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American Science and Engineering, Inc. (NASDAQ:ASEI)

F1Q11 (Qtr End 06/30/2010) Earnings Call

August 9, 2010 4:30 am ET

Executives

Anthony Fabiano - President and CEO

Ken Galaznik - CFO and Treasurer

Analysts

Edward Marshall - Sidoti & Company

Steve Levenson - Stifel Nicolaus

Brian Ruttenbur - Morgan Keegan

Sarah Catherine Phillips - Stephens

Josephine Millward - Benchmark Company

Operator

Good afternoon, ladies and gentlemen, and welcome to the American Science and Engineering's first quarter of fiscal year 2011 results conference call. (Operator Instructions)

Mr. Anthony Fabiano, President and Chief Executive Officer, will now begin the conference.

Anthony Fabiano

Good afternoon everyone. This is Anthony Fabiano. Welcome and thank you for joining us for our first quarter fiscal year 2011 results conference call. I am joined by Ken Galaznik, our CFO and Treasurer. Ken will report the financial results and I'll follow with comments.

I'll now turn the call over to Ken Galaznik, our CFO and Treasurer.

Ken Galaznik

Thank you, Anthony, and welcome everyone to our quarterly conference call. Today, we released the results of our first quarter of fiscal year 2011, which ended June 30, 2010. A copy of this press release was e-mailed or faxed to those of you on our mailing list and it has been posted on our website.

Before we begin, I am obliged to share our Safe Harbor guidelines with you. Forward-looking statements made during the course of this conference call are modified in their entirety by the risk factors we have identified in our press release and in our SEC filings.

Now, I would like to discuss the results of the first quarter. Net sales and contract revenues in the June '10 quarter were $53.6 million or 2% below the first quarter revenues in the prior year of $54.7 million. This decrease in revenues is attributable to decreases in cargo and Z Backscatter systems, offset somewhat by increases in parcel, field service and contract research and development.

The breakout of revenue by product line was as follows: Cargo was $8.2 million; Z Backscatter Systems was $17 million; Field Service was $22.6 million; Parcel was $5.1 million; and Contract Research and Development was $793,000. Also, revenue in the current quarter increased substantially over the prior year due to one multi-unit order that was fulfilled in the current quarter.

The gross profit in the June '10 quarter was $23.8 million, down 7% as compared to the June '09 quarter. This decrease in gross profit is a result of the 2% decrease in revenues noted earlier, and the gross margin contribution decrease of 2.4 percentage points in the current quarter as compared to the same quarter in the prior year.

The decrease in gross margin contribution is primarily attributable to product mix. As a percentage of total sales, the current quarter had less higher-margin Z Backscatter system revenue and substantially more lower-margin parcel revenues.

Selling, general and administrative expenses were $9.8 million or 18% of revenue in the June '10 quarter, as compared to $8.7 million or 16% of revenue in the June '09 quarter. The increase in SG&A expense is a result of salaries and benefits related to headcount increases and increased marketing-related expenses.

Legal expenses decreased in the current quarter, as the company had significant legal expenses in the prior year attributable to a Patent Litigation Suit in which we were the plaintiff that were offset by due diligence (effects) in the first quarter that have since been discontinued.

Company-funded research and development expenditures in the current quarter were $5 million or 9% of revenue as compared to the prior-year expenditure of $5.8 million or 11% of revenues. Our plan for the current quarter was below last year's actual spend in anticipation of efforts directed toward non-research and development activities.

Other income increased by $1.1 million, primarily due to the mark-to-market gain recognized on a foreign currency put, which appreciated during the quarter due to the volatility of the euro.

The company recorded income tax provision of $3.6 million in the current quarter as compared to a $4 million provision in the June '09 quarter. The decrease from the June '09 quarter is due to the reduced taxable income attributable to the factors noted earlier, and a reduction in the effective tax rate from 35.5% in the prior year quarter to 34.5% in the current year quarter.

The reduction in the effective tax rate in the current quarter is primarily attributable to a reduced state tax apportionment, and an increase in the qualifying manufacturing deduction in the current year. At this time we anticipate the effective tax rate to be 34.5% for the current year.

Fully diluted earnings per share in the June '10 quarter were $0.74 as compared to earnings per share in the June '09 quarter of $0.81.

