AMERICAN SCIENCE & ENGINEERING INC ÿ
(General Information Post / "I can't handle all of the Emails!, hope this helps!)ÿ
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Company Description
BUSINESS
American Science and Engineering, Inc., a Massachusetts corporation formed in 1958 (together with its subsidiary, the "Company"), develops, produces, markets, sells and provides research and engineering services with respect to X-ray
inspection systems.
X-RAY PRODUCTS
The Company provides a full line of X-ray detection and imaging products used primarily for the detection of illegal drugs and terrorist explosives. This equipment is purchased by sophisticated government and commercial clients who place a premium on the detection of organic material in complex backgrounds.
The Company utilizes proprietary transmission and backscatter X-ray detection to provide differentiation of bombs, drugs and contraband in camouflaged environments. The range of application includes border control and manifest verification, protection of high risk government offices, mail and parcel screening, correctional facility security, military security, executive security, aviation security, and special event security (e.g. Olympics, UN 50th anniversary and World Cup Soccer).
The Company's market is driven by domestic and global trends toward increasing use of terrorism for political purposes and the continued global proliferation of drug smuggling.
The surge in cross border drug smuggling has created a requirement for cargo and vehicle inspection. With the assistance of the U.S. Department of Defense and U.S. Customs, the Company has developed the CargoSearch(TM) line of X-ray inspection equipment. Based on the success of the CargoSearch(TM) prototype at Otay Mesa, CA, the first commercial installation of CargoSearch(TM) is on line at Calexico, CA, for U.S. Customs to inspect trucks for hidden drugs on the Mexican border and six additional installations are expected to be made along the border over the next 18 months.
The CargoSearch(TM) product family includes fixed site inspection for trucks; mobile equipment to inspect trucks, containers and cars; and a fixed pallet inspection system. This equipment has further application for the detection of weapons and explosives for border security and
protection of high risk facilities. In addition, there is an emerging
application for manifest verification for export and import cargoes.
The Company offers high performance X-ray inspection systems at prices that have generally been higher than those of competing, less capable systems. However, in recent years, the Company has brought to the marketplace several new products that are priced significantly lower than competing systems. Across the entire range of its X-ray inspection systems, the Company has focused on selling products with unique features that create strong product differentiation and competitive advantage.
The Company's product line currently includes 12 models. These models can be broadly categorized into 5 groups including: the Model 101 series, the Model 66 series, the EXR(TM)-ZZ(R) Automatic Explosive Detection Systems, the CargoSearch(TM) family and the BodySearch(TM) Personnel Inspection System. All of these systems utilize the Company's Z(R) Backscatter technology (aspects of
which are covered by issued and pending U.S. patents), which detects organic materials, such as illegal drugs, plastic explosives and plastic weapons, even when they are undetected by other competing systems.
The Micro-Dose(R) Model 101 Series consists of 6 models. The mobile Model 101VAN(TM) is a sophisticated, vehicle mounted inspection system designed and built to the rigorous specifications of the U.S. Customs Service. The Model 101ZZ(R) Trailer is a field deployable system for extended on site security details. The Models 101Z(R), 101ZZ(R), 101GT(TM), and 101XL(TM) are moveable (but not mobile), conveyor based systems allowing rapid inspection of high
volumes of luggage and other packages.
The Model 66(R) handles small packages using the patented Z(R) Backscatter technology. This technology was validated by a study conducted by several U.S. government agencies involving the Model 66(R) and competitive systems in which the Model 66(R) was determined to have superior detection capability for terrorist devices hidden in complex backgrounds. This test resulted in increased
order demand from both government and commercial clients, including a number of Fortune 100 companies.
The EXR(TM) Automatic Explosives Detection System is a new second generation backscatter inspection system, designed to identify automatically all target threats. This system was developed with funding from the Federal Aviation Administration. This system is currently undergoing test and further enhancement. The target market is aviation luggage scanning.
The CargoSearch(TM) family of products includes the CargoSearch(TM) system, the MobileSearch(TM) system, and the PalletSearch(TM) system. The CargoSearch(TM) system is a non-intrusive inspection technology for the X-ray scanning of
trucks, cars, cargo containers, pallets and air cargo using the Company's unique and patented Z(R) Backscatter technology. The fixed CargoSearch(TM) system sells for a turnkey price substantially lower than competing systems.
The first CargoSearch(TM) system has been operating at the U.S. Customs facility in Otay Mesa, California, the busiest truck border crossing in the United States and was recently joined by the newly commissioned system in Calexico, CA. U.S. Customs has ordered six additional CargoSearch(TM) systems to be installed along the border with Mexico.
The first MobileSearch(TM)system was delivered under a $1.8 million contract with the Defense Advanced Research Project Agency (DARPA). This mobile version of a CargoSearch(TM)system is a self-contained unit inside a conventional truck which is deployable within minutes and provides the transport mechanism via a hydraulic drive.
The Company is marketing the MobileSearch(TM)system to agencies of the U.S. government and to foreign security and customs agencies and has sold a second system expected to be delivered in the second quarter of fiscal 1998. The new unit will include both Z(R) Backscatter and transmission X-ray capabilities.
PalletSearch(TM) was designed for the inspection of pallets for the detection of contraband, weapons and explosives for high security facilities where high confidence inspection is a requirement. The first PalletSearch(TM) system was delivered during fiscal 1997 to an ultra-secure agency of the U.S. government, and is presently in operation.
