-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GPh9AH0s+5/Xt3gnLp7LDO4UAbOJj92CcCdXjqXWev/3PORpH4ViINjCIfiIAag2 eS1FdGtTNv0JW1IC/3Phow== 0001157523-06-011382.txt : 20061115 0001157523-06-011382.hdr.sgml : 20061115 20061115093702 ACCESSION NUMBER: 0001157523-06-011382 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20061114 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20061115 DATE AS OF CHANGE: 20061115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMPUDYNE CORP CENTRAL INDEX KEY: 0000022912 STANDARD INDUSTRIAL CLASSIFICATION: SEARCH, DETECTION, NAVIGATION, GUIDANCE, AERONAUTICAL SYS [3812] IRS NUMBER: 231408659 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-29798 FILM NUMBER: 061218210 BUSINESS ADDRESS: STREET 1: 2530 RIVA ROAD STREET 2: SUITE 201 CITY: ANNAPOLIS STATE: MD ZIP: 21401 BUSINESS PHONE: 4102244415 MAIL ADDRESS: STREET 1: 2530 RIVA ROAD STREET 2: SUITE 201 CITY: ANNAPOLIS STATE: MD ZIP: 21401 FORMER COMPANY: FORMER CONFORMED NAME: CDC CONTROL SERVICES INC DATE OF NAME CHANGE: 19680510 8-K 1 a5275057.txt COMPUDYNE 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report November 14, 2006 COMPUDYNE CORPORATION --------------------- (Exact name of registrant as specified in its charter) NEVADA ------ (State or other jurisdiction of incorporation or organization) 0-29798 23-1408659 ------- ---------- (Commission File Number) (I.R.S. employer identification number) 2530 Riva Road, Suite 201 Annapolis, Maryland 21401 ----------------- ----- (Address of principal executive office) (Zip code) Registrant's telephone number, including area code (410) 224-4415 N/A ------------------------------------------------------------- (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION In its press release of November 14, 2006, attached hereto as Exhibit 99, CompuDyne Corporation (the "Company") announced its unaudited results of operations for the quarter ended September 30, 2006. Non-GAAP Financial Measures The press release contains unaudited financial information that is not prepared in accordance with generally accepted accounting principles (GAAP). Investors are cautioned that the non-GAAP financial measures are not to be construed as an alternative to GAAP. The Company's management uses earnings before interest, taxes, depreciation and amortization, as adjusted for non-cash stock option expense (EBITDAS), in its internal analysis of results of operations and monitors EBITDAS to evaluate the Company's compliance with its bank covenant for a fixed charge coverage. The Company's management also uses Income (Loss) Before Non-Cash Stock Option Expense to allow it to compare its results of operations between years. Management believes that EBITDAS and Income (Loss) Before Non-Cash Stock Option Expense is useful to investors as a meaningful comparison between periods and as an analysis of the critical components of the Company's results of operations. Management also believes that EBITDAS is useful to investors because it allows them to evaluate the Company's compliance with its bank covenant for a fixed charge coverage. Management believes that net income per share excluding stock option expense is helpful to investors who are trying to compare current results with prior periods. The information in this Form 8-K and the Exhibit attached hereto shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing. ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS (a) Not applicable. (b) Not applicable. (c) Not applicable. (d) The following exhibit is filed herewith: Exhibit 99 Press Release dated November 14, 2006 Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereto duly authorized. Date: November 15, 2006 COMPUDYNE CORPORATION By: /s/ Geoffrey F. Feidelberg -------------------------- Geoffrey F. Feidelberg Its: Chief Financial Officer INDEX TO EXHIBITS Exhibit 99 - Press Release dated November 14, 2006 EX-99.1 2 a5275057ex991.txt COMPUDYNE EXHIBIT 99.1 Exhibit 99.1 CompuDyne Reports GAAP Earnings Per Share of $0.04 for 2006 Third Quarter - Adjusted Earnings Per Share, Excluding Stock Option Expense, Was $0.09 - Backlogs Continue to Increase ANNAPOLIS, Md.--(BUSINESS WIRE)--Nov. 14, 2006--CompuDyne Corporation (Nasdaq:CDCY), an industry leader in sophisticated security products, integration and technology for the public security markets, today reported net income of $0.04 per share for the third quarter of 2006, compared with a net loss of $0.65 per share reported in the third quarter of 2005. Revenues in the third quarter of 2006 were $34.7 million, up from $33.5 million in the third quarter of 2005. Expenses in the third quarter of 2006 included $0.4 million in non-cash stock option expense. Net income per share before this non-cash charge was $0.09. Net income for the first nine months of 2006 was $0.18 per share, compared with a net loss of $1.01 per share reported in the first nine months of 2005. Revenues for the first nine months of 2006 were $113.6 million, up from $100.9 million in the first nine months of 2005. Expenses in the first nine months of 2006 included $1.0 million in non-cash stock option expense. Net income