American Defense Systems, Inc. (ADSI) (NYSE Amex: EAG), a provider
of advanced transparent and opaque armor, architectural hardening
and security products for Defense and Homeland Security, reported
financial results for the year ended December 31, 2009.
2009 Financial Results
Revenues from continuing operations in 2009 increased 29% to a
record $45.9 million from $35.6 million in 2008. The increase in
revenue in 2009 was primarily due to increased order fulfillment
under a large military contract, including the acceptance of
certain orders that were delayed from the fourth quarter of 2008
into the first and second quarters of 2009. The improvement was
also due to improvement in the physical security product business
of the company's subsidiary, American Physical Security Group, LLC
("APSG"), which increased 125% to $4.5 million from $2.0 million in
2008.
Gross margin as a percentage of revenue in 2009 was 26% as
compared to 31% in 2008. The decrease in gross margin for the year
was due primarily to sales under the military contract mentioned
above that contributed lower gross margins as well as an aggressive
sales program with OEM vendors of armor solutions. Gross margins
are expected to return to historically higher ranges in 2010,
starting in the first quarter.
Loss from continuing operations in 2009 totaled $15.7 million or
$(0.37) per share versus a loss of $2.4 million or $(0.06) per
share in the same period a year-ago.
Net loss in 2009 totaled $16.3 million or $(0.38) per share,
compared to a net loss of $4.5 million or $(0.11) per share in the
same year-ago period.
Adjusted EBITDA loss for 2009 was $6.1 million or $(0.14) per
basic and diluted share versus an adjusted EBITDA loss of $4.9
million or $(0.12) per basic and diluted share in 2008 (see the
definition and important discussion about the presentation of
adjusted EBITDA, a non-GAAP term, below).
Fourth Quarter 2009 Operational Highlights
ADSI advanced operationally in a number of areas during the
fourth quarter of 2009, including:
-- Received the recommendation by the National Tactical Officers
Association (NTOA) and its highest ratings for ADSI's portable
transparent ballistic shield. The ratings are based upon design,
quality and durability. The NTOA member-tested and recommendation
program is designed as a service to assist the association's membership
in selecting the best products available to the tactical community.
-- Introduced a new portable transparent protective shield called "COBRA,"
for Collapsible Optic Bullet Resistant Armor. The COBRA is designed
primarily for the purpose of VIP protection with its ability to easily
roll through standard doorways and onto elevators. The design provides
broader coverage than ADSI's Portable Transparent Ballistic Shield
("PTBS"), while being more portable than the PTBS due to its
collapsible capability. This new shield also presents a more affordable
alternative for security at commercial and government buildings that
cannot justify the cost of hardening the entire facade of the
structure, while providing effective protection against a specific
threat level.
Management Commentary
"The record revenues we achieved in 2009 demonstrated the
strength of our business, the quality of our products, and our
expanding relationships with our customers," said Anthony J.
Piscitelli, chairman and CEO of American Defense Systems. "However,
in 2009 we also invested heavily in bringing a new product to
market with Caterpillar and completed the extensive expense
reduction program we announced in December that we believe will
result in more than $4 million in annualized savings. We also
incurred substantial costs due to regulatory compliance activity
and other professional fees related to our obligation to redeem our
Series A Convertible Preferred Stock."
"Now as a result of both a better operational structure and a
higher margin product mix, along with a top line that exceeded our
earlier expectations," continued Piscitelli, "we expect to report a
positive net income from operations for first quarter of 2010. One
important factor driving our growth is the continued expansion of
our physical security unit, APSG, which more than doubled its sales
in 2009 and is effectively diversifying our sales mix beyond our
traditional military business. APSG, which received two key
certifications from the U.S. Department of Homeland Security in
2009, has recently delivered products to one of the nation's
largest international airports and a major federal government
institution."
Fergal Foley, ADSI's chief operating officer, commented: "The
success of our physical security business has also provided the
economies of scale to bring the manufacturing of our protective
glass products in-house, and we've recently leased a 72,000 square
foot manufacturing facility located just north of Fort Bragg and
Fayetteville, North Carolina. In addition to producing APSG
physical security products and housing our APSG offices, this
facility will also be able to produce the specialized glass used in
our transparent armor solutions for military construction vehicles.
