MEDIA SCIENCES INTERNATIONAL INC 
By (Logo: http://www.newscom.com/cgi-bin/prnh/20020604/NYTU016LOGO)
Financial results for the quarter ended
-- Net revenues of $5,184,000, representing a $1,290,000 or 20% decrease
year-over-year and a $27,000 or 0.5% increase over the prior quarter.
-- Gross margin at 40.6% of net revenues, versus 47.4% for the same period
last year.
-- Net loss of $1,496,000 ($0.13 per share), including special charges,
versus net loss of $488,000 ($0.04 per share) year-over-year.
-- Positive cash flow generated from operations of $575,000.
The Company's financial results for the quarter include the following non-cash special charges:
1. Impairment charges totaling $1,121,000 (about $740,000 after tax or about
$0.06 per share) were recognized related to the Company's decision
to close its not yet operational manufacturing facility in China. These
impairment charges are in addition to the costs the Company incurred
during the quarter as options for the facility were evaluated.
2. A valuation allowance in the amount of $323,000 (about $0.03 per share)
was established for deferred tax assets previously recorded, as it was
deemed more likely than not that certain State net operating loss carry
forwards and other future deductible temporary differences included in
the Company's deferred tax assets will not be realized. This
valuation allowance adjustment has no impact on the Company's cash
flows or future prospects, nor does it alter the Company's ability
to utilize these tax attributes, which is primarily dependent upon future
levels of taxable income.
Results for the quarter continue to reflect the broader economic climate and sales activity consistent with an economic recession as well as continued turbulence in the currency markets, in particular continued strengthening of the U.S. dollar against the European currencies in which the Company sells to its European customers.
CEO's Comments
Levin continued, "Despite the stabilization of revenues, it is incumbent upon us to be fiscally conservative as the economic environment continues to be uncertain. Consequently, we finalized a decision to close our
"With these cost reduction efforts behind us, and expansion of our partner network and imminent new product introductions, we are well positioned to return to profitability and revenue growth."
Revenues
For the three months ended
Net revenues for the nine months ended
The Company ended the quarter with an order backlog of
Gross Margin
Consolidated gross profit for the three months ended
The decline in gross margins for the quarter was primarily attributed to a year over year increase in the Company's warranty expense related to a limited segment of our products. A latent issue was determined to have been caused by a change in manufacturing processes by one of the Company's vendors. While the issue is now resolved, management expects a higher than normal rate of warranty claims in the near future, and has increased the Company's warranty reserve commensurately. Gross margins were also reduced by greater year-over-year customer rebates, the revenue and margin impact resulting from the significant devaluation of the British Pound and the Euro, and a greater level of customer freight costs borne by the Company. These increases were partially offset by some year-over-year reductions in product costs, particularly inbound freight costs.
Research and Development
Research and development spending for the three months ended
The decrease in the Company's research and development costs was the result of cost reduction efforts. Looking forward, management expects the Company's research and development spending to represent a similar to slightly declining proportion of net revenues.
Selling, General and Administrative Expense
Selling, general and administrative expense, exclusive of depreciation and amortization, for the three months ended
The decrease in selling, general and administrative expense was primarily driven by lower year over year costs of litigation and the results of the Company's cost reduction efforts partially offset by greater year over year business formation and start-up costs associated with the
In response to the challenges of the current economic environment, the Company made significant progress in reducing its costs, and working capital requirements. Some of the measures implemented during the quarter are as follows:
-- Closure of the Company's China facility is expected to help the
Company realize about $900,000 in additional annual run-rate savings.
The Company expects to realize the full financial benefits of these
savings late in its fiscal fourth quarter ended June 30, 2009. In
response to the closing of China, Media Sciences' management team
is pursuing alternative means of achieving the tactical and strategic
objectives that initially gave rise to the China initiative.
-- In January, the Company reduced its personnel by another 7%, in addition
to the approximate 20% staff reduction implemented in July. These
headcount reductions are expected to provide an additional annual
run-rate improvement in pretax operating results of about $650,000 and
an improvement in operating cash flows of about $620,000.
-- A company-wide 10% salary, wage and bonus concession was implemented
until certain profitability measures are achieved over a contiguous
six-month period. This temporary measure was implemented in late
January 2009 and is expected to generate about $450,000 in annualized
run-rate savings.
-- The Company's Directors waived their cash compensation until they
determine the present economic uncertainties facing the company have
passed. This temporary action is expected to generate about $123,000 in
annualized run-rate savings and benefited the current quarter by about
$31,000.
-- Inventories were reduced by a further $633,000 for a year-to-date total
reduction of $2,653,000, representing a 17% reduction in days in
inventory.
