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American Defense Systems, Inc.: American Defense Systems Reports Fiscal 2008 Results

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  Published in House and Home on Wednesday, April 15th 2009 at 13:13 GMT, Last Modified on 2009-04-15 13:17:03 by Market Wire
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HICKSVILLE, NY--(Marketwire - April 15, 2009) - American Defense Systems, Inc. (ADSI) (AMEX: [ EAG ]), a leading 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, 2008.

Financial Results for Full-Year 2008

For the full-year 2008, revenues totaled $35.6 million, a decrease of 2% from $36.3 million in 2007. The decrease is primarily attributed to approximately $10.0 million in orders delayed by the federal government until the first half of 2009 and the elimination of approximately $1.3 million from operations discontinued in the fourth quarter.

Income from continuing operations in 2008 was $511,000 or $0.01 per basic and diluted share, compared to income from continuing operations in 2007 of $3.1 million, or $0.08 per basic and diluted share.

Income from continuing operations in 2008 included a $996,000 income tax benefit, as compared to a tax provision of $362,000 in 2007. Before tax, the company had a loss from continuing operations of $485,000 in 2008 versus income from continuing operations of $3.5 million in 2007. The loss before taxes in 2008 reflects a 50% year-over-year increase in general and administrative expenses and salaries, which is due to increasing the infrastructure of the company's headquarters and facilities, and expanding staff to handle future growth. In addition to the general and administrative expenses, the loss from continuing operations in 2008 included $866,000 in interest expense, a $2.9 million unrealized gain on the adjustment of fair value Series A convertible preferred stock classified as a liability, and a $1.5 million unrealized gain on investor warrant liabilities.

Contract backlog at the end of 2008 was approximately $57.0 million, versus approximately $48.0 million at the end of 2007.

Fourth Quarter 2008 Operational Highlights

ADSI advanced development in a number of areas during the fourth quarter of 2008, including:

 -- Received $4.4 million of follow-on orders from the U.S. Army Tank- Automotive and Armaments Command (TACOM) for Crew Protection Kits (CPKs) to be installed on construction vehicles overseas. -- Reported an expected increase in CPK orders from the world's largest privately-owned producer of construction machinery, JCB Construction Equipment, in fulfillment of a new major U.S. Army contract announced by JCB. ADSI forecasts total CPK orders from this agreement to generate more than $10 million through 2010. -- Appointed Nicole L. Prush as director of armor solutions, responsible for the development, marketing and sale of ADSI's line of unique opaque and transparent armor solutions used by the US Military, government agencies, private security and law enforcement. 

Management Commentary

"Our results in 2008 represent good progress in our first year as a publicly traded company and put us on a strong course in 2009," said Anthony J. Piscitelli, chairman and CEO of American Defense Systems. "While we were disappointed to not achieve our revenue target for 2008, the major government orders we needed to reach our target were not lost but simply delayed and are currently being realized in this first half of 2009."

"2008 was also a building year for ADSI. We made significant investments in infrastructure, new staff and product development in order to address our large order backlog and the some $37 million in new contract awards we signed in the first quarter of 2009 -- with more anticipated to follow. We expect to realize more than $21 million in 2009 from these newly signed contracts, which is in addition to order flow stemming from our new Tier 1 supplier arrangement with Caterpillar and our ongoing relationship with JCB Construction Equipment."

"While the military segment of our business has continued to win major contracts, our new American Physical Security Group (APSG) subsidiary also did very well in 2008, with some $2.0 million in revenues in its first year of introduction. APSG has already secured an additional $8.0 million in architectural security-related orders to be realized in 2009. Our T2 tactical training division is also nearing completion of its first major sale, and we anticipate this segment of our business will likely comprise about 10% of revenue in 2009. This across-the-board progress places us well on course to exceeding our 2009 revenue goal of more than $52.0 million, along with substantial profitability."

Financial Guidance

Based on current business conditions and expectations, ADSI expects revenues for the fiscal year ending December 30, 2009 to exceed $52 million, which would represent an increase of more than 46% over 2008. The company also expects to operate profitably in the first half and full year of 2009, and management expects gross margins to range between 33% and 36%. This forecast is supported by a number of factors, including a strong order flow resulting in a contract backlog of approximately $57.0 million at December 31, 2008.

Conference Call and Webcast

The company will hold a conference call today at 4:30 p.m. Eastern time to discuss the result for the fiscal year 2008. Members of ADSI's executive management team will host the presentation, followed by a question and answer period.

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 949-574-3860.

 Date: Wednesday, April 15, 2009 Time: 4:30 p.m. Eastern time (1:30 p.m. Pacific time) Dial-In Number: 1-800-894-5910 International: 1-785-424-1052 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 ]. A telephone replay of the call will be available after 7:30 p.m. Eastern time on the same day and until May 15, 2009, by calling toll-free, 1-800-283-4595 or 1-402-220-0873.

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," "projects," "anticipates," "intends," "plans," "believes," "estimates," "predicts," "potential," "forecasts," "continues" 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; the inability to effect the redemption of ADSI's Series A Convertible Preferred Stock because of insufficient funds available for that purpose; ADSI's ability to realize the full amount of revenues reflected in its backlog; 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. There also can be no assurance that ADSI will obtain a sufficient number of orders under the JCB contract, if any at all, to generate more than $10 million in revenue or that such orders will be placed during the two year period referenced in this press release. Accordingly, ADSI revenues in connection with the matters referenced herein could be significantly less than the $10 million and may not be realized during such two year period.

