CompuDyne Reports $0.23 Loss for Third Quarter of 2004; Backlogs Increase to $138 Million; 2005 Outlook Remains Positive.ANNAPOLIS Annapolis, river, Canada Annapolis, river, c.75 mi (120 km) long, rising in W Nova Scotia, Canada, and flowing SW past Annapolis Royal to Annapolis Basin, an arm of the Bay of Fundy. , Md. -- CompuDyne Corporation (Nasdaq:CDCY) an industry leader in sophisticated security products, integration and technology for the public security markets, today reported a loss of $0.23 per share for the third quarter of 2004 compared to a profit of $0.12 for the third quarter of 2003. Revenues for the third quarter of 2004 were $33.4 million, down from $53.1 million in the third quarter of 2003. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become for the third quarter of 2004 was a negative $1.5 million, down from a positive $2.6 million in the third quarter of 2003. Backlogs increased by $1.2 million to $138.1 million during the quarter. Awards in October October: see month. are expected to be in excess of $8.0 million, with another $3.5 million of awards in the final stages of negotiation. Institutional Security Systems ("ISS ISS See Institutional Shareholder Services (ISS). ") pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta result was a loss of $0.8 million on revenues of $11.8 million in the third quarter of 2004, compared to a profit of $1.2 million on revenues of $26.4 million in the third quarter of 2003. ISS is impacted by two years of declining backlogs as well as modest losses from its West Coast operations. While significant cost reductions have been instituted, they have not been enough to offset the severe reduction in revenues. The negative impact in the third quarter of 2004 of certain projects that generated losses, primarily at the West Coast regional office, is now largely behind us with the completion of most of those projects, although legal costs related thereto there·to adv. 1. To that, this, or it. 2. Archaic In addition to that; furthermore. thereto Adverb Formal 1. to that or it 2. will continue. Backlogs have started to level out, but have not yet begun a sustained up-trend. Because of the long lead-time lead-time n. The time between the initial stage of a project or policy and the appearance of results: a long lead-time in oil production because of the need for new exploration and drilling. between orders and revenues at ISS, results in this segment are expected to be depressed Depressed A description of a market, security, or product that is experiencing weak demand and lowering prices. Notes: A depressed market, security, or product implies that prices and volume are low. There are many reasons for a depressed market, security, or product. for an extended period of time. Attack Protection ("AP") pre-tax result was a loss of $2.1 million on revenues of $6.5 million in the third quarter of 2004, compared to a loss of $0.7 million on revenues of $6.0 million in the third quarter of 2003. The bulk of the loss is related to remedial REMEDIAL. That which affords a remedy; as, a remedial statute, or one which is made to supply some defects or abridge some superfluities of the common law. 1 131. Com. 86. The term remedial statute is also applied to those acts which give a new remedy. Esp. Pen. Act. 1. work on one contract which involved a unique product. This work is expected to be completed in mid-November n. 1. the middle part of November. Noun 1. mid-November - the middle part of November period, period of time, time period - an amount of time; "a time period of 30 years"; "hastened the period of time of his recovery"; "Picasso's blue . The quarter was also impacted by product returns and the continuing low level of revenues. With a near-record backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. of $19.4 million, up from $17.8 million at the end of the second quarter of 2004 and $14.4 million at the end of the third quarter of 2003, the prospects for AP are improving. Significant bids remain outstanding on both new embassy embassy: see diplomatic service; extraterritoriality. projects and security bollards and barriers. Public Safety & Justice ("PS&J") pre-tax income was $0.4 million on revenues of $11.8 million in the third quarter of 2004, a decline from earnings of $0.8 million on revenue of $16.2 million in the third quarter of 2003. The third quarter of 2003 benefited from a large hardware shipment. The third quarter of 2004 was impacted by approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $0.3 million of costs for the extremely successful User's Group meeting in September September: see month. . PS&J was further impacted by hiring costs for its new divisional President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . Quoting activity remains very strong at PS&J. The reception by clients and prospective clients of the Company's newly acquired 90 Degrees software product line has been exceptionally strong. During the third quarter of 2004 there were approximately eleven cutovers (systems going "live") and approximately forty additional systems accepted into warranty An assurance, promise, or guaranty by one party that a particular statement of fact is true and may be relied upon by the other party. Warranties are used in a variety of commercial situations. In many instances a business may voluntarily make a warranty. and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. maintenance - all predictive of significant increases in recurring re·cur intr.v. re·curred, re·cur·ring, re·curs 1. To happen, come up, or show up again or repeatedly. 