Mace Security International Reports Second Quarter 2020 Financial Results

MACE SECURITY INTERNATIONAL INC

Companies Mentioned:

Primary Exchange: OTCQX
Under the Symbol: MACE

Mace Security International Reports Second Quarter 2020 Financial Results

Friday, July 31, 2020 8:00 AM
  • 2Q 2020 net sales totaled $3,400,000, up $465,000 or 16% versus prior year, primarily driven by organic growth, addition of new customers and new product line extensions
  • Net income for the quarter was $453,000 or 13.1% of net sales, an increase of $1,100,000, compared to a net loss of ($606,000) in the same period of 2019
  • EBITDA for the quarter was $596,000 or 17% of net sales, an increase of $1,100,000 versus ($481,000) EBIDTA in the second quarter of 2019
  • YTD EBITDA is $836,000 or 13% of net sales versus ($1,200,000) in 2019 for the same time frame.

CLEVELAND, OH / ACCESSWIRE / July 31, 2020 / Mace Security International (OTCQX:MACE) today announced second quarter 2020 financial results for the quarter ended June 30, 2020.

The Company's net sales for the second quarter were $3,400,000, up 16% versus prior year. The increase reflects organic growth across our retail and e-commerce channels, addition of new customers across core channel segments as well as product line extensions at existing retailers. Net sales across the consumer and e-commerce channels were up $867,000 even when offset by decreases in Sporting Goods and International channels of $239,000 due to store closures and product availability related to COVID-19.

The Company reported a gross margin rate for the quarter of 41%, up 1000 bp from the same time last year. SG&A expenses were $841,000 or 25% of net sales, compared with $1,400,000 or 48% in 2Q 2019, reflecting non-recurring charges last year. Working capital turns were 4.7 on an annualized basis.

President and CEO Gary Medved commented: "Our business exhibited increasing strength as the quarter progressed despite a few challenges created by COVID-19. The company's renewed focus on Mace® Brand, product lineup, and digital awareness allowed us to capitalize on the accelerated shift to consumer personal safety products, as well as online spending brought on by the pandemic. Between our branded website and online marketplaces, total digital sales increased triple digits on a percentage basis in the second quarter driven by existing customers and a dramatic increase in new customer acquisition."

"The pace accelerated as the quarter progressed. Meanwhile, the strong relationships we have forged with our key retail partners helped us weather a severe slowdown in April and early May due to reduced traffic and store closures. The country's lockdown restrictions began to ease midway through the second quarter, when we experienced a significant pick up in weekly sell-through at retail. Given the circumstances, we are pleased with our recent performance and encouraged as this momentum has carried into July and future months. Orders across retail and digital segments have increased in the past two months at a triple-digit percentage rate over the same period in 2019. Though uncertainty remains about the ultimate impact COVID-19 will have on the personal safety products industry, I am confident that our newly refined business model and strengthening balance sheet have Mace® Brand well positioned going forward."

Sanjay Singh, Executive Chairman, commented: "We raised the bar within the company on self-accountability and meeting commitments to our employees, customers and stakeholders. The entire team stepped up, from customer service to those who ship the products amidst challenging supply chain issues and a burgeoning backlog."

"Orders in April were the lowest the company has seen in a very long time but bounced back as businesses opened up in mid-May. The results of our awareness campaign also drove meaningful digital sales. The company is on a solid footing now as we focus our efforts on executing all the initiatives that were launched this year. Balance sheet strength and operations excellence continue to be our areas of focus. I am very proud and inspired by our team's ability to rise to the occasion. The focus on continuous improvement company-wide will continue in 3Q as we continue to ship a sizeable backlog. Gary and his team did a tremendous job this quarter."

Second Quarter 2020 Financial Highlights

  • Net sales increased $465,000 or 16% versus prior year, primarily driven by organic growth, addition of new customers both in retail and e-commerce segments and new product line extensions at retailers
  • Gross profit for the second quarter increased by $473,000 or 51% over the same period in the prior year, driven primarily by increased sales volume, labor efficiencies, and a non-recurring inventory provision that occurred last year
  • SG&A expenses declined by $578,000 to $841,000 for the quarter, or 25% of net sales, driven primarily by lower spending in salaries and benefits, reduced legal and outside marketing services, and a non-recurring impairment of receivables expense that occurred in the second quarter of 2019
  • Net income increased by$1,100,000
  • Cash and cash equivalents increased to $1,600,000 as of June 30, 2020, an increase of $1,300,000 over the $307,000 on hand on December 31, 2019. During the second quarter of 2020, the Company received $619,000 from our lender as part of the PPP stimulus.
  • Adjusted EBITDA for the quarter was $655,000 (1 cent per share)

Second Quarter 2020 Operational Highlights

  • The Company maintained full manufacturing and distribution activities throughout the quarter, and to date has experienced some supply chain disruptions due to the COVID-19 emergency. Labor efficiencies have improved over last year during the same time last year.