The BodySearch(TM) Personnel Inspection System offers a fast, safe, and non-intrusive way to screen individuals for the detection of concealed weapons, drugs, and illegal contraband. This system is used for drug detection and head of state security as well as for correctional facility security.
The BodySearch(TM) Personnel Inspection System offers a fast, safe, and non-intrusive way to screen individuals for the detection of concealed weapons, drugs, and illegal contraband. This system is used for drug detection and head of state security as well as for correctional facility security.
The Company has a number of U.S. and foreign issued patents and pending patent applications with respect to its X-ray products. Each U.S. patent issued prior to June 1995 has a duration of the longer of seventeen years from the date of issue or twenty years from the date of application; U.S. and virtually all foreign patents issued after May 1995 will have a duration of twenty years from the date of application.
The Company relies on certain proprietary technology and know-how, as well as certain of these patents, to establish and maintain its competitive position. The Company believes that its patents, proprietary technology and know-how provide substantial protection for the Company's competitive position.
The Company's X-ray products are marketed to private and governmental organizations through a sales force that contacts potential customers. This sales force includes Company personnel based in the United States and Europe, as well as agents under contracts to sell in foreign countries who are generally on a commission basis .
Most Micro-Dose(R) Systems are built for existing orders, and the Company maintains an inventory of common parts and sub-assemblies for the systems in order to meet expected customer delivery requirements.
The Company is heavily dependent upon sales to agencies of the U.S. Government, and reductions or delays in procurements of the Company's systems by these agencies may have a material adverse effect on the Company.
During fiscal 1997, the majority of sales of X-ray products were under (i) direct contracts with the U.S. Government, and (ii) subcontracts with prime contractors working under direct contracts with the U.S. Government.
The U.S. Customs Service is a major customer (with sales of more than 40 percent of the Company's consolidated revenues in fiscal 1997). The loss of this customer would be likely to have a material adverse effect on the Company taken as a whole. The Company believes that it has a satisfactory relationship with the U.S. Customs Service.
The Company has many competitors in the X-ray product market, including several large and well established manufacturers of security X-ray equipment with financial and other resources greater than those of the Company.
Certain X-ray security system customers select such systems based largely on price. Other customers, notably the U.S. Government and users in countries with high levels of concern over security, tend to select systems based largely on performance and detection capability.
The Company's systems offer premium performance and have in the past, with the exception of CargoSearch(TM), generally been priced higher than many competing systems. The Company believes that its patented and proprietary technology give it a strong competitive position in the sale of security systems to customers concerned with performance and detection. The Company also believes that its strategy of concentrating on products with unique features and/or competitive pricing will give it a strong position to increase its sales of X-ray systems.
The Company has not experienced during the last year, and does not currently anticipate, any hardware delivery delays due to raw material shortages. Most procured material is from U.S. sources. However, the Company is dependent on certain overseas sole source providers of important components. No rare or exotic materials are utilized.
All X-ray products of the Company comply with all applicable U.S. Government regulatory standards.
RESEARCH AND DEVELOPMENT
The Company conducted approximately $2,278,000 of government sponsored research primarily focused on technologies for the detection of illicit drugs, explosives and other security issues in fiscal 1997. This is compared to $2,750,000 and $2,206,000 of government sponsored research and development in fiscal 1996 and 1995, respectively. In addition, the Company spent approximately $1,602,000 of its own funds for research relating to the development of new products or services during fiscal 1997, compared to $533,000 and $852,000 in fiscal 1996 and 1995, respectively.
A significant amount of the Company's research and development work is obtained via contracts or subcontracts that typically provide for reimbursement of allowable costs plus a fixed fee. The Company's contracts in these areas are obtained by submitting research and development proposals to various organizations, sometimes in response to requests for such proposals. The Company's contract research ranges from advances in X-ray systems and image analysis to integrated system development for niche security inspection problems.
PERSONNEL
As of March 28, 1997 the Company had 167 employees compared to 150 employees at the end of the prior year.
SALES BACKLOG
The Company's firm sales backlog was $15,584,000 at March 28, 1997 and $12,198,000 at March 29, 1996.
A majority of the Company's contracts with the U.S. Government contain clauses permitting the government to terminate the contract for convenience upon certain terms and conditions, including payment to the Company of an appropriate fee or profit on work performed. The total of such contracts in the backlog was $11,220,000 at the end of fiscal year 1997 and $8,254,000 at the end of fiscal year 1996.
It is estimated that approximately 83% of the 1997 backlog will be filled within the fiscal year ending March 27, 1998.
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
All export sales are made in U.S. dollars, and many non-U.S. Government export sales are either secured by irrevocable letters of credit or paid in advance. Export sales are believed by the Company to have been at least as profitable as similar domestic sales. Substantially all of the Company's assets are maintained in the United States. The Company has not encountered, and does not anticipate
encountering, risks attendant to export sales that are greater than risks
attendant to domestic sales. The following chart provides information about the breakdown between domestic and export sales for the indicated fiscal years.
Net Sales and Contract Revenues (Dollars in thousands)
Fiscal Year 1997 1996 1995
Domestic $23,703 $14,526 $9,175
Export $ 4,776 $ 3,289 $3,822 |
