Mace Security International Reports Financial Results for the 4th Quarter and Fiscal Year 2002
MOUNT LAUREL, N.J.--March 18, 2003--Mace Security International, Inc. ("Mace") , a manufacturer and marketer of security products and a leading provider of car care services, today announced financial results for the fourth quarter and year ended December 31, 2002.Financial Results
Revenues for the year ended December 31, 2002 were $46.7 million as compared to $48.2 million in 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 Segment. The decrease in the Company's car care revenues during 2002 was principally due to a volume decline within our Northeast region due to an unusual lack of snow and pollen in the first six months of 2002 combined with more challenging weather within our Texas, Arizona, and Northeast regions, especially in the fourth quarter of 2002. In particular, our Texas and Northeast regions experienced record levels of precipitation as reported by the National Oceanic and Atmospheric Administration. Revenues for the eight months in which the Company operated the Security Products Segment were $2.5 million, including approximately $400,000 of revenues from our Electronic Surveillance Products Division started in August of 2002.
Gross profit as a percent of revenues was 28.9% in 2002 as compared to 29.3% in 2001. The 2002 gross profit percentage is comprised of 28.0% for the Car Care Segment versus 28.9% in 2001 and 42.2% for the Security Products Segment in 2002. Despite an 8% car wash volume decline in the Car Care Segment and the fixed nature of many of the Company's operating costs, we experienced less than a one percentage point reduction in gross profit as a result of the Company maintaining a strong average wash and detail revenue per car of $13.90 combined with our continued emphasis on controlling direct labor and other variable operating costs such as wash and detailing chemicals and supplies, car damages, uniform expense, and repairs and maintenance costs. Management was able to hold the increase in direct labor as a percent of wash and detail revenues to 47.6% as compared to 47.1% in 2001. Operating income, excluding an asset impairment charge and costs of terminated acquisitions, was approximately $3.0 million for 2002 as compared to $3.9 million in 2001. This decrease is primarily the result of lower car wash volumes, increased SG&A costs due to resuming operations of the Security Products business, and increased insurance costs. The increase was partially offset by eliminating, in 2002, amortization of goodwill. Additionally, interest expense decreased by $660,000 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 change in accounting principle, excluding an asset impairment charge and costs of terminated acquisitions, was approximately $726,000, or $.06 per share, in 2002 and approximately $1.0 million, or $.08 per share, in 2001. EBITDA for 2002 was $5.3 million or 11.4% of revenues compared to $7.3 million or 15.1% of revenues for 2001.
In 2002 the Company completed both the transitional test and first annual test of impairment of goodwill in accordance with Statement of Financial Accounting Standards No. 142. The Company determined during its transitional testing that the total after-tax charge for impairment of goodwill was approximately $5.7 million. This charge is reported as cumulative effect of change in accounting principle. Additionally, in accordance with Statement of Financial Accounting Standards No. 144, the Company periodically reviews the carrying value of our long-lived assets held and used and assets to be disposed of for possible impairment when events and circumstances warrant such a review. During the year ended December 31, 2002, we decided to market for sale an under-performing car wash site in Texas and two under-performing car wash sites in Arizona. An impairment charge of approximately $1.2 million was recorded in the fourth quarter of 2002 to reflect the estimated selling prices of these sites. These non-cash charges taken in 2002 resulted in a net loss of $5.8 million or $.46 per share for the year ended December 31, 2002 as compared to net income of approximately $900,000, or $.07 per share in 2001.
Revenues for the fourth quarter ended December 31, 2002 were $11.2 million compared to $11.4 million in the same period of 2001. The decrease in revenues during the fourth quarter of 2002 was principally due to a decrease in the Company's car wash and detailing revenues, partially offset by the resumption of operations of the Security Products Segment which provided $905,000 of revenues. The decrease in the Company's car care revenues was the primarily due to extraordinarily unfavorable weather conditions in three of our four geographic markets. However, despite a 13.4% car wash volume decline, average wash and detailing revenue per car increased to $14.08 per car in the fourth quarter of 2002 from $13.90 in the same period in 2001.
Operating income, excluding the previously mentioned asset impairment charge and costs of terminated acquisitions, for the fourth quarter of 2002 was $73,000 compared to $989,000 in the same period of 2001. The decline in operating income was principally related to the aforementioned revenue decline in the car care segment and the inclusion of SG&A costs from recommencing operations of the Security Products Segment, offset partially by the elimination of amortization of goodwill in 2002. Additionally, interest expense decreased by approximately $72,000 in the fourth quarter of 2002 as compared to the same period in 2001. EBITDA was $667,000 or 5.9% of revenues in the fourth quarter of 2002 as compared to $1.85 million or 16.2% of revenues in the same period of 2001. The net loss for the fourth quarter of 2002, excluding the asset impairment charge and costs of terminated acquisitions, was $243,000 or $.02 per share compared to net income of $285,000 or $.02 per share in the fourth quarter of 2001.
The Company's net book value was $57.7 million or $4.65 per share at December 31, 2002. In addition, Mace has $96 million in total assets including approximately $63 million of real estate in high traffic retail areas and $6.2 million in cash and cash equivalents, and an experienced senior management team with a high equity stake in the Company. In light of Mace's book value per share and solid business fundamentals, the Company believes that its shares are undervalued.
In December 2002 the Company effected a one-for-two reverse stock split. Accordingly, all per share figures reflect the effect of the reverse stock split.
Conference Call Notification
Mace will conduct a conference call on Wednesday, March 19, 2003 at 11:00 AM EST. The conference call number is (800) 475-2151. There will be access to a tape recording of the teleconference by calling (877) 519-4471 and entering the reservation number 3813687. This will be available after the teleconference from 2:00 PM EST, Wednesday, March 19, 2003 through 5:00 PM EST, Tuesday, March 25, 2003. 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.
