CompuDyne Corporation (Nasdaq:CDCYE), an industry leader in
sophisticated security products, integration and technology for the
public security markets, today reported a loss of $0.04 per share
for the first quarter of 2005, equal to the $0.04 loss reported in
the first quarter of 2004. Revenues in the first quarter of 2005
were $36.3 million, down from $39.0 million in the first quarter of
2004. Revenues continued to be depressed due to the impact of
recent budget deficits at many of the Company's state and local
government customers, which has impacted both its Institutional
Security Systems ("ISS") and Public Safety & Justice
("PS&J") segments, and the lingering impact of delayed awards
of new projects for the company's Attack Protection ("AP")
business. The loss was a result of the continuing depressed revenue
level, continuing operating challenges that are being addressed
through restructuring efforts and new management, and very heavy
spending to meet Sarbanes Oxley and Section 404 controls
obligations, partially offset by a favorable close-out of a major
contract at ISS. Institutional Security Systems revenue declined
$325 thousand to $15.7 million for the quarter. Pre-tax income
increased $1.0 million to $1.2 million for the quarter. Both
revenue and earnings benefited from the closeout of a major
contract. Revenues have been under pressure, and will continue to
be under pressure for the intermediate term, due to very low
backlogs. Earnings are expected to be depressed for the balance of
the year due to the low revenue outlook, offset to some extent by
cost savings from restructuring and potential favorable settlements
of claims and change orders related to problem projects. With the
recent improvement in state and local government finances, and the
continuing increase in prisoner populations, quoting and bidding
activity has begun to pick up noticeably. ISS announced a $6.1
million project award in April. Attack Protection revenue was flat
at $6.9 million in both the first quarters of 2005 and 2004 while
pre-tax improved from a loss of $679 thousand in the 2004 first
quarter to a profit of $499 thousand in the 2005 first quarter. The
improvement was driven by expense reductions at the Norshield
division, and a significant growth in revenues and profits at the
Fiber SenSys ("FSI") subsidiary, reflective of FSI having received
and shipped its largest single order ever in the first quarter of
2005. The bulk of AP's near-record backlog of new embassy projects
begins shipping late in the second quarter of 2005 and is expected
to impact the second half of 2005 very favorably. The Department of
State has announced that they expect to award eighteen new embassy
projects in late 2005, up from eight in 2004. Public Safety &
Justice revenues declined $785 thousand to $11.7 million in the
first quarter of 2005. Weak revenues reflect somewhat lower
backlogs as well as the decision to delay the release of an
important new product version by two months to assure that the best
possible product would be delivered to our customers. The new
version is now being installed very successfully. Pre-tax at
PS&J in the first quarter of 2005 was a loss of $482 thousand
compared to a profit of $435 thousand in the first quarter of 2004.
The loss developed due to lower than expected revenue as well as
the deferral of an expected change order into the second quarter.
With improved state and local finances, and enhanced federal
grants, new project quoting activity has picked up significantly
and PS&J has two large expected awards under negotiation.
PS&J is expected to return to solid profitability in the second
quarter, with sequentially improving results throughout the year.
Integrated Electronic Systems ("IES") (formerly Federal Security
Systems) revenue declined to $2.0 million in the first quarter of
2005 from $3.6 million in the first quarter of 2004 and resulted in
a breakeven for the first quarter of 2005 compared to a pre-tax
profit of $200 thousand for the first quarter of 2004. The primary
cause of the disappointing results was the delay in start-up of a
major project, a delay that is expected to be resolved in the near
future. IES was awarded a $25 million five-year contract during the
quarter and, although the award is being protested, IES is
expecting to begin work on the contract late in the second quarter.
