News

Applied Signal Technology, Inc. Announces Third Quarter Operating Results

SUNNYVALE, Calif.-(Business Wire)-August 26, 2008 - Applied Signal Technology, Inc. (NASDAQ:APSG) announced its operating results for the third quarter and first nine months of fiscal year 2008 showing double-digit growth in revenues over the same periods in fiscal 2007.

Revenues for the third quarter of fiscal year 2008 were $49,948,000 representing a 26% increase when compared to revenues of $39,542,000 for the third quarter of fiscal year 2007. Third quarter 2008 revenues increased primarily due to increased sales related to engineering development programs, standard products, and recognized revenues on approximately $1.9 million of pre-contract costs. Revenues for the first nine months of fiscal year 2008 were $137,957,000 representing an 11% increase when compared to revenues of $124,140,000 for the first nine months of fiscal year 2007.

Operating income for the third quarter of fiscal year 2008 was $3,218,000 compared to operating income of $1,623,000 for the third quarter of fiscal year 2007. Operating income increased for the third quarter of fiscal 2008 due to increased royalties associated with the licensing of our intellectual property into commercial satellite communications markets and as a result of improvements in company operations. Operating income for the first nine months of fiscal 2008 was $8,433,000 compared to operating income of $7,239,000 for the same period in fiscal 2007 due to increased royalties.

Net income for the third quarter and first nine months of fiscal year 2008 was $1,965,000 or $0.15 per diluted share and $5,468,000 or $0.43 per diluted share, respectively, compared to net income for the third quarter and first nine months of fiscal year 2007 of $977,000 or $0.08 per diluted share and $4,420,000 or $0.36 per diluted share, respectively. This represents a 24% increase in year-to-date net income compared to fiscal 2007. The effective tax rate for fiscal year 2008 is estimated to be 45.9%, compared to an effective tax rate of 43.2% for fiscal 2007.

New orders received during the third quarter of fiscal year 2008 were slightly lower at $70,275,000 compared to new orders of $74,081,000 received during the third quarter of fiscal year 2007. New orders for the first nine months of fiscal year 2008 were $145,314,000 compared to new orders of $150,861,000 for the same period of fiscal year 2007. New orders and backlog could be reduced by $2 to $4 million following the settlement of a notice to terminate several delivery orders for the convenience of the customer.

“We are pleased with the year-over-year increase in revenues and income,” said Mr. William Van Vleet, President and Chief Executive Officer. “We will continue to enhance our operational efficiency and improve our financial performance as our internal initiatives are fully implemented over the course of the next year. We are optimistic about the outlook for future business growth, as we have recently completed a high volume of proposals for new programs providing intelligence, surveillance and reconnaissance solutions for the defense and intelligence markets.”

Attached to this news release are unaudited condensed statements of operations and balance sheets.

The Company will host a conference call on August 26, 2008 to discuss third 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 August 26, 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 over the Internet through World Investor Links’ Vcall Website, located at 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 digital signal processing products, systems and services in support of intelligence, surveillance, and reconnaissance for global security. For further information about Applied Signal Technology’s products and services 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 expected continued improvement in financial performance as operational improvements become fully implemented; the estimated impact of the terminated delivery orders on new orders and backlog; and the outlook for future business growth are forward-looking statements. The risks and uncertainties associated with these statements include whether such operational improvements will be successful in improving financial performance; to what extent the backlog will be reduced after settlement of the terminated efforts; whether new 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 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 AUGUST 1, 2008 AND AUGUST 3, 2007

(In thousands except per share data)

	Three Months Ended				Nine Months Ended
	August 1,		August 3,		August 1,		August 3,
		2008		2007		2008		2007

Revenues from contracts	$	49,948	$	39,542	$	137,957	$	124,140
Operating expenses:
Contract costs		34,572		27,062		95,435		84,505
Research and development		3,953		3,756		10,486		10,751
General and administrative		8,205		7,101		23,603		21,645

Total operating expenses		46,730		37,919		129,524		116,901

Operating income		3,218		1,623		8,433		7,239
Interest income/(expense), net		158		189		538		454

Income before provision
for income taxes		3,376		1,812		8,971		7,693
Provision for income taxes		1,411		835		3,503		3,273

Net income	$	1,965	$	977	$	5,468	$	4,420

Net income per share - basic	$	0.16	$	0.08	$	0.44	$	0.37
Average shares - basic		12,538		12,171		12,427		12,062

Net income per share - diluted	$	0.15	$	0.08	$	0.43	$	0.36
Average shares - diluted		12,741		12,381		12,616		12,283

APPLIED SIGNAL TECHNOLOGY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

ASSETS

		August 1,			October 31,
		2008			2007

Current assets:
Cash, cash equivalents, and short term investments	$	41,094		$	34,933
Accounts receivable		42,287			44,476
Inventory		8,251			5,944
Refundable income tax		-			647
Other current assets		8,267			9,760
Total current assets		99,899			95,760

Property and equipment, at cost		64,980			62,565
Accumulated depreciation and amortization		(49,247	)		(46,096	)
Net property and equipment		15,733			16,469

Goodwill		19,964			19,964

Intangible assets, net		180			616

Long-term deferred tax asset, net		5,788			5,021
Long term investment		11,729			4,114
Other assets		828			789

Total assets	$	154,121		$	142,733

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Accounts payable, accrued payroll and benefits	$	19,402		$	16,983
Notes payable		1,429			1,429
Income taxes payable		-			14
Other accrued liabilities		2,297			1,997
Total current liabilities		23,128			20,423

Long-term liabilities:

Long-term notes payable		4,167			5,357
Other long-term liabilities		4,090			2,117
Total long-term liabilities	$	8,257		$	7,474

Shareholders' equity		122,736			114,836

Total liabilities and shareholders' equity	$	154,121		$	142,733