Argon ST, Inc. Announces Q1 Results

    Business Editors/Technology Editors

    FAIRFAX, Va.--(BUSINESS WIRE)--Feb. 9, 2005--Argon ST, Inc. (NASDAQ:STST), today announced revenues and earnings for its first quarter ended January 2, 2005.

    HISTORICAL RESULTS OF OPERATIONS

    Revenues for the first quarter ended January 2, 2005 increased $29,217,000 to $56,510,000, up 107% compared to $27,293,000 for the prior year quarter.
    Net income for the first quarter ended January 2, 2005 was $4,920,000, or $0.24 per diluted share, an increase of 238% compared to $1,457,000 or $0.11 per diluted share for the prior year quarter.
    Terry Collins, President and CEO of Argon ST stated, "We are pleased with our first quarter financial results and they leave us on track for making our fiscal year financial objectives. The company also made significant progress in the integration of our processes and systems during the first quarter so that we can properly manage our expected growth."

    Financial Highlights

ARGON ST, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

January 2, September 30, 2005 2004 ------------- ------------- ASSETS CURRENT ASSETS Cash and cash equivalents $42,429,000 $29,732,000 Accounts receivable, net 66,463,000 59,716,000 Inventory 1,922,000 1,574,000 Deferred income tax asset 4,937,000 4,822,000 Prepaids and other 1,469,000 1,288,000 ------------- -------------

TOTAL CURRENT ASSETS 117,220,000 97,132,000

Property, equipment and software, net 14,461,000 13,949,000 Goodwill 107,776,000 107,776,000 Intangibles, net 1,947,000 2,190,000 Other assets 654,000 694,000 ------------- -------------

TOTAL ASSETS $242,058,000 $221,741,000 ============= =============

LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued expenses 13,897,000 $12,727,000 Accrued salaries and related expenses 8,413,000 10,606,000 Deferred revenue 45,295,000 28,336,000 Notes payable - current portion 226,000 226,000 Income taxes payable 705,000 5,810,000 Deferred rent 200,000 200,000 ------------- -------------

TOTAL CURRENT LIABILITIES 68,736,000 57,905,000

Deferred income tax liability, long term 1,805,000 1,901,000 Notes payable, net of current portion -- 56,000 Deferred rent 954,000 954,000 Commitments and contingencies -- --

STOCKHOLDERS' EQUITY Common Stock: $.01 Par Value, 25,000,000 shares authorized 19,765,934 and 19,468,734 share issued at January 2, 2005 and September 30, 2004 198,000 195,000 Additional paid-in capital 153,758,000 149,043,000 Treasury stock at cost, 126,245 shares (534,000) (534,000) Retained earnings 17,141,000 12,221,000 ------------- -------------

TOTAL STOCKHOLDERS' EQUITY $170,563,000 $160,925,000 ------------- -------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $242,058,000 $221,741,000 ============= =============

ARGON ST, INC. CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)

For the Fiscal Quarter Ended January 2, December 28, 2005 2003 ------------ ------------

CONTRACT REVENUES $56,510,000 $27,293,000

COST OF REVENUES 45,338,000 23,259,000

GENERAL AND ADMINISTRATIVE EXPENSES 3,335,000 1,734,000 ------------ ------------

INCOME FROM OPERATIONS 7,837,000 2,300,000 OTHER INCOME (EXPENSE) Interest income 140,000 8,000 Interest expense (2,000) -- ------------ ------------ 138,000 8,000

INCOME BEFORE INCOME TAXES 7,975,000 2,308,000 PROVISION FOR INCOME TAXES 3,055,000 851,000 ------------ ------------ NET INCOME $4,920,000 $1,457,000 ============ ============

PER SHARE AMOUNT Basic earnings per share $0.25 $0.12 ============ ============ Diluted earnings per share $0.24 $0.11 ============ ============

WEIGHTED AVERAGE SHARES OUTSTANDING Basic average shares outstanding 19,423,000 12,267,000 ============ ============ Diluted average shares outstanding 20,415,000 13,316,000 ============ ============

    On September 29, 2004, a wholly owned subsidiary of Sensytech, Inc. ("Sensytech") merged with and into Argon Engineering Associates, Inc. ("Argon Engineering") in a merger whereby each outstanding share of Argon Engineering common stock was exchanged for two shares of Sensytech common stock. As a result of the merger, the former Argon Engineering stockholders acquired approximately 65.6% of the issued and outstanding shares of Sensytech common stock. In accordance with Statement of Financial Accounting Standards No. 141 "Business Combinations," the merger was accounted for as a reverse acquisition, whereby Argon Engineering was deemed to have acquired Sensytech for financial reporting purposes. Consistent with the reverse acquisition accounting treatment, the historical financial statements presented for periods prior to the acquisition date are the statements of Argon Engineering except for stockholders' equity which has been retroactively restated for the equivalent number of shares of the legal acquirer.
    The following unaudited condensed pro forma results of operations reflect the pro forma combination of Argon Engineering and Sensytech as if the combination had occurred at the beginning of the period presented, compared with the actual results of operations of Argon Engineering for the same period.

Fiscal quarter ended December 28, 2003 ------------------------------ Historical Pro forma --------------- --------------

Revenue $27,293,000 39,958,000 Income from operations 2,300,000 3,400,000 Net income 1,457,000 2,109,000

Basic earnings per share $0.12 $0.11 Diluted earnings per share $0.11 $0.11

Basic wt average shares 12,267,000 18,766,000 Diluted wt average shares 13,316,000 19,992,000

    Pro forma revenues attributable to Sensytech were $12,665,000 for the fiscal quarter ended December 28, 2003. Pro forma income from operations and net income attributable to Sensytech was $1,458,000 and $873,000, respectively for the fiscal quarter ended December 28, 2003. Pro forma depreciation and amortization on the write up of tangible and intangible assets, in accordance with SFAS 141, was $115,000 and $243,000 respectively for the fiscal quarter ended and December 28, 2003 and the after tax effect was $221,000.

    About Argon ST, Inc.

    Argon ST designs, develops, and manufacturers 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.

    Statements in this press release which are not historical facts are forward-looking statements under the provisions of the Private Securities Litigation Reform Act of 1995. All forward-looking statements involve risks and uncertainties. The Company wishes to caution readers that certain factors can cause the Company's actual results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company. The Company undertakes no obligation and does not intend to update, revise or otherwise publicly release the results of any revisions to these forward-looking statements that may be made to reflect future events or circumstances.

--30--JM/ph*

CONTACT: Argon ST, Inc. Donald F. Fultz, 703-995-5695 don.fultz@argonst.com www.argonst.com

KEYWORD: DISTRICT OF COLUMBIA VIRGINIA INDUSTRY KEYWORD: MANUFACTURING TELECOMMUNICATIONS AEROSPACE/DEFENSE GOVERNMENT BANKING EARNINGS SOURCE: Argon ST, Inc.

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