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 1-09964
Corcap, Inc.
(Exact name of registrant as specified in its charter)
Nevada 06-1237135
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) (Zip Code)
Registrant's telephone number, including area code (203) 247-7611
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 April 30, 1994, a total of 2,929,726 shares of Common Stock, $.01 par
value, were outstanding.
CORCAP, INC.
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 6-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11-12
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 12
Signature 13
CORCAP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
March 31, December 31,
1995 1994
(Unaudited)
ASSETS
Current Assets:
Cash $ 252 $ 202
Accounts receivable, net
1,214 1,827
Inventories:
Work in process
308 260
Raw Materials and supplies
270 254
Total inventories
578 514
Other 66 37
Total Current Assets 2,110 2,580
Property, plant and equipment, at cost 705 699
Less: Accumulated depreciation (674) (672)
Net property, plant and equipment 31 27
Other Assets:
Other assets, net 102 102
Total Assets $ 2,243 $ 2,709
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable $ 1,084 $ 1,137
Customer deposits 33 92
Accrued pension costs 25 25
Accrued liabilities 642 865
Net current liabilities of
discontinued operations 900 881
Current portion of deferred
compensation 96 71
Total Current Liabilities 2,780 3,071
Deferred compensation and other
long term liabilities 381 432
Total Liabilities 3,161 3,503
STOCKHOLDERS DEFICIT
Common stock 29 29
Capital in excess of par 269 269
Minimum pension liability (556) (556)
Accumulated deficit (25,693) (25,569)
(25,951) (25,827)
Contributed capital 25,033 25,033
Total Stockholders' Equity (918) (794)
Total Liabilities and Stockholders'
Equity (Deficit) $ 2,243 $ 2,709
See Accompanying Notes to Consolidated Financial Statements
CORCAP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED 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 534 497
Operating income (loss) (106) 60
Other income (expense):
Interest expense, net (2) (1)
Other income (expense), net 3 1,397
Total other income(expense), net 1 1,398
Income (loss) from continuing operations (105) 1,458
Income tax expense - 1
Income (loss) from continuing operations (105) 1,457
Discontinued operations:
Corcap income (loss) from
operations net of tax benefit (19) 46
Net Income (loss) $ (124) $ 1,503
Weighted average common shares 2,926 2,926
Net income (loss) per common share:
Continuing operations $ (.04) $ .49
Discontinued operations - .02
Net income (loss) per share $ (.04) $ .51
See Accompanying Notes to Consolidated Condensed Financial Statements.
CORCAP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED 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 $ (105) $ 1,457
Depreciation and amortization 2 -
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 613 142
(Increase) decrease in inventories
(64) (42)
Decrease in accounts payable and other accrued
liabilities (310) (33)
Decrease in accounts payable and other accrued
liabilities, related parties - -
(Increase) decrease in other assets - 8
Decrease in long term liabilities (51) (108)
(Increase) decrease in other, net (29) (70)
Total 162 (342)
Net cash provided (used) by continuing operations 57 1,115
Income (loss) from discontinued operations (19) 46
Increase (decrease) in net current liabilities
of discontinued operations 19 321)
Increase (decrease) in net current liabilities
of discontinued operations
related parties - (22)
Increase in net non-current liabilities
of discontinued operations - 290
Net cash flows provided (used) by discontinued operations - (7)
Net cash provided (used) by operating activities - 1,108
Cash flows from investing activities:
Additions to property, plant and equipment - -
Net cash used for investing activities - -
Cash flows from financing activities:
Decrease in long-term debt - (737)
Increase in short term debt - 698
Net cash provided by (used for) financing activities - (39)
Net change 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 $ 79
Income taxes 30 5
See Accompanying Notes to Consolidated Condensed Financial Statements.
CORCAP, INC. 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 the Corcap,
Inc. ("Corcap" or the "Company")
and CompuDyne Corporation ("CompuDyne") most recent Form 10-K filings. The
management of Corcap
believes that all adjustments necessary to present a fair statement of the
results for the periods have been
included.
Principles of consolidation. The accompanying consolidated financial
statements include the accounts of Corcap,
its wholly owned subsidiaries, and its investment in CompuDyne Corporation.
Significant intercompany
transactions have been eliminated in the consolidated financial statements.
