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Mace Security International Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 16, 2011 12:19PM

Mace Security International Inc. (MACE) filed Quarterly Report for the period ended 2011-03-31. Mace Security International Inc. has a market cap of $5.04 million; its shares were traded at around $0 with and P/S ratio of 0.27.



Highlight of Business Operations:

Revenues were approximately $3.6 million and $4.3 million for the three months ended March 31, 2011 and 2010, respectively. Of the $3.6 million of revenues for the three months ended March 31, 2011, $854,000, or 24%, was generated from our professional electronic surveillance operations, $292,000, or 8%, from our consumer direct home and small business electronic surveillance operations, $515,000 or 14%, from our high-end digital and machine vision cameras and professional imaging components operation, $1.1 million, or 31%, from our personal defense and law enforcement aerosol operations in Vermont, and $816,000, or 23%, from our wholesale security monitoring operation in California. Of the $4.3 million of revenues for the three months ended March 31, 2010, $1.0 million, or 23%, was generated from our professional electronic surveillance operation, $349,000, or 8%, from our consumer direct home and small business electronic surveillance operation, $919,000 or 22% from our high-end digital and machine vision cameras and professional imaging components operation, $1.2 million, or 29%, from our personal defense and law enforcement aerosol operation in Vermont and $787,000, or 18%, from our wholesale security monitoring operation in California.

SG&A expenses for the three months ended March 31, 2011 and 2010 were $2.2 million and $2.8 million, respectively. SG&A expenses as a percentage of revenues decreased to 62% in 2011 as compared to 67% for 2010. The reduction in SG&A costs was the result of the implementation of corporate wide cost savings measures in 2008 through the first quarter of 2011, including a significant reduction in employees throughout the entire Company, including a decrease in corporate overhead costs of approximately $185,000. The cost savings were partially realized from a reduction in costs within our security division s surveillance equipment operations. SG&A costs decreased within our Florida and Texas electronic surveillance equipment operations by approximately $312,000, or 32%, partially as a result of our continued consolidation efforts to reduce SG&A expenses as noted above and partially as a result of our reduced sales levels. SG&A expenses in 2010 also include legal costs related to the 2010 settled arbitration proceedings with Mr. Paolino of approximately $80,000 and severance costs of $63,000 related to employee reductions.

Due to continuing challenges in our Mace Security Products, Inc. reporting unit, we performed certain impairment testing of our remaining intangible assets, specifically, the value assigned to customer lists, product lists, and trademarks as of June 30, 2009, December 31, 2009, June 30, 2010 and December 31, 2010. We recorded an impairment charge to trademarks of approximately $80,000 and an impairment charge of $142,000 to customer lists, both principally related to our consumer direct electronic surveillance operations as of June 30, 2009 and an impairment charge of $30,000 for trademarks related to our high-end digital and machine vision cameras and professional imaging component operations at December 31, 2009. With continuing deterioration in 2010, we recorded an additional impairment charge of $74,000 to customer lists, $81,000 to product lists, and $70,000 for trademarks as of June 30, 2010, and impairment charges of $260,000 at December 31, 2010 relating to trademarks, all principally related to our consumer direct electronic surveillance operations and our high-end digital and machine vision cameras and professional imaging component operation.

During the quarter ended December 31, 2009, we wrote down three Arlington, Texas car wash sites for a total of $1.2 million, including a $200,000 write down of a car wash site for which the Company entered into an agreement of sale on January 27, 2010 for a sale price below its net book value; and a $37,000 write down related to a Lubbock, Texas car wash sold on March 10, 2010. In April 2010, we reduced the sale price of a Lubbock, Texas car wash location based on recent offers of $1.7 million for this location and our decision to negotiate a sale of this site at this price, which was below the net book value of $1.85 million. Accordingly, we recorded an impairment charge of $150,000 related to this site at March 31, 2010. Finally, in October 2010, we accepted an offer to purchase our Arlington, Texas oil lubrication and self serve car wash facility for a sale price of $340,000, which was below the site s net book value. Accordingly, we recorded an impairment charge of $53,000 related to this site as of September 30, 2010. We have determined that, due to further reductions in car wash volumes at these sites resulting from increased competition and a deterioration in demographic in the immediate geographic areas of these sites, current economic pressures, along with current data utilized to estimate the fair value of these car wash facilities, future expected cash flows would not be sufficient to recover their carrying values.

Capital expenditures for our Security Segment and our corporate division were $45,000 and $163,000 for the three months ended March 31, 2011 and 2010, respectively. Capital expenditures in our discontinued operations, consisting of car wash operations and our Digital Media Marketing business, were $3,000 and $1,000 for the three months ended March 31, 2011 and 2010, respectively. We estimate capital expenditures for the Security Segment at approximately $150,000 to $200,000 for the remainder of 2011, principally related to technology improvements within our wholesale security monitoring services operations.

The U.S. Attorney conducted an investigation of the Company relating to possible violations of the RCRA at the Company s Bennington, Vermont location. On November 16, 2010, the U.S. Attorney filed a one count indictment charging the Company and Jon Goodrich with a felony of storing hazardous waste without a permit under 42 U.S.C. Section 6928(d)(2)(A). Mr. Goodrich is the President of Mace Personal Defense, Inc., the Company's defense spray division located in Bennington, Vermont. The Company has resolved the indictment through a Plea Agreement entered into between the Company's subsidiary, Mace Personal Defense, Inc., and the U.S. Attorney. The Plea Agreement was made under Fed. R. Crim. P. 11(c)(1)(C), and provides in part, for (i) Mace Personal Defense, Inc. to plead guilty to one count of violating 42 U.S.C. § 6928(d)(2)(A) (Storage of Hazardous Waste Without a Permit); (ii) Mace Personal Defense, Inc. to pay a fine of $100,000 (the "Fine") and a court assessment of $400, the Fine to be paid $34,000 on sentencing, and two additional installments of $33,000 each, at six months and twelve months from January 4, 2011; (iii) the Company to guarantee the payment of the Fine; (iv) the United States to dismiss the indictment against the Company at time of sentencing of Mace Personal Defense, Inc.; and (v) the United States not to prosecute Mace Personal Defense, Inc. (excluding the guilty plea) or the Company for any criminal offenses known to the United States Attorney's Office of Vermont as of the date of signing of the Plea Agreement committed by the Company or Mace Personal Defense, Inc. in the District of Vermont relative to the storage, shipment, handling or disposal of hazardous waste, including any associated record keeping or reporting offenses. The Plea Agreement is not final until it is accepted by the Court. A hearing date for sentencing has been scheduled for May 26, 2011. In addition to the Company incurring $83,000 in legal expenses in 2010 relating to this matter, the Company has recorded an accrual of $100,000 at December 31, 2010 as a result of its agreement to pay the Fine as part of the Plea Agreement.

Read the The complete Report



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