Exhibit 99
CompuDyne Reports $0.65 Loss for Third
Quarter; Backlogs Increase to $135 Million, Cost Reductions in Place;
Outlook is Significantly Improved
ANNAPOLIS, Md.--(BUSINESS WIRE)--Nov. 9, 2005--CompuDyne
Corporation (Nasdaq:CDCY), an industry leader in sophisticated
security products, integration and technology for the public security
markets, today reported a loss of $5.2 million or $0.65 per share for
the third quarter of 2005 compared to a loss of $1.9 million or $0.23
per share for the third quarter of 2004. The third quarter 2005 loss
included a $500 thousand tax benefit, while the third quarter 2004
loss included a $1.2 million tax benefit. Revenues for the third
quarter of 2005 were $33.5 million, essentially unchanged from
revenues of $33.4 million for the third quarter of 2004.
Combined backlogs increased by 3% to $135.2 million at September
30, 2005. These backlogs do not include the recently announced $14.3
million project now underway at our Attack Protection segment.
Institutional Security Systems ("ISS") had a pre-tax loss of $170
thousand in the third quarter of 2005 compared to a pre-tax loss of
$806 thousand in the third quarter of 2004. Revenues in the third
quarter of 2005 were $15.5 million, up 32% from $11.8 million in the
third quarter of 2004. ISS is beginning to benefit from its increasing
backlogs and from the elimination of its West Coast regional office
problems. This business remains challenged by substantial legal costs
related to pursuing claims and change orders related to substantially
completed contracts. Legal costs for ISS were $150 thousand in the
third quarter of 2005 and are expected to remain at relatively high
levels for the next few quarters. Bidding activity is strong in ISS'
traditional corrections business due to pent up demand for additional
capacity that has been building during the past three years of low new
project starts. ISS is also beginning to see positive results from its
move into non-corrections markets.
Attack Protection ("AP") had a pre-tax loss of $1.8 million in the
third quarter of 2005 compared to a pre-tax loss of $2.1 million in
the third quarter of 2004. Revenues were $5.9 million in the third
quarter of 2005, down 9.5% from $6.5 million in the third quarter of
2004. While sales of blast protection products increased slightly in
the third quarter of 2005, sales of perimeter sensors were down
sharply due to testing requirements and delays in awards of several
major contracts, which are expected to slip into late 2005 or early
2006. Sales of blast protection products are expected to increase
dramatically late in the fourth quarter and in 2006 due to releases on
a number of embassy projects and the fast track nature of the
segment's recently initiated $14.3 million project. With the inclusion
of the new project, AP backlogs have reached record levels by a wide
margin. Operating margins at AP have improved significantly due to a
combination of cost reduction efforts through a reduction in personnel
and the implementation of Lean Manufacturing and due to the
elimination of the losses related to a major contract in 2004. AP also
is experiencing heavy legal expense related to several ongoing
lawsuits, with third quarter 2005 legal expenses totaling $150
thousand. During the quarter Fiber SenSys introduced its revolutionary
new "SPIDeR" point detection perimeter sensor that is expected to
contribute importantly to revenues and profits in 2006.
CompuDyne Public Safety & Justice ("CPS&J") had a pre-tax loss of
$3.2 million in the third quarter of 2005 compared to a profit of $370
thousand in the third quarter of 2004. Revenues were $9.2 million, a
decline of 22% from $11.8 million for the third quarter of 2004. The
decline in revenue is the result of a relatively low backlog going
into 2005 and the delay in signing contracts for two major projects
during 2005 (the larger of which is now signed and the other is
expected to be signed shortly). The decline in revenue is also
reflective of a diversion of engineering resources during the year to
new product and software architecture activities, at the expense of
billable project activity. Gross margins contracted during the third
quarter of 2005 due to a concentration of old, low billable rate
projects that were completed to achieve milestone billing points, and
due to costs related to a major "right-sizing" process during the
third quarter which is expected to result in annualized savings in
excess of $3 million. Selling, general and administrative expenses as
well as research and development costs have increased due to the
program, instituted this year, to outsource a substantial amount of
software development work in order to accelerate the implementation of
the businesses' transition to .NET architecture, a process that
continues at a strong pace. Operating margins were further impacted by
the Xanalys acquisition that is anticipated to lose money through the
end of 2005 and the period costs for staging the businesses' annual
User's Group conference. CPS&J had a very successful User's Conference
in September, with over 450 attendees. The businesses' roadmap for
conversion to .NET, as well as its new 24/7, Copperfire and Xanalys
products, were very well received at the conference. CPS&J has also
successfully completed a $7 million installation of its innovative
CorrMedica institutional medical management software product, with
good prospects for additional awards. With the cost of the
right-sizing behind us, a re-allocation of resources to revenue
production, a greatly improved backlog of signed contracts, and an
improving mix of newer project activity with higher billing rates, the
outlook for the fourth quarter of 2005 and 2006 is substantially
improved despite the continuing aggressive investment in software
development.
