Exhibit 99.1
CompuDyne Reports GAAP Earnings Per Share of $0.04 for 2006 Third
Quarter - Adjusted Earnings Per Share, Excluding Stock Option
Expense, Was $0.09 - Backlogs Continue to Increase
ANNAPOLIS, Md.--(BUSINESS WIRE)--Nov. 14, 2006--CompuDyne
Corporation (Nasdaq:CDCY), an industry leader in sophisticated
security products, integration and technology for the public security
markets, today reported net income of $0.04 per share for the third
quarter of 2006, compared with a net loss of $0.65 per share reported
in the third quarter of 2005. Revenues in the third quarter of 2006
were $34.7 million, up from $33.5 million in the third quarter of
2005. Expenses in the third quarter of 2006 included $0.4 million in
non-cash stock option expense. Net income per share before this
non-cash charge was $0.09. Net income for the first nine months of
2006 was $0.18 per share, compared with a net loss of $1.01 per share
reported in the first nine months of 2005. Revenues for the first nine
months of 2006 were $113.6 million, up from $100.9 million in the
first nine months of 2005. Expenses in the first nine months of 2006
included $1.0 million in non-cash stock option expense. Net income per
share for the first nine months of 2006, before this non-cash charge,
was $0.29. EBITDAS for the third quarter of 2006 was $2.3 million,
improved sharply from a negative $4.1 million in the third quarter of
2005. EBITDAS for the first nine months of 2006 totaled $7.1 million.
The third quarter and first nine months of 2006 benefited primarily
from three factors: 1) a significant reduction in our audit and
Sarbanes Oxley related costs; 2) completion of the loss generating
contracts at ISS' West Coast office; and 3) improved operating margins
related to both significant cost reductions and an improvement in the
mix of revenues.
Institutional Security Systems ("ISS") revenue was $11.1 million
in the third quarter of 2006 compared with $15.5 million in the third
quarter of 2005. Pre-tax income decreased from a $0.2 million loss in
the third quarter of 2005 to a $0.4 million loss in the third quarter
of 2006. ISS earnings continue to be negatively impacted by the low
awards and backlog experienced in the latter part of 2005 and early
2006, and by legal costs in pursuing claims and recoveries on
completed projects. ISS continues to aggressively review and reduce
costs while seeking to retain capacity for the current upturn in its
backlog. Legal costs at ISS in the third quarter totaled $0.3 million.
Recent increases in awards and backlogs, and continuing strong pre-bid
activity, bodes well for increased volume and positive earnings
contributions from ISS in the future. ISS backlog increased by $14.3
million to $65.5 million during the quarter.
Attack Protection ("AP") revenue was $8.8 million in the third
quarter of 2006, up 49.7% compared with $5.9 million in the third
quarter of 2005. Pre-tax income improved from a loss of $1.8 million
in the third quarter of 2005 to pre-tax income of $1.5 million in the
third quarter of 2006. The Norshield brand business, which supplies
bullet, blast and attack resistant windows and doors as well as
vehicle barrier systems, benefited from completing a large contract as
well as from significant progress made during 2005 in reducing costs
and improving quality. The Fiber SenSys business, which is one of the
world's largest suppliers of fiber optic based perimeter alarm
systems, did especially well in the third quarter, benefiting from
successfully completing some important military tests and the
introduction of new products. AP backlogs declined by $5.6 million to
$8.0 million during the quarter, reflecting the run off of a major
U.S. embassy contract for bullet, blast and attack protection windows
and doors. Bidding activity remains strong in this segment.
Public Safety & Justice ("PS&J") revenues increased to $10.7
million in the third quarter of 2006 compared with $9.2 million in the
third quarter of 2005. Pre-tax results for PS&J in the third quarter
of 2006 were a loss of $0.6 million compared with a pre-tax loss of
$3.2 million in the third quarter of 2005. The third quarter of 2006
benefited from significant reductions in indirect costs implemented
late in 2005 and further changes instituted by new management put in
place in the third quarter of 2006. The third quarter of 2006 was
negatively impacted by the cost of the tremendously successful annual
Tiburon User's Group conference in Milwaukee in September. In
addition, the decision was made in 2005 to significantly accelerate
the research and development effort to migrate to a full Service
Oriented Architecture and .NET based software product suite, a
commitment which is expected to negatively impact PS&J pre-tax in 2006
by $2.2 million but which should improve revenues and margins in
future years. Spending on this new suite of products in the third
quarter of 2006 was $0.5 million. Although PS&J backlogs increased
slightly in the third quarter, they are still not at levels necessary
for adequate profitability, although the pipeline of prospective new
business is high. Xanalys, Tiburon's investigative analysis software
business, won an important international selection that could lead to
extensive military intelligence work.
