SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(a) of
the Securities Exchange Act of 1934
Date of Report
December 11, 1998
COMPUDYNE CORPORATION
(Exact name of registrant as specified in its charter)
NEVADA
(State or other jurisdiction of incorporation)
1-4245 23-1408659
(Commission File Number) (IRS Employer Identification No.)
90 State House Square
Hartford, Connecticut 06103-3720
(Address of principal executive office)
Registrant's telephone number, including area code
(203) 247-7611
This Amendment No. 1 to the Registrant's Current Report on Form 8-K,
dated December 11, 1998, is made in order to file, as required in
Items 7(a) and 7(b), respectively, of Form 8-K, the audited combined
financial statements of Norment Industries, Inc. and Norshield
Corporation ("Norment and Norshield") and pro-forma financial information
in connection with the Registrant's acquisition of all of the common
stock of Norment and Norshield.
Items 7(a) and 7(b) of the Registrant's Current Report on
Form 8-K, dated December 11, 1998 are amended to read as follows:
Item 7. Financial Statements and Exhibits
(a) Combined balance sheets of Norment and Norshield as of February 28,
1998 and November 28, 1998 and the related combined statements of
income and net assets and cash flows for the nine months ended November
28, 1998, and the combined statements of income, net assets and cash
flows of Norment and Norshield for the years ended February 28, 1998 and
March 1, 1997, together with the report thereon by Arthur Andersen LLP,
independent public accountants, are set forth as follows:
Norment Industries, Inc. and
Norshield Corporation
Combined Financial Statements as of
November 28, 1998 and February 28, 1998
Together With Auditors' Report
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To: Norment Industries, Inc. and
Norshield Corporation:
We have audited the accompanying combined balance sheets of Norment
Industries, Inc. (a Delaware corporation) and Norshield Corporation (an
Alabama corporation) as of November 28, 1998 and February 28, 1998 and
the related combined statements of income, net assets, and cash flows
for the nine month period ended November 28, 1998 and for each of the
two fiscal years in the period ended February 28, 1998. These combined
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these combined financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the combined financial
position of Norment Industries, Inc. and Norshield Corporation as of
November 28, 1998 and February 28, 1998 and the combined results of
their operations and their cash flows for the nine month period ended
November 28, 1998 and for each of the two fiscal years in the period
ended February 28, 1998 in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
Birmingham, Alabama
January 13, 1999
<TABLE>
<CAPTION>
Norment Industries, Inc. and Norshield Corporation
COMBINED BALANCE SHEETS
November 28, 1998 and February 28, 1998
ASSETS
<S> <C> <C>
November 28, February 28,
1998 1998
----------- -----------
CURRENT ASSETS:
Cash $ 12,500 $ 10,622
Accounts receivable, less allowance
for doubtful accounts of $105,430
and $182,356, respectively 14,879,814 18,030,989
Unbilled retainage 5,224,124 4,660,764
Other receivables 63,510 8,209
Costs and estimated earnings in
excess of billings on uncompleted
contracts 2,696,555 1,354,987
Inventory 3,013,370 3,165,133
Prepaid expenses 18,407 16,557
Deferred income taxes 458,232 430,529
----------- -----------
Total current assets 26,366,512 27,677,790
----------- -----------
PROPERTY, PLANT, AND EQUIPMENT, at cost:
Land and buildings 1,551,238 1,542,439
Leasehold improvements 407,741 395,446
Machinery and equipment 2,280,599 2,052,655
Office equipment and furniture 1,067,068 1,899,037
Vehicles 86,925 88,681
Construction in progress 895,100 186,141
--------- ----------
6,288,671 6,164,399
Less accumulated depreciation and
amortization 2,500,583 3,753,994
----------- ----------
Net property, plant, and equipment 3,788,088 2,410,405
----------- ----------
Total assets $30,154,600 $30,088,195
=========== ===========
LIABILITIES AND NET ASSETS
LIABILITIES:
Accounts payable $ 2,969,303 $3,918,258
Accrued expenses 1,112,047 631,261
Billings in excess of costs and
estimated earnings on
uncompleted contracts 4,321,680 3,771,491
----------- -----------
Total liabilities 8,403,030 8,321,010
COMMITMENTS AND CONTINGENCIES
NET ASSETS 21,751,570 21,767,185
----------- -----------
Total liabilities and net assets $30,154,600 $30,088,195
=========== ===========
</TABLE>
The accompanying notes are an integral part of these combined balance
sheets.
