Compudyne (NASDAQ:CDCY)
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From Jun 2019 to Jun 2024
CompuDyne Corporation (NASDAQ:CDCY), an industry leader in sophisticated
security products, integration and technology for the public security
markets, reported a net loss of $16.4 million, or $1.95 per share, on
revenues of $33.9 million, for the fourth quarter of 2006. This compared
to a net loss of $456 thousand, or $0.06 per share, on revenues of $40.7
million, for the fourth quarter of 2005. The full year 2006 net loss was
$15.0 million, or $1.82 per share, on revenues of $147.5 million. This
compares to a net loss of $8.7 million or $1.07 per share, on revenues
of $141.6 million, for the full year 2005. The 2006 loss was driven by a
$16.1 million pre-tax non-cash write-down of goodwill and intangible
assets related to our Public Safety & Justice business. The fourth
quarter net loss before the write-down was $0.9 million, the full year
net income before the impact of the goodwill and intangible write-down
was $0.5 million. Backlogs at December 31, 2006 were $117.3 million,
down 20.8% from $148.1 million at December 31, 2005. Backlogs were
negatively affected by the completion of a major project in our Attack
Protection segment during 2006, and continuing delays in formalizing the
expected awards of a number of projects in our Institutional Security
Systems segment. EBITDAS for the full year 2006 was $7.3 million versus
($2.4) million for the full year 2005.
In addition to the impact of the non-cash goodwill write-down, 2006
results were depressed by several factors many of which are temporal. In
addition, revenue generation remains disappointing due to a decline in
backlogs despite an increase in pre-bid project activity across all of
our businesses. On a positive note, audit and SOX related costs declined
to a more normal level of $0.7 million in 2006 compared to $3.6 million
in 2005.
Institutional Security Systems (“ISS”)
had a pre-tax loss of $0.7 million in the fourth quarter of 2006 and a
pre-tax loss of $1.3 million for the full year of 2006. Revenues in 2006
were $10.6 million for the fourth quarter and $48.3 million for the
year. Revenues decreased $7.0 million or 40% for the fourth quarter of
2006 compared to the fourth quarter of 2005 and $12.4 million or 20% for
the year 2006 as compared to the year 2005. The 2005 fourth quarter
pre-tax profit was $0.1 million and the full year 2005 pre-tax profit
was $0.6 million. ISS backlogs have improved modestly in 2006, rising
from $58.1 million at the beginning of the year to $64.7 million at the
end of 2006. While actual awards early in 2007 have been quite low, ISS
has in excess of $20 million of projects that are expected to be
formally awarded in the next few months. Prospective project activity
remains strong coincident with the improving fiscal condition of our
city, county, and state customers. In addition, the underlying
requirement for additional correctional facilities continues to
increase, exacerbated by several years of low building activity, and
violent crime rates that have begun increasing again in recent years.
ISS has aggressively reduced its cost structure and streamlined its
operations and expects to do very well once backlogs fully recover and
projects progress to our stage of participation.
Attack Protection (“AP”)
had a pre-tax profit of $0.5 million in the fourth quarter of 2006 and a
pre-tax profit of $4.7 million for the full year 2006 on revenues of
$8.4 million in the fourth quarter of 2006 and $40.2 million for the
full year 2006. Results in 2006 reflected a sharp recovery from a
pre-tax loss of $0.2 million in the fourth quarter of 2005 and a pre-tax
loss of $2.3 million for the 2005 year on revenues of $8.2 million for
the fourth quarter of 2005 and $27.0 million for the full year 2005. Our
Attack Protection segment is made up of two businesses: 1) Norshield,
which markets bullet, blast and attack protection products as well as
vehicle barrier systems; and 2) Fiber SenSys (“FSI”),
a world premier manufacturer of fiber optic based perimeter alarm
systems. Norshield completed the largest project, a major new embassy,
in its history in 2006. This project contributed significantly to AP
results in 2006 but represented an unusually large procurement that will
not be repeated in 2007. Norshield backlogs have declined sharply since
the completion of this project, ending the year at only $5.7 million,
down from $28.8 million at the beginning of the year, and 2007 revenues
are expected to be well under 2006 levels despite an active level of
quoting. Norshield had revenues of $31.5 million and pre-tax income of
$3.4 million in 2006 compared to revenues of $20.6 million and a pre-tax
loss of $2.7 million in 2005. FSI had a good year in 2006 with revenues
of $8.7 million and pre-tax profit of $1.3 million compared to revenues
of $6.4 million and pre-tax profit of $0.3 million in 2005. Revenues at
FSI were depressed in the first half of 2006 awaiting results of various
Air Force tests, but picked up sharply in the second half, especially
the fourth quarter. New product introductions are expected to improve FSI’s
revenues in 2007.
