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AntMan1
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MEAD > SEC Filings for MEAD > Form 10-Q on 14-Jan new
      #5626823 - 01/16/13 07:20 PM

This is not good news. This has to be partial from the 800 Issues. They need a kick in the butt because I don't want to be forced to by a Celestron or any other brand! I love my Meade!

http://biz.yahoo.com/e/130114/mead10-q.html


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StarmanDan
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Re: MEAD > SEC Filings for MEAD > Form 10-Q on 14-Jan new [Re: AntMan1]
      #5626851 - 01/16/13 07:36 PM

It would be disheartening if Meade went under. I love my Meade too. I may be an exception but I haven't had a lick of trouble with my LX200GPS and I've abused it quite a bit.

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imjeffp
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Re: MEAD > SEC Filings for MEAD > Form 10-Q on 14-Jan new [Re: StarmanDan]
      #5626953 - 01/16/13 08:27 PM

Quote:

The Company has incurred significant recurring losses and negative cash flows from operations which have resulted in reduced liquidity and a weakened financial position as of November 30, 2012. The Company also has endured working capital problems caused by product development delays during the past twelve months. In addition, in January 2013, the Company's largest customer, and one additional customer, notified the Company that they had unilaterally, and without prior notice, decided to indefinitely hold payment of approximately $0.6 million in accounts receivable, which will further reduce the Company's already limited liquidity. Due to these issues, the Company's management now believes substantial doubt exists about the Company's ability to continue as a going concern and that it must modify the Company's business model and operations to reduce spending to a sustainable level. Such actions could cause the Company to be unable to execute its business plan, take advantage of future opportunities, respond to competitive pressures or customer requirements. It may also cause the Company to delay, scale back or eliminate some or all of its research and development programs, seek opportunities in a strategic relationship or business combination, or to reduce or cease operations.




Any idea who the two big customers are? Dealers, perhaps?


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Christopher EricksonModerator
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Re: MEAD > SEC Filings for MEAD > Form 10-Q on 14-Jan new [Re: imjeffp]
      #5627166 - 01/16/13 10:37 PM

Okay, moderator stepping in here for a moment.

This is a hot topic and can easily go off the rails.

If it does, I'll strip out the violations and lock the thread, ending the conversation. To prevent this, I am asking everyone to stay focused on the topic and not resort to generalized-bashing or attacks on Meade or each other.

If anyone goes off the rails, it is better to flag the offending post and not engage in battle.

Regards,

-Christopher Erickson, forum co-moderator.


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budman1961
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Re: MEAD > SEC Filings for MEAD > Form 10-Q on 14-Jan new [Re: Christopher Erickson]
      #5627269 - 01/17/13 12:14 AM

Please shut this down Chris.........its getting too contentious in CN regarding Meade.......

Andy


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Christopher EricksonModerator
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Re: MEAD > SEC Filings for MEAD > Form 10-Q on 14-Jan new [Re: budman1961]
      #5627383 - 01/17/13 03:03 AM

Quote:

Please shut this down Chris.........its getting too contentious in CN regarding Meade.......

Andy




This is an important topic and I have already chosen to leave it up for a while and see how it goes.

If anyone wants to discuss that decision with me, please do it via PM.

Thanks for understanding.


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AntMan1
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Re: MEAD > SEC Filings for MEAD > Form 10-Q on 14-Jan new [Re: Christopher Erickson]
      #5627570 - 01/17/13 08:08 AM

It is very important. especially to those of us who have know no other brand. It was not my intention to insult anyone. in fact it was totally opposite if you read my first post.lets hope it ends in success now the the 800 issue is gone. Chris ...if you read the whole filling do you think it was the above issue that caused this?




This is an important topic and I have already chosen to leave it up for a while and see how it goes.

If anyone wants to discuss that decision with me, please do it via PM.

Thanks for understanding.




Edited by AntMan1 (01/17/13 08:15 AM)


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REC
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Re: MEAD > SEC Filings for MEAD > Form 10-Q on 14-Jan new [Re: imjeffp]
      #5627938 - 01/17/13 11:52 AM

May be Costco and Walmart? Hope they can get it resolved and stay in business. Perhaps the two new comets this year will spike some new interest in the hobby and help sales efforts!

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ken svp120
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Re: MEAD > SEC Filings for MEAD > Form 10-Q on 14-Jan new [Re: REC]
      #5628355 - 01/17/13 03:48 PM

All I have to say is HUGE props to CN for allowing this information to be presented to the amateur community. At least this way, consumers can make a more informed decision that otherwise would have been possible without knowing this. Hats off to the Admins and Moderators!