Integrated Electronic Systems ("IES") had a pre-tax profit of $172
thousand in the third quarter of 2005 compared to a pre-tax profit of
$137 thousand in the third quarter of 2004. Profits suffered from an
unusually high level of legal costs at IES, totaling $57 thousand in
the third quarter of 2005. Revenues were $2.9 million, a decline of
12% from $3.3 million in the third quarter of 2004. Two important
revenue sources ramped up in the third quarter: a major project for
the Navy, and the five-year $25 million contract for the Bureau of
Engraving & Printing (which remains under protest by the prior
contractor). Prospective new business activity has picked up
throughout the year. Excellent progress was made on the signals
intelligence products manufactured by IES' Data Control Systems
("DCS") division and deliveries are expected to increase in the fourth
quarter and beyond.
Corporate expenditures remained at a very high level, $1.3
million, during the third quarter of 2005, equal to the $1.3 million
in the third quarter of 2004. Total third party spending on audit,
Sarbanes Oxley, and 404 related efforts was $582 thousand for the
quarter. Internal personnel costs and management diversion related to
these legislated requirements remains very high. While these
expenditures and diversion of internal resources will remain
relatively high during the fourth quarter, it is expected to decline
materially in 2006. Net interest expense was $561 thousand during the
third quarter of 2005, flat with the $560 thousand for the third
quarter of 2004. Reductions in staffing at the corporate level will
provide a benefit in the fourth quarter of 2005 and a continuing
benefit in 2006.
The Company ended the third quarter of 2005 with cash and
marketable securities of $18.3 million, basically unchanged from the
$18.1 million at the end of the second quarter of 2005.
While third quarter results were worse than expected, and
certainly disappointing, the Company believes that due to sharply
increased activity levels, recent contract signings and project
activity releases, the absence of certain unusual costs, and cost
reduction actions taken during the third quarter, that fourth quarter
and 2006 results will be significantly improved. The Company continues
to explore alternatives to simplify and focus its operations due to
the increased costs of doing business as a public company.
