IRVINE, Calif., Jan. 8, 2010 (GLOBE NEWSWIRE) -- Meade Instruments Corp. (Nasdaq:MEAD), a leading designer, manufacturer and distributor of optical products, including telescopes, binoculars and microscopes, today reported net sales of $7.3 million for the three months ended November 30, 2009, compared to $9.9 million during the three months ended November 30, 2008. The Company reported a net loss of $0.5 million, or $0.44 per share, for the three months ended November 30, 2009, compared with a net loss of $2.8 million, or $2.39 per share, for the three months ended November 30, 2008.
The results of the Company's former European operations, which were sold in January 2009, have been classified in the prior year as a discontinued operation in accordance with generally accepted accounting principles, as explained in the Company's fiscal 2009 Form 10-K.
In addition, all share and per share amounts have been adjusted retroactively by the one-for-twenty reverse stock split executed on August 7, 2009.
Q3 Results
Net sales were approximately $7.3 million for the three months ended November 30, 2009, compared to $9.9 million for the three months ended November 30, 2008. The decrease in net sales of approximately $2.6 million or 26% compared to the prior year was a result of decreases in net sales of nearly all of the Company's products, offset partially by sales of the Company's new ETX-LS product which started shipping in May 2009. While net sales to the Company's top 25 customers increased slightly by approximately 3% compared to the prior year period, net sales decreased overall. The Company attributes much of the decline in net sales to a reduction in the market for its products due to the generally poor economic environment. The Company is also experiencing increased competition from Asia-based manufacturers. It is not possible to accurately determine how much of the decrease in the Company's net sales is attributable to each of these factors.
Gross profit for the three months ended November 30, 2009 was $1.5 million or 21% of net sales, compared to $1.2 million or 12% of net sales during the three months ended November 30, 2008. Meade's gross profit improved over the prior year due to lower costs of sales primarily attributable to lower costs associated with the Company's manufacturing operations in Mexico -- including the benefit of favorable foreign currency exchange rates, consolidation of the Company's operation in Mexico from two buildings into one, better operating efficiencies and reductions in other indirect costs.
Selling, general and administrative expenses during the three months ended November 30, 2009 decreased by approximately $3.2 million or 64% compared to the three months ended November 30, 2008, primarily due to reduced headcount reductions and reduced facility costs related to the relocation of the Company's former Irvine, California corporate headquarters to a lower cost facility.
Research and development expenses during the three months ended November 30, 2009 decreased by 52% compared to the three months ended November 30, 2008 due primarily to the completion of the Company's new product introduction (ETX-LS) in the first quarter ended May 31, 2009.
Liquidity
Cash used in operating activities during the nine months ended November 30, 2009 was approximately $3.1 million, compared to $8.4 million in the prior year -- a decrease of approximately $5.3 million or 63% due primarily to the decrease in operating loss excluding gain on brand sales. Operating loss excluding gain on brand sales decreased from $10.9 million during the nine months ended November 30, 2008 to $2.8 million during the nine months ended November 30, 2009 -- a decrease of $8.1 million or 74%, due to the improved gross margin and lower operating expenses.
Approximately $1.2 million or 39% of the $3.1 million of cash used in operating activities during the nine months ended November 30, 2009 related to changes in working capital associated with the seasonality of the Company's business. Approximately $1.0 million or 32% of the $3.1 million of cash used in operating activities during the nine months ended November 30, 2009 consisted of restructuring costs associated with officer severance and the lease termination fee associated with the relocation of the Company's corporate headquarters to a lower cost facility in February 2009.
The Company's cash balance as of November 30, 2009 was approximately $3.5 million and the Company has no long term debt. In addition, the Company has an undrawn $10.0 million asset backed credit facility with First Capital of which $3.6 million was available based on the Company's accounts receivable as of November 30, 2009. The Company is still working with its lender on the availability under the $3.0 million inventory component of the facility.
Management Commentary
"Our net sales in our third quarter ended November 30, 2009 were lower than our second quarter of this fiscal year and the third quarter of the prior fiscal year, due to the current difficult market conditions -- including a decreased market for our products due to reduced discretionary spending and increased competition from Asia-based manufacturers within that diminished market. However, we did see further improvement in our third quarter of fiscal 2010 results compared to our first two quarters of this fiscal year, as well as compared to our prior year's third quarter results, due to the actions we have taken over the past year to streamline the Company and improve operations," said Steven Murdock, Chief Executive Officer of Meade. "Although we have been able to improve gross margins and we have realized cost savings, the Company still has work to do in lowering its cost structure to bring it in line with the reduced revenue we are experiencing due to current market conditions. We continue to implement further actions and are taking proactive measures to further decrease corporate overhead and manufacturing expenses in order to improve the Company's performance relative to the decreased market for relatively expensive, highly discretionary products such as ours."
Mr. Murdock continued, "Historically, the third quarter of our fiscal year typically reflected significantly higher revenues than the other quarters. With the sale of our discontinued European operations, which were much more seasonal than our continuing operations, changes in our customer and product mix, and the current economic environment, revenues in our third quarter were lower than our second quarter this year. We are taking a cautious stance for the remainder of the year given the ongoing significant contractions in consumer discretionary spending. The weakened macroeconomic environment suggests that business will continue to be challenging for retailers and related manufacturers of consumer products such as Meade. While we continue to take measures to reduce our costs and increase our results from operations, we do not anticipate achieving profitability during the remainder of fiscal 2010. We are concentrating on improving the quality of our products and results from operations and are looking for ways to build on the actions taken in fiscal 2009 and 2010 to further improve the Company's operating results in fiscal 2011."
