Argon St Inc. has a market cap of $553.3 million; its shares were traded at around $25.44 with a P/E ratio of 23 and P/S ratio of 1.5. STST is in the portfolios of Bruce Kovner of Caxton Associates.
Highlight of Business Operations:At January 3, 2010, the unfavorable rate variance totaled $4.6 million, which was approximately $0.8 million more than the $3.8 million unfavorable rate variance planned for the period. Management expects the variance to be eliminated over the course of the fiscal year and therefore, no portion of the variance is considered permanent.
Cost of revenues decreased approximately $9.9 million or 14% for the three months ended January 3, 2010, as compared to the three months ended December 28, 2008. The decrease was primarily due to decreased contract activity and decreased revenue as described above. As a result of the decreased contract activity, direct materials costs, including subcontract costs, decreased $9.0 million consistent with lower material costs in the SSEE production lots and lower subcontractor costs with the OG2 contract. All other direct costs and overhead costs allocable to such direct costs decreased approximately $1.4 million. These decreases were partially offset by an increase in costs not allocable to a specific program of $0.5 million primarily attributable to increased stock-based compensation. Cost of revenues as a percentage of total revenue decreased to 81% for the three months ended January 3, 2010 as compared to 82% in the same quarter of fiscal year 2009, as we continue strong program execution despite lower volume.
At January 3, 2010, we had cash of $25.5 million compared to cash of $43.1 million at September 30, 2009. Given the large balance of cash during recent periods, we are continuing to assess alternative uses of cash, such as investments in our operations, mergers and acquisitions, and stock repurchases. The $17.6 million decrease in cash during the year was primarily the result of $16.1 million of cash used by operations and $1.4 million of cash paid for acquisitions of property, equipment, software and intangibles.
Net cash used in operating activities for the first quarter of fiscal 2010 was $16.1 million compared to $9.4 million in the same quarter of the prior year. Cash provided by operating activities in fiscal 2010 was primarily comprised of $8.1 million of net income as adjusted for non-cash reconciling items including depreciation and amortization, changes in deferred income taxes, and stock-based compensation. Net income, as adjusted for non-cash reconciling items was reduced by $24.2 million as a result of changes in operating assets and liabilities. This change was driven by a $12.6 million increase in accounts receivable net of deferred revenue, and a $10.1 million decrease in accounts payable. The remaining decrease is a $1.5 million decrease in other operating assets and liabilities.
Net cash used in investing activities for the first quarter of fiscal 2010 was $1.4 million compared to $2.4 million for the same quarter of the prior year. Investing activities included $1.2 million and $2.4 million of cash used to purchase property and equipment during the first quarter of fiscal 2010 and 2009, respectively. We expect to make additional investments in property and equipment as we upgrade and replace older equipment, as our employee base increases and as we invest in advanced C5ISR technology assets.
Net cash used in financing activities for the first quarter of fiscal 2010 was $0.1 million compared to $0.1 million of cash provided by financing activities for the same quarter of the prior year. In both fiscal year 2009 and fiscal year 2010, approximately $0.1 million of cash was generated from stock option exercises and related tax benefits. However, in fiscal year 2010, the Company retired certain restricted share units in respect of related payroll tax liabilities.
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