The Allied Defense Group, Inc.
THE ALLIED DEFENSE GROUP ANNOUNCES THIRD QUARTER 2009
FINANCIAL RESULTS
VIENNA, Va., November 16, 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 and services for use by the U.S. and foreign governments, today announced results for the quarter ended September 30, 2009.
Financial Results:
• | Revenue of $36.2 million compared to $49.3 million in the third quarter of 2008 |
• | Net loss of $3.3 million compared to net loss of $6.2 million during the third quarter of 2008 |
• | EBITDA* from continuing operations of $4.3 million for the nine months ended September 30, 2009 |
• | Funded, committed backlog of $89.6 million as of September 30, 2009 |
“During the third quarter we continued to advance our engagements throughout the world,” said Major General (Ret) John J. Marcello, President and Chief Executive Officer of The Allied Defense Group. “While we are not pleased that the timing of certain contracts and shipments were delayed beyond the end of the quarter, these opportunities either remain active in our pipeline or have already closed. These ebbs and flows should be expected from quarter-to-quarter given the nature of the global ammunition business. More importantly, however, we continue to be very encouraged by the growing number of opportunities available to us in the marketplace. Our unique positioning, combined with our extensive international relationships, will serve us well as we bring these opportunities to fruition.”
Business Segment Details:
Mecar SA
• | Revenue of $19.1 million compared to $32.2 million in the third quarter of 2008 |
• | Backlog of $83.9 million as of September 30, 2009 |
Mecar USA
• | Revenue of $17.1 million compared to $17.0 million in the third quarter of 2008 |
• | Backlog of $5.7 million as of September 30, 2009 |
Third Quarter Summary
Revenue was $36.2 million in the third quarter of 2009, down 27% from the same period of 2008. Lower revenue was due to lower manufacturing activity and a mix of lower value sales contracts at Mecar SA. Gross margin was 10% in the third quarter of 2009, compared to 13% for the same period in 2008. The decline in gross margin was the result of a lower volume of revenue and hours worked at Mecar SA. Lower revenue and gross margins in the current quarter were partially offset by better margin contracts at Mecar USA.
Net loss from continuing operations was $3.2 million in the third quarter of 2009, compared to a net loss of $3.3 million during the same period of 2008. Diluted loss per share from continuing operations was $0.39 in the third quarter of 2009, compared to a loss of $0.41 during the same period of 2008. EBITDA* from continuing operations was a loss of $0.7 million in the third quarter of 2009, compared to income of $2.7 million during the same period of 2008.
Results from continuing operations in the current period were positively impacted by a $0.3 million gain associated with Mecar SA’s forward exchange contracts. Selling and administrative expenses were $4.9 million, roughly in-line with the same period last year. Interest expense was $1.3 million, down from $1.4 million in the same period in 2008.
Nine-Month Summary
Revenue was $115.1 million for the nine months ended September 30, 2009, compared to $116.4 million during the same period of 2008. Gross margin was 13% for the nine months ended September 30, 2009, compared to 16% for the same period in 2008.
Net loss from continuing operations was $2.6 million for the nine months ended September 30, 2009, compared to a net loss of $6.7 million during the same period of 2008. Diluted loss per share from continuing operations was $0.32 for the nine months ended September 30, 2009, compared to a loss of $0.83 during the same period of 2008. EBITDA* from continuing operations was $4.3 million for the nine months ended September 30, 2009, compared to $7.6 million during the same period of 2008.
As of September 30, 2009, the Company’s firm committed backlog was $89.6 million, compared to $168.4 million as of September 30, 2008.
Cash Flow
At September 30, 2009, the Company had $4.1 million of cash on hand. This is up from $1.7 million at June 30, 2009.
The Company used $9.6 million of cash in operating activities during the nine months ended September 30, 2009 as compared to $17.6 million of cash used during the same period of 2008.
