Mace Security Intl Reports Improved Gross Profit Margins of 29.8% for the First Nine Months and 26.6% for the 3rd Qtr of 2002
MOUNT LAUREL, N.J.--Nov. 8, 2002--Mace Security International, Inc. ("Mace") , a manufacturer and marketer of security products and provider of car care services, today announced improved gross profit margins of 29.8% for the nine months ended September 30, 2002 and 26.6% for the third quarter ended September 30, 2002."The third quarter has traditionally been our slowest quarter for car washing, because of the seasonality effects in our markets that influence wash volume. Our Texas region, which has traditionally been our strongest region in volume during the summer months, experienced precipitation well above normal levels during the third quarter of 2002, including a 'record wettest' rating during the month of July 2002, according to the National Oceanic and Atmospheric Administration," said Louis D. Paolino, Jr., CEO and Chairman of Mace. He added, "We were able to offset some of this negative impact on revenues by increasing our car wash volume from the prior-year period through increased direct-mail marketing campaigns and sales from our Security Products Division."
Mr. Paolino also said, "The fundamentals of our two business segments continue to be strong. We have a solid balance sheet with a .36-to-1 debt-to-total capitalization ratio, positive cash flow, a per share book value of $2.33 and $7.2 million of cash and cash equivalents. We continue to be very optimistic about the future of Mace."
Financial Results
Revenues for the nine months ended September 30, 2002 were $35.5 million compared to $36.8 million generated in the same period of 2001. This decrease is principally due to a decline in the Company's car wash and detailing revenues, partially offset by resuming operations of the Security Products Division.
Revenues for the five months in which the Company operated the Security Products Division, May through September of 2002, were approximately $1.6 million.
The decrease in the Company's car care revenues during the nine months of 2002 was principally due to the divesting of two car washes during 2001 combined with a departure from our historic revenue levels within our Northeast region resulting from the unusual lack of snow and pollen in the first six months of 2002.
The Company also experienced more challenging weather within its Texas region during the quarters ended June 30, 2002 and September 30, 2002.
Gross profit as a percent of revenues improved to 29.8% in the first nine months of 2002 from 28.4% in 2001.
This improvement is principally the result of a decline in direct labor as a percentage of wash and detail revenues from 47.7% in the first nine months of 2001 to 46.9% in the same period of 2002, reductions in other direct operating expenses within the Company's car care segment and the resumption of operations of the Security Products Division, which generally realizes gross margins in the 40% to 45% range.
Operating income improved slightly during the nine months of 2002 principally due to eliminating the amortization of goodwill of approximately $665,000, partially offset by an increase in SG&A costs due to resuming operations of the Security Products Division and an increase in insurance costs.
Additionally, interest expense decreased by $600,000 due to a decrease in interest rates on approximately 50% of the Company's debt, which has interest rates tied to prime. Income before cumulative effect of a change in accounting principle for the nine months of 2002 increased 45% to $932,000 or $.04 per share from $641,000 or $.03 per share in 2001.
EBITDA for the nine months of 2002 was $4.6 million or 12.9% of revenues compared to $5.3 million or 14.4% of revenues for the same period of 2001. Prior year results included a gain of $216,000 on the sale of a Pennsylvania car wash facility.
The Company has recently completed the transitional test of impairment of goodwill in accordance with Statement of Financial Accounting Standards No. 142. The Company determined that the total after-tax charge for impairment of goodwill was approximately $5.7 million.
This non-cash charge, reported in the Company's current year-to-date results as a cumulative effect of a change in accounting principle, resulted in a net loss of $4.8 million or $.19 per share for the nine months ended September 30, 2002.
Revenues for the third quarter ended September 30, 2002 were $11.8 million compared to $11.0 million in the same period of 2001. The increase in revenues during the third quarter of 2002 was principally due to the resumption of operations of the Security Products Division, partially offset by a decrease in the Company's car wash and detailing revenues.
The decrease in the Company's car wash and detailing revenues was principally due to a reduction in average wash and detailing revenues per car in the Company's Arizona and Texas markets during the third quarter of 2002 as a result of more aggressive coupon and discount promotions to encourage volume increases to the car wash facilities.
This decrease in average wash and detailing revenues per car was partially offset by a slight increase in volume in the three months ended September 30, 2002, as compared to the same period in 2001. Strong increases in average wash and detailing revenues per car were realized in the Company's Florida and New Jersey/Pennsylvania markets.
Operating income for the third quarter of 2002 was $290,000 compared to $392,000 in the same period of 2001. The decline in operating income was principally related to the inclusion of SG&A costs from recommencing operations of the Security Products Division, offset partially by the elimination of amortization of goodwill of approximately $220,000.
Additionally, interest expense decreased by approximately $159,000 in the third quarter of 2002 as compared to the same period in 2001. EBITDA was $846,000 or 7.1% of revenues in the third quarter of 2002 as compared to $1.4 million or 12.4% of revenues in the same period of 2001.
The net loss for the third quarter ended September 30, 2002 was $116,000 or $.00 per share compared to a loss of $20,000 or $.00 per share in the same quarter of 2001.
The Company's net book value was $59.0 million or $2.33 per share at September 30, 2002. In addition, Mace has $98 million in total assets including approximately $64 million of real estate in high traffic retail areas and $7.2 million in cash and cash equivalents.
Conference Call Notification
Mace will conduct a conference call on Monday, November 11, 2002 at 11:00 AM EST. The conference call number is (888) 424-5801. There will be access to a tape recording of the teleconference by calling (877) 519-4471 and entering the reservation number 3592217. This will be available after the teleconference from 2:00 PM EST, Monday, November 11, 2002 through 5:00 PM EST, Friday, November 15, 2002.
