OAKLAND, N.J., May 13 /PRNewswire-FirstCall/ -- Media Sciences
International, Inc. (Nasdaq: MSII), the leading independent
manufacturer of color toner cartridges and solid inks for use in
color business printers, today announced its quarterly financial
results for the three and nine months ended March 31, 2010. The Company will host an investor
conference call Friday morning at 8:45 a.m.
EDT to discuss its quarterly results.
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Financial results for the quarter ended March 31, 2010 include:
- Net revenues of $5,175,000,
representing a $9,000 or 0.2%
decrease year-over-year and a $411,000 or 7% decrease over the prior
quarter.
- Gross margin at 36.3% of net revenues, versus 40.6% for the
same period last year.
- Net loss of $2,703,000
($0.22 per share), versus a net loss
of $1,496,000 ($0.13 per share) in the year ago quarter.
Our third quarter results were impacted by and include the
following significant cash and non-cash items:
- Valuation Allowance. A non-cash charge in the
amount of $2,033,000 (about
$0.17 per share) was established for
deferred tax assets previously recorded and related effects, as it
was deemed more likely than not that the remaining federal 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.
- Other Income. We recognized $214,000 of non-recurring income from the
purchase of a foreign liquidating entity. We had no similar
items in the comparative year ago periods.
- Foreign Currency Effects. Year-over-year
appreciation of the pound and euro combined with price increases
implemented in January 2009, helped
benefit our top-line revenues and margins by about $170,000. However, these effects were
offset by $165,000 of exchange rate
losses recognized as a result of recent depreciation of the euro
and pound over the quarter from levels of the preceding
quarter.
- Stock-Based Compensation. Our operating results
include $126,000 of non-cash
stock-based compensation expense (about $0.01 per share) recognized under authoritative
guidance.
CEO's Comments
Michael W. Levin, President and
CEO of Media Sciences International, Inc., noted the following
regarding the quarter, "We are disappointed that we did not meet
our top-line expectations for the quarter. In addition to
some historic seasonality we typically experience during January,
our sales volumes were adversely impacted by European and U.S.
weather in January and February, and delays in volume shipments of
our newly commercialized industrial inks. During the quarter,
we also continued to experience attrition of more price sensitive
and less quality oriented U.S. imaging channel volume, which has
generally been offset by the growth we continue to experience in
our U.S. office product and technology distribution channels as
well as continued growth of our European business."
Levin continued, "During the quarter, significant effort and
resources were applied to the recently announced transformative
acquisition of Master Ink. During the call we will review
the many significant strategic benefits the acquisition is expected
to provide us, as well as the improved scalability, operating
leverage and margin improvement we anticipate. Upon closing,
we expect to quickly enjoy the benefits of the combination,
including a reduction in the cost of our existing toner based
product line."
Revenues
For the three months ended March 31,
2010, as compared to the same period last year, net revenues
declined by $9,000 or 0.2% to
$5,175,000 from $5,184,000. Year-over-year for the three
months, sales of color toner cartridges increased by about 11% and
solid ink product sales decreased by about 10%.
For the nine months ended March 31,
2010, as compared to the same period last year, net revenues
increased by $175,000 or 1% to
$16,268,000 from $16,093,000. This increase in net revenues
was primarily driven by the revenue impact of greater
year-over-year sales of toner-based products and continued rapid
growth of our European sales, partially offset by attrition in our
sales volumes to the price sensitive and less quality oriented
imaging channel. Year-over-year for the nine months, sales of
color toner cartridges increased by about 11% and solid ink product
sales decreased by about 8%.
Price increases we implemented in January
2009 helped to materially offset the effects of currency
exchange rates for the first six months of our fiscal year versus
the comparable year ago periods. However, the appreciation of
the euro and pound during the comparative three months ended
March 31, 2010, helped benefit our
top line revenues and margins by about $170,000 for the three and nine months ended
March 31, 2010.
We ended the quarter with an order backlog of $434,000, representing a $107,000 increase over the prior quarter ended
December 31, 2009. For the
comparative year ago period, we had $334,000 of order backlog at March 31, 2009.
Gross Profit
Consolidated gross profit for the three months ended
March 31, 2010, compared to the same
period last year, decreased by $224,000 or 11% to $1,879,000 from $2,103,000. For the three months ended
March 31, 2010, our gross margins
decreased by 430 basis points to 36.3% from 40.6% in the
comparative year ago period. The year-over-year decrease in
our gross profit and margins for the quarter was attributed to a
number of factors including: sales mix, in particular a decreased
level of solid ink sales volume, an increased volume of industrial
ink sales, and an increase in our inventory obsolescence reserves.
These effects were partially offset by a decreased level of
customer rebates and lower tool and die depreciation.
