8-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

     Date of report (Date of earliest event reported)           March 8, 2006

Safeguard Scientifics, Inc.

(Exact Name of Registrant as Specified in Charter)

Pennsylvania	1-5620	23-1609753
(State or Other Jurisdiction	(Commission	(IRS Employer
of Incorporation)	File Number)	Identification No.)

435 Devon Park Drive, 800 Building, Wayne, PA	19087
(Address of Principal Executive Offices)	(Zip Code)
Registrant’s telephone number, including area code	610-293-0600

Not applicable

(Former Name or Former Address, if Changed Since Last Report)

     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

PRESS RELEASE DATED MARCH 8, 2006

ITEM 2.02. Results of Operations and Financial Condition

On March 8, 2006, Safeguard Scientifics, Inc. (“Registrant”) issued a press release setting forth the Registrant’s financial information for the fourth quarter and year ended December 31, 2005. A copy of Registrant’s press release is attached hereto as Exhibit 99.1 and hereby incorporated by reference.

This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (“Exchange Act”) or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

ITEM 9.01. Financial Statements and Exhibits

(c) Exhibits

99.1     Press Release dated March 8, 2006

SIGNATURES

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 hereunto duly authorized.

	Safeguard Scientifics, Inc.
Dated: March 8, 2006	By:	STEVEN J. FEDER
		Steven J. Feder
		Senior Vice President and General Counsel

EX-99.1

EXHIBIT 99.1

CONTACT:	Christopher J. Davis
	Executive Vice President, Chief Administrative & Financial Officer
	Safeguard Scientifics, Inc.
	610-293-0600

SAFEGUARD ANNOUNCES 29% INCREASE
IN FOURTH QUARTER 2005 REVENUES

--Profitable Quarter From Well-Timed Exits and Strong Operating Performance--

Wayne, PA, March 8, 2006 – Safeguard Scientifics, Inc. (NYSE: SFE) today announced its operating results for the fourth quarter and fiscal year 2005.

Safeguard reported net income of $2.3 million in the fourth quarter on consolidated revenues of $53.9 million, a 29% increase from revenues of $41.8 million in the fourth quarter last year. This year’s fourth quarter included $2.0 million of revenue from Acsis, which was acquired in December of 2005.

“We had an outstanding fourth quarter that generated profit from well-timed exits and strong operating performances from our partner companies,” stated Peter J. Boni, President and Chief Executive Officer. “In addition, we completed our first major acquisition since I joined Safeguard and we continue to evaluate a robust deal pipeline to identify companies which we believe can generate significant long-term value for our shareholders. We believe that the execution of our strategy, coupled with the new leadership of our Life Sciences and Information Technology groups, is producing results and providing us with the foundation we need to achieve our goals for 2006.”

Alliance Consulting, which provides business intelligence solutions to Fortune 2000 clients, achieved a 13% increase in fourth quarter revenue compared to the prior year, as a result of higher margin offerings combined with new services such as master data management and global delivery.

At Mantas, a behavior detection software solutions company, revenues grew 29% over the prior year fourth quarter, reflecting growth from new and existing global clients and increased product license acceptances.

Pacific Title, providing digital post-production and archival services to the motion picture industry, saw revenues in the fourth quarter increase 15% over last year. The strong increase was related to increases in traditional trailer production and scan and record as well as revenue from two new business lines, digital intermediate and archival services.

Clarient (NASDAQ: CLRT), a comprehensive diagnostics company, announced a total revenue increase of 109% from the fourth quarter of the prior year. Strong growth in diagnostic lab services, as well as increased sales of its ACIS® automated cellular imaging systems sales, drove this dramatic improvement.

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Laureate Pharma, offering bioprocessing manufacturing outsourcing services to support the development and commercialization of biopharmaceutical products, showed strong growth with revenues increasing 37% compared to the third quarter of 2005. Revenues from new clients fueled their performance.

Safeguard’s consolidated net loss from continuing operations in the fourth quarter of 2005 declined by 74% to $5.5 million from $20.7 million in the fourth quarter of 2004. Other income included a $6 million gain from the sale of private equity holdings. Discontinued operations in the fourth quarter of 2005 included a $7.7 million gain from the sale of Laureate Pharma’s underutilized Totowa, New Jersey operations.

“We are very pleased with the operating performance of our partner companies in the fourth quarter,” stated Christopher J. Davis, Executive Vice President and Chief Financial and Administrative Officer. “In addition to solid operating improvement across our partner companies, this is the fourth consecutive quarter of strong year over year growth in quarterly consolidated revenues – 10% in Q1, 20% in Q2, 28% in Q3 and 29% in Q4. We believe we are well-positioned to deliver long-term value to our shareholders.”

For the year ended December 31, 2005, Safeguard’s consolidated revenues were $186 million, up 22% from $153 million in 2004. Net loss in 2005 improved to $32.1 million, a 42% reduction from the prior year loss of $54.8 million.