Public Safety & Justice (“PS&J”),
our Tiburon public safety software subsidiary, had a pre-tax loss of
$16.8 million in the fourth quarter of 2006 and a pre-tax loss of $18.0
million for the 2006 year on revenues of $11.7 million for the fourth
quarter of 2006 and $45.0 million for the full year 2006. PS&J’s
loss was driven by a non-cash $16.1 million write-down of acquisition
goodwill and intangible assets. Prior to the write-down PS&J’s
results reflected an improvement from the $2.9 million pre-tax loss on
$43.9 million of revenue for the full year of 2005 despite a $0.4
million write-off related to a contract dispute in the fourth quarter of
2006. During 2006 we changed senior management at PS&J. Our new
management has made important strides in regaining Tiburon’s
traditional market leading position in the public safety software
business through a series of steps including: 1) restructuring senior
management; 2) reducing the expense structure by streamlining the
management, flattening the organizational structure, and improving
efficiencies; 3) accelerating and internalizing the critically important
and very exciting new “Next Generation”
software suite development which is based on Service Oriented
Architecture and the Microsoft “.NET”
platform; 4) re-invigorating the sales and marketing effort; and 5)
re-dedicating the company to outstanding customer service, a hallmark of
Tiburon’s corporate strategy since its
founding in 1980. Spending on the Next Generation software suite has
been accelerated and will continue to impact 2007 results. While PS&J
backlog declined in 2006 from $53.7 million at the beginning of the year
to $39.0 million at the end of the year, presaging lower revenues early
in 2007, bidding activity is strong and Tiburon is competing for several
very large projects which are expected to be awarded by mid 2007.
Integrated Electronic Systems (“IES”)
had pre-tax profit of $0.3 million in the fourth quarter of 2006 and
pre-tax profit of $1.0 million for the 2006 year on revenues of $3.2
million for the fourth quarter of 2006 and $13.9 million for the full
year 2006. This compared to pre-tax profit of $0.3 million in the fourth
quarter of 2005 and $0.4 million for the full year 2005 on revenues of
$3.3 million for the fourth quarter of 2005 and full year 2005 revenues
of $10.1 million. Revenues and earnings benefited from many projects
including the large Bureau of Engraving and Printing (“BEP”)
contract. While the latter contract has remained under protest and is
expected to be re-bid, we continue to perform to the very highest
standards under that contract and are optimistic that we will prevail in
the re-bid, which is expected to be concluded late in 2007. IES’
backlog ended 2006 at $7.9 million, up from $7.5 million at the
beginning of 2006. Only $0.3 million of the BEP contract is included in
this backlog.
Corporate expenses declined sharply in 2006, mainly due to the reduction
in audit and Sarbanes Oxley related costs, but also due to successful
efforts to reduce corporate level expenditures. Corporate expense in the
fourth quarter of 2006 was $0.7 million, down from $1.1 million in the
fourth quarter of 2005, Corporate expense was $3.6 million for the full
year of 2006, down from $6.6 million for the full year of 2005. Net
interest expense in the fourth quarter of 2006 was $0.4 million vs $0.5
million in the fourth quarter of 2005, and was $1.9 million for the full
year of 2006 vs $2.1 million for the full year of 2005.
