AMERICAN SCIENCE AND ENGINEERING INC.Billerica, Massachusetts; X-Ray Detection Systems Maker Vies For Big Government Contracts

Since 9/11, national security has become big business. Whether it's securing borders or the nation's airports and seaports, the need for screening is crucial.

American Science and Engineering is one company rising up to meet the country's security needs.

The firm specializes in X-ray inspection systems that promote border security, fight terrorism and combat the smuggling of drugs and humans.

There are about 1,800 security concourses in the nation's airports. Providing security is a daunting task for the Transportation Security Administration.

On Aug. 1, the TSA awarded American Science a $10.8 million contract to use its SmartCheck personnel screening system.

The contract's first phase provides funding to lease five systems with an option to purchase. The TSA also can buy an additional 75 SmartCheck systems, which are used as secondary screening devices.

Last year, the American Civil Liberties Union objected to the screening device because the group felt it infringed on people's privacy.

At the time, SmartCheck could see through clothes in order to spot bombs and weapons.

Phoenix Trial

But the TSA ran a trial for the system at the Phoenix International Airport, the eighth busiest in the U.S. The agency found that the public preferred the machine over security pat downs.

Analyst Stephen Levenson of Stifel Nicolaus said American Science made the decision easier by creating an algorithm that blurred the image on the screen.

"This (contract) offers TSA the ability to deploy our SmartCheck personnel screening system on a broad basis for use as a safe and effective tool for aviation threat detection," CEO Anthony Fabiano said in a press release.

"SmartCheck provides the most comprehensive personnel screening technology available . . . while ensuring the privacy of the traveling public."

Levenson credits the contract to the effective management team led by Fabiano. He said the CEO, who was brought in to restructure the company earlier this decade, expanded the firm's technology into new applications.

"Some called American Science a one-trick pony," he said. "But it has improved margins and operating efficiency while extending its product line and core technology with new devices."

The Billerica, Mass.-based company has built its business around its Z Backscatter technology that can better uncover dangerous and elusive threats. It is protected by more than 20 patents.

Unlike traditional X-rays, the company's systems pick up lower-frequency waves that bounce off softer objects. Software assembles the data into images to reveal drugs, plastic and liquid explosives, ceramic weapons, human bodies and radioactive devices, such as dirty bombs.

Its biggest seller has been its Z Backscatter Van, which was introduced in 2003. The ZBV is a mobile, X-ray scanning system built into a van. Costs vary depending on options, but on average ZBVs have a price tag of about $800,000.

The ZBV can screen static objects while it is moving or can scan moving objects while it's parked.

In dangerous environments, like Iraqi checkpoints, an unmarked ZBV sits inconspicuously so the operator can scan from a safe distance.

The system requires servicing, which provides the company with a recurring revenue stream. That stream accounts for 30% of total sales. Sixty percent stems from sales of inspection systems.

The company makes smaller systems that screen people entering government buildings, such as the White House.

It makes larger systems ideal for scanning cars, vans, trucks and sea cargo containers. The CargoSearch mounts a system on top of a framework that a truck towing a container can drive through for inspection.

Its Z Backscatter technology attracts an elite class of clientele, which includes the U.S. Department of Defense, Homeland Security, Customs and Border Protection as well as other federal agencies.