1. How to use GuruFocus - Tutorials
  2. What Is in the GuruFocus Premium Membership?
  3. A DIY Guide on How to Invest Using Guru Strategies
10qk
10qk
Articles 

Allied Defense Group Inc Reports Operating Results (10-Q)

August 12, 2011 | About:

Allied Defense Group Inc (ADG) filed Quarterly Report for the period ended 2011-06-30.

Allied Defense Group Inc has a market cap of $50.16 million; its shares were traded at around $0 with a P/E ratio of 0.6.

Highlight of Business Operations:

On June 24, 2010, the Company signed a definitive purchase and sale agreement (the Agreement) with Chemring Group PLC (Chemring) pursuant to which Chemring agreed to acquire substantially all of the assets of the Company for $59.6 million in cash and the assumption of certain liabilities. On September 1, 2010, the Company completed the asset sale to Chemring contemplated by the Agreement. Chemring acquired all of the capital stock of Mecar for $45.8 million in cash, and separately Chemring acquired substantially all of the assets of Mecar USA for $13.8 million in cash and the assumption by Chemring of certain specified liabilities of Mecar USA. A portion of the purchase price was paid through the repayment of certain intercompany indebtedness owed to the Company that would otherwise have been cancelled at closing. $15 million of the proceeds from the sale was deposited into escrow to secure the Companys indemnification obligations under the Agreement.

Net assets in liquidation at June 30, 2011 are $44.441 million compared to $45.629 million at December 31, 2010. The change in net assets in liquidation is due to: (i) adjustments of assets to fair value and (ii) adjustments to estimated costs to be incurred during liquidation. The net assets in liquidation per share as of June 30, 2011 has been reduced to $5.40 as compared to $5.54 as of December 31, 2010 and as of March 31, 2011.

The change in net assets in liquidation during the six months ended June 30, 2011 is the net effect of valuation changes to the net assets and changes in the estimated net costs to be incurred during liquidation. Adjusting net assets to fair market value reduced the net assets in liquidation by $0.461 million. The estimated costs to be incurred during liquidation were increased during the quarter by $0.727 million, principally due to our expectation that we will not be able to make final distributions to stockholders until the end of 2013. The net effect was a reduction of $1.188 million in net assets in liquidation for the six months ended June 30, 2011.

Our estimate of $3.390 million in net remaining costs to be incurred during liquidation consists of $0.365 million in compensation for remaining employees and directors; $0.809 million for compliance and other office costs, including resident filing fees and costs to settle remaining leases; $0.401 million for insurance; $1.865 million in fees for professional service providers including legal representation relating to the DOJ subpoena; and $0.15 million in income taxes related to the repatriation of foreign monies; offset by interest income of $0.2 million estimated to be received on our cash and short-term investment balances during liquidation. Our estimates are based on the assumption that liquidation will occur no later than December 31, 2013. As reported in the table below, during the quarter we reduced the estimated net costs to be incurred during liquidation by $901 as we incurred various expenses, net of income received. We increased the estimated net costs an additional $727 due to changes in estimates, primarily due to the extension of the anticipated liquidation term to include calendar year 2013.

The Company has sold its SeaSpace, Titan, the VSK Group, GMS and NSM subsidiaries in separate transactions starting with the first transaction closing in 2007. In each transaction, the Company agreed to indemnify the purchaser for periods subsequent to closing for losses arising from breaches of representations, warranties and covenants. Indemnification periods varied based on the particular representation, warranty or covenant covered, the vast majority of which have all expired. As of June 30, 2011, the only remaining indemnification obligations relate to representations and warranties concerning taxes, environmental matters, breaches of title, breaches of authorization and fraud. For SeaSpace, Titan, the VSK Group, GMS and NSM, these indemnification provisions have been capped at $1.0 million, $0.950 million, $6.806 million (5.0 million), $5.2 million and $0.863 million, respectively. At June 30, 2011, no amount has been accrued related to these indemnifications as a liability is not deemed probable.

On June 24, 2010, the Company signed a definitive purchase and sale agreement with Chemring Group PLC pursuant to which Chemring agreed to acquire substantially all of the assets of the Company for $59.560 million in cash and the assumption of certain liabilities. The purchase and sale agreement contains certain indemnification provisions pursuant to which the Company may be required to indemnify the buyer for a period subsequent to the completion of the sale for any and all losses directly or indirectly based upon, related to, arising out of or in connection with Mecars completed contracts, Mecar USA liabilities retained by the Company and any failure by the Company to satisfy all transaction related expenses. The Companys indemnification liability is limited to, and capped at, the escrowed amount of $15.0 million plus the accumulated interest. The Companys indemnification obligations expire upon the earlier of (i) June 30, 2015 and (ii) the Companys entry into either a court or administrative order or a Chemring-approved settlement agreement, in either case, finally resolving the matters relating to the DOJs subpoena. In the absence of such final resolution, in certain circumstances, up to 50% of the escrowed funds may be released as early as June 24, 2013. At June 30, 2011, no amount has been accrued related to this indemnification as a liability is not deemed probable.

Read the The complete Report

About the author:

10qk
Charlie Tian, Ph.D. - Founder of GuruFocus. You can now order his book Invest Like a Guru on Amazon.

Rating: 2.3/5 (3 votes)

Comments

Please leave your comment:


Performances of the stocks mentioned by 10qk


User Generated Screeners


efredbac10yr Low PE
DANGORDON1-21-19 RET ON > 12% EQ AND CA
mathew94Insider Buys
cspunarJuniors 21Jan19
daftheaderasian growth plus dividend
DANGORDONTECH COS RATE OF RETURN
DANGORDONRETAIL COS RATE OF RETURN
hanley.newsfeedtesting
ripollj67Value,Hi ROIC
paulyew2003USA 1
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)

GF Chat

{{numOfNotice}}
FEEDBACK