UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
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 0-29798
CompuDyne Corporation
(Exact name of registrant as specified in its charter)
Nevada 23-1408659
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7249 National Drive, Hanover, Maryland 21076
(Address of principal executive offices)
Registrant's telephone number, including area code: (410) 712-0275
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 November 15, 2000, a total of 5,336,519 shares of Common Stock,
$.75 par value, were outstanding.
COMPUDYNE CORPORATION AND SUBSIDIARIES
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements - Unaudited
Consolidated Balance Sheets - September 30, 2000
and December 31, 1999 2-3
Consolidated Statements of Operations -
Three Months and Nine Months Ended September 30, 2000 and 1999 4
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 2000 and 1999 5
Notes to Consolidated Financial Statements 6-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11-13
Item 3. Quantitative and Qualitative Disclosures
About Market Risks 14
Part II. Other Information 16
Signature 17
Page Two
COMPUDYNE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
(unaudited)
<TABLE>
<S> <C> <C>
September 30, December 31,
2000 1999
ASSETS
Current Assets:
Cash and cash equivalents $ 650 $ 701
Accounts receivable, net 29,575 33,833
Costs in excess of billings 5,349 5,284
Inventories:
Work in process 1,294 705
Raw materials and supplies 3,303 3,933
------- -------
Total inventories 4,597 4,638
Deferred tax assets 412 331
Prepaid expenses and other current assets 761 506
------- -------
Total Current Assets 41,344 45,293
------- -------
Property, plant and equipment, at cost 8,337 7,613
Less: accumulated depreciation
and amortization 2,254 1,262
------- -------
Net property, plant and equipment 6,083 6,351
------- -------
Capitalized software, net 2,154 2,235
Deferred tax assets 93 237
Goodwill, net 827 852
Other intangible assets 2,303 2,385
Other assets 89 94
------- -------
Total other assets 5,466 5,803
------- -------
Total Assets $ 52,893 $ 57,447
======= =======
</TABLE>
See Notes to Consolidated Financial Statements
Page Three
LIABILITIES AND SHAREHOLDERS' EQUITY
(dollars in thousands, except per share data)
(unaudited)
<TABLE>
<S> <C> <C>
September 30, December 31,
2000 1999
LIABILITIES
Current Liabilities:
Accounts payable $ 9,037 $ 11,827
Accrued payroll expense 2,393 3,040
Accrued interest 43 74
Other accrued expenses 1,380 1,319
Billings in excess of contract
costs incurred 9,282 9,498
Deferred losses/revenue
on acquired contracts - 859
Current portion of long term debt 2,561 2,243
------- -------
Total Current Liabilities 24,696 28,860
Term loan 3,725 5,500
Subordinated notes 9,512 9,910
Industrial revenue bond 1,820 1,960
Warranty reserves 555 532
Long- term pension liability - 489
Other liabilities 183 166
------- -------
Total Liabilities 40,491 47,417
------- -------
SHAREHOLDERS' EQUITY
Common stock, par value $.75 per share:
10,000,000 shares authorized;
5,468,566 shares issued at
September 30, 2000 and 5,412,866 shares
issued at December 31, 1999 4,101 4,060
Other capital 11,831 11,734
Treasury shares, at cost: 133,447 shares at
September 30, 2000 and 88,655 shares at
December 31, 1999 (555) (207)
Receivable from management - (30)
Accumulated deficit (2,975) (5,527)
------- -------
Total Shareholders' Equity 12,402 10,030
------- -------
Total Liabilities and Shareholders' Equity $ 52,893 $ 57,447
======= =======
</TABLE>
See Notes to Consolidated Financial Statements
Page Four
COMPUDYNE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
Net sales $ 30,430 $ 27,827 $ 94,365 $ 77,511
Cost of sales 24,307 22,354 76,138 62,650
------- ------- ------- -------
Gross margin 6,123 5,473 18,227 14,861
Selling, general and
administrative expenses 4,145 3,887 12,523 10,711
Research and development 39 - 129 81
------- ------- ------- -------
Operating income 1,939 1,586 5,575 4,069
Other (income) expense
Interest expense 468 573 1,514 1,676
Other income (42) (78) (133) (369)
------- ------- ------- -------
Total other
(income) expense, net 426 495 1,381 1,307
------- ------- ------- -------