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 registration statement on Form 10 and its most recent annual report on Form 10-K filed on or about the date of this press release. Statements in this press release should be evaluated in light of these important factors.

 AMERICAN DEFENSE SYSTEMS, INC. and SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended December 31, 2008 2007 ------------ ------------ CONTRACT REVENUES EARNED $ 35,588,849 $ 36,316,994 COST OF REVENUES EARNED 24,702,714 22,342,582 ------------ ------------ GROSS PROFIT 10,886,135 13,974,412 ------------ ------------ OPERATING EXPENSES General and administrative expenses 5,789,681 3,874,749 General and administrative salaries 4,758,968 3,170,250 Marketing 2,722,224 1,976,538 Research and development 788,100 612,547 Settlement of litigation 57,377 469,488 Depreciation 842,532 392,115 Loss on disposal of fixed assets - 136 ------------ ------------ Total operating expenses 14,958,882 10,495,823 ------------ ------------ INCOME (LOSS) FROM OPERATIONS (4,072,747) 3,478,589 ------------ ------------ OTHER INCOME (EXPENSE) Unrealized gain on adjustment of fair value Series A convertible preferred stock classified as a liability 2,900,799 - Unrealized gain on investor warrant liability 1,450,117 - Other income (expense) 8,551 (51,658) Interest expense (866,484) (39,111) Interest income 117,312 101,955 Finance charge (22,598) - ------------ ------------ Total other income (expense) 3,587,697 11,186 ------------ ------------ INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (485,051) 3,489,775 INCOME TAX PROVISION (BENEFIT) (996,000) 362,481 ------------ ------------ INCOME FROM CONTINUING OPERATIONS 510,949 3,127,294 INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAXES Income (loss) from operations of discontinued division (230,834) 12,721 Loss from disposal of discontinued division (1,804,875) - ------------ ------------ (2,035,709) 12,721 ------------ ------------ NET INCOME (LOSS) (1,524,760) 3,140,015 PREFERRED STOCK DIVIDENDS (1,081,801) - ------------ ------------ NET INCOME (LOSS) ALLOCATED TO COMMON SHAREHOLDERS $ (2,606,561) $ 3,140,015 ============ ============ Basic and Fully Diluted Net Loss Per Share $ (0.066) $ 0.081 ============ ============ Weighted Average Shares Outstanding 39,416,278 38,801,840 ============ ============ EARNINGS PER SHARE - Basic Income from continuing operations $ 0.01 $ 0.08 ============ ============ (Loss) from discontinued operations $ (0.05) $ 0.00 ============ ============ Net income (loss) $ (0.07) $ 0.08 ============ ============ AMERICAN DEFENSE SYSTEMS, INC. and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 2008 2007 ------------ ------------ ASSETS ------ CURRENT ASSETS Cash $ 374,457 $ 1,434,373 Accounts receivable, net 4,981,150 6,711,161 Inventory 621,048 436,379 Prepaid expenses and other current assets 3,144,601 1,856,063 Costs in excess of billings on uncompleted contracts 7,143,089 5,011,974 Deferred tax asset, net - 4,136,982 Deposits 437,496 608,020 ------------ ------------ TOTAL CURRENT ASSETS 16,701,841 20,194,952 PROPERTY and EQUIPMENT, net 3,743,936 1,125,028 DEFERRED FINANCING COSTS 1,277,833 - NOTES RECEIVABLE 925,000 - GOODWILL 450,000 1,680,361 ADVANCES for FUTURE ACQUISITIONS 159,560 138,000 DEFERRED TAX ASSET 1,167,832 - ASSETS of DISCONTINUED OPERATIONS 736,613 416,414 ------------ ------------ TOTAL ASSETS $ 25,162,615 $ 23,554,755 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES Accounts payable $ 2,480,652 $ 4,350,741 Accrued expenses 755,615 804,486 Line of credit and short term debt 76,832 49,950 Billings in excess of cost on uncompleted contracts - - Due to related party - 12,741 Due to Tactical Applications Group - 1,000,000 Deferred tax liability - 3,965,150 ------------ ------------ TOTAL CURRENT LIABILITIES 3,313,099 10,183,068 LONG TERM LIABILITIES Preferred stock, $.001 par value, 5,000,000 shares authorized, 15,000 shares designated as mandatorily redeemable Series A Convertible Preferred Stock (cumulative), 15,000 shares issued and outstanding 10,981,577 - Investor warrant liability 90,409 - Liabilities of discontinued operations 625,585 73,859 ------------ ------------ TOTAL LIABILITIES 15,010,670 10,256,927 ------------ ------------ COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY Common Stock, $.001 par value: 100,000,000 shares authorized, 39,585,960 and 39,207,950 shares issued and outstanding as of December 31, 2008 and 2007, respectively 39,586 39,208 Additional paid in capital 9,534,616 10,274,602 Retained earnings 577,743 2,984,018 ------------ ------------ TOTAL SHAREHOLDERS' EQUITY 10,151,945 13,297,828 ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 25,162,615 $ 23,554,755 ============ ============