diluted share, respectively, compared with net income for the fourth quarter and fiscal year 2007 of $2,392,000, or $0.19 per diluted share, and $6,812,000, or $0.55 per diluted share, respectively. The effective tax rate for fiscal year 2008 is estimated to be 40.8% compared to the Company�s fiscal year 2007 effective tax rate of 43.2%. The fiscal 2008 effective tax rate decreased primarily because of a combination of discrete events associated with research and development credits and a change in the Company�s method of calculating the depreciation of fixed assets for tax purposes. New Orders New orders received during the fourth quarter of fiscal year 2008 were $39,825,000, essentially unchanged when compared to new orders of $40,332,000 received during the fourth quarter of fiscal year 2007. New orders received during fiscal year 2008 were $185,139,000 compared to new orders of $191,193,000 reported during fiscal year 2007. Attached to this news release are condensed, consolidated statements of income, balance sheets and statements of cash flows for the fourth quarter and fiscal year ended October 31, 2008. Conference Call The Company will host a conference call on December 16, 2008 to discuss fourth quarter and fiscal 2008 results. If you wish to participate in the conference call, please dial 1-877-407-8035 for domestic callers or 1-201-689-8035 for international callers on December 16, 2008 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 as to the Company�s future orders and continued growth, the demand for our equipment, the continued demand and increased spending levels for intelligence, surveillance and reconnaissance solutions, and our ability to improve our cost structure to become incrementally competitive and capture organic growth opportunities across several categories of existing and in-development products are forward-looking statements. The risks and uncertainties associated with these statements include whether orders will be issued by procurers, including the U. S. Government; the timing of any orders placed by procurers; whether we will be successful in obtaining contracts for these orders if they are forthcoming; whether any contracts obtained by us will be performed well and be profitable and whether any such contracts might be terminated prior to completion; whether we will be able to hire qualified staff as needed; and other risks detailed from time to time in our SEC reports including our latest Form 10-K filed for the fiscal year ended October 31, 2007. 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, 2008 AND OCTOBER 31, 2007 � � � � (In thousands except per share data) � Three Months Ended Twelve Months Ended October 31, October 31, October 31, October 31, � 2008 � 2007 � 2008 � 2007 � Revenues from contracts $ 48,374 $ 46,235 $ 186,331 $ 170,375 Operating expenses: Contract costs 34,400 31,628 129,835 116,133 Research and development 2,630 3,453 13,116 14,204 General and administrative � 6,990 � 7,089 � 30,593 � 28,734 � Total operating expenses � 44,020 � 42,170 � 173,544 � 159,071 � Operating income 4,354 4,065 12,787 11,304 Interest income/(expense), net � 223 � 229 � 761 � 683 � Income before provision for income taxes 4,577 4,294 13,548 11,987 Provision for income taxes � 2,028 � 1,902 � 5,531 � 5,175 � Net income $ 2,549 $ 2,392 $ 8,017 $ 6,812 � Net income per share - basic $ 0.20 $ 0.20 $ 0.64 $ 0.56 Average shares - basic 12,622 12,218 12,475 12,100 � Net income per share - diluted $ 0.20 $ 0.19 $ 0.63 $ 0.55 Average shares - diluted 12,844 12,397 12,681 12,314 APPLIED SIGNAL TECHNOLOGY, INC. � � CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) � ASSETS � October 31, October 31, � 2008 � � 2007 � � Current assets: Cash and cash equivalents $ 4,668 $ 5,250 Short term investments � 45,045 � � 29,683 � Cash, cash equivalents, and short term investments 49,713 34,933 Accounts receivable 40,115 44,476 Inventory 8,141 5,944 Refundable income tax - 647 Other current assets � 10,155 � � 9,760 � Total current assets 108,124 95,760 � Property and equipment, at cost 65,773 62,565 Accumulated depreciation and amortization � (50,660 ) � (46,096 ) Net property and equipment 15,113 16,469 � Goodwill 19,964 19,964 � Intangible assets, net 162 616 � Long-term deferred tax asset, net 4,410 5,021 Long term investment 9,381 4,114 Other assets � 865 � � 789 � � Total assets $ 158,019 � $ 142,733 � � LIABILITIES AND SHAREHOLDERS' EQUITY � Current liabilities: Accounts payable, accrued payroll and benefits $ 20,070 $ 16,983 Notes payable 1,429 1,429 Income taxes payable 498 14 Other accrued liabilities � 3,513 � � 1,997 � Total current liabilities 25,510 20,423 � Long-term liabilities: � Long-term notes payable 3,929 5,357 Other long-term liabilities � 3,847 � � 2,117 � Total long-term liabilities $ 7,776 $ 7,474 � Shareholders' equity � 124,733 � � 114,836 � � Total liabilities and shareholders' equity $ 158,019 � $ 142,733 � APPLIED SIGNAL TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Increase (decrease) in cash (In thousands) � � Year Ended October 31, � 2008 � � 2007 � Operating activities: � Net income $ 8,017 6,812 � Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 6,508 5,649 Stock-based compensation 4,779 4,150 Excess tax benefits from stock-based payment arrangements (37 ) (54 ) � Adjustments to reconcile net income to net cash provided Accounts receivable 4,361 (3,897 ) Refundable income taxes 752 - Inventory, prepaids, and other current assets (2,697 ) 2,680 Other assets 519 380 Accrued lease incentives 877 - Accounts payable, taxes payable and accrued liabilities 5,454 (1,565 ) � � Net cash provided by operating activities 28,533 14,155 � Investing activities: � Purchase of available-for-sale securities (109,964 ) (76,411 ) Maturity of available-for-sale securities 88,935 70,877 Additions to property and equipment (4,170 ) (4,451 ) � � Net cash (used in) investing activities (25,199 ) (9,985 ) � Financing Activities: � Issuance of Common Stock 4,044 4,394 Shares repurchased for tax withholding of vested restricted stock awards (279 ) (59 ) Excess tax benefits from stock-based payment arrangements 37 54 Term loan (1,428 ) (1,429 ) Dividends Paid (6,290 ) (6,074 ) � � Net cash (used in) financing activities (3,916 ) (3,114 ) � Net increase (decrease) in cash (582 ) 1,056 Cash, beginning of period � 5,250 � 4,194 � Cash, end of period $ 4,668 � 5,250 � � Supplemental disclosure of cash flow information: Interest paid 382 556 Income taxes paid 7,005 3,873