Operation of this facility is therefore expected to eventually
improve our gross margins company-wide along with other operational
benefits.
"From our extensive efforts in 2009 to establish a better
footing for ADSI in an expanding global market for both government
and commercial physical security and protection, we expect positive
results to continue through the remainder of 2010 and beyond."
Guidance
The company expects to report first quarter 2010 revenue of
approximately $14 million, as compared to guidance of $12 million
issued in December, and report income from operations between $0.01
and $0.03 per share. Management plans to provide second quarter
guidance in its upcoming first quarter 2010 press release and
conference call.
Conference Call and Webcast
The company will hold a conference call to discuss its fiscal
2009 results on Tuesday, April 20, 2010. Members of ADSI's
executive management team will host the presentation, followed by a
question and answer period.
Date: Tuesday, April 20, 2010
Time: 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time)
Dial-In Number: 1-800-895-0231
International: 1-785-424-1054
Conference ID#: 7DEFENSE
The conference call will be broadcast simultaneously and
available for replay via the investor section of the company's Web
site at www.adsiarmor.com.
Please call the conference telephone number 5-10 minutes prior
to the start time. An operator will register your name and
organization and ask you to wait until the call begins. If you have
any difficulty connecting with the conference call, please contact
the Liolios Group at 1-949-574-3860.
A replay of the call will be available after 7:30 p.m. Eastern
time on the same day and until May 20, 2010:
Toll-free replay number: 1-800-723-0488
International replay number: 1-402-220-2651
(No passcode required)
Use of Non-GAAP Financial Information
Adjusted EBITDA is not a financial measure calculated and
presented in accordance with U.S. generally accepted accounting
principles ("GAAP") and should not be considered as an alternative
to net income, operating income or any other financial measures so
calculated and presented, nor as an alternative to cash flow from
operating activities as a measure of the company's liquidity. ADSI
defines adjusted EBITDA as net income/(loss) before interest (net);
taxes; depreciation; unrealized (gain) loss on adjustment of fair
value of its series a convertible preferred stock classified as a
liability, income tax expense (benefit), loss (gain) on disposal of
discontinued division, loss on deemed extinguishment of debt,
finance charge and unrealized (gain) loss on investor warrant
liability. Other companies (including the company's competitors)
may define adjusted EBITDA differently. The company presents
adjusted EBITDA because it believes it to be an important
supplemental measure of performance that is commonly used by
securities analysts, investors and other interested parties in the
evaluation of companies in a similar industry. Management also uses
this information internally for forecasting and budgeting. It may
not be indicative of the historical operating results of ADSI nor
is it intended to be predictive of potential future results.
Investors should not consider adjusted EBITDA in isolation or as a
substitute for analysis of results as reported under GAAP. See
"Reconciliation of GAAP (Loss) to adjusted EBITDA (Loss)" below for
further information on this non-GAAP measure and reconciliation of
adjusted EBITDA to GAAP net loss for the periods indicated.
American Defense Systems, Inc.
Reconciliation of GAAP Loss to Adjusted EBITDA Loss
(in thousands, except per share amounts)
(unaudited)
Dec 31, Dec 31,
2009 2008
--------- ---------
GAAP net income (loss) $ (16,290) $ (4,506)
Reconciling items from GAAP to Adjusted EBITDA loss
Interest expense, net 4,669 2,186
Depreciation 1,085 843
Unrealized (gain) loss on adjustment of fair
value
Series A convertible preferred stock
classified as a liability 326 (2,901)
Income tax expense (benefit) 753 (996)
Loss (gain) on disposal of discontinued
division 575 1,916
Loss on deemed extinguishment of debt 2,614 -
Finance charge 210 23
Unrealized (gain) on investor warrant
liability (36) (1,450)
--------- ---------
Adjusted EBITDA (loss) $ (6,094) $ (4,886)
========= =========
Adjusted EBITDA (loss) per common share:
Basic and diluted $ (0.14) $ (0.12)
========= =========
Weighted average common shares outstanding:
Basic and diluted 43,192 39,416
About American Defense Systems, Inc.
