Earnings News and Notes

American Science and Engineering [ASEI]

Earnings tumbled 43%, well below consensus estimates, on a 16% decline in sales, which the company attributes to the typical lumpiness in the security business and delays in contracts due to competitor protests. The 2009 fiscal third quarter was AS&E’s best ever for sales. Earnings also declined on a drop in gross margins stemming from a sales mix that favored lower margin products, and higher marketing, incentive and stock compensation expenses. The drop in sales was due to less revenue from Z Backscatter Vans (ZBV), field services, and contract research and development, which more than offset improvements in cargo systems, and parcel systems. The breakout product category: Cargo, $14.1M; Z Backscatter Systems, $16.5M; Parcel, $3.5M; Field Service, $20.2M; and Contract R&D, $572K. On the plus side, bookings were a strong $91M, driving backlog to a record $223.9M, which is 46% higher than a year ago. Bookings were driven by orders for cargo, parcel and Z Backscatter systems and field service. The company expects to ship 75% to 80% of the backlog during the next year. AS&E also demonstrated confidence in itself by boosting its quarterly dividend a dime, or 50%, to 30 cents per share. Company officials say the their pipeline of opportunities remains strong and are pleased with the proposed budget increases for Defense and Homeland Security Departments in FY ’11. The company is also expected to receive an Army order for 37 of its ZBV military trailers this year. The officials are also working to get their SmartCheck whole body imaging testing ready for testing by the Transportation Security Administration. AS&E also says it is developing a bottled liquid scanner.

L-1 Identity Solutions [ID]

Losses narrowed in part because the year ago quarter included a $528.6M non-cash impairment charge and slightly higher stock-based compensation expenses. Sales increased 9%, all of it organic, with the increase driven by driver’s license, enrollment and some intelligence work. Sales and income were below the company’s expectations due to a slippage in an expected Defense Department contract for the ABIS biometric matching software. The Army had planned to make a sole-source award to L-1, which is the incumbent ABIS provider, but that was delayed due to a protest threat from another competitor. The contract is related to an expansion of ABIS for biometrics being captured by U.S. forces in Afghanistan. L-1 disclosed that it has taken over the enrollment piece of the Transportation Worker Identification Credential program from Lockheed Martin [LMT] and it expects to see growth in this program going forward. In 2010 L-1 expects its sales to be between $740M and $760M, down from earlier guidance of between $750M and $775M. Organic growth is still expected to be in the 10% to 15% range and adjusted earnings before interest, taxes, depreciation and amortization between $110M and $120M.