OAKLAND, N.J., Sept. 24 /PRNewswire-FirstCall/ -- Media Sciences International, Inc. (Nasdaq: MSII), the leading independent manufacturer of color toner cartridges and solid inks for color business printers, today announced its annual financial results for the period ended June 30, 2009. The Company will host an investor conference call tomorrow morning at 8:45 a.m. ET to discuss its fiscal 2009 results.
(Logo: http://www.newscom.com/cgi-bin/prnh/20020604/NYTU016LOGO )
Financial results for the year ended June 30, 2009 include:
-- Net revenues of $21.7 million, a 10% decrease over fiscal 2008
-- Gross margins of 41%, a 500 basis point decline over fiscal 2008
-- Net loss of $1.68 million versus a net loss of $1.82 million in 2008
-- Per share loss of $0.14 versus $0.16 in 2008 (basic and diluted)
-- Cash flow generated by operating activities $0.4 million versus $3.3
million used by operations in 2008
Results for the year reflected the broader economic climate and sales activity consistent with an economic recession as well as the turbulence experienced in the world currency markets through the year. Our 2009 results were impacted by and include the following significant cash and non-cash items:
-- Impairment Charge. Non-cash charges totaling $1,009,000 (about $666,000
after tax or about $0.06 per share) were recognized primarily related to
closure of the Company's not yet operational manufacturing facility
in China.
-- Business Formation and Start-up Costs. We recognized about $891,000
(about $588,000 after tax or about $0.05 per share) of expenses
associated with formation and start-up of our manufacturing operations
in China, prior to closure.
-- Foreign Currency Devaluation. US dollar translated revenues were
adversely affected by devaluation of the British pound and euro. All
told, the devaluation of the pound and euro adversely impacted our
reported revenues and gross profits by about $800,000 and operating
pretax results by about $1,010,000 (about $667,000 after tax or about
$0.06 per share).
-- Litigation. We incurred $436,000 of expense associated with our
litigation with Xerox (about $288,000 after tax or about $0.02 per
share). This was offset by a $1,500,000 litigation settlement we
received related to litigation with our former insurance broker (about
$990,000 after tax or about $0.08 per share).
-- Valuation Allowance. We established a valuation allowance in the amount
of $532,000 for state deferred tax assets. This non-cash adjustment
reduced our net income by $532,000 or about $0.05 per share.
-- SFAS No. 123(R) Non-cash Expense. Our operating results include
$777,000 of pretax non-cash stock-based compensation expense ($502,000
after tax or about $0.04 per share).
-- Product Warranty. We increased our product warranty reserves by
$238,000. This non-cash charge reduced our gross profits and pretax
results by $238,000 (about $157,000 after tax or about $0.01 per share).
-- Inventory Reserves. We increased our inventory reserves by $212,000.
This non-cash charge reduced our gross profits and pretax results by
$212,000 (about $140,000 or about $0.01 per share).
CEO's Comments
Michael W. Levin, President and CEO of Media Sciences International, Inc. commented on the past fiscal year. "We took decisive action in fiscal 2009 to right-size our overhead and operating costs with our revenues. These cost reduction initiatives helped us realize over the year about $4,800,000 of annual run-rate savings versus our cost structure existing in our prior fiscal year ended June 30, 2008. These cost savings were achieved through a 27% reduction in our headcount, temporary company-wide compensation concessions, closure of our start-up manufacturing operations in China, and a concerted initiative to reduce our other operating costs. As a result of our actions, we generated positive cash from operations for two consecutive quarters, and generated a nominal operating profit in our fourth quarter."
Mr. Levin continued, "Despite the significant cost reductions initiatives put into place, we continued to execute on building the business. We introduced six new products, achieved important catalog listings in the office products channels, commercialized a new solid ink for an OEM partner and grew our Media Sciences branded revenues. These achievements along with a leaner organization provide us with a platform to return to top-line growth and profitability. "
Fiscal 2009 Results
Revenues
Consolidated net revenues decreased by $2,520,000 or 10% to $21,718,000, from $24,238,000 in fiscal 2008. Sales of color toner cartridges increased by about 2% over fiscal 2008 while sales of solid inks contracted by about 11%. Revenues associated with initial placements of printers under our discontinued INKlusive program decreased by approximately $508,000 or 71%, year-over-year, as we focused on our core consumable business. The most significant drivers of the 10% decrease in net revenues were an increase in the year-over-year level of customer rebates and the effect of European currency devaluation against the US dollar. We ended the 2009 fiscal year with an order backlog of $241,000 versus $200,000 at June 30, 2008.
