Applied Signal Technology, Inc. Announces First Quarter Operating Resu

    Business Editors

    SUNNYVALE, Calif.--(BUSINESS WIRE)--Feb. 22, 2005--Applied Signal Technology, Inc. (Nasdaq:APSG) announced its operating results for the first quarter of fiscal year 2005 ended January 28, 2005.
    Revenues for the first quarter of fiscal year 2005 were $30,110,000 compared with revenues of $28,294,000 recorded during the first quarter of fiscal year 2004. The increase in revenues recorded during the first quarter of fiscal year 2005, when compared to the first quarter of fiscal year 2004, is due to a greater backlog of contractual obligations.
    New orders received during the first quarter of fiscal year 2005 were $11,126,000 compared to fiscal year 2004 first quarter new orders of $64,549,000. The significant change in new orders is due to the fact that during the first quarter of fiscal year 2004 we received a major modification resulting in an increase to our largest contract of approximately $48,524,000.
    Operating income for the first quarter of fiscal year 2005 was $3,272,000 compared with operating income of $3,176,000 recorded during the first quarter of fiscal year 2004. The increase in operating income is due to a growth in revenues.
    Net income for the first quarter of fiscal year 2005 was $2,027,000 or $0.17 per diluted share compared with net income of $2,156,000 or $0.19 per diluted share recorded during the first quarter of fiscal year 2004. Net income did not grow proportionately with operating income primarily because our estimated tax rate increased from 35% to 41%.
    Regarding the first quarter operating results, Mr. Gary Yancey, President and Chief Executive Officer of the Company, commented, "We are slightly behind the execution requirements of the contracts in backlog and are working to catch up to these requirements. This resulted in slightly lower first quarter revenue than it would have been under normal conditions. Part of this lag in execution is because of heavier than expected proposal activity and we are hiring to be able to meet all our commitments.
    "Our operating margin is within the range of our long-term business model which is 10% to 13%."
    Mr. Yancey concluded, "Our customers are continuing to come to us with new requirements for intelligence solutions. These requirements are still weighted heavily towards new developments and we believe they will eventually be followed by requirements for additional equipments."
    The Company will host a conference call on February 22, 2005 to discuss first quarter 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 February 22, 2005 at 5:00 p.m. EST/2:00 p.m. PST. There is no pass code required. This call may be listened to simultaneously over the Internet through World Investor Links' Vcall Website, located at www.vcall.com. A rebroadcast of the call will be available upon its completion and will remain available for a limited time.
    Applied Signal Technology, Inc. designs, develops, manufactures and markets advanced digital signal processing equipment to collect and process a wide range of telecommunications signals for signal reconnaissance applications. For additional Company-related information, 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 from those expected. Statements as to the Company's ability to hire qualified employees to be able to meet all our commitments; and future orders for additional equipment 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 profitable and whether any such contracts might be terminated prior to completion; whether we will be able to hire additional 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, 2004.

APPLIED SIGNAL TECHNOLOGY, INC. CONDENSED STATEMENTS OF INCOME (Unaudited) (In thousands except per share data)

Three Months Ended -------------------- January 28, January 30, 2005 2004 ------------ ------------

Revenues from contracts $ 30,110 $28,294

Operating expenses: Contract costs 19,839 18,300 Research and development 3,177 2,137 General and administrative 3,822 4,681 ------------ ------------

Total operating expenses 26,838 25,118 ------------ ------------

Operating income 3,272 3,176 Interest income (expense), net 163 141 ------------ ------------ Income before provision for income taxes 3,435 3,317 Provision for income taxes 1,408 1,161 ------------ ------------

Net income $ 2,027 $ 2,156 ============ ============

Net income per share-basic $0.18 $0.20 Average shares-basic 11,293 10,854

Net income per share-diluted $0.17 $0.19 Average shares-diluted 11,863 11,509

APPLIED SIGNAL TECHNOLOGY

CONDENSED BALANCE SHEETS (in thousands)

ASSETS

January 28, October 31, 2005 2004 ------------ ----------- (unaudited) Current assets: Cash and cash equivalents $ 11,335 $ 11,227 Short term investments 26,257 32,615 Accounts receivable 43,901 43,768 Inventory 9,023 5,392 Prepaids and other current assets 3,681 4,340 ------------ ----------- Total current assets 94,197 97,342

Property and equipment, at cost 63,941 63,105 Accumulated depreciation and amortization (51,500) (50,682) ------------ ----------- Net property and equipment 12,441 12,423

Other assets 1,732 1,687 ------------ -----------

Total assets $108,370 $ 111,452 ============ ===========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities: Accounts payable, accrued payroll and benefits $ 12,325 $ 18,319 Other accrued liabilities 2,356 2,336 Income taxes payable 349 28 ------------ ----------- Total current liabilities 15,030 20,683

Long-Term Liabilities: Accrued Rent 1,108 1,098 Other liabilities 309 305 ------------ ----------- Total Long-Term liabilities $ 1,417 $ 1,403

Shareholders' equity 91,923 89,366 ------------ -----------

Total liabilities and shareholders' equity $108,370 $ 111,452 ============ ===========

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CONTACT: Applied Signal Technology, Inc. James Doyle, 408-749-1888 (Chief Financial Officer) Alice Delgado, 408-749-1888 (Investor Relations)

KEYWORD: CALIFORNIA INDUSTRY KEYWORD: HARDWARE TELECOMMUNICATIONS SOFTWARE NETWORKING EARNINGS CONFERENCE CALLS SOURCE: Applied Signal Technology, Inc.

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