Now let's take a look at the balance sheet. The balance in cash, restricted cash, and short-term investments at June 30, 2010 was $161 million or $18.1 million below the March 31, 2010 balance, while cash used by operating activities was $13.7 million, which was driven by a $5.7 million decrease in accrued expenses, primarily related to the payment of year-end incentive compensation programs, a $6.8 million reduction of deferred revenue, related to the recognition of revenues for which payment was received in a prior period, and a $2.5 million reduction in customer deposits as the revenue related to those pre-payments was recognized in the current quarter.

CapEx for the first quarter was $1.2 million, and we paid a quarterly dividend of $2.7 million. Free cash in the current period was a negative $14.9 million as compared to a positive $3.9 million in the prior year quarter. Accounts receivable increased $2 million in the current period, and DSO increased from 48 days at March 31 to 67 days in the current period. The increase is primarily due to the generation of a large invoice in the last week of the current quarter.

Inventory increased $1.9 million in the current quarter. In the first quarter, depreciation & amortization expense was $1.2 million. As to the status of the stock repurchase program, we did not repurchase any shares in the current quarter, leaving a currently authorized remaining balance under the program of $23.8 million.

Bookings this quarter were $76.7 million after the de-booking of the protest at High Energy MobileSearch order which was booked in our fourth quarter of FY '10, bringing the backlog at June 30, 2010 to $218.7 million, up 38% from the June 30, 2009 balance of $158.4 million. While we have not yet recorded backlog, the company has $11.2 million of unfunded contracts which are expected to be recorded at backlog in the next 12 months.

As noted in our press release, at their last Board Meeting, the Board voted to approve a cash dividend of $30 per share payable on September 2, 2010 to the holders of record at the close of business on August 23, 2010.

I will now turn the meeting back to Anthony for his comments.

Anthony Fabiano

Thank you, Ken. Well, the story for the quarter was bookings and backlog. Our efforts to aggressively invest and worldwide channel expansion in key market verticals are clearly producing positive results with strong first quarter bookings increasing backlog to over $218 million.

So let's talk about bookings and backlog in more detail. As Ken mentioned, we reported a 33% increase in bookings to $76.7 million for the first quarter of fiscal year 2011 as compared with $57.7 million in bookings for the first quarter of the prior fiscal year. So I'm very encouraged because this is typically a quarter where bookings tend to be on the light side.

The strong bookings quarter was the result of record bookings for Z Backscatter systems. You got to know that makes AS&E happy.

Backlog increased 38% from the same period in the last fiscal year, and it climbed to over $200 million for the second time in the last three quarters. So that's a very bullish sign for us.

The sales pipeline: The pipeline looks strong and has increased over 10% from the end of the last quarter, first time I've seen this in a long time. We started to see some of this pipeline convert into orders in the current quarter with $35.6 million in new bookings announced to-date, increasing our already strong backlog to-date.

These new orders in Q2 include a $23 million milestone SmartCheck systems order for harsh environments, a $7 million order for multiple ZBVs for the U.S. government, and a $5.3 million order for ZBVs for a Latin American customs agency.

Let's review some highlights and opportunities in our product areas in the first quarter, starting with none other than Z Backscatter systems. The combination of orders from the U.S. military for the ZBV Military Trailer, or Mil Trailer, and from customs organizations for the Z Backscatter Van made this a record quarter for Z Backscatter systems.

In April, we received a U.S. government contract award valued at $48.8 million for ZBV Military Trailers. We received the first funding release in the amount of $34 million, and in June the U.S. government funded another $6.7 million for Mil Trailers, bringing the total funded amount to-date to $40.7 million.

We also received a milestone international ZBV Mil Trailer order. This is our first non-U.S. order for the ZBV Mil Trailer for use in war zones - interesting. We booked 35 ZBVs in the quarter Q1, bringing our total systems sold from inception to 496 as of the end of the first quarter. And as an aside, we shipped 8 ZBVs in the quarter.

Our orders in Q1 include as follows: Multiple Z Backscatter Vans valued at $13.9 million for customs applications. Note, this order was not shipped in Q1 due to the customer's schedule requirements. We received another order for a Latin American customs agency for multiple ZBVs valued at $8.3 million, also for customs applications to detect drugs, weapons, stowaways and contraband. And also as a note, this order was received late in the quarter, so it was not shipped in Q1.

We also received a multi-million dollar order for two Z Backscatter systems for a Middle East customer for counterterrorism applications.

Now turning to the cargo system; the NATO C3 Agency placed a follow-on order for an additional Z Portal system demonstrating to a satisfaction with this unique and highly effective product. This order closely followed a Z Portal order from NATO received in the fourth quarter of the previous fiscal year.