Income before income
tax provision 1,513 1,091 4,194 2,762
Income tax provision 591 437 1,641 1,083
------- ------- ------- -------
Net income $ 922 $ 654 $ 2,553 $ 1,679
======= ======= ======= =======
Basic earnings per share $ .17 $ .12 $ .48 $ .32
======= ======= ======= =======
Weighted average number of
common shares outstanding 5,352 5,290 5,346 5,214
======= ======= ======= =======
Diluted earnings per share $ .15 $ .11 $ .42 $ .29
======= ======= ======= =======
Weighted average number of
common shares and equivalents 6,015 5,934 6,049 5,856
======= ======= ======= =======
</TABLE>
See Notes to Consolidated Financial Statements
Page Five
COMPUDYNE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<S> <C> <C>
Nine Months Ended
September 30,
2000 1999
Cash flows from operating activities:
Net income $ 2,553 $ 1,679
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation and amortization 1,392 1,079
Deferred income taxes 63 -
Gain on sale of assets (15) (170)
Changes in assets and liabilities:
Accounts receivable 4,258 560
Costs in excess of billings (65) (722)
Inventories 41 (820)
Prepaid expenses (272) (30)
Other assets (72) (158)
Accounts payable (2,789) 1,282
Accrued liabilities (906) 1,133
Accrued income taxes 289 777
Billings in excess of costs (216) 258
Other liabilities (1,766) (620)
------- -------
Net cash flows provided by operations 2,495 4,248
------- -------
Cash flows from investing activities:
Additions to intangibles (41) -
Additions to property, plant and equipment (724) (2,801)
Sale of MicroAssembly assets - 1,400
Purchase of CorrLogic - (1,170)
------- -------
Net cash flows used in investing activities (765) (2,571)
------- -------
Cash flows from financing activities:
Sale of common stock 138 24
Purchase of treasury stock (209) (56)
Proceeds from bond issuance - 2,100
Repayment of long-term debt (1,710) (3,750)
Collection of related party debt - 40
Repayment of related party debt - (35)
------- -------
Net cash used in financing activities (1,781) (1,677)
------- -------
Net decrease in cash (51) -
Cash and cash equivalents at beginning of period 701 1,528
------- -------
Cash and cash equivalents at end of period $ 650 $ 1,528
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 1,531 $ 1,590
Income taxes $ 1,003 $ 321
</TABLE>
See Notes to Consolidated Financial Statements
Page Six
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.
The consolidated balance sheet as of December 31, 1999 has been derived
from the Company's December 31, 1999 audited financial statements.
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,
1999.
New Accounting Pronouncements:
In May 1999, SFAS No. 137 was issued to defer the implementation of
SFAS No. 133 "Accounting for Derivative Instruments and Hedging
Activities," for one year. SFAS No. 133 establishes standards for the
accounting and reporting of derivative instruments and hedging activities
and requires that all derivative instruments embedded in other contracts
be measured at fair value and recognized as assets or liabilities in the
financial statements. Also, in June 2000, SFAS No, 138 "Accounting for
Certain Derivative Instruments and Certain Hedging Activities, an
amendment of FASB No. 133," was issued. SFAS No. 138 amends the
accounting and reporting standards of SFAS No, 133 for certain derivative
instruments and certain hedging activities. These statements are
effective for all annual and interim periods beginning after June 15,
2000. The Company does not currently believe the adoption of SFAS
No. 133 and No. 138 will have a material effect on its financial position
or results of operations.
In May 2000, the Emerging Issues Task Force reached a consensus on EITF
Issue No.00-14: "Accounting for Certain Sales Incentives," which
addresses the recognition, measurement and income classification for
sales incentives offered voluntarily by vendors, without costs to
consumers, as a result of a single exchange transaction. The Company
will be required to and will adopt EITF Issue No. 00-14 in the fourth
quarter of 2000. The Company is in the process of evaluating the
potential impact of this accounting issues consensus on its financial
position and results of operation.
