The Allied Defense Group Announces First Quarter 2009 Financial Results

VIENNA, Va., May 14  /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 ending March 31, 2009.

  Highlights:

  --  Revenue of $31.5 million, an increase of 18% over the first quarter of
      2008
  --  Net loss of $0.3 million, compared to a net loss of $3.3 million
      during the first quarter of 2008
  --  EBITDA* from continuing operations of $1.6 million

  --  Funded, committed backlog of $158.5 million as of March 31, 2009



"We are continuing to execute on our priorities," said Major General (Ret) John J. Marcello, President and Chief Executive Officer of The Allied Defense Group. "We are focused on realizing the significant value our backlog represents, improving our operational efficiency, and securing the funding necessary to support our short-term working capital needs. We are pursuing a number of available options to ensure that we accomplish our objectives."

"We are also continuing to grow our ammunition services business and we are advancing our various engagements around the world, reflecting the repositioning of the Company toward our core competency in ammunition," concluded Major General Marcello.

  Business Segment Details:

  Mecar SA

  --  Revenue of $26.7 million, an increase of 4% over the first quarter of
      2008

  --  Backlog of $109.5 million as of March 31, 2009

  Mecar USA

  --  Revenue of $4.8 million, an increase of $3.7 million over the first
      quarter of 2008

  --  Backlog of $49.0 million as of March 31, 2009

  First Quarter Summary



Revenue was $31.5 million in the first quarter of 2009, up 18% over the same period of 2008. Gross margin was 15% in the first quarter of 2009, compared to 22% for the same period in 2008. Lower gross margins in the current quarter resulted from lower margins at Mecar SA associated with mix. In addition, Mecar USA, a business with lower margins than Mecar SA, saw an increase in its revenue base and gross profit, but overall profit margins were compressed.

Net loss from continuing operations was $1.4 million in the first quarter of 2009, compared to a net loss of $2.7 million during the same period of 2008. Diluted loss per share from continuing operations was $0.17 in the first quarter of 2009, compared to a loss of $0.33 during the same period of 2008. EBITDA from continuing operations was $1.6 million in the first quarter of 2009, compared to $2.1 million during the same period of 2008.

As of March 31, 2009, the Company's firm committed backlog was $158.5 million, compared to $155.7 million as of March 31, 2008.

At March 31, 2009, the Company had $1.9 million cash on hand. For the three months ended March 31, 2009, the Company used cash of $9.5 million from operating activities associated with the growth of working capital. This use of cash was funded with available cash balances and short term financing.

Looking forward, as we have said previously, cash has historically been tight during the summer months. We have several short-term options available to us to manage through these working capital constraints, and we are continuing to work to put a longer-term working capital facility in place. The expectation is that the situation will improve in September with a significant increase in collection of cash receivables.

Results from continuing operations in the current period were negatively impacted by $0.7 million of unrealized loss associated with a forward currency contract. This loss was partially offset by a net gain from the fair value of notes and warrants of $0.2 million. As compared to the prior period, selling and administrative expenses declined by 15%, or $0.8 million, and interest expense declined by 49%, or $0.8 million. The reduced operating expense reflects the transition of the Company to an ammunition-focused business.

Conference Call

The Company will host a conference call to discuss these results today, May 14, 2009, at 4:30 p.m. (ET). To access the conference call, interested parties may call [phone] within the United States or [phone] outside the United States. A replay of the call will be available from approximately 7:30 p.m. (ET) today, May 14, 2009, through 11:59 p.m. (ET) on May 21, 2009. To access the replay, please call [phone] in the United States, or [phone] outside the United States, and enter the following code: 1859041.

                        The Allied Defense Group, Inc.
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)
            (Thousands of Dollars, except per share and share data)

                                              Three Months Ended March 31,
                                                     2009       2008
                                                  -------    -------
  Revenue                                         $31,548    $26,795
                                                  -------    -------
  Cost and expenses
    Cost of sales                                  26,718     20,988
    Selling and administrative                      4,212      4,973
    Research and development                          492        552
                                                  -------    -------
      Operating  income                               126        282
                                                  -------    -------

  Other income (expenses)
    Interest income                                    35        158
    Interest expense                                 (864)    (1,690)
    Net gain (loss) on fair value of senior
     convertible notes and warrants                   239     (1,233)
    Loss from foreign exchange contracts             (662)         -
    Other-net                                        (247)       (67)
                                                  -------    -------
                                                   (1,499)    (2,832)
                                                  -------    -------
      Loss from continuing operations
       before income taxes                         (1,373)    (2,550)

