I do have some housekeeping matters to discuss. But before that, I just want to make sure that for those of you who are just listening to the audio, we do have webcasts. There were instructions on our Website as well as an e-mail. If you did not get those and you want to look at the presentation as we're going through that, you can go to our corp.mays.com to Investor Relations, and you'll see Shareholder Presentations and it will - the 2010 presentation will be the one we'll be going through today.Now, before I turn the call over to Greg, there are some housekeeping matters that we want to address. Certain statements and information during this conference call will constitute forward-looking statements within the meaning of the Federal Private Securities Litigation Reform Act, 1995. When used during a conference call, the words or phrases "will likely result", "are expected to", "will continue", "is anticipated", "estimate", "projected" and "intend to" or similar expressions are intended to identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subjected to certain risks, known and unknown, and uncertainties including but not limited to economic conditions, limit of capital resources and the ability of management to effectively manage the business and integrate required businesses. Such factors could materially adversely affect Mace's financial performance. It could cause Mace's actual results for future periods to differ materially from any opinions or statements expressed during this call. Additional discussions for factors that could cause actual results to differ materially from management's projected forecasts, estimates and expectations, are contained under the heading Risk Factors in Mace's Sec Filings, which includes it registration statements and its periodic reports on Forms 10K and Form 10Q. All statements made during the conference call should also be considered in conjunction with the financial statements and notes contained in Mace's Annual Reports on Form 10K and quarterly reports on Form 10Q. Access to these reports can be generated on its Website, www.mace.com. Please click on the Investor Relations button. With that, I would like now to turn the call over to Greg Krzemien.
Greg KrzemienThank you, Don. Good afternoon, everyone, and thank you for joining us on our call this afternoon to talk about our 2009 results. For those who may be new to our call, just want to remind everyone that we currently have two active segments which we operate in - the security segment and our digital media marketing segment. We also have a third operation which is currently recorded as discontinued operations, which is our car wash operations. This is the first period that we've presented all of our car washes as discontinued operations in the income statement, and classified all of the balance sheet-related fixed assets and debt in assets (all) for sale and related liabilities again in our balance sheet. So I just want to make sure everybody's aware of that change. Also, whenever we restate for discontinued operations, we have to restate the prior quarter financial results. So that was also done in conjunction with putting together this December 31st, 2009 Form 10K. Again, our most significant segment is our security segment, which we operate in three distinct divisions - our personal defense, which is our famous pepper spray operation, our electronic surveillance and access control operation, and our new monitoring service operation which we acquired in April of this past year. During the presentation, Dennis is going to spend some significant time in each of these divisions discussing the events of 2009 and his plans and our plans as a management group for 2010. What I'm going to cover are some financial highlights on income statements. I'll make some comments on some of the cost control measures we've done. I'll comment on our balance sheet, on some key items and cash flow key items, and talk about our car washes and the dispositions and a few other key financial items.
On the first slide here is a slide about our revenues by quarter. Now what I'd like to note here is that, again, these revenues are only for our security and our digital media marketing segment, and that the car washes are discontinued operations. For 2009, overall, we had a decline of revenues of about $9.8 million or 26 percent. On the positive side, our security segment is sequentially up, quarter to quarter, in 2009, and overall it has increased from approximately 20 point - I'm sorry, decreased $20.7 to $18.6 million for 2009. But, on a quarterly basis, we have seen sequential improvement in the last two quarters.In the September quarter, we reported about $4.8 million, and reported about $5.1 million in the fourth quarter. So that was a positive trend for us. Overall, for 2009, our personal defense operation is up about nine percent, which we're very happy to see. Our overall reduction in our revenues in the security segment, as we mentioned in our September call, are really significantly impacted by the recession. Construction has been down; renovations have been down; credit availability to customers is down. But again, we're continuing to work through the recession and through some competitive issues. And Dennis will be speaking about some of our plans to overcome the revenue shortfalls as we go through 2010. On the other side of our business, our digital media marketing segment, we saw a decrease overall of about $7.6 million in 2009. Part of that decrease is because we discontinued the media marketing division, Promopath, in 2008. That had about $2.2 million of sales in 2008 and really zero sales in 2009. So without that, our decrease is about 36 percent in that division, versus 44 percent. We really had difficulties in that segment this past year. Lot of different influences.