American Defense Systems, Inc. ("ADSI") offers advanced
solutions in the design, fabrication, and installation of
transparent and opaque armor, security doors, windows and curtain
wall systems for use by military, law enforcement, homeland defense
and corporate customers. ADSI engineers also specialize in
developing innovative, functional and aesthetically pleasing
security applications for the mobile and fixed infrastructure
physical security industry. For more information, visit the ADSI
corporate Web site at www.adsiarmor.com.
Some of the statements made by American Defense Systems, Inc.
("ADSI") in this press release, including, without limitation,
statements regarding ADSI's anticipated future growth, are
forward-looking in nature. ADSI intends that any forward-looking
statements shall be covered by the safe harbor provisions for such
statements contained in the Private Securities Litigation Reform
Act of 1995. Statements that are predictive in nature, that depend
upon or refer to future events or conditions, or that include words
such as "may," "will," "should," "expects," "anticipates,"
"intends," "plans," "believes," "estimates," "predicts,"
"potential," "continues," "projects" and similar expressions are
forward-looking statements. ADSI cautions you that forward-looking
statements are not guarantees of performance. ADSI undertakes no
obligation and disclaims any obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events, or otherwise. Forward-looking statements involve
known and unknown risks and uncertainties that may cause ADSI's
actual future results to differ materially from those projected or
contemplated in the forward-looking statements. ADSI believes that
these risks include, but are not limited to: ADSI's reliance on the
U.S. government for a substantial amount of its sales and growth;
decreases in U.S. government defense spending; ADSI's ability to
contract further with the U.S. Department of Defense; ADSI's
ability to comply with complex procurement laws and regulations;
competition and other risks associated with the U.S. government
bidding process; changes in the U.S. government's procurement
practices; ADSI's ability to obtain and maintain required security
clearances; ADSI's ability to realize the full amount of revenues
reflected in its backlog; ADSI's ability to finance the redemption
of ADSI's series A convertible preferred stock in accordance with
the terms of such stock; ADSI's reliance on certain suppliers; and
intense competition and other risks associated with the defense
industry in general and the security-related defense sector in
particular.
Additional information concerning these and other important risk
factors can be found under the heading "Risk Factors" in ADSI's
filings with the Securities and Exchange Commission, including,
without limitation, its most recent annual report on Form 10-K.
Statements in this press release should be evaluated in light of
these important factors.
American Defense Systems, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(unaudited)
As of December 31,
--------------------------
ASSETS 2009 2008
------------ ------------
CURRENT ASSETS
Cash $ - $ 374,457
Accounts receivable, net of allowance for
doubtful accounts of $222,448 and $0 as of
December 31, 2009 and 2008, respectively 2,288,666 4,981,150
Accounts receivable-factoring 199,876 -
Tax receivable 108,741
Inventory 1,352,873 621,048
Prepaid expenses and other current assets 540,381 2,088,801
Costs in excess of billings on uncompleted
contracts 6,409,963 7,143,089
Deferred Tax Assets 521 -
Deposits 407,137 437,496
Assets of discontinued operations - 736,613
------------ ------------
TOTAL CURRENT ASSETS 11,308,158 16,382,654
Property and equipment, net 3,078,724 3,743,936
Deferred Financing Costs, net 1,547,551 1,500,533
Notes Receivable, net 400,000 925,000
Intangible Assets 606,000 606,000
Goodwill 450,000 450,000
Deferred Tax Asset - 1,167,832
Other Assets 138,001 159,560
------------ ------------
