Mace Security International Reports Financial Results for the Second Quarter and First Six Months of 2006
MOUNT LAUREL, N.J.--Aug. 14, 2006--Mace Security International, Inc. ("Mace" or the "Company") , a manufacturer of electronic surveillance, security and personal defense products, and an owner and operator of car and truck wash facilities, today announced results for quarter and six months ended June 30, 2006.Financial Results - First Half of 2006 compared to First Half of 2005
Total revenues for the first half of 2006 were $27.9 million compared to $30.7 million for the same period in 2005. The decrease in revenues was primarily due to a decrease in revenues from the Car and Truck Wash Segment of approximately $1.6 million, or 9%, in the first half of 2006 compared to the first half of 2005. Wash and detailing revenues decreased from $13.5 million in the first half of 2005 to $11.8 million in the first half of 2006, a decrease of $1.7 million, or 12%. This decrease was primarily the result of the Company leasing the truck wash operations to a third party, effective January 1, 2006, and a decrease in car wash volumes, most notably in our East Region. Partially offsetting the decline in volume, the Company experienced an increase in average wash and detailing revenue per car to $15.48 in the first half of 2006, from $15.17 in the same period in 2005. Under the Truck Wash leasing arrangement, the Company is paid $9,000 per month, which is reported as income from operating agreements. Revenues for the truck wash were $824,000 in the first half of 2005.
Revenues within the Security Segment decreased by $1.2 million from the first half of 2005 to the first half of 2006. The decrease in revenues from the Security Segment was principally due to a decrease in consumer direct electronic surveillance and high-end fiber optic camera sales. This decrease was partially offset by the Securetek, Inc. operations, which we acquired in November of 2005 and provided revenues of $914,000 in the six months ended June 30, 2006.
Gross profit as a percentage of revenues was approximately 23.7% for the first half of 2006 and 27.5% for the first half of 2005. Gross profit percentage for 2006 was comprised of 28.2% for the Security Segment and 20.1% for the Car and Truck Wash Segment while, for 2005 this percentage was comprised of 29.1% for the Security Segment and 26.3% for the Car and Truck Wash Segment. The decrease in the Car and Truck Wash gross profit percentage was a result of an increase in labor costs as a percentage of car wash and detailing revenues from 46.7% in 2005 to 50.7% in 2006, along with increases in workers' compensation claims, car damage claims and other operating costs. The decrease in the Security Segment gross profit percentage was the result of the mix of products sold.
Selling, general and administrative ("SG&A") expenses for the first half of 2006 increased by $1.9 million over 2005, the increase in SG&A costs is primarily the result of the growth in infrastructure within the Security Segment, which added an additional $387,000 of SG&A costs in 2006; an increase in advertising costs in the car and truck wash services segment; $380,000 related to non-cash charges to compensation expense for share-based compensation under Statement of Financial Accounting Standards ("SFAS") No. 123R; and $1.1 million of legal, consulting and accounting fees relating to the ongoing immigration investigation.
Operating loss for the first half of 2006 was $3.1 million compared to operating income of $657,000 in the first half of 2005. The operating loss was principally the result of the decrease in Car and Truck Wash Segment gross profit, and the increase in SG&A costs noted above. Additionally, in the first half of 2006, the Company recorded a valuation allowance of $1.1 million against its deferred tax assets. The Company recorded a valuation allowance against its net deferred tax assets as a result of management being unable to conclude that realization of the net deferred income tax asset was more likely than not.
In February 2006, the Company approved a plan to sell its Arizona car wash region for $19.5 million. Accordingly, the results of operations for this region are shown as discontinued operations for financial reporting purposes. The Arizona car wash region generated income of $398,000 in the first half of 2006 and $186,000 in the same period of 2005.
The net loss for the first half of 2006 was $2.8 million or $(0.19) per share, as compared to a net income of $450,000, or $0.03 per share for the first half of 2005.
Financial Results - Second Quarter of 2006 compared to Second Quarter of 2005
Total revenues for the second quarter of 2006 were $13.6 million compared to $16.0 million for the same period in 2005. The decrease in revenues was primarily due to a decrease in revenues from the Car and Truck Wash Segment of approximately $1.1 million, or 12%, in the second quarter of 2006 compared to the second quarter of 2005. Wash and detailing revenues decreased from $6.8 million in the second quarter of 2005 to $5.7 million in the second quarter of 2006, a decrease of $1.1 million, or 15%. This decrease was primarily the result of the Company's leasing the truck wash operations to a third party effective January 1, 2006, a decrease in car wash volumes, most notably in our East Region, and a decrease in volume from the divesting of one of our car washes in December, 2005 and one in June, 2006. The Company maintained average wash and detailing revenue per car of $15.60 in the second quarter of 2006 as in the second quarter of 2005. Under the Truck Wash leasing arrangement, the Company is paid $9,000 per month, which is reported as income from operating agreements. Revenues for the truck wash were $373,000 in the second quarter of 2005.
Revenues within the Security Segment decreased by $1.3 million from the second quarter of 2005 to the second quarter of 2006. The decrease in revenues from the Security Segment was principally due to a decrease in consumer direct electronic surveillance and high-end fiber optic camera sales. This decrease was partially offset by the Securetek, Inc. operations, which we acquired in November of 2005 and provided revenues of $420,000 in the three months ended June 30, 2006.
Gross profit as a percentage of revenues was approximately 21.9% for the second quarter of 2006 and 27.9% for the second quarter of 2005. Gross profit percentage for 2006 was comprised of 26.6% for the Security Segment and 18.3% for the Car and Truck Wash Segment, while 2005 was comprised of 29.9% for the Security Segment and 26.3% for the Car and Truck Wash Segment. The decrease in the Car and Truck Wash gross profit percentage was a result of an increase in labor costs as a percentage of car wash and detailing revenues from 48.2% in 2005 to 53.7% in 2006, along with increases in workers' compensation claims, car damage claims and other operating costs. The decrease in the Security Segment gross profit percentage was the result of the mix of products sold.