Page Seven
In March 2000, the Financial Accounting Standards Board issued
Interpretation No.44, "Accounting for Certain Transactions Involving
Stock Compensation, an Interpretation of APB Opinion No. 25," which
clarifies the application of Opinion 25 for certain issues including:
(1) the definition of an employee for purposes of applying APB Opinion
25, (2) the criteria for determining whether a plan qualifies as a
noncompensatory plan, (3) the accounting consequences of various
modifications to the terms of a previously fixed stock option or award
and (4) the accounting for an exchange of stock compensation awards in a
business combination. The Company does not expect that the adoption of
this interpretation will have a material impact on the financial
position, results of operation and presentation of its financial
statements.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements," which provides guidance on the recognition, presentation and
disclosure of revenue in financial statements. The guidelines in SAB No.
101 must be adopted by the fourth quarter of 2000. The Company does not
expect that the adoption of this interpretation will have a material
impact on the financial position, results of operation and presentation
of its financial statements.
Certain 1999 amounts have been reclassified to conform to the 2000
presentation.
2. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
(dollars in thousands)
<TABLE>
<S> <C> <C>
September 30, December 31,
2000 1999
U.S. Government Contracts
Billed $ 1,402 $ 1,433
Unbilled 1,711 2,636
------- -------
3,113 4,069
Commercial
Billed 21,385 23,598
Unbilled 5,486 6,568
------- -------
26,871 30,166
------- -------
Total Accounts Receivable 29,984 34,235
Less: Allowance for Doubtful Accounts (409) (402)
------- -------
Net Accounts Receivable $ 29,575 $ 33,833
======= =======
</TABLE>
Page Eight
3. COMMON STOCK AND COMMON STOCK OPTIONS
The Compensation and Stock Option Committee ("Committee") granted the
following options:
<TABLE>
<S> <C> <C> <C>
Date of Grant Number of Shares Grantee Market Price
_____________ ________________ _______ ____________
May 22, 2000 2,500 Non-Employee directors $8.813
June 14, 2000 2,000 Non-Employee directors $7.750
September 25, 2000 2,500 Non-Employee directors $7.719
Date of Grant Number of Shares Grantee Market Price
_____________ ________________ _______ ____________
Quanta SecurSystems
April 04, 2000 9,408 key employees $8.875
Norment Security Group
April 14, 2000 27,500 key employees $8.500
June 12, 2000 12,500 CorrLogic key employee $8.000
Norment Security Group
June 28, 2000 25,000 key employee $8.688
Norment Security Group
August 21, 2000 20,000 key employees $7.500
CompuDyne Corporation
September 11, 2000 20,000 key employee $7.375
</TABLE>
4. EARNINGS PER SHARE
Earnings per share are presented in accordance with SFAS No. 128,
"Earnings Per Share." This statement requires dual presentation of basic
and diluted earnings per share on the face of the income statement.
Basic earnings per share excludes dilution and is computed by dividing
income available to common shareholders by the weighted-average number of
shares outstanding for the period. Diluted earnings per share reflects
the potential dilution that could occur if securities or other contracts
to issue common stock were exercised or converted into common stock.
