| [May 07, 2004] |
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CompuDyne Reports -$0.04 Loss Per Share for First Quarter; First Quarterly Loss in Eight Years Due to Weak Backlogs
HANOVER, Md. --(Business Wire)-- May 7, 2004 -- Orders Began an Upward Turn in February, March and April 2004
CompuDyne Corp. (Nasdaq:CDCY) an industry leader in sophisticated security products, integration and technology for the public security markets, today reported a loss of ($0.04) per share in the first quarter of 2004, the first quarterly loss since 1995. The loss is largely attributed to depressed conditions in the company's Institutional Security Systems ("ISS") business, and delays in awards in the Attack Protection ("AP") business, resulting in six straight quarters of declining backlogs. Budget deficits at the state and local government levels have resulted in a sharp curtailment in new prison and jail construction awards, and have led to a slowdown in awards for new software projects for the Public Safety & Justice business. Also impacting the first quarter were higher legal costs, the residual impact of the previously disclosed west coast regional office losses, and higher interest expense related to the January 2004 issuance of $40.25 million in convertible subordinated notes. Orders finally took a significant upward turn in February 2004, and the trend has continued through April 2004.
The Company reported a ($0.04) loss per share for the three months ended March 31, 2004, down from earnings of $0.12 per share in the first quarter of 2003. Revenues in the first quarter of 2004 were $39.0 million, down from $46.8 million in the first quarter of 2003. The decline in revenue was a direct result of the decline in backlogs. Net loss for the first quarter of 2004 was ($0.3) million, compared to a profit of $0.9 million in the first quarter of 2003.
Revenues increased slightly and pre-tax income was flat in the Federal Security Systems business. Revenues were up 8% and pre-tax earnings increased six fold in the Public Safety & Justice business. However in the Attack Protection business, revenues were down 17% and pre-tax income swung from a positive $562 thousand during the first quarter of 2003 to a negative ($679) thousand during the first quarter of 2004. Institutional Security Systems, reflecting the severe decline in new contracts over the past five quarters, saw revenue decline by 32% and pre-tax income decline by 72% to $207 thousand. Corporate expenses were higher due to increased interest expense from the convertible subordinated notes and higher costs largely related to new legislation.
While company backlogs continued to decline during the first quarter of 2004, by $7.7 million, to $131.7 million at March 31, 2004, a typically slow period, new order activity has picked up significantly in February, March, April and May of 2004. Quoting and bidding activity has been especially strong in the Attack Protection business. Because of the nature of the company's projects, especially in ISS and to a somewhat lesser extent in AP, there is a significant lag time between the receipt of an award and the generation of revenue from the award.
The company expects continued weak results in the second quarter of 2004, potentially significantly improved results in the second half of 2004, and is planning for a return to normal levels of profitability and growth in 2005.
The company announced that it has taken steps to expand the number of independent directors on its board. The company is also in the process of supplementing its senior management team to assure that as revenues resume their historical growth rates, and as the company identifies and consummates future acquisitions, operating margins will also recover and improve to acceptable levels.
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, the Company's ability to secure new contracts and the risks inherent in CompuDyne's business and future uncertainties which are further described in its filings with the Securities and Exchange Commission, such as the Company's Form 10-K, Form 10-Q, and Form 8-K reports.
