Integral Systems, Inc. (Nasdaq:ISYS) ("Company") has reported preliminary, unaudited financial results for the fourth quarter and fiscal year ended September 25, 2009.

Revenue for the fourth quarter was US$38.9 million, down 16 percent compared to the fourth quarter of fiscal 2008. Gross margin for the quarter was 32.6 percent compared to 45.4 percent for the same period last year. Fourth quarter 2009 loss from operations was $1.6 million compared to income of $7.6 million in the fourth quarter 2008.

The decline in revenue was primarily the result of a $3.9 million revenue rate reserve taken to provide for potential future audit adjustments by the U.S. government relating to reimbursable rates on government programs. In late October, the Company received an unexpected notice from the government that a majority of its product development costs were being disallowed for reimbursement. The Company has been in discussions with the government and, while no assurance can be given, we are hopeful of recovering some or all this reserve in future periods.

Gross margin was lower in the quarter due to higher unallowable costs in the government segment. Operating results reflect higher investments in research and development initiatives as well as the rate reserve taken in the Company's government segment, and includes some anticipated non-recurring costs related to the management restructuring that occurred in August. Dilutive earnings per share for the fourth quarter of 2009 was a loss of $0.06 compared to dilutive earnings of $0.28 per share for the fourth quarter of fiscal 2008.

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