EX-99.1

Argon ST, Inc. Announces Financial Results for Fourth Quarter and Fiscal 2006; Provides Fiscal
2007 Outlook

FAIRFAX, VA – December 14, 2006 Argon ST, Inc. (NASDAQ: STST), a leading systems engineering, development and services company providing full-service C4ISR (command, control, communications, computers, intelligence, surveillance and reconnaissance) systems and services to a wide range of defense and intelligence customers, today announced revenues and earnings for its fourth quarter and fiscal year ended September 30, 2006.

The company reported fourth quarter net income of $4.1 million ($0.18 per diluted share), compared to $6.1 million ($0.29 per diluted share) in the fourth quarter of fiscal year 2005. Revenues for the fourth quarter were $66.1 million, compared with revenues of $83.7 million for the same quarter in the prior year. Net cash provided by operations for the fourth quarter were $12.0 million, compared to net cash used by operations of $22.0 million in the same period of the prior year.

Net income for the fiscal year ended September 30, 2006 was $19.4 million ($0.87 per diluted share), compared to net income of $21.8 million ($1.06 per diluted share) for the prior year. Revenues for the fiscal year ended September 30, 2006 were $258.8 million compared with revenues of $271.8 million for the prior year. Net Cash provided by operations for the year were $38.0 million representing a significant improvement over net cash used by operations of $26.6 million in the same period of the prior year.

Terry Collins, Chairman, CEO and President, stated: “Revenue and profit for the fourth quarter and fiscal year were negatively impacted by delayed awards on certain contracts as well as unanticipated contract losses. Margin performance maintained historic performance levels, and cash flow for the year improved.”

Mr. Collins continued, “While we are disappointed in our operating performance in both the fourth quarter and year, we remain confident that we are well positioned for future growth. The competitive award of the SSEE Increment F program and the extension for the third phase of a multi-year full rate production contract were both significant accomplishments during the year. Similarly, the company was pleased to announce the receipt of the Surface Ship Torpedo Defense AN/SLQ-25A contract in November of this year. These large multi-year programs are major contributors to continuing to solidify a base on which the company can build to achieve its long-term objectives. We are confident of our FY07 plan and are pursuing several substantive opportunities that could have a positive effect on our plan, if we are successful.”

On October 1, 2005, the company adopted Financial Accounting Standards Board Statement No. 123R, Share Based Payment, which requires the company to recognize share-based payment transactions as a compensation expense in its financial statements. For the fourth quarter ended September 30, 2006, the company recorded stock based compensation expense of $0.4 million before tax and $0.3 million net of taxes. For the fiscal year ended September 30, 2006, the company recorded stock-based compensation expense of $1.9 million before tax and $1.5 million net of taxes. Management believes that excluding the effect of FAS 123R provides a useful comparison with results of periods prior to the company’s implementation of the standard.

•

Operating Income for the fourth quarter was $7.0 million compared with $9.2 million in the same period of the prior year. Operating income for the fiscal year ended September 30, 2006 was $32.5 million compared with $34.4 million in the prior year.

•

Net Income for the fourth quarter was $4.4 million ($0.19 per diluted share) compared with $6.1 million ($0.29 per diluted share) in the same period of the prior year. Net income for the year ended September 30, 2006 was $20.9 million ($0.94 per diluted share) compared with $21.8 million ($1.06 per diluted share) in the prior year.

A reconciliation of GAAP results with results excluding the effect of FAS 123R is provided at the end of this press release.

The company is issuing initial guidance for the fiscal year 2007. The table below represents management’s current expectations about the company’s future financial performance, based on information available at this time. The forward guidance in the table below does not include any effect for acquisitions Argon ST might make in the future.

Argon ST, Inc. designs, develops, and produces systems and sensors for the Command and Control Communications, Computers, Intelligence, Surveillance, and Reconnaissance (C4ISR) markets including SIGINT (Signals Intelligence), ESM (Electronic Support Measures), EW (Electronic Warfare), imaging, and acoustic systems serving domestic and worldwide markets.

