Zomax (NASDAQ:ZOMX)
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Zomax Announces Third Quarter 2004 Financial Results
MINNEAPOLIS, MN...November 2, 2004 /PRNewswire-FirstCall/ -- Zomax
Incorporated (NASDAQ:ZOMX) today reported financial results for its third
quarter ended September 24, 2004. Revenues in the quarter were $45.7 million,
an increase of 2.7% over the third quarter of 2003. The Company's net loss for
the quarter was ($5.5) million, or ($0.17) per share, as compared to a net loss
of ($2.5) million, or ($0.08) per share in the third quarter of 2003. On a
year-to-date basis, 2004 revenues were $140.8 million, an increase of 3.7% over
the same period in 2003. The year-to-date net loss was ($5.2) million in 2004,
or ($0.16) per share, compared to ($5.8) million, or ($0.18) per share in 2003.
Excluding specified items described below and illustrated in Table A, the third
quarter net loss on a non-GAAP basis was ($0.01) per share in 2004, compared to
($0.02) per share in 2003, and the year-to-date loss was ($0.05) per share in
2004, compared to ($0.09) per share in 2003.
The Company's 2004 non-GAAP results exclude a second quarter pre-tax gain of
$2.8 million, or $0.05 per share, on the sale of a portion of its investment in
Intraware (NASDAQ:ITRA), and a third quarter pre-tax charge of $7.5 million, or
$0.16 per share, to establish reserves for liabilities that represent the
Company's estimate of the minimum expected probable losses resulting from
settlement offers made by the Company in connection with the pending Securities
and Exchange Commission investigation and consolidated class action lawsuit.
There is no assurance that these offers will result in settlements or that
eventual losses related to these matters will not materially exceed these
reserves. The 2003 non-GAAP results reflect a total pre-tax adjustment of $5.1
million, or $0.09 per share, to exclude a charge related to the settlement of a
customer claim and to include a previously disclosed retroactive royalty
benefit recorded in the fourth quarter of 2003.
The Company's third quarter revenue increase was achieved through growth from
both new and existing software customers, offsetting some content reductions by
PC OEMs. In addition, third quarter non-GAAP gross margins improved to 17.1%
in 2004, from 15.6% in 2003, as a result of cost management initiatives and
despite increasing costs of polycarbonate used in the production of CD and DVD
media.
"We are pleased to again report improvements in our 2004 operating results over
last year, particularly with respect to our revenue and gross margin," Anthony
Angelini, President and CEO, stated. "Our customers continually look to us to
help reduce the total cost to deliver their products to market. We are working
hard to achieve this goal and improve our profitability in spite of increases
in our cost of materials."
Angelini continued, "Our balance sheet continues to remain strong, with cash
and long-term investments of approximately $70 million and no debt. We continue
to carefully look for opportunities to take advantage of our cash position and
more aggressively grow our business."
Looking forward to the fourth quarter of 2004, operating revenues and expenses
will include 14 weeks of business operations as compared to 13 weeks in a
typical fiscal quarter. The Company's current expectations are for its
business to be seasonally stronger than the third quarter, but that it is
unlikely that it will reach the levels of revenue and operating profitability
achieved in the exceptionally strong fourth quarter of 2003.
The Company will host a conference call at 4:30 p.m. (CST) on Tuesday November
2, 2004, to comment further on the financial results for the third quarter 2004
and forward guidance. To participate in this conference call, please call
(719) 457-2626. 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 2004 and 2003 earnings
information in conformity with Generally Accepted Accounting Principles (GAAP),
we have provided non-GAAP earnings data that reflects certain adjustments for
items we believe to be of a non-recurring or non-operating nature. As outlined
in more detail above and in Table A, these adjustments include a second quarter
2004 gain on the sale of equity securities, a third quarter 2004 charge related
to potential litigation matters, a third quarter 2003 charge related to a
customer settlement and the retroactive effect on the third quarter of 2003 of
a 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 these adjustments
each individually occur in only one reporting period and therefore the
inclusion of these adjustments in our 2004 and 2003 earnings results provides a
more relevant and reliable comparison of operating results between the periods.
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
of the impact of polycarbonate price increases on our profitability, the
opportunity to use our cash position to aggressively grow our business and our
expectation that fourth quarter 2004 results will be seasonally stronger than
the third quarter of 2004 but will not achieve the levels of the fourth quarter
of 2003, 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
11 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 Nine Months Ended
September September
2004 2003 2004 2003
Revenue $45,718 $44,535 $140,835 $135,760
Cost of revenue 37,922 38,145 116,907 116,341
Gross profit 7,796 6,390 23,928 19,419
Selling, general and
administrative expenses 9,181 8,035 27,944 26,248
Litigation reserves 7,500 - 7,500 -
Charge related to settlement of
customer claim - 3,000 - 3,000
Operating loss (8,885) (4,645) (11,516) (9,829)
Gain on sale of available-for-sale
securities - - 2,770 -
Other income, net 261 252 581 18
Loss before income taxes (8,624) (4,393) (8,165) (9,811)
Income tax benefit (3,127) (1,859) (2,939) (4,042)
Net loss $(5,497) $(2,534) $(5,226) $(5,769)
Loss per share:
Basic $(0.17) $(0.08) $(0.16) $(0.18)
Diluted $(0.17) $(0.08) $(0.16) $(0.18)
Weighted average common shares
outstanding:
Weighted average common shares
outstanding 32,503 32,553 32,669 32,635
Dilutive effect of stock options - - - -
Weighted average common and
diluted shares outstanding 32,503 32,553 32,669 32,635
ZOMAX INCORPORATED
Table A - Comparative Non-GAAP Adjustments to 2004 and 2003 Results
(Unaudited)
Three Months Ended Nine Months Ended
September September
2004 2003 2004 2003
Loss per share, as reported $(0.17) $(0.08) $(0.16) $(0.18)
Amount of fourth quarter 2003
royalty benefit adjustment
relating to the third quarter
and the nine months ended
September 2003 - 0.01 - 0.04
Charge related to customer claim - 0.05 - 0.05
Gain on sale of available-for-sale
securities - - (0.05) -
Provision for litigation reserves 0.16 - 0.16 -
Loss per share, as adjusted $(0.01) $(0.02) $(0.05) $(0.09)
ZOMAX INCORPORATED
Consolidated Balance Sheets (Unaudited)
(Amounts in thousands)
September December
ASSETS: 2004 2003
Current Assets:
Cash and cash equivalents $66,066 $68,899
Accounts receivable, net 29,878 39,403
Inventories, net 12,765 12,757
Other current assets 14,874 10,069
Total current assets 123,583 131,128
Property and equipment, net 34,953 38,859
Available-for-sale securities 3,903 11,646
Deferred income taxes 627 -
$163,066 $181,633
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable 15,672 20,524
Accrued expenses 18,895 22,028
Total current liabilities 34,567 42,552
Other long-term liabilities 99 -
Deferred income taxes - 1,315
Total liabilities 34,666 43,867
Shareholders' equity:
Common stock 61,772 62,469
Retained earnings 60,666 65,892
Accumulated other comprehensive income 5,962 9,405
Total shareholders' equity 128,400 137,766
$163,066 $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/