We received a critical infrastructure order for a Z Portal to secure a high threat facility in the U.S., we expect that this break through order could lead to additional requirements for similar facilities. We're pretty encouraged about this one.

The military and customs organizations that have deployed our proprietary and Z Backscatter products, including the ZBV, the Mil-Trailer and the Z Portal are reporting significantly improved field performance for their counterterrorism and customs applications using Z Backscatter technology. As evidenced by their increasing number of contraband seizures as well as the increased level of new orders we're experiencing.

Turning to parcel systems, it was a light bookings quarter for parcel, but we continue to receive consistent orders from key customers including the U.S. Military, U.S. government agencies and Fortune 500 companies who require comprehensive explosive and contraband threat detection. As you know, our parcel systems business area includes personnel scanning systems. And as I noted earlier, we received a significant $23 million order in the current quarter, Q2; that will boost booking for this business year in the fiscal year which we're very, very happy about.

Service; Service once again recorded a very solid bookings quarter and continues to be a strong segment of our business with it's high level of customer satisfactions and contributions to the bottom line. In the first quarter we received a $6 million order for a service renewal contract for ZBVs and ZBV Mil Trailers operating in Theatre to support U.S. Government's counterterrorism missions.

With the higher bookings and the continued introduction of new products, our install base of best in class products continues to rapidly grow. When this is coupled with high levels of customer satisfaction, the quality of our products and excellent service performance we are expecting our service business to continue to make a significant contribution to our overall profitability.

Now to summarize the quarter; although revenue in the quarter was reduced by customer site preparation delays for cargo products and schedule requirements for ZBVs, we remain well positioned to deliver significant portion of our backlog on schedule to meet or exceed customer expectations throughout the balance of the fiscal year.

We are prepared to execute our recent Z Backscatter systems orders rapidly and efficiently to drive revenue and earnings performance. While this was light quarter for parcel bookings, it was a great quarter for parcel revenue. Our team executed flawlessly to deliver a large parcel order on time to meet customer expectations.

As I mentioned in previous calls, one of the key metrics that we follow closely is customer satisfaction. And an excellent measure of customer satisfaction is repeat orders, otherwise known to me as customer loyalty. In Q1, we received follow-on orders from strategic customers including key U.S. Government agencies, specifically the U.S. Military and NATO. Our percentage of repeat orders is increasing annually and contribution significantly to our strong bookings results.

Simply stated, our systems are proving themselves in the field and our customers are ordering more. We're very proud of the repeat orders from loyal customers and the broader market recognition of AS&E's differentiated products and customer service advantages is most encouraging. It is the result of enhanced sales penetration initiatives, growing product offering and a growing reputation for superior detection equipment at affordable pricing coupled with best in class service and support.

We believe we are well positioned to take advantage of new global security opportunities to drive successful performance throughout the fiscal year.

I'll now turn the call back to the operator.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from Edward Marshall with Sidoti & Company.

Edward Marshall - Sidoti & Company

Ken, I'm sorry to do this to you, but I'm going to ask have you repeated the revenue numbers that were in your prepared commentary. I had missed them.

Ken Galaznik

Cargo was $8.2 million; Z Backscatter systems was $17 million; Field Service, $22.6 million; parcel, $5.1 million and Contract R&D was $793,000.

Edward Marshall - Sidoti & Company

Unusually high R&D number in the quarter, is there some seasonality to it? Looks like it was up last year as well, relative to the percent of sales.

Ken Galaznik

No, not really. Last year the first quarter was $500,000, this year, $793,000.

Edward Marshall - Sidoti & Company

I'm sorry, not the sales number. I'm looking at the expensed R&D.

Ken Galaznik

It was below last year by about around $800,000, and as I commented we planned on a lower number in the current quarter internally, because of the redirecting efforts to non-R&D functions.

Edward Marshall - Sidoti & Company

And then, were there Mil Trailers shipped in the quarter?

Ken Galaznik

There were.

Edward Marshall - Sidoti & Company

Could you say the amount?

Ken Galaznik

Yes, there were 10 shipped in the current quarter.

Edward Marshall - Sidoti & Company

And then you mentioned bookies in the Field Service were very strong. What was the total?

Ken Galaznik

Historically, this is a lighter quarter for Field Service. The next quarter is typically the stronger one. But in the past, Field Service bookings in this quarter were usually close to zero, so we're pretty happy with where they ended up.