Selling, general and administrative expense, exclusive of depreciation and amortization, for the three and nine months ended
Net Loss
For the three and nine months ended
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 Brother(R), Dell(R), Epson(R), Konica Minolta(R), OKI(R), Ricoh(R), Samsung(R), and Xerox(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(R)--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-K for the year ended
Non-GAAP Financial Measures
The Company's financial results are reported in accordance with generally accepted accounting principles (GAAP). Management finds it useful at times to provide adjustments to its GAAP numbers. This news release contains the non-GAAP financial measure of EBITDA, defined as Earnings Before Interest, Taxes, Depreciation and Amortization, which are adjusted from results based on GAAP to exclude certain expenses.
These non-GAAP financial measures should not be construed as being more important than comparable GAAP measures. They are presented because the Company's management uses this information when evaluating current results of operations and cash flow, and believes that this information provides the users of the financial statements with an additional and useful comparison of the Company's current results of operations and cash flows with past and future periods.
This adjusted financial information should not be construed as an alternative to our reported results determined in accordance with GAAP. Further, our definition of this adjusted financial information may differ from similarly title measures used by other companies.
Reconciliation of
Non-GAAP Measures Three Months Ended Nine Months Ended
3/31/2009 12/31/2008 3/31/2008 3/31/2009 3/31/2008
Reported income
(loss) from
operations (1,582,997) (814,174) (791,084)(1,496,165)(1,963,342)
Depreciation
& amortization 242,853 246,203 253,753 713,961 762,028
EBITDA (1,340,144) (567,971) (537,331) (782,204)(1,201,314)
Add-back of
non-cash expenses:
Increase
(decrease) in
inventory
reserves (28,131) 38,371 31,897 39,479 40,378
Impairment
charge 1,121,401 - - 1,121,401 -
Stock-based
compensation 217,086 208,005 110,916 580,502 327,613
1,310,356 246,376 142,813 1,741,382 367,991
Cash EBITDA (29,788) (321,595) (394,518) 959,178 (833,323)
Add-back of
non-recurring
items:
Litigation costs 164,094 79,259 704,916 427,048 1,298,069
Litigation
settlement
recovery - - - (1,500,000) -
Foreign currency
exchange losses
(gains) 86,452 186,370 (18,959) 373,208 (29,760)
Business start-up
costs 247,650 344,000 162,879 890,762 508,779
498,196 609,629 848,836 191,018 1,777,088
Normalized EBITDA 468,408 288,034 454,318 1,150,196 943,765
Weighted Avg.
Common Share
Outstanding 11,723,716 11,721,467 11,687,517 11,720,761 11,578,459
- Cash EBITDA /
Share - Basic ($0.00) ($0.03) ($0.03) $0.08 ($0.07)
- Normalized
EBITDA /
Share - Basic $0.04 $0.02 $0.04 $0.10 $0.08
Adjusted Weighted
Avg. Shares
Outstanding 11,723,716 11,721,467 11,687,517 11,720,761 11,578,459
- Cash EBITDA /
Share - Diluted ($0.00) ($0.03) ($0.03) $0.08 ($0.07)
- Normalized
EBITDA /
Share - Diluted $0.04 $0.02 $0.04 $0.10 $0.08
MEDIA SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
March 31, March 31,
2009 2008 2009 2008
NET REVENUES $5,184,056 $6,473,997 $16,093,166 $18,590,364
COST OF GOODS SOLD:
Cost of goods sold,
excluding depreciation
and amortization,
product warranty,
shipping and freight 2,298,917 2,877,042 7,474,487 8,403,651
Depreciation and
amortization 140,331 150,040 397,447 450,340
Product warranty 497,635 260,754 939,135 672,106
Shipping and freight 144,652 120,707 408,417 451,414
Total cost of
goods sold 3,081,535 3,408,543 9,219,486 9,977,511
GROSS PROFIT 2,102,521 3,065,454 6,873,680 8,612,853
OTHER COSTS AND EXPENSES:
Research and
development 321,839 467,031 1,043,085 1,433,310
Selling, general and
administrative,
excluding
depreciation and
amortization 2,154,973 3,298,070 7,431,654 8,866,892
Depreciation and
amortization 87,305 91,437 273,705 275,993
Impairment charge 1,121,401 - 1,121,401 -
Litigation settlement - - (1,500,000) -
Total other costs
and expenses 3,685,518 3,856,538 8,369,845 10,576,195
LOSS FROM OPERATIONS (1,582,997) (791,084) (1,496,165) (1,963,342)
Interest expense (72,712) (50,559) (201,868) (66,696)
Interest income 70 115 3,037 25,294
Amortization of debt
discount on convertible
