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, 1995
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.)
90 State House Square, Hartford, Connecticut 06103-3720
(Address of principal executive offices)
(203) 247-7611
(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 9, 1995, a total of 1,603,372 shares of Common Stock, $.75 par value,
were outstanding. <PAGE>
COMPUDYNE CORPORATION AND SUBSIDIARIES
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 1995
and December 31, 1994 3
Consolidated Statements of Operations - Three
Months Ended March 31, 1995 and 1994 4
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1995 and 1994 5
Notes to Consolidated Financial Statements 6-9
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial
Condition 10-11
Part II. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 13
Signature 14
Index to Exhibits 15
Computation of Net Income Per Share
<PAGE>
COMPUDYNE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)
March 31, December 31,
1995 1994
ASSETS
Current Assets:
Cash $ 252 $ 202
Accounts receivable, net 1,214 1,827
Inventories:
Work in process 307 260
Raw materials and supplies 270 254
Total inventories 577 514
Prepaid expenses and other current assets 66 37
Total Current Assets 2,109 2,580
Non-current receivables, related partie 5 5
Property, plant and equipment, at cost 706 699
Less: accumulated depreciation and amortization (674) ( 672)
Net property, plant and equipment 32 27
Other assets, net 10 10
Total Assets $ 2,156 $ 2,622
LIABILITIES AND SHAREHOLDERS'(DEFICIT) EQUITY
Current Liabilities:
Accounts payable $ 1,084 1,137
Customer deposits 33 92
Accrued pension costs 25 25
Accrued expenses 642 865
Current portion of deferred compensation 96 71
Total Current Liabilities 1,880 2,190
Long term pension liability 304 304
Deferred compensation, net of current portion 77 128
Total Liabilities 2,261 2,622
SHAREHOLDERS' (DEFICIT) EQUITY:
Common stock, par value $.75 per share 10,000,000 shares
authorized; 1,603,372 shares issued and outstanding 1,202 1,202
Other capital 7,988 7,988
Receivable from management (92) (92)
Deficit (9,203) (9,098)
Total Shareholders'Equity (Deficit) (105) -
Total Liabilities and Shareholders' Equity (Deficit) $ 2,156 $ 2,622
See Notes to Consolidated Financial Statements.
<PAGE>
COMPUDYNE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
(Unaudited)
Three Months Ended
March 31,
1995 1994
Net sales $ 2,331 $ 2,401
Cost of sales 1,903 1,844
Gross margin 428 557
Selling, general and administrative
expenses 529 481
Research and Development 5 16
Operating income (loss) (106) 60
Other (income) expense
Interest expense 7 3
Interest income (4) (4)
Other (income) expense (3) (1,397)
Total other (income) expense, net - 1,398
Income (loss) from continuing operations
before income tax provision (106) 1,458
Income tax provision (benefit) - 1
Income (loss) from continuing operations (106) 1,457
Net income (loss) $ (106) $ 1,457
Weighted average common shares 1,603 1,762
Net income (loss) per common share:
Continuing operations $ (.07) $ .83
Divested operations - -
Net income (loss) $ (.07) $ .83
See Notes to Consolidated Financial Statements
<PAGE>
COMPUDYNE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Three Months Ended
March 31,
1995 1994
Cash flows provided by (used for) operating activities:
Income (loss) from continuing operations $ (106) $ 1,457
Depreciation and amortization 2 -
Changes in assets and liabilities:
Decrease in accounts receivable 613 142
(Increase) decrease in inventories (63) (42)
Increase in prepaid expenses (29) (70)
Decrease in accounts payable (53) (299)
Increase (decrease) in accrued liabilities (223) 64
Increase (decrease) in customer deposits (59) 23
Other, net (25) (168)
Cash flows provided by (used for) operating activities 57 1,107
Cash flows used for investing activities:
Increase in receivables from related parties - (7)
Additions to property, plant and equipment (7) -
Net cash flows used for investing activities (7) (7)
Cash flows (used for) financing activities:
Collection of receivable from management - 8
Increase in short term debt - 698
Decrease in long term debt - (737)
Net cash (used for) provided by financing activities - (31)
Net increase (decrease) in cash 50 1,069
Cash and cash equivalents at beginning of period 202 298
Cash and cash equivalents at end of period $ 252 $ 1,367
Supplemental Schedule of Cash Flow Information:
Cash paid during the period for:
Interest $ 7 $ 25
Income Taxes - 1
See Notes to Consolidated Financial Statements.<PAGE>
COMPUDYNE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIGNIFICANT ACCOUNTING POLICIES
All financial information for all interim periods presented is unaudited. The
financial statements have been prepared in conformity with the accounting
principles
described in CompuDyne Corporation's ("CompuDyne" or the "Company") most recent
Form 10-K filing. The management of CompuDyne believes that all adjustments
necessary to present a fair statement of the results for the periods have been
included.