Consolidated gross profit for the nine months ended March 31, 2010, compared to the same period last
year, decreased by $353,000 or 5% to
$6,520,000 from $6,874,000. For the nine months ended
March 31, 2010, our gross margins
decreased by 260 basis points to 40.1% from 42.7% in the
comparative year ago period. The year-over-year decrease in
our gross profit and margins for the nine months was primarily
attributed to an increase in our warranty expense and sales mix,
partially offset by lower year-over-year customer rebates and lower
tool and die depreciation.
Our margins reflect a portfolio of products. Generally,
our non-industrial solid ink products generate greater margins than
do toner-based products or our industrial inks. While margins
within the solid ink product line are very consistent, margins
within the toner-based product line vary quite significantly.
As a result, our margins can vary materially, not only as a
function of the solid ink to toner sales mix, but of the sales mix
within the toner-based product line itself and the significance of
industrial solid ink volumes. We expect to see changes in our
margins, both favorable and unfavorable, as a result of continued
changes in our sales mix.
Research and Development
Research and development spending for the three months ended
March 31, 2010, compared to the same
period last year, increased by $45,000 or 14% to $367,000 from $322,000. For the nine months ended
March 31, 2010, compared to the same
period last year, spending increased by $37,000 or 4% to $1,080,000 from $1,043,000. The year-to-date increase in
our research and development costs is primarily attributed to
additional travel cost associated with product manufacturing
efforts in China with our contract
vendors. Looking forward, we expect our research and
development spending to represent a similar proportion of our net
revenues.
Selling, General and Administrative
Selling, general and administrative expense, exclusive of
depreciation and amortization, for the three months ended
March 31, 2010, compared to the same
period last year, increased by $72,000 or 3% to $2,227,000 from $2,155,000. For the nine months ended
March 31, 2010, selling, general and
administrative expense, exclusive of depreciation and amortization,
as compared to the same period last year, decreased by $1,255,000 or 17% to $6,177,000 from $7,432,000.
The decrease in selling, general and administrative expense for
the nine months ended March 31, 2010
over the year ago period was primarily driven by our cost reduction
efforts, lower year-over-year costs of litigation, improvements in
our currency translation loss experience, and the absence of
business formation and start-up costs, offset by direct and
indirect costs associated with the Master Ink acquisition including
legal and extensive travel expenses.
In January 2009, we implemented a
company-wide 10% salary, wage and bonus concession. In the
fall of 2008, our directors also waived their cash compensation.
Effective October 1, 2009, half
of these temporary concessions were reinstated and are reflected in
our operating results. For the three and nine months ended
March 31, 2010, the savings
associated with these temporary concessions were about $65,000 and $261,000, respectively. Effective
April 19, 2010, all remaining
temporary concessions were reinstated.
Net Loss
For the three and nine months ended March
31, 2010, we lost $2,703,000
($0.22 per share basic and diluted)
and $3,013,000 ($0.25 per share basic and diluted). This compares
with a net loss of $1,496,000
($0.13 per share basic and diluted)
and $1,535,000 ($0.13 per share basic and diluted), respectively,
for the three and nine months ended March
31, 2009.
Conference Call Note
Media Sciences International, Inc. will hold a conference call
to discuss its quarterly results on Friday,
May 14, 2010, at 8:45 a.m. Eastern
Time. The call will be webcast live by Thomson/CCBN and may
be accessed through Media Sciences' web site at
www.mediasciences.com. Investors and other interested parties in
the United States may access the
teleconference by calling 866.543.6405. International callers may
dial 617.213.8897. The passcode for the teleconference is
46731879.
For more information on Media Sciences, its SEC filings, or to
access more information about Media Science's quarter and
year-to-date financial results, including supplemental financial
schedules, please visit the investor relations section of the
Company's website at www.mediasciences.com or directly at
http://phx.corporate-ir.net/phoenix.zhtml?c=79804&p=irol-irhome.
(Note: If clicking on the above links does not open in a new
web page, please cut and paste the above URLs into your browser's
address bar.)
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®, Dell®, Epson®, Konica Minolta®, OKI®, Ricoh®, Samsung®,
and Xerox® 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®—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 about future
events and financial trends that may affect our financial
condition, results of operations, business strategy and financial
needs and are subject to risks and uncertainties. Actual
results may differ materially from those included or implied in
these statements due to a variety of factors, including the risk
that the acquisition will not proceed as anticipated or that
certain pre-closing and post-closing adjustments to the terms and
conditions will be needed, and those factors identified in our
Annual Report on Form 10-K for the year ended June 30, 2009, on file with the Securities and
Exchange Commission. Any forward-looking statements contained in
this release speak only as of the time made and we assume no duty
to update them, whether as a result of new information, unexpected
events, future changes, or otherwise.
Web site: http://www.mediasciences.com
SOURCE Media Sciences International, Inc.