The Allied Defense Group, Inc. (Form: 8-K)

VIENNA, Va., November 16, 2009 — 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 and services for use by the U.S. and foreign governments, today announced results for the quarter ended September 30, 2009.

•

Revenue of $36.2 million compared to $49.3 million in the third quarter of 2008

•

Net loss of $3.3 million compared to net loss of $6.2 million during the third quarter of 2008

•

EBITDA* from continuing operations of $4.3 million for the nine months ended September 30, 2009

“During the third quarter we continued to advance our engagements throughout the world,” said Major General (Ret) John J. Marcello, President and Chief Executive Officer of The Allied Defense Group. “While we are not pleased that the timing of certain contracts and shipments were delayed beyond the end of the quarter, these opportunities either remain active in our pipeline or have already closed. These ebbs and flows should be expected from quarter-to-quarter given the nature of the global ammunition business. More importantly, however, we continue to be very encouraged by the growing number of opportunities available to us in the marketplace. Our unique positioning, combined with our extensive international relationships, will serve us well as we bring these opportunities to fruition.”

•

Revenue of $19.1 million compared to $32.2 million in the third quarter of 2008

•

Revenue of $17.1 million compared to $17.0 million in the third quarter of 2008

Revenue was $36.2 million in the third quarter of 2009, down 27% from the same period of 2008. Lower revenue was due to lower manufacturing activity and a mix of lower value sales contracts at Mecar SA. Gross margin was 10% in the third quarter of 2009, compared to 13% for the same period in 2008. The decline in gross margin was the result of a lower volume of revenue and hours worked at Mecar SA. Lower revenue and gross margins in the current quarter were partially offset by better margin contracts at Mecar USA.

Net loss from continuing operations was $3.2 million in the third quarter of 2009, compared to a net loss of $3.3 million during the same period of 2008. Diluted loss per share from continuing operations was $0.39 in the third quarter of 2009, compared to a loss of $0.41 during the same period of 2008. EBITDA* from continuing operations was a loss of $0.7 million in the third quarter of 2009, compared to income of $2.7 million during the same period of 2008.

Results from continuing operations in the current period were positively impacted by a $0.3 million gain associated with Mecar SA’s forward exchange contracts. Selling and administrative expenses were $4.9 million, roughly in-line with the same period last year. Interest expense was $1.3 million, down from $1.4 million in the same period in 2008.

Revenue was $115.1 million for the nine months ended September 30, 2009, compared to $116.4 million during the same period of 2008. Gross margin was 13% for the nine months ended September 30, 2009, compared to 16% for the same period in 2008.

Net loss from continuing operations was $2.6 million for the nine months ended September 30, 2009, compared to a net loss of $6.7 million during the same period of 2008. Diluted loss per share from continuing operations was $0.32 for the nine months ended September 30, 2009, compared to a loss of $0.83 during the same period of 2008. EBITDA* from continuing operations was $4.3 million for the nine months ended September 30, 2009, compared to $7.6 million during the same period of 2008.

As of September 30, 2009, the Company’s firm committed backlog was $89.6 million, compared to $168.4 million as of September 30, 2008.

At September 30, 2009, the Company had $4.1 million of cash on hand. This is up from $1.7 million at June 30, 2009.

The Company used $9.6 million of cash in operating activities during the nine months ended September 30, 2009 as compared to $17.6 million of cash used during the same period of 2008.

Cash provided by investing activities was $0.9 million during the nine months ended September 30, 2009 as compared to $0.8 million generated during the same period of 2008. Cash provided by financing activities was $3.9 million during the nine months ended September 30, 2009 as compared to utilized cash of $0.4 million during the same period of 2008. The increase in cash provided by financing activities stemmed from short term financing made available by the Mecar SA bank group.

“Our cash position has improved during the third quarter.” said Debbie Ricci, Chief Financial Officer of The Allied Defense Group. “We are working hard to secure a longer-term lending facility to bolster our working capital needs. In the meantime, we will continue to carefully manage our cash until we secure appropriate working capital solutions.”