The Credit Card Act of 2009 really impacted our customer base. We saw credit card decline rates in the five to one ratio in the May/June time frame. And that really didn't start improving until we hit into the November and the December time frame. We started dropping the more reasonable two to one decline ratio. So we're kind of happy to see that that has come down. It's staying down, and we believe that hopefully will be staying down in, throughout 2010 and into the future. The Credit Card Act has weeded out some of the customers who were having difficulties getting credit.Going into 2010, you know, we're again happy with the decline rates going down. We're really encouraged by seeing improvements in new member growth, in introducing new products such as our pet vitamin product which we just introduced. And another big thing which we're hopeful for is introducing Promopath again into our mix of businesses, which really does a couple of things for it. It helps our relationships with publishers which helps us gain new members. It also is an avenue for our Linkstar operation, our eCommerce business to obtain customers without paying us to (give again) publisher fee. So we're encouraged that this resurgence or bringing back Promopath on a very cautious, very controlled basis will help us going through 2010. Dennis, would you like to move to the next slide, please? Thank you. Next slide is on gross margins. Happy to report that we have seen improvements in our gross margins in 2009. In blue we have our overall margin improvements. On a year total basis, we improved from 26.8 percent to about 29.4 percent. It's about 2.6 percentage points improvement over 2008. You know, really saw strength in the security margins for 2009. We're up to 29.4 percent from 26 - I'm sorry, we're up from 24.3 percent rather to 30.1 percent. And that could be seen in the red colors there.
You know, we attribute that to a lot of positive things that management team has been doing, working with new vendors, buying products at a better rate, really working to weed out low margin customers, working hard on how we give out discounts, really working down the returns of products, and also on the overhead side of the business really reducing some of the costs in the warehouse operation and other direct cost operations have improved the margins in the security segment. So really pleased with what we've been able to achieve there.On the digital media side, we did see a slight decline in our profit margins from about 29.9 percent to 28.1 percent. Part of that is the decline rates; the time lag between paying for the CTA cost and generating the revenue for these new members causes the margins to be a little bit erratic at times. But again, just like in the security segment, we've taken a lot of cost over the last year, plus out of the digital media marketing segment, and we really hope that will see the benefits of that as we go through 2010. The next slide is a slide on operating losses. The key thing to point out here is, is that despite our revenues being down as I previously mentioned, the red bar, we've been able to keep in check our operating losses. Our operating losses, including impairment charges or (GAAP) from about $10.9 million to $9 million even. We look at it also without the impairment losses. So the adjusted operating loss, which is in green, we have at about $7.5 million for '09 versus about $7.6 million for '08. So again, even without impairment charges we have been able to actually reduce the operating loss despite the revenue decline that I've previously mentioned. Again, a lot of this is due to the margin improvement I just mentioned (and us) purchasing a product to reduce some overhead costs; also reducing other SG&A costs; headcount reductions have helped us keep check on the operating losses despite the revenue shortfalls. Dennis, we'd like to advance to next slide, please.
SG&A expenses - again, happy to report here that we've been able to reduce these expenses as reported on the financial statements, reduce these expenses from a little over $17 million to about $15 million. That's a $2 million-dollar reduction or about 12 percent. Would like to mention that that 2009 SG&A cost of $15 million does include about $860,000 dollars' worth of expenses related to our CSS monitoring station operation we acquired in April. So if I pull that out of the '09 numbers, our SG&A costs are about $14.2 million, versus the $17 million in '08. So that shows a more dramatic 17 percent decrease in SG&A costs.Read the rest of this transcript for free on seekingalpha.com