Mace Security CEO Discusses Q3 2010 Results – Earnings Call Transcript

Mace Security International Inc. (MACE)

Q3 2010 Earnings Call

November 17, 2010, 1:00 p.m. CT

Executives

Sarah Din - MarCom Manager

Dennis Raefield - Chief Executive Officer and President

Greg Krzemien - Chief Financial Officer

Analysts

Andrew Shapiro - Lawndale Capital

Kevin Greitch - Private Investor

Presentation

Operator

Welcome to the Mace 2010 third quarter results investor conference call. At this time, I would like to turn the call over to Sarah Din.

Sarah Din

Thank you, Christa.

Welcome to Mace Security International third quarter investor conference call. My name is Sarah Din and I'm the MarCom Manager for Mace. Also with us today for this call is Mace's Chief Executive Officer and President, Dennis Raefield, and Mace's Chief Financial Officer, Greg Krzemien. Today Greg Krzemien will be discussing the financial results for the quarter and Dennis Raefield will discuss the market trends, business conditions, and the Company's plans. Now, before I turn the call over to Greg, there are some general housekeeping matters that we want to address. Certain statements and information during this conversation 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 word or phrases like 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 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 include its registration statements, its periodic reports on forms 10-Q and form 10-K. 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. You can access these reports on Mace .com through the Investor Relations section on the website. With that, I would like to now turn the call over to Greg.

Greg Krzemien

Thank you, Sarah. Good afternoon to those of you on the East Coast, good morning to those of you on the West Coast and thank you very much for joining our third quarter 2010 investor call. I will be covering the results for the third quarter of 2010. I will be making some comparisons to last year's results for the same periods, three and nine months ending September and also be making some comments on sequential quarters in 2010. In way of some background for those who may be new to one of our calls, we currently at Mace function in one active segment, that being the security segment. We have also discontinued operations of two other segments, those being our car wash segment and our digital media marketing segment, which I will make some brief comments on in a little while.

As far as our securities segment goes, we operate in four operating units or distinct divisions. We have our electronic surveillance equipment operations, where we sell both professional and home and small business lines of electronic surveillance equipment. We have our industrial vision and conferencing call equipment, a Company called IBS. We have our personal defense operation, our famous aerosol pepper spray Company, and we also have our wholesale security monitoring Company, Mace CSSS, which we acquired in April of 2009. As I mentioned and as I disclosed in our 10-K, again, the digital media marketing and the car wash segments are counted for as discontinued operations in the 10-K that we recently filed, 10-Q that we recently filed. So in that accounting, in essence, in the income statement all of the operations, the revenues and all of the expenses of the digital media marketing segment and the car wash segment are pulled out of the line items and rest in one line item on the bottom of the income statement, so you got a pure picture of the Company's operations from a security segment standpoint.

Additionally, on the balance sheet the assets and the related liabilities of those discontinued operations are pulled out of the balance sheet line items that are for sale and they're moved up to assets held for sale and liabilities related to assets held for sale. As to the ongoing security segment, I'm going to cover again some financial highlights. Dennis will follow-up with some more discussion and add some more color to those operational highlights that I cover. First, I would like to talk a little bit about revenues. Our revenues, again up for the security operations, which is where these comments will be centered, we've seen nice progressive sequential growth this year. If you may remember, at the beginning of the year our first quarter was soft in the securities segment, with a little under $4.3 million of revenues.

And we went up to $4.353 million in the second quarter, that was about an $86,000 or 2% growth. And for the most recent quarter, the September quarter, we were up another $374,000 to a little over $4.7 million or about 8%, 8.5% growth for the September quarter. So we're pleased that sequentially we're seeing improvements as we go through the year here. So we've got nine months versus nine months last year, it is relatively flat in the $13.3 million to $13.4 million range. So we're basically treading with last year, but with the softness at the beginning of the year, we're showing some nice sequential growth. A couple of comments on each of our security segments on the revenue side. Again on the personal defense, our famous aerosol spray division, we're really happy with the growth there. From a standpoint comparing the third quarter of this year to the third quarter of last year, we're up about $280,000 or 2.3% in sales.

And just looking sequentially from the second to the third quarter this year, we're up from a little over $1.1 million to about $1.5 million, which is a nice $390,000 increase or about 35%, just in the second to the third quarter. So we're just really pleased with the growth we've seen there in the last couple of months. Sustaining a nice margin of about 45%, 46% in that division. Our sales are very strong in the pink products that we've released, especially very hot-selling item these day, anything pink. Our bear spray has been selling very well. Wireless systems, our Jogger Mace or Mace guns, just doing very well. Large increases in our sporting goods sales and our large retailer sales. We also picked up a new large retailer recently, Pep Boys, to add to Auto Zone, one of our other large auto retailers. So we're just really pleased with the progress that we've made in that division.

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