Revenue and Earnings Decline Due To Continued Economic Conditions and Higher Costs

COLUMBIA, Md., Aug. 3 /PRNewswire-FirstCall/ -- Integral Systems, Inc. (Nasdaq: ISYS) ("Company") today reported financial results for the third quarter of fiscal year 2009.

Revenue for the quarter was $39.8 million, down 5.6% from the same period in 2008. Gross margin for the quarter was 22.3% compared to 39.4% for the same period last year. Third quarter 2009 loss from operations was $3.8 million compared to operating income of $7.8 million in the third quarter of 2008. The decline in revenue was the result of a significant decline in product shipments from the Company's Space Communications Systems segment and delayed government contract procurements. Gross margin was lower in the quarter due to an anticipated significant shipment of low gross margin antenna equipment in our government segment, a specific $0.8 million bad debt charge and $0.8 million relating to unrecognizable revenue as a result of a commercial customer's bankruptcy announcement and a decline in higher gross margin product shipments. Operating income reflects higher selling, general, and administrative (SG&A) costs relating to legal and accounting fees, investments in research and development initiatives and a one-time charge of $1.0 million related to real estate transactions. Earnings per share for the third quarter of 2009 was a loss of $0.09 compared to earnings of $0.30 per share for the third quarter of 2008.

Year-to-date revenue was $121.0 million, an increase of 6.3% over the same period in 2008. Gross margin for the first three quarters of 2009 was 31.9% compared to 35.2% for the same period last year. Year-to-date operating income declined $15.8 million from the same period in 2008 due to higher SG&A expenses. Year-to-date 2009 earnings per share was $0.13 compared to $0.73 per share for the same period of 2008.

The higher SG&A costs that the Company has experienced this year are the result of conscious efforts to solidify the Company's infrastructure, build a robust business development function, and ensure compliance in all material respects in the Company's financial, information systems, security, and quality control operations.

On July 30, 2009, the Company announced that the Company has reached a settlement with the Securities and Exchange Commission ("SEC") concerning the SEC's previously disclosed investigation into the actions of three former Company officials. Information about the investigation is set forth in the Company's 2008 Form 10-K and other periodic filings.

Under the settlement, the Company consented to a "cease and desist" order requiring future compliance with certain provisions of Federal securities laws and regulations. The settlement does not require the Company to pay a monetary penalty and concludes the SEC's investigation into these matters with respect to the Company. In the order, the SEC stated that in determining to accept the settlement, it considered both remediation efforts undertaken by and cooperation from the Company.

QUARTER HIGHLIGHTS

• Submitted our proposal for the Next Generation Global Positioning System (GPS OCX) as a member of the Northrop Grumman Corporation team
• Awarded a contract with Telesat of Ottawa, Canada to provide our EPOCH IPS command and control software to support SkyTerra1 and SkyTerra2 satellites
• Awarded a contract to provide our MonicsNET satellite carrier monitoring system to NATO
• Announced a contract signing with Orbital Sciences to provide primary and backup command and control systems for KOREASAT-6
• Honored as the US Small Business Administration's 2009 Region III Prime Contractor of the Year
  

"This fiscal year has been more volatile and challenging than anyone could have predicted," said John Higginbotham, Chief Executive Officer of Integral Systems. "The impact of the global recession on our customers is clear, reflected in delayed shipments, delayed contract signings and the bankruptcy of a commercial customer."

Higginbotham concluded, "While we are disappointed in the results of the quarter, we remain focused on improving areas of the business we directly control and leveraging the value of our entire range of offerings. To that end, we continue to look for opportunities to achieve greater efficiencies in our operating structure, we are investing in our business development function as we seek to diversify and expand our customer base into adjacent markets, and we are dedicated to improving innovation to maintain our competitive posture in our core markets."

Mr. John Higginbotham, Chief Executive Officer, and Mr. Bill Bambarger, Chief Financial Officer, will host the Company's third quarter earnings results conference call on Monday, August 3, 2009, at 11:00 AM ET. Interested parties are invited to join the call by calling 800.892.9785, ID number 21432360. A replay of the conference call can be heard from 1:00 PM ET Monday, August 3, 2009 through 1:00 PM ET Wednesday, August 5, 2009 by dialing 800-633-8284 or 402-977-9140. Ask for reservation number 21432360.

ABOUT INTEGRAL SYSTEMS

Integral Systems, Inc. applies more than 25 years experience to provide integrated technology solutions for SATCOM-interfaced networks. Customers have relied on the Integral Systems family of companies (Integral Systems Europe, Lumistar, Inc., Newpoint Technologies, Inc., RT Logic, and SAT Corporation) to deliver on time and on budget for more than 250 satellite missions. Our dedication to customer service has solidified long-term relationships with the U.S. Air Force, NASA, NOAA, and nearly every satellite operator in the world. Integral Systems is listed in Forbes' Top 200 Small Companies in America for 2008. For more information visit www.integ.com.

Except for statements of historical facts, this news release contains forward-looking statements about the Company [NOTE: There are no financial projections in this release], all of which are based on the Company's current expectations. There can be no assurance that the Company's expectations will in fact be realized. The forward-looking statements contained in this news release are subject to additional risks and uncertainties, including the Company's reliance on contracts and subcontracts funded by the U.S. government, intense competition in the ground systems industry, the competitive bidding process to which the Company's government and commercial contracts are subject, the Company's dependence on the satellite industry for most of its revenues, rapid technological changes in the satellite industry, the Company's acquisition strategy and those other risks noted in the Company's SEC filings.