CompuDyne Corporation (Nasdaq:CDCY), an industry leader in
sophisticated security products, integration and technology for the
public security markets, today reported a net loss of $0.28 per
share for the first quarter of 2007, compared to a profit of $0.10
per share reported in the first quarter of 2006. Revenues in the
first quarter of 2007 were $31.1 million, down from $40.5 million
in the first quarter of 2006. EBITDAS for the first quarter of 2007
was negative $0.4 million, down from a positive $2.5 million in the
first quarter of 2006. First quarter 2007 results were negatively
impacted by low backlogs entering 2007, and a delay in the award of
new projects, resulting in flat backlogs rather than the increasing
backlogs that had been anticipated. While results in the first
quarter were somewhat worse than we had anticipated, we continue to
believe that these are temporal impacts and that high levels of new
business activity should eventually translate into increasing
backlogs and increasing revenues in the coming quarters.
Institutional Security Systems (�ISS�) revenue was $11.2 million in
the first quarter of 2007 compared with $13.4 million in the first
quarter of 2006. Pre-tax loss was $1.3 million in the first quarter
of 2007 compared to a $0.1 million pre-tax income in the first
quarter of 2006. ISS revenues and earnings were negatively impacted
by low backlogs, and delays in planned project starts already in
backlog. Recent increases in new business activity, as evidenced by
strong award levels in March, and a significant amount of business
that is pending formal award, suggests that backlogs will improve
throughout the year. Pipeline activity is the strongest it has ever
been, reflecting strong latent demand for additional jail and
prison capacity at all levels of the market � local, state and
federal. Especially encouraging is the increasing acceptance of
ISS� �MaxWall� modular steel jail cell product, which has the
potential of significantly expanding ISS� market. ISS backlog
declined by $0.8 million to $63.9 million during the quarter.
Attack Protection (�AP�) revenue was $4.4 million in the first
quarter of 2007, down significantly from $11.7 million in the first
quarter of 2006. Pre-tax loss was $0.9 million in the first quarter
of 2007, compared to pre-tax income of $1.2 million in the first
quarter of 2006. AP�s Norshield business, which produces bullet,
blast and attack resistant doors and windows and vehicle barrier
systems, completed a very large embassy order in 2006. Norshield
continues to work to replace this volume, however backlogs declined
sharply during 2006 while working on this project and have only
recently started to recover, presaging continuing low volumes in
this business in the coming months of 2007. The delayed receipt of
a substantial change order request materially impacted results.
Norshield has undergone significant �right-sizing� efforts during
2007 resulting in cost reductions of $1.2 million on an annual
basis, and has adopted a strategy of offering to install its
products for customers rather than just sell the products. This new
strategy, combined with a closer integration with ISS, is expected
to expand Norshield�s market potential while improving its
efficiency. AP�s Fiber SenSys (�FSI�) brand business, which is one
of the world�s largest supplier of fiber optic based perimeter
alarm systems, almost doubled its revenues in the first quarter of
2007 compared to the first quarter of 2006. FSI is expected to
continue to improve revenues throughout the year and produce
significant earnings in 2007. AP backlogs increased by $3.6 million
to $9.3 million during the quarter, reflecting some success in
generating new business both in the traditional embassy market and
in other markets where high levels of protection are required.
Public Safety & Justice (�PS&J�) revenues declined to $10.6
million in the first quarter of 2007 compared to $11.8 million in
the first quarter of 2006. PS&J had a pre-tax loss of $0.2
million in the first quarter of 2007 compared to break-even in the
first quarter of 2006. Spending by PS&J�s Tiburon business on
its �Next Generation� suite of .NET based software products, which
is being fully expensed, continues to impact current results and
will impact future results. During the first quarter PS&J very
successfully took live one of the largest installations they have
ever undertaken. PS&J backlogs declined slightly during the
quarter, from $39.1 million at the beginning of the quarter to
$37.7 million at the end of the quarter. Integrated Electronic
Systems (�IES�) revenue was $5.0 million in the first quarter of
2007 compared to $3.6 million in the first quarter of 2006 and
resulted in a doubling of pre-tax income to $0.4 million for the
first quarter of 2007 compared to $0.2 million for the first
quarter of 2006. We have been advised that the Bureau of Engraving
and Printing (�BEP�) will put its contract out to bid again as a
result of internal reorganizations. Results of this planned re-bid
are expected to become known late this year. We are optimistic that
it will be re-awarded to IES due to our outstanding performance.
