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Spy right: Security worries spike sales

Global security fears help boost sales for an X-ray scanning firm.

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AS&E's X-ray scan shows a stowaway on a van's floor.
The Z Portal System scans trucks and containers.

(FORTUNE Small Business) -- Few companies have mined anxieties about terrorism as profitably as American Science & Engineering, which debuted at No. 6 on last year's FSB 100 list of America's fastest-growing small public companies and has built on that success in recent months.

Based in Billerica, Mass., the firm makes X-ray scanning gear that spots drugs, explosives, and other illicit items in cargo, vehicles, and packages. AS&E's scanners can penetrate 14 inches of steel. They produce images that are almost photo-sharp.

One of AS&E's top sellers, the Z Backscatter Van, boasts an X-ray system that can peer into vehicles and even buildings as it drives along. Since the van's 2003 introduction, some 300 have been sold to firms and government agencies worldwide, at prices ranging up to $900,000.

Sales for the six months ending Sept. 30 topped $82 million, up 38% over the same period in 2006. Profits dipped a fraction to $10.6 million, largely, AS&E says, because of heavy investment in R&D.

Revenues are split evenly between U.S. and international customers, says CFO Ken Galaznik. AS&E's clients include some of the world's largest ports, and China recently ordered a parcel inspection system for use at checkpoints during the Beijing Olympics. In December, AS&E announced a $20 million order from a customs agency in the Middle East, the second phase of a contract worth a total of $45 million.

Founded some 50 years ago by a group of MIT scientists, AS&E muddled along for years selling security products to a single customer, the U.S. government. After 9/11 sparked worldwide demand for security products, AS&E watched from the sidelines as rivals cashed in.

In 2003 the firm recruited turnaround specialist Anthony Fabiano as CEO. He hired new management, streamlined production, and developed new products. He also beefed up AS&E's sales and marketing efforts.

"AS&E's frugality and solid client bonds contribute to its strong long-term outlook," says Joshua Jabs, an analyst with Roth Capital Partners in Newport Beach, Calif. To top of page

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