<TABLE>
<CAPTION>
Norment Industries, Inc. AND Norshield Corporation
COMBINED STATEMENTS OF INCOME
for the Nine Months ended November 28, 1998 and the Fiscal years
ended February 28, 1998 and March 1, 1997
<S> <C> <C> <C>
November 28, February 28, March 1,
1998 1998 1997
------------ ------------ ----------
(Nine Months) (52 Weeks) (52 Weeks)
NET SALES $ 58,652,229 $ 75,419,212 $72,405,279
COST OF GOODS SOLD 46,755,255 60,322,813 57,970,745
------------ ------------ -----------
Gross margin 11,896,974 15,096,399 14,434,534
SELLING, GENERAL, AND
ADMINISTRATIVE EXPENSES 8,841,118 10,990,913 9,938,738
CORPORATION ALLOCATION 346,989 448,992 506,295
----------- ----------- ----------
Operating income 2,708,867 3,656,494 3,989,501
INTERCOMPANY INTEREST EXPENSE 1,181,386 1,543,824 1,243,824
----------- ----------- ----------
INCOME BEFORE PROVISION FOR
INCOME TAXES 1,527,481 2,112,670 2,745,677
PROVISIONS FOR INCOME TAXES 445,944 505,357 992,524
----------- ---------- ----------
NET INCOME $ 1,081,537 $1,607,313 $1,753,153
=========== ========== ==========
EARNINGS PER SHARE:
Basic and diluted $ 983 $ 1,461 $ 1,594
=========== ========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING:
Basic and diluted 1,100 1,100 1,100
=========== ========== =========
</TABLE>
The accompanying notes are an integral part of these combined statements.
<TABLE>
<CAPTION>
Norment Industries, Inc. and Norshield Corporation
COMBINED STATEMENTS OF NET ASSETS
for the nine months ended November 28, 1998, and
the fiscal years ended February 28, 1998 and March 1, 1997
<S> <C>
BALANCE, March 2, 1996 $14,222,022
Net income 1,753,153
Intercompany funding 2,573,878
-----------
BALANCE, March 1, 1997 18,549,053
Net income 1,607,313
Intercompany funding 1,610,819
-----------
BALANCE, February 28, 1998 21,767,185
Net income 1,081,537
Intercompany funding (1,097,152)
-----------
BALANCE, November 28, 1998 $21,751,570
===========
</TABLE>
The accompanying notes are an integral part of these combined
statements.
<TABLE>
<CAPTION>
Norment Industries, Inc. and Norshield Corporation
COMBINED STATEMENTS OF CASH FLOWS
for the nine months ended November 28, 1998 and
the fiscal years ended February 28, 1998 and March 1, 1997
<S> <C> <C> <C>
November 28, February 28, March 1,
1998 1998 1997
------------ ------------ ----------
(Nine Months) (52 Weeks) (52Weeks)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,081,537 $ 1,607,313 $1,753,153
Adjustments to reconcile
net income to net cash
provided by (used in)
operating activities:
Depreciation and
amortization 375,121 497,591 554,245
Gain on sale of
property, plant,
and equipment (48,658) (4,667) 0
Deferred income taxes (27,703) (156,114) 92,903
Changes in assets and liabilities:
Accounts receivable 3,151,175 4,945,362 (10,882,758)
Unbilled retainage (563,360) (131,171) (569,760)
Other receivables (55,301) (8,209) 16,597
Costs and estimated earnings
in excess of billings on
uncompleted contracts (1,341,568) (5,760) (168,395)
Inventory 151,763 (585,956) (768,913)
Prepaid expenses (1,850) (1,335) 0
Accounts payable (948,955) (3,403,903) 3,393,875
Accrued expenses 480,786 32,390 189,919
Billings in excess of costs
and estimated earnings on
uncompleted contracts 550,189 (3,842,416) 4,081,042
---------- --------- ---------
Total adjustments 1,721,639 (2,664,188) (4,061,245)
---------- --------- ---------
Net cash flows provided
by (used in) operating
activities 2,803,176 (1,056,875) (2,308,092)
---------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds on sales of property,
plant, and equipment 48,658 9,030 0
Capital expenditures (1,752,804) (552,352) (276,808)
---------- -------- --------
Net cash flows used in
investing activities (1,704,146) (543,322) (276,808)
---------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayments) on
intercompany funding (1,097,152) 1,610,819 2,573,878
---------- --------- ---------
Net cash flows provided
by (used in) financing
activities (1,097,152) 1,610,819 2,573,878
---------- --------- ---------
NET INCREASE (DECREASE) IN CASH 1,878 10,622 (11,022)
CASH, beginning of period 10,622 0 11,022
---------- --------- ---------
CASH, end of period $ 12,500 $ 10,622 $ 0
========== ========= =========
</TABLE>
The accompanying notes are an integral part of these combined statements.