Cash provided by investing activities was $0.9 million during the nine months ended September 30, 2009 as compared to $0.8 million generated during the same period of 2008. Cash provided by financing activities was $3.9 million during the nine months ended September 30, 2009 as compared to utilized cash of $0.4 million during the same period of 2008. The increase in cash provided by financing activities stemmed from short term financing made available by the Mecar SA bank group.
“Our cash position has improved during the third quarter.” said Debbie Ricci, Chief Financial Officer of The Allied Defense Group. “We are working hard to secure a longer-term lending facility to bolster our working capital needs. In the meantime, we will continue to carefully manage our cash until we secure appropriate working capital solutions.”
Conference Call
The Company will host a conference call to discuss these results today, November 16, 2009, at 5:00
p.m. (ET). To access the conference call, interested parties may call (888) 286-2314 within the
United States or (719) 325-2479 outside the United States. A replay of the call will be available
from approximately 8:00 p.m. (ET) today, November 16, 2009, through 11:59 p.m. (ET) on November 23,
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: 2628448.The Allied Defense Group,
Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Thousands of Dollars, except per share and share data)
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||||||||||
Revenue | $ | 36,185 | $ | 49,247 | $ | 115,113 | $ | 116,364 | ||||||||||||||||
Cost and expenses | ||||||||||||||||||||||||
Cost of sales | 32,738 | 42,851 | 99,614 | 97,323 | ||||||||||||||||||||
Selling and administrative | 4,902 | 4,877 | 13,653 | 15,125 | ||||||||||||||||||||
Research and development | 443 | 535 | 1,515 | 1,667 | ||||||||||||||||||||
Impairment of long-lived assets | - | 462 | - | 462 | ||||||||||||||||||||
Operating income (loss) | (1,898 | ) | 522 | 331 | 1,787 | |||||||||||||||||||
Other income (expenses) | ||||||||||||||||||||||||
Interest income | 20 | 102 | 83 | 511 | ||||||||||||||||||||
Interest expense | (1,282 | ) | (1,429 | ) | (3,186 | ) | (5,470 | ) | ||||||||||||||||
Net gain (loss) on fair value of senior | ||||||||||||||||||||||||
convertible notes and warrants | 10 | (155 | ) | 257 | (682 | ) | ||||||||||||||||||
Gain (loss) from foreign exchange contracts | 343 | (1,329 | ) | 912 | (1,473 | ) | ||||||||||||||||||
Other-net | (402 | ) | (846 | ) | (1,205 | ) | (837 | ) | ||||||||||||||||
(1,311 | ) | (3,657 | ) | (3,139 | ) | (7,951 | ) | |||||||||||||||||
Loss from continuing | ||||||||||||||||||||||||
operations before income | ||||||||||||||||||||||||
taxes | (3,209 | ) | (3,135 | ) | (2,808 | ) | (6,164 | ) | ||||||||||||||||
Income tax (benefit) expense | (4 | ) | 173 | (199 | ) | 495 | ||||||||||||||||||
Loss from continuing operations | (3,205 | ) | (3,308 | ) | (2,609 | ) | (6,659 | ) | ||||||||||||||||
Income (loss) from discontinued operations, net of tax | ||||||||||||||||||||||||
Gain on sale of subsidiaries | 45 | — | 1,856 | 113 | ||||||||||||||||||||
Loss from discontinued | ||||||||||||||||||||||||
operations | (114 | ) | (2,912 | ) | (1,679 | ) | (2,063 | ) | ||||||||||||||||
Net income (loss) from | ||||||||||||||||||||||||
discontinued operations | (69 | ) | (2,912 | ) | 177 | (1,950 | ) | |||||||||||||||||
NET LOSS | $ | (3,274 | ) | $ | (6,220 | ) | $ | (2,432 | ) | $ | (8,609 | ) | ||||||||||||
