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Revenues from continuing operations for the nine months ended September 30, 2009, increased 16% to $36.2 million, from $31.3 million in the comparable 2008 period. The increase was due primarily to increased order fulfillment under a large U.S. Marine Corp. contract, including orders that were expected to ship in the fourth quarter of 2008 that were delayed into the first and second quarters of 2009. The revenue increase for the nine-month period was also due to additional sales generated by the company’s physical security product business of $1.2 million (all of which occurred in the third quarter of 2009), which represented a 20% increase over $1.0 million for the nine months ended September 30, 2008.
Gross margin as a percentage of revenue for the third quarter was 21%, compared to 32% for the third quarter of 2008. The decrease in the third quarter 2009 gross margin was due primarily to the introduction of a new product with more aggressive initial pricing per a particular contract that shipped in the third quarter of 2009, and which was not offset by more favorable margin products that did not ship due to delay order acceptance. This also resulted in a gross profit margin of 33% for the nine months ended September 30, 2009, compared to 35% for the same period in 2008. Gross margins are expected to return to historical ranges in 2010.
Loss from operations in the third quarter of 2009 totaled $1.9 million vs. income from operations of $94,000 in the same period a year ago. Loss from operations for the first nine months of 2009 totaled $1.4 million vs. a loss from operations of $875,000 in the same period a year ago.
The net loss in the third quarter of 2009 totaled $3.6 million, or $0.08 per share, compared to a net loss of $808,000, or $0.02 per basic and diluted share, in the same year-ago period. The net loss for the first nine months of 2009 totaled $7.9 million, or $0.19 per share, vs. a net loss of $27,000, or $0.00 per share, in the same year-ago period.
Adjusted EBITDA loss for the quarter was $1.7 million, or $0.04 per basic and diluted share, vs. an adjusted EBITDA loss of $72,000, or $0.00 per basic and diluted share in the same year-ago period. Adjusted EBITDA loss for the first nine months of 2009 was $627,000, or $0.01 per basic and diluted share, vs. an adjusted EBITDA loss of $878,000, or $0.02 per basic and diluted share, in the same year-ago period.
Contract backlog at September 30, 2009, totaled $46 million, a decrease of 4% from $48 million at the end of the previous quarter and lower by 16% from $55 million at September 30, 2008.
“Following a record revenue quarter in which we generated the highest income from operations as a public company, this third quarter of 2009 was disappointing but not reflective of the strength of our business and the increasing demands we see in our sales pipeline,” said Anthony J. Piscitelli, chairman and CEO. “It does, however, indicate the challenges we face as we pursue larger and more aggressive contracts, and particularly where a brief delay in a single large order acceptance can mean the difference between another record revenue quarter and one that disappoints, as well as one that can affect order shipments in subsequent quarters.
“In light of this, we are revisiting our approach to our practice of issuing annual guidance. We can say at this point that, while we expect improvement in the final quarter of 2009, because of these emerging factors, it is unlikely we will achieve our previously stated revenue goal for 2009. In preparation for the next year, we are focusing on things we can better control and have begun to execute on a cost restructuring program designed to create greater efficiencies and substantial savings in our general and administrative costs.
“Notwithstanding the troop reductions in Iraq and possible continued buildup in Afghanistan, we expect that demand in those countries for armored military construction vehicles will continue in order to repair significant war damage and for nation-building purposes. In order to diversify our revenue stream and reduce our dependence upon large military orders, we are continuing to pursue expansion of our physical security product business. The recent designations and certification our APSG unit has received by the DHS are an excellent fulcrum for this endeavor, as evidenced by the substantial increase of related sales in the third quarter. We are also exploring interests in armored construction equipment expressed by other countries to address issues with mine-infested regions.”
Additional details are available at www.adsiarmor.com.