Page Nine
The following is a reconciliation of the amounts used in calculating
basic and diluted earnings per common share:
<TABLE>
<S> <C> <C> <C>
Per Share
Income Shares Amount
(dollars in thousands)
Basic earnings per common
share for the three months
ended September 30, 2000:
Income available to
common stockholders $ 922 5,351,827 $ .17
Effect of dilutive stock options 663,571
----------
Diluted earnings per common
share for the three months
ended September 30, 2000 $ 922 6,015,398 $ .15
--------- --------- --------
Basic earnings per common
share for the three months
ended September 30, 1999:
Income available to
common stockholders $ 654 5,289,597 $ .12
Effect of dilutive stock options 644,801
---------
Diluted earnings per common
share for the three months
ended September 30, 1999 $ 654 5,934,398 $ .11
--------- --------- --------
Per Share
Income Shares Amount
(dollars in thousands)
Basic earnings per common
share for the nine months
ended September 30, 2000:
Income available to
common stockholders $ 2,553 5,345,898 $ .48
Effect of dilutive stock options 703,193
---------
Diluted earnings per common
share for the nine months
ended September 30, 2000 $ 2,553 6,049,091 $ .42
--------- --------- --------
Basic earnings per common
share for the nine months
ended September 30, 1999:
Income available to
common stockholders $ 1,679 5,214,151 $ .32
Effect of dilutive stock options 641,474
---------
Diluted earnings per common
share for the nine months
ended September 30, 1999 $ 1,679 5,855,625 $ .29
--------- --------- --------
</TABLE>
Page Ten
5. SUBSEQUENT EVENT
On November 6, 2000, (effective October 31, 2000), CompuDyne entered into
and consummated an agreement to purchase all of the capital stock of
Fiber SenSys, Inc., an Oregon corporation. CompuDyne paid $1.65 million
in cash for all of the outstanding capital stock of Fiber SenSys, Inc.
Page Eleven
COMPUDYNE CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Third Quarter 2000 and 1999 Comparison
--------------------------------------
Net sales for the Company were $30.4 million for the third quarter of
2000, an increase of $2.6 million from $27.8 million for the third
quarter of 1999. Sales in the Corrections group were $20.8 million, a
decrease of $519 thousand from $21.3 million in 1999. Net sales for the
Federal Systems group increased $665 thousand to $3.5 million in the
third quarter of 2000, from $2.9 million in the same period in 1999.
This increase is attributable to the additional marketing resources
provided in the fourth quarter of 1999. Net sales for the Attack
Protection group were $6.1 million in the third quarter of 2000, an
increase of $2.4 million from $3.7 million for the same period in 1999.
This is due to an increase in sales to the United States State
Department for its embassy upgrade program.
CompuDyne's gross margin increased $650 thousand in the third quarter of
2000 to $6.1 million, compared to $5.5 million in the third quarter of
1999. The Corrections group increased $184 thousand to $4.4 million for
the third quarter of 2000 from $4.2 million for the third quarter of
1999. Gross margin for the Federal Systems group increased by $96
thousand from $420 thousand in the third quarter of 1999 to $516 thousand
in the third quarter of 2000. The Attack Protection group increased $371
thousand to $1.2 million for the third quarter of 2000 from $789 thousand
for the third quarter of 1999. Overall gross margins increased 11.9%,
this is in line with the overall increase in sales.
CompuDyne's selling, general and administrative expenses increased $258
thousand to $4.1 million for the third quarter of 2000 from $3.9 million
for the same period in 1999. The Corrections group was $3.1 million for
the third quarter of 2000, an increase of $57 thousand from $3.0 million
for the third quarter of 1999. The Federal Systems group selling, general
and administrative expenses were $180 thousand in the third quarter of
2000, an increase of $24 thousand from $156 thousand in the third
quarter of 1999. The Attack Protection group increased selling, general
and administrative expenses by $77 thousand to $511 thousand for the
third quarter of 2000, from $434 thousand for the same period in 1999.
CompuDyne corporate selling, general and administrative expenses
increased $100 thousand from $271 thousand in the third quarter of 1999
to $371 thousand for the third quarter of 2000. Although there were
slight increases and decreases by segment, selling, general and
administrative expense was 13.6% of sales in the third quarter of 2000
and 14.0% in the third quarter of 1999.
Research and development costs were $39 thousand for the third quarter
of 2000. No costs were incurred for R&D in the third quarter of 1999.
All research and development costs were incurred in the Federal Systems
group for current product line improvements.
Page Twelve
Interest expense was $468 thousand in the third quarter of 2000, a
decrease of $105 thousand from $573 thousand in the third quarter of
1999. This is attributable to principal payments made during the
third quarter of 1999 and scheduled installments since that date.