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AntMan1
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Re: MEAD > SEC Filings for MEAD > Form 10-Q on 14-Jan new [Re: REC]
      #5628495 - 01/17/13 05:17 PM

Has to be one of them or maybe telescopes.com


Quote:

May be Costco and Walmart? Hope they can get it resolved and stay in business. Perhaps the two new comets this year will spike some new interest in the hobby and help sales efforts!




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bicparker
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Re: MEAD > SEC Filings for MEAD > Form 10-Q on 14-Jan new [Re: AntMan1]
      #5628689 - 01/17/13 07:11 PM

Some other notable events go along with management's disclosure of liquidity:

- Two of their outside directors resigned this month (Paul Sonkin and Michael Haynes). Sonkin specialized in small cap value investments and has made a substantial investment in time and money to this company and prop up their stock. Their board now has only 4 members (2 employee and 2 non-employee).

- They have fully funded a $1.6 million loan against their A/R with some pretty expensive terms (prime plus 4 with minimum interest and fees per month that will mandate payoff, not pay down). Meade really avoided funding any of their available credit lines in recent years, so this is something of note. They are using a factor and specialty lender, so this is a bit non-traditional by design, but the nature of their current financials probably makes other more conventional lending sources unavailable.

A couple of words of caution to avoid overreacting about all of this:
1. Management has to make conservative and worst case disclosures under current SEC reporting requirements and in this current economic environment.
2. Meade has not reported or disclosed December 2012 numbers yet. These are key numbers.
3. The fact that they were able to get credit funding, no matter the source, means that someone perceives some tangible value in their business.


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AntMan1
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Re: MEAD > SEC Filings for MEAD > Form 10-Q on 14-Jan new [Re: bicparker]
      #5628809 - 01/17/13 08:15 PM

I am sure they walked away with there pockets overflowing. A lot of good all the big wigs brought to John Diebel's baby. 2,500 started it all.

I just purchased an extended warranty. I hope the redesigned lx850 sells like no tomorrow. It is a beautiful scope for those who can afford it.

Sometimes you have to hit rock bottom before you can rise up...... Story of America.

PS: Where is John Diebel these days? Retired? he must be getting up there in age?


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bicparker
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Re: MEAD > SEC Filings for MEAD > Form 10-Q on 14-Jan new [Re: AntMan1]
      #5628962 - 01/17/13 09:56 PM

No one has walked away with pockets overflowing. Quite the opposite, in fact. Based upon what I know about Sonkin's stock position with Meade and what expenditures he made over a period of time in that respect, I think he has lost quite a bit of money. Michael Haynes was another outside stockholder who was requested by his employer to step down. Again, I don't think that there any walking away with bags o' cash here. In both cases, I think these were "stop-loss" actions on those directors' parts to limit any further liabilities. Board memberships for public companies are not the lucrative cakewalks they used to be a couple of decades ago.

Edited by bicparker (01/17/13 09:57 PM)


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Christopher EricksonModerator
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Re: MEAD > SEC Filings for MEAD > Form 10-Q on 14-Jan new [Re: AntMan1]
      #5629059 - 01/17/13 10:53 PM

Quote:

It is very important. especially to those of us who have know no other brand. It was not my intention to insult anyone. in fact it was totally opposite if you read my first post.lets hope it ends in success now the the 800 issue is gone. Chris ...if you read the whole filling do you think it was the above issue that caused this?




I was worried this would happen way back when Synta bought Celestron. Synta has big, deep financial pockets, ultra-cheap labor, Chinese government backing and minimal government bureaucratic regulation. This all placed Meade at a big competitive disadvantage.

I believe moving assembly to Mexico was a good business decision.

I believe their ongoing reluctance to sell spare parts to serious amateurs is a mistake. I believe I understand their reasons but I think they could make reasonably-good money from spare parts and create a lot of customer good-will in the process. Requiring OTA's to be shipped in for optical problems would remain acceptable.

I believe that Meade will continue to be killed by the Chinese in the low end. If I were in charge, I would focus on the mid and high range product markets.

While I am giving Meade free advice (worth every penny!) I would also abandon sand-castings for CNC machining. Sand castings look rough and will never be as accurate and clean-looking as CNC-machined parts. The LX-80 would be a much nicer mount if it were anodized, CNC-machined aluminum instead of a bunch of aluminum and plastic castings.

ISON, the (hopefully) big comet coming this winter will likely boost telescope sales in all categories for all makers. I hope Meade will be in a position to take advantage of it. If someone were really into high-risk investments with potential for high payouts (or a complete loss), buying Meade stock right now could be interesting.

Personally I really hope that Meade survives the current crisis and grows as a company. As an alternate, maybe someone will buy them up and continue the company, their products and spare parts.

Directly or indirectly, I believe losing Meade would be a loss for all amateur astronomers.

And P.S. - It is my understanding that John Diebold is currently working for one dollar a year while he struggles to bring Meade back from the brink.


