Media Sciences International, Inc. News
Media Sciences Reports Q2 Results
(Logo: http://www.newscom.com/cgi-bin/prnh/20020604/NYTU016LOGO ) Financial results for the quarter ended December 31, 2007 include: — Net revenues of $5.7 million, a decrease of $0.4 million or 6% year- over-year and 12% versus the prior quarter. — Gross margin at 46% of net revenues, a 1,200 basis point decrease, year-over-year and in-line with the prior quarter. — Net loss of $0.49 million versus net income of $0.63 million year-over- year. — EPS loss of $0.04 basic and fully diluted.
Results for the quarter were adversely impacted by weak post-Thanksgiving order activity and the following expense items:
— Costs of expedited shipping associated with launch of new toner-based products and clearing associated backorders totaled about $230,000 (about $138,000 after tax or $0.01 per diluted share), adversely impacting our margins by about 300 basis points; — Litigation costs totaling $352,000 (about $211,000 after tax or about $0.02 per diluted share); — Business start-up costs associated with Asian manufacturing operations of $196,000 (about $118,000 after tax or $0.01 per diluted share);
Collectively, these expense items reduced the Company's pretax income by
Michael W. Levin, President and CEO of Media Sciences International, Inc. commented on the Company's performance, "We are very disappointed with our performance during the quarter. We have analyzed sales during the weak post-
Revenues
Net revenues for the three months ended
Gross Margin
For the three and six months ended
The Company's greater mix of toner-based versus solid ink product sales was the greatest driver of the year-over-year margin decline. On a portfolio basis, toner-based products typically carry lower margins than solid ink products. Our sales mix of products resulted in about 500 basis points of year-over-year change in our margins.
Year-over-year, we experienced increases in our delivered material and finished goods prices as well as in our out-bound shipping costs that we pay on behalf of our customers due to higher shipping costs. The impact of these greater shipping costs was about 300 basis points of year-over-year change in our margins. We recognized about
The impact of higher production costs represented about 200 basis points of year-over-year change in our margins. These increased costs included (1) the costs of labor and supplies associated with custom labeling for certain new private label customers; (2) additional quality assurance labor associated with the growth of our toner-based product volumes; (3) domestic personnel to fill and package limited quantities of toner-based product for sale to U.S. military and governmental entities; and (4) during the three months ended
Research and Development
Versus the same quarter last year, research and development spending increased by
Selling, General and Administrative
Selling, general and administrative expense, exclusive of depreciation and amortization, for the quarter, compared to the same period last year, increased by
For the three and six months ended
Most of the increase in professional fees was attributed to legal fees associated with the Xerox litigation; for the three and six months ended
Sequentially, as compared with the prior quarter, selling, general and administrative expense for the three months ended
Net Income
For the quarter, we lost
Effective Tax Rate
For the quarter, the Company's blended effective tax rate was 42.5% versus 35.0% for the same period last year. The Company's blended effective state and federal tax rate varies due to the magnitude of various permanent differences between reported pretax income and what is recognized as taxable income by various taxing authorities. The availability of tax credits associated with manufacturing, research and development activities, as well as exclusions, such as the Extraterritorial Income Exclusion, can result in an effective rate that is lower than the statutory rate.
CEO's Comments
Commenting on the Company's strategy,
These efforts have taken longer to yield results than we had anticipated. That said, our commitment to these initiatives is unwavering, and our expectations for meaningful and tangible results as measured by revenue growth, margin enhancement, inventory reductions, operational leverage and profitability are unchanged.
Non-Executive Chairman
Media Sciences President and CEO Michael W. Levin continues, "I called upon Willem van Rijn to assume the role of non-executive Chairman, which he has agreed to do. During his two years as a Media Sciences Director, I have come to admire Willem's experience and style, and believe he is uniquely suited to lead Media Sciences' active and diverse Board. This change will allow me to focus on the execution of our strategy, while bringing more attention to our daily operations."
Conference Call Note
Media Sciences International, Inc. will hold a conference call to discuss annual results on
For more information on Media Sciences or its SEC filings, please visit the investor relations section of the Company's website at www.mediasciences.com.
