Zomax Announces Second Quarter 2004 Financial Results MINNEAPOLIS,
MN ... August 2, 2004 ... /PRNewswire-FirstCall/ -- Zomax
Incorporated (NASDAQ:ZOMX) today reported financial results for its
second quarter ended June 25, 2004. Revenues in the second quarter
were $45.1 million, an increase of 2.5% compared to $44.0 million
in the second quarter of 2003. Net earnings for the quarter were
$1.3 million, or $0.04 per share, and include a gain on the sale of
a portion of the Company's investment in Intraware. Excluding this
gain, the Company's net loss for the quarter was ($0.4) million, or
($0.01) per share, compared to a net loss on an as reported basis
of ($1.5) million, or ($0.05) per share, in the second quarter of
2003. On an as adjusted basis, reflecting 2003 royalty agreement
revisions as previously disclosed and illustrated in Table A, the
second quarter 2003 net loss was ($1.0M), or ($0.03) per share. On
a year-to-date basis, 2004 revenues were $95.1 million, an increase
of 4.3% over the comparable period in 2003. Year-to-date net
earnings were $0.3 million, or $0.01 per share, compared to a
reported net loss of ($3.2) million, or ($0.10) per share in the
comparable period in 2003. Excluding the Intraware gain from 2004
results, and adjusting 2003 results for the effect of the royalty
agreement revisions, the Company's year-to-date net loss was ($1.4)
million, or ($0.04) per share, in 2004, compared to ($2.3) million,
or ($0.07) per share, in 2003. The Company's balance sheet
continued to gain strength from the first quarter of 2004, with
improvements in both cash and net working capital. The Company's
cash position improved to $69.9 million from $59.4, and net working
capital improved to $94.5 million from $89.4. The Company has no
debt. Commenting on the quarter, Anthony Angelini, President and
CEO, stated, "We are pleased to be able to report continued growth
in revenue and earnings over our 2003 results. We are particularly
encouraged by improvements we have made in our gross profit margins
in the second quarter. We believe that cost optimization
initiatives we put in place earlier in the year have started to
yield positive results." Angelini continued, "In addition to making
improvements in our operating results, we continue to carefully
look for opportunities to leverage our balance sheet. Our strong
balance sheet and cash position continue to be a one of our
greatest assets, both in terms of our ability to attract and retain
key customers as well as providing us the flexibility to
aggressively invest in growing our business. We are actively
working on opportunities to put that cash to work more productively
to produce greater long term returns for our shareholders." Moving
forward, there are several influences in the marketplace that could
impact the Company's results for the balance of the year. The areas
that could positively or negatively impact its results include a
greater opportunity to increase growth in the industry through
organic and external expansion opportunities, an increase in
polycarbonate prices (a petroleum based commodity) used in the
manufacture of CD and DVDs, and a push by personal computer
manufacturers to reduce back-up media included with sales of new
personal computers. The Company continues to be cautious in the
short run as it works to better understand the effects of changes
in the personal computer industry, realization of its sales
pipeline, continued opportunity to impact margin improvements
through cost optimization initiatives and the effect petroleum
price increases on the cost and pricing of CD and DVDs. Therefore,
the best guidance the Company can provide for the third quarter is
that operating results are expected to be similar to the second
quarter of this year. Howard Liszt, Chairman of the Board of
Directors, stated, "I am pleased with the opportunity to serve as
Chairman of the Board and lead the Board going forward. We are
excited about the future of Zomax and the new management team. We
are especially encouraged by the steps they are taking toward
restoring growth and profitability in the business. The Board looks
forward to providing management and the shareholders with the
leadership, experience and independence to assist in accelerating
Zomax' long term growth." The Company will host a conference call
at 4:30 p.m. (CDT) on Monday, August 2, 2004, to comment further on
the financial results for the second quarter 2004 and forward
guidance. To participate in this conference call, please call (719)
457-2693. The conference call will also be available by Webcast.