YTD 2020 Operational Highlights

  • Net Sales increased by $544,000 or 9.6% versus the same period last year driven by organic growth, product line extensions in the second quarter and sales to new customers
  • Gross Profits increased by $514,000 or 26% when compared to the same period last year mostly due to increases in labor efficiencies and the impact of one-time costs that occurred last year
  • SG&A decreased by $1,500,000 or 47% mostly from one-time costs that occurred last year and from cost controls and lower wages
  • Net Income was $573,000 or 9% of net sales versus a loss of $1,500,000 last year

Conference Call

Mace® will conduct a conference call on Tuesday August 4th, 2020 at 11 AM EDT, 8 AM PDT to discuss its financial and operational performance for the quarter.

Participant Toll-Free Dial-In Number: (833) 360-0862; Conference ID 9602639

A full set of the consolidated financial statements and accompanying slide presentation are available on www.Mace.com. A digital recording of the conference call will be available for replay two hours after the call's completion. The date ranges the recording will be available are listed below. To access the recording, use the dial-in number listed below and the conference ID 9602639

Encore dial-in number: 855-859-2056 (or internationally on 404-537-3406)
Encore dates: Will be available 2 hours after the call and will expire midnight on October 3, 2020

About Mace Security International, Inc.

Mace Security International Inc. is a globally recognized leader in personal safety products. Based in Cleveland, Ohio, the Company has spent more than 30 years designing and manufacturing consumer and tactical products for personal defense and security under its world-renowned Mace® Brand - the original trusted brand of pepper spray products. The Company's other leading brands include Tornado® Brand stun guns and pepper spray, and Vigilant® Brand personal alarms. The Company also offers aerosol defense sprays for law enforcement and security professionals worldwide through its Take Down® Brand.

Mace Security International distributes and supports its products and services through mass-market retailers, wholesale distributors, independent dealers, e-commerce channels and through its website, www.Mace.com. For more information, please visit www.mace.com.

Forward-Looking Statements

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, our ability to compete with competitors, dilution to shareholders, and limited capital resources.

Mace Security International, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in thousands)

 
  Three Months Ended June 30,  
 
  2020     2019  
 
           
Net sales
  $ 3,432     $ 2,967  
Cost of goods sold
    2,032       2,040  
 
               
Gross profit
    1,400       927  
 
               
Selling, general, and administrative expenses
    841       1,419  
Amortization of intangible assets
    96       67  
Loss on disposal of property and equipment
    -       29  
 
               
Operating income (loss)
    463       (588 )
 
               
Interest expense
    (10)       (17 )
Other expense, net
    -       (1 )
 
               
Income (loss) before income tax provision
    453       (606 )
 
               
Income tax provision
    -       -  
 
               
Net income (loss)
  $ 453     $ (606 )
 
               
 
               
 
               

Mace Security International, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in thousands)

 
  Six Months Ended June 30,  
 
  2020     2019  
 
           
Net sales
  6,223     5,679  
Cost of goods sold
    3,742       3,712  
 
               
Gross profit
    2,481       1,967  
 
               
Selling, general, and administrative expenses
    1,721       3,237  
Amortization of intangible assets
    165       134  
Loss on disposal of property and equipment
    -       29  
 
               
 
               
Operating income (loss)
    595       (1,433 )
 
               
Interest expense
    (22)       (31 )
Interest income
    -       4  
Loss on short-term investments
    -       (1 )
Other expense, net
    -       (1 )
 
               
Income (loss) before income tax provision
    573       (1,462 )
 
               
Income tax provision
    -       -  
 
               
Net income (loss)
  573     (1,462 )
 
               
 
               
 
               

Mace Security International, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share information)

ASSETS
  June 30, 2020     December 31, 2019  
 
  (Unaudited)        
Current assets:
           
Cash
  1,620     307  
Accounts receivable, less allowance for doubtful accounts of $535 and
               