  Income tax expense                                    -        128
                                                  -------    -------

  Loss from continuing operations                  (1,373)    (2,678)
                                                  -------    -------


  Income (loss) from discontinued operations,
   net of tax
      Gain on sale of subsidiaries                    946        113
      Income (loss) from discontinued operations      110       (730)
                                                  -------    -------
      Net income (loss) from discontinued
       operations                                   1,056       (617)
                                                  -------    -------

    NET LOSS                                        $(317)   $(3,295)
                                                  =======    =======

  Earnings (Loss) per share - basic and diluted:

    Net loss from continuing operations            $(0.17)    $(0.33)
    Net income (loss) from discontinued
     operations, net of tax                          0.13      (0.08)
                                                  -------    -------
      Total loss per share - basic and diluted     $(0.04)    $(0.41)
                                                  =======    =======
  Weighted average number of common shares:
    Basic and Diluted                           8,079,972  8,013,156



                          The Allied Defense Group, Inc
               Calculation of EBITDA from continuing operations
                                   (Unaudited)
                (All amounts are in thousands of U.S. Dollars)

                                                         Three months ended
                                                              March 31,
                                                            2009     2008
                                                         -------  -------
  Consolidated Net Loss from continuing operations       $(1,373) $(2,678)

    Any extraordinary or non recurring gains or losses
      (Gain) loss from fair value of notes and warrants     (239)   1,233
      Loss from Sale of Fixed Assets                           -      231
      Non-cash expenses associated with stock
       compensation expense                                  141      182

                                                         -------  -------
        Adjusted Net Loss from continuing operations     $(1,471) $(1,032)

      Interest Income                                        (35)    (158)
      Interest Expense                                       864    1,690
      Income tax expense                                       -      128
      Depreciation and Amortization Expense                1,023    1,310
      Any non-cash transactions:
        Foreign currency losses                              963       70
        Adjustments related to Inventory                     193      114
        Other non-cash charges                                29        -

                                                         -------  -------
        Consolidated EBITDA                               $1,566   $2,122
                                                         -------  -------

  *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 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)


                                       March 31,      December 31,
  ASSETS                                 2009            2008(a)
                                       --------        --------
  Current Assets
    Cash and cash equivalents            $1,888          $8,816
    Restricted cash                      17,540           9,666
    Accounts receivable, net             23,261          12,646
    Costs and accrued earnings
     on uncompleted contracts            29,046          21,999
    Inventories, net                     22,956          21,508
    Contracts in progress                 5,167           1,469
    Prepaid and other current assets      3,915           3,137
    Assets held for sale                  4,555           4,474
                                       --------        --------
      Total current assets              108,328          83,715
                                       --------        --------

  Property, Plant and Equipment, net     17,714          19,525
                                       --------          ------

  Other Assets                              424             459
                                       --------        --------

  TOTAL ASSETS                         $126,466        $103,699
                                       ========        ========


  CURRENT LIABILITIES
    Current maturities of senior
     secured convertible notes              $ -            $933
    Bank overdraft facility               5,089             381
    Current maturities of
     long-term debt                       2,871           2,659
    Current maturities of foreign
     Exchange contract                      654             405
    Accounts payable                     16,440          14,536
    Accrued liabilities                  21,904          16,099
    Customer deposits                    32,021          16,731
    Belgium social security               2,041           3,522
    Income taxes                          3,792           3,913
    Liabilities held for sale             1,260           1,316
                                       --------        --------
      Total current liabilities          86,072          60,495
                                       --------        --------

  LONG TERM OBLIGATIONS
    Long-term debt, less current
     maturities                          5,826           6,681
    Long-term foreign exchange
     contract, less current maturities   1,399           1,072
    Derivative instrument                   84             318
    Other long-term liabilities            655             682
                                       --------        --------
      Total long-term obligations        7,964           8,753
                                       --------        --------

  TOTAL LIABILITIES                     94,036          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,
     8,084,748 at March 31, 2009
     and 8,079,509 at December 31, 2008    809             808
    Capital in excess of par value      56,070          55,912
    Accumulated deficit                (38,668)        (38,351)
    Accumulated other comprehensive
     income                             14,219          16,082
                                       --------        --------
      Total stockholders' equity        32,430          34,451
                                       --------        --------

  TOTAL LIABILITIES AND STOCKHOLDERS'
   EQUITY                             $126,466        $103,699
                                      ========        ========

  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, [phone], fax, [phone],





Web Site:  http://www.allieddefensegroup.com/ 

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