Earnings News and Notes

ICx Technologies [ICXT]

Losses widened slightly despite aggressive cost cutting, which couldn’t offset a $2.5 million charge related to the pending sale of PureTech Systems, a provider of video analytics and command and control software that ICx acquired two years ago (TR2, Dec. 12, 2007). ICx says that PureTech no longer fits into its strategic plan. ICx did see a spike in contract research and development (R&D), which typically carries lower margins than product and service revenues, which narrowed overall margins and helped lower profits. The 3% revenue decline was due to delays in government contracting, mainly from the lack of an FY ’10 Defense Appropriations Bill, and delays in potential international business. Sales benefited from growth in government funded R&D work, in particular the Joint Nuclear, Biological, Chemical Reconnaissance Increment II (J2) program that could potentially be worth hundreds of millions of dollars if it transitions into production (TR2, Oct. 15, 2008). ICx is seeing a pickup in activity on the J2 program, which aimed at creating a CRBN mission package consisting of a number of commercial and government off-the-shelf technology such as handheld devise, sampling kits and personal protection gear. The company believes there is a possibility that DoD will accelerate deployment of an early version. The concept is proven and there is “every indication that the customer is happy with the technology and progress to date,” Colin Cumming, ICx’ CEO, says on the earnings call. Funded backlog stood at $78M, up from 2Q but down from a year ago. Unfunded backlog stood at $330M. The company and analysts were disappointed with the results. But, Morgan Keegan defense and security analyst says he’s pleased with ICx’ steps to improve efficiencies and operational performance. ICx says it still has an opportunity to compete for the Transportation Security Administration’s Bottled Liquid Scanner program and believes it is well positioned with two of the three core technologies on a pending Defense Department bio-detection program called the Joint Biological Tactical Detection System. ICx is maintaining its 2009 earnings guidance of between $5M and $8M earnings before interest, taxes, depreciation and amortization. Sales guidance was lowered by $10M to between $180M and $190M.