The Company will host a conference call to discuss these results today, November 16, 2009, at 5:00
p.m. (ET). To access the conference call, interested parties may call (888) 286-2314 within the
United States or (719) 325-2479 outside the United States. A replay of the call will be available
from approximately 8:00 p.m. (ET) today, November 16, 2009, through 11:59 p.m. (ET) on November 23,
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: 2628448.The Allied Defense Group,
Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Thousands of Dollars, except per share and share data)


			Three Months Ended						Nine Months Ended
			September 30,						September 30,
			2009			2008			2009			2008
Revenue			$	36,185		$	49,247		$	115,113		$	116,364
Cost and expenses
	Cost of sales			32,738			42,851			99,614			97,323
	Selling and administrative			4,902			4,877			13,653			15,125
	Research and development			443			535			1,515			1,667
	Impairment of long-lived assets			-			462			-			462

		Operating income (loss)		(1,898	)		522			331			1,787

Other income (expenses)
	Interest income			20			102			83			511
	Interest expense			(1,282	)		(1,429	)		(3,186	)		(5,470	)
	Net gain (loss) on fair value of senior
	convertible notes and warrants			10			(155	)		257			(682	)
	Gain (loss) from foreign exchange contracts			343			(1,329	)		912			(1,473	)
	Other-net			(402	)		(846	)		(1,205	)		(837	)

				(1,311	)		(3,657	)		(3,139	)		(7,951	)

		Loss from continuing
		operations before income
		taxes		(3,209	)		(3,135	)		(2,808	)		(6,164	)
Income tax (benefit) expense				(4	)		173			(199	)		495

Loss from continuing operations				(3,205	)		(3,308	)		(2,609	)		(6,659	)

Income (loss) from discontinued operations, net of tax
		Gain on sale of subsidiaries		45			—			1,856			113
		Loss from discontinued
		operations		(114	)		(2,912	)		(1,679	)		(2,063	)

		Net income (loss) from
		discontinued operations		(69	)		(2,912	)		177			(1,950	)

	NET LOSS		$	(3,274	)	$	(6,220	)	$	(2,432	)	$	(8,609	)

Earnings (Loss) per share — basic and diluted:
	Net loss from continuing operations		$	(0.39	)	$	(0.41	)	$	(0.32	)	$	(0.83	)
	Net earnings (loss) from discontinued
	operations			(0.01	)		(0.36	)		0.02			(0.24	)
		Total loss per share -
		basic and diluted	$	(0.40	)	$	(0.77	)	$	(0.30	)	$	(1.07	)

Weighted average number of common shares:
	Basic			8,143,661			8,067,089			8,102,913			8,034,164
	Diluted			8,143,661			8,067,089			8,102,913			8,034,164

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


			September 30,			December 31,
ASSETS			2009			2008 (a)
Current Assets
	Cash and cash equivalents		$	4,083		$	8,816
	Restricted cash			8,039			9,666
	Accounts receivable, net			20,610			12,646
	Costs and accrued earnings on uncompleted contracts			35,360			21,999
	Inventories, net			20,798			21,508
	Contracts in progress			2,413			1,469
	Prepaid and other current assets			4,145			3,137
	Assets held for sale			—			4,474
		Total current assets		95,448			83,715

Property, Plant and Equipment, net				17,789			19,525

Other Assets				1,852			459

TOTAL ASSETS			$	115,089		$	103,699

CURRENT LIABILITIES
	Current maturities of senior secured convertible notes		$	-		$	933
	Bank overdraft facility			4,657			381
	Current maturities of long-term debt			5,294			2,659
	Current maturities of foreign exchange contracts			261			405
	Accounts payable			15,983			14,536
	Accrued liabilities			18,100			16,099
	Customer deposits			23,748			16,731
	Belgium social security			2,876			3,522
	Income taxes			3,842			3,913
	Liabilities held for sale			—			1,316
		Total current liabilities		74,761			60,495

LONG TERM OBLIGATIONS
	Long-term debt, less current maturities			5,210			6,681
	Long-term foreign exchange contracts, less current maturities			295			1,072
	Derivative instrument			65			318
	Other long-term liabilities			1,353			682
		Total long-term obligations		6,923			8,753

TOTAL LIABILITIES				81,684			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, 8,172,368 at September 30, 2009 and 8,079,509 at
	December 31, 2008			817			808
	Capital in excess of par value			56,361			55,912
	Accumulated deficit			(40,783	)		(38,351	)
	Accumulated other comprehensive income			17,010			16,082
		Total stockholders' equity		33,405			34,451

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY			$	115,089		$	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)


					Nine Months Ended September 30,
					2009			2008
Cash flows from operating activities
	Net Loss				$	(2,432	)	$	(8,609	)
	Less: Gain on sale of subsidiaries					(1,856	)		(113	)
		Discontinued operations, net of tax				1,679			2,063
									—

