ADSI Reports 2008 Results (posted 4/28/09)
American Defense Systems, Inc. recently reported its financial results for the year ended December 31, 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, 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 vs. 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, as well as 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.
ADSI advanced development in a number of areas during the fourth quarter of 2008:
- 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 director of armor solutions, responsible for the development, marketing and sale of ADSI's line of opaque and transparent armor solutions used by the U.S. military, government agencies, private security and law enforcement.
“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.”
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.
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