ADG AMG Critical Materials NV

VIENNA, Va., Aug. 13 /PRNewswire-FirstCall/ -- 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 ended June 30, 2009. Highlights: -- Revenue of $47.4 million, an increase of 18% over the second quarter of 2008 -- Net income of $1.2 million compared to net income of $0.9 million during the second quarter of 2008 -- EBITDA* from continuing operations of $3.4 million -- Funded, committed backlog of $117.9 million as of June 30, 2009 "We have achieved two significant milestones; divesting our last non-core business this month and achieving profitability in the second quarter," said Major General (Ret) John J. Marcello, President and Chief Executive Officer of The Allied Defense Group. "Our decisions to focus on our core competency in ammunition, rid ourselves of expensive debt, take action to improve the efficiency of our operations and manage our working capital have delivered a transformed business poised to capitalize on the tremendous opportunities ahead of us." Business Segment Details: Mecar SA -- Revenue of $23.0 million, a decrease of 28.2% from the second quarter of 2008 -- Backlog of $90.8 million as of June 30, 2009 Mecar USA -- Revenue of $24.4 million, an increase of $16.1 million over the second quarter of 2008 -- Backlog of $27.1 million as of June 30, 2009 Second Quarter Summary Revenue was $47.4 million in the second quarter of 2009, up 18% over the same period of 2008. Gross margin was 15% in the second quarter of 2009, compared to 17% for the same period in 2008. Lower gross margins in the current quarter resulted from higher sales activities at Mecar USA, a business that, in general, has lower margins than Mecar SA. Net income from continuing operations was $2.0 million in the second quarter of 2009, compared to a net loss of $0.7 million during the same period of 2008. Diluted earnings per share from continuing operations were $0.24 in the second quarter of 2009, compared to a loss of $0.09 during the same period of 2008. EBITDA from continuing operations was $3.4 million in the second quarter of 2009, compared to $2.8 million during the same period of 2008. Results from continuing operations in the current period were positively impacted by a $1.2 million gain associated with Mecar SA's forward exchange contracts. As compared to the year-ago period, selling and administrative expenses declined by 14%, or $0.7 million and interest expense declined by 56%, or $1.3 million. The reduced operating expense reflects the transition of the Company to an ammunition-focused business. The reduced interest expense resulted from the full repayment of the Company's senior secured convertible notes in January 2009. Six-Month Summary Revenue was $78.9 million for the six months ended June 30, 2009, up 18% over the same period of 2008. Gross margin was 15% for the six months ended June 30, 2009, compared to 19% for the same period in 2008. Net income from continuing operations was $0.6 million for the six months ended June 30, 2009, compared to a net loss of $3.4 million during the same period of 2008. Diluted earnings per share from continuing operations were $0.07 for the six months ended June 30, 2009, compared to a loss of $0.42 during the same period of 2008. EBITDA from continuing operations was $5.0 million for the six months ended June 30, 2009, compared to $4.9 million during the same period of 2008. As of June 30, 2009, the Company's firm committed backlog was $117.9 million, compared to $149.4 million as of June 30, 2008. Cash Flow At June 30, 2009, the Company had $1.7 million of cash on hand. This is down $178,000 from March 31, 2009. The Company used $8.9 million of cash in operating activities during the six months ended June 30, 2009 as compared to $20.0 million of cash used during the same period of 2008. Despite an 18% increase in revenue, the cash used from operations during the current period was reduced mainly as a result of lower working capital requirements associated with Mecar USA. Cash used in investing activities was $0.3 million during the six months ended June 30, 2009 as compared to $1.4 million generated during the same period of 2008. Cash provided by financing activities was $2.2 million during the six months ended June 30, 2009 as compared to $9.1 million generated during the same period of 2008. The reduction in cash provided by financing activities stemmed from lower revolving credit borrowings in the