Norment Industries, Inc. and Norshield Corporation
NOTES TO COMBINED FINANCIAL STATEMENTS
November 28, 1998 and February 28, 1998
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Norment Industries, Inc. ("Norment"), a wholly owned subsidiary of Apogee
Enterprises, Inc. ("Apogee") and headquartered in Montgomery, Alabama, is
a comprehensive security and detentions systems manufacturer, integrator,
and contractor, which operates through four divisions. SESCO, located in
Montgomery, Alabama, is a systems integrator, providing both physical
security and installation of electronic systems to the corrections
market. Trentech, also located in Montgomery, Alabama, designs and
manufactures custom electronic security systems primarily for the
corrections industry. Products and services provided by Trentech include
electronic control and annunciation systems, graphic control panels,
touch-screen control systems, badging and video ID systems, access
control systems, custom command centers, close-circuit television, and
perimeter and intrusion detection systems. Airteq, located in Portland,
Oregon, designs and manufactures pneumatic security locks and sliding
door locking devices. Airteq also manufactures mechanical and
electro-mechanical locks, as well as a complete line of door hardware.
EMSS, located in Livermore, California, is a leading detention systems
contractor primarily serving the West Coast. The operations of EMSS are
essentially the same as the services offered by SESCO and Trentech. EMSS
provides a single point of responsibility for engineering and integrating
all the critical security components into the overall construction for
the facilities including hardware, hollow metal, bullet-resistant
glass, and the electronic controls system.
Norshield Corporation ("Norshield" and collectively with Norment, the
"Companies"), also a wholly owned subsidiary of Apogee and located in
Montgomery, Alabama, is one of the world's largest manufacturers and
suppliers of ballistic, attack, and blast-resistant products. Norshield
manufactures and supplies a full line of detention equipment, including
detention furnishings, custom security windows, control room framing,
bullet-resistant aluminum enclosures, woven rod mesh, security hardware,
and pneumatic locking systems.
As further discussed in Note 10, Norment and Norshield were acquired from
Apogee by CompuDyne Corporation ("CompuDyne") effective November 28,
1998. The accompanying combined financial statement presentation
includes the accounts of Norment and Norshield. All significant
transactions between the Companies have been eliminated. Excluded from
the presentation are the accounts of VoiceTrack, a division of Norment,
which was not acquired by CompuDyne.
2. SIGNIFICANT ACCOUNTING POLICIES
Fiscal Year-End
Prior to November 28, 1998, the Companies were on a 52/53 week
year ending on the Saturday closest to February 28. As a result
of the business combination (see Note 10), the Companies'
financial reporting year will become December 31 to conform with
CompuDyne.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Certain estimates used by management are susceptible to
significant changes in the economic environment. These include
estimates of percentage-completion on long-term contracts and
valuation allowances for contract accounts receivable. Actual
results could differ from those estimates.
Inventory
Inventory is valued at the lower of cost or market, which approximates
first-in, first-out ("FIFO") cost.
Property, Plant, and Equipment
Property, plant, and equipment are recorded at cost less accumulated
depreciation and amortization and include expenditures for major renewals
and betterments that substantially increase the useful lives of existing
assets. Maintenance and repairs are charged to expense as incurred.
Upon sale, retirement, or other disposition of these assets, the cost and
related accumulated depreciation are removed from the respective
accounts, and the related gain or loss is credited or charged to income.