Selling, general and administrative ("SG&A") expenses for the second quarter of 2006 increased by $1.2 million over the same period in 2005. The increase in SG&A costs is primarily the result of the growth in infrastructure within the Security Segment which added an additional $125,000 of SG&A costs in 2006; an increase in advertising costs in the car and truck wash services segment; $120,000 related to non-cash charges to compensation expense for share-based compensation under SFAS 123R; and $896,000 of legal, consulting and accounting fees relating to the ongoing immigration investigation.
Operating loss for the second quarter of 2006 was $2.2 million as compared to operating income of $487,000 in the second quarter of 2005. The operating loss was principally the result of the decrease in Car and Truck Wash Segment gross profit, and the increase in SG&A costs noted above. In the second quarter of 2006, the Company recorded a valuation allowance of $701,000 against its deferred tax assets. The Company recorded a valuation allowance against its net deferred tax assets as a result of management being unable to conclude that realization of the net deferred income tax asset was more likely than not.
The net loss for the second quarter of 2006 was $1.9 million or $(0.12) per share, as compared to net income of $439,000, or $0.03 per share, for the second quarter of 2005.
The Company's net book value was $59.3 million, or $3.88 per share, at June 30, 2006. In addition, Mace had $92.2 million in total assets, including $8.1 million of cash and short-term investments at June 30, 2006.
As previously disclosed, the Company learned on March 13, 2006 that the United States Attorney for the Eastern District of Pennsylvania is investigating the Company for the alleged hiring of undocumented workers at the Company's car washes. The Company was served with a federal grand jury subpoena seeking certain employment related documents. The Company is in the process of responding to the subpoena. The Company has been informed by the government that it is a subject of the government's investigation. The Company intends to fully cooperate with the investigation.
Mace Security International, Inc. is a manufacturer of electronic surveillance, security and personal defense products, and an owner and operator of car and truck wash facilities. 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", "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 subject to certain risks, known and unknown, and uncertainties, including but not limited to economic conditions, dependence on management, dilution to shareholders, limited capital resources, the effects of weather on the demand for car care services, the effects of rapid growth on Mace and the ability of management to effectively respond to that growth, our ability to achieve operating synergies, our ability to compete against established competitors, regulatory matters, the effects of competition, and our ability to obtain additional financing. 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 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 under the heading "Risk Factors" in Mace's SEC filings, including its registration statements and its periodic reports on Form 10-K and Form 10-Q. This press release should be read 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.
Mace Security International, Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except share and per share information)
(Unaudited)
Three Months Ended June 30,
---------------------------
2006 2005
Revenues
Car wash and detailing services $ 5,742 $ 6,785
Lube and other automotive services 875 817
Fuel and merchandise sales 1,042 1,120
Security sales 5,918 7,247
------------ ------------
13,577 15,969
Cost of revenues
Car wash and detailing services 4,679 4,857
Lube and other automotive services 656 591
Fuel and merchandise sales 923 984
Security sales 4,343 5,078
------------ ------------
10,601 11,510
Selling, general and administrative
expenses 4,716 3,499
Depreciation and amortization 490 473
------------ ------------
Operating (loss) income (2,230) 487
Interest expense, net (246) (214)
Other income 283 109
Income from operating agreement 27 -
------------ ------------
(Loss) income from continuing operations
before income taxes (2,166) 382
Income tax expense 39 138
------------ ------------
(Loss) income from continuing operations (2,205) 244
Income from discontinued operations, net
of tax $ 326 $ 195
------------ ------------
Net (loss) income $ (1,879) $ 439
============ ============
Per share of common stock (basic and
diluted):
(Loss) income from continuing operations $ (0.14) $ 0.02
Income from discontinued operations 0.02 0.01
------------ ------------
Net (loss) income $ (0.12) $ 0.03
============ ============
Weighted average shares outstanding
Basic 15,274,311 15,271,132
Diluted 15,274,311 15,509,261
Mace Security International, Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except share and per share information)
(Unaudited)
Six Months Ended June 30,
-------------------------
2006 2005
Revenues
Car wash and detailing services $ 11,846 $ 13,476
Lube and other automotive services 1,675 1,561
Fuel and merchandise sales 1,900 2,026
Security sales 12,445 13,612
------------ ------------
27,866 30,675
Cost of revenues
Car wash and detailing services 9,368 9,606
Lube and other automotive services 1,273 1,204
Fuel and merchandise sales 1,677 1,772
Security sales 8,933 9,657
------------ ------------
21,251 22,239
Selling, general and administrative expenses 8,754 6,840
Depreciation and amortization 943 939
------------ ------------
Operating (loss) income (3,082) 657
Interest expense, net (509) (432)
Other income 372 188
Income from operating agreement 54 -
------------ ------------
(Loss) income from continuing operations
before income taxes (3,165) 413
Income tax expense 78 149
------------ ------------
(Loss) income from continuing operations (3,243) 264
Income from discontinued operations, net of
tax $ 398 $ 186
------------ ------------
Net (loss) income $ (2,845) $ 450
============ ============
Per share of common stock (basic and
diluted):
(Loss) income from continuing operations $ (0.21) $ 0.02
Income from discontinued operations 0.02 0.01
------------ ------------
Net (loss) income $ (0.19) $ 0.03
============ ============
Weighted average shares outstanding
Basic 15,273,600 15,271,132
Diluted 15,273,600 15,582,547