2. To return to one's attention or memory. 3. To return in thought or discourse. revenue levels in coming months and years. Federal Security Systems ("FSS FSS Federal Supply Service (US General Services Administration) FSS Flight Service Station FSS Family Self-Sufficiency FSS Fixed Satellite Service FSS Forensic Science Service (Great Britain) ") pre-tax income in the third quarter of 2004 was $0.1 million on revenues of $3.3 compared to $0.2 million on revenues of $4.5 million in the third quarter of 2003. Revenues and pre-tax income have been impacted by delays in expected timing of awards, including the recently announced $4.7 million award which will now impact calendar year 2005 revenues favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. but will have little impact on 2004. Pre-tax income was also impacted by continuing investments in developing the signals intelligence product line, which continues to meet with strongly positive inquiries and orders. FSS will continue to make meaningful investments in this product line during the coming twelve months which will temporarily impact pre-tax income but are expected to result in a significantly advanced product with strong marketability Marketability A negotiable security is said to have good marketability if there is an active secondary market in which it can easily be resold. marketability The ease with which an investment may be bought and sold in the secondary market. . Corporate expenditures were at a higher level than normal due to hiring expenses related to the strengthening of the company's senior management team, costs related to the evaluation of acquisitions we chose not to pursue, as well as continued high levels of spending to meet obligations under Sarbanes Oxley Oxley refers to several things: People
Third quarter 2004 pre-tax income was worse than anticipated at the time of our October 7th press release due to unexpected adjustments to contract costs. While it is not yet possible to accurately project the fourth quarter, it is expected to be considerably improved over the third quarter. The company is in the final stages of negotiating recovery of certain expenses on a longstanding Adj. 1. longstanding - having existed for a long time; "a longstanding friendship"; "the longstanding conflict" long - primarily temporal sense; being or indicating a relatively great or greater than average duration or passage of time or a duration as specified; contract. The degree of success the Company has in this effort, if any, will determine fourth quarter results. Expectations for 2005 continue to be good, with the completion in 2004 of work on contracts in a loss position which negatively impacted 2004 and slowly improving backlogs. While ISS is expected to continue under pressure due to depressed backlogs, AP is expected to turn profitable during 2005. PS&J is expected to show a further increase in profits over 2004. FSS is going into the year with improved prospects moderated by planned investments in its signals intelligence line. Hiring costs will accelerate in AP to meet expanded revenue expectations but hiring costs for the Company as a whole, at the senior management level will be reduced. Sarbanes Oxley related costs are also expected to moderate to some extent. On balance, 2005 is expected to return to a solid level of profitability. The Company expects to make a formal estimate of 2004 and 2005 earnings near the end of 2004. Certain statements made in this press release constitute "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and 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 Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. by such forward-looking statements. Factors which could cause actual results to differ from expectations include, among others, capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. patterns of the security market, competitive factors and pricing measures, regulatory requirements Regulatory requirements are part of the process of drug discovery and drug development. Regulatory requirements describe what is necessary for a new drug to be approved for marketing in any particular country. , the Company's ability to secure new contracts, costs related to potential acquisitions, the level of product returns, the amount of remedial work needed to be performed, 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-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. , Form 10-Q Form 10-Q See 10-Q. , and Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. reports.
