American Science and Engineering [ASEI]

1Q12 1Q11
Net Inc.
5.7M, 0.61
6.8M, 0.74

Sells fell nearly 5% due to a decline in revenues in the company’s cargo and Z Backscatter Van (ZBV) product lines. Company officials attribute the declines to ongoing order delays stemming from a number of issues such as budget and debt ceiling issues in the U.S., with the latter issue impacting spending decisions by European governments, the Arab spring, and fallout from the tsunami and consequent nuclear troubles in Japan that had ripple effects along the Pacific Rim. Popular uprising in the Middle East have delayed the completion of work on some cargo inspection system installations, which means delayed revenue recognition for the company, Anthony Fabiano, AS&E’s president and CEO, tells analysts. Bookings also suffered, albeit more dramatically, due to the same reasons that hampered sales, with orders totaling $8.3M in the quarter versus $76.7M a year ago. The sales breakout for the quarter by product category was: Cargo, $3.4M; Backscatter Systems, $10.4M; Field Service, $23.5M; Parcel, $12.9M; and Contract R&D, $910,000. AS&E booked six ZBVs in the quarter and shipped 12. Parcel revenues were well up due to the deliver of multiple whole body imaging systems for an order that has been fulfilled. The order decline also impacted backlog, which slid to $172.5M from $218.8M a year ago. The company expects to ship 75-80% of backlog in the next year. Fabiano says it was a disappointing quarter but that the sales pipeline remains strong but with no clarity when government agencies worldwide will begin to cut checks. As usual, AS&E provided no guidance and said sales could go up or down. One sign of its confidence in the market is a ramp up in R&D spending to $6.1M versus $5M a year ago as it continues to work to expand and enhance product lines. Net income declined 16% and free cash flow was $11.9M. The company only repurchased 301 shares in the quarter and still has $20M remaining on its repurchase authorization. Benchmark Capital analyst Josephine Millward, who has a hold on AS&E, says there is limited visibility to support any revenue growth for the company this year and sees “more potential downside” given the recent loss to Smiths Detection for a $69M Marine Corps contract for rugged mobile non-intrusive inspection systems and little in the way from the Army in near-term requirements.