Edward Marshall - Sidoti & Company

So was it strong on a relative sense, or was it strong just in general?

Ken Galaznik

On a relative sense.

Operator

Our next question comes from the line of Steve Levenson with Stifel Nicolaus.

Steve Levenson - Stifel Nicolaus

You mentioned $13.9 million of, I guess, Z Backscatter system shipments that were held up because of customer schedules. Were those items that could have shipped had they been prepared, or have they since been shipped subsequent to the end of the quarter?

Anthony Fabiano

Yes, what happened is, we can turn over Backscatter systems very, very quickly. And the customer just wasn't ready to take them. So the schedule was such that we had to wait till successive quarters to deliver them to meet the requirements. So yes, we could have shipped them.

Steve Levenson - Stifel Nicolaus

And you also mentioned that one of your customers for cargo was doing some site preparation, what was the impact of that?

Anthony Fabiano

Yes, that's something we've run into, Steve, and I suspect that many of our competitors do it. It's part of the cargo business. And you build the equipment and then you need to install it, but often times the customer would prefer to do the site prep and construction as opposed to contracting it to us. And when that happens, it's frequent that they're not ready, especially international customers.

And that was exactly the case. They just weren't ready for us to put the equipment on the site even though it was built and ready to go. So we just got to support them and help them and get them there.

Steve Levenson - Stifel Nicolaus

And what would you estimate as the renewal rate on Field Service?

Anthony Fabiano

I'm not sure I understand the question.

Steve Levenson - Stifel Nicolaus

Are people pretty much 100% renewing or are some of your customers choosing to go elsewhere, do it on their own?

Anthony Fabiano

No, we're in good shape. I would say, in spite of the pressure nationally on the budget, the renewals have been really strong. And they really count on us to do the job. And we're efficient; we're effective, we keep the equipment up and running. They would rather use us than somebody else to try to do it themselves.

Steve Levenson - Stifel Nicolaus

There was a solicitation for $67 million worth of Z Backscatter military trailers form the marines that said the order date was anticipated to by August 9th, but the award date that's today, can you give us an update on that?

Anthony Fabiano

Where did you pick that up?

Steve Levenson - Stifel Nicolaus

From the soliticitation which was supposed to back in July.

Ken Galaznik

I really couldn't comment on, Steve, as far as what I've heard recently. Those dates tend to move around a bit.

Anthony Fabiano

There is interest there, but I can't comment on where that one is going because funding has to be in place and a lot of other things. So I think time will tell on that one.

Steve Levenson - Stifel Nicolaus

It was nice to see the SmartCheck order, the military order, just curious as to what the update is. But using scanning is a little bit controversial, just wondered where you think you are right now with the TSA?

Anthony Fabiano

Well some good news there, the TSA has asked us to deliver our prototype to TSA for testing. And voila, it's at the lab finally being tested. We've been waiting a long time and they got a huge backlog of test work to do. So we're thrilled that the system is down in test.

Operator

Your next question comes from the line of Brian Ruttenbur with Morgan Keegan.

Brian Ruttenbur - Morgan Keegan

First question I have is just to confirm some numbers, other income you said was due to the euro gains $1.4 million, is that right?

Anthony Fabiano

It has to do with a foreign currency put that we had in place. Brian, we're required to do a mark-to-market on that at the end of the quarter and that drove a $1.1 million pickup.

Brian Ruttenbur - Morgan Keegan

Okay, so that was $1.1 million at the gap, is that right?

Anthony Fabiano

Yes.

Brian Ruttenbur - Morgan Keegan

And then maybe you can walk through the cash. You said cash was down roughly $18 million. Can you walk through the logic behind that, why you didn't generate cash in the period?

Ken Galaznik

Some of it, Brian, if I hear the angle you're down correctly, when you at the $6.8 million reduction in deferred revenue, that's simply a function of payments we've received in the prior period. We had cash in the prior period we have the revenue in the current period. So that we had to back that out of the cash as you'll see on the cash slow statement.

In addition to that $6.8 you've got another $2.5 million that came out related to the application, if you will, of customer deposits. That's where the revenue was recognized in the current period.

So that $9.3 million that's about half of it. In addition to that, you've got a significant reduction in accrued expenses of $5.7 million that goes to primarily the payment of year end incentive compensation programs.

In addition to that, you've got little heavier quarter for us than usual, $1.2 million of CapEx. And as we've talked about the earnings for the period, we were down a bit in net income starting off at the top of the cash flow.