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bicparker
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Re: MEAD > SEC Filings for MEAD > Form 10-Q on 14-Jan new [Re: Christopher Erickson]
      #5629289 - 01/18/13 02:43 AM

Meade's problems didn't happen overnight and were mostly self inflicted. Their own numbers painted the pictures over the past decade. Also, Meade's problems are less related to Synta's purchase of Celestron (though that didn't help Meade's competitive position) and mostly related to their timing and conditions of business model transformations:

1) into a high volume/low margin/low end telescope vendor and then,
2) reverting their focus back into low volume/high margin/high end telescopes.

They operated both of these models with inadequate working capital (exacerbated by drawn out patent suit from 2002-2004 costing them around $15 million over that time period) and found themselves in the classic conundrum of making a profit while losing money (this scenario is taught in a lot of accounting texts, interestingly enough) in the first model and then showing losses while losing money with their market cap upside down to their book value (which, as a public company, reduced their funding/financing capabilities and highlighted their aging inventories and other assets).

This isn't Monday morning quarterbacking... these are things that were discussed as they happened on the CN forums at length over the past several years.

At its sales revenue peaks, where sales were over $100 million per year, 98% of their sales volume came from low margin/low end telescopes, whereas the other 2% came from their higher end scopes and accessories (called by Meade as the Advanced Astronomical Telescopes in their segment disclosures). That 2%, by the way, contributed around 17% of their net sales (in 2004). Their highest sales revenue peak was in 2004 with about $138 million in sales. That was also their last profitable year. (All of this information, by the way, was gleaned from their annual reports over the years. I used to follow their finances pretty closely).

By 2006, they were taking some significant writedowns on the low margin inventory mostly due to tough supplier terms they had with companies like WalMart, who had liberal return policies that went back directly to the manufacturer/supplier, not WalMart. They also had a couple of major customer defaults during the decade adding to the writedowns. Since these were already thin margin items, the losses started hitting hard.

R&D during this time fluctuated a lot and was held down as they spent the money on legal fees, selling costs, and warranty costs. They increased it again when they started getting out of the discount telescope business, but it was challenging as they were still taking some serious losses during this transformation, which also included selling off a lot of business lines and assets (Bresser, Simmons, et al). They wanted to get back into the mid-higher end/high margin telescope business, but that market had already changed and was crowded with other competitors vying for a shrinking market (the 2012 telescope market total was estimated by one analyst to be around $127 million, compared to over $200 million in 2002).

They went from a company with over $100 million in net revenues to one with $21 million in 2012. From about 2002 on, though, the burn rate on their working capital took its toll from which they never quite recovered. Which is where they are now, with a liquidity problem.


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Christopher EricksonModerator
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Re: MEAD > SEC Filings for MEAD > Form 10-Q on 14-Jan [Re: bicparker]
      #5629362 - 01/18/13 05:14 AM

Quote:

Meade's problems didn't happen overnight and were mostly self inflicted. Their own numbers painted the pictures over the past decade. Also, Meade's problems are less related to Synta's purchase of Celestron (though that didn't help Meade's competitive position) and mostly related to their timing and conditions of business model transformations:

1) into a high volume/low margin/low end telescope vendor and then,
2) reverting their focus back into low volume/high margin/high end telescopes.

They operated both of these models with inadequate working capital (exacerbated by drawn out patent suit from 2002-2004 costing them around $15 million over that time period) and found themselves in the classic conundrum of making a profit while losing money (this scenario is taught in a lot of accounting texts, interestingly enough) in the first model and then showing losses while losing money with their market cap upside down to their book value (which, as a public company, reduced their funding/financing capabilities and highlighted their aging inventories and other assets).

This isn't Monday morning quarterbacking... these are things that were discussed as they happened on the CN forums at length over the past several years.

At its sales revenue peaks, where sales were over $100 million per year, 98% of their sales volume came from low margin/low end telescopes, whereas the other 2% came from their higher end scopes and accessories (called by Meade as the Advanced Astronomical Telescopes in their segment disclosures). That 2%, by the way, contributed around 17% of their net sales (in 2004). Their highest sales revenue peak was in 2004 with about $138 million in sales. That was also their last profitable year. (All of this information, by the way, was gleaned from their annual reports over the years. I used to follow their finances pretty closely).

By 2006, they were taking some significant writedowns on the low margin inventory mostly due to tough supplier terms they had with companies like WalMart, who had liberal return policies that went back directly to the manufacturer/supplier, not WalMart. They also had a couple of major customer defaults during the decade adding to the writedowns. Since these were already thin margin items, the losses started hitting hard.