The adjustments consisted only of normal reoccurring accruals.
Net Income (Loss) per common share. Net income (loss) per common share was
determined by dividing net income (loss) by the weighted average number of
common
shares outstanding during the period including the effect of common stock
equivalents
and stock awards where such effect would be dilutive.
CONTRACTS IN PROGRESS
Contracts in progress consist of the following:
($ in thousands) March 31, December 31,
1995 1994
U.S. Government Contracts:
Billed $ 426 $ 390
Unbilled 440 644(1)
Total $ 866 $ 1,044
(1): The reserve for disallowances of $168 thousand at December 31, 1994 and
March 31, 1995 the reserve is included in other accrued expenses.
Almost all of the U.S. Government billed and unbilled receivables are derived
from cost-plus or time-and material contracts. The conversion of the majority
of the
dollars from unbilled to billed receivables is merely a timing consideration,
i.e., they will
be billed within six days after the month-end closing date. The remainder will
be billed
following final audit of direct and indirect costs by the Defense Contract
Audit Agency.
NOTES PAYABLE
On November 18, 1994 CompuDyne obtained a $350 thousand working capital
line of credit agreement with the Asian American Bank and Trust Company of
Boston
Massachusetts. The Company used the line of credit during the quarter and paid
off its
loans at March 31, 1995. The credit agreement requires the Company to maintain
a
working capital ratio of 1.1 to 1.0. As of March 31, 1995 the Company had a
working
capital ratio of 1.12 to 1.0.
COMMITMENTS AND CONTINGENT LIABILITIES
The Company and certain of its subsidiaries are obligated as lessees under
various
operating leases for office, distribution and manufacturing facilities.
Noncancelable
operating lease commitments are approximately $297 thousand in 1995, $437
thousand in
1996, $450 thousand in 1997, $464 thousand in 1998, $477 thousand in 1999 and
$80
thousand in 2000.
On December 31, 1993, CompuDyne Inc. ("CDI") a wholly-owned subsidiary of
the Company filed a petition in bankruptcy under Chapter 7 of the United States
Bankruptcy Code with the U. S. Bankruptcy Court in Hartford Connecticut. At the
time
CDI filed for bankruptcy it was indebted to the Company in an amount of
approximately
$2.6 million. It is improbable that the Company will recover any portion of
this
indebtedness. CDI is the subject of several federal and state administrative
proceedings
and lawsuits with respect to environmental and other matters. As a result of
the
bankruptcy petition, such proceedings and lawsuits have been stayed. Management
is
unable to assess whether the Company will be held responsible for environmental
clean-
up costs with respect to any of the properties now or formerly owned by CDI.
The only
claim which has been made against the Company was settled in December 1992 for
$10
thousand.
On December 20, 1993, the Company received a summons naming it as a third
party defendant in four asbestosis cases pending against a former subsidiary of
CDI. The
Company's insurance carriers are currently defending the claims. Management
believes
that any ultimate obligation relative to this claim, if any, will not have a
material impact
on the Company's financial position and results of operations.
During the third quarter of 1994, the Company and CDI received notice from
Everbrite Electric Signs, Inc. (Everbrite) notifying the Company that it may be
a
potential responsible party under the North Carolina General Statutes in
connection with
the closure and abatement of the Seaborad Chemical Corporation site located in
Jamestown, North Carolina. Preliminary information supplied by the North
Carolina
Department of Environment, Health and Natural Resources indicates that General
Indicator Corp. a former subsidiary of CDI sent 1,540 gallons of paint related
matter in
1986 to the site. According to the purchase and sale agreement with Everbrite,
the
Company has an obligation to defend them on actions of this nature prior to
1988.
Accordingly, the Company recommended that Everbrite join a Seaboard Defense
Group
which it did. The total anticipated costs of remediating the site will be
approximately $4-
6 thousand to the Company.
In October 1994, the Company received notice from three former employees of
QDi alleging incidences of sexual harassment from supervisors and employees
during
their period of employment. The employees have offered to settle the claim for
$100
thousand each or have threatened to initiate litigation. The Company has
thoroughly
investigated the incident upon its allegation and determined that the claims
are without
merit and will vigorously defend any litigation against it.
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.
RELATED PARTIES
CompuDyne provides corporate services to Corcap for which it charged $- a
month for the first quarter of 1995 compared to $4 thousand a month during
1994.
Corcap's residual outstanding debt to CompuDyne was $5 thousand as of March
31, 1995 compared to a $22 thousand as of March 31, 1994.
During January 1995 Corcap sold 13,500 shares of CompuDyne Common Stock
under Rule 144 of the Securities Act of 1933.
