MINNEAPOLIS, Aug. 9 /PRNewswire-FirstCall/ -- Zomax Incorporated
(NASDAQ:ZOMX), today reported financial results for its second
quarter ended July 1, 2005. Revenues in the quarter were $42.6
million, a decrease of 5.5% from the $45.1 million in revenues
reported in the second quarter of 2004. Net loss for second quarter
of 2005 was $5.7 million, or $0.17 per share, compared with net
income of $0.5 million, or $0.02 per share in the second quarter of
2004. The net loss in the second quarter included pre-tax charges
of approximately $2.2 million or $0.05 per share, related to
previously announced restructuring activities in the Company's
Ireland and Fremont, California operations, and a pre-tax benefit
of $0.4 million, or $0.01 per share, related to an adjustment of
the portion of the Company's litigation reserves that are payable
in shares of the Company's common stock. Second quarter 2004
results include a pre-tax gain of approximately $2.8 million, or
$0.05 per share, on the sale of a portion of the Company's
investment in Intraware (NASDAQ:ITRA). "During the second quarter,
we achieved revenues that were in-line with the guidance we
provided in May," said Anthony Angelini, President and CEO of
Zomax. "A highlight of the quarter was our support of a successful
launch of a new operating system and other new software titles for
one of the industry's leading personal computer and digital music
providers. The continuing development of new applications and
products by our customers to serve the evolving needs of the
marketplace brings further opportunities to enhance our
relationships and create significant new long-term revenue
streams." "We are keenly focused on executing our longer term
strategy of transforming Zomax into a supply chain program
management company, fully capable of developing best-in-class
solutions for our customers' requirements," continued Mr. Angelini.
"Our goal is to partner with our customers to successfully manage
their supply chain needs based upon their specific objectives. As
we focus on offering additional services outside of our traditional
sourcing, replication, assembly and distribution capabilities, we
also believe that we will continue to reduce our internal fixed
cost structure and enhance the universe of solution sets that we
can provide our customers." Revenues for the six-month period ended
July 1, 2005 were $84.8 million, which compares with revenues of
$95.1 million during the comparable period of 2004. Net loss for
the first six months of 2005 was $9.8 million, or $0.30 per share,
compared with a net loss of $1.0 million, or $0.03 per share during
the comparable period of 2004. Results for the six-month period
ended July 1, 2005 included a total of approximately $2.4 million
or $0.05 per share, in charges related to the restructuring
activities at the Company's Ireland and California operations, and
a pre-tax benefit of $2.2 million, or $0.04 per share, related to
an adjustment of the portion of the Company's litigation reserves
that are payable in shares of the Company's common stock. Year-to-
date 2004 results include a pre-tax gain of approximately $2.8
million, or $0.05 per share, on the sale of a portion of the
Company's investment in Intraware. Outlook Mr. Angelini continued,
"As of this quarter, a majority of the financial restructuring
component of our transition is done. As we have discussed
previously, we expect to complete all associated restructuring
early in the third quarter. Our transition of operations continues.
However we have achieved a number of critical milestones, including
the elimination of nearly 20% in CD replication capacity, while
continuing to focus on meeting our customers' needs. Based upon the
success that we have had in implementing the financial and
operational components of our plan, we continue to believe we will
achieve our goal of reaching profitability some time in the second
half of the year. In addition, our balance sheet remains strong
with approximately $54.1 million in cash and no debt and we believe
we have the financial strength and flexibility to implement our
strategy to drive long term, profitable growth for the Company."
Looking ahead to the third quarter of 2005, the Company is
forecasting revenues of approximately $40 million. Excluding
restructuring costs of between $0.01 and $0.02 per share, the
Company expects to incur a net loss of between $0.03 and $0.07
cents per share in the quarter. Conference Call Zomax will host a
conference call and webcast, today, August 9, 2005 beginning at
4:30 p.m. Central Time, to discuss the Company's second quarter
2005 results, outlook for third quarter 2005 and current corporate
developments. To participate in this conference call, please dial
800-366-3908 for domestic callers or 303-262-2131 for international
callers. A replay of the conference call will be available for
seven days by calling 800-405-2236 for domestic callers or
303-590-3000 for international callers, both using passcode
11036791#. The conference call will also be available by webcast.