current period at Mecar SA. "We have carefully managed our cash during the first six months of 2009, including discounting letters of credit and obtaining bank overdraft loans," said Debbie Ricci, Chief Financial Officer of The Allied Defense Group. "We will continue to take these steps until we secure appropriate working capital solutions." Conference Call The Company will host a conference call to discuss these results today, August 13, 2009, at 4:30 p.m. (ET). To access the conference call, interested parties may call (888) 245-0962 within the United States or (913) 312-1463 outside the United States. A replay of the call will be available from approximately 7:30 p.m. (ET) today, August 13, 2009, through 11:59 p.m. (ET) on August 20, 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: 4105359. The Allied Defense Group, Inc. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Thousands of Dollars, except per share and share data) Three Months Ended Six Months Ended June 30, June 30, -------- -------- 2009 2008 2009 2008 ---- ---- ---- ---- Revenue 47,380 $40,322 $78,928 $67,117 Cost and expenses Cost of sales 40,158 33,484 66,876 54,472 Selling and administrative 4,539 5,275 8,751 10,248 Research and development 580 580 1,072 1,132 --- --- ----- ----- Operating income 2,103 983 2,229 1,265 ----- --- ----- ----- Other income (expenses) Interest income 28 251 63 409 Interest expense (1,040) (2,351) (1,904) (4,041) Net gain (loss) on fair value of senior convertible notes and warrants 8 706 247 (527) Gain (loss) from foreign exchange contracts 1,231 (144) 569 (144) Other-net (556) 76 (803) 9 ---- -- ---- - (329) (1,462) (1,828) (4,294) ---- ------ ------ ------ Income (loss) from continuing operations before income taxes 1,774 (479) 401 (3,029) Income tax (benefit) expense (195) 194 (195) 322 ---- --- ---- --- Income (loss) from continuing operations 1,969 (673) 596 (3,351) ----- ---- --- ------ Income (loss) from discontinued operations, net of tax Gain on sale of subsidiaries 865 - 1,811 113 Income (loss) from discontinued operations (1,675) 1,579 (1,565) 849 ------ ----- ------ --- Net income (loss) from discontinued operations (810) 1,579 246 962 ---- ----- --- --- NET INCOME (LOSS) 1,159 $906 $842 $(2,389) ===== ==== ==== ======= Earnings (Loss) per share - basic: Net earnings (loss) from continuing operations 0.24 $(0.09) $0.07 $(0.42) Net earnings (loss) from discontinued operations (0.10) 0.20 0.03 0.12 ----- ---- ---- ---- Total earnings (loss) per share - basic 0.14 $0.11 $0.10 $(0.30) ==== ===== ===== ====== Earnings (Loss) per share - diluted: Net earnings (loss) from continuing operations 0.24 $(0.09) $0.07 $(0.42) Net earnings (loss) from discontinued operations (0.10) 0.20 0.03 0.12 ----- ---- ---- ---- Total earnings (loss) per share - diluted 0.14 $0.11 $0.10 $(0.30) ==== ===== ===== ====== Weighted average number of common shares: Basic 8,085,207 8,021,755 8,082,402 8,017,418 Diluted 8,101,875 8,021,755 8,107,595 8,017,418 The Allied Defense Group, Inc. Calculation of EBITDA from continuing operations (Unaudited) (All amounts are in thousands of U.S. Dollars) Three months Six months ended June 30, ended June 30, 2009 2008 2009 2008 ---- ---- ---- ---- Consolidated Net Income (Loss) from continuing operations $1,969 $(673) $596 $(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 $2,106 $(1,257) $635 $(2,289) Interest Income (28) (251) (63) (409) Interest Expense 1,040 2,351 1,904 4,041 Income tax (benefit) expense (195) 194 (195) 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. The Allied Defense Group, Inc. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Thousands of Dollars, except per share and share data) June 30, December 31, ASSETS 2009 2008 (a) -------- ------------ Current Assets Cash and cash equivalents $1,710 $8,816 Restricted cash 14,272 9,666 Accounts receivable, net 14,403 12,646 Costs and accrued earnings on uncompleted contracts 31,104 21,999 Inventories, net 23,732 21,508 Contracts in progress 6,072 1,469 Prepaid and other current assets 5,516 3,137 Assets held for sale 2,712 4,474 ----- ----- Total current assets 99,521 83,715 ------ ------ Property, Plant and Equipment, net 18,031 19,525 ------ ------ Other Assets 502 459 --- --- TOTAL ASSETS $118,054 $103,699 ======== ======== CURRENT LIABILITIES Current maturities of senior secured convertible notes $- $933 Bank overdraft facility 221 381 Current maturities of long-term