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Sunnyvale, CA. December 19, 1994 - Applied Signal Technology, Inc. (NASDAQ - APSG) announced revenues and net income for the year ended October 31, 1994. Revenues for the fiscal year were $64,341,000 representing an 11% increase over fiscal year 1993 revenues of $57,954,000. Net income declined 4% to $3,140,000 or $0.40 per share for the year ended 1994 from $3,263,000 or $0.47 per share for the same period of 1993.

Revenues for the fourth quarter of fiscal 1994 were $22,387,000; up 26% from $17,791,000 for the fourth quarter of fiscal 1993. Net income for the fourth quarter of fiscal 1994 was $1,635,000 or $0.22 per share, up 191% compared to net income of $562,000 or $0.07 per share for the same period of 1993. The change in the quarter to quarter net income was exaggerated by the $500,000 for contract losses charged to earnings during the fourth quarter of fiscal 1993.

Brian Offi, the Company's chief financial officer, indicated that the fiscal 1994 fourth quarter revenues and net income were unusually strong due in large part to the award of several new contracts at the end of the government's fiscal year. In anticipation of the high volume of awards at year-end, management permitted selected early contract starts as well as the buildup of product inventory in order to support customer requirements. This action resulted in record quarterly results. Regarding the nominal drop in year-to-year net income, Mr. Offi went on to say that "Net income eroded slightly during the current fiscal year which is attributable to an increase in general and administrative spending resulting from an increased emphasis on marketing during fiscal 1994 and due to an increase in the effective tax rate from 34% for fiscal 1993 to 39% for fiscal 1994. The increase in tax rate is primarily the result of reduced tax benefits obtained under the research and development credit for fiscal 1994." Mr. Offi went on to say "Variations in operating results are a normal part of the defense contracting business which will tend to cause fluctuations in the quarter to quarter results."

Regarding the 1994 operating results, Gary Yancey, president and CEO of Applied Signal Technology was quoted as saying, "Fiscal 1994 represents another year of growth and we have changed our organizational structure in an attempt to expand our marketplace in the future. We feel that the fundamental signal reconnaissance marketplace will remain strong while the additional military and commercial marketplaces will offer additional opportunities for growth in the future."

Applied Signal Technology designs, develops, manufactures and markets signal processing equipment to collect and process a wide range of telecommunications signals for foreign signal reconnaissance as well as consumer wireless communications applications. The Company believes that its commitment to high levels of research and development spending differentiates Applied Signal Technology from its competitors and has enabled the Company to provide advanced technology solutions to its customers. The equipment is primarily purchased by the United States government and is used for foreign signal reconnaissance.