Gross Margin
Consolidated gross profit decreased by $2,209,000 or 20% to $8,895,000 from $11,104,000 in 2008. In fiscal 2009, our gross margin was 41% of net revenues as compared with 46% of net revenues in 2008. Virtually all of this 500 basis point decrease in margins is attributable to our increased year-over-year level of rebates and the impact of currency devaluation. Our gross margins were also affected by year-over-year increases in our warranty costs, offset by realized reductions in our product costs.
Research and Development
In 2009, research and development spending decreased by $498,000 or 27% over 2008. The decline in our fiscal 2009 research and development spending was the result of our broad-based initiatives to reduce our operating costs.
Selling, General and Administrative Expense
In 2009, selling, general and administrative expense, exclusive of depreciation and amortization, decreased by $2,752,000 or 23% over 2008. This decrease was primarily driven by our broad-based efforts to reduce our operating costs, in particular, lower compensation and benefits, professional, advertising, and travel and entertainment costs. Our 2009 selling, general and administrative expense, exclusive of depreciation and amortization, includes several significant expenses that were unusual or of a non-recurring in nature. These items include: (1) $891,000 of costs associated with the start-up activities for our operations in China, which have ceased; (2) $210,000 of realized currency exchange losses; and (3) $436,000 of litigation costs.
Net Loss
For the year ended June 30, 2009, we lost $1,675,000 from operations or $0.14 per share basic and fully diluted, as compared to the year ended June 30, 2008, where we lost $1,824,000 from operations or $0.16 per share basic and fully diluted. As discussed above, our fiscal 2009 and 2008 results were adversely impacted by a number of significant cash and non-cash items, some of which were non-recurring in nature. In 2009, these items included the $1,500,000 litigation settlement we received and the $1,009,000 impairment charge we recognized.
Inventory
For the year ended June 30, 2009 we achieved a $2.8 million or about 31% decrease in our inventory levels to $6.4 million from $9.2 million as a result of execution on our inventory management initiative. Based on these year-end inventory levels, which include raw materials, we achieved an 84 day or 29% reduction in our days in inventory from 292 days last year to 208 days this year.
Conference Call Note
Media Sciences International, Inc. will hold a conference call to discuss annual results on Friday, September 25, 2009, 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 866.700.0161. International callers may dial 617.213.8832. The passcode for the teleconference is 16428750.
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 inks 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 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 June 30, 2008, 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.
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 Three Months Ended
Measures
6/30/2009 3/31/2009 6/30/2008
--------- --------- ---------
Reported income (loss) from
operations 242 (1,582,997) (1,079,516)
Depreciation & amortization 241,449 242,853 230,211
------- ------- -------
EBITDA 241,691 (1,340,144) (849,305)
Add-back of non-cash expenses:
Increase (decrease) in
inventory reserves 172,144 (28,131) 93,423
Increase (decrease) in
warranty reserves 120,000 129,344 (20,481)
Impairment charge (112,313) 1,121,401 -
Stock-based compensation 196,512 217,086 148,209