debt 7,079 2,659 Current maturities of foreign exchange contracts 293 405 Accounts payable 14,841 14,536 Accrued liabilities 18,324 16,099 Customer deposits 27,350 16,731 Belgium social security 2,075 3,522 Income taxes 3,709 3,913 Liabilities held for sale 987 1,316 --- ----- Total current liabilities 74,879 60,495 ------ ------ LONG TERM OBLIGATIONS Long-term debt, less current maturities 5,625 6,681 Long-term foreign exchange contracts, less current maturities 581 1,072 Derivative instrument 76 318 Other long-term liabilities 1,310 682 ----- --- Total long-term obligations 7,592 8,753 ----- ----- TOTAL LIABILITIES 82,471 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, 8,090,055 at June 30, 2009 and 8,079,509 at December 31, 2008 809 808 Capital in excess of par value 56,234 55,912 Accumulated deficit (37,509) (38,351) Accumulated other comprehensive income 16,049 16,082 ------ ------ Total stockholders' equity 35,583 34,451 ------ ------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $118,054 $103,699 ======== ======== (a) Condensed consolidated balance sheet as of December 31, 2008, has been derived from audited consolidated financial statements. The Allied Defense Group, Inc. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Thousands of Dollars) Six Months Ended June 30, 2009 2008 ---- ---- Cash flows from operating activities Net Income (loss) $842 $(2,389) Less: Gain on sale of subsidiaries (1,811) (113) Discontinued operations, net of tax 1,565 (849) ----- ---- Income (Loss) from continuing operations 596 (3,351) Adjustments to reconcile net income (loss) from continuing operations to net cash used in operating activities, net of divestitures: Depreciation and amortization 2,069 2,702 Unrealized (gain) loss on forward contracts (569) 144 Loss on sale of fixed assets - 231 Net (gain) loss related to fair value of notes and warrants (247) 527 Provision for estimated losses on contracts 17 43 Provision for warranty reserves, uncollectible accounts and inventory obsolescence (194) 383 Common stock and stock option awards 226 178 Deferred director stock awards 60 36 (Increase) decrease in operating assets and increase (decrease) in liabilities, net of effects from discontinued businesses Restricted cash (4,409) 5,132 Accounts receivable (1,708) (7,126) Costs and accrued earnings on uncompleted contracts (8,726) (25,071) Inventories (2,155) (5,559) Contracts in progress (4,603) (2,575) Prepaid and other current assets (1,537) (1,852) Accounts payable and accrued liabilities 1,829 5,281 Customer deposits 10,260 8,736 Deferred compensation 598 26 Income taxes (278) 321 ---- --- Net cash used in operating activities - continuing operations (8,771) (21,794) Net cash (used in) provided by operating activities - discontinued operations (152) 1,822 ---- ----- Net cash used in operating activities (8,923) (19,972) ------ ------- Cash flows from investing activities Capital expenditures (680) (946) Net proceeds from sale of subsidiaries 422 2,433 --- ----- Net cash (used in) provided by investing activities - continuing operations (258) 1,487 Net cash used in investing activities - discontinued operations - (59) - --- Net cash (used in) provided by investing activities (258) 1,428 ---- ----- Cash flows from financing activities Principal payments on senior convertible notes $(928) $(481) Net borrowings (repayments) of debt and capital lease obligations 3,057 9,547 Net cash transferred to discontinued operations (132) 1,581 Proceeds from employee stock purchases 37 65 Retirement of stock - (9) - -- Net cash provided by financing activities - continuing operations 2,034 10,703 Net cash provided by financing activities - discontinued operations 131 (1,621) --- ------ Net cash provided by financing activities 2,165 9,082 ----- ----- Net change in cash of discontinued operations 22 (142) Effects of exchange rate on cash (112) 735 ---- --- NET DECREASE IN CASH AND CASH EQUIVALENTS (7,106) (8,869) Cash and cash equivalents at beginning of period 8,816 21,651 ----- ------ Cash and cash equivalents at end of period $1,710 $12,782 ====== ======= 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: http://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 DATASOURCE: Allied Defense Group, Inc. CONTACT: Geoff Grande, CFA, FD, +1-617-747-1721, or Fax: +1-617-897-1511, Web Site: http://www.allieddefensegroup.com/

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