per share for the first nine months of 2006, before this non-cash charge, was $0.29. EBITDAS for the third quarter of 2006 was $2.3 million, improved sharply from a negative $4.1 million in the third quarter of 2005. EBITDAS for the first nine months of 2006 totaled $7.1 million. The third quarter and first nine months of 2006 benefited primarily from three factors: 1) a significant reduction in our audit and Sarbanes Oxley related costs; 2) completion of the loss generating contracts at ISS' West Coast office; and 3) improved operating margins related to both significant cost reductions and an improvement in the mix of revenues. Institutional Security Systems ("ISS") revenue was $11.1 million in the third quarter of 2006 compared with $15.5 million in the third quarter of 2005. Pre-tax income decreased from a $0.2 million loss in the third quarter of 2005 to a $0.4 million loss in the third quarter of 2006. ISS earnings continue to be negatively impacted by the low awards and backlog experienced in the latter part of 2005 and early 2006, and by legal costs in pursuing claims and recoveries on completed projects. ISS continues to aggressively review and reduce costs while seeking to retain capacity for the current upturn in its backlog. Legal costs at ISS in the third quarter totaled $0.3 million. Recent increases in awards and backlogs, and continuing strong pre-bid activity, bodes well for increased volume and positive earnings contributions from ISS in the future. ISS backlog increased by $14.3 million to $65.5 million during the quarter. Attack Protection ("AP") revenue was $8.8 million in the third quarter of 2006, up 49.7% compared with $5.9 million in the third quarter of 2005. Pre-tax income improved from a loss of $1.8 million in the third quarter of 2005 to pre-tax income of $1.5 million in the third quarter of 2006. The Norshield brand business, which supplies bullet, blast and attack resistant windows and doors as well as vehicle barrier systems, benefited from completing a large contract as well as from significant progress made during 2005 in reducing costs and improving quality. The Fiber SenSys business, which is one of the world's largest suppliers of fiber optic based perimeter alarm systems, did especially well in the third quarter, benefiting from successfully completing some important military tests and the introduction of new products. AP backlogs declined by $5.6 million to $8.0 million during the quarter, reflecting the run off of a major U.S. embassy contract for bullet, blast and attack protection windows and doors. Bidding activity remains strong in this segment. Public Safety & Justice ("PS&J") revenues increased to $10.7 million in the third quarter of 2006 compared with $9.2 million in the third quarter of 2005. Pre-tax results for PS&J in the third quarter of 2006 were a loss of $0.6 million compared with a pre-tax loss of $3.2 million in the third quarter of 2005. The third quarter of 2006 benefited from significant reductions in indirect costs implemented late in 2005 and further changes instituted by new management put in place in the third quarter of 2006. The third quarter of 2006 was negatively impacted by the cost of the tremendously successful annual Tiburon User's Group conference in Milwaukee in September. In addition, the decision was made in 2005 to significantly accelerate the research and development effort to migrate to a full Service Oriented Architecture and .NET based software product suite, a commitment which is expected to negatively impact PS&J pre-tax in 2006 by $2.2 million but which should improve revenues and margins in future years. Spending on this new suite of products in the third quarter of 2006 was $0.5 million. Although PS&J backlogs increased slightly in the third quarter, they are still not at levels necessary for adequate profitability, although the pipeline of prospective new business is high. Xanalys, Tiburon's investigative analysis software business, won an important international selection that could lead to extensive military intelligence work. Integrated Electronic Systems ("IES") revenue was $4.1 million in the third quarter of 2006 compared with $2.9 million in the third quarter of 2005 and resulted in pre-tax income of $0.4 million for the third quarter of 2006 compared with $0.2 million for the third quarter of 2005. The re-bid of the Bureau of Engraving & Printing ("BEP") contract, occasioned by a protest filed by the previous incumbent, remains unresolved and we are optimistic that it will be re-awarded to IES due to its current performance. IES' Quanta subsidiary continues to perform this BEP contract and total revenues and earnings at Quanta have already exceeded Quanta's results for all of 2005. In early July 2006 Quanta purchased the assets of Signami LLC, a company that makes signals intelligence software and equipment that complements devices made by IES' Data Control Systems division. The newly combined Signami DCS contributed to IES' third quarter with $0.7 million of revenue and $0.1 million of pre-tax income despite non-cash acquisition amortization charges. Signami DCS ended