Earnings (Loss) per share — basic and diluted: | ||||||||||||||||||||||||
Net loss from continuing operations | $ | (0.39 | ) | $ | (0.41 | ) | $ | (0.32 | ) | $ | (0.83 | ) | ||||||||||||
Net earnings (loss) from discontinued | ||||||||||||||||||||||||
operations | (0.01 | ) | (0.36 | ) | 0.02 | (0.24 | ) | |||||||||||||||||
Total loss per share - | ||||||||||||||||||||||||
basic and diluted | $ | (0.40 | ) | $ | (0.77 | ) | $ | (0.30 | ) | $ | (1.07 | ) | ||||||||||||
Weighted average number of common shares: | ||||||||||||||||||||||||
Basic | 8,143,661 | 8,067,089 | 8,102,913 | 8,034,164 | ||||||||||||||||||||
Diluted | 8,143,661 | 8,067,089 | 8,102,913 | 8,034,164 |
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The Allied Defense Group, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Thousands of Dollars, except per share and share data)
September 30, | December 31, | |||||||||||||||
ASSETS | 2009 | 2008 (a) | ||||||||||||||
Current Assets | ||||||||||||||||
Cash and cash equivalents | $ | 4,083 | $ | 8,816 | ||||||||||||
Restricted cash | 8,039 | 9,666 | ||||||||||||||
Accounts receivable, net | 20,610 | 12,646 | ||||||||||||||
Costs and accrued earnings on uncompleted contracts | 35,360 | 21,999 | ||||||||||||||
Inventories, net | 20,798 | 21,508 | ||||||||||||||
Contracts in progress | 2,413 | 1,469 | ||||||||||||||
Prepaid and other current assets | 4,145 | 3,137 | ||||||||||||||
Assets held for sale | — | 4,474 | ||||||||||||||
Total current assets | 95,448 | 83,715 | ||||||||||||||
Property, Plant and Equipment, net | 17,789 | 19,525 | ||||||||||||||
Other Assets | 1,852 | 459 | ||||||||||||||
TOTAL ASSETS | $ | 115,089 | $ | 103,699 | ||||||||||||
CURRENT LIABILITIES | ||||||||||||||||
Current maturities of senior secured convertible notes | $ | - | $ | 933 | ||||||||||||
Bank overdraft facility | 4,657 | 381 | ||||||||||||||
Current maturities of long-term debt | 5,294 | 2,659 | ||||||||||||||
Current maturities of foreign exchange contracts | 261 | 405 | ||||||||||||||
Accounts payable | 15,983 | 14,536 | ||||||||||||||
Accrued liabilities | 18,100 | 16,099 | ||||||||||||||
Customer deposits | 23,748 | 16,731 | ||||||||||||||
Belgium social security | 2,876 | 3,522 | ||||||||||||||
Income taxes | 3,842 | 3,913 | ||||||||||||||
Liabilities held for sale | — | 1,316 | ||||||||||||||
Total current liabilities | 74,761 | 60,495 | ||||||||||||||
LONG TERM OBLIGATIONS | ||||||||||||||||
Long-term debt, less current maturities | 5,210 | 6,681 | ||||||||||||||
Long-term foreign exchange contracts, less current maturities | 295 | 1,072 | ||||||||||||||
Derivative instrument | 65 | 318 | ||||||||||||||
Other long-term liabilities | 1,353 | 682 | ||||||||||||||
Total long-term obligations | 6,923 | 8,753 | ||||||||||||||
TOTAL LIABILITIES | 81,684 | 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, 8,172,368 at September 30, 2009 and 8,079,509 at | ||||||||||||||||
December 31, 2008 | 817 | 808 | ||||||||||||||
Capital in excess of par value | 56,361 | 55,912 | ||||||||||||||
Accumulated deficit | (40,783 | ) | (38,351 | ) | ||||||||||||
Accumulated other comprehensive income | 17,010 | 16,082 | ||||||||||||||
Total stockholders' equity | 33,405 | 34,451 | ||||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 115,089 | $ | 103,699 | ||||||||||||
(a) | Condensed consolidated balance sheet as of December 31, 2008, has been derived from audited consolidated financial statements. |