Integrated Electronic Systems ("IES") revenue was $4.1 million in
the third quarter of 2006 compared with $2.9 million in the third
quarter of 2005 and resulted in pre-tax income of $0.4 million for the
third quarter of 2006 compared with $0.2 million for the third quarter
of 2005. The re-bid of the Bureau of Engraving & Printing ("BEP")
contract, occasioned by a protest filed by the previous incumbent,
remains unresolved and we are optimistic that it will be re-awarded to
IES due to its current performance. IES' Quanta subsidiary continues
to perform this BEP contract and total revenues and earnings at Quanta
have already exceeded Quanta's results for all of 2005. In early July
2006 Quanta purchased the assets of Signami LLC, a company that makes
signals intelligence software and equipment that complements devices
made by IES' Data Control Systems division. The newly combined Signami
DCS contributed to IES' third quarter with $0.7 million of revenue and
$0.1 million of pre-tax income despite non-cash acquisition
amortization charges. Signami DCS ended the quarter with $2.3 million
of order backlog.
In the third quarter of 2006, our corporate pre-tax costs totaled
$1.3 million, compared with third quarter 2005 costs of $1.7 million.
This included $0.5 million of net interest cost in the third quarter
of 2006 and $0.5 million in the third quarter of 2005. The majority of
the expense reduction in 2006 is due to reduced costs related to audit
and compliance with Section 404 of Sarbanes-Oxley. These costs have
been, and are expected to continue to be, considerably below 2005
levels. Other expenses at the Corporate level have also been reduced.
With good cash flow, the balance sheet remains solid with cash and
marketable securities of $20.4 million (which includes pledged assets
of $5.5 million), working capital of $30.6 million, shareholders'
equity of $40.4 million, and only $1.8 million of debt maturities
prior to 2011.
Company-wide backlogs, although down from December 31, 2005,
increased quarter over quarter during the third quarter of 2006, by
$10.2 million to $121.7 million. Although this is still not an
acceptable level, 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)
September 30, December 31,
ASSETS 2006 2005
------------- -------------
(dollars in thousands)
Current Assets
Cash and cash equivalents $ 3,042 $ 6,938
Marketable securities 11,891 11,429
Accounts receivable, net 30,131 39,625
Contract costs in excess of billings 11,039 13,764
Inventories 6,056 6,195
Prepaid expenses and other 2,818 2,809
------------- -------------
Total Current Assets 64,977 80,760
Cash equivalents pledged 5,479 -
Property, plant and equipment, net 10,723 9,962
Goodwill 27,519 26,846
Other intangible assets, net 8,596 8,221
Other 2,036 903
------------- -------------
Total Assets $ 119,330 $ 126,692
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 14,220 $ 23,030
Billings in excess of contract costs
incurred 11,491 13,847
Deferred revenue 8,213 8,094
Current portion of notes payable 440 440
------------- -------------
Total Current Liabilities 34,364 45,411
Notes payable 2,685 3,125
Convertible subordinated notes payable,
net 39,445 39,305
Deferred tax liabilities 2,060 2,060
Other 385 369
------------- -------------
Total Liabilities 78,939 90,270
Commitments and Contingencies
Shareholders' Equity 40,391 36,422
------------- -------------
Total Liabilities and Shareholders'
Equity $ 119,330 $ 126,692
============= =============
COMPUDYNE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
--------- --------- -------------------
(in thousands, except per share data)
Revenues $ 34,696 $ 33,499 $113,560 $100,909
Cost of sales 22,878 25,561 77,097 70,161
--------- --------- --------- ---------
Gross profit 11,818 7,938 36,463 30,748
Selling, general &
administrative expenses 9,175 10,592 28,253 30,914
Research and development 1,769 2,565 5,470 6,918
--------- --------- --------- ---------
Income (loss) from operations 874 (5,219) 2,740 (7,084)
Total other expense, net 539 558 1,470 1,651
--------- --------- --------- ---------
Income (loss) before taxes on
income 335 (5,777) 1,270 (8,735)