Participants may log on to the Webcast conference call by visiting
the Company's website at http://www.zomax.com/ . Use of Non-GAAP
Financial Measure In addition to presenting in this press release
our 2003 earnings information in conformity with Generally Accepted
Accounting Principles (GAAP), we have provided non-GAAP 2003
earnings data that reflects an adjustment to present the
retroactive effect of the revised royalty agreement, signed in the
fourth quarter of 2003, the details of which were previously
disclosed in our 2003 Form 10-K. We believe that this non-GAAP
financial measure is useful to investors because the inclusion of
this adjustment in our 2003 earnings results provides a more
relevant and reliable comparison to our 2004 operating results
which reflect the reduced royalty rates contained in the revised
agreement. The presentation of this additional information is not
meant to be considered a substitute for financial measures prepared
in accordance with GAAP. Forward-Looking Statements Certain
statements contained in this press release related to our
expectations that cost optimization initiatives initiated earlier
this year will continue to provide opportunities for improved
margins, the impact of polycarbonate price increases on our
profitability, the opportunity to increase our growth through
organic and external expansion opportunities, the push by personal
computer manufacturers to reduce back-up media included with sales
of new personal computers, the results of the steps that management
is taking to restore growth and profitability and our expectation
that third quarter 2004 results will be similar to the second
quarter 2004 are "forward- looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995 and involve
known and unknown risks, uncertainties and other factors that may
cause the our actual results, performance or achievements to be
materially different from the results, performance or achievements
expressed or implied by the forward looking statements. We caution
that any forward-looking statements made by us in this release or
in other announcements made by us are qualified by important
factors that could cause actual results to differ materially from
those in the forward-looking statements. These factors include,
without limitation, the changes and volatility in the personal
computer hardware and software industry, particularly with respect
to the demand for CD and DVD media, from which a significant
portion of our revenues are derived; macroeconomic factors that
influence the demand for personal computer hardware and software
and the resulting demand for our services; consolidation among our
customers or competitors, which could cause disruption in our
customer relationships or displacement of us as a services provider
to one or more customers; our ability to make the proper strategic
choices with respect to pursing profitable growth in our business;
increased competition within our industry and increased pricing
pressure from our customers; our dependence on relatively few
customers for a majority of our revenues; fluctuations in our
operating results from quarter-to-quarter, which are influenced by
many factors outside of our control, including variations in the
demand for particular services we offer or the content included in
the products we produce for our customers; the volatility of
polycarbonate prices; effects of pending litigation; and other
risks and uncertainties, including those identified and discussed
in detail under the caption "Risks and Uncertainties" in Item 1 of
our 2003 Form 10-K. We undertake no obligation to update or revise
any forward-looking statements we make in this release due to new
information or future events. Investors are advised to consult any
further disclosures we make on this subject in our filings with the
Securities and Exchange Commission, especially on Forms 10-K, 10-Q
and 8-K, in which we discuss in more detail various important
factors that could cause actual results to differ from expected or
historical results. About Zomax: Zomax helps companies more
efficiently bring their products and content to market worldwide.
Zomax' solutions enhance the process of sourcing, production, and
fulfillment through a modular suite of supply chain services. These
services include "front-end" customer contact and e-commerce
services, material management, CD/DVD production, assembly and
kitting services, JIT physical and electronic fulfillment and
returns management. Founded in 1993, Zomax operates 12 facilities
across the United States, Canada, Mexico, and Ireland. The
Company's Common Stock is traded on the NASDAQ Stock Market under
the symbol "ZOMX". ZOMAX INCORPORATED Consolidated Statements of
Operations (Unaudited) (Amounts in thousands, except per share
data) Three Months Ended June Six Months Ended June 2004 2003 2004
2003 Revenue $45,082 $43,997 $95,117 $91,225 Cost of revenue 36,289
37,666 78,985 78,196 Gross profit 8,793 6,331 16,132 13,029
Selling, general and administrative expenses 9,597 8,880 18,763
18,213 Operating loss (804) (2,549) (2,631) (5,184) Gain on sale of
available-for-sale securities 2,770 - 2,770 - Other income
(expense), net 161 (173) 320 (234) Income (loss) before income
taxes 2,127 (2,722) 459 (5,418) Income tax expense (benefit) 875
(1,212) 188 (2,183) Net earnings (loss) $1,252 $(1,510) $271
$(3,235) Earnings (loss) per share: Basic $0.04 $(0.05) $0.01
$(0.10) Diluted $0.04 $(0.05) $0.01 $(0.10) Weighted average common
shares outstanding: Weighted average common shares outstanding
32,790 32,459 32,753 32,674 Dilutive effect of stock options 283 -
362 - Weighted average common and diluted shares outstanding 33,073
32,459 33,115 32,674 ZOMAX INCORPORATED Table A - Comparative
Adjustments to 2003 Results (Amounts in thousands, except per share
data) Second Quarter 2003 Six months ended June 2003 Loss per Loss
per Net Loss Share Net Loss Share As reported $(1,510) $(0.05)
$(3,235) $(0.10) Amount of fourth quarter 2003 royalty benefit
adjustment relating to the second quarter and the six months ended
June 2003 476 0.02 930 0.03 As adjusted $(1,034) $(0.03) $(2,305)
$(0.07) ZOMAX INCORPORATED Consolidated Balance Sheets (Unaudited)
(Amounts in thousands) June December ASSETS: 2004 2003 Current
Assets: Cash and cash equivalents $69,854 $68,899 Accounts
receivable, net 27,765 39,403 Inventories, net 11,238 12,757 Other
current assets 10,552 10,069 Total current assets 119,409 131,128
Property and equipment, net 35,016 38,859 Available-for-sale
securities 5,390 11,646 Deferred income taxes 33 - $159,848
$181,633 LIABILITIES AND SHAREHOLDERS' EQUITY: Current liabilities:
Accounts payable 12,514 20,524 Accrued expenses 12,408 22,028 Total
current liabilities 24,922 42,552 Deferred income taxes - 1,315
Total liabilities 24,922 43,867 Shareholders' equity: Common stock
62,960 62,469 Retained earnings 66,163 65,892 Accumulated other
comprehensive income 5,803 9,405 Total shareholders' equity 134,926
137,766 $159,848 $181,633 DATASOURCE: Zomax Incorporated CONTACT:
Anthony Angelini, President and CEO, or Rob Rueckl, Chief Financial
Officer, both of Zomax Incorporated, +1-763-553-9300 Web site:
http://www.zomax.com/
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