I can't help but chuckle, reading the earnings report that American Science & Engineering (Nasdaq: ASEI) put out yesterday.

You see, after reading over the numbers, I was all set to come out and blast AS&E for its poor performance in Q4. Quarterly sales down 8%, profits cut in half -- miserable news all around. And yet, AS&E has gone and stolen my thunder, hoisted me by my own petard, or pulled a rabbit out of the hat -- take the metaphor of your choice.

Black magic
Before we get to that, though, a few words on Q4 are in order: AS&E missed estimates, but I won't criticize it for that. AS&E doesn't give guidance, making it one of the few companies from which Wall Street analysts can't simply crib estimates and then present the work as their own. Estimating AS&E's numbers is pure guesswork, and yesterday, it was the analysts who were proved wrong -- not AS&E.

Still, the news was not good. Sales declined, gross margins declined, R&D spending soared, and AS&E wrote off $0.12 per share in bad debt. No wonder net profits ($0.30 per share, if you're counting) suffered. Operating margins now sit at 12.7% for the year. That's still more than rivals L-3 (NYSE: LLL), Analogic (Nasdaq: ALOG), and OSI (Nasdaq: OSIS) make, but AS&E now lags GE (NYSE: GE) in the margins race.

This makes three straight quarters of year-over-year profit declines at AS&E. Inventories of unsold goods sit about twice as high as their year-ago levels, and accounts receivable, 18% higher. With so much working capital tied up in uncollected bills and unsold goods, free cash flow plunged 65% for the year,  to $14 million.

Speaking of free cash flow, we now come to the one bit of unqualifiedly good news in the report. In recent quarters, I've chided companies such as Symantec (Nasdaq: SYMC), Applied Materials (Nasdaq: AMAT), and AS&E for failing to include a cash flow statement in their press releases. No sooner had I voiced the complaint than Symantec and Applied Materials began providing the documents, leaving AS&E alone in the "naughty" column.

No more. With a wave of its magic wand, AS&E's investor relations department made my criticism disappear and replaced it with a cash flow statement yesterday. And the fact that AS&E released the document in a quarter when it reported bad news makes the disclosure all the more commendable. So while I can't praise its numbers, I have to commend AS&E for its shareholder-friendly move. Kudos, guys.

What did we expect out of AS&E last quarter, and what did we get? Find out in: