Mace Security International Inc. (MACE)

1Q 2010 Earnings Call

May 19 2010, 11:00 AM ET

Executives

Don Taylor - Vice President, Marketing & Investor Relations

Dennis Raefield - CEO and President

Greg Krzemien - Chief Financial Officer

Analysts

Andrew Shapiro - Lawndale Capital Management

Presentation

Operator

Good morning. My name is (Theresa) and I will be your conference operator today. At this time, I would like to welcome everyone to the first quarter 2010 financial results conference call for Mace Security International. All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question and answer session. If you would like to ask a question at that time, simply press star and then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you.

Mr. Don Taylor, you may begin your conference.

Don Taylor

Thank you, (Theresa). Welcome to Mace Security International's first quarter investor conference call. I am Don Taylor. I'm Mace's vice president for Marketing Investor Relations. Also, on today's call, is Mace's chief executive officer and president, Dennis Raefield; Mace's chief financial officer, Greg Krzemien.

On today's call, Greg Krzemien will discuss the financial results for the quarter and Dennis Raefield will discuss the market trends, business conditions and company plans. Before I turn the call over the call to Greg, there are some housekeeping matters that we must 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 of 1995. When used during the 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 business. Such factors could materially adversely affect Mace's financial performance and could cause Mace's actual results for future periods to differ materially from any opinions or statements expressed during this call. Additional discussions of factors that could actual - 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 include its registration statements and its periodic reports on Form 10-K and Form 10-Q.

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 10-K and quarterly reports on Form 10-Q. 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 Krzemien

Thanks, Don, and good morning to everybody and thanks for joining us on our call today. I'm not sure if there's any newcomers on the call but for those who are newcomers, I will just spend a few seconds describing our different operations.

As most of you know, we currently operate in two active business segments, that being the security segment and the digital media marketing segment. In our security segment, we operate in four different divisions or operations; our electronic surveillance equipment both on the professional and more of the do-it-yourself level, our industrial vision, and conferencing equipment division. We have our personal defense division which is our famous Mace pepper sprays and our acquisition of last April, Mace CSSS which is our security monitoring station operation out in Anaheim, California. Our second segment, our digital media marketing has two divisions; Linkstar which is our e-commerce, a product sales company; and Promopath which is a digital marketing form of that group.

As far as discontinued segments, most of you know, we discontinued the car wash segment. We sold those car washes down from approximately 50 to 53 car washes a couple of years ago. We have seven remaining. All the operations of the car washes are presented in the statement of operations as discontinued operations. So, in essence all of the revenue and expenses are stripped out of the line items on the income statement and out in one line item on the bottom, and the assets and the related liabilities of the car washes were also stripped out of the balance sheet and placed on one line on the asset side called assets held for sale and on the liability side, liabilities related to assets held for sale. So, when you look at the balance sheet and income statement except for those lines I just described, you can - you can see the two asset segments in the financials.

I'm going to spend some time here reviewing some of the various details of our operations, highlighting a couple of items and then, Dennis, our CEO, will spend a little bit more time describing the past and the future in these divisions. I will provide some comments and income statements on revenues, gross profits, SG&A, changes and impairments, or comment on our cost reduction efforts, make a few comments on our balance sheet and cash flows, and a couple other highlights and some other financial data. Again, in my conversations, they talk about these various line items. I will not be including the car washes. They are discontinued operations but I will spend a minute or two on a couple of highlights and where we are with the car washes.

So, right now, I'm just going to go into some revenue points. As far as this first quarter of '010, our revenues were a little soft. We did about 6.9 on seven million dollars of revenues versus $7.2 million in the first quarter of last year; that is a decrease about 228,000 or about 3.2 percent. We're really up in the security segment by 90,000 but that does include the acquisition of CSSS, our monitoring station in the April of '09 which will not be included in prior numbers and that is about $787,000 in the current year numbers; and as far as the digital media marketing segment, this is where we saw our most significant decrease, about $318,000 or about 10 percent from the first quarter of '09.

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