Depreciation is computed using the straight-line method over the
estimated service lives of the depreciable assets as follows:
<TABLE>
<S> <C> <C>
Buildings 20-40 years
Leasehold improvements Life of lease
Machinery and equipment 5-10 years
Office equipment and furniture 3-7 years
Vehicles 3-7 years
</TABLE>
Long-Term Contracts and Revenue Recognition
Long-term contract earnings are recognized on the percentage of
completion method whereby that portion of the total contract price
is recognized based on the percentage of costs incurred to date to
total estimated costs. Revisions in revenue, costs, and profit
estimates occurring during the course of a contract are reflected
from the time the revisions are determined. Provisions for
estimated losses on uncompleted contracts are made in the period
in which such losses are determined.
Costs and estimated earnings in excess of billings on uncompleted
contracts represent the excess of contract revenues recognized to
date over billings to date on certain contracts. Billings in
excess of costs and estimated earnings on uncompleted contracts
represent the excess of billings to date over the amount of
revenue recognized to date on the remaining contracts.
Income Taxes
The Companies have not filed their own income tax returns, but
have been included in the consolidated federal and state income
tax returns of Apogee. The provisions for income taxes are based
on the Companies' income before taxes and represent assessments by
Apogee which approximate taxation of the Companies as if they were
stand-alone taxpayers. The Companies also recognize deferred tax
assets and liabilities based upon temporary differences between
financial and tax reporting. Recognition of deferred tax asset
balance sheet amounts is based on management's belief that it is
more likely than not that the tax benefit associated with certain
temporary differences will be realized.
Foreign Exchange Risk
The Companies enter into forward currency exchange contracts in
order to manage specific foreign currency exposures related to
foreign construction contracts, receivables, and cash denominated
in foreign currencies. At November 28, 1998, the Companies had
forward contracts maturing at various dates, the last of which is
August 17, 1999, with a value of approximately $2,400,000. Gains
and losses on forward contracts related to cash and receivables
are recognized currently, while gains and losses related to
construction projects are deferred and accounted for as a part of
the related transaction.
Fair Value of Financial Instruments
In preparing disclosures about the fair value of financial
instruments, management has determined that the carrying amount
approximates fair value for current financial instruments due to
the short maturities of those instruments.
Net Assets
For purposes of the combined financial statement presentation, Net
Assets consist of the Companies' capital stock accounts and
Apogee's intercompany investment in each subsidiary, as follows:
<TABLE>
<S> <C> <C>
November 28, February 28,
1998 1998
------------ ------------
Norment common stock, $.01 par
value, 1,000 shares
authorized, issued, and
outstanding $ 10 $ 10
Norshield common stock, $.01 par
value, 100 shares authorized,
issued, and outstanding 1 1
Retained earnings and
intercompany funding 21,751,559 21,767,174
----------- -----------
$21,751,570 $21,767,185
=========== ===========
</TABLE>
Earnings Per Share
In February 1997, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 128, Earnings Per Share. SFAS No. 128 replaced the
presentation of primary EPS with the presentation of basic EPS.
It also requires dual presentation of basic and diluted EPS.
Basic EPS excludes dilution and is computed by dividing income
available to common stockholders by the weighted-average number of
common shares outstanding for the period. Diluted EPS reflects
the potential dilution that could occur if securities or other
contracts to issue common stock are exercised or converted into
common stock or resulted in the issuance of common stock that then
shared in the earnings of the entity.
For purposes of presenting combined EPS for the Companies on a
stand-alone basis, the number of common shares outstanding for
each of the Companies were added together and divided into the
income available to common stockholders. There were no dilutive
shares, and as such, the computation of basic and diluted EPS is
the same.
New and Pending Accounting Pronouncements
In June 1997, the FASB issued SFAS No. 130, Reporting
Comprehensive Income, which establishes standards for the
reporting and display of comprehensive income and its components
in the financial statements. The adoption of SFAS No. 130 did not
have a material impact on the Companies' combined financial reporting.
In June 1997, the FASB issued SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information, which
establishes new standards for segment reporting, using the
"management approach," in which reportable segments are based on
the same criteria or which management disaggregates a business for
making operating decisions and assessing performance. As separate
subsidiaries of Apogee, the Companies were considered to be a
single segment by Apogee. As subsidiaries, presentation of
segment information is not required.