Net income for the third quarter of 2000 for CompuDyne was $922 thousand,
an increase of $268 thousand from $654 thousand in the third quarter of
1999. Net income for the Corrections group increased $49 thousand to
$459 thousand for the third quarter of 2000 from $410 thousand for the
third quarter of 1999. The Federal Systems group net income increased
$30 thousand to $123 thousand in the third quarter of 2000, from $93
thousand for the third quarter of 1999. Net income for the Attack
Protection group was $307 thousand for the third quarter of 2000, an
increase of $174 thousand from $133 thousand for the same period in 1999.
The unallocated corporate office costs for the third quarter increased
$15 thousand to $33 thousand in the third quarter of 2000, from $18
thousand for the third quarter of 1999.
The Company had a backlog at the end of the third quarter of 2000 of
$117 million, an increase of $18 million from $99 million at the end of
the third quarter of 1999.
Year-to-Date Comparison
-----------------------
Net sales for the Company were $94.4 million for the first nine months
of 2000, an increase of $16.9 million from $77.5 million for the first
nine months of 1999. Sales in the Corrections group were $67.4 million,
an increase of $8.5 million from $58.9 million in 1999. This increase
is primarily a result of increased revenues for the Norment Security
Group, completing new work from the backlog accumulated in 1999. Net
sales for the Federal Systems group increased $1.6 million to $9.4
million in the first nine months of 2000, from $7.8 million in the same
period in 1999. This increase is attributable to the additional
marketing resources provided in the fourth quarter of 1999. Net sales
for the Attack Protection group were $17.6 million in the first nine
months of 2000, an increase of $7.6 million from the $10.0 million for
the same period in 1999. This is due to an increase in sales to the
United States State Department for its embassy upgrade program.
MicroAssembly, which had net sales of $670 thousand in the first half of
1999, was sold on May 28, 1999.
As a result of increased sales CompuDyne's gross margin increased $3.3
million in the first nine months of 2000 to $18.2 million, from $14.9
million in the first nine months of 1999. The Corrections group
increased $2.0 million to $13.5 million for the first nine months in
2000 from $11.5 million for the first nine months of 1999. Gross margin
for the Federal Systems group increased by $384 thousand from $1.1
million in the first nine of 1999 to $1.5 million in the first nine
months of 2000. The Attack Protection group increased gross margin $1.1
million to $3.2 million for the first nine months in 2000 from $2.1
million for the first nine months of 1999. MicroAssembly, which had a
gross margin of $152 thousand in the first half of 1999, was sold on May
28, 1999.
Page Thirteen
CompuDyne's selling, general and administrative expenses increased $1.8
million to $12.5 million for the first nine months of 2000 from $10.7
million for the same period in 1999. The Corrections group was $9.2
million for the first nine months of 2000, an increase of $1.3 million
from $7.9 million for the first nine months of 1999. The Federal Systems
group selling, general and administrative expenses were $586 thousand in
the first nine months of 2000, an increase of $108 thousand from $478
thousand in the first nine months of 1999. The Attack Protection group
increased selling, general and administrative expenses by $222 thousand
to $1.5 million for the first nine months of 2000, from $1.3 million for
the same period in 1999. MicroAssembly, which had selling, general and
administrative expenses of $148 thousand in the first half of 1999, was
sold on May 28, 1999. CompuDyne corporate selling, general and
administrative expenses increased $294 thousand from $903 thousand in the
first nine months of 1999 to $1.2 million for the first nine months of
2000. This increase is primarily attributable to a total of $174
thousand in costs associated with a six month contract for public
relation services, a one time charge for a recruitment fee and the costs
incurred for a potential acquisition that has been abandoned. Although
in real dollars selling, general and administrative expenses increased,
when expressed as a percentage of sales it actually decreased 0.6% from
1999.
Research and development costs were $129 thousand for the first nine
months of 2000, an increase of $48 thousand from $81 thousand in 1999.
All research and development costs for both periods were spent in the
Federal Systems group for improvements to the current product line of
Data Control Systems, a division of Quanta Systems Corporation.
Interest expense was $1.5 million in the first nine months of 2000, a
decrease of $162 thousand from $1.7 million in the first nine months of
1999. This is attributable to principal payments made during the third
quarter of 1999 and scheduled installment payments since that date.