Other non-cash items (56,131) 18,754 (38,022)
------- ------ -------
320,212 1,458,454 183,129
Cash EBITDA 561,903 118,310 (666,176)
Add-back of non-recurring items:
Litigation costs 9,417 164,094 390,796
Litigation settlement recovery - - -
Foreign currency transaction
losses (gains) (163,679) 86,452 9,076
Business start-up costs - 247,650 376,333
------- ------- -------
(154,262) 498,196 776,205
Normalized Cash EBITDA 407,641 616,506 110,029
---------------------- ------- ------- -------
Weighted Avg. Common Share
Outstanding 11,746,732 11,723,716 11,707,964
- Cash EBITDA / Share - Basic $0.05 $0.01 ($0.06)
- Normalized EBITDA / Share -
Basic $0.03 $0.05 $0.01
Adjusted Weighted Avg. Shares
Outstanding 11,746,732 11,723,716 11,707,964
- Cash EBITDA / Share -
Diluted $0.05 $0.01 ($0.06)
- Normalized EBITDA / Share -
Diluted $0.03 $0.05 $0.01
Reconciliation of Non-GAAP Year Ended
Measures
6/30/2009 6/30/2008
--------- ---------
Reported income (loss) from
operations (1,495,924) (3,042,858)
Depreciation & amortization 955,410 992,241
------- -------
EBITDA (540,514) (2,050,617)
Add-back of non-cash expenses:
Increase (decrease) in
inventory reserves 211,623 133,801
Increase (decrease) in
warranty reserves 237,912 5,959
Impairment charge 1,009,088 -
Stock-based compensation 777,014 475,822
Other non-cash items 5,946 (69,052)
----- -------
2,241,583 546,530
Cash EBITDA 1,701,069 (1,504,087)
Add-back of non-recurring items:
Litigation costs 436,465 1,688,865
Litigation settlement recovery (1,500,000) -
Foreign currency transaction
losses (gains) 209,529 (20,684)
Business start-up costs 890,762 885,112
------- -------
36,756 2,553,293
Normalized Cash EBITDA 1,737,825 1,049,206
---------------------- --------- ---------
Weighted Avg. Common Share
Outstanding 11,727,175 11,610,128
- Cash EBITDA / Share - Basic $0.15 ($0.13)
- Normalized EBITDA / Share -
Basic $0.15 $0.09
Adjusted Weighted Avg. Shares
Outstanding 11,727,175 11,610,128
- Cash EBITDA / Share -
Diluted $0.15 ($0.13)
- Normalized EBITDA / Share -
Diluted $0.15 $0.09
MEDIA SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended June 30,
2009 2008
---- ----
NET REVENUES $21,718,141 $24,237,566
COST OF GOODS SOLD:
Cost of goods sold, excluding
depreciation and amortization,
product warranty, and shipping and
freight 10,162,977 11,159,459
Depreciation and amortization 537,471 568,837
Product warranty 1,561,785 877,442
Shipping and freight 561,018 528,228
------- -------
Total cost of goods sold 12,823,251 13,133,966
GROSS PROFIT 8,894,890 11,103,600
OTHER COSTS AND EXPENSES:
Research and development 1,359,270 1,857,044
Selling, general and administrative,
excluding depreciation
and amortization 9,163,416 11,914,987
Depreciation and amortization 359,040 374,427
Impairment charge 1,009,088 -
Litigation settlement (1,500,000) -
---------- ----------
Total other costs and expenses 10,390,814 14,146,458
LOSS FROM OPERATIONS (1,495,924) (3,042,858)
Interest expense (273,169) (119,358)
Interest income 3,039 25,918
Amortization of debt discount on
convertible debt (84,785) -
------- ----------
LOSS BEFORE INCOME TAXES (1,850,839) (3,136,298)
Benefit for income taxes (175,566) (1,312,091)
-------- ----------
NET LOSS $(1,675,273) $(1,824,207)
============ ============
LOSS PER SHARE
Basic $(0.14) $( 0.16)
======= ========
Diluted $(0.14) $( 0.16)
======= ========
WEIGHTED AVERAGE SHARES USED TO COMPUTE
LOSS PER SHARE
Basic and diluted 11,727,175 11,610,128
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-K for the
year ended June 30, 2009. We encourage you to review the accompanying
notes to these consolidated statements, found in that filing.
