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Meade Instruments Corporation (MEAD)

F4Q08 Earnings Call

June 16, 2008 8:30 am ET

Executives

 

Steven L. Muellner – President, Chief Executive Officer, Director

Paul E. Ross – Chief Financial Officer, Senior Vice President - Finance

[Shelly Young], Vice President - Investor Relations

Analysts

 

Steve DeNault - Northland Securities

Jim Barrett - C.L. King Associates

John [Dashure] - Pinnacle Fund

Bobby Melnick - Carrier Partners

Presentation

 

Operator

Good morning Ladies and Gentlemen. Thank you for standing by. Welcome to the Meade Q4 and full year 2008 earnings calls. During today's presentation all parties will be in a listen only mode. Following the presentation the conference will be open for questions. (Operator Instructions) As a reminder this conference is being recorded today, Monday, June 16, 2008.

I would now like to turn the conference over to Shelly Young, Vice President of Investor Relations.

Shelly Young

Good morning everyone. Welcome to Meade's 4th quarter and full year 2008 earnings conference call. Earlier this morning 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 web cast live and is also available on our investor relations section of our web site. The archived audio of the web cast and a transcript of the call will be posted on the website later today.

Before we begin, as usual, we would like to remind everyone of the precautionary language regarding forward-looking statements contained in today's news release which also apply 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 just predictions and actual events or results may differ materially. For the list of risks 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 the result of new information, future events or otherwise.

Our management team members participating 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

Thank you to everyone for joining us this morning. Even earlier out here on the West Coast than of course it is on the East Coast but we wanted to schedule this call before the market opened in order to give our investors sufficient time to digest the information we'll be sharing with you today. Before we discuss quarterly earnings I would like to make a few comments as I usually do on the continuing progress we are making with the restructure of the company.

In recent calls we talked about the closure of the facilities, most notably the closure of our plants in Arizona and Georgia as well as the sale of our excess facility in Germany. Tied to the process was the significant reduction in global headcount from over 500 employees just over two years ago to our current level of approximately 250 employees. These major efforts, along with other actions of course, have served to reduce the SG&A expenditures by over $10 million annually and while taking these steps we haven't neglected looking at our capital structure of course, reducing SKUs, related inventory from nearly $40 million two years ago to today's level of something below $20 million. Not insignificantly, while this work was taking place we were aggressively addressing the serious problems with our supply chain, which I'll remind everyone two years ago had all but ground to a halt not just with the Simmons product but more importantly with our critically important ETX telescope line. Today our supply problems are behind us and we have built a solid team of internal professionals and outside suppliers working together to deliver our product to meet market demand. The most recent action taken was the shutdown of manufacturing in the US and simultaneous transfer of production to Mexico which is expected to yield an immediate positive impact on our gross margin in fiscal 2009.

While all of this activity was taking place, the board of directors formed a special committee late last year to explore strategic alternatives for the company. The company owns some widely-known and well-respected brand names that we believe and have always believed have tremendous value in the marketplace. Our view of these brands was proven correct and we have begun to unlock that value. At the end of April we divested the Weaver and Redfield sport optics brands for cash proceeds of approximately $8 million and on Friday we announced the sale of our Simmons brand for a little over $7 million. These transactions have significantly improved the company's liquidity and put us in a strong position to internally fund our restructuring and future growth plans. Having said that, the sale of these brands leaves a burdensome overhead cost structure for the remaining company and we will be aggressively cutting costs this year to right-size the cost structure commensurate with our new revenue model. I've often said that Meade has a three to five year turnaround and I'll remind everyone that we are just now entering year three. We have a ways to go in completing the turnaround but we believe that we are on track to accomplish our goal within that three to five year stated period.

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