Meade Instruments Corp. (MEAD)
F2Q09 Earnings Call
October 20, 2008 5:00 pm ET
Shelley Young – The Piacente Group, Inc.
Steven L. Muellner – President, Chief Executive Officer & Director
Paul E. Ross – Chief Financial Officer & Senior Vice President Finance
Barbara Bagley – Lewis Capital Management
John Dashure– Pinnacle Fund
Peter Albert – Private Investor
Previous Statements by MEAD
» Meade Instruments, Inc. F1Q09 (Quarter End 05/31/2008) Earnings Call Transcript
» Meade Instruments Corp. F4Q08 (Qtr End 2/28/08) Earnings Call Transcript
» Meade Instruments F3Q08 (Qtr End 11/30/07) Earnings Call Transcript
Earlier today we issued a press release announcing our financial results. This release is available on the investor relations section of our website. This conference call is being webcast live and is also available on the investor relations section of our website. An archived audio of the webcast of the call will be posted on the website later today.
Before we begin, as usual, we would like to remind everyone of the cautionary language regarding forward-looking statements contained in today’s news release which also applies to any such statements made during this conference call. During the course of this call, the company may make forward-looking statements regarding future events or the financial performance of the company.
We wish to caution you that such statements are staff’s predictions and actual events or results may differ materially. For a list of risk and uncertainties that may affect future results please refer to the company’s various reports filed with the US Securities & Exchange Commission. Investors should not place undue reliance on such forward-looking statements and the company undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.
Our management team members anticipating on the call today are Steve Muellner, President and Chief Executive Officer and Paul Ross, Chief Financial Officer. I would now like to turn the call over to Steve Muellner
Steven L. Muellner
This quarter was the second full quarter in which the company manufactured substantially all of its high end telescopes in our newly opened Mexico manufacturing facility. The gross margin improvement we achieved last quarter continued due to the reduction in both direct and in-direct manufacturing costs.
We’re still ramping up this facility and as a result we are still not able to ship sufficient high end, higher margin telescopes to meet market demand. We still have a backlog which we expect to substantially work through over the next two quarters. Early indications suggest that the anticipated cost savings are now materializing and the transfer of production outside the United States will be a key driver in improving the company’s future operating results.
The company will continue to lower its cost structure to bring it in line with the reduced revenue expectations due to the divestitures of our sports optics business and we are taking proactive measures to reduce overhead, streamline operations and further simplify our business. During the second quarter we completed the sale of our Simmons sport optics brand and associated inventory for gross proceeds of $7.25 million resulting in a gain of approximately $800,000.
These proceeds were used to fund working capital for the company and to provide short term liquidity which we used in place of our bank line of credit. We are very mindful of our use of credit in the current environment. While we continue to be in compliance with our bank covenants we are monitoring sell through to ensure that our liquidity remains sufficient for the remainder of the year.
The company reported a net loss this quarter of $2 million or $0.09 per share compared with a net loss of $4 million or $0.20 in the same quarter of fiscal 08. Excluding the $800,000 gain on the sale of Simmons brand and associated inventory in June of this year, the company would have reported a net loss of $2.8 million or $0.12 per share. The company still is investing in R&D and we expect to introduce a major new product prior to the end of this fiscal year.
I’d now like to turn the call over to Paul to review the financial results for the second quarter ’09.
Paul E. Ross
Net sales for the second quarter of fiscal year 2009 were $12.6 million, down approximately 22% from $16.2 million in net sales in the second quarter of fiscal 2008. Approximately three quarters of the decrease in that revenue was due to the company’s divestiture of the Simmons and Weaver sport optic brands earlier in fiscal ’09.
Rifle scope and binocular revenue was down $2.7 million in the second quarter of fiscal ’09 versus the prior year due to these divestitures. The remainder of the decrease was due to the reduction in shipments of high end telescopes due to the transfer of our manufacturing facilities to Mexico. The company is still ramping up its production to ship sufficient high end telescopes to meet demand resulting in a backlog which we expect to substantially clear by the end of the fiscal year.
Gross profit for the second quarter of fiscal 2009 was $2.6 million or 21% of net sales compared with $2.3 million or 14% of net sales in the prior year’s comparable quarters. This improvement in gross profit margin was primarily driven by lower indirect manufacturing costs as a result of the closure of the company’s US manufacturing operations.