The effect of consolidating
CompuDyne with Corcap was to report CompuDyne's net sales from continuing
operations which totals $2.3
million and $2.4 million for the quarters ended March 31, 1995, and 1994,
respectively.
Income taxes. The income tax provision is based on management's estimate of
Corcap's annualized effective
federal and state tax rates.
Net income (loss) per common share. Net income (loss) per common share is
based on the weighted average
of common shares outstanding during the period, including the effect of common
stock equivalents and stock
awards where such effect would be dilutive.
BUSINESS SEGMENTS
Financial information for Corcap and CompuDyne on a separate company basis,
excluding the elimination of
adjustments made in consolidation, is as follows:
Discontinued Operations
Corcap - Formerly operated an elastomer products business.
The results of Corcap are accounted for as discontinued operations in the
Balance Sheet and the Consolidated
Statements of Operation in the financial statements due to the divestment of
the Acadia segment on July 1, 1991.
Financial results for periods prior to the date of discontinuance have been
restated. Net current liabilities and
net non-current liabilities of discontinued operations at March 31, 1995 and
December 31, 1994 consisted of the
following:
Corcap
March 31, December 31,
1995 1994
($ Thousands)
Property plant & equipment, net $ 1,031 $ 1,044
Net current liabilities 1,922) (1,823)
Deferred pension liability (9) (102)
Other non-current liabilities (900) (881)
Less current portion (900) (881)
Net non-current liabilities of
discontinued operations $ - $ -
Net assets (liabilities)
of discontinued operations, related parties $ (5) $ (5)
For the Quarters ended March 31 1995 1994
($ Thousands)
Net Sales $ - $ -
Gross Margin - -
Net income (loss) $ (19) $ 46
CompuDyne - Operates an electronics and engineering services business and home
improvement division.
March 31, December 31,
1995 1994
Current assets $ 2,110 $ 2,580
Noncurrent assets 46 42
Total assets 2,156 2,622
Current liabilities, related parties - -
Current liabilities 1,880 2,190
Non-current liabilities 381 432
Total liabilities 2,261 2,622
Net assets $ (105) $ -
For the Quarters ended March 31 1995 1994
($ Thousands)
Net Sales $ 2,331 $ 2,401
Gross Margin 428 557
Net income (loss) from:
Continuing operations (105) 1,457
Net income (loss) $ (105) $ 1,457
COMPUDYNE NOTES AND LOAN PAYABLES
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.
RELATED PARTY TRANSACTIONS
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 $22 thousand
as of March 31, 1994.
During January 1995 Corcap sold 13,500 shares of CompuDyne Common Stock under
Rule 144 of the Securities Act of
1933.
As a result of the sale of the 13,500 shares by Corcap, Corcap's ownership of
CompuDyne Common Stock decreased from
35.0% of the issued and outstanding shares of CompuDyne Common Stock as of
December 31, 1994 to 34.2% as of
March 31, 1995, and, after assuming the exercise of Warrants for 150,000 shares
of CompuDyne Common Stock (which
are presently exercisable until November 18, 1996) Corcap's ownership would be
increased to 39.8%. Pursuant to Stock
Purchase Agreements, dated August 1, 1993, between CompuDyne and five members
of management, such persons may
purchase up to an additional 125,000 shares of CompuDyne Common Stock on each
of August 1, 1995 and 1996, assuming
certain conditions are met. During 1994, the stock ownership of all members of
CompuDyne management (four persons),
increased to 13.3% of the issued and outstanding shares of CompuDyne Common
Stock, and, after assuming the exercise
of the Corcap Warrants, management's ownership would decrease to 12.1%. If
such persons purchase all of such shares,
Corcap's ownership, on a fully diluted basis, would be decreased to 35% and
management's ownership, on a fully diluted
basis, would be increased to 22.6%
CONTRACTS IN PROGRESS
Contracts in progress consist of the following:
($ 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.
CONTINGENT LIABILITIES
Corcap no longer has any long term operating leases. CompuDyne has
noncancelable operating lease commitments of
$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 March 10, 1986, the United States Environmental Protection Agency ("EPA")
notified a subsidiary of Corcap, (then
a subsidiary of Lydall) and 34 other entities that they may be potentially
responsible for response costs under the
Comprehensive Environmental Response Compensation and Liability Act ("CERCLA")
in connection with the release
of hazardous substances at a landfill located in Michigan City, Indiana
("Landfill"). On November 10, 1987, the EPA
notified the subsidiary of Corcap that it and other entities identified in the
above matter also may be potentially
responsible for the EPA's response costs in connection with a property located
adjacent to the Landfill, known as the Lin-
See Property. The EPA has indicated that it intends to expand the Landfill
matter to encompass the Lin-See Property.
