- The Washington Times - Monday, February 16, 2004

Shares of Sensytech Inc. slipped last week after the Newington, Va., defense contractor posted marginally improved earnings for its first fiscal quarter, citing several one-time expenses from a factory move.

Sensytech, a small company that makes torpedo defense and reconnaissance communications systems, said profits climbed 9 percent to $873,000 (13 cents per diluted share) for the quarter ended Dec. 31 from $804,000 (16 cents) a year earlier. Diluted earnings reflect the value of convertible warrants and stock options.

Revenue for the quarter jumped 8 percent to $12.6 million from $11.7 million a year earlier.

Sensytech’s stock slipped less than 1 percent to close at $14.16 Friday on Nasdaq from $14.99 a week earlier. The markets were closed yesterday for the Presidents Day holiday.

The stock has fallen as low as $9.40 and has risen as high as $20.21 over the last year.

The biggest factor for the small growth in net income was expenses from moving a manufacturing facility from New Jersey to western Pennsylvania, said Chairman and Chief Executive Officer S. Kent Rockwell.

“These kind of expenses are typical when you shut down one facility and move it to another location,” he said. Moving expenses, estimated at $893,000, are forecast to affect earnings through the second fiscal quarter, which ends March 30.

Procedural delays in receiving final government certification at the new plant have held up orders and hurt bookings, which reached $4.6 million in the recent quarter. The company expects to post $25 million in bookings in its second quarter.

Several analysts called the delays short-term concerns, adding they were encouraged by Sensytech’s contract opportunities with the government, primarily with the Defense and Homeland Security departments.

“They have great proprietary technologies and are leaders with their service products,” which include reconnaissance communications and airborne imaging systems, said Stephen Levenson, a research director for Advest Inc., a Hartford, Conn., financial services firm and subsidiary of the Mony Group Inc.

But Sensytech’s size, expected to reach $64 million in revenues for fiscal 2004 ending Sept. 30, make the company more vulnerable to contract delays or cancellations than its larger rivals, said Mr. Levenson, who rated the stock a “buy.”

With smaller contractors, “you can see quarterly results swing well above or well below analyst expectations if there is a fluctuation in production,” he said, stressing that shareholders look at the company’s year-to-year results for a more accurate view of its progress.

Mr. Levenson does not own any stock and Advest does not have a financial relationship with the company.

Steven Gish, an analyst, said he expected Sensytech’s back orders and revenues to pick up this year after the new facility is fully operational.

“But that won’t translate into earnings until later in the company’s fiscal year,” said Mr. Gish, with Newport Beach, Calif., investment bank Roth Capital Partners LLC.

By the second half of the fiscal year, the company also will be “primed” to make more acquisitions, Mr. Gish said, rating the stock a “buy.”

“One of the cornerstones of this company is its acquisitions,” which the company has not made since February 2002, Mr. Gish said. “But as Sensytech moves into secure earnings, we will likely see more in that market.”

Mr. Gish does not own any stock and Roth Capital does not do business with the company.

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