$536 at June 30, 2020 and December 31, 2019, respectively
    2,246       1,544  
Inventories
    1,672       1,591  
Notes receivable, net of allowance, and other current assets
    276       446  
 
               
Total current assets
    5,814       3,888  
 
               
Property and equipment:
               
Buildings and leasehold improvements
    255       245  
Machinery and equipment
    2,017       2,003  
Furniture and fixtures
    110       110  
 
               
Total property and equipment
    2,382       2,358  
 
               
Accumulated depreciation and amortization
    (1,873)       (1,796 )
 
               
Total property and equipment, net
    509       562  
 
               
Operating lease - right-of-use asset, net of amortization
    647       752  
Finance lease - right-of-use asset, net of amortization
    30       11  
Goodwill
    1,031       1,031  
Intangible assets, net
    2,579       2,744  
Notes receivable, net of allowance, and other non-current assets
    14       14  
 
               
Total other assets
    4,301       4,552  
 
               
 
               
Total assets
  10,624     9,002  
 
               

 

LIABILITIES AND STOCKHOLDERS' EQUITY
  June 30, 2020     December 31, 2019  
 
  (Unaudited)        
Current liabilities:
           
Current portion of long-term debt
  220     215  
Bank line of credit
    600       600  
Current operating lease obligation
    211       209  
Current finance lease obligation
    6       3  
Accounts payable
    904       364  
Income taxes payable
    55       56  
Accrued expenses and other current liabilities
    364       412  
 
               
Total current liabilities
    2,360       1,859  
 
               
Long-term debt, net of current portion
    173       284  
Payroll Protection Program Loan, non-current
    619       -  
Non-current operating lease obligations
    455       565  
Non-current finance lease obligations
    25       8  
 
               
Total liabilities
    3,632       2,716  
 
               
Stockholders' equity:
               
Preferred stock, $.01 par value; authorized 10,000,000 shares, no shares
               
issued and outstanding at June 30, 2020 and December 31, 2019
    -       -  
Common stock, $.01 par value; authorized 100,000,000 shares,
               
issued and outstanding shares of 63,954,003 and 63,319,834, at June 30,
               
2020 and December 31, 2019, respectively
    639       633  
Additional paid-in capital
    103,379       103,252  
Accumulated deficit
    (97,004)       (97,577 )
 
    7,014       6,308  
Less treasury stock at cost, 90,548 shares at both June30, 2020
               
and December 31, 2019
    (22)       (22 )
 
               
Total stockholders' equity
    6,992       6,286  
 
               
Total liabilities and stockholders' equity
  10,624     9,002  
 
               
 
               

Mace Security International, Inc. and Subsidiaries
RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA
(Unaudited)
(Amounts in thousands)

 
  Three Months Ended June 30,  
 
  2020     2019  
 
           
Net income (loss)
  453     (606 )
 
               
Adjustments:
               
Interest expense
    10       17  
Interest income
    -       -  
Income tax expense
    -       -  
Depreciation and amortization
    133       108  
 
               
 
               
EBITDA
    596       (481)  
 
               
 
               
Severance
    12       -  
Non-cash stock compensation expense
    47       6  
 
               
 
               
Adjusted EBITDA
  655     (475 )
 
               
 
               

Mace Security International, Inc. and Subsidiaries
RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA
(Unaudited)
(Amounts in thousands)

 
  Six Months Ended June 30,  
 
  2020     2019  
 
           
Net income (loss)
  573     (1,462 )
 
               
Adjustments:
               
Interest expense
    22       31  
Interest income
    -       (4 )
Income tax expense
    -       -  
Depreciation and amortization
    241       218  
 
               
 
               
EBITDA
    836       (481)  
 
               
 
               
Severance
    -       -  
Non-cash stock compensation expense
    77       242  
 
               
 
               
Adjusted EBITDA
  913     (239 )
 
               

In this press release, the Company's financial results and financial guidance are provided in accordance with accounting principles generally accepted in the United States (GAAP) and using certain non-GAAP financial measures. Management believes that presentation of operating results using non-GAAP financial measures provides useful supplemental information to investors and facilitates the analysis of the Company's core operating results and comparison of operating results across reporting periods. Management also uses non-GAAP financial measures to establish budgets and to manage the Company's business. A reconciliation of the GAAP financial results to non-GAAP financial results is included in the attached schedules.

Contacts:

Gary Medved
President and Chief Executive Officer
[email protected]

SOURCE: MACE SECURITY INTERNATIONAL INC


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