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 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)
September 30, December 31,
2005 2004
------------- -------------
(dollars in thousands)
ASSETS
Current Assets
Cash and cash equivalents $ 10,299 $ 5,198
Marketable securities - 19,577
Cash and marketable securities -
pledged 489 -
Accounts receivable, net 31,985 34,291
Contract costs in excess of billings 14,384 16,087
Inventories 5,740 5,165
Prepaid expenses and other 4,162 5,412
------------- -------------
Total Current Assets 67,059 85,730
Cash and marketable securities - pledged 7,555 -
Property, plant and equipment, net 10,718 12,094
Goodwill 25,971 25,894
Other intangible assets, net 8,211 8,460
Other 716 713
------------- -------------
Total Assets $ 120,230 $ 132,891
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued
liabilities $ 18,238 $ 21,771
Billings in excess of contract costs
incurred 12,099 13,497
Deferred revenue 7,656 5,998
Current portion of notes payable 440 440
------------- -------------
Total Current Liabilities 38,433 41,706
Notes payable 3,125 3,565
Convertible subordinated notes payable,
net 39,258 39,118
Deferred tax liabilities 2,072 2,072
Other 501 599
------------- -------------
Total Liabilities 83,389 87,060
------------- -------------
Commitments and Contingencies
Total Shareholders' Equity 36,841 45,831
------------- -------------
Total Liabilities and
Shareholders' Equity $ 120,230 $ 132,891
============= =============
COMPUDYNE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
--------- --------- --------- ---------
(in thousands, except per share data)
Revenue $ 33,499 $ 33,360 $100,909 $110,170
Cost of sales 24,982 24,552 69,582 80,017
--------- --------- --------- ---------
Gross profit 8,517 8,808 31,327 30,153
Selling, general &
administrative expenses 10,587 9,288 30,909 26,119
Research and development 3,149 2,051 7,502 5,680
--------- --------- --------- ---------
Loss from operations (5,219) (2,531) (7,084) (1,646)
--------- --------- --------- ---------
Total other expense, net 558 540 1,651 1,783
--------- --------- --------- ---------
Loss before income taxes (5,777) (3,071) (8,735) (3,429)
Income tax benefit (500) (1,221) (500) (1,362)
--------- --------- --------- ---------
Net loss $ (5,277) $ (1,850) $ (8,235) $ (2,067)
========= ========= ========= =========
Loss per share:
- ---------------
Basic loss per common share $ (.65) $ (.23) $ (1.01) $ (.26)
========= ========= ========= =========
Weighted average number of
common shares outstanding 8,116 8,171 8,132 8,085
========= ========= ========= =========
Diluted loss per common share $ (.65) $ (.23) $ (1.01) $ (.26)
========= ========= ========= =========
Weighted average number of
common shares and equivalents 8,116 8,171 8,132 8,085
========= ========= ========= =========
COMPUDYNE CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL DATA
(in thousands, unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
---------- ---------- ---------- ----------
Revenues
Institutional Security
Systems $ 15,548 $ 11,783 $ 43,008 $ 41,794
Attack Protection 5,892 6,510 18,855 20,204
Integrated Electronic
Systems 2,898 3,296 6,805 11,242
Public Safety and
Justice 9,161 11,771 32,241 36,930
---------- ---------- ---------- ----------
$ 33,499 $ 33,360 $ 100,909 $ 110,170
========== ========== ========== ==========
Three Months Ended Nine Months Ended
June 30, June 30,
2005 2004 2005 2004
---------- ---------- ---------- ----------
Pre-tax income (loss)
Institutional Security
Systems $ (170) $ (806) $ 528 $ (683)
Attack Protection (1,800) (2,101) (2,141) (3,236)
Integrated Electronic
Systems 172 137 180 551
Public Safety and
Justice (3,188) 370 (3,270) 1,765
Corporate (791) (671) (4,032) (1,826)
---------- ---------- ---------- ----------
$ (5,777) $ (3,071) $ (8,735) $ (3,429)
========== ========== ========== ==========
Backlog September 30, June 30, December 31,
2005 2005 2004
-------------- -------------- --------------
Institutional
Security
Systems $ 52,557 $ 56,492 $ 49,324
Attack
Protection 16,210 19,466 20,803
Integrated
Electronic
Systems 8,146 9,105 8,299
Public Safety
and Justice 58,270 46,045 48,434
-------------- -------------- --------------
Total $ 135,183 $ 131,108 $ 126,860
============== ============== ==============
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(in thousands, unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
---------- ---------- ---------- ----------
Net loss $ (5,277) $ (1,850) $ (8,235) $ (2,067)
Interest expense 748 849 2,301 2,443
Tax benefit (500) (1,221) (500) (1,362)
Depreciation and
amortization 872 732 2,596 2,099
---------- ---------- ---------- ----------
EBITDA $ (4,157) $ (1,490) $ (3,838) $ 1,113
========== ========== ========== ==========
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
results of operations and monitors it to evaluate its borrowing
capacity. 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 operations. Management
also believes that EBITDA is a valuable financial measure for
investors because it allows them to evaluate the Company's borrowing
capacity.
CONTACT: CompuDyne Corporation
Geoffrey F. Feidelberg, 410-224-4415 ext.313
investors.relations@compudyne.com