About CompuDyne
CompuDyne operates within four business segments; each with prominent positions in physical and electronic security and technology-based solutions for the public security market. The Institutional Security Systems segment is one of the largest suppliers of physical and electronic security products, as well as integration and maintenance services, to the corrections and courthouse markets. The Attack Protection segment is one of the largest providers of bullet, blast and attack resistant products to U.S. embassies, banks, courthouses and other highly secured facilities in the U.S. and around the world. The segment also designs and manufactures fiber-optic sensors and related systems using optical fiber, proprietary optics and digital signal processing. The Federal Security Systems segment is a supplier of security and specialty engineering services and telecommunications products to the military, intelligence and commercial markets. The Public Safety & Justice segment develops, implements, and supports automated information solutions for public safety and justice agencies worldwide. This division serves government agencies throughout the United States, and is one of the largest companies dedicated to the public safety and justice software market. Public Safety and Justice also provides large-scale inmate management and institutional medical software systems. -0- *T COMPUDYNE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited) March 31, December 31, ASSETS 2004 2004 ------ ------------ ------------ (in thousands) Current Assets Cash and cash equivalents $ 3,802 $ 1,869 Marketable securities 22,465 - Accounts receivable, net 41,241 41,780 Contract costs in excess of billings 14,767 17,568 Inventories 5,874 6,704 Deferred tax assets 1,270 1,371 Prepaid expenses and other 1,859 2,322 ------------ ------------ Total Current Assets 91,278 71,614 Property, plant and equipment, net 9,654 10,079 Goodwill 21,280 21,280 Other intangible assets, net 9,673 9,785 Other 754 904 ------------ ------------ Total Assets $ 132,639 $ 113,662 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current Liabilities Accounts payable and accrued liabilities $ 17,229 $ 21,078 Billings in excess of contract costs incurred 11,091 13,551 Deferred revenue 5,460 6,036 Current portion of notes payable 440 2,103 ------------ ------------ Total Current Liabilities 34,220 42,768 Notes payable 4,005 15,555 Convertible subordinated notes payable 38,978 - Deferred tax liabilities 1,654 1,592 Other 665 820 ------------ ------------ Total Liabilities 79,522 60,735 Commitments and Contingencies Total Shareholders' Equity 53,117 52,927 ------------ ------------ Total Liabilities and Shareholders' Equity $ 132,639 $ 113,662 ============ ============ COMPUDYNE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) Three Months Ended March 31, 2004 2003 ------------ ------------ (in thousands, except per share data) Revenues $ 39,027 $ 46,767 Cost of sales 28,829 34,984 ------------ ------------ Gross profit 10,198 11,783 Operating expenses 8,162 7,987 Research and development 1,755 1,862 ------------ ------------ Income from operations 281 1,934 Total other expense 792 362 ------------ ------------ (Loss) income before income taxes (511) 1,572 Income taxes (benefit) (204) 630 ------------ ------------ Net (loss) income $ (307) $ 942 ============ ============ Earnings per share: ------------------- Basic (loss) earnings per common share $ ( .04) $ .12 ============ ============ Weighted average number of common shares outstanding 8,009 7,822 ============ ============ Diluted (loss) earnings per common share $ ( .04) $ .12 ============ ============ Weighted average number of common shares and equivalents 8,009 8,073 ============ ============ COMPUDYNE CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL DATA (in thousands, unaudited) Three Months Ended March 31, 2004 2003 ------------ ------------ Revenues Public Safety and Justice $ 12,442 $ 11,487 Institutional Security Systems 16,057 23,448 Attack Protection 6,953 8,343 Federal Security Systems 3,575 3,489 ------------ ------------ $ 39,027 $ 46,767 ============ ============ Three Months Ended March 31, 2004 2003 ------------ ------------ Pre-tax income (loss) Public Safety and Justice $ 435 $ 68 Institutional Security Systems 207 737 Attack Protection (679) 562 Federal Security Systems 200 207 Corporate (674) (2) ------------ ------------ $ (511) $ 1,572 ============ ============ March 31, December 31, 2004 2003 ------------ ------------ Backlog Public Safety and Justice $ 57,332 $ 63,727 Institutional Security Systems 52,147 57,258 Attack Protection 12,905 10,043 Federal Security Systems 9,269 8,326 ------------ ------------ $ 131,653 $ 139,354 ============ ============ RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Three Months Ended March 31, 2004 2003 ------------ ------------ Net (loss) income $ (307) $ 942 Interest expense 749 378 Tax expense (204) 630 Depreciation and amortization 704 751 ------------ ------------ EBITDA $ 942 $ 2,701 ============ ============ (1) 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. *T
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