In July 1998, the FASB issued SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, which establishes
the accounting definition of a derivative and specifies
measurements, recognition, and disclosure of changes in the fair
value of derivatives (hedges) held by a company. This standard
will require derivatives designated as hedges to be recorded on
the balance sheet at fair value with the change in fair value of
the underlying hedged item. This standard will be adopted by the
Companies in the year 2000 and is not expected to have a material
impact on the Companies' combined balance sheets or results of
operations.
3. RECEIVABLES
Accounts receivable and unbilled retainage consist of the following at
November 28, 1998 and February 28, 1998:
<TABLE>
<S> <C> <C>
November 28, February 28,
1998 1998
------------ ------------
Contract receivables:
Billed:
Completed contracts and in
progress $ 13,639,748 $15,812,028
Retained 1,345,496 2,401,317
------------ ------------
Total billed 14,985,244 18,213,345
Less allowance for
doubtful accounts (105,430) (182,356)
------------ ------------
Accounts receivable, net 14,879,814 18,030,989
Unbilled retainage 5,224,124 4,660,764
------------ ------------
Net accounts receivable $ 20,103,938 $22,691,753
============ ============
</TABLE>
4. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Information with respect to contracts in process at November 28, 1998
and February 28, 1998 is as follows:
<TABLE>
<S> <C> <C>
November 28, February 28,
1998 1998
------------ ------------
Costs and estimated earnings on
uncompleted contracts $114,083,810 $ 93,490,075
Less billings on uncompleted
contracts 115,708,935 95,906,579
------------ ------------
$ (1,625,125) $ (2,416,504)
============ ============
</TABLE>
Contracts in process are included in the combined balance sheets
under
the following captions:
<TABLE>
<S> <C> <C>
November 28, February 28,
1998 1998
------------ ------------
Costs and estimated earnings in
excess of billings on
uncompleted contracts $ 2,696,555 $1,354,987
Billings in excess of costs and
estimated earnings on
uncompleted contracts 4,321,680 3,771,491
----------- -----------
$(1,625,125) $(2,416,504)
=========== ===========
</TABLE>
5. TRANSACTIONS WITH RELATED PARTIES
In addition to participation in the benefit plans described in
Note 7, the Companies are parties to a number of transactions with
their parent, Apogee.
The Companies have an arrangement whereby an affiliate of Apogee
provides various accounting and management services to the
Companies. Allocated costs for these management functions totaled
$346,989 for the period ended November 28, 1998 and $448,992 and
$506,295 for the fiscal years ended February 28, 1998 and March 1,
1997, respectively. Certain of these accounting and information
management services will continue to be provided by the Apogee
affiliate subsequent to the closing of the CompuDyne transaction
until a plan of conversion to CompuDyne systems can be completed.
Apogee provides funding to the Companies through a combination of
intercompany debt and temporary equity funding. Interest
assessments for intercompany funding deemed to be debt by Apogee
totaled $1,181,386 for the period ended November 28, 1998 and
$1,543,824 and $1,243,824 for the fiscal years ended February 28,
1998 and March 1, 1997, respectively.
Related to a contract Apogee was fulfilling, the Companies
recorded sales of $1,011,154 and costs of goods sold of $709,714
during the fiscal year ended March 1, 1997. There were no
material sales to or purchases from Apogee in periods subsequent
to fiscal 1997.
6. INCOME TAXES
A summary of the components of the provision for income taxes for
the nine months ended November 28, 1998 and the fiscal years ended
February 28, 1998 and March 1, 1997 is as follows:
<TABLE>
<S> <C> <C> <C>
November 28, February 28, March 1,
1998 1998 1997
------------ ------------ --------
Federal:
Current $ 437,577 $ 611,097 $ 831,111
Deferred (25,593) (144,225) 85,828
--------- --------- ---------
411,984 466,872 916,939
--------- --------- ---------
State:
Current 36,070 50,374 68,510
Deferred (2,110) (11,889) 7,075
--------- --------- ---------
33,960 38,485 75,585
--------- --------- ---------
Provision for income taxes $ 445,944 $ 505,357 $992,524
========= ========= =========
</TABLE>
The provision for income taxes differs from the amounts computed
by applying federal statutory rates due to the following:
<TABLE>
<S> <C> <C> <C>
November 28, February 28, March 1,
1998 1998 1997
------------ ------------ --------
Tax provision computed at the
federal statutory rate (34%) $ 534,618 $ 739,435 $960,987
Effect of foreign sales (133,174) (290,022) (45,541)
Effect of state income taxes,
net of benefits 22,074 25,015 49,130
Other 22,426 30,929 27,948
--------- --------- ---------
$ 445,944 $ 505,357 $992,524
========= ========= =========
</TABLE>
Temporary differences which create net deferred tax assets at November
28, 1998 and February 28, 1998 are as follows:
<TABLE>
<S> <C> <C>
November 28, February 28,
1998 1998
------------ ------------
Depreciation $ (208,740) $(187,975)
Inventory 159,833 220,242
Organization costs 228,948 244,480
Warranty reserve 161,943 61,902
Other accrued expenses 116,248 91,880
---------- ----------
Deferred tax assets, net $ 458,232 $ 430,529
========== ==========
</TABLE>
7. EMPLOYEE BENEFIT PLANS
Prior to November 28, 1998, the Companies participated in Apogee's
qualified defined contribution pension plan, which covers
substantially all full-time nonunion employees. Contributions to
the Plan are based on a percentage of employees' base earnings.
