Raefield has his work cut out

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08/14/2008
Mace released its 2Q financials today, and it's clear that incoming CEO Dennis Raefield has his work cut out for him. The top line number looks good, actually, with the company bringing in $15.1 million in the second quarter of 2008, up from $9.0 million in 2007, gross profit as a percentage of revenues at 30% for the second quarter of 2008, compared to 22.1% for the second quarter of 2007. But other numbers look less good: Operating loss for the second quarter of 2008 was $3.9 million, compared to $2.1 million in the second quarter of 2007. The increase in the operating loss was principally the result of the increase in SG&A expenses and the recording of asset impairment charges of $2.6 million, partially offset by our overall increase in sales and gross profit. In the second quarter of 2008, in accordance with Statement of Financial Accounting Standards ("SFAS") 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the Company recorded an impairment charge of approximately $1.4 million representing the write-off of the net book value of certain impaired customer relationships within our Digital Media Marketing Segment, as well as the impairment of assets related to two full service car washes in Arlington, Texas of approximately $1.2 million. Net loss for the second quarter of 2008 was approximately $4.0 million, or $(0.24) per share, compared to a loss of $1.3 million, or $(0.08) per share, for the second quarter of 2007. Net loss being more than 25% of revenues just doesn't seem good. Most relevantly, The increase in total revenues was offset by a slight decline in revenues of approximately $70,000 in Mace's Security Segment, resulting in Security Segment revenues of $5.56 million in the second quarter of 2008, compared to $5.63 million in the same period in 2007. Mace's Security Segment revenues during the second quarter of 2008 as compared to 2007 included an increase in revenues in its personal defense business, offset by a decline in revenues in the Company's consumer direct surveillance and machine vision camera operations. Revenue from the Company's professional surveillance product operation remained constant in the second quarter of 2008 compared to the same period in 2007. In a supposedly growing security systems market, stagnant revenues are a bad sign. Raefield is going to need to come in and do more than streamline things. He's going to have to kick-start their dealer program and get the professional surveillance operation rolling.