About Media Sciences International, Inc. (Nasdaq: MSII): Media Sciences International, Inc. (Nasdaq: MSII), the leading independent manufacturer of solid ink and color toner cartridges for office color printers, has a strong reputation for being the informed customer's choice. As the premium quality price alternative to the printer manufacturer's brand, Media Sciences' newly manufactured color toner and solid ink products for use in Dell(R), Samsung(R), Xerox(R), Tektronix(R), OKI(R), Ricoh(R), Konica Minolta(TM)/Minolta QMS(R), Epson(R), and Brother(R) office color printers deliver up to and over 30% in savings when compared to the printer manufacturer's brand. Behind every Media Sciences product is The Science of Color(TM)-the company's proprietary process for delivering high quality products at the very best price, including its commitment to exceptional, highly responsive technical support and its longstanding, industry-leading warranty. For more information on the Company, its products, and its programs, visit www.mediasciences.com, E-mail info@mediasciences.com, or call 201.677.9311.
Brand names are used for descriptive purposes only and are the properties of their respective owners.
Forward Looking Statements
This press release contains certain forward-looking statements about our goals and prospects within the meaning of the Private Securities Litigation Reform Act. These statements are based on management's current beliefs and expectations and are subject to risks and uncertainties. Actual results may differ materially from those included in these statements due to a variety of factors, including those factors identified in our Annual Report on Form 10- KSB for the year ended
Non-GAAP Financial Measures Reconciliation of Non-GAAP Measures Three Months Ended Six Months Ended 12/31/2007 9/30/2007 12/31/2006 12/31/2007 12/31/2006 Reported income (loss) from operations (838,541) (333,717) 937,284 (1,172,258) 1,724,848 Depreciation & amortization 260,168 248,107 223,510 508,275 442,442 EBITDA (578,373) (85,610) 1,160,794 (663,983) 2,167,290 Add-back of non-cash expenses: Increases (decreases) to inventory reserves (18,904) 27,385 80,734 8,481 114,329 Stock-based compensation 136,725 82,292 250,418 219,017 396,741 117,821 109,677 331,152 227,498 511,070 Cash EBITDA (460,552) 24,067 1,491,946 (436,485) 2,678,360 Add-back of non- recurring items: Litigation Cost 352,032 241,508 123,973 593,540 259,476 352,032 241,508 123,973 593,540 259,476 Normalized EBITDA (108,520) 265,575 1,615,919 157,055 2,937,836 Weighted Avg. Common Share Outstanding 11,576,357 11,470,759 11,221,435 11,523,930 11,179,621 - Adjusted EBITDA / Share - Basic ($0.04) $0.00 $0.13 ($0.04) $0.24 - Normalized EBITDA / Share - Basic ($0.01) $0.02 $0.14 $0.01 $0.26 Adjusted Weighted Avg. Shares Outstanding 11,576,357 11,470,759 11,769,260 11,523,930 11,709,703 - Adjusted EBITDA / Share - Diluted ($0.04) $0.00 $0.13 ($0.04) $0.23 - Normalized EBITDA / Share - Diluted ($0.01) $0.02 $0.14 $0.01 $0.25 MEDIA SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES Condensed Consolidated Statements of OPERATIONS (UNAUDITED) Three Months Ended Six Months Ended December 31, December 31, 2007 2006 2007 2006 NET REVENUES $5,685,477 $6,077,555 $12,116,367 $11,702,089 COST OF GOODS SOLD: Cost of goods sold, excluding depreciation and amortization, product warranty, shipping and freight 2,567,505 2,152,445 5,526,609 4,194,939 Depreciation and amortization 153,293 152,311 300,300 304,406 Product warranty 199,234 112,138 411,351 320,172 Shipping and freight 163,136 115,928 330,708 228,050 Total cost of goods sold 3,083,168 2,532,822 6,568,968 5,047,567 GROSS PROFIT 2,602,309 3,544,733 5,547,399 6,654,522 OTHER COSTS AND EXPENSES: Research and development 468,914 372,144 966,280 792,020 Selling, general and administrative, excluding depreciation and amortization 2,876,776 2,164,534 5,568,822 4,000,170 Depreciation and amortization 95,160 70,771 184,555 137,484 Total other costs and expenses 3,440,850 2,607,449 6,719,657 4,929,674 INCOME (LOSS) FROM OPERATIONS (838,541) 937,284 (1,172,258) 1,724,848 Interest income, net 1,052 24,933 9,042 33,048 INCOME (LOSS) BEFORE INCOME TAXES (837,489) 962,217 (1,163,216) 1,757,896 Provision (benefit) for income taxes (352,330) 336,794 (490,899) 590,008 NET INCOME (LOSS) $(485,159) $625,423 (672,318) 1,167,888 EARNINGS (LOSS) PER SHARE Basic $(0.04) $0.06 $(0.06) $0.10 Diluted $(0.04) $0.05 $(0.06) $0.10 WEIGHTED AVERAGE SHARES USED TO COMPUTE EARNINGS PER SHARE Basic 11,576,357 11,221,435 11,523,930 11,179,621 Diluted 11,576,357 11,769,260 11,523,930 11,709,703
