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/
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