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The Allied Defense Group, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Thousands of Dollars)
Nine Months Ended September 30, | ||||||||||||||||||||||||
2009 | 2008 | |||||||||||||||||||||||
Cash flows from operating activities | ||||||||||||||||||||||||
Net Loss | $ | (2,432 | ) | $ | (8,609 | ) | ||||||||||||||||||
Less: Gain on sale of subsidiaries | (1,856 | ) | (113 | ) | ||||||||||||||||||||
Discontinued operations, net of tax | 1,679 | 2,063 | ||||||||||||||||||||||
— | ||||||||||||||||||||||||
Loss from continuing operations | (2,609 | ) | (6,659 | ) | ||||||||||||||||||||
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities, net of divestitures: | ||||||||||||||||||||||||
Depreciation and amortization | 3,201 | 4,568 | ||||||||||||||||||||||
Unrealized (gain) loss on forward contracts | (912 | ) | 1,473 | |||||||||||||||||||||
Loss on sale of fixed assets | 90 | — | ||||||||||||||||||||||
Net (gain) loss related to fair value of notes and warrants | (257 | ) | 682 | |||||||||||||||||||||
Provision (reduction) for estimated losses on contracts | (52 | ) | 906 | |||||||||||||||||||||
Provision (reduction) for warranty reserves, uncollectible accounts and inventory obsolescence | (55 | ) | 495 | |||||||||||||||||||||
Common stock and stock option awards | 322 | 292 | ||||||||||||||||||||||
Deferred director stock awards | 82 | 54 | ||||||||||||||||||||||
(Increase) decrease in operating assets and increase (decrease) in liabilities, net | ||||||||||||||||||||||||
of effects from discontinued businesses | ||||||||||||||||||||||||
Restricted cash | 1,833 | 5,076 | ||||||||||||||||||||||
Accounts receivable | (7,475 | ) | (13,374 | ) | ||||||||||||||||||||
Costs and accrued earnings on uncompleted contracts | (11,779 | ) | (19,580 | ) | ||||||||||||||||||||
Inventories | 1,462 | (1,271 | ) | |||||||||||||||||||||
Contracts in progress | (944 | ) | (3,265 | ) | ||||||||||||||||||||
Prepaid and other current assets | (1,263 | ) | 629 | |||||||||||||||||||||
Accounts payable and accrued liabilities | 2,274 | 4,419 | ||||||||||||||||||||||
Customer deposits | 6,130 | 4,139 | ||||||||||||||||||||||
Deferred compensation | 614 | 40 | ||||||||||||||||||||||
Income taxes | (284 | ) | 390 | |||||||||||||||||||||
Net cash used in operating activities - continuing operations | (9,622 | ) | (20,986 | ) | ||||||||||||||||||||
Net cash provided by operating activities - discontinued | ||||||||||||||||||||||||
operations | — | 3,436 | ||||||||||||||||||||||
Net cash used in operating activities | (9,622 | ) | (17,550 | ) | ||||||||||||||||||||
Cash flows from investing activities | ||||||||||||||||||||||||
Capital expenditures | (1,220 | ) | (1,493 | ) | ||||||||||||||||||||
Procceds from sale of fixed assets | 137 | - | ||||||||||||||||||||||
Net proceeds from sale of subsidiaries | 2,023 | 2,433 | ||||||||||||||||||||||
Net cash provided by investing activities - continuing | ||||||||||||||||||||||||
operations | 940 | 940 | ||||||||||||||||||||||
Net cash used in investing activities - discontinued | ||||||||||||||||||||||||
operations | — | (114 | ) | |||||||||||||||||||||
Net cash provided by investing activities | 940 | 826 | ||||||||||||||||||||||
Cash flows from financing activities | ||||||||||||||||||||||||
Increase in short-term borrowings | $ | 977 | $ | 2,587 | ||||||||||||||||||||
Principal payments on senior convertible notes | (928 | ) | (481 | ) | ||||||||||||||||||||
Bank overdraft | 3,993 | (1,822 | ) | |||||||||||||||||||||
