FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington,D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly period ended March 31, 1996
.............................
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
.............................
Commission File Number 1-4245
.............................
CompuDyne Corporation
....................................................
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1408659
.............................. ................
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
120 Union Street, Willimantic, Connecticut 06226
................................................
(Address of principal executive offices)
(860) 456-4187
..............................................
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X NO
.... ....
As of May 10, 1996, a total of 1,807,832 shares of Common Stock, $.75 par
value, were outstanding.
COMPUDYNE CORPORATION AND SUBSIDIARIES
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 1996
(unaudited) and December 31, 1995 3
Consolidated Statements of Operations - Three
Months Ended March 31, 1996 and 1995 (unaudited) 4
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1996 and 1995 (unaudited) 5
Notes to Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial
Condition 7-8
Part II. Other Information 9
Item 6. Exhibits and Reports on Form 8-K
Signature 10
Index to Exhibits 11
Computation of Net Income Per Share 12
.........................................................................
COMPUDYNE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)
March 31, December 31,
1996 1995
ASSETS
Current Assets:
Cash $ - $ -
Accounts receivable, net 2,435 2,122
Inventories:
Finished Goods 139 144
Work in process 432 473
Raw materials and supplies 403 405
........ .......
Total inventories 974 1,022
........ .......
Prepaid expenses and other current assets 86 97
........ .......
Total Current Assets 3,495 3,241
........ .......
Non-current receivables, related parties 60 60
........ .......
Property, plant and equipment, at cost 1,284 1,279
Less: accumulated depreciation
and amortization 711 691
........ .......
Net property, plant and equipment 573 588
........ .......
Goodwill & other intangibles, net
of accumulated amortization 1,116 1,127
........ .......
Other assets, net 17 17
........ .......
Total Assets $ 5,261 $ 5,033
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,492 $ 1,515
Bank line payable 328 259
Accrued pension costs 40 40
Other accrued expenses 800 641
Current portion of deferred compensation 61 61
Current portion of notes payable
related parties 20 20
........ .......
Total Current Liabilities $ 2,741 $ 2,536
........ .......
Notes payable, related parties $ 470 $ 470
Long term pension liability 370 370
Deferred compensation, net of
current portion 50 59
Deferred taxes and other liabilities 223 231
........ .......
Total Liabilities $ 3,854 $ 3,666
........ .......
SHAREHOLDERS' EQUITY:
Convertible Preference stock,
Series D, 1,260,460 shares 1,891 1,891
issued and outstanding as of March 31, 1996
Common stock, par value $.75 per
share 10,000,000 shares 1,355 1,355
authorized; 1,807,832 shares
issued and outstanding
Other capital 7,973 7,973
Receivable from management (91) (91)
Deficit (9,721) (9,761)
...... ......
Total Shareholders' Equity 1,407 1,367
...... ......
Total Liabilities and Shareholders' Equity $ 5,261 $ 5,033
======== =======
See Notes to Consolidated Financial Statements.
COMPUDYNE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
(Unaudited)
Three Months Ended
March 31,
1996 1995
......................
Net sales $ 3,038 $ 2,046
Cost of sales 2,572 1,772
......... .........
Gross margin 466 274
Selling, general and administrative expenses 351 240
Research and Development 68 5
......... .........
Operating income (loss) 47 29
......... .........
Other (income) expense
Interest (income) expense 18 7
Other (income) expense (3) (7)
......... .........
Total other (income) expense, net 15 -
......... .........
Income (loss) from continuing operations
before income tax provision 32 2
Income tax provision (benefit) (8) -
......... .........
Income (loss) from continuing operations 40 29
(Loss) from discontinued operations - (135)
......... .........
Net income (loss) $ 40 $ (106)
========= =========
Weighted average common equivalent shares 3,096 1,603
========= =========
Income per common and dilutive common
equivalent share:
Continuing operations .01 .02
Discontinued operations - (.08)
......... .........
Net income (loss) per share $ .01 $ (.06)
========= =========
See Notes to Consolidated Financial Statements
COMPUDYNE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Three Months Ended
March 31,
1996 1995
...................
Cash flows provided by (used for)
operating activities:
Income (loss) from continuing operations $ 40 $ 29
Adjustments to reconcile net income
to net cash from operations:
Depreciation 20 -
Amortization 11 -
(Increase) decrease in accounts receivable (313) 394
(Decrease) increase in prepaid expenses 11 (12)
(Decrease) increase in inventories 48 (87)
Increase (decrease) in accounts payable (23) 45
Increase (decrease in accrued liabilities 142 (105)
....... ........
Cash flows provided by (used in)
continuing operations (64) 264
....... ........
Income (loss) from discontinued operations - (135)
(Increase) decrease in net current assets - 98
....... ........