The above results of operations and following Balance Sheet and Statement of Cash Flows, as reported under U.S. Generally Accepted Accounting Principles (U.S. GAAP), will be presented in the Company's 10-Q for the quarter ended
MEDIA SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets December 31, June 30, 2007 2007 ASSETS (Unaudited) CURRENT ASSETS: Cash and cash equivalents $925,006 $1,808,285 Accounts receivable, net 2,495,472 2,164,826 Inventories 7,489,109 5,801,526 Taxes receivable 317,289 566,967 Deferred tax assets 727,349 727,349 Prepaid expenses and other current assets 263,830 253,387 Total Current Assets 12,218,054 11,322,340 PROPERTY AND EQUIPMENT, NET 2,490,366 2,752,223 OTHER ASSETS: Goodwill and other intangible assets, net 3,584,231 3,584,231 Deferred tax assets 291,515 - Other assets 142,271 65,672 Total Other Assets 4,018,017 3,649,903 TOTAL ASSETS $18,726,437 $17,724,466 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Bank line of credit $155,220 $- Current maturities of long-term debt 147,118 147,118 Accounts payable 2,226,711 1,428,379 Accrued compensation and benefits 591,414 757,116 Other accrued expenses and current liabilities 1,547,617 722,725 Accrued product warranty costs 203,895 192,707 Deferred revenue 571,831 603,234 Total Current Liabilities 5,443,806 3,851,279 OTHER LIABILITIES: Long-term debt, less current maturities 250,994 323,965 Deferred rent liability 200,918 234,378 Deferred revenue, less current portion 196,383 240,893 Other tax obligations 724,556 589,298 Deferred tax liabilities - 463,590 Total Other Liabilities 1,372,851 1,852,124 TOTAL LIABILITIES 6,816,657 5,703,403 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Series A Convertible Preferred Stock, $.001 par value Authorized 1,000,000 shares; none issued - - Common Stock, $.001 par value Authorized 25,000,000 shares; issued and outstanding 11,679,699 shares 11,679,699 shares in December and 11,435,354 shares in June 11,679 11,435 Additional paid-in capital 11,729,110 11,136,505 Retained earnings 168,991 873,123 Total Shareholders' Equity 11,909,780 12,021,063 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $18,726,437 $17,724,466 MEDIA SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (UNAUDITED) Six Months Ended December 31, 2007 2006 CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $(672,318) $1,167,888 Adjustments to reconcile net income (loss) to net cash provided(used) by operating activities: Depreciation and amortization 508,275 442,442 Deferred income taxes (755,105) 65,000 Tax benefits from employee stock options 125,058 - Provision for inventory obsolescence 8,481 - Recovery of bad debts (4,134) - Stock-based compensation expense 221,337 396,741 Excess tax benefits from stock-based compensation - (98,120) Changes in operating assets and liabilities : Accounts receivable (326,512) (316,236) Inventories (1,693,128) (966,893) Income taxes 353,122 149,980 Prepaid expenses and other current assets (87,042) 236,926 Accounts payable 798,332 946,264 Accrued compensation and benefits (165,702) (243,377) Other accrued expenses and current liabilities 836,080 108,914 Deferred rent liability (33,460) (32,539) Deferred revenue (75,913) (134,319) Net cash provided (used) by operating activities (962,629) 1,722,671 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment (246,417) (426,157) Net cash used in investing activities (246,417) (426,157) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from bank credit line, net of repayments 155,220 - Bank term loan repayments (72,971) (71,235) Excess tax benefits from stock-based compensation - 98,120 Proceeds from issuance of common stock 243,518 157,646 Net cash provided by financing activities 325,767 184,531 NET (DECREASE) INCREASE IN CASH (883,279) 1,481,045 CASH, BEGINNING OF PERIOD 1,808,285 1,485,399 CASH, END OF PERIOD $925,006 $2,966,444 SUPPLEMENTAL CASH FLOW INFORMATION Interest paid $ 16,191 $ 33,020 Income taxes paid (refunded) $(213,974) $374,902
SOURCE Media Sciences International, Inc.
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