Net borrowings (repayments) of long-term debt and capital lease obligations | (213 | ) | (702 | ) | ||||||||||||||||||||
Net cash transferred to discontinued operations | - | 3,090 | ||||||||||||||||||||||
Proceeds from employee stock purchases | 54 | 80 | ||||||||||||||||||||||
Retirement of stock | — | (9 | ) | |||||||||||||||||||||
Net cash provided by financing activities - continuing | ||||||||||||||||||||||||
operations | 3,883 | 2,743 | ||||||||||||||||||||||
Net cash used in financing activities - discontinued | ||||||||||||||||||||||||
operations | — | (3,136 | ) | |||||||||||||||||||||
Net cash provided by (used in) financing activities | 3,883 | (393 | ) | |||||||||||||||||||||
Net change in cash of discontinued operations | - | (185 | ) | |||||||||||||||||||||
Effects of exchange rate on cash | 66 | 460 | ||||||||||||||||||||||
NET DECREASE IN CASH AND CASH EQUIVALENTS | (4,733 | ) | (16,842 | ) | ||||||||||||||||||||
Cash and cash equivalents at beginning of period | 8,816 | 21,651 | ||||||||||||||||||||||
Cash and cash equivalents at end of period | $ | 4,083 | $ | 4,809 | ||||||||||||||||||||
Supplemental Disclosures of Cash Flow information | ||||||||||||||||||||||||
Cash paid during the period for | ||||||||||||||||||||||||
Interest | $ | 3,609 | $ | 5,518 | ||||||||||||||||||||
Taxes | $ | 28 | $ | 99 | ||||||||||||||||||||
Supplemental Disclosures of Non-Cash Investing and Financing Activities | ||||||||||||||||||||||||
Capital leases | $ | 22 | $ | 26 |
The Allied Defense Group, Inc
Calculation of EBITDA from continuing operations
(Unaudited)
(All amounts are in thousands of U.S. Dollars)
Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||||||||||||||
Consolidated Net Income (Loss) from continuing operations | $ | 1,637 | $ | (673) | $ | 264 | $ | (3,351 | ) | |||||||||||||||||||
Any extraordinary or non recurring gains or losses | ||||||||||||||||||||||||||||
(Gain) loss from fair value of notes and warrants | (8 | ) | (706 | ) | (247 | ) | 527 | |||||||||||||||||||||
Loss from Sale of Fixed Assets | - | - | - | 231 | ||||||||||||||||||||||||
Non-cash expenses associated with stock compensation | ||||||||||||||||||||||||||||
expense | 145 | 122 | 286 | 304 | ||||||||||||||||||||||||
Adjusted Net Income (Loss) from continuing operations | $ | 1,774 | $ | (1,257 | ) | $ | 303 | $ | (2,289 | ) | ||||||||||||||||||
Interest Income | (28 | ) | (251 | ) | (63 | ) | (409 | ) | ||||||||||||||||||||
Interest Expense | 1,040 | 2,351 | 1,904 | 4,041 | ||||||||||||||||||||||||
Income tax expense | 137 | 194 | 137 | 322 | ||||||||||||||||||||||||
Depreciation and Amortization Expense | 1,046 | 1,392 | 2,069 | 2,702 | ||||||||||||||||||||||||
Any non-cash transactions: | ||||||||||||||||||||||||||||
Foreign currency (gain) loss | (436 | ) | 128 | 527 | 197 | |||||||||||||||||||||||
Adjustments related to Inventory | (290 | ) | 57 | (97 | ) | 171 | ||||||||||||||||||||||
Other non-cash charges | 178 | 153 | 207 | 153 | ||||||||||||||||||||||||
Consolidated EBITDA | $ | 3,421 | $ | 2,767 | $ | 4,987 | $ | 4,888 | ||||||||||||||||||||
*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 Income (Loss) from continuing operations to EBITDA from continuing operations for the reported periods.
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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 and services 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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