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-K for 2002, 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.
Mace Security International, Inc. and Subsidiaries
Consolidated Statements of Operations
(dollars in thousands, except per share data)
Year Ended December 31,
--------------------------------------------
2002 2002 2001 2001
(Unaudited) (Unaudited)
Pro Forma (1) Pro Forma (1)
--------------------------------------------
Revenues:
Car wash and detailing
services $36,696 $36,696 $39,859 $39,859
Lube and other
automotive services 4,219 4,219 4,487 4,487
Fuel and merchandise
sales 3,217 3,217 3,638 3,638
Security product sales 2,471 2,471 - -
Operating agreements 80 80 240 240
--------------------------------------------
46,683 46,683 48,224 48,224
Cost of revenues:
Car wash and detailing
services 25,674 25,674 27,417 27,417
Lube and other
automotive services 3,301 3,301 3,446 3,446
Fuel and merchandise
sales 2,802 2,802 3,234 3,234
Security product sales 1,429 1,429 - -
--------------------------------------------
33,206 33,206 34,097 34,097
Selling, general and
administrative expenses 8,499 8,499 7,366 7,366
Depreciation and
amortization 1,953 1,953 2,813 2,813
Costs of terminated
acquisitions 57 - 135 -
Asset impairment charge 1,165 - - -
--------------------------------------------
Operating income 1,803 3,025 3,813 3,948
Interest expense, net (2,219) (2,219) (2,885) (2,885)
Other income 327 327 514 514
--------------------------------------------
(Loss) income from
continuing operations
before income taxes (89) 1,133 1,442 1,577
Income tax (benefit)
expense (32) 407 534 583
--------------------------------------------
(Loss) income before
cumulative effect of
change in accounting
principle (57) 726 908 994
Cumulative effect of
change in accounting
principle, net of tax
benefit of $2,188 (5,733) - - -
--------------------------------------------
Net (loss) income $(5,790) $726 $908 $994
============================================
Basic (loss) earnings
per share
(Loss) income before
cumulative effect of
change in accounting
principle - 0.06 0.07 0.08
Cumulative effect of
change in accounting
principle (0.46) - - -
--------------------------------------------
Total $(0.46) $0.06 $0.07 $0.08
============================================
Weighted average shares
outstanding (3) 12,630,964 12,630,964 12,724,282 12,724,282
============================================
Diluted (loss) earnings
per share
(Loss) income before
cumulative effect of
change in accounting
principle - 0.06 0.07 0.08
Cumulative effect of
change in accounting
principle (0.46) - - -
--------------------------------------------
Total $(0.46) $0.06 $0.07 $0.08
============================================
Weighted average shares
outstanding (3) 12,630,964 12,656,308 12,742,122 12,742,122
============================================
EBITDA (2) $4,083 $5,305 $7,140 $7,275
EBITDA % 8.7% 11.4% 14.8% 15.1%
(1) Excludes costs of terminated acquisitions, asset impairment charge
and cumulative effect of change in accounting principle, all net
of related income taxes.
(2) EBITDA is calculated as (loss) income before cumulative effect of
a change in accounting principle, adding back interest, income
taxes, and depreciation and amortization.
(3) 2001 shares restated to reflect one-for-two reverse stock split
effected in December 2002.
Mace Security International, Inc. and Subsidiaries
Consolidated Statements of Operations
(dollars in thousands, except per share data)
(Unaudited)
Three Months Ended December 31,
--------------------------------------------
2002 2002 2001 2001
Pro Forma (1) Pro Forma (1)
--------------------------------------------
Revenues:
Car wash and detailing
services $8,467 $8,467 $9,551 $9,551
Lube and other
automotive services 1,051 1,051 1,041 1,041
Fuel and merchandise
sales 810 810 736 736
Security products 905 905 - -
Operating agreements - - 60 60
--------------------------------------------
11,233 11,233 11,388 11,388
Cost of revenues:
Car wash and detailing
services 6,255 6,255 6,268 6,268
Lube and other
automotive services 792 792 820 820
Fuel and merchandise
sales 716 716 643 643
Security products 561 561 - -
--------------------------------------------
8,324 8,324 7,731 7,731
Selling, general and
administrative expenses 2,339 2,339 1,892 1,892
Depreciation and
amortization 497 497 776 776
Costs of terminated
acquisitions - - 28 -
Asset impairment charge 1,165 - - -
--------------------------------------------
Operating (loss) income (1,092) 73 961 989
Interest expense, net (550) (550) (622) (622)
Other income 97 97 85 85
--------------------------------------------
(Loss) income before
income taxes (1,545) (380) 424 452
Income tax (benefit)
expense (556) (137) 157 167
--------------------------------------------
Net (loss) income $(989) $(243) $267 $285
============================================
Basic (loss) earnings per
share $(0.08) $(0.02) $0.02 $0.02
============================================
Weighted average shares
outstanding (3) 12,481,226 12,481,226 12,714,213 12,714,213
============================================
Diluted (loss) earnings
per share $(0.08) $(0.02) $0.02 $0.02
============================================
Weighted average shares
outstanding (3) 12,481,226 12,481,226 12,732,436 12,732,436
============================================
EBITDA (2) $(498) $667 $1,822 $1,850
EBITDA % (4.4)% 5.9% 16.0% 16.2%
(1) Excludes costs of terminated acquisitions and asset impairment
charge, each net of related income taxes.
(2) EBITDA is calculated as net (loss) income adding back interest,
income taxes and depreciation and amortization.
(3) 2001 shares restated to reflect one-for-two reverse stock split
effected in December 2002.