Apogee makes deposits with the trustee on behalf of the Companies'
participants on an annual basis. The Companies' contributions to
the Plan were $209,940, $258,589, and $234,844 for the nine months
ended November 28, 1998 and the fiscal years ended February 28,
1998 and March 1, 1997, respectively.
Prior to November 28, 1998, the Companies also participated in
Apogee's 401(k) savings plan, which allows all employees to
contribute 1% to 13% of their annual compensation subject to
Internal Revenue Service limitations. Apogee matches 30% of
employee contributions up to the first 6% contributed. The
Companies' expense related to this plan was $83,104, $100,914, and
$89,021 for the nine months ended November 28, 1998 and the fiscal
years ended February 28, 1998 and March 1, 1997, respectively.
8. OPERATING LEASES
The Companies have operating leases for buildings and equipment.
Minimum future rental payments for all operating leases having
remaining terms in excess of one year are as follows:
<TABLE>
<C> <C>
Fiscal year ending in:
1999 $ 363,015
2000 153,336
2001 31,002
---------
$ 547,353
=========
</TABLE>
Total rental expense amounted to $205,099, $236,465, and $238,945
for the nine months ended November 28, 1998 and the fiscal years
ended February 28, 1998 and March 1, 1997, respectively.
9. COMMITMENTS AND CONTINGENCIES
The Companies are party to various legal proceedings incidental to
normal operating activities. In particular, like others in the
construction industry, the Companies' construction business is
routinely involved in various disputes and claims arising out of
the construction projects. Although it is impossible to predict
the outcome of such proceedings, management of the Companies
believes that any resulting liability will not have a material
effect on its financial position or results of future operations.
10. BUSINESS COMBINATION
Effective November 28, 1998, CompuDyne acquired all of the capital
stock of Norment and Norshield from Apogee for a total purchase
price approximating $22.5 million. The transaction, which
provided for the retention by Apogee of Norment's VoiceTrack
division, certain contracts, cash, and certain scheduled
liabilities, closed November 30, 1998, subject to adjustments for
working capital as of the effective date.
Item 7(b)
PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated condensed
financial statements give effect to the December 3, 1998
acquisition of Norment and Norshield by CompuDyne Corporation.
The pro forma consolidated condensed balance sheet gives effect
to the transaction as if it had been consummated on November 28,
1998 and the pro forma consolidated condensed statements of
operations give effect to the transaction as if it had been
in effect throughout the fiscal year ended December 31, 1997 and
the nine month period ended September 30, 1998. The unaudited
pro forma financial statements have been adjusted for the
purchase method of accounting whereby the assets and liabilities
of Norment and Norshield are adjusted to estimated fair market
value, based upon preliminary estimates, which are subject to
change as additional information is obtained. The allocations of
purchase costs are subject to final determination based upon
estimates and other evaluations of fair market value. Therefore,
the allocations reflected in the following unaudited pro forma
financial statements may differ from the amounts ultimately
determined. The information should be read in conjunction with
the accompanying notes and the separate financial statements of
Norment and Norshield included herein.