the quarter with $2.3 million of order backlog. In the third quarter of 2006, our corporate pre-tax costs totaled $1.3 million, compared with third quarter 2005 costs of $1.7 million. This included $0.5 million of net interest cost in the third quarter of 2006 and $0.5 million in the third quarter of 2005. The majority of the expense reduction in 2006 is due to reduced costs related to audit and compliance with Section 404 of Sarbanes-Oxley. These costs have been, and are expected to continue to be, considerably below 2005 levels. Other expenses at the Corporate level have also been reduced. With good cash flow, the balance sheet remains solid with cash and marketable securities of $20.4 million (which includes pledged assets of $5.5 million), working capital of $30.6 million, shareholders' equity of $40.4 million, and only $1.8 million of debt maturities prior to 2011. Company-wide backlogs, although down from December 31, 2005, increased quarter over quarter during the third quarter of 2006, by $10.2 million to $121.7 million. Although this is still not an acceptable level, quoting and bidding activity levels continue to be much higher than in recent years. Certain statements made in this press release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including those statements concerning the Company's expectations with respect to future operating results and other events. Although the Company believes it has a reasonable basis for these forward-looking statements, these statements involve risks and uncertainties that cannot be predicted or quantified and consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors which could cause actual results to differ from expectations include, among others, capital spending patterns of the security market and the demand for the Company's products, competitive factors and pricing pressures, changes in legislation, regulatory requirements, government budget problems, the Company's ability to secure new contracts, the ability to remain in compliance with its bank covenants, delays in government procurement processes, inability to obtain bid, payment and performance bonds on various of the Company's projects, technological change or difficulties, the ability to refinance debt when it becomes due, product development risks, commercialization difficulties, adverse results in litigation, the level of product returns, the amount of remedial work needed to be performed, costs of compliance with Sarbanes-Oxley requirements and the impact of the failure to comply with such requirements, risks associated with internal control weaknesses identified in complying with Section 404 of Sarbanes-Oxley, the Company's ability to realize anticipated cost savings, the Company's ability to simplify its structure and modify its strategic objectives, and general economic conditions. Risks inherent in the Company's business and with respect to future uncertainties are further described in its other filings with the Securities Exchange Commission, such as the Company's Form 10-K, Form 10-Q, and Form 8-K reports. COMPUDYNE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited) September 30, December 31, ASSETS 2006 2005 ------------- ------------- (dollars in thousands) Current Assets Cash and cash equivalents $ 3,042 $ 6,938 Marketable securities 11,891 11,429 Accounts receivable, net 30,131 39,625 Contract costs in excess of billings 11,039 13,764 Inventories 6,056 6,195 Prepaid expenses and other 2,818 2,809 ------------- ------------- Total Current Assets 64,977 80,760 Cash equivalents pledged 5,479 - Property, plant and equipment, net 10,723 9,962 Goodwill 27,519 26,846 Other intangible assets, net 8,596 8,221 Other 2,036 903 ------------- ------------- Total Assets $ 119,330 $ 126,692 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable and accrued liabilities $ 14,220 $ 23,030 Billings in excess of contract costs incurred 11,491 13,847 Deferred revenue 8,213 8,094 Current portion of notes payable 440 440 ------------- ------------- Total Current Liabilities 34,364 45,411 Notes payable 2,685 3,125 Convertible subordinated notes payable, net 39,445 39,305 Deferred tax liabilities 2,060 2,060 Other 385 369 ------------- ------------- Total Liabilities 78,939 90,270 Commitments and Contingencies Shareholders' Equity 40,391 36,422 ------------- ------------- Total Liabilities and Shareholders' Equity $ 119,330 $ 126,692 ============= ============= COMPUDYNE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2006 2005 2006 2005 --------- --------- ------------------- (in thousands, except per share data) Revenues $ 34,696 $ 33,499 $113,560 $100,909 Cost of sales 22,878 25,561 77,097 70,161 --------- --------- --------- --------- Gross profit 11,818 7,938 36,463 30,748 Selling, general & administrative expenses 9,175 10,592 28,253 30,914 Research and development 1,769 2,565 5,470 6,918 --------- --------- --------- --------- Income (loss) from operations 874 (5,219) 2,740 (7,084) Total other expense, net 539 558 1,470 1,651 --------- --------- --------- --------- Income (loss) before taxes on income 335 (5,777) 1,270 (8,735) Income tax