TASER International, Inc. (TASR) Q2 2010 Earnings Call Transcript July 27, 2010 11:00 am ET Executives Rick Smith – CEO Dan Behrendt – CFO Analysts Mark Strouse – J.P. Morgan Steve Dyer – Craig-Hallum Eric Wold – Merriman Peter Mahoney [ph] Presentation Operator
Previous Statements by TASR
» TASER International Inc. Q1 2010 Earnings Call Transcript
» TASER International, Inc. Q4 2009 Earnings Call Transcript
» TASER International Q3 2009 Earnings Transcript
Such factors include, but are not limited to market acceptance of our products; establishment and expansion of our direct and indirect distribution channels; attracting and retaining the endorsement of key opinion leaders in law enforcement community; the level of product technology and price competition for our products; the degree and rate of growth of the markets in which we compete and the accompanying demand for our products; potential delays international and domestic orders; implementation risks of manufacturing automation; risks associated with rapid technological change; execution and implementation risks of new technology; new product introduction risks; ramping manufacturing production to meet demand; litigation resulting from alleged product-related injuries and deaths; media publicity concerning product uses and allegations of injure and deaths; negative impact this could have on sales; product quality risks; potential fluctuations in quarterly operating results; competition; negative reports concerning TASER device uses; financial and budgetary constraints of prospects and customers; dependent on sole and limited source suppliers; fluctuations in component pricing; risk of government investigation regulations; TASER product test reports; dependence upon key employees, employee retention risks and other factors detailed in the company’s filings with the Securities and Exchange Commission.And with that, I'd like to turn the call back over to Rick Smith, our CEO. Rick Smith Thank you. Okay. So for the quarter, net sales were $19.1 million, which was a decrease of about 12%, compared to second quarter of last year. The decrease was primarily driven by fewer significant international orders. We have been looking after a number, we got a number of very significant international orders we've been working. We’re not able to get them disburse in the quarter. We do believe that we’ll get at least one or two of those significant orders in the back half of the year, which could have a significant impact on the business. But as we talked about historically, these large orders typically have longer sales cycles, just there's a lot of political things happening over to get them closed. We remain positive on those, just, unfortunately couldn't bring them in this quarter.
With lower sales level, of course, our margins declined, with less leverage on the lower sales and also some inventory obsolescence. You all recall in the fourth quarter we brought the new automated assembly line, we’ve continued to run some of our manual lines in parallel as we converted over, built up inventory and made sure that we had stability in automation line. So this last quarter we completed, that changeover and there were some inventories and safety stocks that became obsolete that are not compatible with the new automated equipment.So long-term we believe, obviously this will improve margins, efficiencies and our cost structure, but the changeover, I see, there’s some cost involved in new inventory obsolescence. SG&A is down 80% year-over-year even with the restructuring charges. We did, in the last quarter, use some downsizing within the company. We executed reduction reports across our various locations. At this point, we reduced – if you look at salary and benefits versus the high watermark in Q3 of last year, our annual run rate is down by about $5 million, just in salary and benefits and of course, we're looking at other places in SG&A as where we're doing some belt tightening to make sure that we can return the company to profitability as soon as possible. Our R&D expenses are down about 30% over the prior year, as we're streamlining our efficiencies and some of the major projects are winding down due to completion. We're now into Alpha [ph] for early market launch, so lot of the heavy expense associated with the development of those projects is behind us. Read the rest of this transcript for free on seekingalpha.com