Conference Call

A live web cast and audio presentation to discuss Safeguard’s fourth quarter earnings, business, and financial outlook with accompanying slides will begin at 9:00am EST, Thursday, March 9. The live web cast can be accessed at Safeguard’s web site http://www.safeguard.com under the Investor Relations section. Participants are encouraged to visit the site prior to the call to assure that the necessary audio applications are downloaded and installed. A replay of this web cast will be available at the site through March 8, 2007.

About Safeguard

Safeguard Scientifics, Inc. (NYSE: SFE) builds value in high-growth, revenue-stage information technology and life sciences businesses. Safeguard provides growth capital as well as a range of strategic, operational and management resources to our partner companies. Safeguard participates in expansion financings, corporate carve-outs, management buyouts, recapitalizations, industry consolidations and early-stage financings. For additional information, visit www.safeguard.com.

Forward-Looking and Cautionary Statements

Except for the historical information and discussions contained herein, statements contained in this release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Our forward-looking statements are subject to risks and uncertainties. These forward-looking statements that could cause actual results to differ materially, include, among others, managing rapidly changing technologies, limited access to capital, competition, the ability to attract and retain qualified employees, the ability to execute our strategy, the uncertainty of the future performance of our companies, acquisitions and dispositions of companies, the inability to manage growth, compliance with government regulations and legal liabilities, additional financing requirements, labor disputes, the effect of economic conditions in the business sectors in which our companies operate, and other uncertainties described in the Company’s filings with the Securities and Exchange Commission. Many of these factors are beyond our ability to predict or control. In addition, as a result of these and other factors, our past financial performance should not be relied on as an indication of future performance. The Company does not assume any obligation to update any forward-looking statements or other information contained in this press release.

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Safeguard Scientifics, Inc.
Condensed Consolidated Balance Sheets
(in thousands)

	December 31,		December 31,
	2005		2004
Assets
Current Assets
Cash and cash equivalents, restricted cash and marketable securities - Parent	$	141,168	$	162,378
- Subsidiaries		19,503		19,170
Restricted marketable securities		3,805		3,771
Accounts receivable, net		49,656		36,997
Prepaid expenses and other current assets		6,122		9,599
Assets of discontinued operations		—		795
Total current assets		220,254		232,710
Property and equipment, net		39,688		36,118
Ownership interests in and advances to companies		17,897		35,311
Long-term marketable securities		3,311		11,964
Long-term restricted marketable securities		9,457		13,045
Intangible assets, net		15,618		10,594
Goodwill		100,469		88,383
Other		9,131		12,483
Assets of discontinued operations		375		8,631
Total Assets	$	416,200	$	449,239
Liabilities and Shareholders’ Equity
Lines of credit	$	14,523	$	11,636
Current portion of convertible senior debentures		5,000		—
Current maturities of long-term debt		3,380		3,820
Other current liabilities		50,420		45,418
Liabilities of discontinued operations		1,119		1,608
Total current liabilities		74,442		62,482
Long-term debt		5,170		11,210
Minority interest		10,478		11,652
Other long-term liabilities		16,135		12,665
Convertible senior debentures		145,000		150,000
Total shareholders’ equity		164,975		201,230
Total Liabilities and Shareholders’ Equity	$	416,200	$	449,239

Certain prior year amounts have been reclassified to conform to the current year presentation.

Safeguard Scientifics, Inc.
Condensed Consolidated Statements of Operations
(in thousands except per share amounts)

	Three Months Ended December 31,						Twelve Months Ended December 31,
	2005			2004			2005			2004
Revenue
Product sales	$	6,697		$	2,630		$	13,380		$	6,998
Service sales		47,188			39,150			172,836			145,972
Total revenue		53,885			41,780			186,216			152,970
Operating Expenses
Cost of sales - product		2,053			1,219			4,286			4,342
Cost of sales - service		33,715			28,788			122,624			101,185
Selling, general and administrative		23,686			21,329			85,859			90,330
Research and development		3,058			2,565			10,534			11,028
Purchased in-process research & development		2,183			—			2,183			89
Amortization of intangibles		840			775			3,589			3,414
Total operating expenses		65,535			54,676			229,075			210,388
Operating loss		(11,650	)		(12,896	)		(42,859	)		(57,418	)
Other income (loss), net		5,122			(752	)		7,338			38,804
Recovery (impairment) - related party		288			(3,400	)		28			(3,400	)
Interest Income		1,383			1,072			5,039			2,628
Interest expense		(1,740	)		(1,875	)		(6,512	)		(9,761	)
Equity loss		(591	)		(5,461	)		(6,597	)		(14,534	)
Minority interest		1,656			2,543			6,356			8,428
Net loss from continuing operations before income taxes		(5,532	)		(20,769	)		(37,207	)		(35,253	)
Income tax benefit		74			81			43			24
Net loss from continuing operations		(5,458	)		(20,688	)		(37,164	)		(35,229	)
Income (loss) from discontinued operations, net of income taxes		7,800			2,086			5,094			(19,591	)
Net Income (Loss)	$	2,342		$	(18,602	)	$	(32,070	)	$	(54,820	)
Basic net loss per share from continuing operations	$	(0.05	)	$	(0.17	)	$	(0.31	)	$	(0.29	)
Basic net income (loss) per share from discontinued operations		0.07			0.02			0.04			(0.17	)
Basic net income (loss) per share	$	0.02		$	(0.15	)	$	(0.27	)	$	(0.46	)
Diluted net loss per share from continuing operations	$	(0.05	)	$	(0.17	)	$	(0.31	)	$	(0.29	)
Diluted net income (loss) per share from discontinued operations		0.07			0.02			0.04			(0.17	)
Diluted net income (loss) per share (a)	$	0.02		$	(0.15	)	$	(0.27	)	$	(0.46	)
Weighted average shares outstanding
Basic and Diluted		121,047			120,419			120,845			119,965

