Hanover company's stock falls sharply

CompuDyne shares decline 13% after lower 4Q earnings estimate

January 01, 2003|By Stacey Hirsh | Stacey Hirsh,SUN STAFF

Shares of CompuDyne Corp. fell as much as 21 percent yesterday after the Hanover security-systems maker announced that its fourth-quarter earnings would be lower than expected.

CompuDyne, which sells items such as attack-resistant doors and windows, had previously indicated that earnings for the fourth quarter would reach 23 cents per share.

But after the market closed Monday, the company announced that it would be "only nominally profitable" in the fourth quarter.

In an interview yesterday, Martin A. Roenigk, CompuDyne chairman and chief executive officer, said, "We think the fourth quarter will [show] ... nominal earnings, and by that we're really saying in the 1- to 2-cent range."

Investors reacted negatively to Monday's announcement, sending shares down 21.7 percent yesterday to $5.70 before closing at $6.29, down 99 cents, or 13.6 percent, on the Nasdaq stock market.

In October, CompuDyne lowered earnings estimates for the year to 45 cents per share, down from 60 cents to 65 cents per share.

The company would have had to earn 23 cents per share in the fourth quarter to meet the predicted 45 cents-per-share figure. The company earned 22 cents a share in the first three quarters but never issued an earnings estimate for the fourth quarter.

The company earned 2 cents per share in the third quarter, 9 cents per share in the second quarter and 11 cents per share in the first quarter.

Earnings for 2001 were 67 cents per share, or $4.1 million, on revenue of $127.4 million.

CompuDyne's fourth-quarter earnings will be released Feb. 13. Only one analyst covers the company, and he could not be reached for comment yesterday.

The company attributed the lower-than-expected estimates to three factors.

First, CompuDyne said it had management and performance problems at its West Coast regional office.

"The important thing is that it's not revenue issues, it's not pricing on the contracts," Roenigk said. "It's just that we haven't done a very good job of executing."

Roenigk said the company changed management at that office and tightened control of CompuDyne's regional operations.

The second problem was at a 75,000-square-foot plant that the company bought and filled with machinery and workers, creating overcapacity.

While the company has changed some management at that plant to deal with logistical and quality control issues, Roenigk said the fourth quarter of 2002 and some of the first quarter of this year will feel the drag of the excess capacity.

Third was a backlog in converting contract awards into revenue-generating projects.

"The bad news is that we had these problems," Roenigk said, adding that the good news is that the problems are definable and fixable.

Roenigk said the company also was adversely affected by homeland-security spending being less than expected.

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