The following unaudited pro forma condensed statements of operations
are based on assumptions and estimates and are not necessarily
indicative of what the actual results of operations of CompuDyne
would have been assuming such transactions had been completed as
of January 1, 1997, nor do they purport to represent the results
of operations for future periods. Further, the unaudited pro
forma condensed statement of operations for the interim period
ended September 30, 1998 is not necessarily indicative of the
results of operations for the full year.
<TABLE>
<CAPTION>
COMPUDYNE CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(In thousands, except share data)
As of
As 11/28/98
of 9/30/98 Norment/ Adjust- Pro
CompuDyne Norshield ments Forma
--------- --------- ------ -----
<S> <C> <C> <C> <C>
Cash and cash
equivalents $ - $ 12 $ (2)[3] $ 10
Accounts receivable
trade 4,648 15,049 - 19,697
Less - allowance for
doubtful accounts (35) (104) - (139)
Accounts receivable
long term contracts 1,306 5,224 - 6,530
Finished goods inventory 89 - - 89
Work in progress 291 2,697 350[1] 3,338
Raw materials and
supplies 1,052 3,013 - 4,065
Less - inventory
reserve (310) - - (310)
Prepaid expenses 97 18 - 115
Other - 458 - 458
----- ----- ----- -----
Current Assets 7,138 26,367 348 33,853
Noncurrent debt of
related parties 60 - - 60
Deferred tax asset 144 - - 144
Property, plant &
equipment at cost 1,612 6,289 (653)[1] 7,248
Less accumulated
depreciation (781) (2,501) 2,501[1] (781)
Goodwill and other
intangible assets 62 - - 62
Other assets 78 - (50)[2] 28
------- -------- ------- -------
TOTAL ASSETS $ 8,313 $ 30,155 $ 2,146 $40,614
======= ======== ======= =======
Accounts payable
- trade $ 2,141 $ 2,969 $ - $ 5,110
Accounts payable
- interco 6 - - 6
Accounts payable
- other 23 - 300[1] 323
Bank loan payable 1,702 - 98[1] 1,800
Accrued expenses 923 1,112 - 2,035
Billings in excess
of costs - 4,322 - 4,322
Accrued income taxes 246 - - 246
Current portion of notes
payable - related
parties 20 - - 20
------ ------ ---- ------
Current Liabilities 5,061 8,403 398 13,862
Long term pension
liability 494 - - 494
Long term debt
(LaSalle) - - 11,500[1] 11,500
Long term debt to
related parties 20 - - 20
Subordinated note
(Blair) - - 9,000[1] 9,000
Other long term
liabilities 191 - - 191
------- ------- ------- -------
TOTAL LIABILITIES $ 5,766 $ 8,403 $20,898 $35,067
Common stock 3,093 - 807[1] 3,900
Other capital 8,203 - 2,193[1] 10,396
Receivable
- management (90) - - (90)
Treasury shares (120) - - (120)
Retained earnings (8,539) 21,752 (21,752)[4] (8,539)
------- ------- ------- -------
TOTAL EQUITY 2,547 21,752 (18,752) 5,547
------- ------- ------- -------
TOTAL LIABILITIES
AND EQUITY $ 8,313 $30,155 $ 2,146 $40,614
======= ======= ======= =======
</TABLE>
See Notes to Unaudited Pro forma Consolidated financial Statements
COMPUDYNE CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(TWELVE MONTHS)
(In thousands, except share data)
<TABLE>
<CAPTION>
Twelve Months Ended
12/31/97 2/28/98
Norment/ Adjust- Pro
CompuDyne Norshield ments Forma
--------- --------- ------- -----
<S> <C> <C> <C> <C>
Net sales $ 20,016 $ 75,419 $ - $ 95,435
Cost of goods sold 16,538 60,323 - 76,861
-------- -------- ----- --------
Gross margin 3,478 15,096 - 18,574
Selling, general and
administrative expenses 2,726 11,440 (147) 14,019
[5,6,8]
Research and development 172 - 172
Interest expense 62 1,544 656[7] 2,262
Other income (20) - - (20)
------- ------- ----- ------
Income before tax provision 538 2,112 (509) 2,141
Income tax provision (benefit) (158) 505 (394)[9] (47)
------- ------- ----- ------
Net income $ 696 $ 1,607 $(115) $2,188
======= ======= ===== ======
Basic earnings per share:
Net income $ .23 $ .57
Weighted average number of
common shares outstanding 3,005 4,063
Diluted earnings per share:
Net income $ .16 $ .49
Weighted average number of
common shares and
equivalents 4,364 4,124
See Notes to Unaudited Pro forma Consolidated Financial Statements.