TOTAL ASSETS $ 17,528,434 $ 24,935,515
============ ============
LIABILITIES AND SHAREHOLDERS' (DEFICIENCY)
EQUITY
CURRENT LIABILITIES
Accounts payable $ 6,744,285 $ 2,480,652
Accrued expenses 498,795 755,615
Line of Credit - 76,832
Warrant liability 35,413 90,409
Mandatory redeemable Series A Convertible
Preferred Stock (cumulative), 15,000 shares
authorized issued and outstanding - 10,981,577
Liabilities of discontinued operations - 736,613
------------ ------------
TOTAL CURRENT LIABILITIES 7,278,493 15,121,698
LONG TERM LIABILITIES
Mandatory redeemable Series A Convertible
Preferred Stock (cumulative), 15,000 shares
authorized issued and outstanding 12,429,832 -
Deferred Tax Liability 521 -
------------ ------------
TOTAL LIABILITIES 19,708,846 15,121,698
------------ ------------
COMMITMENTS AND CONTINGENCIES - Note 6
SHAREHOLDERS' (DEFICIENCY) EQUITY
Common stock, $0.001 par value, 100,000,000
shares authorized, 46,611,457 and 39,585,960
shares issued and outstanding as of December
31, 2009 and 2008, respectively 46,611 39,586
Additional paid-in capital 14,712,414 11,096,031
Accumulated Deficit (16,939,437) (1,321,800)
------------ ------------
TOTAL SHAREHOLDERS' (DEFICIENCY) EQUITY (2,180,412) 9,813,817
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS'
(DEFICIENCY) EQUITY $ 17,528,434 $ 24,935,515
------------ ------------
American Defense Systems, Inc. and Subsidiaries
Condensed Consolidated Statement of Operations
(unaudited)
Year Ended December 31,
--------------------------
2009 2008
------------ ------------
CONTRACT REVENUES EARNED $ 45,893,979 $ 35,588,849
COST OF REVENUES EARNED 33,929,327 24,702,714
------------ ------------
GROSS PROFIT 11,964,652 10,886,135
------------ ------------
OPERATING EXPENSES
General and administrative expenses 7,519,114 5,661,781
General and administrative salaries 4,144,666 4,758,968
Sales and marketing 2,661,636 2,722,224
T2 expenses 531,506 -
Research and development 412,285 788,100
Settlement of litigation 63,441 57,377
Depreciation and amortization 1,085,331 842,532
Professional fees 2,734,816 1,561,415
------------ ------------
TOTAL OPERATING EXPENSES 19,152,795 16,392,397
------------ ------------
OPERATING LOSS (7,188,143) (5,506,262)
------------ ------------
OTHER INCOME (EXPENSE)
Unrealized (loss) gain on adjustment of fair
Value Series A convertible preferred stock
Classified as a liability (325,837) 2,900,799
Unrealized gain on warrant liability 35,673 1,450,117
Loss on deemed extinguishment of debt (2,613,630) -
Other income 8,869 8,551
Interest expense (3,019,079) (1,222,205)
Interest expense - Mandatory redeemable
preferred stock dividends (1,650,000) (1,081,081)
Interest income - 117,312
Finance charge (209,698) (22,598)
------------ ------------
TOTAL OTHER INCOME (EXPENSE) (7,773,702) 2,150,895
------------ ------------
LOSS BEFORE INCOME TAXES FROM CONTINUING
OPERATIONS (14,961,845) (3,355,367)
INCOME TAX EXPENSE (BENEFIT) 752,971 (996,000)
------------ ------------
LOSS FROM CONTINUING OPERATIONS (15,714,816) (2,359,367)
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX:
Loss from operations of discontinued division - (230,834)
Loss from disposal of discontinued division (575,000) (1,915,903)
------------ ------------
(575,000) (2,146,737)
------------ ------------
NET LOSS (16,289,816) (4,506,104)
============ ============
Weighted Average Shares Outstanding (Basic and
Diluted) 43,192,175 39,416,278
============ ============
Loss per Share - Basic and Diluted:
LOSS FROM CONTINUING OPERATIONS $ (0.37) $ (0.06)
============ ============
LOSS FROM DISCONTINUED OPERATIONS $ (0.01) $ (0.05)
============ ============
NET LOSS $ (0.38) $ (0.11)
============ ============
Company Contacts: Roger Ward V.P. of Marketing & Investor
Relations American Defense Systems, Inc. Tel 516-390-5300, x326
Email Contact Investor Relations: Ron Both Managing Director
Liolios Group, Inc. Tel 949-574-3860 Email Contact
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