As a result of the sale of the 13,500 shares by Corcap, Corcap's ownership of
CompuDyne Common Stock decreased from 35.0% of the issued and outstanding
shares
of CompuDyne Common Stock as of December 31, 1994 to 34.2% as of March 31,
1995,
and, after assuming the exercise of Warrants for 150,000 shares of CompuDyne
Common
Stock (which are presently exercisable until November 18, 1996) Corcap's
ownership
would be increased to 39.8%. Pursuant to Stock Purchase Agreements, dated
August 1,
1993, between CompuDyne and five members of management, such persons may
purchase up to an additional 125,000 shares of CompuDyne Common Stock on each
of
August 1, 1995 and 1996, assuming certain conditions are met. During 1994, the
stock
ownership of all members of CompuDyne management (four persons), increased to
13.3% of the issued and outstanding shares of CompuDyne Common Stock, and,
after
assuming the exercise of the Corcap Warrants, management's ownership would
decrease
to 12.1%. If such persons purchase all of such shares, Corcap's ownership, on
a fully
diluted basis, would be decreased to 35% and management's ownership, on a fully
diluted basis, would be increased to 22.6%
<PAGE>
COMPUDYNE CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
At the end of the 1995 first quarter CompuDyne had working capital of $229
thousand which compares with $390 thousand at year end. The $161 thousand
decrease
was primarily due to the loss for the quarter of $106 thousand and a reduction
of
deferred compensation of $51 thousand and an increase in fixed assets of $7
thousand.
RESULTS OF OPERATIONS
CompuDyne had a loss of $106 thousand for the 1995 first quarter compared with
a net income of $1,454 million for the 1994 first quarter. The loss for the
1995 first
quarter was primarily attributable to Suntec division which lost $128 thousand
and Data
Control which lost $52 thousand. Quanta earned $116 thousand for the quarter
while
Corporate activities cost $42 thousand. Net income during the 1994 first
quarter was
primarily attributable to the collection of life insurance proceeds of $1.8
million which
was offset by a liability of $442 thousand for deferred compensation payments
due nine
former executives who had been given a contingent interest in the policies and
operating
income of $60 thousand. At the end of the first quarter the Company had a
backlog of
$7 million.
Net sales from continuing operations in the first quarter of 1995 decreased 4%
to
$2.3 million from $2.4 million in the first quarter of 1994. The decrease was
primarily
due to the Suntec division which had sales of $285 thousand compared with $649
thousand for the 1994 first quarter. This was offset by increases in sales at
Quanta
Systems division where revenues increased by $306 thousand to $1.940 million
for the
1995 first quarter. Data Control division had a small sales decline of $11
thousand when
compared to the 1994 first quarter.
Gross margin for the first quarter of 1995 decreased $129 thousand (23%) to
$428
thousand from $557 thousand for the first quarter of 1994. Suntec's Gross
Margin
decreased by $174 thousand as a result of lower sales volume but was offset
again by
DCS which had an increase of $10 thousand and Quanta Systems Division which had
a
increase of $37 thousand.
Selling, general and administrative expense increased $48 thousand, or 10%, to
$529 thousand from $481 thousand for the 1994 first quarter. There were
increases in
expenses at DCS $28 thousand and Quanta Systems $25 thousand which were offset
by
Suntec $133 thousand. Corporate expenses during the quarter were $128 thousand
higher
due to the reversal of excess accruals at the Corporate offices in 1994.
Research and development costs decreased $11 thousand to $5 thousand.
CompuDyne's interest expense for the 1995 first quarter increased $4 thousand
to
$7 thousand compared with the 1994 first quarter of $3 thousand. The increase
was
attributable to the use of the revolving line of credit with Asian American
Bank during
the quarter.
Other income of $3 thousand for the 1995 first quarter compares with $1.4
million
for the 1994 first quarter. During the first quarter of 1994, the Company
received the
insurance proceeds from the death of Frank Kelley of $1.831 million, which was
offset by
a liability for deferred compensation payments due nine former executives of
$442
thousand.
<PAGE>
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibit (11) - Consolidated Computation of Net Income (Loss) Per Share
(b) Reports on Form 8-K
None
<PAGE>
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 9, 1995
/s/ I. Elaine Chen
I. Elaine Chen
Corporate Controller
(Chief Accounting Officer)
<PAGE>
INDEX TO EXHIBITS
Computation of Net Income Per Common Share
<PAGE>
Exhibit 11
COMPUDYNE CORPORATION
COMPUTATION OF NET INCOME PER COMMON SHARE
(In Thousands, Except for Per Share Data)
(Unaudited)
Three Months Ended
March 31
Average Shares Outstanding 1994 1993
1. Average number of common shares
outstanding 1,603 1,478
2. Adjusted weighted average stock options - 68
3. Adjusted weighted average number of
common stock warrants outstanding - 216
standing 1,603 1,762
Net Income (Loss)
4. Income (loss) from continuing operations $ (106) $ 1,457
5. Adjusted net income (loss) available to common
stock $ (106) $ 1,457
Net Income (Loss) Per Share
6. Income (loss) per common share from continuing
operations $ (.07) $ .83
Net income per share $ (.07) $ .83