Income tax expense (benefit) 8 (500) (169) (500)
--------- --------- --------- ---------
Net income (loss) $ 327 $ (5,277) $ 1,439 $ (8,235)
========= ========= ========= =========
Income (loss) per share:
- ------------------------------
Basic income (loss) per common
share $ .04 $ (.65) $ .18 $ (1.01)
========= ========= ========= =========
Weighted average number of
common shares outstanding 8,355 8,116 8,198 8,132
Diluted income (loss) per
common share $ .04 $ (.65) $ .18 $ (1.01)
========= ========= ========= =========
Weighted average number of
common shares and equivalents 8,378 8,116 8,233 8,132
COMPUDYNE CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL DATA
(in thousands, unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
--------- --------- --------- ---------
Revenues
Institutional Security
Systems $ 11,091 $ 15,548 $ 37,666 $ 43,008
Attack Protection 8,822 5,892 31,839 18,855
Public Safety and Justice 10,666 9,161 33,368 32,241
Integrated Electronic
Systems 4,117 2,898 10,687 6,805
--------- --------- --------- ---------
$ 34,696 $ 33,499 $113,560 $100,909
========= ========= ========= =========
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
--------- --------- --------- ---------
Gross Profit
Institutional Security
Systems $ 1,780 $ 2,343 $ 5,806 $ 7,491
Attack Protection 3,279 341 10,430 4,089
Public Safety and Justice 5,750 4,781 18,218 18,073
Integrated Electronic
Systems 1,009 473 2,009 1,095
--------- --------- --------- ---------
$ 11,818 $ 7,938 $ 36,463 $ 30,748
========= ========= ========= =========
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
--------- --------- --------- ---------
Pre-tax income (loss)
Institutional Security
Systems $ (360) $ (170) $ (610) $ 528
Attack Protection 1,456 (1,800) 4,209 (2,141)
Public Safety and Justice (644) (3,188) (1,166) (3,270)
Integrated Electronic
Systems 377 172 722 180
Corporate (494) (791) (1,885) (4,032)
--------- --------- --------- ---------
$ 335 $ (5,777) $ 1,270 $ (8,735)
========= ========= ========= =========
September 30, December 31, September 30,
2006 2005 2005
------------- ------------ -------------
Backlog
Institutional Security
Systems $ 65,489 $ 58,128 $ 52,557
Attack Protection 7,991 28,802 16,210
Public Safety and Justice 40,088 53,705 58,270
Integrated Electronic
Systems 8,137 7,503 8,146
------------- ------------ -------------
$ 121,705 $ 148,138 $ 135,183
============= ============ =============
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
EBITDAS
(in thousands, except per share data; unaudited)
Three Months Nine Months
Ended Ended
September 30, September 30,
2006 2005 2006 2005
------- -------- ------- --------
Net income (loss) $ 327 $(5,277) $1,439 $(8,235)
Interest expense 822 764 2,479 2,317
Income tax expense (benefit) 8 (500) (169) (500)
Depreciation and amortization 794 872 2,339 2,596
Non-cash stock option expense 389 - 967 -
------- -------- ------- --------
EBITDA adjusted for non-cash stock
option expense (EBITDAS) $2,340 $(4,141) $7,055 $(3,822)
======= ======== ======= ========
Income (Loss) Before Non-Cash Stock Option Expense
Three Months Nine Months
Ended Ended
September 30, September 30,
2006 2005 2006 2005
------- -------- ------- --------
Net income (loss) $ 327 $(5,277) $1,439 $(8,235)
Non-cash stock option expense 389 - 967 -
------- -------- ------- --------
Income (loss) before non-cash stock
option expense $ 716 $(5,277) $2,406 $(8,235)
======= ======== ======= ========
Diluted income (loss) per common
share before non-cash stock option
expense $ .09 $ (.65) $ .29 $ (1.01)
======= ======== ======= ========
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. The Company's
management also uses Income (Loss) Before Non-Cash Stock Option
Expense to allow it to compare its results of operations between
years. 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. Management believes that net income per share
excluding stock option expense is helpful to investors who are trying
to compare current results with prior periods.
CONTACT: CompuDyne Corporation
Geoffrey F. Feidelberg
Investor Relations
410-224-4415 ext.313
investors.relations@compudyne.com