	Loss from continuing operations					(2,609	)		(6,659	)
	Adjustments to reconcile net loss from continuing operations to net cash used in operating activities, net of divestitures:
		Depreciation and amortization				3,201			4,568
		Unrealized (gain) loss on forward contracts				(912	)		1,473
		Loss on sale of fixed assets				90			—
		Net (gain) loss related to fair value of notes and warrants				(257	)		682
		Provision (reduction) for estimated losses on contracts				(52	)		906
		Provision (reduction) for warranty reserves, uncollectible accounts and inventory obsolescence				(55	)		495
		Common stock and stock option awards				322			292
		Deferred director stock awards				82			54
		(Increase) decrease in operating assets and increase (decrease) in liabilities, net
		of effects from discontinued businesses
			Restricted cash			1,833			5,076
			Accounts receivable			(7,475	)		(13,374	)
			Costs and accrued earnings on uncompleted contracts			(11,779	)		(19,580	)
			Inventories			1,462			(1,271	)
			Contracts in progress			(944	)		(3,265	)
			Prepaid and other current assets			(1,263	)		629
			Accounts payable and accrued liabilities			2,274			4,419
			Customer deposits			6,130			4,139
			Deferred compensation			614			40
			Income taxes			(284	)		390

				Net cash used in operating activities - continuing operations		(9,622	)		(20,986	)
				Net cash provided by operating activities - discontinued
				operations		—			3,436


				Net cash used in operating activities		(9,622	)		(17,550	)

Cash flows from investing activities
	Capital expenditures					(1,220	)		(1,493	)
	Procceds from sale of fixed assets					137			-
	Net proceeds from sale of subsidiaries					2,023			2,433
				Net cash provided by investing activities - continuing
				operations		940			940
				Net cash used in investing activities - discontinued
				operations		—			(114	)


				Net cash provided by investing activities		940			826

Cash flows from financing activities
	Increase in short-term borrowings				$	977		$	2,587
	Principal payments on senior convertible notes					(928	)		(481	)
	Bank overdraft					3,993			(1,822	)
	Net borrowings (repayments) of long-term debt and capital lease obligations					(213	)		(702	)
	Net cash transferred to discontinued operations					-			3,090
	Proceeds from employee stock purchases					54			80
	Retirement of stock					—			(9	)


				Net cash provided by financing activities - continuing
				operations		3,883			2,743
				Net cash used in financing activities - discontinued
				operations		—			(3,136	)
				Net cash provided by (used in) financing activities		3,883			(393	)

	Net change in cash of discontinued operations					-			(185	)
	Effects of exchange rate on cash					66			460

				NET DECREASE IN CASH AND CASH EQUIVALENTS		(4,733	)		(16,842	)
Cash and cash equivalents at beginning of period						8,816			21,651
Cash and cash equivalents at end of period					$	4,083		$	4,809

Supplemental Disclosures of Cash Flow information
	Cash paid during the period for
		Interest			$	3,609		$	5,518
		Taxes			$	28		$	99
Supplemental Disclosures of Non-Cash Investing and Financing Activities
		Capital leases			$	22		$	26

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


				Three months ended June 30,						Six months ended June 30,
				2009			2008			2009			2008
Consolidated Net Income (Loss) from continuing operations				$	1,637		$		(673)	$	264		$	(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	$	1,774		$	(1,257	)	$	303		$	(2,289	)
		Interest Income			(28	)		(251	)		(63	)		(409	)
		Interest Expense			1,040			2,351			1,904			4,041
		Income tax expense			137			194			137			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. is a multinational defense company focused on the manufacture, sale and distribution of ammunition and ammunition-related products and services for use by the U.S. and foreign governments.

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.


Delaware	1-11376	04-2281015
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)

8000 Towers Crescent Drive, Suite 260, Vienna, Virginia		22182
_________________________________ (Address of principal executive offices)		___________ (Zip Code)


	The Allied Defense Group, Inc.

November 24, 2009	By:	/s/ Deborah F. Ricci

		Name: Deborah F. Ricci
		Title: Chief Financial Officer and Treasurer


Exhibit No.		Description

99.1		News Release of The Allied Defense Group, Inc., issued on November 16, 2009


Date of Report (Date of Earliest Event Reported):		November 16, 2009


Registrant’s telephone number, including area code:		(703) 847-5268