No specific money claim has been made to the subsidiary of Corcap by the EPA
with regard to the Landfill matter or
the Lin-See Property, and the total cost of the remediation is not yet known.
The preliminary indications are that the
subsidiary's contribution to the waste volume at the Landfill, if any, was
approximately 0.286% of the total volume. Under
the terms of the Post-Distribution Agreement, Corcap and Lydall will share any
loss which may be sustained in these
matters based on the ratio of the total market value of the outstanding capital
stock of each company at the time the
actual liability is determined. As of December 31, 1994, Corcap's
proportionate share of any liability would have been
less than 1%.
A wholly-owned subsidiary of Corcap received a preliminary report in May 1989
from an environmental consulting firm
that certain substances are present in the soil at the site of Corcap's
Dayville, Connecticut, plant as a consequence of past
operations. Corcap's tenant was exploring the nature and distribution of those
substances to determine what remediation
action was required. On July 1, 1991, Corcap's subsidiary leased the property
to Clipper and, in connection therewith,
Clipper agreed to assume responsibility for up to $500 thousand of remediation
costs. Continued site work and
remediation analysis had been conducted by environmental engineers contracted
by Corcap, on behalf on Clipper. On
July 27, 1994 Clipper's responsibility for environmental costs ended upon the
termination of the lease in consideration
of their cancellation of a mortgage to Corcap. A final study plan was prepared
for review by the Connecticut Department
of Environmental Protection to ascertain the costs of remediation and a reserve
of $248 thousand was provided for in
the third quarter of 1994 and is included in net current liabilities of
discontinued operations. The plan has been tentatively
approved awaiting a specific work schedule.
During the third quarter of 1991, a wholly-owned subsidiary of Corcap received
notification that it may be a potential
responsible party under the North Carolina General Statutes in connection with
the closure and abatement of the
Seaboard Chemical Corporation site located in Jamestown, North Carolina.
Preliminary information supplied by the
North Carolina Department of Environment, Health and Natural Resources
indicates that, during the fall of 1986 and
early 1987, a subsidiary of Lydall, which was part of its Elastomer Products
Group, may have shipped approximately
.0001016% of the aggregate waste material located at the site. In connection
with the spinoff of Corcap from Lydall on
July 1, 1988, Corcap succeeded to the businesses and operations that were
formerly conducted by the Elastomer Products
Group of Lydall, and Corcap agreed to indemnify Lydall with respect to
liabilities arising out of the conduct of the
elastomer products business prior to the spinoff. During the third quarter of
1994 Corcap received a pro-rata invoice
from the consulting engineer for the site for approximately $500. The
environmental engineers indicated that Corcap's
potential liability may approximate $8 thousand.
During 1991, Corcap management was advised that the Internal Revenue Service
was auditing Lydall's tax returns for
certain years in which Corcap's former Acadia subsidiaries were part of Lydall.
On December 12, 1992 Lydall presented
an invoice to Corcap for $499 thousand representing final taxes and interest
paid to the IRS as a result of an audit of
Corcap entities for the years 1983 through 1988. Corcap and Lydall are
currently engaged in negotiations to settle the
amount of this liability. The entire $499 thousand amount, however, has been
recognized as a liability in Corcap's financial
statements for the years ended December 31, 1994 and 1993. In July 1991, Lydall
informed Corcap that as a result of an
audit of Corcap entities for the years 1987-1989 Lydall had calculated that
Corcap's share of the current assessment is
an additional $786 thousand. Lydall has not presented Corcap with an invoice
for that amount. Lydall an Corcap are in
negotiations to settle the first claim and the possible second claim. It is
possible that significant additional taxes could
be levied on Lydall for which Corcap would be obligated to reimburse Lydall
under the Post-Distribution Agreement.
Also under the Post-Distribution Agreement, it is possible that Lydall may be
obligated to reimburse Corcap for certain
tax benefits which it obtained as a result of including the Acadia subsidiaries
in its consolidated tax return during such
years. It is not presently possible to ascertain with any certainty the extent
to which any such liabilities, including any
liabilities arising from the Internal Revenue Service audit, will be incurred
by either company and, if incurred, the portion
of which will be allocated to Corcap or whether any such liabilities will be
covered by insurance or recoverable from
others.