IES� Quanta subsidiary continues to perform this BEP contract. IES�
newly combined Signami DCS business, made up of our Signami
acquisition and our DCS signals intelligence business, contributed
$1.8 million to IES� first quarter 2007 revenues. Signami DCS
continues to spend heavily on the refinement of its existing
signals intelligence product and on the new integrated platform of
Signami and DCS technologies � with the introduction of the new
product later this year we expect both revenues and margins in this
business to improve substantially. In the first quarter of 2007,
corporate had a pre-tax loss of $0.3 million, compared to a pre-tax
loss of $0.9 million in the first quarter of 2006. This included
$0.4 million of net interest cost in the first quarter of 2007,
down from $0.5 million in the first quarter of 2006. Corporate
expense was reduced despite incurring $0.2 million on legal matters
and $0.2 million on Audit/SOX (down from $0.4 million in the first
quarter of 2006) related costs in the first quarter of 2007. We
ended the quarter with cash and marketable securities of $24.2
million, working capital of $29.7 million, and only $1.5 million of
debt maturities prior to 2011. Company-wide backlogs were
essentially flat during the first quarter of 2007, ending the
quarter at $117.1 million, down $0.2 million. This remains an
unacceptably low level, however pipeline, 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) � March 31,
December 31, ASSETS � 2007� � 2006� (dollars in thousands) Current
Assets Cash and cash equivalents $ 10,694� $ 7,740� Marketable
securities 6,001� 8,687� Accounts receivable, net 25,584� 25,534�
Contract costs in excess of billings 12,231� 12,031� Inventories
6,152� 5,577� Prepaid expenses and other � 2,031� � 4,595� Total
Current Assets 62,693� 64,164� � Cash equivalents pledged 7,500�
7,500� Property, plant and equipment, net 9,281� 9,630� Goodwill
13,275� 13,274� Other intangible assets, net 7,282� 7,428� Other �
1,841� � 1,954� Total Assets $ 101,872� $ 103,950� � LIABILITIES
AND SHAREHOLDERS� EQUITY � Current Liabilities Accounts payable and
accrued liabilities $ 12,933� $ 14,155� Billings in excess of
contract costs incurred 9,444� 9,221� Deferred revenue 10,145�
9,305� Current portion of notes payable � 440� � 440� Total Current
Liabilities 32,962� 33,121� � Notes payable 2,685� 2,685�
Convertible subordinated notes payable, net 39,539� 39,492�
Deferred tax liabilities 1,425� 1,425� Other � 392� � 388� Total
Liabilities � 77,003� � 77,111� � Commitments and Contingencies �
Shareholders� Equity � 24,869� � 26,839� Total Liabilities and
Shareholders� Equity $ 101,872� $ 103,950� COMPUDYNE CORPORATION
AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
� Three Months Ended March 31, � 2007� � 2006� (in thousands,
except per share data) � Revenues $ 31,132� $ 40,470� � Cost of
sales � 21,354� � 27,961� � Gross profit 9,778� 12,509� � Selling,
general and administrative expenses 9,299� 9,736� Research and
development � 2,371� � 1,767� (Loss) income from operations (1,892)
1,006� � Total other expense, net � 442� � 383� � (Loss) income
before taxes on income (2,334) 623� Income tax benefit � -� � (184)
Net (loss) income $ (2,334) $ 807� � Earnings (loss) per share:
Basic (loss) income per common share $ (.28) $ .10� � Weighted
average number of common shares outstanding � 8,436� � 8,119� �
Diluted (loss) income per common share $ (.28) $ .10� � Weighted
average number of common shares and equivalents � 8,436� � 8,159�
COMPUDYNE CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL DATA
(in thousands, unaudited) � Three Months Ended March 31, 2007�
2006� Revenues Institutional Security Systems $ 11,155� $ 13,355�
Attack Protection 4,437� 11,684� Public Safety and Justice 10,583�
11,844� Integrated Electronic Systems � 4,957� � 3,587� $ 31,132� $
40,470� � � Three Months Ended March 31, 2007� 2006� Gross Profit
Institutional Security Systems $ 986� $ 2,173� Attack Protection
967� 3,292� Public Safety and Justice 6,517� 6,538� Integrated
Electronic Systems � 1,308� � 506� $ 9,778� $ 12,509� � � Three
Months Ended March 31, 2007� 2006� Pre-tax income (loss)
Institutional Security Systems $ (1,275) $ 136� Attack Protection
(926) 1,205� Public Safety and Justice (200) 7� Integrated
Electronic Systems 413� 184� Corporate � (346) � (909) $ (2,334) $
623� March 31, 2007 December 31, 2006 March 31, 2006 Backlog
Institutional Security Systems $ 63,868� $ 64,687� $ 57,030� Attack
Protection 9,299� 5,686� 20,961� Public Safety and Justice 37,707�
39,067� 43,874� Integrated Electronic Systems � 6,208� � 7,902� �
6,590� $ 117,082� $ 117,342� $ 128,455� RECONCILIATION OF NON-GAAP
FINANCIAL MEASURES EBITDAS (in thousands, except per share data;
unaudited) � Three Months Ended March 31, 2007� 2006� � Net loss $
(2,334) $ 807� Interest expense 792� 815� Income tax (benefit) -�
(184) Depreciation and amortization 841� 795� Non-cash stock option
expense � 263� � 255� EBITDA adjusted for non-cash stock option
expense (EBITDAS) $ (438) $ 2,488� � 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. 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.
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