Statements in this press release which are not historical facts are forward-looking statements under the provision of the Private Securities Litigation Reform Act of 1955. Forward-looking statements are not guarantees of future performance and are based upon numerous assumptions about future conditions that could prove not to be accurate. Forward looking statements are subject to numerous risks and uncertainties, and our actual results could differ materially as a result of such risks and other factors. In addition to those risks specifically mentioned in the reports filed by the Company with the Securities and Exchange Commission (including the Company’s Form 10-K for the fiscal year ended September 30, 2005), such risks and uncertainties include, but are not limited to: the availability of U.S. and international government funding for the Company’s products and services; changes in the U.S. federal government procurement laws, regulations, policies and budgets (including changes to respond to budgetary constraints and cost-cutting initiatives); the number and type of contracts and task orders awarded to the Company; the exercise by the U.S. government of options to extend the Company’s contracts; the Company’s ability to retain contracts during any rebidding process; the timing of Congressional funding on the Company’s contracts; any government delay or termination of the Company’s contracts and programs; difficulties in developing and producing operationally advanced technology systems; the timing and customer acceptance of contract deliverables; the Company’s ability to attract and retain qualified personnel, including technical personnel and personnel with required security clearances; charges from any future impairment reviews; the future impact of any acquisitions or divestitures the Company may make; the competitive environment for defense and intelligence information technology products and services; general economic, business and political conditions domestically and internationally; and other factors affecting the Company’s business that are beyond its control. All of the forward-looking statements should be considered in light of these factors. Investors should not put undue reliance on any forward-looking statements. We undertake no obligation to update these forward-looking statements to reflect new information, future events or otherwise.


	September 30,
ASSETS	2006			2005
CURRENT ASSETS
Cash and cash equivalents	$	33,498,000		$	4,064,000
Accounts receivable, net		86,842,000			103,577,000
Inventory		3,954,000			1,166,000
Income taxes receivable		23,000			2,464,000
Deferred project costs		5,597,000			—
Deferred income tax asset		2,083,000			1,742,000
Prepaids and other		1,481,000			888,000

TOTAL CURRENT ASSETS		133,478,000			113,901,000
Property, equipment and software, net		16,726,000			14,896,000
Advances and cash held in escrow		—			10,900,000
Goodwill		148,719,000			107,956,000
Intangibles, net		13,200,000			1,219,000
Other assets		1,408,000			962,000

TOTAL ASSETS	$	313,531,000		$	249,834,000

LIABILITIES AND STOCKHOLDER’S EQUITY
CURRENT LIABILITIES
Line of Credit		—		$	11,000,000
Accounts payable and accrued expenses		19,124,000			26,857,000
Accrued salaries and related expenses		10,678,000			8,848,000
Deferred revenue		13,053,000			7,139,000
Notes payable — current portion		—			56,000
Capital lease obligations — current		33,000			19,000
Deferred rent		419,000			61,000
TOTAL CURRENT LIABILITIES		43,307,000			53,980,000
Deferred income tax liability, long term		2,937,000			1,979,000
Deferred rent		1,538,000			1,799,000
Capital lease obligations, net of current		53,000			63,000
Commitments and contingencies		—			—
STOCKHOLDERS’ EQUITY
Common stock:
$.01 Par Value, 100,000,000 shares
authorized, 22,313,709 and 20,153,878 shares
issued at September 30, 2006 and 2005		223,000			202,000
Additional paid in capital		212,610,000			158,458,000
Treasury stock at cost, 126,245 shares		(534,000	)		(534,000	)
Retained earnings		53,397,000			34,002,000
Accumulated other comprehensive loss		—			(115,000	)

TOTAL STOCKHOLDERS’ EQUITY	$	265,696,000		$	192,013,000

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	313,531,000		$	249,834,000


	For the Quarter Ended				For the Year Ended
	September 30,				September 30,
	2006		2005		2006		2005
CONTRACT REVENUES	$	66,145,000	$	83,681,000	$	258,835,000	$	271,754,000
COST OF REVENUES		52,955,000		71,258,000		206,023,000		222,792,000
GENERAL AND ADMINISTRATIVE
EXPENSES		6,595,000		3,273,000		22,212,000		14,578,000

INCOME FROM OPERATIONS		6,595,000		9,150,000		30,600,000		34,384,000
INTEREST INCOME, NET		281,000		170,000		1,180,000	$	698,000
INCOME BEFORE INCOME TAXES		6,876,000		9,320,000		31,780,000		35,082,000
PROVISION FOR INCOME TAXES		2,772,000		3,258,000		12,385,000		13,301,000

NET INCOME	$	4,104,000	$	6,062,000	$	19,395,000	$	21,781,000

EARNINGS PER SHARE
Basic	$	0.19	$	0.30	$	0.90	$	1.10
Diluted	$	0.18	$	0.29	$	0.87	$	1.06
WEIGHTED- AVERAGE SHARES
OUTSTANDING
Basic		22,163,853		19,966,072		21,659,606		19,738,367
Diluted		22,695,361		20,825,447		22,255,467		20,616,024


