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North & Webster Responds To CSP Inc.'s Letter To Stockholders

NEW YORK, Feb. 5, 2013 /PRNewswire/ -- North & Webster, LLC ("North & Webster") issued a statement today expressing its disappointment with the Board of Directors of CSP Inc. (NasdaqGM: CSPI) ("CSP" or the "Company") for its apparent attempt to paint a rosier picture than reality of CSP's Fiscal 2012 fourth quarter results in a letter sent to the Company's stockholders on February 4, 2013.  In the letter, CSP claims to have achieved $4.9 million in fourth quarter net income, but North & Webster believes these numbers do not hold up to scrutiny when you consider that:

  • $2.6 million, or more than half, of this $4.9 million number was merely the non-cash write-up of a deferred tax asset, not actual earned income, and is thus misleading for the Company to use in its attempt to boost management's performance and credibility;
  • $1.1 million of this $4.9 million came directly from life insurance proceeds, as stated by CFO Gary Levine on the December 13, 2012 earnings conference call; and
  • North & Webster estimates that at least $1.34 million of this $4.9 million came from "stuffing the channel" as the Company freely admitted in a December 13, 2012 press release where President and Chief Executive Officer, Victor Dellovo, stated, "Looking ahead, we expect that the recording of royalties for nine E-2D planes in 2012 versus only five that we had expected for fiscal 2012 will create a difficult year-over-year comparison in fiscal 2013."  The Company booked revenues from nine planes in 2012, and two in the 4 th quarter.

North & Webster estimates that the real income number for the 4 th quarter was more like a loss of $140,000 and earnings for the full Fiscal 2012 were more like $1.1 million. To throw more salt on stockholder wounds, the CSP Board granted management approximately $1,314,693 in bonuses (ranging from 150-367% of targeted bonuses) based on what North & Webster believes were inflated numbers. These Board-approved bonuses doubled management's yearly compensation. 

North & Webster would also like to correct the misleading statements by CSP about our practices.  North & Webster has run three proxy contests and has successfully achieved board representation and pro-shareholder change in all three situations.  These statements about us are a continuation of CSP's strategy to mislead stockholders and distract from the long history of poor performance at the Company.

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