On July 9, 1989 CompuDyne sold the land and building in Vienna, Virginia which
housed its Vega Division. In
conjunction with the transaction CDI, a subsidiary of CompuDyne, entered into a
five-year agreement to lease back the
Vienna property for $77 thousand a month on a triple net basis. As part of
that agreement, Corcap agreed to guarantee
certain obligations of the lessee. On November 29, 1990 two subsidiaries of
CompuDyne entered into an agreement with
Carlton Industries Inc., ("Carlton") for the sale of its Vega and OAR
operations. The terms of the agreement included
the assignment of the Vega building lease in Vienna, Virginia to Carlton. In
March, 1991, Vega Precision Laboratories,
Inc. ("VPL"), a subsidiary of Carlton, negotiated a rent deferral agreement
whereby $25 thousand of the rent plus 10%
on that amount, would be deferred each month until the end of December, 1991,
after which VPL agreed to pay such
deferred amount at not less than $10 thousand a month in 1992 and 1993. CDI
remained as the primary lessee and
Corcap remained as guarantor. On December 31, 1991, CDI filed a voluntary
petition in bankruptcy under Chapter 7 of
the United States Bankruptcy Code (See "Information Regarding
CompuDyne-Description of Business"). On June 18,
1993 Carlton Industries was sold to Herley Industries, Inc. who acquired VPL.
Neither the bankruptcy of CDI or the sale
of Carlton affected Corcap's position as guarantor. The lease expired on June
30, 1994, the building was razed and the
Company has not been made aware of any defaults on the lease.
Corcap and its subsidiaries including CompuDyne are 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Corcap had a net loss for the 1995 first quarter of $124 thousand compared with
income of $1.503 million for the quarter
ended March 31, 1994. 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. The discontinued
operations of Corcap accounted for a loss of $19 thousand.
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.
Corcap had a loss from discontinued operations which represented the costs of
operating the Dayville plant less a gain
on sale of CompuDyne stock sold during the quarter.
FINANCIAL CONDITION
At the end of the 1994 first quarter Corcap's consolidated working capital
deficiency which includes $900 thousand of
discontinued operations increased to $670 thousand from a deficiency of $491
thousand at December 31, 1994. $161
thousand decrease was primarily due to CompuDyne's loss for the quarter of $105
thousand and a reduction of deferred
compensation of $51 thousand and an increase in fixed assets of $7 thousand.
Corcap had a decrease in working capital
due to the loss for the quarter.
Corcap's Continued Existence
Due to the disposition of assets in 1990 and 1991, Corcap's remaining assets
are CompuDyne Common Stock and the
Dayville Property. CompuDyne is currently prohibited under state law from
paying dividends because its assets do not
exceed its liabilities. Consequently, Corcap does not have any revenue or cash
flow. Corcap is obligated to make quarterly
payments to its qualified retirement plans. During 1992, Corcap was unable to
make the last required quarterly payment
to the Plans and was unable to make any payments during 1993 and 1994 which
caused the Plans to have an unwaived
funding deficiency with respect to the unpaid quarterly amounts, subjecting
Corcap to excise tax liability under the
Internal Revenue Code of 1986, as amended, of at least 10% of the funding
deficiency. On March 21, 1995 Corcap filed
an application with the Internal Revenue Service requesting a waiver of the
minimum funding standard. In addition,
Corcap has a number of contingent liabilities, including a liability to Lydall
for up to $499 thousand as a result of an IRS
audit and an additional pending $786 thousand which has not been recorded. The
Board of Directors of Corcap is
continuing to consider various options that may enable Corcap to meet its
obligations and to serve the best interests of
its shareholders.
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a)28.1 CompuDyne Corporation's Form 10-Q for the quarter ended March 31,
1995.
(b) Reports on Form 8-K
None
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.
CORCAP, INC.
Date: May 10, 1995 /s/ Norman Silberdick
Norman Silberdick
President and (Chief
Accounting Officer)
INDEX TO EXHIBITS
Page number
28.1 CompuDyne Corporation's Form 10-Q for the quarter ended March 31, 1995.
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.
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
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%
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.
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
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)
INDEX TO EXHIBITS
Computation of Net Income Per Common Share