R&D during this time fluctuated a lot and was held down as they spent the money on legal fees, selling costs, and warranty costs. They increased it again when they started getting out of the discount telescope business, but it was challenging as they were still taking some serious losses during this transformation, which also included selling off a lot of business lines and assets (Bresser, Simmons, et al). They wanted to get back into the mid-higher end/high margin telescope business, but that market had already changed and was crowded with other competitors vying for a shrinking market (the 2012 telescope market total was estimated by one analyst to be around $127 million, compared to over $200 million in 2002).

They went from a company with over $100 million in net revenues to one with $21 million in 2012. From about 2002 on, though, the burn rate on their working capital took its toll from which they never quite recovered. Which is where they are now, with a liquidity problem.




Fascinating insights!

If you could give Meade just one piece of advice right now, what would it be?


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bicparker
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Re: MEAD > SEC Filings for MEAD > Form 10-Q on 14-Jan [Re: Christopher Erickson]
      #5629430 - 01/18/13 07:33 AM

Unfortunately, I wouldn't have a lot of good options in advice given that they are sort of back against the wall right now. But whatever they do, they need to execute quickly and without mistakes and missteps (i.e., no product recalls or delays, no miscues).

Their book value is three times their market cap (their stock value/market cap is about $2 million). They missed the Christmas season. There are a couple of options here (both of which are very narrow for success because the current condition):

1. They could liquidate to a competitor in favor of the shareholders (and this would also protect the directors and officers at this point). Inventory, manufacturing agreements, brands and model names, and R&D IP... these could still have some good value to someone with the resources and funds to market and continue their manufacture. Coronado alone could easily be worth a few hundred thousand (and that is the scale of numbers we are talking about now).

2. Mark out a business plan to get them to to the Christmas season (which for them is really in the August/September frame when they sell to distributors and retailers). This may include filing for Chapter 11 re-organization. This will also likely require new investors (if they can find them) and a management makeover (which may happen anyway if it hasn't already). A very tough option since they won't be able to give strong confidence of warranty support for potential buyers (this is already hurting Meade now).

Option 1 is the most likely one that the company can consider. Even if they go for option 2, a re-org could easily turn into option 1 as a consequence.

If they go for option 2., this will have to be a focused effort on manufacturing and getting product out to the retailers. Lots of product demonstrations, demo videos, travels to the field (literally), and grass roots marketing (especially through the Internet and not just their website). R&D expenditures will have to be zero because it won't matter if they don't get through Christmas and they will have to put all resources to making money. They have the designs, they have just need to get product out there. I don't know how well ramped up their production is right now, particularly the stuff that is outsourced to China.

There is something else that will affect all of this... Their primary lender (Rosenthal & Rosenthal, Inc.) who has the paper on their receivables in exchange for $1.6 million. Their loan agreement does not have covenants, but rather gives the lender latitude to call the loan at just about any time (this is in the 10-Q and in a separate 8-K filing). This could force a Chapter 7 liquidation, which would take the options out of Meade's hands and put its assets to the highest bidder(s).

This last item really puts a huge sense of urgency on Meade and will require the quick execution that I was talking about earlier. They already know the December numbers and what January and February will look like. Meade just needs to move forward with a plan and move forward quickly, otherwise other folks will be making the decisions.


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LoveChina61
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Re: MEAD > SEC Filings for MEAD > Form 10-Q on 14-Jan [Re: bicparker]
      #5629789 - 01/18/13 11:46 AM

Meade needs to come to China. They can sell themselves off to the highest bidder like Celestron did, or they can bring the company over here themselves and set up a wholly-foreign owned enterprise (WFOE). They will need to trim down quick and focus on the products which have the best chance of success in the long run. But they need to do it quick!

Maybe it will turn out to be for the best like it has been for Celestron. Celestron owners must feel happy knowing that their company and its products will be around for at least another 20 years.

Welcome to China, Meade!

Mike

Meade LX200 8" Classic
LX200 10" Classics (two of them)
Meade 14" GPS
Celestron - none


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bicparker
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Re: MEAD > SEC Filings for MEAD > Form 10-Q on 14-Jan [Re: LoveChina61]
      #5629858 - 01/18/13 12:20 PM

Mike,
Spot on! Especially the quick, fast, without delay, quick, hurry, quick, etc.!

That may be one of the best sources of investment funds and manufacturing at this point (and they already have some connections there).

Just as an aside, I don't think Celestron really can't get into this as an investor because I am pretty sure that the FTC anti-trust order between Meade and Celestron is still in place, and in any case, they would have to go through an expensive FTC/Justice review to gain any financial connection to Meade assets.


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meade4ever
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Re: MEAD > SEC Filings for MEAD > Form 10-Q on 14-Jan [Re: bicparker]
      #5630007 - 01/18/13 02:05 PM

I hope Meade will stay an US company forever

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