The Company’s Balance Sheet remained very
strong at the end of 2006. Cash and marketable securities increased by
$5.6 million during 2006 to $23.9 million at the end of the year. Cash
benefited from the $4.5 million (before $1.7 million of expenses and
selling shareholder participation) settlement with Friedman Billings &
Ramsay related to the 2001 PIPE offering ($1.3 million, net was received
at December 31, 2006 and $1.5 million, net was received in January,
2007). This settlement did not impact net income since it was credited
directly to Shareholders’ Equity. Tangible
Net Worth increased by $4.8 million during the year and Working Capital
totaled $31.0 million at December 31, 2006. Other than the short-term
portion of the Company’s Industrial Revenue
Bonds, which amounted to $0.4 million at December 31, 2006, the Company
has no outstanding short-term debt, has only $2.7 million in the
long-term portion of its Industrial Revenue Bonds, and its’
Convertible Subordinated Notes have no principal due until 2011.
With continuing strong pre-bid activity in most of our businesses, and a
solid new management in place at PS&J, we are quite optimistic about the
intermediate to longer term outlook. However operating results will
remain depressed until we are able to secure some of the significant
potential projects we are pursuing, and, assuming we win these projects,
until we get past the normal extended start-up phase of the projects,
when our revenues begin to be generated in earnest.
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, 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)
ASSETS
December 31,2006
December 31,2005
(dollars in thousands)
Current Assets
Cash and cash equivalents
$
7,740
$
6,938
Marketable securities
8,687
11,429
Accounts receivable, net
25,534
39,625
Contract costs in excess of billings
12,031
13,764
Inventories
5,577
6,195
Prepaid expenses and other
4,595
2,809
Total Current Assets
64,164
80,760
Cash equivalents pledged
7,500
-
Property, plant and equipment, net
9,630
9,962
Goodwill
13,274
26,846
Other intangible assets, net
7,428
8,221
Other
1,954
903
Total Assets
$
103,950
$
126,692
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable and accrued liabilities
$
14,155
$
23,030
Billings in excess of contract costs incurred
9,221
13,847
Deferred revenue
9,305
8,094
Current portion of notes payable
440
440
Total Current Liabilities
33,121
45,411
Notes payable
2,685
3,125
Convertible subordinated notes payable, net
39,492
39,305
Deferred tax liabilities
1,425
2,060
Other
388
369
Total Liabilities
77,111
90,270
Commitments and Contingencies
Shareholders’ Equity
26,839
36,422
Total Liabilities and Shareholders’ Equity
$
103,950
$
126,692
COMPUDYNE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended
December 31,
Twelve Months Ended
December 31,
2006
2005
2006
2005
(in thousands, except per share data)
Revenues
$
33,902
$
40,741
$
147,462
$
141,650
Cost of sales
22,498
29,529
99,595
99,111
Gross profit
11,404
11,212
47,867
42,539
Selling, general & administrative expenses
10,008
9,674
38,261
40,567
Research and development
1,824
1,183
7,294
8,685
Impairment of goodwill and other intangibles
16,141
-
16,141
-
(Loss) income from operations
(16,569)
355
(13,829)
(6,713)
Total other expense, net
426
526
1,896
2,193
Loss before income taxes
(16,995)
(171)
(15,725)
(8,906)
Income tax (benefit) expense
(563)
285
(732)
(215)
Net loss
$
(16,432)
$
(456)
$
(14,993)
$
(8,691)
Earnings (loss) per share:
Basic loss per common share
$
(1.95)
$
(.06)
$