Corporate expenses totaled $2.6 million of which $1.1 million was
charged to the individual businesses. Of the $2.6 million, $1.1
million was expended on audit, Sarbanes Oxley, and Section 404
related expenses. Also, $540 thousand was expended on net interest
expense. The Sarbanes Oxley and Section 404 related expenses are
expected to be very heavy again in the second quarter, and to begin
moderating thereafter, however they are expected to continue as a
heavy administrative burden indefinitely due to the Company's
complex structure and modest size. The Company is looking at ways
to moderate this complexity and reduce these costs. While backlogs
declined during the first quarter of 2005, by $11.1 million to
$115.7 million, quoting and bidding activity has picked up and
several important contracts are under negotiation. The outlook for
improving backlogs is good. The Company's policy is to not include
an award in backlog if it is under protest. Had the protest related
to IES' $25 million award been resolved prior to the end of the
quarter, the Company's quarter end backlog would be significantly
higher than the backlog at December 31, 2004. The Company estimates
that the second quarter of 2005 will result in a modest loss
similar to the first quarter, and that the second half of 2005 will
be sufficiently improved to result in profitable operations for the
year. 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 successfully grow the Company by completing
acquisitions, the ability to remain in compliance with its bank
covenants, delays in government procurement processes, ability 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, 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. -0- *T COMPUDYNE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (unaudited) March 31, December 31,
ASSETS 2005 2004 ------------ ------------ (dollars in thousands)
Current Assets Cash and cash equivalents $ 4,183 $ 5,198 Marketable
securities 10,769 19,577 Cash and marketable securities - pledged
489 - Accounts receivable, net 33,325 34,291 Contract costs in
excess of billings 15,060 16,087 Inventories 4,894 5,165 Prepaid
expenses and other 5,014 5,412 ------------ ------------ Total
Current Assets 73,734 85,730 Cash and marketable securities -
pledged 5,510 - Property, plant and equipment, net 11,689 12,094
Goodwill 25,913 25,894 Other intangible assets, net 8,352 8,460
Other 901 713 ------------ ------------ Total Assets $126,099
$132,891 ============ ============ LIABILITIES AND SHAREHOLDERS'
EQUITY Current Liabilities Accounts payable and accrued liabilities
$ 16,605 $ 21,771 Billings in excess of contract costs incurred
12,276 13,497 Deferred revenue 6,693 5,998 Current portion of notes
payable 440 440 ------------ ------------ Total Current Liabilities
36,014 41,706 Notes payable 3,565 3,565 Convertible subordinated
notes payable, net 39,165 39,118 Deferred tax liabilities 2,072
2,072 Other 514 599 ------------ ------------ Total Liabilities
81,330 87,060 Commitments and Contingencies Shareholders' Equity
44,769 45,831 ------------ ------------ Total Liabilities and
Shareholders' Equity $126,099 $132,891 ============ ============
COMPUDYNE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
OPERATIONS (unaudited) Three Months Ended March 31, 2005 2004
------------ ------------ (in thousands, except per share data)
Revenues $ 36,306 $ 39,027 Cost of sales 23,923 28,829 ------------
------------ Gross profit 12,383 10,198 Selling, general and
administrative expenses 10,027 8,162 Research and development 2,111
1,755 ------------ ------------ Income from operations 245 281
------------ ------------ Total other expense, net 564 792
------------ ------------ (Loss) before income taxes (319) (511)
Income taxes expense (benefit) - (204) ------------ ------------
Net loss $ (319) $ (307) ============ ============ (Loss) per
share: ----------------- Basic (loss) per common share $ (.04) $
(.04) ============ ============ Weighted average number of common
shares outstanding 8,163 8,009 ============ ============ Diluted
(loss) per common share $ (.04) $ (.04) ============ ============
Weighted average number of common shares and equivalents 8,163
8,009 ============ ============ COMPUDYNE CORPORATION AND
SUBSIDIARIES CONSOLIDATED FINANCIAL DATA (in thousands, unaudited)
Three Months Ended March 31, 2005 2004 ------------ ------------
Revenues Institutional Security Systems $ 15,732 $ 16,057 Attack
Protection 6,898 6,953 Integrated Electronic Systems 2,019 3,575
Public Safety and Justice 11,657 12,442 ------------ ------------ $
36,306 $ 39,027 ============ ============ Three Months Ended March
31, 2005 2004 ------------ ------------ Pre-tax income (loss)
Institutional Security Systems $ 1,230 $ 207 Attack Protection 499
(679) Integrated Electronic Systems (8) 200 Public Safety and
Justice (482) 435 Corporate (1,558) (674) ------------ ------------
$ (319) $ (511) ============ ============ March 31, December 31,
2005 2004 ------------ ------------ Backlog Institutional Security
Systems $ 42,700 $ 49,324 Attack Protection 20,139 20,803
Integrated Electronic Systems 8,395 8,299 Public Safety and Justice
44,488 48,434 ------------ ------------ $115,722 $126,860
============ ============ RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES (in thousands, unaudited) Three Months Ended March 31,
2005 2004 ------------ ------------ Net (loss) $ (319) $ (307)
Interest expense 803 749 Tax expense - (204) Depreciation and
amortization 877 704 ------------ ------------ EBITDA $ 1,361 $ 942
============ ============ *T This press release contains unaudited
financial information that is not prepared in accordance with
generally accepted accounting principals (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
(EBITDA), in its internal analysis of net income and monitors it to
ensure compliance with certain covenants under the Company's credit
facility. Management believes that EBITDA provides useful
information to investors for meaningful comparison to prior periods
and analysis of the critical components of its results of its
operations. Management also believes that EBITDA is a valuable
financial measure to investors because it allows them to monitor
the Company's compliance with certain covenants under its credit
facility.
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