Cash flows provided by (used in)
discontinued operations - (37)
....... ........
Net cash flows provided by (used in) operations (64) 227
....... ........
Cash flows from investing activities:
Additions to property, plant and equipment (5) (3)
....... ........
Net cash flows used for investing activities (5) (3)
....... ........
Cash flows (used for) financing activities:
Increase (decrease) in short term debt 69 (92)
Net cash (used for) provided by
financing activities 69 (92)
....... ........
Net increase (decrease) in cash - 132
Cash and cash equivalents at beginning of period - 176
....... ........
Cash and cash equivalents at end of period $ - $ 308
======= ========
Supplemental Schedule of Cash Flow Information:
Cash paid during the period for:
Interest $ 6 $ 7
======= ========
See Notes to Consolidated Financial Statements.
COMPUDYNE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
.........................
The accompanying unaudited consolidated financial statements of CompuDyne
Corporation and subsidiaries (the "Company"), have been prepared pursuant
to the rules and regulations of the Securities and Exchange Commission.
Certain information and note disclosures normally included in the annual
financial statements, prepared in accordance with generally accepted
accounting principles, have been condensed or omitted pursuant to those
rules and regulations, although the Company believes that the disclosures
made are adequate to make the information presented not misleading.
In the opinion of management, the accompanying unaudited consolidated
financial statements reflect all necessary adjustments and
reclassifications (all of which are of a normal, recurring nature) that
are necessary for fair presentation for the periods presented. It is
suggested that these consolidated financial statements be read in
conjunction with the consolidated financial statements and the notes
thereto included in the Company's latest annual report to the Securities
and Exchange Commission on Form 10-K for the year ended December 31,
1995.
2. ACCOUNTS RECEIVABLE
.......................
Accounts receivable consist of the following:
($ in thousands) March 31, December 31,
1996 1995
U.S. Government Contracts:
Billed $ 1,489 $ 974
Unbilled 379 701
.......... .........
1,868 1,675
Commercial 603 483
.......... .........
Total Accounts Receivable $ 2,471 $ 2,158
.......... .........
Less Allowance for Doubtful Accounts (36) (36)
.......... .........
Net Accounts Receivable $ 2,435 $ 2,122
========== =========
3. COMMON STOCK AND COMMON STOCK OPTIONS
.........................................
On February 2, 1996 the Compensation and Stock Option Committee granted
options to purchase 16,290 shares of CompuDyne Common Stock to key
employees of CompuDyne's subsidiary, MicroAssembly Systems, Inc.
("MicroAssembly"), at a price of $1.81 per share (100% of the fair market
value of such shares at the date of grant) and in accordance with the
terms and conditions of the 1986 Incentive Compensation Plan.
4.DISCONTINUED OPERATIONS
.........................
On August 21, 1995, Quanta Systems, a wholly owned subsidiary of the
Company, transferred all of the assets and liabilities of Quanta's
Suntec division to Suntec Service Corporation ("Suntec"), a newly-formed
corporation, in return for (i) all of Suntec's issued and outstanding
common stock and (ii) Suntec's agreement to pay to Quanta a royalty of 2%
of Suntec's net sales and other revenues for thirty (30) years from the
date of the closing. Quanta then sold all of Suntec's Common Stock to
Norman Silberdick, who resigned on that date as CompuDyne's Chairman,
President, Chief Executive Officer and Director.
As a result of the disposal of Suntec in August of 1995, the consolidated
statements of operations for the first quarter ended March 31, 1995 have
been restated to reflect Suntec as a discontinued operation.
COMPUDYNE CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
.....................
CompuDyne had a profit of $40 thousand for the 1996 first quarter
compared with a profit of $29 thousand from continuing operations for the
1995 first quarter. The profit in the 1996 first quarter was primarily
due to the Quanta Systems operations which had net income of $85
thousand. Data Control had a profit of $4 thousand after $68 thousand of
Research and Development expenditures while MicroAssembly had a loss of
$30 thousand after $30 thousand of non-cash purchase accounting charges.
Unallocated corporate charges were $12 thousand. In the first quarter of
1995 higher profits at Quanta Systems of $117 thousand were offset by a
$52 thousand loss at Data Control. At the end of the 1996 first quarter
the Company had a backlog of $6.48 million of which $0.51 million was at
MicroAssembly.
Net Sales from continuing operations in the first quarter of 1996
increased 48% to $3.0 million from $2.0 million for the 1995 first
quarter. All operations contributed to the increase. Quanta Systems was
up 19%, to $2.316 million due to revenue from new contracts awarded in
the last quarter of 1995. Data Control was up 256% to $377 thousand due
to increased shipments resulting from completion of major research and
development efforts. MicroAssembly, at $345 thousand, was fully
incremental since it was acquired in August of 1995. Data Control's
increase was attributable primarily to increased volume.
