Allied Defense (ADG) 8-K The Allied Defense Group Announces First Quarter 2009 Financial Results

The Allied Defense Group, Inc.

THE ALLIED DEFENSE GROUP ANNOUNCES FIRST QUARTER 2009
FINANCIAL RESULTS

VIENNA, Va., May 14, 2009 — The Allied Defense Group, Inc. (NYSE Amex: ADG), a multinational defense company focused on the manufacture, sale and distribution of ammunition and ammunition-related products for use by the U.S. and foreign governments, today announced results for the quarter ending March 31, 2009.

Highlights:

• Revenue of $31.5 million, an increase of 18% over the first quarter of 2008

• Net loss of $0.3 million, compared to a net loss of $3.3 million during the first quarter of 2008

• EBITDA* from continuing operations of $1.6 million

• Funded, committed backlog of $158.5 million as of March 31, 2009

“We are continuing to execute on our priorities,” said Major General (Ret) John J. Marcello, President and Chief Executive Officer of The Allied Defense Group. “We are focused on realizing the significant value our backlog represents, improving our operational efficiency, and securing the funding necessary to support our short-term working capital needs. We are pursuing a number of available options to ensure that we accomplish our objectives.”

“We are also continuing to grow our ammunition services business and we are advancing our various engagements around the world, reflecting the repositioning of the Company toward our core competency in ammunition,” concluded Major General Marcello.

Business Segment Details:

Mecar SA

• Revenue of $26.7 million, an increase of 4% over the first quarter of 2008

• Backlog of $109.5 million as of March 31, 2009

Mecar USA

• Revenue of $4.8 million, an increase of $3.7 million over the first quarter of 2008

• Backlog of $49.0 million as of March 31, 2009

First Quarter Summary

Revenue was $31.5 million in the first quarter of 2009, up 18% over the same period of 2008. Gross margin was 15% in the first quarter of 2009, compared to 22% for the same period in 2008. Lower gross margins in the current quarter resulted from lower margins at Mecar SA associated with mix. In addition, Mecar USA, a business with lower margins than Mecar SA, saw an increase in its revenue base and gross profit, but overall profit margins were compressed.

Net loss from continuing operations was $1.4 million in the first quarter of 2009, compared to a net loss of $2.7 million during the same period of 2008. Diluted loss per share from continuing operations was $0.17 in the first quarter of 2009, compared to a loss of $0.33 during the same period of 2008. EBITDA from continuing operations was $1.6 million in the first quarter of 2009, compared to $2.1 million during the same period of 2008.

As of March 31, 2009, the Company’s firm committed backlog was $158.5 million, compared to $155.7 million as of March 31, 2008.

At March 31, 2009, the Company had $1.9 million cash on hand. For the three months ended March 31, 2009, the Company used cash of $9.5 million from operating activities associated with the growth of working capital. This use of cash was funded with available cash balances and short term financing.

Looking forward, as we have said previously, cash has historically been tight during the summer months. We have several short-term options available to us to manage through these working capital constraints, and we are continuing to work to put a longer-term working capital facility in place. The expectation is that the situation will improve in September with a significant increase in collection of cash receivables.

Results from continuing operations in the current period were negatively impacted by $0.7 million of unrealized loss associated with a forward currency contract. This loss was partially offset by a net gain from the fair value of notes and warrants of $0.2 million. As compared to the prior period, selling and administrative expenses declined by 15%, or $0.8 million, and interest expense declined by 49%, or $0.8 million. The reduced operating expense reflects the transition of the Company to an ammunition-focused business.

Conference Call

The Company will host a conference call to discuss these results today, May 14, 2009, at 4:30 p.m. (ET). To access the conference call, interested parties may call (888) 262-8790 within the United States or (913) 312-1403 outside the United States. A replay of the call will be available from approximately 7:30 p.m. (ET) today, May 14, 2009, through 11:59 p.m. (ET) on May 21, 2009. To access the replay, please call (888) 203-1112 in the United States, or (719) 457-0820 outside the United States, and enter the following code: 1859041.

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The Allied Defense Group, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Thousands of Dollars, except per share and share data)

			Three Months Ended March 31,
			2009			2008
Revenue			$	31,548		$	26,795
Cost and expenses
	Cost of sales			26,718			20,988
	Selling and administrative			4,212			4,973
	Research and development			492			552
		Operating income		126			282
Other income (expenses)
	Interest income			35			158
	Interest expense			(864	)		(1,690	)
	Net gain (loss) on fair value of senior
	convertible notes and warrants			239			(1,233	)
	Loss from foreign exchange contracts			(662	)		-
	Other-net			(247	)		(67	)
				(1,499	)		(2,832	)
		Loss from continuing operations before income taxes		(1,373	)		(2,550	)
Income tax expense				—			128
Loss from continuing operations				(1,373	)		(2,678	)
Income (loss) from discontinued operations, net of tax
		Gain on sale of subsidiaries		946			113
		Income (loss) from discontinued operations		110			(730	)
		Net income (loss) from discontinued operations		1,056			(617	)
	NET LOSS		$	(317	)	$	(3,295	)
Earnings (Loss) per share — basic and diluted:
	Net loss from continuing operations		$	(0.17	)	$	(0.33	)
	Net income (loss) from discontinued
	operations, net of tax			0.13			(0.08	)
		Total loss per share — basic and diluted	$	(0.04	)	$	(0.41	)
Weighted average number of common shares:
	Basic and Diluted			8,079,972			8,013,156