Participants may log on to the webcast conference call by
pre-registering at http://www.zomax.com/ and clicking on the
webcast link. 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." For more information on Zomax, visit http://www.zomax.com/
or call (866) 553-9393. Safe Harbor for Forward-Looking Statements
Certain statements in this press release relating to expected
financial results for the third quarter of 2005, the timing of the
completion of our restructuring activities, our ability to achieve
profitability sometime in the second half of 2005, our ability to
continue to reduce our fixed cost structure, and our ability to
drive long-term, profitable growth of the Company, 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 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, our ability to implement our restructuring and
consolidation plans designed to achieve cost reductions in our
North American and Ireland operations; the potential negative
impact on our customer relationships as we implement our
consolidation plans or attempt to execute pricing strategies that
are not acceptable to the market place, our ability to accurately
predict the amount of time and cost required to fully complete our
restructuring plan, our ability to retain key employees during and
subsequent to the execution of these restructuring activities, 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; and other risks and uncertainties, including
those identified and discussed in detail in periodic filings we
make with the Securities and Exchange Commission. 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 July 1, June 25, July 1, June 25,
2005 2004 (1) 2005 2004 (1) Revenue $42,585 $45,082 $84,766 $95,117
Cost of revenue 39,269 37,062 79,654 80,147 Gross profit 3,316
8,020 5,112 14,970 Selling, general and administrative expenses
9,734 9,622 19,961 19,027 Restructuring costs 2,179 - 2,409 -
Litigation reserve adjustment (415) - (2,245) - Operating (loss)
income (8,182) (1,602) (15,013) (4,057) Gain on sale of available-
for-sale securities - 2,770 - 2,770 Other income, net 421 161 771
320 Earnings (loss) before income taxes (7,761) 1,329 (14,242)
(967) Income tax (benefit) expense (2,082) 795 (4,415) 45 Net
earnings (loss) $(5,679) $534 $(9,827) $(1,012) Earnings (loss) per
share: Basic $(0.17) $0.02 $(0.30) $(0.03) Diluted $(0.17) $0.02
$(0.30) $(0.03) Weighted average common shares outstanding:
Weighted average common shares outstanding 32,632 32,790 32,623
32,753 Dilutive effect of stock options - 283 - - Weighted average
common and diluted shares outstanding 32,632 33,073 32,623 32,753
(1) We have restated our first and second quarter 2004 condensed
consolidated financial statements for misstatements discovered in
our Ireland subsidiary ZOMAX INCORPORATED Condensed Consolidated
Balance Sheets (Unaudited) (Amounts in thousands) July 1, December
31, 2005 2004 ASSETS: Current Assets: Cash and cash equivalents
$54,129 $41,092 Available-for-sale securities - 19,200 Accounts
receivable, net 23,662 36,180 Inventories, net 14,943 14,633 Other
current assets 9,159 12,114 Total current assets 101,893 123,219
Property and equipment, net 30,979 35,408 Available-for-sale
securities 1,177 3,624 Deferred income taxes 11,579 5,903 $145,628
$168,154 LIABILITIES AND SHAREHOLDERS' EQUITY: Current liabilities:
Accounts payable 14,924 20,710 Accrued expenses 16,297 19,177 Total
current liabilities 31,221 39,887 Deferred rent 303 155 Total
liabilities 31,524 40,042 Shareholders' equity: Common stock 62,423
62,134 Retained earnings 47,034 56,861 Accumulated other
comprehensive income 4,647 9,117 Total shareholders' equity 114,104
128,112 $145,628 $168,154 DATASOURCE: Zomax Incorporated CONTACT:
Anthony Angelini, President and CEO, or Rob Rueckl, Chief Financial
Officer, both of Zomax, Inc., +1-763-553-9300, or Douglas Sherk,
CEO, or Jennifer Beugelmans, Senior Vice President, both of EVC
Group, Inc., both at +1-415-896-6820 Web site:
http://www.zomax.com/
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