Gross margin from continuing operations for the first quarter of 1996
increased $192 thousand (70%) to $466 thousand from $274 thousand for the
first quarter of 1995. Quanta Systems' gross margin of $281 thousand was
up $3 thousand while Data Control's gross margin of $135 thousand
compared to a negative $4 thousand, and MicroAssembly was fully
incremental at $50 thousand. Quanta Systems continues to see a narrowing
of margins from its traditional Defense related business.
Selling, general and administrative expense from continuing operations
increased $86 thousand to $291 thousand, due almost entirely to
MicroAssembly being included in the first quarter of 1996 at $81
thousand.
Research and development expenditures were $68 thousand, up from $5
thousand in the first quarter of 1995. Expenditures in the first quarter
of 1996 were entirely in Data Control and were largely related to the
Satellite Test Modem and the Automatic Power Controller.
CompuDyne's interest expense for the 1996 first quarter increased by $12
thousand to $19 thousand compared with $7 thousand in the first quarter
of 1995. The increase was attributable to increased notes payable and
bank borrowings.
The near term outlook is very positive. Quanta Systems has a strong
backlog which will assure improved results over the next two quarters.
While margins continue to narrow in Quanta Systems' business, increased
volume is expected to overcome this effect. The sharp increase in demand
at Quanta Systems has strained working capital and although the Company's
bank line was increased to $750 thousand during the first quarter, a
further increase is being sought. Data Control continues to work off its
strong year-end backlog. However, it is now critical that the Company
receive follow-on orders from key customers who have purchased their
evaluation units of the Satellite Test Modem. MicroAssembly is seeing
some upturn in both its existing customer base and its list of
prospective customers who have already seen demonstrations of the unique
Stick-Screw system. The Company continues to actively seek acquisitions
in the physical security industry, and is in active discussions with one
company.
LIQUIDITY AND CAPITAL RESOURCES
...............................
The Company's principal source of cash is from operating activities and
bank borrowings. The Company's primary requirement for working capital
is to carry billed and unbilled receivables, a majority of which are due
under prime contracts with the U.S. Government, or subcontracts
thereunder.
In February 1996, the company increased its secured line of credit with
the Asian American Bank and Trust Company of Boston, Massachusetts from
$500 thousand to $750 thousand. Due to the anticipated higher volume of
business in the near future, the Company is currently working with the
Bank to increase the line of credit to $1.1 million.
PART II - OTHER INFORMATION
...........................
Item 1 - Legal Proceedings
..........................
The Company is party to certain legal actions and inquiries for
environmental and other matters resulting from the normal course of
business. Although the total amount of liability with respect to these
matters cannot be ascertained, management of the Company believes that
any resulting liability should not have a material effect on its
financial position or results of future operations.
Item 2 - Changes in Securities
None
Item 3 - Defaults Upon Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
None
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibit (11) - Consolidated Computation of Net Income (Loss) Per
Share
(b) Report on Form 8-K
Form 8-K Reporting the change of auditors filed on January 4,
1996.
.........................................................................
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COMPUDYNE CORPORATION
Date: May 14, 1996 /s/ I. Elaine Chen
I. Elaine Chen
Chief Financial Officer
.........................................................................
INDEX TO EXHIBITS
Computation of Net Income Per Common Share
.........................................................................
Exhibit 11
COMPUDYNE CORPORATION
COMPUTATION OF EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE
(In Thousands, Except for Per Share Data)
Three Months Ended
March 31
1996 1995
..................
Primary earnings (loss) per share:
Earnings (loss) from continuing operations $ 40 $ 29
Discontinued operations - (135)
Net earnings (loss) $ 40 $ (106)
Weighted average common and common
equivalent shares 1,808 1,603
Adjustment to options 28 -
Assumed conversion of preferred shares 1,260 -
3,096 1,603
Earnings (loss) per share:
Continuing operations before
extraordinary item $ .01 $ .02
Discontinued operations - (.08)
Net earnings (loss) $ .01 $ (.06)
Fully diluted earnings (loss) per share:
Earnings (loss) from continuing operations $ 40 $ 29
Adjustment for interest on promissory notes 10 (135)
Discontinued operations - -
Net earnings (loss) $ 50 $ (106)
Weighted average common and
common equivalent shares 3,096 1,603
Conversion of promissory notes 284 -
Fully diluted shares 3,380 1,603
Earnings (loss) per share:
Continuing operations before
extraordinary item $ .02 $ .02
Discontinued operations - (.08)
Net earnings (loss) $ .02 $ (.06)