</TABLE>
COMPUDYNE CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(NINE MONTHS)
(In thousands, except share data)
<TABLE>
<CAPTION>
Nine Months Ended
9/30/98 11/28/98
Norment/ Adjust- Pro
CompuDyne Norshield ments Forma
--------- --------- ------- -------
<S> <C> <C> <C> <C>
Net sales $18,183 $58,652 $ - $76,835
Cost of goods sold 14,907 46,755 - 61,662
------- ------- ------ -------
Gross margin 3,276 11,897 - 15,173
Selling, general and
administrative expenses 2,298 9,188 (120) 11,366
[10,11,13]
Research and development 181 - - 181
Interest expense 82 1,181 469[12] 1,732
Other income (18) - - (18)
------- ------- ------ ------
Income before tax provision 733 1,528 (349) 1,912
Income tax provision (benefit) 228 446 (286)[14] 388
------- ------- ------ ------
Net income $ 505 $ 1,082 $ (63) $1,524
======= ======= ====== ======
Basic earnings per share:
Net income $ .13 $ .40
Weighted average number
of common shares
outstanding 3,845 4,849
Diluted earnings per share:
Net income $ .11 $ .34
Weighted average number
of common shares
and equivalents 4,447 5,031
See Notes to Unaudited Pro forma Consolidated Financial Statements.
</TABLE>
COMPUDYNE CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
The adjustments to the unaudited pro forma consolidated balance
sheet as of 9/30/98 are as follows:
(1) To reflect payment of purchase price of $22,500,000 with bank loans
and the sale of unregistered common stock.
(2) To accrue transaction costs of acquisition.
(3) To recognize cash received for sale of stock to financier and to pay
down bank line of credit with cash from stock sold to financier.
(4) To eliminate the equity of Norment and Norshield.
The adjustments to the unaudited pro forma consolidated statement of
operations for the year ended December 31, 1997 are as follows:
(5) To record depreciation expense associated with acquired assets.
(6) To remove intercompany charges from Norment's former parent.
(7) To record interest expense related to the bank financing for the
acquisition.
(8) To record expense for administrative services provided by Norment's
former parent.
(9) To adjust the income tax provision.
The adjustments to the unaudited pro forma consolidated statement of
operations for the nine months ended September 30, 1998.
(10) To record depreciation expense associated with acquired assets.
(11) To remove intercompany charges from Norment's former parent.
(12) To record interest expense related to the bank financing for the
acquisition.
(13) To record expense for administrative services provided by Norment's
former parent.
(14) To adjust the income tax provision.
NOTE 2
The pro forma statements of operations exclude the estimated
non-recurring merger costs of approximately $1,400,000.
Item 7(c) of the Registrant's Current Report on Form 8-K is
amended by adding to the list of exhibits set forth therein a new
Exhibit 23 as follows:
Exhibit (23) Consent of Arthur Andersen LLP, dated February 16, 1999,
to use in this Report on Form 8-K of its Report, dated January 13, 1999,
on the financial statements of Norment Industries, Inc. and Norshield
Corporation.
--------------------------------
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed by
the undersigned hereto duly authorized.
COMPUDYNE CORPORATION
Dated: February 16, 1999 By: /s/ William C. Rock
William C. Rock
Its: Chief Financial Officer
INDEX TO EXHIBITS
Exhibit (23) Consent of Arthur Andersen LLP, dated February 16,
1999.
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference of our report, dated January 13, 1999, on the combined
balance sheets of Norment Industries, Inc. and Norment Corporation as of
November 28, 1998 and February 28, 1998, and the related combined
statements of income, net assets and cash flows for the nine month period
ended November 28, 1998 and for each of the two fiscal years in the
period ended February 28, 1998 included in this Amendment No. 1 to the
Current Report on Form 8-k of CompuDyne Corporation, which Current Report
was originally dated December 11, 1998, into the previously filed
Registration Statement of CompuDyne Corporation on Form S-8 with respect
to the CompuDyne Corporation 1986 Stock Incentive Compensation Plan
Benefit Plan.
Arthur Andersen LLP
Birmingham, Alabama
February 16, 1999