ABOUT MEADE INSTRUMENTS
Meade Instruments is a leading designer, manufacturer and distributor of optical products including telescopes and accessories for the beginning to serious amateur astronomer. Meade offers a complete line of binoculars that address the needs of everyone from the casual observer to the serious sporting or birding observer. The Company distributes its products worldwide through a network of specialty retailers, mass merchandisers and domestic and foreign distributors. Additional information on Meade is available at http://www.meade.com.
"Safe-Harbor" Statement under the Private Securities Litigation Reform Act of 1995: This news release contains comments and forward-looking statements based on current plans, expectations, events, and financial and industry trends that may affect the Company's future operating results and financial position, including, without limitation, the Company's expectations that the cost savings and improved gross margins can be sustained and will be a key driver toward profitability; that the Company will continue to implement further cost reductions. Such statements involve risks and uncertainties which cannot be predicted or quantified and which may cause future activities and results of operations to differ materially from those discussed above. Such risks and uncertainties include, without limitation: the Company's ability to execute on its restructuring initiatives and achieve the projected cost savings, as well as the potential need for further restructuring activities; the Company's ability to retain its credit facility; as well as other risks and uncertainties previously set forth in the Company's filings with the Securities and Exchange Commission. The historical results achieved are not necessarily indicative of future prospects of the Company. For additional information, please refer to the Company's filings with the Securities and Exchange Commission.
MEADE INSTRUMENTS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, expect per share data)
(Unaudited)
Three Months Ended Nine Months Ended
November 30, November 30,
-------------------- --------------------
2009 2008 2009 2008
--------- --------- --------- ---------
Net sales $ 7,271 $ 9,872 $ 19,101 $ 24,669
Cost of sales 5,771 8,664 15,191 21,568
--------- --------- --------- ---------
Gross profit 1,500 1,208 3,910 3,101
Selling 665 1,171 1,989 3,431
General and administrative 1,144 3,840 4,138 9,057
Research and development 212 441 619 1,300
ESOP contribution expense -- -- -- 178
Gain on brand sales -- 62 -- (5,202)
--------- --------- --------- ---------
Operating loss (521) (4,306) (2,836) (5,663)
Interest (income) expense,
net (7) 48 (34) 168
--------- --------- --------- ---------
Loss before income taxes (514) (4,354) (2,802) (5,831)
Income tax benefit -- (981) (13) (1,946)
--------- --------- --------- ---------
Loss from continuing
operations (514) (3,373) (2,789) (3,885)
Income from discontinued
operations, net of tax -- 583 -- 834
--------- --------- --------- ---------
Net loss $ (514) $ (2,790) $ (2,789) $ (3,051)
========= ========= ========= =========
Loss from continuing
operations per share -
basic and diluted $ (0.44) $ (2.89) $ (2.39) $ (3.32)
========= ========= ========= =========
Income from discontinued
operations, net of tax
per share - basic and
diluted $ -- $ 0.50 $ -- $ 0.71
========= ========= ========= =========
Net loss per share - basic
and diluted $ (0.44) $ (2.39) $ (2.39) $ (2.61)
========= ========= ========= =========
Weighted average common
shares outstanding - basic
and diluted 1,167 1,167 1,167 1,167
========= ========= ========= =========
MEADE INSTRUMENTS CORP.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
November 30, February 28,
2009 2009
----------- -----------
ASSETS
Current assets:
Cash $ 3,469 $ 5,890
Restricted cash -- 700
Accounts receivable 5,245 2,488
Inventories, net 7,268 8,895
All other current assets 342 553
----------- -----------
Current assets, total 16,324 18,526
Long term Assets 1,875 2,040
----------- -----------
$ 18,199 $ 20,566
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,219 $ 1,702
Accrued liabilities and other current
liabilities 2,633 3,330
----------- -----------
Current liabilities, total 4,852 5,032
Deferred rent 12 --
Total stockholders' equity 13,335 15,534
----------- -----------
$ 18,199 $ 20,566
=========== ===========
MEADE INSTRUMENTS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
November 30,
--------------------
2009 2008
--------- ---------
Cash flows from operating activities:
Net loss $ (2,789) $ (3,051)
Income from discontinued operations, net of tax -- 834
--------- ---------
Loss from continuing operations (2,789) (3,885)
Adjustments to reconcile loss from continuing
operations to net cash used in operating
activities:
Gain on brand sales -- (5,202)
Depreciation and amortization 399 601
ESOP contribution -- 179
Allowance for doubtful accounts (68) 89
Deferred income taxes -- 11
Stock-based compensation 590 421
Deferred rent amortization 12 132
Gain on sale of fixed assets (3) --
Changes in assets and liabilities:
Accounts receivable (2,689) 45
Inventories 1,623 850
Prepaid expenses and other current assets 211 (87)
Accounts payable 517 (2,097)
Accrued lease termination fee (700) --
Accrued liabilities (159) 499
--------- ---------
Net cash used in operating activities (3,056) (8,444)
--------- ---------
Cash flows from investing activities:
Proceeds from brand sales -- 15,250
Capital expenditures (68) (122)
Reduction in restricted cash 700 --
Proceeds from sale of fixed assets 3 --
--------- ---------
Net cash provided by investing activities 635 15,128
--------- ---------
Cash flows from financing activities:
Net payments under bank lines of credit -- (5,492)
--------- ---------
Net cash used in financing activities -- (5,492)
Cash flows from discontinued operations -- (1,898)
--------- ---------
Net decrease in cash (2,421) (706)
--------- ---------
Cash at beginning of period 5,890 970
--------- ---------
Cash at end of period $ 3,469 $ 264
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