MINNEAPOLIS, MN, August 9, 2006 /PRNewswire-FirstCall/ -- Zomax
Incorporated (NASDAQ:ZOMX) today reported on operational progress
and financial results for its second quarter ended June 30, 2006.
Recent Operational Highlights -- The Company achieved
year-over-year improvement in several second quarter financial
metrics: - Reduced operating loss by 47% prior to restructuring
costs, adjustments to the litigation reserve and SFAS 123R stock
option expenses. - Reduced SG&A expenses by 16% prior to SFAS
123R stock option expenses. - Reduced fixed manufacturing expenses
by 27%. - Improved performance of Ireland subsidiary from an
operating loss of $1.9 million before restructuring charges in the
second quarter of 2005 to operating income of $0.3 million for the
second quarter of 2006. -- Ended the quarter with $42 million in
cash and no debt. -- Added two meaningful new customers from the
consumer electronics and retail software industries as well as
significant new programs with two existing customers. -- Closed on
the previously announced Ireland joint venture and strategic sales
and marketing agreement with MPO. Revenues in the second quarter
were $33 million, compared with $42.6 million reported in the
second quarter of 2005. Operating loss for the second quarter of
2006 was $3.9 million, inclusive of $0.5 million of non-cash stock
option expenses as required by the new accounting standard SFAS
123R, or an operating loss of $3.4 million excluding the
aforementioned costs. Net loss for the second quarter of 2006 was
$3.4 million or $0.11 per share inclusive of stock option expenses
of $0.02 per share. In the second quarter of 2005, operating loss
was $8.2 million or $6.4 million excluding restructuring charges of
$2.2 million and excluding a $0.4 million benefit from the
revaluation of the stock component of the litigation reserve.
Ireland Joint Venture Completed Zomax recently announced that it
closed on its joint venture with MPO International (MPO), a
privately-held leader in the media manufacturing and services
industry. Through the joint venture, the two companies have
consolidated their separate media replication businesses,
manufacturing operations and management teams into one entity. The
new joint venture, Zomax/MPO Ireland Limited, officially began
operations on August 1. As previously announced, this new joint
venture does not include Zomax' well-performing contact and program
management center located in Santry, Ireland. The newly-formed
joint venture was created to profitably support the existing media
manufacturing needs of both Zomax Limited's and MPO Ireland's
clients. Under the new sales and marketing agreement, Zomax and MPO
plan to pursue new growth opportunities in Europe. One of the
strategic opportunities that the companies are pursuing is
leveraging Zomax' reputation as a best-in-class supply chain
company and MPO's European production and fulfillment capabilities
to create new customer opportunities in the European IT market
segment. The companies will also look to develop opportunities to
utilize Zomax' contact center operations and subscription
management capabilities in Ireland for new revenue opportunities
with MPO's strong base of entertainment customers. As a result of
the closing of the joint venture, Zomax will exercise a lease exit
right in its Clondalkin production facility and consolidate it into
MPO's existing production facility in the greater Dublin area. The
closure of the Clondalkin facility will result in a cash
restructuring charge of approximately $1.9 million for lease exit
and facility transition costs that will be incurred over the
balance of 2006. Of that amount, approximately $1.3 million is
expected to be recorded in the third quarter of 2006. About Zomax
Zomax helps companies more efficiently bring their products and
content to market worldwide. Our comprehensive program management
approach helps companies develop, manage and improve their rapidly
changing product and program supply chains. Zomax' solutions
leverage a modular suite of supply chain services that include
project management, data management, customer contact and
e-commerce services, sourcing management, CD/DVD production,
assembly and kitting services, JIT physical and electronic
fulfillment and returns management. Founded in 1993, Zomax
currently operates 8 facilities across the United States, Canada,
Mexico and Ireland. For more information on Zomax, visit
http://www.zomax.com/ or call 866-553-9393. Use of Non-GAAP
Financial Measures The Company believes the presentation of
operating and net loss information for the second quarter of 2006
excluding stock option expensing and for the second quarter of 2005
excluding restructuring charges and the benefit from a revaluation
of the stock component of the litigation reserve is a useful
presentation of information regarding the underlying business
trends and performance of the Company's ongoing operations and that
period-over-period comparisons of such operations are meaningful.