COMPUDYNE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
September 30, December 31,
ASSETS 2004 2003
--------- ---------
(in thousands)
Current Assets
Cash and cash equivalents $ 2,366 $ 1,869
Marketable securities 15,711 -
Accounts receivable, net 40,578 41,780
Contract costs in excess of billings 17,239 17,568
Inventories 5,096 6,704
Deferred tax assets 1,168 1,371
Prepaid expenses and other 4,969 2,322
--------- ---------
Total Current Assets 87,127 71,614
Property, plant and equipment, net 11,421 10,079
Goodwill 23,157 21,280
Other intangible assets, net 9,570 9,785
Other 972 904
--------- ---------
Total Assets $ 132,247 $ 113,662
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 15,053 $ 21,078
Billings in excess of contract costs
incurred 12,522 13,551
Deferred revenue 6,434 6,036
Current portion of notes payable 440 2,103
--------- ---------
Total Current Liabilities 34,449 42,768
Notes payable 3,565 15,555
Convertible subordinated notes payable 39,071 -
Deferred tax liabilities 1,709 1,592
Other 619 820
--------- ---------
Total Liabilities 79,413 60,735
Commitments and Contingencies
Shareholders' Equity 52,834 52,927
--------- ---------
Total Liabilities and Shareholders'
Equity $ 132,247 $ 113,662
========= =========
COMPUDYNE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
--------- --------- --------- ---------
(in thousands, except per share data)
Revenues $ 33,360 $ 53,136 $ 110,170 $ 147,441
Cost of sales 24,552 41,125 80,017 111,860
--------- --------- --------- ---------
Gross profit 8,808 12,011 30,153 35,581
Selling, general and
administrative expenses 9,288 8,471 26,119 24,125
Research and development 2,051 1,683 5,680 5,596
--------- --------- --------- ---------
Income (loss) from
operations (2,531) 1,857 (1,646) 5,860
--------- --------- --------- ---------
Total other expense 540 221 1,783 925
--------- --------- --------- ---------
Income (loss) before
income taxes (3,071) 1,636 (3,429) 4,935
Income taxes expense
(benefit) (1,221) 654 (1,362) 1,974
--------- --------- --------- ---------
Net income (loss) $ (1,850) $ 982 $ (2,067) $ 2,961
========= ========= ========= =========
Earnings (loss) per share:
--------------------------
Basic earnings (loss) per
common share $ (.23) $ .12 $ (.26) $ .38
========= ========= ========= =========
Weighted average number of
common shares outstanding 8,171 7,923 8,085 7,881
========= ========= ========= =========
Diluted earnings (loss)
per common share $ (.23) $ .12 $ (.26) $ .36
========= ========= ========= =========
Weighted average number of
common shares and
equivalents 8,171 8,199 8,085 8,140
========= ========= ========= =========
COMPUDYNE CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL DATA
(in thousands, unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
---------- --------- --------- ---------
Revenues
Public Safety and Justice $ 11,771 $ 16,194 $ 36,930 $ 38,733
Institutional Security
Systems 11,783 26,357 41,794 75,497
Attack Protection 6,510 6,036 20,204 20,912
Federal Security Systems 3,296 4,549 11,242 12,299
---------- --------- --------- ---------
$ 33,360 $ 53,136 $110,170 $147,441
========== ========= ========= =========
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
---------- --------- --------- ---------
Pre-tax income (loss)
Public Safety and Justice $ 370 $ 790 $ 1,765 $ 1,340
Institutional Security
Systems (806) 1,216 (683) 2,788
Attack Protection (2,101) (663) (3,236) (153)
Federal Security Systems 137 223 551 726
Corporate (671) 70 (1,826) 234
---------- --------- --------- ---------
$ (3,071) $ 1,636 $ (3,429) $ 4,935
========== ========= ========= =========
September 30, December 31,
2004 2003
------------- ------------
Backlog
Public Safety and Justice $ 50,215 $ 63,727
Institutional Security
Systems 59,524 57,258
Attack Protection 19,351 10,043
Federal Security Systems 9,018 8,326
------------- ------------
$ 138,108 $ 139,354
============= ============
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES(1)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
---------- --------- --------- ---------
Net income (loss) $ (1,850) $ 982 $ (2,067) $ 2,961
Interest expense 849 366 2,443 1,079
Tax expense (1,221) 654 (1,362) 1,974
Depreciation and amortization 732 640 2,099 2,016
---------- --------- --------- ---------
EBITDA $ (1,490) $ 2,642 $ 1,113 $ 8,030
========== ========= ========= =========
(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.
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