Integral Earnings Drop In First Quarter of 2007

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  Space News Business

Integral Earnings Drop In First Quarter of 2007

By WARREN FERSTER
Space News Staff Writer
posted: 22 February 2007
03:51 pm ET




WASHINGTON — Satellite ground-system software provider Integral Systems Inc. attributed an earnings decline for the 2007 first quarter to higher bid proposal costs, fees associated with an informal U.S. government probe and an ongoing review of strategic alternatives, and lower-than expected shipments by its Space Communications Systems segment.

Revenues for the period ending Dec. 31 were $27.4 million, a drop of $1.8 million from the 2006 first quarter number, Integral Systems of Lanham, Md., reported Feb. 9. Operating income dropped from $4.6 million the previous year to $3.1 million, while net income decreased from $3.1 million to $2.1 million, the company said.

As a result, the company is revising its net income projections for the 2007 fiscal year.

Integral has suffered a string of problems over the last year or so, including the April resignation and subsequent conviction on sex offense charges of its chairman and chief executive officer, Steven Chamberlain. That came after the January 2006 resignation of longtime Integral board member Bonnie Wachtel, who cited various corporate governance concerns.

In a Nov. 7, 2006, filing with the U.S. Securities and Exchange Commission (SEC), Integral said it had placed Gary Prince, executive vice president and managing director of operations, on administrative leave in connection with a previously disclosed informal SEC inquiry. In her Jan. 9, 2006, resignation letter, Wachtel said Prince had been convicted on felony fraud charges during the late 1990s but did not accuse him of any wrongdoing at Integral.

Under pressure from shareholders, Integral’s new management team, led by Chief Executive Peter Gaffney, retained an investment banking firm in April to explore strategic options including a sale of the company. During a conference call May 9, Gaffney said he hoped to close a deal before the end of 2006.

In the Feb. 9 press release disclosing its first quarter results, Integral said bookings remain strong but that bid proposal costs remain higher than normal due to the company’s pursuit of a U.S. Air Force GPS ground-system contract and bid activity at its RT Logic subsidiary. “These activities do impact our bottom line in the near term, but there is a lot of work we’re pursuing that we are well positioned to win,” Gaffney said.

The company said it is revising its earnings per share, but not its revenue, estimates for its 2007 fiscal year, which ends Sept. 30. Revenue for the year is still projected at $131 million, but net income is expected to be $1.07 per share, which is down 15 cents from guidance issued Dec. 11, the company said.

Elaine Brown, Integral’s chief financial officer, did not return a call seeking comment. Tory Walker, a company spokeswoman, did not respond to an e-mail requesting comment.