Certain prior year amounts have been reclassified to conform to the current year presentation.

As a result of the sale of CompuCom, in October 2004, the results of CompuCom are shown as a discontinued operation for all periods presented.

As a result of the sale of Laureate Pharma’s Totowa, New Jersey facility in December 2005, the operating results related to its Totowa facility are included in discontinued operations in 2005.

Mantas is pursuing the sale of a portion of its telecommunications business and certain related assets and liabilities, which are classified as held-for-sale at December 31, 2005. The operating results of the telecommunications business are included in discontinued operations for all periods presented. On March 3, 2006, Mantas completed the sale of its telecommunications business.

(a) If a consolidated or equity method company has dilutive options or securities outstanding, dilutive net loss per share is computed first by adjusting from net income (loss) for the income attributable to the potential exercise of the dilutive options or securities of the company.

Safeguard Scientifics, Inc.
Results of Segment Operations from Continuing Operations
(in thousands)

	Three Months Ended December 31,						Twelve Months Ended December 31,
	2005			2004			2005			2004
Revenues
Alliance	$	27,232		$	24,140		$	93,774		$	93,148
Clarient		6,028			2,883			20,150			9,769
Laureate Pharma		1,558			—			7,709			—
Mantas		9,991			7,760			31,215			22,282
Pacific Title		7,054			6,113			31,346			25,609
Other Companies		2,022			884			2,022			2,162
Total Segment Results	$	53,885		$	41,780		$	186,216		$	152,970
Operating Income (Loss) from continuing operations (a)
Alliance	$	1,080		$	(1,468	)	$	664		$	(5,024	)
Clarient		(4,059	)		(6,078	)		(15,981	)		(20,974	)
Laureate Pharma		(3,063	)		—			(10,471	)		—
Mantas		2,047			(507	)		(73	)		(11,740	)
Pacific Title		(187	)		279			3,644			1,226
Other Companies (c)		(2,579	)		(251	)		(2,579	)		(1,647	)
Total Segment Results		(6,761	)		(8,025	)		(24,796	)		(38,159	)
Other Items (d)		(4,889	)		(4,871	)		(18,063	)		(19,259	)
	$	(11,650	)	$	(12,896	)	$	(42,859	)	$	(57,418	)
Safeguard Share of Net Income (Loss) from Continuing Operations (b)
Alliance	$	869		$	(1,553	)	$	(108	)	$	(5,321	)
Clarient		(2,476	)		(3,609	)		(9,717	)		(12,829	)
Laureate Pharma		(3,207	)		—			(10,870	)		—
Mantas		2,049			(527	)		(77	)		(12,132	)
Pacific Title		(294	)		287			3,748			1,157
Other Companies (c)		1,854			(5,684	)		(3,347	)		25,887
Total Segment Results		(1,205	)		(11,086	)		(20,371	)		(3,238	)
Other Items (d)		(4,253	)		(9,602	)		(16,793	)		(31,991	)
Net Loss from Continuing Operations	$	(5,458	)	$	(20,688	)	$	(37,164	)	$	(35,229	)

(a)	Operating Income (Loss) from continuing operations represents the revenues less operating expenses of each segment, and excludes any allocation to minority interest.
(b)	Safeguard Share of Net Income (Loss) from Continuing Operations includes the net results of each segment, including interest, adjusted for any amount allocated to minority interest.
(c)	Other Companies includes those companies in which Safeguard has less than a majority interest, as well as our ownership in funds. Our share of Other Companies consists primarily of equity income (loss) and gains (loss) on companies, both of which are reported below the operating income (loss) line. The results of Laureate Pharma from acquisition (December 2, 2004) through December 31, 2004, are included in the Other Companies segment for 2004. The results of Acsis from acquisition (December 2, 2005) through December 31, 2005 are included in the Other Companies segment for 2005.
(d)	Other Items includes corporate expenses and income taxes.