Brian Ruttenbur - Morgan Keegan

Okay. And then maybe we can just talk about, I know you don't give any kind of forward guidance but something Anthony said was kind of in reference to that you expect to ship and recognize as revenue the remaining of the backlog or the majority of the backlog this year.

And he made some kind of reference, I don't know if I read this wrong or heard it wrong, that this is going to be kind of your weakest quarter, something along that that's going to get stronger from here. Maybe, Anthony, or, Ken, you can talk to that about maybe second quarter should be stronger than first quarter?

Anthony Fabiano

Well, let me qualify a few things; one, we were specifically asked about Field Service bookings. I mentioned that historically this quarter was weaker than other quarters. So that was the specific comment I think that you picked up.

The other thing that I think I was trying to imply, but I did not specifically state how much of our backlog would be shipped is that we had a lot of shipments that could have gone in Q1 but didn't go, as Ken said and I said.

And we have a significant backlog of business powered by Z Backscatter systems, which is you know, are high end, high turn over systems. So we're pretty confident that we're going to be able to move a lot of equipment out in the next couple of quarters. But I didn't make any comments about Q2 versus Q1 or any other quarters or nor did I say how much of our total backlog would be deliverable in the fiscal year.

Brian Ruttenbur - Morgan Keegan

Okay. Just a follow up a little bit on that. You have roughly $22 million ZBVs that you got. Booking in the period that you did not recognize as revenue because you haven't shipped them yet and you anticipate shipping those this fiscal year. Is that correct form the customs primarily?

Anthony Fabiano

I would hope so unless there are changes in schedule. A lot depends upon the customer's deployment than having the sites ready where the equipment is tailored to go. But you never know, Brian, but I'm optimistic.

Brian Ruttenbur - Morgan Keegan

Okay. And then maybe I'll ask a question to Ken, in terms of cash generation on the year. Do you anticipate generating equivalent amount of cash as you did last year?

Ken Galaznik

The last year was strong because of the flipside of what we just talked about on deferred revenue and customer deposits. So that's the thing. The last time we had a quarter like this from a cash stand point, for a free cash stand point was that first quarter of '09. And by the end of the year we generated about $33 million of free cash.

Brian Ruttenbur - Morgan Keegan

Okay, so to look for a $30 million to $40 million cash generation seems to be the norm. Brian, I'll let you make that call, but if I go back to the '09 year, we started off in a similar position for free cash, and that's where we wound up.

Operator

Your next question comes from the line of Sarah Catherine Phillips with Stephens.

Sarah Catherine Phillips - Stephens

Just wondering if you have an update on the re-bidding process; on the CBP order that was de-booked in the quarter?

Anthony Fabiano

Yes, as a matter of fact we do so. The Government issued a corrective action as a result of that bid to re-bid it, and the interested parties to submit a proposal which we have submitted about a week ago.

Sarah Catherine Phillips - Stephens

And then do you know how long that process might take?

Anthony Fabiano

Oh boy! Your guess is as good as mine. I am hopeful that they get it done. It's dragged on for so long, and it's coming up near the end of the government fiscal year. So I would hope that by the end of the fiscal year they'd make a decision, unless one of these guys protest, so you never know. But I think that they are motivated to making it work, let's put it that way.

Sarah Catherine Phillips - Stephens

And then, there is a CBP pre-solicitation in June that's going for I think upto 27 Z portals. Can you talk about that or know where they might be in that process?

Anthony Fabiano

Now, I really can't speak about that at this time.

Sarah Catherine Phillips - Stephens

And then, any new opportunities or funding for CBPs or Mil Trailers that you're talking right now? And it seems like there is that (inaudible) just in June. A portion of it would be vehicle scanners with low energy Backscatter technology. But anything that you can talk about there?

Anthony Fabiano

The only thing I could say is that there is a tremendous demand for the Mil Trailer product. It's a question of just funding. There are end users that want the equipment beyond what we have on book that we are selling. And we also have international interest now as well. So we are pretty excited about it, but it really comes down to the budget. I mean, if you could tell me where next year's budget's going to go from the military standpoint and what money will be left over by the end of this year, I could give you a better idea, but I just don't know yet.

Operator

Our next question comes from the line of Josephine Millward with Benchmark Company.

Josephine Millward - Benchmark Company

Most of my questions have been answered. I just wanted to follow-up on the revenue delay from Cargo. Can you help us quantify how much was delayed or deferred due to customer site preparation in Cargo? Are we talking about $5 million or $10 million plus?