Investors should consider these non-GAAP measures in addition to,
and not as a substitute for, financial performance measures
prepared in accordance with GAAP. In addition, these non-GAAP
financial measures may not be the same as similar measures
presented by other companies. Forward-Looking Statements Certain
statements contained in this press release are "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements relate to our
expectations of future performance and events including the
anticipated profitability of the Ireland joint venture and our
ability to execute on our plans for the Ireland joint venture
related to integration and market opportunities. These
forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause 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 pursuing profitable growth in our business;
our ability to successfully evolve the business toward becoming a
supply chain program management company, particularly in light of
the changes needed in our infrastructure, personnel, asset base and
customer relationships; 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; our ability to
execute on the plans related to the Ireland joint venture; and
other risks and uncertainties, including those identified and
discussed in detail under the caption "Risks and Uncertainties" in
Item 1A of our 2005 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. ZOMAX INCORPORATED Condensed
Consolidated Statements of Operations (Unaudited) (Amounts in
thousands, except per share data) Three Months Ended Six Months
Ended June 30, July 1, June 30, July 1, 2006 2005 2006 2005 Revenue
$33,058 $42,585 $69,284 $84,766 Cost of revenue 28,272 39,269
61,822 79,654 Gross profit 4,786 3,316 7,462 5,112 Selling, general
and administrative expenses 8,661 9,734 17,779 19,961 Restructuring
Costs - 2,179 874 2,409 Litigation reserve adjustment - (415) -
(2,245) Operating (loss) income (3,875) (8,182) (11,191) (15,013)
Other income, net 358 421 944 771 Earnings (loss) before income
taxes (3,517) (7,761) (10,247) (14,242) Income tax (benefit)
expense (98) (2,082) 93 (4,415) Net earnings (loss) $(3,419)
$(5,679) $(10,340) $(9,827) Earnings (loss) per share: Basic
$(0.11) $(0.17) $(0.32) $(0.30) Diluted $(0.11) $(0.17) $(0.32)
$(0.30) Weighted average common shares outstanding: Weighted
average common shares outstanding 32,488 32,632 32,485 32,623
Dilutive effect of stock options - - - - Weighted average common
and diluted shares outstanding 32,488 32,632 32,485 32,623 ZOMAX
INCORPORATED Condensed Consolidated Balance Sheets (Unaudited)
(Amounts in thousands) June 30, December 31, 2006 2005 ASSETS:
Current Assets: Cash and cash equivalents $42,014 $45,250 Accounts
receivable, net 21,775 26,823 Inventories, net 9,452 13,978 Other
current assets 2,521 2,409 Total current assets 75,762 88,460
Property and equipment held for use, net 22,133 24,504
Available-for-sale securities 1,890 2,091 Other Long-Term Assets
117 117 $99,902 $115,172 LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities: Accounts payable 8,765 14,709 Accrued expenses
10,053 11,538 Total current liabilities 18,818 26,247 Other long
term liabilities 338 317 Total liabilities 19,156 26,564
Shareholders' equity: Common stock 63,252 62,248 Retained earnings
10,375 20,715 Accumulated other comprehensive income 7,119 5,645
Total shareholders' equity 80,746 88,608 $99,902 $115,172
DATASOURCE: Zomax Incorporated CONTACT: Anthony Angelini, President
and CEO, +1-763-553-9300, or Dick Barnes, EVP and CFO,
+1-763-553-9300, both of Zomax Incorporated, or Investors, Douglas
Sherk, CEO, or Media, Jennifer Beugelmans, Managing Director, both
of EVC Group, Inc., +1-646-277-8704, or Media, Steve DiMattia,
Managing Director of EVC Group, Inc., +1-646-277-8706 Web site:
http://www.zomax.com/
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