MEDIA SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of June 30,
2009 2008
---- ----
CURRENT ASSETS:
Cash and cash equivalents $550,602 $236,571
Accounts receivable, net 3,427,550 3,082,516
Inventories, net 6,392,441 9,216,439
Taxes receivable 20,257 70,282
Deferred tax assets 830,447 772,288
Prepaid expenses and other
current assets 541,153 285,241
------- -------
Total Current Assets 11,762,450 13,663,337
PROPERTY AND EQUIPMENT, NET 2,096,986 2,472,570
OTHER ASSETS:
Goodwill and other intangible
assets, net 3,584,231 3,584,231
Deferred tax assets 279,486 260,292
Other assets 75,159 124,359
------ -------
Total Other Assets 3,938,876 3,968,882
TOTAL ASSETS $17,798,312 $20,104,789
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable 1,128,187 3,046,563
Accrued compensation and
benefits 690,948 731,744
Other accrued expenses and
current liabilities 1,151,325 1,829,919
Short-term capital lease
obligation 69,815 -
Income taxes payable - 12,606
Accrued product warranty costs 436,578 198,666
Deferred revenue 209,079 519,139
------- -------
Total Current Liabilities 3,685,932 6,338,637
OTHER LIABILITIES:
Long-term debt, less current
maturities 2,749,132 2,594,209
Deferred rent liability 121,873 166,969
Convertible debt, net of
discount of $401,830 in 2009 848,170 -
Deferred revenue, less current
portion 38,708 148,553
------ -------
Total Other Liabilities 3,757,883 2,909,731
TOTAL LIABILITIES 7,443,815 9,248,368
--------- ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred Stock, $.001 par value
Authorized 5,000,000 shares;
none issued - -
Common Stock, $.001 par value
25,000,000 shares authorized;
issued and outstanding,
respectively, 12,413,292 and
11,771,966 shares in 2009 and
11,794,101 and 11,708,964 shares
in 2008 11,772 11,709
Additional paid-in capital 13,000,680 11,798,443
Accumulated other comprehensive
income 216 29,167
Accumulated deficit (2,658,171) (982,898)
---------- --------
Total Shareholders' Equity 10,354,497 10,856,421
---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $17,798,312 $20,104,789
============ ============
MEDIA SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended June 30,
2009 2008
---- ----
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $(1,675,273) $(1,824,207)
Adjustments to reconcile net
loss to net cash provided (used) by
operating activities:
Depreciation and amortization 955,410 992,241
Stock-based compensation
expense 777,014 475,822
Deferred income taxes (141,308) (1,254,415)
Impairment charge 1,009,088 -
Provision for inventory
obsolescence 211,623 133,801
Provision for product
warranties 237,912 5,959
Recovery of allowance for
returns and doubtful accounts (78,839) (69,052)
Amortization of debt discount
on convertible debt 84,785 -
Changes in operating assets
and liabilities :
Accounts receivable (256,139) (835,778)
Inventories 2,615,001 (3,546,952)
Current and long-term income
taxes receivable/payable 37,419 297,468
Prepaid expenses and other
assets (65,811) (89,095)
Accounts payable (1,916,378) 1,618,851
Accrued compensation and
benefits (39,149) (26,016)
Other accrued expenses and
current liabilities (889,779) 1,107,643
Deferred rent liability (45,096) (67,409)
Deferred revenue (419,905) (176,435)
-------- --------
Net cash provided (used) by
operating activities 400,575 (3,257,574)
------- ----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of property and
equipment (948,242) (712,588)
Proceeds from disposition of
property and equipment 92,895 -
------ --------
Net cash used in investing
activities (855,347) (712,588)
-------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Increase in restricted cash (140,901) -
Bank line of credit, net of
repayments 154,923 1,094,209
Bank term loan repayments - (471,083)
Bank term loan proceeds - 1,500,000
Capital lease obligation
repayments (458,673) -
Proceeds from issuance of
subordinated convertible debt 1,250,000 -
Proceeds from issuance of
common stock, net - 260,933
------- -------
Net cash provided by financing
activities 805,349 2,384,059
------- ---------
Effect of exchange rate
changes on cash and cash
equivalents (36,546) 14,389
------- ------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 314,031 (1,571,714)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 236,571 1,808,285
------- ---------
CASH AND CASH EQUIVALENTS, END
OF YEAR $550,602 $236,571
============ ============
SUPPLEMENTAL CASH FLOW
INFORMATION:
Interest paid $239,473 $100,956
Income taxes refunded $(91,764) $(355,144)
SUPPLEMENTAL DISCLOSURE OF
NON-CASH TRANSACTIONS:
Capital lease additions $528,488 $-
SOURCE Media Sciences International, Inc.