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The Allied Defense Group, Inc
Calculation of EBITDA from continuing operations
(Unaudited)
(All amounts are in thousands of U.S. Dollars)

				Three months ended March 31,
				2009			2008
Consolidated Net Loss from continuing operations				$	(1,373	)	$	(2,678	)
	Any extraordinary or non recurring gains or losses
		(Gain) loss from fair value of notes and warrants			(239	)		1,233
		Loss from Sale of Fixed Assets			—			231
		Non-cash expenses associated with stock compensation expense			141			182
			Adjusted Net Loss from continuing operations	$	(1,471	)	$	(1,032	)
		Interest Income			(35	)		(158	)
		Interest Expense			864			1,690
		Income tax expense			—			128
		Depreciation and Amortization Expense			1,023			1,310
		Any non-cash transactions:
			Foreign currency losses		963			70
			Adjustments related to Inventory		193			114
			Other non-cash charges		29			—
			Consolidated EBITDA	$	1,566		$	2,122

*Earnings before interest, taxes, depreciation and amortization, non-cash stock compensation and payments, non-cash charges that do not result in future cash obligations, any extraordinary or non recurring gains (losses) and any non-cash transactions (EBITDA) is not intended to present a measure of performance in accordance with accounting principles generally accepted in the United States (GAAP). Nor should Consolidated EBITDA from continuing operations be considered as an alternative to statements of cash flows as a measure of liquidity. Consolidated EBITDA from continuing operations is included herein as means to measure operating performance that financial analysts, lenders, investors and other interested parties find to be a useful tool for analyzing companies. The measurement of EBITDA from continuing operations, as provided above, is defined in the terms of the Company’s senior secured convertible notes that were repaid in January 2009 and may not reflect EBITDA from continuing operations as calculated by other parties. The above table reconciles GAAP Net Loss from continuing operations to EBITDA from continuing operations for the reported periods.

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The Allied Defense Group, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Thousands of Dollars, except per share and share data)

			March 31,			December 31,
ASSETS			2009			2008 (a)
Current Assets
	Cash and cash equivalents		$	1,888		$	8,816
	Restricted cash			17,540			9,666
	Accounts receivable, net			23,261			12,646
	Costs and accrued earnings on uncompleted contracts			29,046			21,999
	Inventories, net			22,956			21,508
	Contracts in progress			5,167			1,469
	Prepaid and other current assets			3,915			3,137
	Assets held for sale			4,555			4,474
		Total current assets		108,328			83,715
Property, Plant and Equipment, net				17,714			19,525
Other Assets				424			459
	Intangible assets, net
	Long-term inventory			3,072			2,412
	Other assets			459			251
		Total other assets		3,531			2,663
TOTAL ASSETS			$	126,466		$	103,699
CURRENT LIABILITIES
	Current maturities of senior secured convertible notes		$	-		$	933
	Bank overdraft facility			5,089			381
	Current maturities of long-term debt			2,871			2,659
	Current maturities of foreign exchange contract			654			405
	Notes payable						—
	Accounts payable			16,440			14,536
	Accrued liabilities			21,904			16,099
	Customer deposits			32,021			16,731
	Belgium social security			2,041			3,522
	Income taxes			3,792			3,913
	Liabilities held for sale			1,260			1,316
		Total current liabilities		86,072			60,495
LONG TERM OBLIGATIONS
	Long-term debt, less current maturities			5,826			6,681
	Long-term foreign exchange contract, less current maturities			1,399			1,072
	Derivative instrument			84			318
	Other long-term liabilities			655			682
		Total long-term obligations		7,964			8,753
TOTAL LIABILITIES				94,036			69,248
CONTINGENCIES AND COMMITMENTS
STOCKHOLDERS’ EQUITY
	Preferred stock, no par value; authorized 1,000,000 shares; none issued			-			-
	Common stock, par value, $.10 per share; authorized 30,000,000 shares;
	issued and outstanding, 8,084,748 at March 31, 2009 and 8,079,509 at
	December 31, 2008			809			808
	Capital in excess of par value			56,070			55,912
	Accumulated deficit			(38,668	)		(38,351	)
	Accumulated other comprehensive income			14,219			16,082
		Total stockholders' equity		32,430			34,451
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY			$	126,466		$	103,699

About The Allied Defense Group, Inc.

The Allied Defense Group, Inc. is a multinational defense company focused on the manufacture, sale and distribution of ammunition and ammunition-related products for use by the U.S. and foreign governments.

For more information, please visit our web site:www.allieddefensegroup.com.

Certain statements contained herein are “forward looking” statements as such term is defined in the Private Securities Litigation Reform Act of 1995. Because statements include risks and uncertainties, actual results may differ materially from those expressed or implied and include, but are not limited to, those discussed in filings by the Company with the Securities and Exchange Commission.

Contact:

Geoff Grande, CFA
FD
P: 617-747-1721
F: 617-897-1511
geoff.grande@fd.com

SOURCE: The Allied Defense Group, Inc.

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