expense (benefit) 8 (500) (169) (500) --------- --------- --------- --------- Net income (loss) $ 327 $ (5,277) $ 1,439 $ (8,235) ========= ========= ========= ========= Income (loss) per share: - ------------------------------ Basic income (loss) per common share $ .04 $ (.65) $ .18 $ (1.01) ========= ========= ========= ========= Weighted average number of common shares outstanding 8,355 8,116 8,198 8,132 Diluted income (loss) per common share $ .04 $ (.65) $ .18 $ (1.01) ========= ========= ========= ========= Weighted average number of common shares and equivalents 8,378 8,116 8,233 8,132 COMPUDYNE CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL DATA (in thousands, unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2006 2005 2006 2005 --------- --------- --------- --------- Revenues Institutional Security Systems $ 11,091 $ 15,548 $ 37,666 $ 43,008 Attack Protection 8,822 5,892 31,839 18,855 Public Safety and Justice 10,666 9,161 33,368 32,241 Integrated Electronic Systems 4,117 2,898 10,687 6,805 --------- --------- --------- --------- $ 34,696 $ 33,499 $113,560 $100,909 ========= ========= ========= ========= Three Months Ended Nine Months Ended September 30, September 30, 2006 2005 2006 2005 --------- --------- --------- --------- Gross Profit Institutional Security Systems $ 1,780 $ 2,343 $ 5,806 $ 7,491 Attack Protection 3,279 341 10,430 4,089 Public Safety and Justice 5,750 4,781 18,218 18,073 Integrated Electronic Systems 1,009 473 2,009 1,095 --------- --------- --------- --------- $ 11,818 $ 7,938 $ 36,463 $ 30,748 ========= ========= ========= ========= Three Months Ended Nine Months Ended September 30, September 30, 2006 2005 2006 2005 --------- --------- --------- --------- Pre-tax income (loss) Institutional Security Systems $ (360) $ (170) $ (610) $ 528 Attack Protection 1,456 (1,800) 4,209 (2,141) Public Safety and Justice (644) (3,188) (1,166) (3,270) Integrated Electronic Systems 377 172 722 180 Corporate (494) (791) (1,885) (4,032) --------- --------- --------- --------- $ 335 $ (5,777) $ 1,270 $ (8,735) ========= ========= ========= ========= September 30, December 31, September 30, 2006 2005 2005 ------------- ------------ ------------- Backlog Institutional Security Systems $ 65,489 $ 58,128 $ 52,557 Attack Protection 7,991 28,802 16,210 Public Safety and Justice 40,088 53,705 58,270 Integrated Electronic Systems 8,137 7,503 8,146 ------------- ------------ ------------- $ 121,705 $ 148,138 $ 135,183 ============= ============ ============= RECONCILIATION OF NON-GAAP FINANCIAL MEASURES EBITDAS (in thousands, except per share data; unaudited) Three Months Nine Months Ended Ended September 30, September 30, 2006 2005 2006 2005 ------- -------- ------- -------- Net income (loss) $ 327 $(5,277) $1,439 $(8,235) Interest expense 822 764 2,479 2,317 Income tax expense (benefit) 8 (500) (169) (500) Depreciation and amortization 794 872 2,339 2,596 Non-cash stock option expense 389 - 967 - ------- -------- ------- -------- EBITDA adjusted for non-cash stock option expense (EBITDAS) $2,340 $(4,141) $7,055 $(3,822) ======= ======== ======= ======== Income (Loss) Before Non-Cash Stock Option Expense Three Months Nine Months Ended Ended September 30, September 30, 2006 2005 2006 2005 ------- -------- ------- -------- Net income (loss) $ 327 $(5,277) $1,439 $(8,235) Non-cash stock option expense 389 - 967 - ------- -------- ------- -------- Income (loss) before non-cash stock option expense $ 716 $(5,277) $2,406 $(8,235) ======= ======== ======= ======== Diluted income (loss) per common share before non-cash stock option expense $ .09 $ (.65) $ .29 $ (1.01) ======= ======== ======= ======== This press release contains unaudited financial information that is not prepared in accordance with generally accepted accounting principles (GAAP). Investors are cautioned that the non-GAAP financial measures are not to be construed as an alternative to GAAP. The Company's management uses earnings before interest, taxes, depreciation and amortization, as adjusted for non-cash stock option expense (EBITDAS), in its internal analysis of results of operations and monitors EBITDAS to evaluate the Company's compliance with its bank covenant for a fixed charge coverage ratio. The Company's management also uses Income (Loss) Before Non-Cash Stock Option Expense to allow it to compare its results of operations between years. Management believes that EBITDAS and Income (Loss) Before Non-Cash Stock Option Expense is useful to investors as a meaningful comparison between periods and as an analysis of the critical components of the Company's results of operations. Management also believes that EBITDAS is useful to investors because it allows them to evaluate the Company's compliance with its bank covenant for a fixed charge coverage ratio. Management believes that net income per share excluding stock option expense is helpful to investors who are trying to compare current results with prior periods. CONTACT: CompuDyne Corporation Geoffrey F. Feidelberg Investor Relations 410-224-4415 ext.313 investors.relations@compudyne.com -----END PRIVACY-ENHANCED MESSAGE-----