Net income for the first nine months of 2000 for CompuDyne was $2.6
million, an increase of $873 thousand from $1.7 million in the first nine
months of 1999. Net income for the Corrections group increased $339
thousand to $1.5 million for the first nine months of 2000, from $1.2
million for the first nine months of 1999. CorrLogic, a unit within the
Corrections group, in the first six months of 2000 had the major portion
of its operating expenses charged against a reserve established at the
time of its acquisition for anticipated losses to be incurred on acquired
contracts. This amounted to $982 thousand, net of tax benefit, during
the first half of 2000 and at June 30, 2000, the reserve was fully
utilized. Favorable operating results going forward from this unit is
dependent on its ability to successfully compete for and win profitable
contracts. CorrLogic currently has a number of proposals outstanding
that if contract awards do occur should improve profitability going
forward. The Federal Systems group net income increased $150 thousand
to $310 thousand in the first nine months of 2000, from $160 thousand for
the first nine months of 1999. Net income for the Attack Protection group
was $746 thousand for the first nine months of 2000, an increase of $503
thousand from $243 thousand for the same period in 1999. MicroAssembly's
contribution to net income decreased by $101 thousand, since it was sold
on May 28, 1999.
Page Fourteen
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operations was $2.5 million in the first three
quarters of 2000, a decrease of $1.7 million from $4.2 million provided
by operations in the first three quarters of 1999. The primary
operational uses of cash include payments to decrease accounts payable
and other accrued liabilities of $2.8 million and $900 thousand,
respectively and a decrease in other liabilities of $1.8 million. These
were partially offset by decreases in accounts receivable of $4.3
million. Property and equipment purchases totaled $724 thousand. The
primary financing activities were principal payments of $1.7 million in
long-term debt.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
------------------
CompuDyne used fixed and variable rate notes payable to finance its
acquisition of Norment/Norshield. These on-balance sheet financial
instruments, to the extent they provide for variable rates of interest,
expose the Company to interest rate risk, with the primary interest rate
exposure resulting from changes in the LIBOR rate used to determine the
interest rate applicable to the borrowing under the Company's loan from
LaSalle National Bank.
The information below summarizes CompuDyne's sensitivity to market risks
associated with fluctuations in interest rates as of September 30, 2000.
To the extent that the Company's financial instruments expose the Company
to interest rate risk, they are presented in the table below. The
table presents principal cash flows and related interest rates by year of
maturity of the Company's notes payable with variable rates of interest
in effect at September 30, 2000.
Page Fifteen
Financial Instruments by Expected Maturity Date
<TABLE>
<S> <C> <C> <C> <C>
Year Ending Subject to Average Subject to Average
December 31 Variable rate interest rate Fixed rate interest rate
------------- ------------- ---------- -------------
Notes Payable:
2000 $ 500,000 8.625% $ - 13.15%
2001 2,375,000 8.750% - 13.15%
2002 2,500,000 8.850% - 13.15%
2003 600,000 9.000% - 13.15%
Thereafter - - 9,000,000 13.15%
--------- ---------
Total $ 5,975,000 - $ 9,000,000 13.15%
Fair Value $ 5,975,000 - $ 9,000,000 13.15%
<S> <C> <C> <C>
Year Ending
December 31 Variable to Fixed Average Pay Rate Average Receive Rate
----------------- ---------------- --------------------
Interest Rate Swaps:
2000 $ 6,750,000 7.08% 8.66%
2001 $ 6,750,000 7.08% 8.66%
Thereafter $ -
</TABLE>
The Company used a foreign exchange contract to partially hedge its
exposure to exchange rate risk related to one firmly committed sales
contract. The foreign exchange contract was entered into for non-trading
purposes and was matched to the underlying transaction and did not
constitute speculative or leveraged positions independent of this
exposure. As most of this contract has been completed, no significant
exchange risk exists as of September 30, 2000.
Page Sixteen
Part II - Other Information
Item 6 - Exhibits and Reports on Form 8-K
(a) Financial Data Schedule
Page Seventeen
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: November 15, 2000 /s/ William C. Rock
William C. Rock
Chief Financial Officer