In addition, a live web cast of the conference call will be available online at www.mace.com or www.streetevents.com. A tape recording of the teleconference will also be available on the Company's website through December 31, 2002.
Mace Security International, Inc. is a manufacturer of less-than-lethal defense sprays and electronic security products for consumers, as well as a marketer of safety and security products worldwide. Mace is also a leading provider of car care services. Additional information about Mace is available at www.mace.com.
Certain statements and information included in this press release constitute "forward-looking statements" within the meaning of the Federal Private Securities Litigation Reform Act of 1995.
When used in this press release, the words or phrases "will likely result", "are expected to", "will continue", "is anticipated", "estimate", "projected", "intends 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 subject to certain risks, known and unknown, and uncertainties, including but not limited to economic conditions, dependence on management, dilution to shareholders, lack of capital, the effects of weather on the demand for car care services, the effects of rapid growth upon the Company and the ability of management to effectively respond to the growth, its ability to achieve operating synergies, its ability to compete, regulatory matters, the effects of competition, its ability to maintain the control of the Company's cash business, and the ability of the Company to obtain additional financing.
Such factors could materially adversely affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed within this press release.
Additional discussion of factors that could cause actual results to differ materially from management's projections, forecasts, estimates and expectations are contained in the Company's SEC filings, including its S-3 registration statements, Form 10-K for 2001, Form 10-Q for the quarter ended March 31, 2001, Form 10-Q for the quarter ended June 30, 2001, Form 10-Q for the quarter ended September 30, 2001, Form 10-Q for the quarter ended March 31, 2002, Form 10-Q for the quarter ended June 30, 2002 and Form 10-Q for the quarter ended September 30, 2002.
This press release should be read in conjunction with the financial statements and notes contained in the Company's annual report on Form 10-K and the Company's quarterly reports on Form 10-Q.
TABLES FOLLOW
Mace Security International, Inc.
Consolidated Statements of Operations
(dollars in thousands, except per share data)
(Unaudited)
Nine Months Ended September 30,
-----------------------------
2002 2001
-----------------------------
Revenues
Car wash and detailing services $ 28,229 $ 30,308
Lube and other automotive
services 3,168 3,446
Fuel and merchandise sales 2,407 2,902
Security products sales 1,566 --
Operating agreements 80 180
-----------------------------
35,450 36,836
Cost of revenues
Car wash and detailing services 19,419 21,149
Lube and other automotive
services 2,509 2,626
Fuel and merchandise sales 2,086 2,591
Security products sales 868 --
-----------------------------
24,882 26,366
Gross Profit 10,568 10,470
Selling, general and
administrative expenses 6,160 5,474
Depreciation and amortization 1,456 2,037
Costs of terminated acquisitions 57 107
-----------------------------
Operating income 2,895 2,852
Interest expense, net (1,669) (2,263)
Other income 230 429
-----------------------------
Income before income taxes and
cumulative effect of a change
in accounting principle 1,456 1,018
Income tax expense 524 377
-----------------------------
Income before cumulative effect
of a change in accounting
principle 932 641
Cumulative effect of a change in
accounting principle, net of tax
of $2,188 (5,733) --
-----------------------------
Net (loss) income $ (4,801) $ 641
=============================
Basic income per share
Before cumulative effect of a
change in accounting principle $ 0.04 $ 0.03
Cumulative effect of a change
in accounting principle, net
of tax (0.23) --
-----------------------------
Total $ (0.19) $ 0.03
=============================
Weighted average shares
outstanding 25,362,849 25,455,350
=============================
Diluted income per share
Before cumulative effect of a
change in accounting principle $ 0.04 $ 0.03
Cumulative effect of a change
in accounting principle, net
of tax (0.23) --
-----------------------------
Total $ (0.19) $ 0.03
=============================
Weighted average shares
outstanding 25,416,951 25,490,776
=============================
EBITDA (1) $ 4,581 $ 5,318
EBITDA % 12.9% 14.4%
(1) EBITDA is calculated as income before cumulative effect of a
change in accounting principles adding back interest, income taxes,
depreciation and amortization expense.
Mace Security International, Inc.
Consolidated Statements of Operations
(dollars in thousands, except per share data)
(Unaudited)
Three Months Ended September 30,
-----------------------------
2002 2001
-----------------------------
Revenues
Car wash and detailing services $ 8,707 $ 8,933
Lube and other automotive
services 1,125 1,084
Fuel and merchandise sales 839 888
Security products sales 1,169 --
Operating agreements -- 60
-----------------------------
11,840 10,965
Cost of revenues
Car wash and detailing services 6,433 6,504
Lube and other automotive
services 887 840
Fuel and merchandise sales 731 795
Security products sales 643 --
-----------------------------
8,694 8,139
Gross Profit 3,146 2,826
Selling, general and
administrative expenses 2,325 1,717
Depreciation and amortization 474 684
Costs of terminated acquisitions 57 33
-----------------------------
Operating income 290 392
Interest expense, net (553) (712)
Other income 82 289
-----------------------------
Loss before income taxes (181) (31)
Income tax benefit (65) (11)
-----------------------------
Net loss $ (116) $ (20)
=============================
Basic and diluted loss per share -- --
=============================
Weighted average shares
outstanding 25,353,136 25,428,427
=============================
EBITDA (1) $ 846 $ 1,365
EBITDA % 7.1% 12.4%
(1) EBITDA is calculated as net loss income adding back interest,
income taxes, depreciation and amortization expense.