Ken Galaznik

I prefer not to do that.

Josephine Millward - Benchmark Company

Okay. Can you give us a sense of whether you think that could move forward during the current quarter, or would it be a Q3 event?

Ken Galaznik

You mean whether or not the site work would be done and the orders would be released?

Josephine Millward - Benchmark Company

Right.

Ken Galaznik

Can't really say. Put it this way; we are working very, very hard with certain customers to help them move things along. But I can't be assured that those efforts are going to be successful in this quarter, next quarter or the quarter after. We'll have to wait and see.

Josephine Millward - Benchmark Company

And Anthony, you talked about your sales pipeline. I think you said it's up 10% from last quarter. Can you just help us think about what areas it's driving, this growing pipeline?

Anthony Fabiano

Yes, good question. One is international business, and specifically in both the Cargo area and the Z backscatter area. So that's why we are pretty excited about it. We have new products we've come out with in the cargo area that are garnering a lot of interest; we've done a lot of demonstrations - and also, in different parts of the world that we've sold in, in the past.

So we are pretty encouraged. I think globally, things are really humming for us around the world right now. And so I am really hopeful that we make some more breakthroughs.

Josephine Millward - Benchmark Company

Now, previously I think you talked about critical infrastructure protection overseas. So are you seeing a lot of the demand from government customers or the private sector, and is it still primarily in the Middle East or is it pretty broad based?

Anthony Fabiano

Well, it's broadening. Most of the critical infrastructure business that we have experienced thus far has been from governments. But we expected long term that it would be more and more in the private sector. We have sold in the private sector in the past, and we are seeing more interest there now, which is something that I find very encouraging.

Josephine Millward - Benchmark Company

And congratulations on the SmartCheck order. Do you anticipate demand for this technology outside of your traditional customer base? I know you are trying to penetrate TSA. Any other potential customers? And if you can also talk about what other opportunities you might have at TSA?

Anthony Fabiano

Well, the TSA is really important because it's usually the merit badge that everyone wants to see internationally to sell that type of equipment to other government agencies. So that's a key driver. The other thing is that we do sell some SmartChecks but in small quantities to non-government agencies. And so that's been going on for some time now.

And then the order of course that we announced is really in the family of SmartCheck, it's not exactly a SmartCheck system. It's called a SIM, a smart imaging system that is a modular ruggedized system that was designed and built. There is more potential for that we hope.

Josephine Millward - Benchmark Company

Are you working on anything else with TSA in addition to personnel screening?

Anthony Fabiano

We are.

Josephine Millward - Benchmark Company

AT X-ray perhaps?

Anthony Fabiano

Can't tell you at this time, but we're always looking to solve unsolved customer problems.

Operator

And today's final question is a follow up from the line of Brian Ruttenbur with Morgan Keegan.

Brian Ruttenbur - Morgan Keegan

Can you talk a little bit about your opinion on Reveal being acquired by SAIC, and if you have the ability to develop internally a CT system? I think you had a history with CT going way back. And maybe you can talk a little bit about that, your opinion about it.

Anthony Fabiano

Well, I can't talk about Reveal, even though they are a company around the corner from us that we've known for many years. As far as CT goes, yes, AS&E built the first CT system that was ever designed many, many years ago. That's a pretty crowded environment right now, and one has to be really concerned about the future of CT systems, particularly for sale overseas because they're very expensive. And one also has to be concerned about where the budgets going with regard to that type of equipment in the short term as well.

That's all I can say is, I am just reading what you're reading in the papers and in the analyst reports and in the literature that's coming out of Washington.

Brian Ruttenbur - Morgan Keegan

So this is not an area that you want to eventually grow (inaudible)?

Anthony Fabiano

To answer your question, would I invest millions of dollars today to reinvent a Computer Tomography system and compete with the people who are doing it? No.

Operator

There are no further questions. Ladies and gentlemen, if you wish to access the replay for this call, you may do so by dialing 888-286-8010 for U.S. callers and 617-801-6888 for international callers with the conference identification number of 93516226. An audio replay will also be available on the AS&E website at www.as-e.com in the investor information section.

This concludes the conference for today. Thank you all for participating, and have a nice day. All parties may now disconnect.

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Source: American Science and Engineering, Inc. F1Q11 (Qtr End 06/30/2010) Earnings Call Transcript
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