(1.82)
$
(1.07)
Weighted average number of common shares outstanding
8,430
8,119
8,256
8,129
Diluted loss per common share
$
(1.95)
$
(.06)
$
(1.82)
$
(1.07)
Weighted average number of common shares and equivalents
8,430
8,119
8,256
8,129
COMPUDYNE CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL DATA
(in thousands, unaudited)
Three Months EndedDecember 31,
Twelve Months EndedDecember 31,
2006
2005
2006
2005
Revenues
Institutional Security Systems
$
10,599
$
17,644
$
48,265
$
60,652
Attack Protection
8,402
8,162
40,241
27,017
Public Safety and Justice
11,694
11,630
45,062
43,871
Integrated Electronic Systems
3,207
3,305
13,894
10,110
$
33,902
$
40,741
$
147,462
$
141,650
Three Months EndedDecember 31,
Twelve Months EndedDecember 31,
2006
2005
2006
2005
Gross Profit
Institutional Security Systems
$
1,530
$
2,405
$
7,336
$
9,896
Attack Protection
2,651
2,016
13,081
6,105
Public Safety and Justice
6,246
6,261
24,464
24,913
Integrated Electronic Systems
977
530
2,986
1,625
$
11,404
$
11,212
$
47,867
$
42,539
Three Months EndedDecember 31,
Twelve Months EndedDecember 31,
2006
2005
2006
2005
Pre-tax income (loss)
Institutional Security Systems
$
(667)
$
101
$
(1,277)
$
629
Attack Protection
463
(192)
4,672
(2,333)
Public Safety and Justice
(16,817)
342
(17,983)
(2,928)
Integrated Electronic Systems
263
251
985
431
Corporate
(237)
(673)
(2,122)
(4,705)
$
(16,995)
$
(171)
$
(15,725)
$
(8,906)
December 31, 2006
December 31, 2005
Backlog
Institutional Security Systems
$
64,687
$
58,128
Attack Protection
5,686
28,802
Public Safety and Justice
39,067
53,705
Integrated Electronic Systems
7,902
7,503
$
117,342
$
148,138
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
EBITDAS
(in thousands, except per share data; unaudited)
Three Months EndedDecember 31,
Twelve Months EndedDecember 31,
2006
2005
2006
2005
Net loss
$
(16,432)
$
(456)
$
(14,993)
$
(8,691)
Interest expense
789
748
3,268
3,065
Income tax expense (benefit)
(563)
285
(732)
(215)
Depreciation and amortization
828
797
3,167
3,393
Non-cash stock option expense
146
-
1,113
-
Impairment of goodwill
14,401
-
14,401
-
Impairment of other intangibles, net of tax
1,105
-
1,105
-
EBITDA adjusted for non-cash stock option expense (EBITDAS)
$
274
$
1,374
$
7,329
$
(2,448)
Income (Loss) Before Non-Cash Stock Option Expense and Impairment
Charges
Three Months EndedDecember 31,
Twelve Months EndedDecember 31,
2006
2005
2006
2005
Net loss
$
(16,432)
$
(456)
$
(14,993)
$
(8,691)
Non-cash stock option expense
146
-
1,113
-
Net loss before non-cash stock option expense
(16,286)
(456)
(13,880)
(8,691)
Impairment of goodwill
14,401
-
14,401
-
Impairment of other intangibles, net
1,105
-
1,105
-
(Loss) income before non-cash stock option expense and impairments
$
(780)
$
(456)
$
1,626
$
(8,691)
Diluted loss per common share before non-cash stock option expense
$
(1.93)
$
(.06)
$
(1.68)
$
(1.07)
Diluted (loss) income per common share before non-cash stock
option expense and impairments
$
(.09)
$
-
$
.20
$
-
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 and impairment charges
(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 and impairment charges to allow it
to compare its results of operations between years. Management believes
that EBITDAS and Income (Loss) Before Non-Cash Stock Option Expense and
Impairment Charges 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 (loss) per share excluding stock option expense and
impairment charges is helpful to investors who are trying to compare
current results with prior periods.