	Years Ended September 30,
	2006			2005
Cash flows from operating activities
Net income	$	19,395,000		$	21,781,000
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization		5,625,000			4,493,000
Deferred income tax (benefit) provision		(677,000	)		3,532,000
Stock-based compensation		1,921,000			—
Loss on disposal of property		165,000			—
Bad debt expense		80,000			—
Change in:
Billed accounts receivable		18,082,000			(23,820,000	)
Unbilled accounts receivable		1,603,000			(19,033,000	)
Inventory		(2,788,000	)		60,000
Prepaids and other		(254,000	)		400,000
Deferred project costs		(5,534,000	)		—
Accounts payable and accrued expenses		(8,830,000	)		13,151,000
Accrued salaries and related expenses		732,000			(1,758,000	)
Deferred revenue		5,914,000			(21,197,000	)
Income taxes		2,570,000			(8,274,000	)
Deferred rent		40,000			321,000
Tax benefit of option exercises		—			3,798,000

Net cash provided by (used in) operating activities		38,044,000			(26,546,000	)
Cash flows from investing activities
Net cash acquired in merger		—			—
Acquisitions of property, equipment and software		(3,795,000	)		(4,370,000	)
Advances and cash held in escrow		10,900,000			(10,900,000	)
Deposits and other assets		(233,000	)		(233,000	)
Business acquisitions, net of cash acquired		(56,670,000	)		-

Net cash (used in) provided by investing activities		(49,798,000	)		(15,503,000	)
Cash flows from financing activities
Advances (repayments) on line of credit		(11,000,000	)		11,000,000
Payment on note payable		(56,000	)		(226,000	)
Retirement of common stock		—			—
Tax benefit on stock option exercises		2,015,000			-
Proceeeds from exercise of stock options		2,572,000			4,453,000
Proceeds from employee stock purchase plan exercises		897,000			1,171,000
Principal repayments on capital lease obligations		(8,000	)		(17,000	)
Proceeds from secondary offering, net of expenses		46,768,000			-
Dividends paid		—			—

Net cash provided by (used in) financing activities		41,188,000			16,381,000
Net increase (decrease) in cash and cash equivalents		29,434,000			(25,668,000	)
Cash and cash equivalents, beginning of year		4,064,000			29,732,000

Cash and cash equivalents, end of year	$	33,498,000		$	4,064,000

Supplemental disclosure
Income taxes paid, net of refunds	$	(8,479,000	)	$	(14,212,000	)

Interest expense paid	$	(166,000	)	$	(11,000	)

	$			$
Note payable issued for stock redemption		-			-

Assets acquired under capital leases	$	13,000		$	99,000

The company has presented net income, as adjusted, to show the effect that the adoption of FAS 123R had on the company’s earnings per share. The company believes that these non-GAAP financial measures provide useful information to investors because they allow investors to compare the company’s current performance to prior performance and to the performance of companies that have not yet adopted FAS 123R. These non-GAAP financial measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.


	As Reported					Non-GAAP		As Reported					Non-GAAP
	For Quarter					For Quarter		For Year					For Year
	Ended		Non-GAAP			Ended		Ended		Non-GAAP			Ended
	9-30-06		Adjustment			9-30-06		9-30-06		Adjustment			9-30-06
CONTRACT REVENUES	$	66,145,000	$	0		$	66,145,000	$	258,835,000	$	0		$	258,835,000
COST OF REVENUES		52,955,000		(136,000	)		52,819,000		206,023,000		(907,000	)		205,116,000
GENERAL AND ADMINISTRATIVE
EXPENSES		6,595,000		(296,000	)		6,299,000		22,212,000		(1,014,000	)		21,198,000

INCOME FROM OPERATIONS		6,595,000		432,000			7,027,000		30,600,000		1,921,000			32,521,000
INTEREST INCOME, NET		281,000		0			281,000		1,180,000		0			1,180,000

INCOME BEFORE INCOME TAXES		6,876,000		432,000			7,308,000		31,780,000		1,921,000			33,701,000
PROVISION FOR INCOME TAXES		2,772,000		138,000			2,910,000		12,385,000		416,000			12,801,000
NET INCOME	$	4,104,000	$	294,000		$	4,398,000	$	19,395,000	$	1,505,000		$	20,900,000

EARNINGS PER SHARE (BASIC)	$	0.19	$	0.01		$	0.20	$	0.90	$	0.06		$	0.96

EARNINGS PER SHARE (DILUTED)	$	0.18	$	0.01		$	0.19	$	0.87	$	0.07		$	0.94

WEIGHTED-AVERAGE SHARES
OUTSTANDING
Basic		22,163,853		0			22,163,853		21,659,606		0			21,659,606

Diluted		22,695,361		0			22,695,361		22,255,467		0			22,255,467

Victor F. Sellier, Chief Financial Officer
vic.sellier@argonst.com
URL: www.argonst.com


Revenues Income from Operations		$305 million to $325 million $36 million to $39 million