debt (28,211) - (54,422) -
LOSS BEFORE INCOME TAXES (1,683,850) (841,528) (1,749,418) (2,004,744)
Benefit for income taxes 188,102 353,548 214,329 844,447
NET LOSS $(1,495,748) $(487,980) $(1,535,089)$(1,160,297)
LOSS PER SHARE
Basic and diluted $(0.13) $(0.04) $(0.13) $(0.10)
WEIGHTED AVERAGE SHARES
USED TO COMPUTE LOSS
PER SHARE
Basic and diluted 11,723,716 11,687,517 11,720,761 11,578,459
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
March 31,
2009 June 30,
ASSETS (Unaudited) 2008
CURRENT ASSETS:
Cash and cash equivalents $548,542 $236,571
Accounts receivable, net 2,902,516 3,082,516
Inventories 6,563,238 9,216,439
Taxes receivable 72,584 70,282
Deferred tax assets 674,189 772,288
Prepaid expenses and other current
assets 280,264 285,241
Total Current Assets 11,041,333 13,663,337
PROPERTY AND EQUIPMENT, NET 2,182,126 2,472,570
OTHER ASSETS:
Goodwill and other intangible assets,
net 3,584,231 3,584,231
Deferred tax assets 508,765 260,292
Other assets 121,790 124,359
Total Other Assets 4,214,786 3,968,882
TOTAL ASSETS $17,438,245 $20,104,789
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $1,319,629 $3,046,563
Accrued compensation and benefits 528,551 731,744
Other accrued expenses and current
liabilities 1,159,744 1,829,919
Short-term capital lease obligation 188,820 -
Income taxes payable - 12,606
Accrued product warranty costs 316,578 198,666
Deferred revenue 306,074 519,139
Total Current Liabilities 3,819,396 6,338,637
OTHER LIABILITIES:
Long-term debt 2,337,439 2,594,209
Deferred rent liability 131,681 166,969
Convertible debt, net of discount of
$432,193 in March 817,807 -
Deferred revenue, less current
portion 67,527 148,553
Total Other Liabilities 3,354,454 2,909,731
TOTAL LIABILITIES 7,173,850 9,248,368
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;
25,000,000 shares authorized;
issued and outstanding,
respectively, 12,401,897 and
11,737,065 shares in March and
11,794,101 and 11,708,964 shares
in June 11,737 11,709
Additional paid-in capital 12,806,610 11,798,443
Accumulated other comprehensive
income (loss) (35,965) 29,167
Accumulated deficit (2,517,987) (982,898)
Total Shareholders' Equity 10,264,395 10,856,421
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $17,438,245 $20,104,789
MEDIA SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
March 31,
2009 2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,535,089) $(1,160,297)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation and amortization 713,961 762,030
Stock-based compensation expense 580,502 327,613
Deferred income taxes (214,329) (378,159)
Impairment charge 1,121,401 -
Provision for inventory
obsolescence 39,479 40,378
Provision for product warranties 117,912 26,440
Provision for (recovery of )
returns and doubtful accounts 7,655 (31,030)
Amortization of debt discount
on convertible debt 54,422 -
Changes in operating assets
and liabilities:
Accounts receivable 160,797 (1,345,019)
Inventories 2,618,756 (3,169,823)
Income taxes (14,908) (111,144)
Prepaid expenses and other
current assets 7,546 (163,359)
Accounts payable (1,725,191) 967,296
Accrued compensation and
benefits (203,327) (162,170)
Other accrued expenses and
current liabilities (1,018,262) 1,017,636
Deferred rent liability (35,288) (50,372)
Deferred revenue (294,091) (110,731)
Net cash provided (used)
by operating activities 381,946 (3,540,711)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (688,085) (322,227)
Net cash used in
investing activities (688,085) (322,227)
CASH FLOWS FROM FINANCING ACTIVITIES
Bank credit line net proceeds (256,769) 1,542,369
Bank term loan repayments - (471,083)
Bank term loan proceeds - 1,500,000
Capital lease obligation repayments (339,668) -
Proceeds from issuance of
subordinated convertible debt 1,250,000 -
Proceeds from issuance of common stock - 258,375
Net cash provided by
financing activities 653,563 2,829,661
Effect of exchange rate changes on
cash and cash equivalents (35,453) 22,481
NET INCREASE (DECREASE) IN CASH 311,971 (1,010,796)
CASH, BEGINNING OF PERIOD 236,571 1,808,285
CASH, END OF PERIOD $548,542 $797,489
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $177,271 $57,366
Income taxes paid (refunded) $14,908 $(364,635)
SUPPLEMENTAL DISCLOSURE OF NON-CASH
TRANSACTIONS
Capital lease additions $528,488 $-
SOURCE Media Sciences International, Inc.
